AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1997
REGISTRATION NO. 333-21511
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
BENEFICIAL MORTGAGE SERVICES, INC.
(Exact name of registrant as specified in its governing instruments)
Delaware 52-2022851
(State of incorporation) (I.R.S. Employer Identification No.)
One Christina Centre
301 North Walnut Street
Wilmington, Delaware 19801
(Address of principal executive offices)
Scott A. Siebels, Esq.
One Christina Centre
301 North Walnut Street
Wilmington, Delaware 19801
(302) 425-2500
(Name and address of agent for service)
With a copy to:
Malcolm S. Dorris
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time on or after the effective date of the 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, 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 offer. [ ] ____________________.
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. [ ]
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class of to be Offering Price Aggregate Registration
Securities to Be Registered Registered(1) Per Unit(2) Offering Price(2) Fee(3)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Securities................ $1,000,000 100% $1,000,000 $303.03
- -----------------------------------------------------------------------------------------------------------------------
(1) The Registration Statement relates to the initial offering from time to
time of $1,000,000 aggregate principal amount of Asset Backed Securities
and to any resales thereof in market making transactions to the extent
required.
(2) Estimated solely for purposes of calculating the registration fee on the
basis of the proposed maximum aggregate offering price.
(3) Previously paid.
</TABLE>
THE REGISTRANT HEREBY AMENDS THE 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 THE 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
The Registration Statement includes a basic prospectus and an
illustrative form of prospectus supplement for use in an offering of Asset
Backed Securities. The description in the form of prospectus supplement of
credit enhancement mechanisms or other features is intended merely as an
illustration of the principal features of a possible series of Asset Backed
Securities; the features applicable to any actual series of Asset Backed
Securities may include some, all or none of the features so illustrated and may
include any features specified in the prospectus.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL ___, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus dated April ___, 1997)
$--------------------
Beneficial Home Equity Loan Asset Backed Certificates
Beneficial Mortgage Services, Inc., Depositor
-------------------
The Beneficial Home Equity Loan Asset Backed Certificates, Series 199_-_
(the "Certificates") will consist of ____ classes of senior Certificates (the
"Class (__) Certificates") and _____ classes of subordinate Certificates (the
"Class (__) Certificates," the "Class (__) Certificates" and the "Class (__)
Certificates,"). Only the Class ___, Class ___ and Class ___ Certificates (the
"Offered Certificates") are offered hereby. The Certificates represent undivided
interests in a trust fund (the "Trust Fund") consisting primarily of certain
balances of a pool (the "Pool") of home equity revolving credit line accounts
(the "Home Equity Loans") secured by deeds of trust or mortgages (of which
approximately _____% by principal balance are first deeds of trust or mortgages
and the remainder are second deeds of trust or mortgages) on residential
properties that are primarily one- to four-family properties (the "Mortgaged
Properties"). The Home Equity Loans were originated or acquired by the Depositor
and certain of its affiliates in the ordinary course of their business. The
Originators (defined in "The Originators" herein) are all wholly-owned direct or
indirect subsidiaries of Beneficial Corporation. The Depositor will acquire
certain of the Home Equity Loans from the Originators, and transfer them to the
Trust Fund pursuant to a Pooling and Servicing Agreement (the "Agreement") dated
as of ___________, 199_ between the Depositor, as depositor and Beneficial
Mortgage Corporation, as master servicer (in such capacity, the "Master
Servicer") and _______________ as Trustee. The obligations of the Master
Servicer, as such, are limited to its contractual servicing obligations. All
defined terms are indexed in the Index of Principal Terms commencing on page __
hereof or the Index of Principal Terms included in the Prospectus.
(Cover continued on following page)
PROSPECTIVE INVESTORS SHOULD CONSIDER THE DISCUSSION OF CERTAIN FACTORS
SET FORTH UNDER "RISK FACTORS" CONTAINED HEREIN ON PAGES ____________.
-------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS __________, 199_. 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 PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES 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.
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST FUND ONLY
AND DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR, BENEFICIAL
CORPORATION OR ANY AFFILIATE THEREOF. NEITHER THE CERTIFICATES NOR THE HOME
EQUITY LOANS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY. COLLECTIONS
IN RESPECT OF THE HOME EQUITY LOANS IN THE TRUST FUND ARE THE SOLE SOURCE OF
DISTRIBUTION ON THE CERTIFICATES.
-------------------
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 ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
-------------------
<TABLE>
<CAPTION>
===========================================================================================================================
Price to Public Underwriting Discount Proceeds to Company
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Class A Certificate % % %
- ---------------------------------------------------------------------------------------------------------------------------
Total $ $ $
===========================================================================================================================
</TABLE>
The Offered Certificates are offered subject to prior sale, when, as and
if issued by the Trust Fund and accepted by the Underwriter and subject to its
right to reject orders in whole or in part. It is expected that delivery of the
Offered Certificates to the Underwriter will be made in book-entry form only
through the Same-Day Funds Settlement System of The Depository Trust Company,
Cedel Bank, societe anonyme, and the Euroclear System on or about ____________,
199_.
The date of this Prospectus Supplement is ____________, 199_.
<PAGE>
Distributions of principal and interest on the Certificates will be made
on the ____ day of each month or, if such day is not a business day, the next
succeeding business day (each, a "Distribution Date"), beginning on __________,
199_. On each Distribution Date, holders of the Offered Certificates (the
"Certificateholders") will be entitled to receive, from and to the extent of
funds available in the Certificate Account (as defined in "Description of
Certificates -- Payments on Home Equity Loans; Establishment of Home Equity Loan
Payment Record; Deposits to Certificate Account" herein), interest on the
aggregate outstanding principal balance of the Offered Certificates (the
"Certificate Principal Balance") at the floating interest rates described herein
and distributions with respect to the Trust Percentage (as defined on page __
below) of principal of the Home Equity Loans, calculated as set forth herein.
The rights of holders of the Class (__) Subordinate Certificates to receive
distributions with respect to the Home Equity Loans are subordinated to the
extent described herein to the rights of holders of the Class A Certificates,
and the rights of holders of the Class (__) Certificates to receive
distributions with respect to the Home Equity Loans are subordinated to the
rights of holders of the Class (__) and Class (__) Certificates. The rights of
holders of the Class (__) Certificates to receive distributions are subordinated
to the rights of holders of the Class (__), Class (__) and Class (__)
Certificates.
An election will [not] be made to treat the Trust Fund as a real estate
mortgage investment conduit ("REMIC") for federal income tax purposes. [As
described more fully herein, the Class (__), Class (__) and Class (__)
Certificates will constitute "regular interests" in the REMIC and the Class (__)
Certificates will constitute the single class of "residual interests" in the
REMIC.] See "Certain Federal Income Tax Consequences" herein and in the
Prospectus.
Prior to their issuance, there has been no market for the Offered
Certificates nor can there be any assurance that one will develop or, if it does
develop, that it will provide the Certificateholders with liquidity or will
continue for the life of the Offered Certificates. The Underwriter(s) (as
defined in "Underwriting" herein) intends, but is not obligated, to make a
market in the Offered Certificates. See "Risk Factors" herein.
-------------------
THE OFFERED CERTIFICATES CONSTITUTE PART OF A SEPARATE SERIES OF
CERTIFICATES ISSUED BY THE DEPOSITOR AND ARE BEING OFFERED PURSUANT TO THIS
PROSPECTUS SUPPLEMENT AND THE DEPOSITOR'S PROSPECTUS DATED ____________, 199_,
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
OFFERED CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED
BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
To the extent that any statements in this Prospectus Supplement
supplement statements contained in the Prospectus, the supplemental statements
in this Prospectus Supplement shall control.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the Underwriter(s) or a request by
such investor's representative within the period during which there is an
obligation to deliver a Prospectus Supplement and Prospectus, the Depositor or
the Underwriter(s) will promptly deliver, or cause to be delivered, without
charge, a paper copy of the Prospectus Supplement and Prospectus.
-------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER(S) MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
-------------------
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates, whether or not participating
in this distribution, may be required to deliver a Prospectus Supplement and
Prospectus. This 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.
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary of certain pertinent information is qualified in
its entirety by reference to the detailed information appearing elsewhere in
this Prospectus Supplement and the accompanying Prospectus. Reference is made to
the Index of Principal Terms for the location in this Prospectus Supplement of
the definitions of certain capitalized terms.
Offered Certificates....... The Trust Fund will issue its Home Equity Loan
Asset Backed Certificates, Series 199_-_, in
four classes pursuant to a Pooling and
Servicing Agreement dated as of ___________,
199_ (the "Agreement") by and between the
Depositor, the Master Servicer and the
Trustee. The Class (__) Certificates (the
"Class (__) Certificates") will be senior
certificates and the Class (__) Certificates
(the "Class (__) Certificates"), and the
Class (__) Certificates (the "Subordinate
Certificates") will be subordinate
certificates, all as described herein. Only
the Class (__), Class (__) and Class (__)
Certificates (collectively, the "Offered
Certificates") are being offered hereby. The
Certificates will initially represent
undivided ownership interests in the Trust
Balances (as defined below in "Trust
Balance") of certain home equity revolving
credit line accounts (the "Home Equity
Loans") sold to the Trust Fund and secured by
either first or second deeds of trust or
mortgages. Each Class of Offered Certificates
represents the right to receive specified
portions of the Trust Percentage (as defined
below in "Trust Balance") of payments
received in respect of the Home Equity Loans
after _________, 199_ (the "Cut-Off Date"),
as set forth in the Agreement. No Class
represents any interest in any additional
amounts advanced under the Home Equity Loans
after the Cut-Off Date (the "Additional
Balances"). All the ownership interests in
(and the obligations to fund) the Additional
Balances will be retained by the related
Originators.
Depositor.................. Beneficial Mortgage Services, Inc. (the
"Depositor"), an indirect wholly-owned,
subsidiary of Beneficial Corporation.
Cut-off Date Pool Balance... $______________
Trust Balance.............. The "Trust Balance" for any Home Equity Loan for
any day (i.e., the portion of the outstanding
principal balance of such Home Equity Loan
owned by the Trust Fund on such day) is equal
to the unpaid principal balance of the Home
Equity Loan as of the Cut-Off Date (the
"Cut-Off Date Trust Balance") less (i) (x) as
to any payment applied to reduce the
outstanding balance of such Home Equity Loan
that is received during the Collection Period
(as defined below) in which such payment is
due, the Trust Percentage of such payment,
and (y) as to any such payment received
during a Collection Period that was due and
not received in a prior Collection Period,
the Overdue Trust Percentage (as defined
below)of such payment (the sum of (x) and
(y) being referred to as the "Trust Principal
Payments") and (ii) the Trust Percentage of
certain insurance proceeds applied in
reduction of the Loan Balance (as defined
below) for such Home Equity Loan ("Trust
Insurance Proceeds").
S-3
<PAGE>
The "Loan Balance" for any Home Equity Loan and
for any day is the principal balance of such
Home Equity Loan on such day. As of the
Cut-Off Date, the Trust Balance and the Loan
Balance will be equal and the corresponding
Trust Percentage will therefore equal 100%.
The Loan Balance will exceed the Trust
Balance to the extent of any Additional
Balances in respect of the related Home
Equity Loan. All collections on the Home
Equity Loans generally will be allocated pro
rata to the Trust Fund and the Originator
that owns such Additional Balance based on
the portions of the Loan Balance represented
by the Trust Balance and such Additional
Balance, respectively. At such time as the
Trust Balance for any Home Equity Loan is
reduced to zero, such Home Equity Loan will
be released from the Trust Fund.
The "Trust Percentage" for any Collection Period
is the percentage obtained by dividing the
average daily Trust Balance for the second
preceding Collection Period by the average
daily Loan Balance for such second preceding
Collection Period; provided that as to any
Foreclosed Home Equity Loan (as defined in
"Description of Certificates -- Foreclosure
Upon Home Equity Loans" herein), the Trust
Percentage will be the percentage in effect
for the Collection Period in which such Home
Equity Loan became a Foreclosed Home Equity
Loan.
The "Overdue Trust Percentage" for any
Collection Period and any payment received in
respect of a Home Equity Loan that was due in
a previous Collection Period is the
percentage obtained by dividing the average
daily Trust Balance for all consecutive prior
Collection Periods from and including the
Collection Period in which such payment was
due to and including the Collection Period in
which such payment was received in full by
the average daily Loan Balance for such
consecutive prior Collection Periods. The
Overdue Trust Percentage shall be applied
only to payments received in a given
Collection Period that were due in a prior
Collection Period.
A "Collection Period" for any Home Equity Loan
for any Distribution Date is the one-month
period ending on the last day of the monthly
billing cycle for such Home Equity Loan (the
"Cycle Date") in the calendar month preceding
the calendar month in which such Distribution
Date occurs; provided that the first
Collection Period will begin on the Cut-Off
Date and end on the applicable Cycle Date in
_________, 199_. When used with respect to
all the Home Equity Loans and a Distribution
Date, the term "Collection Period" means the
respective Collection Periods applicable to
each of the Home Equity Loans that commenced
in the second preceding calendar month (or,
in the case of the first Collection Period,
the Cut-Off Date) and ended in the calendar
month immediately preceding the month of such
Distribution Date.
Originators of the Home Equity
Loans...... Each of the originators of the Home Equity Loans
is a wholly-owned direct or indirect
subsidiary of Beneficial Corporation (the
"Originators"). The Originators conduct their
business in the following states: Arizona,
California, Delaware, Florida, Georgia,
Idaho, Indiana, Kentucky, Maryland,
Massachusetts, Michigan, Mississippi,
Montana, Nevada, New Hampshire, New Jersey,
New York, North Carolina, Ohio, Oregon,
Pennsylvania, Rhode Island, South Carolina,
Tennessee, Utah, Virginia, Washington and
West Virginia (collectively, the "Included
States").
S-4
<PAGE>
Master Servicer............ Beneficial Mortgage Corporation will act
as Master Servicer of the Home Equity Loans.
Each Home Equity Loan originated by another
of the Originators will be subserviced by
such Originator on behalf of the Master
Servicer. However, the Agreement will provide
that the Master Servicer will remain
primarily liable for the servicing of the
Home Equity Loans and have the ultimate
responsibility for ensuring that the
subservicers perform their duties as such.
The Master Servicer will be entitled to
retain on behalf of itself and the
subservicers as a servicing fee (the
"Servicing Fee") a portion of the interest
payments received with respect to the Home
Equity Loans.
Trustee.................... __________________, a ________________.
Distributions on the
Certificates............. Distributions of principal and interest to each
Certificateholder will be made on the ____
day of each month or, if such day is not a
business day, the next succeeding business
day (each, a "Distribution Date"), commencing
on __________, 199_, in an amount equal to
the product of such Certificateholder's
Percentage Interest and the amount
distributed in respect of the related Class.
Distributions are required to be made on each
Distribution Date to Certificateholders of
record as reflected in the certificate
register maintained by the Trustee on the day
prior to such Distribution Date, or, if
Definitive Certificates (as defined in
Description of Certificates -- Registration
of Certificates" herein) are issued and
beneficial ownership of the regular interests
shall no longer be held through book-entry
certificates, the last day of the month
preceding the month of such Distribution Date
(the "Record Date"). The "Percentage
Interest" of any Offered Certificate will be
equal to the percentage obtained by dividing
the original principal balance of such
Offered Certificate by the aggregate of the
original balance of all the Offered
Certificates of the same Class. Distributions
on the Offered Certificates will be applied
first to accrued and unpaid interest and then
to principal. The "Accrual Period" for each
Class on any Distribution Date shall be the
period from and including the preceding
Distribution Date (or ____________, 199_ in
the case of the first Distribution Date) to
and including the day prior to the current
Distribution Date. Interest on the Offered
Certificates will be calculated on the basis
of the actual number of days in the related
Accrual Period and a year assumed to consist
of 360 days. The funds available in the
Certificate Account for distribution in
respect of the Certificates on a Distribution
Date (the "Available Funds") will be applied
in the amounts and the order of priority set
forth under subheadings A, B, C and D below.
See "Description of the Certificates --
Amount of Distributions" herein for a
detailed description of the amounts on
deposit in the Certificate Account that will
constitute the Available Funds on each
Distribution Date. The aggregate amounts
distributed to the Class (__), Class (__) and
Class (__) Certificateholders in respect of a
Distribution Date are the Class (__)
Distribution Amount, the Class (__)
Distribution Amount and the Class (__)
S-5
<PAGE>
Distribution Amount, respectively, which are
described under "Description of the
Certificates -- Amount of Distributions"
herein. The Distribution Amount for a Class
of Certificates is generally equal to the sum
of (i) the lesser of (a) the portion of
Available Funds allocated to such Class and
(b) the sum of the amount of interest accrued
on the outstanding principal balance of such
Class (together with any unpaid interest from
prior Distribution Dates plus interest
thereon, to the extent legally permitted) and
scheduled principal payments for such Class
(together with any unpaid principal from
prior Distribution Dates plus interest
thereon) and (ii) any remaining Available
Funds not required to be distributed in
respect of another Class.
A. Class (__) Interest.... Interest for the related Accrual Period will be
paid on the Class (__) Certificates on each
Distribution Date, to the extent of the
Available Funds for the Class (__)
Certificates for such date, at the Class (__)
Pass-Through Rate on the then outstanding
Class (__) Certificate Balance. The "Class
(__) Pass-Through Rate" for any Accrual
Period will be equal to __________. The
"Class (__) Certificate Balance" as of any
Distribution Date is the original principal
balance of the Class (__) Certificates less
all amounts distributed on account of
principal to holders of the Class (__)
Certificates on prior Distribution Dates. In
the event that, on a particular Distribution
Date, Available Funds are not sufficient to
make a full distribution of interest to the
holders of the Class (__) Certificates, the
amount of any interest shortfall will be
carried forward and added to the amount of
interest such holders will be entitled to
receive on the next Distribution Date. Any
such amount so carried forward will itself
bear interest at the Class (__) Pass-Through
Rate to the extent legally permitted. See
"Description of the Certificates -- Amount of
Distributions" herein.
B. Class (__) and Class (__)
Interest............. Interest for the related Accrual Period will be
paid on the Class (__) and Class (__)
Certificates on each Distribution Date to the
extent of the amount available therefor for
such Distribution Date, at the Class (__)
Pass-Through Rate on the then outstanding
Class (__) Certificate Balance and at the
Class (__) Pass-Through Rate on the then
outstanding Class (__) Certificate Balance.
The "Class (__) Pass-Through Rate" for any
Accrual Period will be equal to __________.
The "Class (__) Pass-Through Rate" for any
Accrual Period will be equal to __________.
The "Class (__) Certificate Balance" and the
"Class (__) Certificate Balance" as of any
Distribution Date are the original principal
balances of the Class (__) Certificates and
Class (__) Certificates less all amounts
distributed on account of principal to
holders of the Class (__) Certificates and
the Class (__) Certificates on prior
Distribution Dates, respectively. The rights
of holders of the Class (__) Certificates to
receive distributions of interest will be
subordinated to the rights of holders of the
Class (__) Certificates to receive such
S-6
<PAGE>
distributions. See "Description of the
Certificates -- Subordination" herein. In the
event that, on a particular Distribution
Date, the Amount Available for Class (__)
Interest or the Amount Available for Class
(__) Interest (as described herein under
"Description of the Certificates -- Amount of
Distributions") is not sufficient to make a
full distribution of interest to the holders
of the related Class of Certificates, the
amount of any interest shortfall will be
carried forward and added to the amount of
interest such holders will be entitled to
receive on the next Distribution Date. Any
such amount so carried forward will itself
bear interest at the related Pass-Through
Rate to the extent legally permitted. See
"Description of the Certificates -- Amount of
Distributions" herein.
C. Class (__) Principal... On each Distribution Date, the Class (__)
Certificateholders will be entitled to
receive, based upon the Class (__)
Certificate Balance, as distributions of
principal, to the extent of the Available
Funds after payment of all interest payable
on the Class (__), Class (__) and Class (__)
Certificates on such date, the sum of (i) the
Trust Percentage or Overdue Trust Percentage,
as applicable, of each principal payment
received during the related Collection Period
in respect of the Home Equity Loans, (ii) the
aggregate of any Trust Insurance Proceeds
received during the related Collection
Period, (iii) the Trust Balance of each Home
Equity Loan at the end of the related
Collection Period that is repurchased by the
Depositor on account of (x) a breach of a
representation or warranty made by the
Depositor in the Agreement that materially
and adversely affects the interests of the
Certificateholders, (y) a material defect in
the related loan documentation or (z) the
failure to satisfy certain conditions with
respect to such Home Equity Loan as of the
Closing Date (any such Home Equity Loan
described in (x), (y) or (z) above being
referred to herein as a "Defective Home
Equity Loan"), (iv) the Substitution
Adjustment Amount (as defined in "Description
of Certificates -- Assignment of Home Equity
Loans" herein) for each Defective Home Equity
Loan that was replaced by one or more
Eligible Substitute Home Equity Loans (as
defined in "Description of Certificates --
Assignment of Home Equity Loans" herein) on
the business day preceding such Distribution
Date, (v) the Trust Balance of each Home
Equity Loan (other than a Defective Home
Equity Loan to be purchased not later than
such Distribution Date) that became a
Liquidated Home Equity Loan (as defined in
"Losses on Liquidated Home Equity Loans"
herein) during the calendar month next
preceding the month of such Distribution Date
and (vi) any previously unpaid shortfalls in
required distributions of principal. In
addition, on the Distribution Date on which
the Certificate Balances of the Subordinate
Certificates have been reduced to zero and on
each Distribution Date thereafter, Class (__)
Certificateholders will be entitled to
receive on account of principal the Class
(__) Excess Available Amount (described below
under "Certain Other Distributions of
Principal to Class (__) and Class (__)
Certificateholders"), exclusive of any
portion thereof distributed to the Class (__)
Certificateholders on
S-7
<PAGE>
the Class (__) Termination Date, until the
Class (__) Certificate Balance is reduced to
zero.
Notwithstanding the foregoing, in no event shall
the aggregate distributions of principal to
holders of the Class (__) Certificates exceed
the original Class (__) Certificate Balance.
D. Class (__) and Class (__)
Principal........... Except for payments of the Class (__) Excess
Available Amount as described below, payments
of principal in respect of the Class (__)
Certificates will not commence until the
Distribution Date on which the Class (__)
Certificate Balance has been reduced to zero
(the "Class (__) Termination Date") and
payments of principal in respect of the Class
(__) Certificates will not commence until the
Distribution Date following the Class (__)
Termination Date on which the Class (__)
Certificate Balance has been reduced to zero
(the "Class (__) Termination Date"). On the
Class (__) Termination Date and on each
Distribution Date thereafter, payments of
principal in respect of the Class (__)
Certificates will be made in an amount equal
to the sum of the amounts specified in
clauses (i)-(vi) under "Class (__) Principal"
above (net of any principal paid in respect
of the Class (__) Certificates on the Class
(__) Termination Date), to the extent of
Available Funds remaining after payment of
all interest payable on the Class (__)
Certificates and the Class (__) Certificates
on such dates. On each Distribution Date on
or after the Class (__) Termination Date,
payments of the Class (__) Certificates will
be made in an amount equal to the sum of the
amounts specified in clauses (i)-(vi) under
"Class (__) Principal" above (net of
principal paid in respect of the Class (__)
Certificates on the Class (__) Termination
Date), to the extent of Available Funds
remaining after payment of all interest
payable on the Class (__) Certificates on
such date. Notwithstanding the foregoing, in
no event shall the aggregate distributions of
principal to holders of the Class (__) and
Class (__) Certificates exceed the original
Class (__) and Class (__) Certificate
Balance, respectively.
Certain Other Distributions
of Principal to Class (__)
and Class (__)
Certificateholders....... On each Distribution Date to and including the
Distribution Date on which the Class (__)
Certificate Balance has been reduced to zero
(the "Class (__) Termination Date"), the
Class (__) Certificateholders will be
entitled to receive as payments of principal
(in addition to the amounts, if any,
distributable as described in "Class (__) and
Class (__) Principal" above) an amount equal
to the lesser of (x) Excess Available Funds
and (y) an amount equal to approximately
______% of the Pool Balance for such
Distribution Date (such amount, the "Class
(__) Excess Available Amount"). "Excess
Available Funds" in respect of a Distribution
Date is the amount, if any, by which
Available Funds exceed the sum of (i) the
Class (__) Formula Amount, (ii) the Class
(__) Formula Amount and
S-8
<PAGE>
(iii) the Class (__) Interest Requirement.
The Class (__) and Class (__) Formula Amounts
and Class (__) Interest Requirement are
described under "Description of the
Certificates -- Amount of Distributions"
herein. The Class (__) and Class (__) Formula
Amounts are generally equal to the sum of all
interest accrued on each such Class of
Certificates (together with interest due and
unpaid from prior Distribution Dates with
interest thereon at the applicable
Pass-Through Rate) plus the amounts described
in the first paragraph under "Class (__)
Principal" above, in the case of the Class
(__) Certificates, and under "Class (__) and
Class (__) Principal" above, in the case of
the Class (__) Certificates.
On the Class (__) Termination Date and on each
Distribution Date thereafter until the
Distribution Date on which the Class (__)
Principal Balance is reduced to zero, the
Class (__) Certificateholders will be
entitled to receive as payments of principal
(in addition to the amounts, if any,
distributable as described in "Class (__) and
Class (__) Principal" above) the Class (__)
Excess Available Amount (net of any such
amounts paid in respect of the Class (__)
Certificates on the Class (__) Termination
Date).
Since, as described above, all principal
proceeds of the Trust Balance of the Home
Equity Loans will initially be applied
towards the payment of principal of the Class
(__) Certificates, the existence of Excess
Available Funds on any Distribution Date
prior to the Class (__) Termination Date will
depend upon the interest spread on the Home
Equity Loans (i.e., the amount, if any, by
which (x) aggregate interest payments
received on the Home Equity Loans (less the
Servicing Fee) exceed (y) the interest
distributable in respect of the Certificates
at the related Pass-Through Rates and
realized losses in respect of the Home Equity
Loans).
Subordination of the Class
(__) and Class (__)
Certificates............. The rights of holders of the Class (__) and
Class (__) Certificates to receive
distributions of amounts collected on the
Home Equity Loans will be subordinated, to
the extent described herein, to the rights of
holders of the Class (__) Certificates to
receive such distributions and the rights of
holders of the Class (__) Certificates to
receive distributions of such amounts will be
further subordinated to the rights of the
holders of the Class (__) Certificates to
receive such distributions. The subordination
of the Class (__) and Class (__) Certificates
to the Class (__) Certificates is intended to
enhance the likelihood of timely receipt by
holders of the Class (__) Certificates of
their required monthly interest payments and
the ultimate receipt by such holders of
principal equal to the original Class (__)
Certificate Balance. The subordination of the
Class (__) Certificates to the Class (__)
Certificates is intended to enhance the
likelihood of timely receipt by holders of
the Class (__) Certificates of their required
monthly interest payments and
S-9
<PAGE>
the ultimate receipt by such holders of
principal equal to the original Class (__)
Certificate Balance. See "Risk Factors" and
"Maturity and Prepayment Considerations"
herein.
The protection afforded to holders of Class (__)
Certificates by means of the subordination,
to the extent provided herein, of the Class
(__) and Class (__) Certificates will be
accomplished by (i) the application of the
Available Funds as described under
"Distributions on the Certificates" above and
(ii) if the Available Funds on a Distribution
Date are not sufficient to permit the
distribution of the entire Class (__) Formula
Amount to the Class (__) Certificateholders,
respectively, the distribution to Class (__)
Certificateholders, until the Class (__)
Certificate Balance is reduced to zero, of
Available Funds on future Distribution Dates
that would otherwise have been payable to
holders of the Class (__) and Class (__)
Certificates.
The protection afforded to holders of Class
(__) Certificates by means of the
subordination, to the extent provided
herein, of the Class (__) Certificates will
be accomplished by (i) the application of
the Available Funds as described under
"Distributions on the Certificates" above
and (ii) if the Available Funds remaining
for distribution of principal to the Class
(__) Certificates on a Distribution Date are
not sufficient to permit the distribution of
the entire Class (__) Formula Amount to such
Certificateholders, the distribution to Class
(__) Certificateholders, until the Class (__)
Certificate Balance is reduced to zero, of
Available Funds on future Distribution Dates
that would otherwise have been payable to
holders of the Class (__) Certificates.
Although the Class (__) and Class (__)
Certificates are subordinated to the Class
(__) Certificates and the Class (__)
Certificates are subordinated to the Class
(__) Certificates, on each Distribution Date
prior to the Class (__) Termination Date, any
Class (__) Excess Available Amount will be
distributed to the Class (__)
Certificateholders in reduction of the Class
(__) Certificate Balance, and on the Class
(__) Termination Date and on each
Distribution Date thereafter, any Class (__)
Excess Available Amount will be distributed
to the Class (__) Certificateholders in
reduction of the Class (__) Certificate
Balance. These distributions will have the
effect of accelerating the amortization of
the Class (__) and Class (__) Certificates
and are expected to result in the Class (__)
and Class (__) Certificate Balances being
reduced to zero prior to the Class (__)
Termination Date and the Class (__)
Certificate Balance being reduced to zero
prior to the Class (__) Termination Date. Any
such acceleration would create
overcollateralization (i.e., the Pool Balance
being greater than the sum of the Class (__)
Certificate Balance, the Class (__)
Certificate Balance and the Class (__)
Certificate Balance), which has the effect of
providing credit support for the Offered
Certificates. See "Maturity and Prepayment
Considerations" and "Description of the
Certificates -- Subordination of the Class
(__) and Class (__) Certificates" herein.
S-10
<PAGE>
Servicer Letter of Credit..... Unless the short-term debt obligations of
Beneficial Corporation are rated at least A-1
by Standard & Poor's Debt Ratings Group
("Standard & Poor's"), P-1 by Moody's
Investors Service, Inc. ("Moody's") and F-1
by Fitch Investors Service, L.P. ("Fitch"
and, together with Standard & Poor's and
Moody's, the "Rating Agencies"), if the
Master Servicer wishes to commingle with its
own funds the proceeds of the Home Equity
Loans prior to the time such proceeds would
otherwise be required to be deposited in the
Certificate Account, the Master Servicer
must, as a condition to such commingling,
enter into a letter of credit, surety or
similar agreement or other arrangement
acceptable to the Rating Agencies that would
not cause a reduction or withdrawal of the
then-current ratings of any Class of
Certificates (the "Servicer Letter of
Credit") with a qualified financial
institution. If the Master Servicer obtains
such a Servicer Letter of Credit and fails to
deposit in the Certificate Account the
amounts required to be deposited therein on
or prior to the business day preceding the
related Distribution Date, the Trustee will,
pursuant to the agreement governing the terms
of the Servicer Letter of Credit, make a draw
on such Servicer Letter of Credit in an
amount equal to such deficiency (such amount
not to exceed the maximum coverage then
provided under the Servicer Letter of Credit)
and deposit such funds in the Certificate
Account. Any fees for a Servicer Letter of
Credit will be paid by the Master Servicer
and will not be an expense of the Trust Fund.
See "Risk Factors" and "Description of the
Certificates -- Servicer Letter of Credit"
herein.
Servicing Fee.............. The Servicing Fee will be retained by the
Master Servicer each month out of interest
collections on each Home Equity Loan in an
amount equal to one-twelfth of the product of
___% (the "Servicing Fee Rate") and the
related Trust Balance as of the beginning of
the preceding Collection Period. The
Originators will be entitled to a portion of
such fee in their capacity as subservicers.
The Home Equity Loans...... The Home Equity Loans are home equity revolving
credit line loans originated or acquired by
the Originators in their home equity
revolving credit line loan programs and are
secured by deeds of trust or mortgages (of
which approximately _____% by principal
balance as of the Cut-Off Date are first
deeds of trust or mortgages and the remainder
are second deeds of trust or mortgages) on
properties that are primarily one- to
four-family residential properties located in
the Included States.
A. Payments............ As described herein, the minimum monthly payment
required under each Home Equity Loan is
automatically changed each time the Reference
Rate adjusts or whenever an Additional
Balance is advanced. The advance of an
Additional Balance will involve the extension
of the period (ranging from 5 to 30 years, as
provided in the Loan Agreement) over which
the full amortization of the Loan Balance
would occur if equal monthly payments were
made in such minimum amount and the Loan Rate
remained constant throughout. Thus, the
maturity dates of
S-11
<PAGE>
the Home Equity Loans, and, therefore, the
Offered Certificates, may be continuously
extended. Interest on each Home Equity Loan
is computed and payable monthly on the
average daily outstanding Loan Balance at a
floating rate per annum (the "Loan Rate")
equal at any time to the sum of the prime
rate charged by _____________________
("Prime") on the first day of the months of
March, June, September and December (or, for
____% of the Home Equity Loans by Cut-Off
Date Loan Balance, the London interbank
offered rate for three-month United States
dollar deposits as published in the Wall
Street Journal) ("Three-Month LIBOR") (each
such rate, the "Reference Rate") and a
specified margin (ranging from ____% to
____%, with a weighted average as of the
Cut-Off Date of ____% or, in the case of Home
Equity Loans where the Loan Rate is based on
Three-Month LIBOR, ranging from ____% to
____%, with a weighted average as of the
Cut-Off Date of ____%). The maximum Loan
Rates on the Home Equity Loans generally
range from ____% to ____% per annum and the
weighted average maximum Loan Rate of the
Home Equity Loans as of the Cut-Off Date was
____% per annum. In certain of the states
where the Mortgaged Properties are located,
adjustments in any year (commencing on the
anniversary date of the account) will not
increase or decrease by more than a specified
percentage (ranging from ____% to ____%) for
home equity loans. See "The Home Equity Loan
Pool" herein. Principal amounts may be drawn
(up to the maximum permitted principal amount
or "Credit Limit") or repaid under each Home
Equity Loan from time to time. The Home
Equity Loans have monthly billing cycles
which end on Cycle Dates which fall on
various days throughout each calendar month.
The Cycle Date for each Home Equity Loan
generally corresponds to the day of the month
on which such Home Equity Loan was originally
closed. Billing statements are produced as of
each Cycle Date reflecting all payment
activity and any additional borrowings by the
borrower during the one-month period since
the previous Cycle Date. All payments of
principal of and interest on a Home Equity
Loan in respect of any Collection Period
(including payments made after any increased
borrowings by a borrower subsequent to the
Cut-Off Date), in general, will be allocated
pro rata between the Trust Fund and the
related Originator on the basis of the
average daily Trust Balance and the
Additional Balance during the second
preceding Collection Period.
B. The Pool............ The Cut-Off Date Trust Balances of the Home
Equity Loans generally ranged from $________
to $________ and averaged $________. Credit
Limits as of the Cut-Off Date ranged from
$________ to $________ and averaged
$________. Each Home Equity Loan was
originated between _______, 199_ and
_________, 199_, and as of the Cut-Off Date
the weighted average loan utilization rate
(computed by dividing the Loan Balance for
each Home Equity Loan by the related Credit
Limit) was ____% weighted by Credit Limit.
Based on the Sample Pool (as defined in "Risk
Factors -- Lack of Electronic Records
regarding Historical Data for certain Home
Equity Loans" herein) the weighted average
second lien ratio (computed
S-12
<PAGE>
by dividing the Credit Limit for each Home
Equity Loan by the sum of such Credit Limit
and the outstanding balances of all loans
secured by first mortgages or deeds of trust
affecting the related Mortgaged Property) was
____%. The weighted average Combined
Loan-to-Value Ratio (as defined in "Home
Equity Loan Pool" herein) of the Home Equity
Loans in the Sample Pool was ____%. See "The
Home Equity Lending Program" herein.
All of the Home Equity Loans are required to
be covered by standard hazard insurance
policies insuring against losses due to fire
and various other causes. See "Description
of the Certificates" herein.
Losses on Liquidated Home
Equity Loans............. A "Liquidated Home Equity Loan," as to any
Distribution Date, is any Home Equity Loan
(other than a Defective Home Equity Loan to
be repurchased or replaced on or prior to
such Distribution Date) as to which the
Master Servicer has determined as of the end
of the calendar month next preceding the
month of such Distribution Date that all
proceeds that it expects to recover in
connection with the liquidation thereof (the
"Liquidation Proceeds") have been recovered.
As described under "Distributions on the
Certificates" above, Class (__)
Certificateholders and, commencing on the
Class (__) Termination Date, Class (__)
Certificateholders will be entitled to
receive on each Distribution Date in respect
of each Home Equity Loan that became a
Liquidated Home Equity Loan in such preceding
calendar month the entire Trust Balance of
such Liquidated Home Equity Loan, regardless
of whether the Trust Percentage of the
related Net Liquidation Proceeds (i.e., the
Liquidation Proceeds less expenses incurred
in connection with liquidating the related
Home Equity Loan) is equal to its Trust
Balance. If on any Distribution Date the
aggregate amount of losses of principal
realized in respect of Liquidated Home Equity
Loans as of the end of the calendar month
next preceding the month of such Distribution
Date causes the amount of Available Funds to
be less than the sum of the Class (__)
Formula Amount, the Class (__) Formula Amount
and the Class (__) Distribution Amount
(exclusive of the Class (__) Excess Available
Amount component thereof), the resulting
shortfall will be carried forward to future
Distribution Dates and will be distributed to
the extent, if any, that amounts remain in
the Certificate Account after distribution of
the required components of the Class (__) and
Class (__) Formula Amounts. See "Risk Factors
-- Yield Sensitivity of Subordinate
Certificateholders" and "Description of the
Certificates -- Subordination of the Class
(__) and Class (__) Certificates" herein.
Optional Purchase.......... On any Distribution Date on which the aggregate
of the Trust Balances (the "Pool Balance") is
10% or less of the Pool Balance as of the
Cut-Off Date (the "Cut-Off Date Pool
Balance"), the Master Servicer will have the
option to purchase from the Trust Fund each
Home Equity Loan and all property acquired in
respect of any Home Equity Loan remaining in
the Trust Fund. The purchase price will be
equal to the greatest of (i) the sum of (x)
the Pool Balance as of the first day of
S-13
<PAGE>
the related Collection Period and (y) one
month's interest at the applicable Net Loan
Rate on the Pool Balance as of such day
(including any Foreclosed Home Equity Loans),
(ii) the aggregate fair market value as
determined by the Master Servicer of all of
the assets of the Trust Fund and (iii) the
sum of the Class (__), Class (__) and Class
(__) Certificate Balances, plus accrued and
unpaid interest thereon and on any overdue
interest at the respective Pass- Through
Rates. The portion of such purchase price
equal to the Class (__), Class (__) and Class
(__) Certificate Balances and any unpaid
interest shortfall thereon, together with
interest at the related Pass-Through Rates on
the Class (__), Class (__) and Class (__)
Certificate Balances and interest at such
rates on any related unpaid interest
shortfall (to the extent legally permitted),
will be distributed to holders of the Class
(__), Class (__) and Class (__) Certificates,
respectively, thereby effecting early
retirement of the Certificates.
Termination................ If not previously terminated in accordance with
the terms of the Agreement, the Trustee will
sell the assets remaining in the Trust Fund
on the ______________ Distribution Date and
the Trust Fund will terminate.
ERISA Considerations....... A fiduciary of a pension or other employee
benefit plan (a "Plan") subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), contemplating the
purchase of Class (__) Certificates should
consult its counsel before making a purchase
and the fiduciary and such legal advisors
should consider whether the conditions of the
administrative exemption (collectively, the
"Exemption") granted to the Underwriter(s)
from certain of the prohibited transaction
rules of ERISA are satisfied or the possible
application of certain other exemptions
described herein. The Exemption will be
applicable to the acquisition, holding and
resale of the Class (__) Certificates (but
not the Class (__) and Class (__)
Certificates) by a Plan subject to ERISA
provided that certain conditions (some of
which are described herein under "ERISA
Considerations -- Class (__) Certificates")
are met. The Class (__) and Class (__)
Certificates are not eligible for acquisition
by any Plan subject to ERISA. See "ERISA
Considerations" herein. Legal Investment
Considerations........... The Offered
Certificates will not constitute "mortgage
related securities" for purposes of the
Secondary Mortgage Market Enhancement Act of
1984 ("SMMEA"). Accordingly, many
institutions with legal authority to invest
in comparably rated securities secured by
first liens may not be legally authorized to
invest in the Certificates because they are
not "mortgage related securities" under
SMMEA.
Registration of Certificates... Beneficial owners may elect to hold their
Offered Certificate interests through the
Depository Trust Company ("DTC"), in the
United States, or Cedel Bank, societe anonyme
("Cedel") or the Euroclear System
("Euroclear"), in Europe. The Offered
Certificates will initially be registered in
the name of Cede, the nominee of DTC. Offered
S-14
<PAGE>
Certificates will be available in definitive
form only under the limited circumstances
described herein. Consequently, for purposes
of the Agreement, Cede will be the sole
record holder of the Offered Certificates
unless and until Offered Certificates are
issued in definitive form. The interests of
beneficial owners ("Beneficial Owners") of
Offered Certificates will be represented by
book-entries on the records of DTC and
participating members thereof. Beneficial
Owners will only be able to exercise the
rights of Certificateholders through DTC and
its participants. All references in this
Prospectus to "holders" or
"Certificateholders" shall be deemed, unless
the context clearly requires otherwise, to
refer to Cede, as the sole holder of the
Offered Certificates. See "Risk Factors" and
"Description of the Certificates --
Registration of Certificates" herein.
Certain Federal Tax
Aspects.................. An election will [not] be made to treat the
Trust Fund as a "real estate mortgage
investment conduit" ("REMIC") for federal
income tax purposes. The Class (__), Class
(__) and Class (__) Certificates will be
designated as "regular interests" in the
REMIC and will be treated as debt instruments
of the Trust Fund for federal income tax
purposes. [The Class (___) Certificates will
be designated as "residual interests" in the
REMIC. Beneficial Owners, including
Beneficial Owners that generally report
income on the cash method of accounting, will
be required to include interest on the Class
(__) Certificates, the Class (__)
Certificates or the Class (__) Certificates
in income in accordance with the accrual
method of accounting. ln general, as a result
of the qualification of the Trust Fund as a
REMIC, the Certificates will be treated as
(i) assets described in Section
7701(a)(19)(C) of the Internal Revenue Code
of 1986, as amended (the "Code") and (ii)
"real estate assets" under Section 856(c) of
the Code in the same proportion that the
assets in the REMIC consist of qualifying
assets under such sections. For further
information regarding the federal income tax
consequences of investing in the
Certificates]. See "Certain Federal Income
Tax Consequences" herein and in the
Prospectus.
Use of Proceeds............ The net proceeds to be received from the sale
of the Offered Certificates will be used by
the Depositor to pay the purchase price for
the Home Equity Loans purchased from the
Depositor.
Rating..................... It is a condition to the issuance of the Class
(__) Certificates that they be rated (not
lower than) "___" by ___________. A rating is
not a recommendation to purchase, hold or
sell the Offered Certificates. There can be
no assurance that the initial ratings
assigned to the Offered Certificates will not
be lowered or withdrawn by any of the Rating
Agencies in the future. A rating by any
Rating Agency is not a recommendation to
purchase, hold or sell Offered Certificates.
See "Certificate Ratings" herein and "Rating"
in the Prospectus.
S-15
<PAGE>
RISK FACTORS
Prospective investors should consider, in addition to the special
considerations discussed under "Special Considerations" in the Prospectus and
the other matters discussed in this Prospectus Supplement and the Prospectus,
the following factors.
No Market for the Offered Certificates
Prior to their issuance there has been no market for the Offered
Certificates nor can there be any assurance that one will develop or, if it does
develop, that it will provide holders of the Offered Certificates with liquidity
or will continue for the life of the Offered Certificates. The Underwriter(s)
intends, but is not obligated, to make a market in the Offered Certificates.
Lack of Electronic Records regarding Historical Data for certain
Home Equity Loans
As discussed under "The Home Equity Loan Pool" herein, until July 7,
1996, the Originators did not maintain in their electronic records certain data
with respect to the Home Equity Loans, including information relating to the
location of the Mortgaged Properties and information required to determine the
Combined Loan-to-Value Ratios for the Home Equity Loans. Certain of the
information presented in the tables under "The Home Equity Loan Pool" (including
information with respect to the geographical distribution of the Mortgaged
Properties and the Combined Loan-to-Value Ratios for the Home Equity Loans) only
relates to Home Equity Loans originated after July 7, 1996 (the "Sample Pool").
Although the Depositor believes that the Sample Pool is representative of the
entire Pool of Home Equity Loans in all material respects, no assurance can be
given in that regard.
Values of Mortgaged Properties subject to Residential Real Estate
Market Conditions
An overall decline in the residential real estate market in one or more
of the applicable regions could adversely affect the values of the Mortgaged
Properties securing the related Home Equity Loans such that the Loan Balances of
such Home Equity Loans, together with any primary financing on such Mortgaged
Properties, equal or exceed the value of such Mortgaged Properties. Since a
significant portion of the Home Equity Loans are secured by second deeds of
trust or mortgages subordinate to the rights of the beneficiaries under the
related first deeds of trust or mortgages, a decline in real estate values would
adversely affect the position of the Trust Fund as the holder of a second lien
before having such an effect on that of the holder of the related first lien. In
addition, a rise in interest rates over a period of time, the general condition
of a Mortgaged Property and other factors may also have the effect of reducing
the value of such Mortgaged Property from the appraised value at the time the
Home Equity Loan was originated. If, following origination, there is a
subsequent reduction in the value of the Mortgaged Property, the ratio of the
amount of the Home Equity Loan to the value of the Mortgaged Property may exceed
the ratio in effect at the time the Home Equity Loan was originated. Such an
increase may reduce the likelihood that, in the event of a default by the
borrower, liquidation or other proceeds will be sufficient to satisfy the Home
Equity Loan after satisfaction of any senior liens.
Effect of Increase in Interest Rates on Ability to Repay
An increase in interest rates over the Loan Rate in effect at the time a
Home Equity Loan was originated may have an adverse effect on the borrower's
ability to pay the required monthly payment. If the borrower also has a first
lien loan which is an adjustable rate loan and interest rates have increased
above the initial rate on such first lien loan, the borrower's ability to pay
the required monthly payment may be further adversely
S-16
<PAGE>
affected by the increase in monthly payments on such first lien loan. Moreover,
such an increase in interest rates may reduce the borrower's ability to obtain
refinancing.
Even assuming that the Mortgaged Properties provide adequate security
for the Home Equity Loans, substantial delays could be encountered in connection
with the liquidation of defaulted Home Equity Loans and corresponding delays in
the receipt of related proceeds by the Certificateholders could occur. Further,
liquidation expenses (such as legal fees, real estate taxes, and maintenance and
preservation expenses) will reduce the proceeds payable to Certificateholders
and thereby reduce the security for the Home Equity Loans. In the event the
Mortgaged Properties fail to provide adequate security for the Home Equity
Loans, holders of the Offered Certificates could experience a loss.
Mortgaged Properties Subject to Uninsured Risks
Although the Master Servicer is required to cause hazard insurance for
each Mortgaged Property to be maintained, the standard form of fire and extended
coverage policy typically does not cover any physical damage resulting from the
following: war, revolution, governmental actions, floods or 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. Accordingly, holders of the Offered
Certificates will bear all risk of loss resulting from such uninsured risks. See
"Description of the Certificates -- Hazard Insurance" herein.
Recomputation of Minimum Monthly Payment and Prepayment Considerations
As described herein under "The Home Equity Lending Program -- Home
Equity Loan Terms," minimum monthly payments due under a Home Equity Loan are
recomputed whenever an Additional Balance is advanced. Such recomputation is
based upon a level installment payment schedule providing for the monthly
payment of interest at the then-current Loan Rate and the amortization of the
Loan Balance over a period corresponding to the period over which the Home
Equity Loan was originally scheduled to amortize. The effect of any such
reamortization will be to extend the final date on which the Home Equity Loan
will be paid in full to a date which corresponds to the term at origination
(i.e., a Home Equity Loan which amortized over 30 years at origination will be
reamortized so as to be paid in full 30 years subsequent to the date of its most
recent advance) and to minimize any current requirement to pay principal. As a
result, in the absence of voluntary prepayments by borrowers, the Home Equity
Loans could extend continuously with negligible reductions in their Loan
Balances and, accordingly, the Certificates could remain outstanding for an
extended period but not to exceed the life of the Trust Fund. The pro rata basis
upon which payments of principal of a Home Equity Loan are allocated between the
Trust Balance and any Additional Balance may also increase the weighted average
lives of the Offered Certificates over those which otherwise would be
experienced were payments to be allocated first to the Trust Fund (until the
Trust Balance has been reduced to zero) and then to the Additional Balances held
by the Originators. See "Allocations of Payments on the Home Equity Loans
Between the Trust Fund and the Originators" herein. Although, for the reasons
described above, it is possible that the Offered Certificates will remain
outstanding (albeit at greatly reduced Certificate Principal Balances)
substantially beyond the time at which generally contemporaneous certificates
evidencing interests in substantially comparable trust funds have been paid in
full, the Master Servicer will have the option to purchase the Trust Balance of
each Home Equity Loan from the Trust Fund on any Distribution Date upon which
the Pool Balance is 10% or less of the Cut-Off Date Pool Balance. The
Originators are unable to project when sufficient Home Equity Loans will have
been paid to reduce the Pool Balance to the level at which the Master Servicer
has the option to purchase the remaining Home Equity Loans. If exercised, this
option would result in a final distribution to holders of the Offered
Certificates. Notwithstanding the foregoing, the Trustee will sell the assets
remaining in the Trust Fund on the ______________ Distribution Date and the
Trust Fund will terminate.
The rate of prepayment of the Home Equity Loans is unpredictable and
will likely depend upon a number of factors. Since home equity loans are not
generally viewed by borrowers as permanent financing, the Home Equity Loans may
experience a higher rate of prepayments than traditional mortgage loans. In
addition, enforcement of the "due-on-sale" provisions of the Home Equity Loans
may also increase prepayments as may the obligation of the Depositor to
repurchase the Trust Balance of any Home Equity Loan as to which the Credit
Limit has been increased following the Cut-Off Date or as to which certain
representations and warranties have been breached
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as of the Cut-Off Date. See "Description of the Certificates -- Amendments to
Loan Agreements" and " -- Collection and Other Servicing Procedures" herein and
"Certain Legal Aspects of Mortgage Loans -- Due-on-Sale Clauses" in the
Prospectus. On the other hand, the possibility that prepayment charges described
herein under "The Home Equity Lending Program -- Home Equity Loan Terms" may be
imposed in connection with the prepayment of certain Home Equity Loans could
slow prepayments during the early years of the Trust Fund during which such
charges may be assessed. Additional factors that may also be expected to affect
the prepayment experience of the Trust Fund include general economic conditions,
interest rates, the availability of alternative financing, homeowner mobility
and any changes limiting or eliminating the deductibility for federal income tax
purposes of interest payments on home equity loans. Furthermore, the prepayment
experience of the Trust Fund will be affected by the extent to which (i) in the
case of Defective Home Equity Loans, the Trust Balances of such Home Equity
Loans are repurchased by the Depositor, (ii) in the case of Liquidated Home
Equity Loans, the Trust Balance is, to the extent of Available Funds,
distributed to holders of the Offered Certificates and (iii) casualty losses are
incurred in respect of Home Equity Loans resulting in the receipt of Insurance
Proceeds by the Trust Fund. See "Description of the Certificates -- Amount of
Distributions" herein.
As a result of the initial allocation of principal proceeds of the Trust
Balances of the Home Equity Loans to the distribution of principal in respect of
the Class (__) Certificates, and after the Class (__) Termination Date, in
respect of the Class (__) Certificates, an increase in the rate of prepayments
of the Home Equity Loans will likely have the effect of reducing the weighted
average lives of the Class (__) and Class (__) Certificates. In addition, on the
Distribution Date on which the Class (__) and Class (__) Certificate Balances
are reduced to zero and on each Distribution Date thereafter until the Class
(__) Certificate Balance is reduced to zero, the holders of the Class (__)
Certificates are entitled to receive as distributions of principal the Class
(__) Excess Available Amount. Such distributions will have the effect of
accelerating the amortization of the Class (__) Certificates. By contrast, prior
to the Class (__) Termination Date, distributions of principal to the Class (__)
and Class (__) Certificateholders will be limited to the Class (__) Excess
Available Amount, if any, which will be distributed first to the Class (__)
Certificateholders until the Class (__) Certificate Balance is reduced to zero,
and then to the Class (__) Certificateholders until the Class (__) Certificate
Balance is reduced to zero. Since an increase in the level of prepayments of the
Home Equity Loans will likely have the effect of reducing the aggregate interest
payments required on the Home Equity Loans on subsequent dates relative to the
amount of interest distributable on the Offered Certificates during such period,
such an increase in prepayments may have the effect of extending the weighted
average life of the Class (__) and Class (__) Certificates. Conversely, a
decreased level of prepayments will likely have the effect of increasing the
aggregate interest payments required on the Home Equity Loans on subsequent
dates relative to the interest distributable on the Offered Certificates during
such period and, accordingly, will have the effect of reducing the weighted
average lives of the Class (__) and Class (__) Certificates.
Subordination of Payments
In order to enhance the likelihood of receipt by the Class (__)
Certificateholders of the Class (__) Formula Amount on each Distribution Date,
the rights of Class (__) and Class (__) Certificateholders to receive
distributions with respect to the Home Equity Loans will be subordinated to
certain rights of Class (__) Certificateholders to receive such distributions.
The rights of holders of the Class (__) Certificates will be further
subordinated to certain rights of holders of the Class (__) Certificates to
receive such distributions. Prior to the Class (__) Termination Date, holders of
the Class (__) Certificates will receive as distributions of principal all
payments of principal made on the Trust Balances of the Home Equity Loans and,
commencing on the Class (__)
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Termination Date, until the Class (__) Termination Date, holders of the Class
(__) Certificates will receive as distributions of principal all such payments.
The entitlement of such Certificates to all of the payments of principal of the
Home Equity Loans will have the effect of accelerating the amortization of the
Class (__) Certificates, from what it would have been if such amounts had been
distributed pro rata on the basis of the principal balances of all Classes of
the Offered Certificates. Until the Class (__) Termination Date, holders of the
Class (__) Certificates will receive distributions of principal only to the
extent of the Class (__) Excess Available Amount, if any. Similarly, following
the Class (__) Termination Date and until the Class (__) Termination Date,
holders of the Class (__) Certificates will receive distributions of principal
only to such extent. Such distributions are expected to have the effect of
accelerating the amortization of the Class (__) and Class (__) Certificates. See
"Yield Sensitivity of Class (__) and Class (__) Certificates" below.
Bankruptcy and Insolvency Considerations
Retention of Documentation. Under the terms of the Agreement, during the
period that the Offered Certificates are outstanding and so long as Beneficial
Corporation's long-term unsecured debt is rated at least A- by Standard &
Poor's, A3 by Moody's and A- by Fitch, the Originators will be entitled to
maintain possession of the documentation relating to each Home Equity Loan sold
by them, including the Loan Agreement or other evidence of indebtedness signed
by the borrower, and assignments of the Home Equity Loans in favor of the
Trustee will not be required to be recorded. Failure to deliver such documents
to the Trustee, when required as described below, and to record the assignments
of the Home Equity Loans in favor of the Trustee will have the result of making
the sale thereof potentially ineffective against (i) any creditors of the
Originators who may have been fraudulently or inadvertently induced to rely on
the Home Equity Loans as assets of the Originators or (ii) in the event the
Originators fraudulently or inadvertently resell a Home Equity Loan to a
purchaser who had no notice of the prior sale thereof and takes possession of
the related Loan Agreement or other evidence of indebtedness, against such a
purchaser. The Agreement will provide that if any loss is suffered in respect of
a Home Equity Loan as a result of an Originator's retention of the documentation
relating to such Home Equity Loan or the failure to record the assignment of the
Home Equity Loan, the Depositor will purchase the Trust Balance of such Home
Equity Loan from the Trust Fund. In the event Beneficial Corporation's long-term
unsecured debt rating does not satisfy the above referenced standards while the
Offered Certificates are outstanding, the documentation relating to each Home
Equity Loan will be delivered to and maintained by the Trustee, and assignments
of the Home Equity Loans in favor of the Trustee will be required to be recorded
(unless an opinion of counsel is obtained to the effect that such recording is
not required to protect the Trustee's right, title and interest in and to the
related Home Equity Loan).
True Sale. The Originators intend that the transfer of the Trust Balance
of each of the Home Equity Loans to the Depositor, will constitute a sale by
each of the Originators to the Depositor and the Depositor intends that its
transfer of the Trust Balance of each of the Home Equity Loans to the Trust Fund
will constitute a sale by it to the Trust Fund. Accordingly, it is intended that
such Trust Balance will not be part of the bankruptcy estate of either any
Originator, or the Depositor and will not be available to the creditors of any
Originator, or the Depositor. However, in the event of an insolvency of an
Originator, or the Depositor, it is possible that the bankruptcy trustee or a
creditor of such Originator, or the Depositor or such Originator, as
debtor-in-possession may argue that the transaction between such Originator and
the Depositor or the Depositor and the Trust Fund, as applicable, was a pledge
of the Trust Percentage of each such Home Equity Loan rather than a true sale.
This position, if accepted by a court, could prevent timely payments of amounts
due on the Offered Certificates. In the event that the documentation relating to
the Home Equity Loans is not delivered to the Trustee and the Originators have
not recorded assignments of the Home Equity
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Loans in favor of the Trustee as described herein under "Description of the
Certificates -- Assignment of Home Equity Loans" prior to the insolvency of an
Originator, or the Depositor, the Trust Fund will not have a perfected security
interest in the related Home Equity Loans and the collections thereon, which may
result in delays in payment and failure to pay amounts due on the Offered
Certificates. In addition, unless the Trust Fund's pro rata share of the
collections on the Home Equity Loans is required to be deposited in the
Certificate Account within two business days following receipt in accordance
with the Agreement, cash collections may be commingled with the Master
Servicer's own funds and used for the Master Servicer's own benefit prior to
each Distribution Date. In the event of the insolvency of the Master Servicer,
the Trust Fund likely will not have a perfected interest in such collections and
the inclusion thereof in the bankruptcy estate of the Master Servicer may result
in delays in payment and failure to pay amounts due on the Offered Certificates.
If a filing of a petition for relief by or against the Originators, or
the Depositor under applicable federal bankruptcy laws were made and a claim
were made that the transfer of the Trust Percentage of each Home Equity Loan to
the Trust Fund should be characterized not as a sale but rather as a transaction
intended to create a security interest to secure obligations of the Originators,
or the Depositor, delays in payments on the Offered Certificates and possible
reductions in the amount of distributions of principal and interest could occur.
In addition, so long as the Originators retain the documentation relating to the
Home Equity Loans in their possession, if such a recharacterization were to
occur, holders of the Offered Certificates may be treated as unsecured creditors
of the Originators.
General Federal and State Regulations
Applicable state laws generally regulate interest rates and other
charges, require certain disclosures, and require licensing of the originator
and holder of loans such as the Home Equity Loans. In addition, many states have
other laws, public policies and general principles of equity relating to the
protection of consumers, unfair and deceptive trade practices and debt
collection practices which may apply to the origination, servicing and
collection of the Home Equity Loans. Depending on the provisions of the
applicable law and the specific facts and circumstances involved, violations of
these laws, policies and principles may limit the ability of the Originators, as
subservicers, and, thus, the Master Servicer, to collect all or part of the
principal of or interest on the Home Equity Loans, may entitle the borrower to a
refund of amounts previously paid and, in addition, could subject the
Originators, as subservicers, and the Master Servicer to damages and
administrative enforcement remedies. See "Certain Legal Aspects of Mortgage
Loans" in the Prospectus.
The Home Equity Loans are also subject to federal laws, including:
(i) the Federal Truth in Lending Act and Regulation Z promulgated
thereunder, which require certain disclosures to the borrowers regarding
the terms of the Home Equity Loans;
(ii) the Equal Credit Opportunity Act and Regulation B
promulgated thereunder, which prohibit discrimination on the basis of
age, race, color, sex, religion, marital status, national origin,
receipt of public assistance or the exercise of any right under the
Consumer Credit Protection Act, in the extension of credit;
(iii) the Fair Credit Reporting Act, which regulates the use and
reporting of information related to the borrower's credit experience;
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(iv) the Fair Debt Collection Practices Act and the Federal Trade
Commission rule on Credit Practices, which regulate practices used to
effect collection on consumer loans;
(v) for Home Equity Loans that were closed after November 7,
1989, the Home Equity Loan Consumer Protection Act of 1988, which
requires additional application disclosures, limits changes that may be
made to loan agreements without the borrower's consent and restricts a
lender's ability to declare a default or to suspend or reduce a
borrower's credit limit to certain enumerated events;
(vi) the Real Estate Settlement Procedures Act and Regulation X
promulgated thereunder, which require certain disclosures to borrowers
regarding settlement costs; and
(vii) the Flood Disaster Protection Act of 1973, as amended by
the National Flood Insurance Reform Act of 1994, which prohibits certain
lending or servicing institutions from making or modifying loans secured
by real estate in certain flood hazard areas unless the underlying
property is covered by appropriate flood insurance.
Numerous other federal and state statutory provisions, including the
federal bankruptcy laws, the Soldiers' and Sailors' Civil Relief Act of 1940 and
state debtor relief laws, may adversely affect the Master Servicer's ability to
collect the principal of or interest on the Home Equity Loans and could also
affect the interests of the Certificateholders in the Home Equity Loans if such
laws result in Home Equity Loans being written off as uncollectible. See
"Description of the Certificates -- Amount of Distributions" herein and "Certain
Legal Aspects of Mortgage Loans -- Anti-Deficiency Legislation and Other
Limitations on Lenders" in the Prospectus.
Distributions of Principal to Class (__) and Class (__) Certificateholders;
Effect on Class (__) and Class (__) Certificateholders of Losses on Home Equity
Loans
Prior to the Class (__) Termination Date, the Class (__)
Certificateholders will not receive any distributions from principal payments on
or in respect of the Home Equity Loans, and the Class (__) Certificateholders
will not receive any such distributions until the Class (__) Termination Date.
The Class (__) Certificateholders will receive as distributions of principal the
Class (__) Excess Available Amount until the Class (__) Termination Date and the
Class (__) Certificateholders will receive as distributions of principal such
amount thereafter. It is not possible to predict whether there will be any Class
(__) Excess Available Amount on any Distribution Date. It is also not possible
to predict when the Class (__) Termination Date, Class (__) Termination Date or
Class (__) Termination Date will occur, if ever. However, each such date will be
affected by the rate of voluntary principal prepayments and recoveries on
account of the liquidation of defaulted Home Equity Loans. The aggregate amount
of distributions on the Class (__) Certificates and the Class (__) Certificates
will be affected by the loss experience of the Home Equity Loans. If the amount
of Available Funds, if any, remaining after the application of Available Funds
to interest due on the Offered Certificates and principal due to be distributed
(exclusive of the portion thereof equal to principal losses on liquidated Home
Equity Loans) (the "Remaining Available Funds") is insufficient to cover such
losses, such losses will be borne by the Class (__) Certificateholders until the
Class (__) Termination Date and thereafter by the Class (__) Certificateholders.
Consequently, Class (__) and Class (__) Certificateholders may not recover their
initial investment in their respective Class of Certificates. In addition, under
such circumstances, such losses will have the effect of reducing the amount of
the Class (__) Excess Available Amount, thereby decreasing the rate of
amortization of the Class (__) Certificates and, after the Class (__)
Termination Date, the Class (__) Certificates. See "Maturity and Prepayment
Considerations" herein.
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Yield Sensitivity of Class (__) and Class (__) Certificateholders
As described herein under "Description of the Certificates -- Amount of
Distributions," Class (__) Certificateholders and, after the Class (__)
Termination Date, Class (__) Certificateholders, will be entitled to receive on
each Distribution Date in respect of each Home Equity Loan that became a
Liquidated Home Equity Loan in such preceding calendar month the entire Trust
Balance of such Home Equity Loan, regardless of whether the Trust Percentage of
the related Net Liquidation Proceeds (i.e., the Liquidation Proceeds less
expenses incurred in connection with liquidating the related Home Equity Loan)
is equal to its Trust Balance. In the event that the aggregate amount of losses
in respect of Liquidated Home Equity Loans causes the sum of the Class (__),
Class (__) and Class (__) Certificate Balances to equal or exceed the Pool
Balance and such losses are not covered by future Excess Available Funds, if
any, such losses will be borne by the holders of the Class (__) Certificates
and, after the date, if any, on which the sum of the Class (__) Certificate
Balance and the Class (__) Certificate Balance equals or exceeds the Pool
Balance, by the holders of the Class (__) Certificates. Consequently, the yield
on the Class (__) Certificates and, after such date, the Class (__)
Certificates, will be extremely sensitive to the losses experienced by the Pool
and the timing of any such losses. If the actual rate and amount of losses
experienced by the Pool exceed the rate and amount of such losses assumed by an
investor in the Class (__) or Class (__) Certificates, such investor's yield to
maturity may be lower than anticipated.
ALLOCATIONS OF PAYMENTS ON THE HOME EQUITY LOANS
BETWEEN THE TRUST FUND AND THE ORIGINATORS
The aggregate outstanding Loan Balance of the Home Equity Loans in the
Pool on the Cut-Off Date, including the right to receive all payments of
interest on such Loan Balance (net of the Servicing Fee), have been sold and
assigned to the Trust Fund. Although each Loan Agreement could in the future
evidence more than the Trust Balance, the balance assigned to the Trust Fund
will be the balance outstanding as of the Cut-Off Date. If Additional Balances
are drawn by the borrowers, future payments and other recoveries (including
proceeds of any insurance policy or liquidation proceeding) of both principal
and interest on the related Home Equity Loans will be allocated for any
Distribution Date on a pro rata basis between the Trust Fund and the Originators
in amounts reflecting the portions of the Loan Balance represented by the
average daily Trust Balance and any average daily Additional Balance.
THE DEPOSITOR
Beneficial Mortgage Services, Inc., the Depositor, is an indirect
wholly-owned subsidiary of Beneficial Corporation and was formed on
February 6, 1997 under the laws of the State of Delaware. The Depositor was
formed for the limited purpose of purchasing and selling mortgage loans,
mortgage pass-through certificates, certain other mortgage-backed securities,
home improvement installment sale contracts and certain direct obligations of
the United States, and issuing, or causing trusts or partnerships to issue,
securities collateralized by, or evidencing on ownership interest in, such
assets.
THE MASTER SERVICER
Beneficial Mortgage Corporation, the Master Servicer, is an indirect
wholly-owned subsidiary of Beneficial Corporation. Each Home Equity Loan will
be serviced directly by the Master Servicer if such Home Equity Loan was
originated by Beneficial Mortgage Corporation, or, if originated by
another Originator, subserviced by such Originator as subservicer on behalf of
the Master Servicer. The servicing and collection policies of the Originators
and the Master Servicer are substantially similar except for differences
attributable to differences in local law and regional economic conditions. In no
event are such differences materially adverse to the interest of
Certificateholders. The Agreement will provide that the Master Servicer will
remain primarily liable for the servicing of the Accounts and have the ultimate
responsibility for ensuring that the subservicers perform their duties as such.
The Master Servicer will be entitled to retain the Servicing Fee on behalf of
itself and the subservicers. The Originators will be entitled to a portion of
the Servicing Fee in their capacity as subservicers.
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THE ORIGINATORS
The Originators, wholly-owned direct and indirect subsidiaries of
Beneficial Corporation, are each licensed as required to make home equity
revolving credit line loans in the states where the Mortgaged Properties
securing Home Equity Loans originated by them are located. The Originators will
sell and assign the Trust Balance of each Home Equity Loan to the Depositor
immediately prior to the issuance of the Certificates.
USE OF PROCEEDS
The Depositor will transfer the Home Equity Loans and other assets of
the Trust Fund to the Trustee in exchange for the Certificates. The net proceeds
to be received from the sale of the Certificates will be used by the Depositor
to pay for the Home Equity Loans purchased from the Originators.
THE HOME EQUITY LENDING PROGRAM
General
The Originators have originated closed-end, fixed-rate mortgages for
over twenty-five years, and have offered home equity revolving credit line
accounts (the "home equity loans") since 1982. As of _______, 199_, the
subsidiaries of the Originators' parent corporation, Beneficial Corporation, had
approximately $________ billion of home equity loans in their owned and managed
portfolios. Of this total amount, approximately $________ billion in home equity
loans were made to customers in the Included States.
Underwriting Procedures Relating to Home Equity Loans
All home equity loan applications received by the Originators are
subjected to an initial credit approval process. The first step in the credit
approval process is to develop a customer analysis profile ("CAP") based upon
information disclosed in the credit application, such as salary, current
employment, and length of period of employment. Each region of the United States
has its own empirically derived numerical credit scoring system, which is used
as an indicator of probability of prompt repayment. If the initial CAP subtotal
is acceptable, an independent credit bureau report is obtained and reviewed,
along with credit references where appropriate. Credit ratings obtained through
the review of the credit bureau report are used to determine the total CAP
score. A loan will not be approved if the total CAP score is lower than the
minimum acceptable total for that region. In addition, a total CAP score which
meets or exceeds the acceptable score for that region is not sufficient reason
in itself for approval of an application.
All home equity loan applications achieving an acceptable CAP score are
next subjected to a direct credit investigation. This investigation includes, in
addition to the above-referenced independent credit bureau report, obtaining (i)
a verification of the first deed of trust or mortgage balance, if any, and
payment history, (ii) verification of employment, income and residence, (iii) a
title search to ensure that all liens, except for any existing first trust deed
or mortgage, are paid prior to, or at the time of, the funding of the loan, and
(iv) for home equity loans with a Credit Limit of $10,000 or more, an
independent appraisal of the property, using a certified appraiser and standard
FNMA/FHLMC appraisal forms.
After this investigation is completed, a decision is made to accept or
reject the loan application. The Originators base their lending decisions
primarily on their analysis of the borrower's ability to repay the loan. If the
application is accepted, a maximum credit limit ("Credit Limit") is
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assigned based on the borrower's ability to repay and an acceptable combined
loan-to-value ratio. Generally, all prospective borrowers must have a
debt-to-income ratio of no greater than 50% where debt is defined as the sum of
the first deed of trust or mortgage payment, including escrow payments for
hazard insurance premiums, real estate taxes, mortgage insurance premiums and
any owner's association dues, plus payments on any installment debt (including
payments on the home equity loan, computed on the basis of the Credit Limit
applied for at the then-current interest rate on the home equity loan) that
extends beyond ten months, and alimony, child support or maintenance payments,
and where income is defined as stable monthly gross income from the borrower's
primary source of employment, plus acceptable secondary income. In addition, an
assessment is made of the adequacy of the borrower's remaining income to pay
other monthly obligations, taking into consideration such factors as the number
of dependents. The borrowers are not required to requalify or update their
applications for their home equity loans following the initial credit
application process. The determination of an acceptable combined loan-to-value
ratio (which takes into account any senior lien loan) is based on the real
estate's quality, condition, appreciation history and prospective market
conditions. The home equity loans generally will have a combined loan-to-value
ratio not in excess of 75% if secured by a second deed of trust or mortgage, or
80% if secured by a first deed of trust or mortgage. All home equity loans with
a Credit Limit of $10,000 or more are required to be covered by title insurance
policies or, in Georgia, Ohio and Pennsylvania, foreclosure impairment insurance
which is underwritten by affiliates of the Originators.
Home Equity Loan Terms
The borrower may access the home equity loan by writing a check. The
borrower must, however, on the opening of an account, draw an initial advance.
The minimum initial advance ranges from $2,500 to $5,500. Each home equity loan
is assigned an amortization basis when the account is opened. The "amortization
basis" is the length of time in which the initial advance plus interest is
scheduled to be repaid in full. The amortization bases of the home equity loans
range from 60 months (5 years) to 360 months (30 years) depending on the Credit
Limit assigned. Generally, the amortization basis is longer the higher the
Credit Limit. The minimum monthly payment on a home equity loan is equal to the
sum of the following: (i) a Monthly Payment Amount (which is the amount
necessary to completely repay the balance and the applicable finance charge in
equal installments over the assigned amortization basis); (ii) any monthly
insurance charges; (iii) any delinquency or other similar charges; and (iv) any
past due amounts, including past due finance charges. The Monthly Payment Amount
will be recomputed each time the Reference Rate adjusts and whenever an
additional amount is advanced under the home equity loan (such amount, an
"advance"); such recomputation in the case of an advance also resets the
amortization schedule. The effect of each such advance on the related home
equity loan is to reset the commencement date of the original amortization basis
to the date of the most recent advance. For example, a home equity loan made
originally with a 15-year amortization basis measured from the date of
origination changes at the time of the next advance to a home equity loan with
an amortization basis of 15 years measured from the date of such advance.
Interest on home equity loans is calculated on the basis of actual days elapsed
over a year of 360 days. Accordingly, in the case of home equity loans having a
30-year amortization basis, there may be no repayment of principal for billing
cycles in which there are more than 30 days. Generally, a borrower's minimum
monthly payment is due one month after the billing date. A billing cycle for a
home equity loan is a one-month period which generally commences on the day
following the end of the preceding billing cycle (or the date such home equity
loan was originated, in the case of the first billing cycle) and ends on the
corresponding day of the following month. Billing statements are produced as of
the end of each billing cycle which reflect all payment activity and any
additional borrowings during such billing cycle.
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Each home equity loan bears interest at a variable rate which may change
each calendar quarter based on changes in the Reference Rate. The initial
interest rate generally will be the Reference Rate plus from ____ to ____
percentage points, rounded up to the nearest one-quarter percent (the "Margin").
The applicable Margin on any home equity loan is determined by an overall
evaluation of the borrower and market conditions. Subsequently, the interest
rate charged on the home equity loan will be reviewed on the first day of the
months of March, June, September and December and will be increased or decreased
if the Reference Rate in effect on such dates is different by ___ of ____% or
more from the Reference Rate used to calculate the interest rate then in effect
on the home equity loan. Any such adjustment in the interest rate on a home
equity loan will take effect on the first day of the borrower's billing cycle in
April, July, October and January, respectively. Depending on the date on which a
home equity loan account is opened, the first adjustment may take place earlier
than three calendar months after the opening of the account. In certain of the
Included States, adjustments in any year (commencing on the anniversary date of
the account) will not increase or decrease by more than a specified percentage
(ranging from ____% to ____%) for home equity loans. The Home Equity Loans have
maximum Loan Rates generally ranging from ____% to ____% per annum. The weighted
average maximum Loan Rate of the Home Equity Loans as of the Cut-Off Date was
____%. The interest rates on the home equity loans are generally not subject to
a floor annual percentage rate.
For home equity loans secured by real property located in certain
states, the Originators may have a right to assess a penalty in connection with
the prepayment of a Home Equity Loan. The amount of the prepayment charge will
generally be based on the interest rate on the home equity loan in effect on the
date of prepayment. A prepayment charge also may be assessed against the
borrower if a home equity loan account is closed by the related Originator due
to a default by the borrower under the loan agreement evidencing the home equity
loan (the "loan agreement"). It has been the Originators' general policy to
collect prepayment charges on all home equity loans evidenced by loan agreements
which provide for a prepayment charge, although in some limited cases such
prepayment charges may be waived. The prepayment charges collected on the home
equity loans will not be distributed to the Certificateholders, but will be
retained by the Master Servicer and paid to the Originators as compensation for
the origination costs of the home equity loans incurred by the Originators. See
"Maturity and Prepayment Considerations" herein.
Each loan agreement provides that the related Originator has the right
to require the borrower to pay the entire balance plus all other accrued but
unpaid charges immediately, and to cancel the borrower's credit privileges under
the loan agreement if, among other things, the borrower fails to make any
minimum monthly payment when due under the loan agreement, if there is a
material change in the borrower's ability to repay the home equity loan, if the
borrower sells any interest in the property securing the loan agreement, thereby
causing the "due-on-sale" clause in the trust deed or mortgage to become
effective, or if, as a result of unfavorable economic conditions or legislation,
the Originators determine not to continue to offer home equity loans to new
borrowers.
In the event of a default on a first deed of trust or mortgage that is
senior to any home equity loan, the related Originator has the right to satisfy
the defaulted senior lien loan in full or to cure such default and bring the
defaulted senior lien loan current, in either event adding any amounts expended
in connection with such satisfaction or cure to the then-current principal
balance of such home equity loan. In such event, the Originators will either
take the action described above or may refrain from taking any action based upon
reasonable commercial practice in the home equity revolving credit line loan
industry generally. See "Certain Legal Aspects of Mortgage Loans -- Foreclosure"
and " -- Junior Mortgages" in the Prospectus.
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None of the home equity loans are insured by the Federal Housing
Administration, guaranteed by the Veterans Administration or otherwise insured
or guaranteed in any manner (except for title, foreclosure impairment and hazard
insurance).
Servicing of Home Equity Loans
Each Home Equity Loan will be serviced directly by the Master Servicer
or, if originated by another Originator, by such Originator as subservicer on
behalf of the Master Servicer. The servicing and collection policies of the
Originators and the Master Servicer are substantially similar except for
differences attributable to differences in local law and local economic
conditions which in no event are materially adverse to the interests of
Certificateholders. The Master Servicer and the Originators, through local loan
offices, keep abreast of, and in making servicing decisions take account of,
local economies and other regional considerations. The Master Servicer and the
Originators believe that this type of regionalized, consumer-oriented attention
enables them to service their portfolios of home equity loans in the most
efficient manner.
The current policy of the Master Servicer and the Originators is
generally to consider initiating the foreclosure process on the mortgaged
property after a home equity loan is more than 60 days contractually delinquent
and, in the case of non-judicial foreclosure, after all notices required by law
have been sent to the borrower. Upon obtaining title to the property, the loan
is written down to its net realizable value and any losses are recognized. After
six months, such loan is written down an additional 25% of its net realizable
value. Any real estate which is owned and not resold is ordinarily charged off
after 12 months. However, losses on Liquidated Home Equity Loans will be
realized by the Trust Fund as described herein under "Description of the
Certificates -- Amount of Distributions."
Servicing and charge-off policies and collection practices may change
over time in accordance with the Master Servicer's business judgment, changes in
the Master Servicer's home equity loan portfolio and applicable laws and
regulations, as well as other items.
The information in the tables below represents (i) the loan loss
experience for the total real estate portfolio (both revolving home equity loans
and traditional closed-end second mortgages, since separate loan loss data on
the revolving home equity loans is not maintained) for both the entire United
States servicing portfolio of the consumer finance subsidiaries of Beneficial
Corporation (such portfolio, the "Total U.S. Real Estate Portfolio") and their
combined servicing portfolio in the Included States (such portfolio, the
"Included States Portfolio"), and (ii) the delinquency experience for revolving
home equity loans for both the entire United States servicing portfolio of such
subsidiaries (such portfolio, the "U.S. Servicing Portfolio") and the Included
States Portfolio.
The delinquency information presented in the tables is based upon
calendar month information, whereas the Home Equity Loan delinquencies will be
reported to the Certificateholders on a billing cycle basis. See "Description of
the Certificates -- Reports to Certificateholders" herein.
S-26
<PAGE>
<TABLE>
Total U.S. Real Estate Portfolio Loan Loss Experience
<CAPTION>
Year Ended December 31,
--------------------------------------------------
199_ 199_ 199_ 199_
--------- --------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Number of Real Estate Loans
Serviced.........................
Average Aggregate Loan Balance of
Real Estate Serviced.............
Gross Credit Losses(1)
Dollars........................
Percentage.....................
- ---------
(1) Not including accrued interest.
(2) Annualized.
</TABLE>
<TABLE>
Included States Portfolio Loan Loss Experience
<CAPTION>
Year Ended December 31,
--------------------------------------------------
199_ 199_ 199_ 199_
--------- --------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Number of Real Estate Loans
Serviced.........................
Average Aggregate Loan Balance of
Real Estate Serviced.............
Gross Credit Losses(1)
Dollars........................
Percentage.....................
- ---------
(1) Not including accrued interest.
(2) Annualized.
</TABLE>
S-27
<PAGE>
<TABLE>
Home Equity Revolving Credit Line (HELS)
U.S. Servicing Portfolio Delinquency Experience
<CAPTION>
Year Ended December 31,
--------------------------------------------------
199_ 199_ 199_ 199_
--------- --------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Number of HELs Serviced............
Loan Balance of HELs Serviced......
Loan Balance of HELs 2 Months
Delinquent(1)....................
Loan Balance of HELs 3 Months or
more Delinquent(1)...............
Total of 2 Months or more
Delinquent as a Percentage of the
Loan Balance of HELs
Serviced(1)......................
- ---------
(1) On a contractual basis.
</TABLE>
<TABLE>
Home Equity Revolving Credit Line (HELS)
Included States Portfolio Delinquency Experience
<CAPTION>
Year Ended December 31,
--------------------------------------------------
199_ 199_ 199_ 199_
--------- --------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Number of HELs Serviced............
Loan Balance of HELs Serviced......
Loan Balance of HELs 2 Months
Delinquent(1)....................
Loan Balance of HELs 3 Months or
more Delinquent(1)...............
Total of 2 Months or more
Delinquent as a Percentage of the
Loan Balance of HELs
Serviced(1)......................
- ---------
(1) On a contractual basis.
</TABLE>
S-28
<PAGE>
THE HOME EQUITY LOAN POOL
The Home Equity Loans are evidenced by loan agreements (each, a "Loan
Agreement") secured by deeds of trust or mortgages on the Mortgaged Properties.
Each Home Equity Loan was selected by the related Originator for
inclusion in the Pool from among those that met the following criteria: (i) as
of the Cut-Off Date, a current Loan Balance of not less than $________, (ii) as
of the Cut-Off Date, the most recent payment in respect of each Home Equity Loan
was received on or subsequent to the ______, 199_ billing date, (iii) secured by
a first or second lien position, (iv) originated by loan offices of the
Originators doing business in the Included States, (v) did not have a remaining
term or original term greater than 360 months and (vi) did not provide for
negative amortization. Each Home Equity Loan was originated between ________,
199_ and _________, 199_ in the ordinary course of the Originators' Home Equity
Loan programs. As of the Cut-Off Date, the average principal balance of the Home
Equity Loans was $________. As of the Cut-Off Date, the weighted average Margin
of the Home Equity Loans where the Reference Rate is based on Prime was ____%,
the weighted average loan utilization rate (computed by dividing the Loan
Balance for each Home Equity Loan by the related Credit Limit) of the Home
Equity Loans was ____% weighted by Credit Limit and the weighted average Net
Loan Rate was ____%. As of the Cut-Off Date, ____% of the Home Equity Loans (by
Trust Balance) were secured by first deeds of trust or mortgages and the
remainder were secured by second deeds of trust or mortgages.
Prior to July 7, 1996, the Originators did not maintain in their
electronic records the following data: (i) the valuation of the related
mortgaged properties and the balance of each mortgage loan that is senior to a
Home Equity Loan, which information is needed in order to compute the Combined
Loan-to-Value Ratio of such Home Equity Loan, (ii) the existence of liens senior
to the related Home Equity Loan, (iii) the type of Mortgaged Property (e.g.,
single-family), (iv) the use of the Mortgaged Property (e.g., owner-occupied),
or (v) the actual location of the Mortgaged Property. Although such information
is contained in the original physical files for each Home Equity Loan, the
Originators do not enter such information into their electronic records. The
Originators have on their electronic records information with respect to the
billing address of the borrower and the location of the Originator's loan
office, but do not have information with respect to the actual location of the
Mortgaged Property. The Depositor cannot predict to what extent there is a
correlation between the billing address or the location of the Originator's loan
office, on the one hand, and the actual location of the Mortgaged Property, on
the other hand. Therefore, the Depositor cannot determine whether the billing
addresses of the borrowers or the location of the Originator's loan offices
would provide an accurate picture of the geographical distribution of the
Mortgaged Properties. Consequently, certain of the tables below are based solely
on information on the Sample Pool which includes all Home Equity Loans
originated after ________, 199_ (the "Sample Pool Home Equity Loans"). The _____
Home Equity Loans in the Sample Pool represent ____% of the ______ Home Equity
Loans and _____% of the aggregate Trust Balance of the Home Equity Loans.
Although the Depositor believes that the Sample Pool is representative of the
entire Pool in all material respects, no assurance can be given in this regard.
Based on the Trust Balances of the Sample Pool Home Equity Loans as of
_________, 199_ (the "Sample Pool Balance"), the weighted average Combined
Loan-to-Value Ratio was approximately ____%, and the Combined Loan-to-Value
Ratios did not exceed ____%, in the case of approximately ____% by Sample Pool
Balance of such Sample Pool Home Equity Loans, and did not exceed __%, in the
case of ____% by Sample Pool Balance of such Sample Pool Home Equity Loans. In
addition, ____% of the Sample Pool Home Equity Loans by Sample Pool Balance were
secured by deeds of trust or mortgages on single-family residences and ____% of
the Sample Pool Home Equity Loans by Sample Pool Balance were secured by
properties
S-29
<PAGE>
represented by the borrowers to be their primary residences. "Combined
Loan-to-Value Ratio" for any Home Equity Loan means the ratio of (i) the credit
limit as of the date of origination of such Home Equity Loan plus the then
current balance of any first mortgage to (ii) the appraised value of the related
Mortgaged Property, as determined in connection with the origination of such
Home Equity Loan.
The sum of the individual balances and percentages set forth on the
following schedules may not equal the total due to rounding. The following
schedules are indicative of certain additional characteristics of the Home
Equity Loans and the Sample Pool Home Equity Loans as of the Cut-Off Date:
Cut-Off Date Trust Balances(1)
- --------------------------------------------------------------------------------
Cut-Off Percentage of
Range of Number of Date Pool By
Cut-Off Date Home Equity Trust Cut-Off Date
Trust Balances Loans Balance Trust Balance
- --------------------------------------------------------------------------------
Total 100.00%
=======
- -------------------
(1) The average Cut-Off Date Trust Balance is $________.
Cut-Off Date Loan Rates(1)
- --------------------------------------------------------------------------------
Cut-Off Percentage of
Number of Date Pool By
Range of Home Equity Trust Cut-Off Date
Loan Rates Loans Balance Trust Balance
- --------------------------------------------------------------------------------
Total 100.00%
- -------------------
(1) The Weighted Average Cut-Off Date Loan Rate is ____% per annum.
S-30
<PAGE>
Cut-Off Date Margin Ranges -- LIBOR(1)(2)
- --------------------------------------------------------------------------------
Cut-Off Percentage of
Number of Date Pool By
Cut-Off Date Home Equity Trust Cut-Off Date
Margin Ranges Loans Balance Trust Balance
- --------------------------------------------------------------------------------
Total 100.00%
- -------------------
(1) The Weighted Average Cut-Off Date Margin where the Reference Rate is based
on Three-Month LIBOR is ____%.
(2) This schedule includes those Home Equity Loans where the Reference Rate is
based on Three-Month LIBOR.
Cut-Off Date Margin Ranges-Prime (1)(2)
- --------------------------------------------------------------------------------
Cut-Off Percentage of
Number of Date Pool By
Cut-Off Date Home Equity Trust Cut-Off Date
Margin Ranges Loans Balance Trust Balance
- --------------------------------------------------------------------------------
Total 100.00%
=======
- -------------------
(1) The Weighted Average Cut-Off Date Margin where the Reference Rate is based
on Prime is _____%.
(2) This schedule includes those Home Equity Loans where the Reference Rate is
based on Prime.
Cut-Off Date Maximum Interest Rate(1)
- --------------------------------------------------------------------------------
Cut-Off Percentage of
Cut-off Date Number of Date Pool By
Maximum Home Equity Trust Cut-Off Date
Interest Rate Loans Balance Trust Balance
- --------------------------------------------------------------------------------
Total 100.00%
=======
- -------------------
(1) The Weighted Average Cut-Off Date Maximum Interest Rate is ____% per annum.
S-31
<PAGE>
Cut-Off Date Loan Amortization Term(1)
- --------------------------------------------------------------------------------
Cut-Off Percentage of
Loan Amortization Number of Date Pool By
Term Home Equity Trust Cut-Off Date
Trust Balances Loans Balance Trust Balance
- --------------------------------------------------------------------------------
Total 100.00%
=======
- -------------------
(1) The Weighted Average Cut-Off Date Loan Amortization Term is approximately
___ months. The effect of an Additional Balance in connection with a Home
Equity Loan is to reset the commencement date of the original amortization
basis to the date such Additional Balance is drawn.
Sample Pool Types of Mortgaged Properties(1)(2)
- --------------------------------------------------------------------------------
Cut-Off Percentage of
Number of Date Pool By
Home Equity Trust Sample Pool
Property Type Loans Balance Balance
- --------------------------------------------------------------------------------
Total 100.00%
=======
- -------------------
(1) Based on information supplied by the borrower in loan application.
(2) Includes Home Equity Loans secured by multiple Mortgaged Properties. Each of
these Home Equity Loans has been categorized according to the property type
of the Mortgaged Property that has the highest appraised value securing such
Home Equity Loan.
Sample Pool Use of Mortgaged Properties(1)(2)
- --------------------------------------------------------------------------------
Cut-Off Percentage
Number of Date of
Home Equity Trust Sample Pool
Property Use Loans Balance Balance
- --------------------------------------------------------------------------------
Total 100.00%
=======
- -------------------
(1) Based on information supplied by the borrower in loan application.
(2) Includes Home Equity Loans secured by multiple Mortgaged Properties. Each of
these Home Equity Loans has been categorized according to the use of the
Mortgaged Property that has the highest appraised value securing such Home
Equity Loan.
S-32
<PAGE>
Year of Origination
- --------------------------------------------------------------------------------
Cut-Off Percentage of
Number of Date Pool By
Year of Home Equity Trust Cut-Off Date
Origination Loans Balance Trust Balance
- --------------------------------------------------------------------------------
Total 100.00%
=======
Sample Pool Combined Loan-to-Value Ratio(1)
- --------------------------------------------------------------------------------
Cut-Off Percentage
Range of Number of Date of
Combined Home Equity Trust Sample Pool
Loan-to-Value Ratios Loans Balance Balance
- --------------------------------------------------------------------------------
Total 100.00%
=======
- -----------------
(1) The weighted average of the Sample Pool Combined Loan-to-Value Ratio is
____%.
Sample Pool Geographical Distribution of Mortgaged Properties(1)
- --------------------------------------------------------------------------------
Cut-Off Percentage
Number of Date of
Home Equity Trust Sample Pool
State Loans Balance Balance
- --------------------------------------------------------------------------------
Total 100.00%
=======
- ------------------
(1) Includes Home Equity Loans secured by multiple Mortgaged Properties. Each of
these Home Equity Loans has been geographically categorized according to the
location of the Mortgaged Property that has the highest appraised value
securing such Home Equity Loan.
S-33
<PAGE>
MATURITY AND PREPAYMENT CONSIDERATIONS
As described herein, the actual maturity of the Offered Certificates
will depend on the timing of the receipt of principal (including prepayments) on
the Home Equity Loans, the amount of Excess Available Amounts distributed on
each Distribution Date and, among other things, the extent to which the Home
Equity Loans become Liquidated Home Equity Loans. All of the Home Equity Loans
may be prepaid in full or in part at any time. In certain of the Included
States, however, the Originators may have a right to assess a penalty in
connection with prepayments of any such Home Equity Loans. The prepayment
charges collected on the Home Equity Loans will not be distributed to
Certificateholders, but will be retained by the Master Servicer and paid to the
related Originator as compensation for the origination costs of the Home Equity
Loans incurred by the Originator. See "The Home Equity Lending Program -- Home
Equity Loan Terms" herein.
The Originators do not generally maintain records of the historical
prepayment experience on their portfolios of home equity loans, and the
Depositor is not aware of any publicly available studies or statistics on the
rate of prepayment of home equity loans such as the Home Equity Loans.
Generally, home equity loans are not viewed by mortgagors as permanent
financing. Accordingly, the Home Equity Loans may experience a higher rate of
prepayment than traditional mortgage loans. On the other hand, because the
amortization schedules relating to the Home Equity Loans are reset upon
additional draws by the related borrowers, in the absence of voluntary borrower
prepayments, slower rates of principal payments could be experienced relative to
traditional fully amortizing first mortgages. The prepayment experience of the
Home Equity Loans may be affected by a wide variety of factors, including
general economic conditions, interest rates, the availability of alternative
financing and homeowner mobility. Notwithstanding the foregoing, the Trustee
will sell the assets remaining in the Trust Fund on the Distribution Date
occurring in ______________ and the Trust Fund will terminate.
Borrower payments of principal (including prepayments) with respect to
any Home Equity Loan will be applied on a pro rata basis to the reduction of the
related Trust Balance and any related Additional Balance. As described above,
holders of Class (__) Certificates are entitled to distributions of principal
equal to the Trust Percentage of all principal received on or in respect of the
Home Equity Loans until the Class (__) Termination Date. After such date,
holders of the Class (__) Certificates will be entitled to all such amounts
until the Class (__) Termination Date and thereafter holders of the Class (__)
Certificates will be entitled to all such amounts. In addition, the rate at
which the Class (__), Class (__) and Class (__) Certificate Balances amortize
will be affected by the application of Excess Available Funds as described
herein and by any repurchases of Home Equity Loans by the Depositor pursuant to
the Agreement. Furthermore, substantially all of the Home Equity Loans contain
due-on-sale provisions, and the Master Servicer intends to enforce such
provisions unless such enforcement is not permitted by applicable law. The
enforcement of a due-on-sale provision will have the same effect as a prepayment
of the related Home Equity Loan. See "Description of the Certificates --
Collection and Other Servicing Procedures" herein and "Certain Legal Aspects of
Mortgage Loans -- Due-on-Sale Clauses" in the Prospectus for a description of
certain provisions of the Agreement that may affect the prepayment experience on
the Home Equity Loans. The yield to an investor in any Class of Offered
Certificates who purchases such Offered Certificates at a price that is
different from par will be different if the rate of prepayment on the Home
Equity Loans is actually different than the rate anticipated by such investor at
the time such Certificates were purchased. Holders of the Offered Certificates
will bear the risk of being able to reinvest their distributions of principal at
a yield at least equal to the yield on their Offered Certificates.
S-34
<PAGE>
Collections on the Home Equity Loans may vary because, among other
things, borrowers may make payments during any month as low as the interest
payment for such month plus an amount of principal or as high as the entire
outstanding balance plus accrued interest thereon. Collections on the Home
Equity Loans may also vary due to seasonal purchasing and payment habits of
borrowers.
No assurance can be given as to the level of prepayments that the Home
Equity Loans will experience, and it can be expected that a portion of borrowers
will not prepay their Home Equity Loans to any significant degree.
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The prepayment assumption model used in this
Prospectus Supplement is based on a Constant Prepayment Rate ("CPR"). CPR
represents a constant rate of prepayment on the Home Equity Loans each month
relative to the aggregate outstanding principal balance of the Home Equity
Loans. CPR does not purport to be either a historical description of the
prepayment experience of any pool of home equity loans or a prediction of the
anticipated rate of prepayment of any pool of home equity loans, including the
Home Equity Loans, and no representation is made to the effect that the Home
Equity Loans will prepay at the specified CPR. Furthermore, the Depositor does
not make any representation about the appropriateness of the CPR model.
The following tables set forth the percentages of the initial Class (__)
and Class (__) Certificate Balances that would be outstanding after each of the
dates shown, based on CPRs of 0%, 10%, 20%, 25%, 30% and 40% per annum. It is
very unlikely that the Home Equity Loans will prepay at a constant rate of CPR
until maturity or that all of the Home Equity Loans will prepay at the same
rate.
The following tables assume that the Home Equity Loans have been
aggregated into a pool with a principal balance of $______________, a weighted
average Loan Rate of _____%, and a weighted average Net Loan Rate of _____%. In
addition, such tables assume that (i) the distributions are made in accordance
with the description set forth under "Description of the Certificates -- Amount
of Distributions" herein, (ii) distributions of principal and interest on the
Offered Certificates will be made on the ____ day of each calendar month
regardless of the day on which the Distribution Date actually occurs, (iii) no
delinquencies or losses occur on the Home Equity Loans, (iv) scheduled monthly
payments on the Home Equity Loans are comprised of interest only and the only
principal payments on the Home Equity Loans are those represented by prepayments
calculated under each of the prepayment assumptions as set forth in the previous
paragraph, (v) all prepayments are prepayments in full, (vi) the scheduled due
date for each of the Home Equity Loans is the first day of each month and each
Home Equity Loan accrues interest on the basis of a 360-day year of twelve
30-day months, (vii) the Closing Date is ____________, 199_, (viii) other than
as indicated in the tables, the Home Equity Loans are not purchased as described
under "Description of the Certificates -- Termination; Retirement of the
Certificates" herein, (ix) the difference between the weighted average Loan Rate
of _____% and the weighted average Net Loan Rate of _____% is sufficient to pay
servicing fees, (x) the initial Class (__) Certificate Balance is $___________
the initial Class (__) Certificate Balance is $__________ and the initial Class
(__) Certificate Balance is $__________ and (xi) the Class (__), Class (__) and
Class (__) Pass-Through Rates remain constant at ______%, ______% and ______%
per annum, respectively.
Since the tables were prepared on the basis of the assumptions in the
preceding paragraph, there will be discrepancies between the characteristics of
the actual Home Equity Loans and the characteristics assumed in preparing the
tables. Any such discrepancy may have an effect upon the percentages of the
Class (__) and Class (__) Certificate Balances outstanding and the weighted
S-35
<PAGE>
average lives of the Offered Certificates set forth in the tables. In
particular, all the rates on the Home Equity Loans are adjustable and will most
likely vary from the assumed interest rate, which variation may have a
significant effect on the percentages of the Class (__) and Class (__)
Certificate Balances outstanding and the weighted average lives. As a result of
the foregoing, the distributions of principal on the Offered Certificates may be
made earlier or later than indicated in the tables. In addition, the tables show
the weighted average lives of each Class of the Offered Certificates assuming
that the Master Servicer exercises its option to purchase the Home Equity Loans
when the Pool Balance is 10% or less of the Cut-Off Date Pool Balance, as
described herein under "Description of the Certificates -- Termination;
Retirement of the Certificates." There can be no assurance that such purchase
will occur.
Based upon the assumptions set forth above, the weighted average life
and expected maturity date of the Class (__) Certificates are ____ years and
__________, 199_, assuming a CPR of 0%, ____ years and _______, 199_, assuming a
CPR of 30%, and ____ years and ___________, 199_, assuming a CPR of 40%.
The Master Servicer has the option of purchasing all of the assets of
the Trust Fund at such time as the Pool Balance is less than 10% of the Cut-Off
Date Pool Balance. In the event the Master Servicer exercises its option of
purchasing all of the assets of the Trust Fund, distributions allocable to
principal will be made to holders of the Offered Certificates in advance (and
possibly significantly in advance) of the time that the aggregate amount of such
distributions would otherwise have been made to Certificateholders. See
"Description of the Certificates -- Termination; Retirement of the Certificates"
herein. Further, the distribution of all or a portion of the Excess Available
Funds in reduction of principal of the Class (__) Certificates for so long as
such Certificates are outstanding, and thereafter in reduction of principal of
the Class (__) Certificates, will accelerate the rate of principal distributable
thereon. In addition, if the Class (__) Certificates remain outstanding
following the retirement of the Class (__) and Class (__) Certificates, all or a
portion of the Excess Available Funds will be distributed in reduction of
principal of the Class (__) Certificates and, accordingly, will accelerate the
amortization of such Class.
<TABLE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE OUTSTANDING
Class (__) CERTIFICATES
<CAPTION>
Distribution Dates 0% 10% 20% 25% 30% 40%
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Initial.......................... 100% 100% 100% 100% 100% 100%
Weighted Average Life(1).........
Expected Maturity Date...........
Weighted Average Life(2).........
Expected Maturity Date(2)........
- ---------
(1) The weighted average life of the Class (__) Certificates is determined by
(i) multiplying the amount of each principal payment by the number of years
from the date of issuance to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the initial Certificate Balance for
such Certificates.
</TABLE>
S-36
<PAGE>
(2) Assumes that an optional purchase is exercised by the Master Servicer when
the Pool Balance is 10% or less of the Cut-Off Date Pool Balance.
<TABLE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE OUTSTANDING OF
Class (__) CERTIFICATES
<CAPTION>
Distribution Dates 0% 10% 20% 25% 30% 40%
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Initial.......................... 100% 100% 100% 100% 100% 100%
Weighted Average Life(1).........
Expected Maturity Date...........
Weighted Average Life(2).........
Expected Maturity Date(2)........
- ---------
(1) The weighted average life of the Class (__) Certificates is determined by
(i) multiplying the amount of each principal payment by the number of years
from the date of issuance to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the initial Class (__) Certificates
Balance.
(2) Assumes that an optional purchase is exercised by the Master Servicer when
the Pool Balance is 10% or less of the Cut-Off Date Pool Balance.
</TABLE>
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement, which will be
filed with the Securities and Exchange Commission on a Form 8-K current report
after the initial issuance of the Certificates. The following summaries describe
certain provisions of the Agreement, but 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 Agreement. Wherever particular sections or defined terms of
the Agreement are referred to, such sections or defined terms are hereby
incorporated herein by reference. The description of the Agreement herein
contains the material terms of the Agreement and supplements the description of
a Pooling and Servicing Agreement in the Prospectus.
General
The Offered Certificates will be issued in denominations of $________
and integral multiples thereof and will evidence specified beneficial ownership
interests in the Trust Fund. (Section ____). The Trust Fund consists of, to the
extent provided in the Agreement, (i) the Trust Balance of each of the Home
Equity Loans that from time to time are subject to the Agreement, (ii) the
assets that from time to time are identified as deposited in respect thereof in
the Certificate Account referred to below under Payments on Home Equity Loans;
Establishment of Home Equity Loan Payment Record; Deposits to Certificate
Account" in accordance with the Agreement (except as otherwise provided
therein), (iii) the Trust Percentage of property acquired by foreclosure of such
Home Equity Loans or deed in lieu of foreclosure and (iv) any Servicer Letter of
Credit. (Article and Section ____). Definitive Certificates (as defined in
"Description of Certificates -- Registration of Certificates" herein), if
issued, will be transferable and exchangeable at the corporate trust office of
the Trustee, acting as Certificate Registrar. No service charge will be made for
any
S-37
<PAGE>
registration of exchange or transfer of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge. (Section ____).
Assignment of Home Equity Loans
At the time of issuance of the Certificates, the Originators will assign
to the Depositor, who in turn will assign to the Trustee, all of the
Originators' right, title and interest in and to the Trust Percentage of each
Home Equity Loan, including the Trust Percentage of all principal and interest
received on or with respect to each such Home Equity Loan subsequent to the
Cut-Off Date (other than principal and interest allocable to any Additional
Balance and any prepayment charges, fees or amounts received in respect of
taxes, insurance premiums, assessments and similar items, as provided in the
Agreement), together with all their right, title and interest in and to the
Trust Percentage of the proceeds of any related insurance policies received
after the Cut-Off Date. (Section ____). The Trustee, concurrently with the
Depositor's assignment, will deliver the Certificates to the Depositor in
exchange for the Home Equity Loans. (Section ____).
Under the terms of the Agreement, during the period that the
Certificates are outstanding and so long as Beneficial Corporation's long-term
senior debt is rated at least A- by Standard & Poor's, A3 by Moody's and A- by
Fitch, the related Originators shall be entitled to maintain possession of
certain documents relating to the Home Equity Loans (the "Mortgage Files") and
will not be required to deliver any of them to the Trustee. In addition, during
such time the Originators shall not be required to record assignments of the
Home Equity Loans in favor of the Trustee. In the event, however, that
possession of any Mortgage File is required by the Master Servicer, the Master
Servicer will be entitled to request delivery thereof and to retain the same for
as long as necessary for servicing purposes. Any such Mortgage Files will be
returned to the related Originator (unless returned to the related borrower in
connection with the payment in full of the related Home Equity Loan) when
possession thereof is no longer required. In the event that Beneficial
Corporation's long-term senior debt rating does not satisfy the above-referenced
standards while the Certificates are outstanding, the documentation relating to
each Home Equity Loan will be delivered to and maintained by the Trustee and the
Originators will be required to record assignments of the Home Equity Loans in
favor of the Trustee (unless opinions of counsel are delivered to the Trustee to
the effect that recordation of assignments is not required to protect the
interests of the Trustee in the Home Equity Loans). The Agreement will provide
that the Master Servicer will notify each of the Originators and the Trustee
upon learning that Beneficial Corporation's long-term senior debt rating does
not satisfy the above-referenced standards. Under the Agreement, the Trustee is
appointed attorney-in-fact for each Originator with power to prepare, execute
and record assignments of the Home Equity Loans in the event that the
Originators fail to do so on a timely basis. (Section ____).
In the event the Mortgage Files are delivered to the Trustee, the
Trustee will review such Mortgage Files within 60 days of receipt thereof.
(Section ____). If any such document is found to be missing or defective in any
material respect and if the omission or defect is not cured within a 30-day
period, the Depositor will be obligated either (i) to repurchase the Trust
Balance of the related Home Equity Loan from the Trust Fund at a price equal to
the sum of the Trust Balance of such Home Equity Loan as of the end of the
Collection Period preceding the date of repurchase and accrued and unpaid
interest on such Trust Balance at the Net Loan Rate to the end of the related
Collection Period (the "Purchase Price") or (ii) within two years from the
original issuance of the Certificates, to substitute therefor one or more
Eligible Substitute Home Equity Loans and deliver the positive difference
between the Trust Balance of the replaced Home Equity Loan (together with any
accrued and unpaid interest thereon) and the amount of the conveyed balance of
the Eligible
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Substitute Home Equity Loans (such difference, the "Substitution Adjustment
Amount") to the Master Servicer for deposit in the Certificate Account prior to
the following Distribution Date.
(Section ____).
The Depositor will make certain representations and warranties as to the
accuracy in all material respects of certain information furnished to the
Trustee with respect to each Home Equity Loan (e.g., original Combined
Loan-to-Value Ratio, Cut-Off Date Trust Balance and Loan Rate). In addition, the
Depositor will represent and warrant that, as of the applicable Cycle Date
immediately preceding the Cut-Off Date, no payment of principal or interest on
or in respect of any Home Equity Loan is more than 30 days past due on a
contractual basis. (Section ____). Upon discovery of a breach of any such
representation and warranty which materially and adversely affects the interests
of the Certificateholders in the related Home Equity Loan, the Depositor will
have a period of 60 days after discovery or notice of a breach to effect a cure.
If the breach is not cured within such 60-day period, the Depositor will be
obligated either (i) to repurchase the Trust Balance of the related Home Equity
Loan from the Trust Fund at the Purchase Price or (ii) within two years from the
original issuance of the Certificates, to substitute for such Trust Balance an
Eligible Substitute Home Equity Loan and remit the Substitution Adjustment
Amount to the Master Servicer, as described above, in either case for deposit in
the Certificate Account prior to the Distribution Date following the end of the
related cure period. Upon receipt by the Trustee of written notification of any
such repurchase or substitution, the Trustee shall execute and deliver an
instrument of transfer or assignment necessary to vest in the Depositor legal
and beneficial ownership of the Trust Balance of such Home Equity Loan
(including any property acquired in respect thereof or proceeds of any insurance
policy with respect thereto). The obligation of the Depositor to repurchase or
replace the Trust Balance of any such Home Equity Loan shall be the sole remedy
available to Certificateholders or the Trustee for any such breach. (Sections
____ and ____). In a separate agreement among the Originators and the Depositor
the Originators will make corresponding representations, warranties and
covenants to the Depositor and will indemnify the Depositor for any losses
resulting from breaches in any representations and warranties relating to the
Home Equity Loans.
An Eligible Substitute Home Equity Loan is a Home Equity Loan that
conforms to the representations and warranties of the Depositor in the Agreement
described above (deemed to have been made as of the date of substitution), has a
Loan Rate of not less than the Loan Rate of the Defective Home Equity Loan and
not more than ____% in excess thereof, has a final maturity no more than six
months earlier or later than the final maturity of the Defective Home Equity
Loan, has an original Combined Loan-to-Value Ratio not greater than that of the
Defective Home Equity Loan and has a Mortgage of the same or higher level of
priority of the Mortgage relating to the Defective Home Equity Loan (an
"Eligible Substitute Home Equity Loan"). (Section ____). [The remedies in the
event of a breach of representation or warranty with respect to an Eligible
Substitute Home Equity Loan will be similar to those described above (to the
extent permitted by laws applicable at the time to REMICs, except that
substitution will not be permitted after two years following the initial
issuance of the Certificates). (Section ____)].
[Notwithstanding the foregoing, in the case of any repurchase or
substitution of the Trust Balance of a Home Equity Loan that would result in the
realization of a gain by the Trust Fund, the Depositor will not be required to
repurchase or replace the Trust Balance of such Home Equity Loan unless it is a
Defective Home Equity Loan and the Trustee has received (i) either an opinion of
counsel to the effect that such repurchase or substitution will not be subject
to tax as a result of being deemed a "prohibited transaction" under section
860F(a)(2) of the Code or a certificate from the Depositor to the effect that
such repurchase or substitution will not give rise to net income taxable under
section 860F(a)(1) of the Code and (ii) an opinion of counsel to the effect that
such
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repurchase or substitution will not be deemed a contribution to the REMIC after
the "start-up day" that would give rise to the tax specified under section
860G(d)(1) of the Code. Any such opinion or certificate will be provided solely
at the expense of the Master Servicer. In the absence of such opinion or
certificate, the Depositor will not be required to repurchase the Trust Balance
of such Home Equity Loan unless it is a Defective Home Equity Loan and there is
an actual or imminent default with respect thereto or unless such breach
adversely affects the enforceability of such Home Equity Loan. (Section ____)].
Pursuant to the Agreement, the Master Servicer will, or will cause the
related Originator, as subservicer, to, service and administer the Home Equity
Loans as more fully set forth below.
Amendments to Loan Agreements
[The Master Servicer and any Originator in its capacity as subservicer
may consent to the modification of the terms of any of the Loan Agreements not
expressly prohibited by the Agreement, if (i) the effect of such modification
will not be to materially and adversely affect the security afforded by the
Mortgaged Property or, except as provided in the following sentence, decrease or
slow the timing of receipt of any payments required thereunder, (ii) such
modification will not cause the Trust Fund to fail to qualify as a REMIC under
the REMIC Provisions, (iii) after such modification of the Loan Agreement or
Mortgage, the related Home Equity Loan is a "qualified mortgage" as defined in
the REMIC Provisions, and (iv) the modification does not cause the Trust Fund to
owe additional tax to any state or federal governmental agency. (Section ____).
The Master Servicer and any Subservicer also may in its discretion (i) waive any
late payment charge or any prepayment or other fees which may be collected in
the ordinary course of servicing the Home Equity Loans and (ii) arrange with a
borrower a schedule for the payment of interest due and unpaid, provided such
arrangement is consistent with the Master Servicer's or Subservicer's
then-current policies with respect to comparable home equity loans held in its
own portfolio. (Section ____)].
The Master Servicer and each Originator in its capacity as subservicer
may also consent to the placing of a lien or liens junior to that of the
Mortgage on the related Mortgaged Property so long as the total of the principal
amount of any first deed of trust or mortgage, the Credit Limit and the
aggregate principal balance secured by any such junior lien or liens does not
exceed ____%, if such Mortgage is a second deed of trust or mortgage, or ____%,
if such Mortgage is a first deed of trust, of the appraised value of the
Mortgaged Property as specified in an appraisal made by or on behalf of the
Master Servicer at the time of and in connection with such consent. (Section
____).
In addition, the Master Servicer and each Originator in its capacity as
subservicer may consent to an increase in the Credit Limit for any Home Equity
Loan, provided (i) the Master Servicer or such Originator in its capacity as
subservicer and such borrower enter into a new Loan Agreement providing for such
increase and (ii) the Master Servicer deposits in the Certificate Account the
amount necessary to prepay in full on behalf of the borrower the Trust Balance
of the related Home Equity Loan. (Section ____).
In the event that any tax is imposed on "prohibited transactions" of the
Trust Fund, as defined in section 860F(a)(2) of the Code, such tax will be
charged against amounts otherwise distributable to holders of the Class (__)
Certificates. To the extent such amounts are insufficient, such tax will be paid
by the Master Servicer from its own funds, in which case the Master Servicer may
retain from amounts otherwise distributable to the holders of the Class (__)
Certificates on any subsequent Distribution Date funds sufficient to reimburse
the Master Servicer for any such payments. (Section ____).
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Consent to Senior Liens
The Master Servicer and each Originator, in its capacity as a
subservicer, to the extent consistent with its then-current practice respecting
comparable mortgage loans held in its own portfolio, may permit the replacement
of an existing senior lien loan with a new senior lien loan on any Mortgaged
Property. The Master Servicer and each Originator in its capacity as subservicer
may consent to the placement of a lien or liens senior to that of the Mortgage
on the related Mortgaged Property; provided that the Combined Loan-to-Value
Ratio for such Home Equity Loan after placement of such lien or liens will not
exceed the Combined Loan-to-Value Ratio of such Home Equity Loan at origination.
(Section ____).
Payments on Home Equity Loans; Establishment of Home Equity Loan Payment Record;
Deposits to Certificate Account
The Master Servicer and each of the Originators, in its capacity as
subservicer, will follow such collection procedures as it follows from time to
time with respect to mortgage loans in its servicing portfolio which are
comparable to the Home Equity Loans. Collections in respect of the Trust
Percentage of the Home Equity Loans that constitute part of the Trust Fund will
be recorded in a record (the "Home Equity Loan Payment Record") to be
established and maintained by the Master Servicer. The Master Servicer will
credit to the Home Equity Loan Payment Record payments in respect of each Home
Equity Loan attributable to Trust Interest, Trust Principal Payments, Trust
Liquidation Proceeds (i.e., the Trust Percentage of Liquidation Proceeds), the
Purchase Price of any Trust Balance repurchased and Trust Insurance Proceeds
(collectively, "Home Equity Loan Collections"). Payments and collections that do
not constitute Home Equity Loan Collections (e.g., annual fees or prepayment
charges) will not be credited to the Home Equity Loan Payment Record.
(Section ____).
Debits to the Home Equity Loan Payment Record will be permitted to make
deposits in the Certificate Account to be established by the Master Servicer
with the Trustee as described below. (Section ____). Until so debited, all funds
recorded on the Home Equity Loan Payment Record will be held in trust for the
Certificateholders. (Section ____).
The Master Servicer will establish and maintain a separate account (the
"Certificate Account") with the Trustee for the benefit of the
Certificateholders. The Certificate Account must be (i) maintained with a
depository institution whose long-term deposits or long-term unsecured debt
obligations at the time of any deposit therein are rated by each of the Rating
Agencies in its highest rating category, (ii) an account or accounts the
deposits in which are fully insured under the Bank Insurance Fund or The Savings
Association Insurance Fund, as from time to time constituted, (iii) a segregated
trust account maintained with the Trustee in its fiduciary capacity in its
corporate trust department or (iv) an account otherwise acceptable to each
Rating Agency, as evidenced by a letter from such Rating Agency. The collateral
that is eligible to secure amounts in the Certificate Account is limited to
Permitted Investments (i.e., United States government securities and other
high-quality investments). (Article and Section ____). Funds in the Certificate
Account may be invested in Permitted Investments maturing in general not later
than the business day preceding the next Distribution Date. All income and gain
realized from any such investment will be for the benefit of the Master
Servicer. The amount of any loss incurred in connection with any such investment
must be deposited in the Certificate Account by the Master Servicer out of its
own funds immediately as realized. (Section ____).
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The Master Servicer will deposit in the Certificate Account not later
than (i) the business day preceding each Distribution Date, provided the Master
Servicer is entitled to retain and commingle funds pursuant to Section ____ of
the Agreement, or (ii) the second business day following receipt of such funds,
in the event the Master Servicer is not entitled to retain and commingle funds
pursuant to Section ____ of the Agreement, an amount equal to the aggregate of
the following amounts:
(i) the total amount of Home Equity Loan Collections received
during the related Collection Period; and
(ii) the Purchase Price for any Defective Home Equity Loans which
the Master Servicer is required to repurchase on the business day
preceding such Distribution Date.
Subject to the requirements to deposit such amounts in the Certificate
Account as set forth in the preceding paragraph, the Master Servicer may retain
and commingle funds to be deposited in the Certificate Account with its own
funds so long as (i) no Event of Default (as defined in "Description of
Certificates -- Events of Default herein) shall have occurred and be continuing
and (ii) either (x) the Master Servicer remains an affiliate of Beneficial
Corporation and the short-term debt obligations of Beneficial Corporation are
rated at least A-1 by Standard & Poor's and P-1 by Moody's (or such lower rating
as each such organization may otherwise agree to in writing) or (y) the Master
Servicer arranges for and maintains a Servicer Letter of Credit securing the
Master Servicer's obligations acceptable in form and substance to each Rating
Agency; provided, however, that amounts permitted to be retained and commingled
pursuant to this subclause (y) shall not exceed the maximum amount of coverage
under the Servicer Letter of Credit in accordance with the terms thereof (the
"Available Servicer LOC Amount"). As of any Distribution Date on which a
Servicer Letter of Credit is maintained, the Available Servicer LOC Amount will
be the maximum amount of coverage thereunder in accordance with the terms
thereof. (Section ____).
Servicer Letter of Credit
If a Servicer Letter of Credit is required to be maintained, the terms
of this paragraph shall be applicable. In the event that the Master Servicer is
at any time commingling with its own funds proceeds of the Home Equity Loans and
fails to deposit in the Certificate Account on or before the business day prior
to a Distribution Date funds collected in connection with the Home Equity Loans
which the Master Servicer is obligated to so deposit, the Trustee will, pursuant
to the terms of the Servicer Letter of Credit, make a proper demand under the
Servicer Letter of Credit that the institution that is then obligated under the
Servicer Letter of Credit (the "Servicer LOC Issuer") pay as promptly as
practicable to the Trustee for deposit in the Certificate Account the lesser of
(i) Home Equity Loan Collections for the related Distribution Date and (ii) the
amount by which the total deposited by the Master Servicer in the Certificate
Account is less than the amount of such Home Equity Loan Collections (but in no
event shall the amount of such demand exceed the Available Servicer LOC Amount).
(Section ____).
Method of Distribution on the Certificates
The Collection Period for any Home Equity Loan for any Distribution Date
will be the one-month period ending on the Cycle Date for such Home Equity Loan
in the month preceding the month of the related Distribution Date; provided that
the first Collection Period will begin on the Cut-Off Date and end on the
applicable Cycle Date in ________, 199_. (Section ____).
Since the Collection Period for the initial Distribution Date will
consist, as to each Home Equity Loan, of only that portion of the billing cycle
beginning in ______ 199_ which falls on or after
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the Cut-Off Date, the Master Servicer will be required to deposit in the
Certificate Account either (i) on the business day prior to the initial
Distribution Date, if the Master Servicer is permitted to commingle funds, or
(ii) on the second business day following the Closing Date, if the Master
Servicer is not permitted to commingle funds, the amount by which the sum of the
Class (__) Formula Amount, the Class (__) Formula Amount, the Class (__)
Interest Requirement and approximately ____% of the Pool Balance for the initial
Distribution Date exceeds the amount representing payments on and collections in
respect of the Trust Percentage of the Home Equity Loans received on or after
the Cut-Off Date and prior to the end of the related Collection Period. (Section
____).
Distributions of principal and interest on the Certificates will be made
by the Trustee on each Distribution Date (i.e., the ____ day of each month or,
if such date is not a business day, the next succeeding business day, commencing
__________, 199_), to the persons in whose names such Certificates are
registered as of the Record Date. Distributions will be made by check or money
order mailed (or upon the request of a Certificateholder owning Certificates
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 Certificates, will be DTC or its nominee) as it appears on the
certificate register maintained by the Trustee in amounts calculated as
described herein on the fifth business day prior to the related Distribution
Date (the "Determination Date"). However, the final distribution in respect of
the Certificates will be made only upon presentation and surrender thereof at
the office or the agency of the Trustee specified in the notice to
Certificateholders of such final distribution. (Sections ____ and ____).
Amount of Distributions
Pass-Through Rates
The "Class (__) Pass-Through Rate" for any Distribution Date is
____________. Calculations of interest with respect to the Class (__)
Certificates will be based on the actual number of days elapsed during the
related Accrual Period and a year assumed to consist of 360 days. (Section
____).
In the event that, on a particular Distribution Date, Available Funds
are not sufficient to make a full distribution of interest to the holders of the
Class (__) Certificates, the amount of any interest shortfall will be carried
forward and added to the amount of interest such holders will be entitled to
receive on the next Distribution Date. Any such amount so carried forward will
itself bear interest at the related Pass-Through Rate to the extent legally
permitted.
The "Class (__) Pass-Through Rate" for any Accrual Period will be
___________. The "Class (__) Pass-Through Rate" for any Accrual Period will be
____________. Calculations of interest with respect to the Class (__) and the
Class (__) Certificates will be based on the actual number of days elapsed
during the related Accrual Period and a year assumed to consist of 360 days.
(Section ____).
In the event that on a particular Distribution Date, the Amount
Available for Class (__) Interest or the Amount Available for Class (__)
Interest is not sufficient to make a full distribution of interest to the
holders of the Class (__) and Class (__) Certificates, the amount of any
interest shortfall will be carried forward and added to the amount of interest
such holders will be entitled to receive on the next Distribution Date. Any such
amount so carried forward will itself bear interest at the related Pass-Through
Rate to the extent legally permitted.
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Calculation of LIBOR
On the second business day preceding each Distribution Date (or, in the
case of the initial Accrual Period, the second business day preceding the first
day of such Accrual Period) (each such date, a "LIBOR Determination Date"), the
Trustee will determine the London interbank offered rate for one- month U.S.
dollar deposits ("LIBOR") for the next Accrual Period for the Certificates on
the basis of the rate for such deposits that appears on the Telerate Page 3750
as of 11:00 a.m., London time, on that LIBOR Determination Date (or in the case
of the initial Accrual Period, on the second business day preceding the Closing
Date). As used in this section, "business day" means a day on which banks are
open for dealing in foreign currency and exchange in London and New York City
and "Telerate Page 3750" means the display designated as page "3750" on the
Telerate Service (or such other page as may replace the 3750 page on that
service or such other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates for U.S. dollar deposits). (Section ____).
With respect to a LIBOR Determination Date on which no rate appears on
Telerate Page 3750, LIBOR will be determined on the basis of the rates at which
one-month U.S. dollar deposits are offered at approximately 11:00 a.m., London
time, on that LIBOR Determination Date by four "Reference Banks" to prime banks
in the London interbank market commencing on the second business day immediately
following that LIBOR Determination Date. "Reference Banks" means leading banks
selected by the Trustee and engaged in transactions in Eurodollar deposits in
the international Eurocurrency market (i) with an established place of business
in London, (ii) which have been designated as such by the Trustee and (iii) not
controlling, controlled by, or under common control with, the Depositor. The
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, LIBOR in respect of that LIBOR Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are provided,
LIBOR in respect of that LIBOR Determination Date will be the higher of (x)
LIBOR as determined on the previous LIBOR Determination Date and (y) the Reserve
Interest Rate. The "Reserve Interest Rate" shall be the rate per annum that the
Trustee determines to be either (i) the arithmetic mean (rounded upwards if
necessary to the nearest whole multiple of 1/16%) of the one-month U.S. dollar
lending rates which at least two New York City banks selected by the Trustee are
quoting on the relevant LIBOR Determination Date to the principal London offices
of leading banks in the London interbank market or (ii) in the event that the
Trustee can determine no such arithmetic mean, the lowest one-month U.S. dollar
lending rate which at least two New York City banks selected by the Trustee are
quoting on such LIBOR Determination Date to leading European banks. (Section
____).
The establishment of LIBOR on each LIBOR Determination Date by the
Trustee and the Trustee's calculation of the rate of interest applicable to the
Certificates for the related Accrual Period shall (in the absence of manifest
error) be final and binding. Each such rate of interest may be obtained by
telephoning the Trustee at ______________.
Class (__) Certificates
On each Distribution Date, the Trustee will distribute from the
Certificate Account to the Class (__) Certificateholders of record on the
related Record Date the Class (__) Distribution Amount. The "Class (__)
Distribution Amount" for any Distribution Date will be the sum of (i) the lesser
of (x) Available Funds for the Class (__) Certificates and (y) the Class (__)
Formula Amount and (ii) any Class (__) Excess Available Amount to which the
Class (__) Certificateholders are entitled.
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The "Class (__) Formula Amount" for any Distribution Date is the sum of:
(a) interest at the Class (__) Pass-Through Rate on the sum of
(i) the outstanding Class (__) Certificate Balance immediately prior to
such Distribution Date and (ii) to the extent legally permitted, any
Unpaid Class (__) Interest Shortfall (as defined below);
(b) to the extent not previously distributed, if distribution of
the amount of interest calculated pursuant to clause (a) above was not
made in full on a previous Distribution Date, the difference between (i)
the amount of interest calculated pursuant to clause (a) above for such
previous Distribution Date and (ii) the amount of interest actually
distributed to holders of the Class (__) Certificates on such previous
Distribution Date (the "Unpaid Class (__) Interest Shortfall");
(c) the sum of (A) all principal payments received during the
related Collection Period in respect of the Trust Percentage or Overdue
Trust Percentage, as applicable, of the Home Equity Loans, (B) all Trust
Insurance Proceeds received during the related Collection Period, (C)
the Trust Balance on the last day of the related Collection Period of
each Defective Home Equity Loan that was purchased by the Depositor on
the business day next preceding such Distribution Date, (D) the
Substitution Adjustment Amount for each Defective Home Equity Loan that
was replaced by an Eligible Substitute Home Equity Loan on the business
day next preceding such Distribution Date and (E) the Trust Balance on
the last day of the related Collection Period of each Home Equity Loan
that became a Liquidated Home Equity Loan during the calendar month
preceding the month of such Distribution Date; and
(d) to the extent not previously distributed, if distribution of
the amount of principal calculated pursuant to clause (c) above was not
made in full on a previous Distribution Date, the difference between (i)
the amount of principal calculated pursuant to clause (c) above for such
previous Distribution Date and (ii) the amount of principal actually
distributed to holders of the Class (__) Certificates on such previous
Distribution Date (the "Unpaid Class (__) Principal Shortfall");
provided, however, that the portion of the Class (__) Distribution Amount to be
distributed as principal will be limited to the Class (__) Certificate Balance
immediately prior to such Distribution Date. The amounts distributable pursuant
to clauses (c) and (d) above will be distributed only after the distribution of
the amounts in clauses (a) and (b) and the distribution of the Class (__) and
Class (__) Interest Requirements.
"Available Funds" for a Distribution Date will consist of:
(i) the total amount of interest (net of the Servicing Fee)
received in connection with the Trust Balances of the Home Equity Loans
(such amount, the "Trust Interest") during the related Collection
Period; plus
(ii) Trust Principal Payments received during the related
Collection Period; plus
(iii) Trust Insurance Proceeds received during the related
Collection Period; plus
(iv) Trust Liquidation Proceeds received during the related
Collection Period; plus
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(v) the aggregate Purchase Price for the Trust Balances of any
Home Equity Loans repurchased by the Depositor on the business day next
preceding such Distribution Date pursuant to the Agreement; plus
(vi) the aggregate Substitution Adjustment Amount for any
Defective Home Equity Loans that were replaced by Eligible Substitute
Home Equity Loans during the related Collection Period.
On any Distribution Date on or after the date on which both the Class
(__) and Class (__) Certificate Balances have been reduced to zero, the holders
of the Class (__) Certificates will also be entitled to receive on account of
principal the Class (__) Excess Available Amount (net of principal paid in
respect of the Class (__) Certificates on the Class (__) Termination Date) until
the Class (__) Certificate Balance is reduced to zero.
The "Class (__) Excess Available Amount" is the lesser of (x) the Excess
Available Funds and (y) an amount equal to approximately ______% of the Pool
Balance for such Distribution Date.
Class (__) and Class (__) Certificates
On each Distribution Date, the Trustee will distribute from the
Certificate Account to the Class (__) and Class (__) Certificateholders of
record on the related Record Date, and prior to any distribution being made on
the Class (__) Certificates, an amount equal to the Class (__) Distribution
Amount and Class (__) Distribution Amount, respectively. The Class (__)
Distribution Amount for any Distribution Date will be the sum of (i) the Class
(__) Formula Amount and (ii) with respect to any Distribution Date on or after
the Class (__) Termination Date, the Class (__) Excess Available Amount (on the
Class (__) Termination Date, exclusive of the portion thereof, if any,
distributed to the Class (__) Certificateholders).
The "Class (__) Formula Amount" for any Distribution Date is the sum of:
(i) the Amount Available for Class (__) Interest; and
(ii) commencing on the Class (__) Termination Date and on each
Distribution Date thereafter, the Amount Available for Class (__)
Principal.
The "Amount Available for Class (__) Principal" for each Distribution
Date on and after the Class (__) Termination Date is the lesser of:
(i) Available Funds for such Distribution Date less (a) any
amounts distributed in respect of the Class (__) Certificates on such
date, (b) the Class (__) Interest Requirement and (c) the Class (__)
Interest Requirement; and
(ii) the sum of:
(a) the sum of the amounts described in clause (c) of the
definition of "Class (__) Formula Amount" (net of principal
distributed on of the Class (__) Certificates on the Class (__)
Termination Date); and
(b) to the extent not previously distributed, if
distribution of the amount payable pursuant to the preceding
clause (a) was not made in full on a previous
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Distribution Date, the difference between (x) the amount so
payable and (y) the amount of principal actually distributed to
holders of the Class (__) Certificates on such previous
Distribution Date (the "Unpaid Class (__) Principal Shortfall").
The "Amount Available for Class (__) Interest" for any Distribution Date
will be the lesser of (i) Available Funds in excess of the Class (__) Interest
Requirement for such Distribution Date and (ii) the "Class (__) Interest
Requirement," which is the sum of:
(a) interest at the Class (__) Pass-Through Rate on the sum of
(i) the outstanding Class (__) Certificate Balance immediately prior to
such Distribution Date and (ii) to the extent legally permitted, any
Class (__) Unpaid Interest Shortfall (defined below); plus
(b) to the extent not previously distributed, if distribution of
the amount of interest calculated pursuant to clause (a) above was not
made in full on a previous Distribution Date, the difference between (i)
the amount of interest which holders of such Class would have received
on such Distribution Date if the Amount Available for Class (__)
Interest in the Certificate Account had been sufficient and (ii) the
amount of interest actually distributed to such holders on such
Distribution Date (the "Unpaid Class (__) Interest Shortfall").
The "Class (__) Distribution Amount" will be calculated for any
Distribution Date as the sum of (i) the Amount Available for Class (__)
Interest, (ii) the Class (__) Excess Available Amount and (iii) with respect to
any Distribution Date on or after the Class (__) Termination Date following the
Class (__) Termination Date, the sum of the amounts described in clause (c) of
the definition of "Class (__) Formula Amount" (net of principal distributed on
the Class (__) Certificates on the Class (__) Termination Date). The "Amount
Available for Class (__) Interest" for any Distribution Date will be the lesser
of (i) Available Funds in excess of the Class (__) Interest Requirement and the
Class (__) Interest Requirement for such Distribution Date and (ii) the "Class
(__) Interest Requirement," which is the sum of:
(a) interest at the Class (__) Pass-Through Rate on the sum of
(i) the outstanding Class (__) Certificate Balance immediately prior to
such Distribution Date and (ii) to the extent legally permitted, any
Unpaid Class (__) Interest Shortfall (defined below); plus
(b) to the extent not previously distributed, if distribution of
the amount of interest calculated pursuant to clause (a) above was not
made in full on a previous Distribution Date, the difference between (i)
the amount of interest which holders of such Class would have received
on such Distribution Date if the Amount Available for Class (__)
Interest in the Certificate Account had been sufficient and (ii) the
amount of interest actually distributed to such holders on such
Distribution Date (the "Unpaid Class (__) Interest Shortfall").
Amounts distributed to holders of the Class (__) and Class (__)
Certificates on a Distribution Date will be deemed to be applied, first, to
distribution of current interest (i.e., the amount calculated pursuant to clause
(a) of the description of the Class (__) Interest Requirement or Class (__)
Interest Requirement above), second, to the distribution of any previously
unpaid interest on such Classes (i.e., the amount calculated pursuant to clause
(b) of such description), and third, to the distribution of principal, if any,
of such Classes.
On each Distribution Date prior to the Class (__) Termination Date,
distributions of principal on the Class (__) and Class (__) Certificates will be
limited to the Class (__) Excess Available Amount, if any, which will be
distributed to the Class (__) Certificateholders until the Class (__)
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Termination Date and thereafter will be distributed to the Class (__)
Certificateholders until the Class (__) Termination Date. (Section ____).
Subordination of the Class (__) and Class (__) Certificates
The rights of holders of the Class (__) and Class (__) Certificates to
receive distributions with respect to the Home Equity Loans will be subordinated
to the rights of holders of the Class (__) Certificates by means of the
preferential right of holders of the Class (__) Certificates to receive the
Class (__) Interest Requirements from Available Funds prior to any distribution
being made out of funds on deposit in the Certificate Account in respect of the
Class (__) and Class (__) Certificates. This subordination is intended to
enhance the likelihood of timely receipt of the interest on Class (__)
Certificates by holders of the Class (__) Certificates on each Distribution Date
and the ultimate receipt by such holders of principal equal to the original
Class (__) Certificate Balance and to afford such Certificateholders limited
protection against losses.
In addition, the rights of holders of the Class (__) Certificates to
receive distributions with respect to the Home Equity Loans will be further
subordinated to the rights of holders of the Class (__) Certificates by means of
the preferential right of holders of the Class (__) Certificates to receive the
Class (__) Interest Requirements from Available Funds remaining after payment of
the Class (__) Interest Requirements prior to any distribution being made out of
funds on deposit in the Certificate Account in respect of the Class (__)
Certificates. This subordination is intended to enhance the likelihood of timely
receipt of the interest on Class (__) Certificates by holders of the Class (__)
Certificates on each Distribution Date and the ultimate receipt by such holders
of principal equal to the original Class (__) Certificate Balance and to afford
such Certificateholders limited protection against losses.
Class (__) Certificateholders, and after the Class (__) Termination
Date, Class (__) Certificateholders, will be entitled to receive on each
Distribution Date in respect of each Home Equity Loan that became a Liquidated
Home Equity Loan in such preceding calendar month the entire Trust Balance of
such Home Equity Loan, regardless of whether the Trust Percentage of the related
Net Liquidation Proceeds (i.e., the Liquidation Proceeds less expenses incurred
in connection with liquidating the related Home Equity Loan) are equal to its
Trust Balance. In the event that the aggregate amount of losses in respect of a
Liquidated Home Equity Loan exceeds the amount of Remaining Available Funds, the
Class (__) Certificateholders will absorb all such losses. The holders of the
Class (__) Certificates will bear an increasing risk of loss as the Class (__)
Certificate Balance and the Class (__) Certificate Balance are reduced. In
addition, if the aggregate of the Trust Balances were reduced to equal the sum
of the Class (__) Certificate Balance, holders of the Class (__) Certificates
would thereafter absorb the effect of all Liquidated Loan Loss Amounts on the
Home Equity Loans if Remaining Available Funds were insufficient to cover such
losses and, accordingly, could incur a loss on their investment. See "Amount of
Distributions" herein. Similarly, Holders of the Class (__) Certificates will
bear an increasing risk of loss as the Class (__) Certificate Balance is
reduced. If the aggregate Trust Balances were reduced to equal the sum of the
Class (__) and Class (__) Certificate Balances, holders of the Class (__)
Certificates would thereafter absorb the effect of all Liquidated Loan Loss
Amounts on the Home Equity Loans if Remaining Available Funds were insufficient
to cover such losses and, accordingly, could incur a loss on their investment. A
"Liquidated Loan Loss Amount" is, with respect to any Distribution Date, the
excess, if any, of (x) the sum of (A) the Trust Balance of any Home Equity Loan
that became a Liquidated Home Equity Loan during the month immediately preceding
the month of such Distribution Date and (B) accrued and unpaid interest thereon
at the rate of interest applicable to the Trust Balance of such Home Equity Loan
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(the "Loan Rate") less the Servicing Fee Rate (the "Net Loan Rate") over (y) the
Net Liquidation Proceeds thereon.
Holders of the Class (__) and Class (__) Certificates will not be
required to refund any amounts properly distributed to them, regardless of
whether there are sufficient funds on any subsequent Distribution Date to make a
full distribution to holders of any more senior Class of Certificates.
Reports to Certificateholders
Concurrently with each monthly remittance to the Certificate Account,
the Master Servicer will forward to the Trustee for mailing to each
Certificateholder a statement setting forth:
(i) the amount of such distribution to holders of the Class (__)
Certificates allocable to principal, any Unpaid Class (__) Principal
Shortfall included in such distribution and any remaining Unpaid Class
(__) Principal Shortfall after giving effect to such distribution;
(ii) the amount of such distribution to holders of the Class (__)
Certificates allocable to interest, any Unpaid Class (__) Interest
Shortfall included in such distribution and any remaining Unpaid Class
(__) Interest Shortfall after giving effect to such distribution;
(iii) the amount of any principal shortfall and any interest
shortfall in respect of the Class (__) Certificates for such
Distribution Date;
(iv) the Class (__) Certificate Balance and the Principal Factors
in respect of the Class (__) Certificates, each after giving effect to
the distribution of principal on such Distribution Date;
(v) the amount of such distribution to holders of the Class (__)
and Class (__) Certificates allocable to principal, any Unpaid Class
(__) Principal Shortfall and any remaining Unpaid Class (__) Principal
Shortfall after giving effect to such distribution;
(vi) the amount of such distribution to holders of the Class (__)
and Class (__) Certificates allocable to interest, any Unpaid Class (__)
Interest Shortfall or any unpaid Class (__) Interest Shortfall included
in such distribution and any remaining Unpaid Class (__) Interest
Shortfall or any Unpaid Class (__) Interest Shortfall after giving
effect to such distribution;
(vii) the amount of any principal shortfall and any interest
shortfall in respect of each Class (__) and Class (__) Certificates for
such Distribution Date;
(viii) the Class (__) and Class (__) Certificate Balance and the
Principal Factor in respect of the Class (__) and Class (__)
Certificates, each after giving effect to the distribution of principal
on such Distribution Date;
(ix) the Pool Balance for the following Distribution Date and the
number of outstanding Home Equity Loans for the following Distribution
Date;
(x) the number and aggregate Trust Balances of Home Equity Loans
as to which no payment of interest or principal has been received for a
period of at least (a) one billing cycle
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and (b) two or more billing cycles, respectively, as of the end of
the month in which the related Collection Period ends;
(xi) any Liquidated Loan Loss Amount for such Distribution Date;
(xii) the book value (within the meaning of 12 C.F.R. SS571.13 or
comparable provision) of the Trust Percentage of any real estate
acquired through foreclosure or grant of a deed in lieu of foreclosure
and held by the Trust Fund as of the last day of the related Collection
Period; and
(xiii) the Class (__) Pass-Through Rate, the Class (__)
Pass-Through Rate and the Class (__) Pass-Through Rate applicable to the
distribution on the following Distribution Date.
In the case of information furnished pursuant to clauses (i), (ii),
(v) and (vi) above, the amounts will be expressed as a dollar amount per
Certificate with a $1,000 denomination. (Section ___).
The Agreement will define "Principal Factor" with respect to each Class
as the percentage, carried to seven places (rounded down), obtained by dividing
either the Class (__) Certificate Balance, Class (__) Certificate Balance or
Class (__) Certificate Balance, as of any Distribution Date (after giving effect
to all payments of principal made on such Distribution Date) by the original
Class (__) Certificate Balance, Class (__) Certificate Balance or Class (__)
Certificate Balance. (Section ____).
Within 90 days after the end of each calendar year, the Master Servicer
will forward to the Trustee for mailing to each Person who at any time during
the calendar year was a Certificateholder a statement containing the information
set forth in clauses (i) and (ii) (for Class (__) Certificateholders) or (v) and
(vi) (for Class (__) and Class (__) Certificateholders) above aggregated for
such calendar year or applicable portion thereof during which such Person was a
Certificateholder. (Section ____). Unless and until Replacement Certificates are
issued as described herein, Cede will be the sole certificateholder as such term
is used in the Agreement and will not forward to Beneficial Owners the reports
referred to above. However, such reports may be made available to Beneficial
Owners upon request to their Participants. See "Registration of Certificates"
herein.
Collection and Other Servicing Procedures
The Master Servicer and each Originator, in its capacity as subservicer,
will follow such collection procedures as it follows from time to time with
respect to mortgage loans held in its own portfolio which are comparable to the
Home Equity Loans. Consistent with the above, the Master Servicer and each
Originator may in its discretion (i) waive any late payment charge or any
prepayment or other fee that may be collected in the ordinary course of
servicing the Home Equity Loans and (ii) arrange with a borrower a schedule for
the payment of interest due and unpaid; provided such arrangement is consistent
with the Master Servicer's or such Originator's policies with respect to
comparable home equity loans held in its own portfolio. (Section ____).
In any case in which a Mortgaged Property is being conveyed by the
borrower, the Master Servicer and each Originator will be obligated to exercise,
to the extent permitted under applicable law, its right to accelerate the
maturity of the related Home Equity Loan under any due-on-sale
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clause applicable thereto. See "Certain Legal Aspects of Mortgage Loans --
Due-on-Sale Clauses" in the Prospectus. (Section ____).
Hazard Insurance
The Agreement requires the Master Servicer to (i) cause to be maintained
for each Home Equity Loan hazard insurance with an appropriate endorsement in
favor of the Master Servicer or the related subservicer and extended coverage in
an amount equal to the lesser of (x) the maximum insurable value of the
improvements securing the related Home Equity Loan from time to time and (y) the
combined principal balance owing on such Home Equity Loan and any mortgage loan
senior to such Home Equity Loan from time to time, and (ii) maintain for any
property acquired upon foreclosure of a Home Equity Loan, or by deed in lieu of
such foreclosure, hazard insurance with an appropriate endorsement in favor of
the Master Servicer or the related Originator, in its capacity as subservicer,
and extended coverage in an amount equal to the lesser of (x) the maximum
insurable value from time to time of the improvements which are a part of such
property or (y) the combined principal balance of such Home Equity Loan and any
mortgage loan senior to such Home Equity Loan at the time of such foreclosure,
or deed in lieu of foreclosure, plus accrued interest and the good faith
estimate of the Master Servicer of related liquidation expenses to be incurred
in connection therewith. The ability of the Master Servicer to assure 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 a borrower. 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 borrower in accordance with the Master
Servicer's normal servicing procedures), to the extent they constitute Trust
Liquidation Proceeds or Trust Insurance Proceeds, will ultimately be deposited
in the Certificate Account. The Agreement will provide that the Master Servicer
may satisfy its obligation to cause hazard policies to be maintained by
maintaining a blanket policy issued by an insurer acceptable to the Rating
Agencies insuring against losses on the Home Equity Loans. If such blanket
policy contains a deductible clause, the Master Servicer will deposit in the
Certificate Account the Trust Percentage of all sums which would have been
deposited therein but for such clause. (Section ____).
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 and hail, and riot, strike and
civil commotion, subject to the conditions and exclusions specified in each
policy. Although the policies relating to the Home Equity Loans will be
underwritten by different insurers and therefore will not contain identical
terms and conditions, the basic terms thereof dictated by applicable state laws
typically do not cover any physical damage resulting from the following: war,
revolution, governmental actions, floods or 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. When a
Mortgaged Property is located in a federally designated flood area at the time
of origination of the related Home Equity Loan, the Agreement will require the
related Originator to cause flood insurance (to the extent available) to be
maintained for each such Home Equity Loan in an amount equal in general to the
lesser of the 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. (Section ____).
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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 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 residential properties have historically appreciated in value over
time, if the amount of hazard insurance maintained on the improvements securing
the Home Equity Loans were to decline as the principal balances owing thereon
decreased, hazard insurance proceeds could be insufficient to restore fully the
damaged property in the event of a partial loss.
Foreclosure Upon Home Equity Loans
The Master Servicer, or the applicable Originator, as subservicer, will
foreclose upon or otherwise comparably convert to ownership Mortgaged Properties
securing such of the Home Equity Loans serviced by it as come into and continue
in default when, in the opinion of the Master Servicer, no satisfactory
arrangements can be made for the collection of delinquent payments. In
determining whether to foreclose upon or otherwise comparably convert the
ownership of a Mortgaged Property, the Master Servicer and each Originator shall
take into account (and shall not be required to foreclose or otherwise convert
the ownership of such Mortgaged Property in the case of) the existence of any
hazardous substances, hazardous wastes or solid wastes, as such terms are
defined in the Comprehensive Environmental Response Compensation and Liability
Act, the Resource Conservation and Recovery Act of 1976, or other federal, state
or local environmental legislation, on such Mortgaged Property. In connection
with such foreclosure or other conversion, the Master Servicer and each
Originator will follow such practices and procedures as it deems necessary or
advisable and as are in keeping with its general first or second mortgage
servicing activities; provided that neither the Master Servicer nor any
Originator will expend its own funds in connection with foreclosure or other
conversion, correction of a default on a senior deed of trust or mortgage or
restoration of any property unless it determines that such foreclosure,
correction or restoration will increase Trust Liquidation Proceeds. [Any
Mortgaged Property so acquired by the Trust Fund will be disposed of in
accordance with applicable federal income tax regulations and consistent with
the status of the Trust Fund as a REMIC. (Section ____)].
Upon the receipt of any liquidation proceeds net of related expenses
(the "Net Liquidation Proceeds") relating to a Foreclosed Home Equity Loan, the
Trust Percentage of such Net Liquidation Proceeds (the "Trust Liquidation
Proceeds") will be deposited in the Certificate Account for distribution to
Certificateholders on the following Distribution Date. A "Foreclosed Home Equity
Loan" is any Home Equity Loan which is not a Liquidated Home Equity Loan and as
to which the related Mortgaged Property is held in the Trust Fund upon the
foreclosure or comparable conversion thereof.
Servicing and Other Compensation and Payment of Expenses
The principal servicing compensation to be paid to the Master Servicer
in respect of its servicing activities relating to the Certificates will be
retained by it from collections of interest on the Trust Balance of each Home
Equity Loan in the Trust Fund at the time such collections are received at a
rate equal to __% per annum on such Trust Balance as of the beginning of the
related
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Collection Period. A portion of such servicing compensation will be paid to each
of the Originators in its capacity as subservicer of the Home Equity Loans. In
addition, the Master Servicer will retain any benefit from the investment of
funds in the Certificate Account. All assumption fees, prepayment charges and
late payment charges, to the extent collected from borrowers, will be retained
by the Master Servicer. (Section ____).
The Master Servicer will pay from its own funds certain ongoing expenses
associated with the Trust Fund and incurred by it in connection with its
responsibilities under the Agreement, including, without limitation, payment of
the fees and disbursements of the Trustee, any custodian appointed by the
Trustee, the Certificate Registrar and any payment agent. In addition, the
Master Servicer will be entitled to reimbursement for certain expenses incurred
by it in connection with Liquidated Home Equity Loans and in connection with the
restoration of Mortgaged Properties, such right of reimbursement being prior to
the rights of Certificateholders to receive any related Trust Insurance Proceeds
or Trust Liquidation Proceeds. (Section ____).
Evidence as to Compliance
The Agreement provides for delivery on or before ________ in each year,
beginning ________, 199_, to the 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 Agreement throughout the preceding
calendar year. (Section ____).
The Agreement provides that on or before ________ in each year,
beginning ________, 199_, a firm of independent public accountants will furnish
a statement to the Trustee to the effect that such firm has examined, for the
preceding calendar year, certain documents and records related to the servicing
of mortgage loans under agreements (including the Agreement) substantially
similar to the Agreement and such examination, which shall have been conducted
substantially in compliance with the Uniform Single Audit Program for Mortgage
Bankers, has disclosed no items of non-compliance with the provisions of the
Agreement which, in the opinion of such firm, are material, except for such
items of non-compliance as will be referred to in the report. (Section ____).
Certain Matters Regarding the Master Servicer
The Agreement will provide that the Master Servicer may not resign from
its obligations and duties thereunder, except in connection with a permitted
transfer of servicing, unless 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. No such resignation will become effective until the Trustee or a
successor Master Servicer shall have assumed the Master Servicer's obligations
and duties under the Agreement. (Section ____).
The Agreement will provide that neither the Master Servicer nor any
director, officer, employee or agent of the Master Servicer will be under any
liability to the Trust Fund or the Certificateholders for any action taken or
for refraining from the taking of any action in good faith pursuant to the
Agreement, or for errors in judgment. However, neither the Master Servicer nor
any such person will be protected against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties thereunder. The Agreement will further provide that the Master Servicer
and any director, officer, employee or agent of the Master Servicer is entitled
to indemnification by the Trust Fund and will be held harmless against any loss,
liability or expense incurred in connection with any legal action relating to
the Agreement or the Certificates, other than
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any loss, liability or expense related to any specific Home Equity Loan or Home
Equity Loans (except any such loss, liability or expense otherwise reimbursable
pursuant to the Agreement) and any loss, liability or expense incurred by reason
of willful misfeasance, bad faith or gross negligence in the performance of
duties thereunder or by reason of reckless disregard of obligations and duties
thereunder. In addition, the Agreement will provide that the Master Servicer
will be under no obligation to appear in, prosecute or defend any legal action
which is not incidental to its duties under the Agreement and which in its
opinion may involve it in any expense or liability. The Master Servicer may,
however, in its discretion, undertake any such action which it may deem
necessary or desirable with respect to the Agreement and the rights and duties
of the parties thereto and the interest of the Certificateholders thereunder. In
such event, the legal expenses and costs of such action and any liability
resulting therefrom will be expenses, costs and liabilities of the Trust Fund
and the Master Servicer will be entitled to be reimbursed therefor from amounts
otherwise distributable to holders of the residual certificates on any
subsequent Distribution Date. The Master Servicer's right to such indemnity or
reimbursement shall survive any resignation or termination of the Master
Servicer 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 ____).
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 under the Agreement, without the execution or filing of any
paper or any further act on the part of any of the parties thereto, anything
herein to the contrary notwithstanding. (Section ____).
The Master Servicer will not be obligated as part of its servicing
responsibilities to make any advances with respect to the Home Equity Loans.
Events of Default
Events of Default under the Agreement (each, an "Event of Default") will
consist of (i) any failure by the Master Servicer to deposit in the Certificate
Account any deposit required to be made under the Agreement, which failure
continues unremedied for five business days after the giving of written notice
of such failure to the Master Servicer by the Trustee, or to the Master Servicer
or the Trustee by holders of any Class of Certificates affected thereby,
evidencing, as to such Class, Percentage Interests aggregating not less than
51%; (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 Agreement which
materially affects the rights of holders of any Class of Certificates or
residual certificates and continues unremedied for 60 days after the giving of
written notice of such failure to the Master Servicer by the Trustee, or to the
Master Servicer or the Trustee by holders of any Class of Certificates affected
thereby, evidencing, as to such Class, Percentage Interests aggregating not less
than 51%; (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) realized losses on the Home Equity
Loans exceeding certain levels more fully described in the Agreement. (Section
____).
Rights Upon Event of Default
So long as an Event of Default remains unremedied, either the Trustee or
holders of any Class of Certificates affected thereby, evidencing, as to such
Class, Percentage Interests aggregating
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not less than 51%, may terminate all of the rights and obligations of the Master
Servicer under the Agreement covering such Trust Fund and in and to the Home
Equity Loans, whereupon the Trustee will succeed to all the responsibilities,
duties and liabilities of the Master Servicer under such Agreement and will be
entitled to similar compensation arrangements. In the event that the 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 jurisdiction for the
appointment of, a housing and home finance institution that is then servicing a
home equity loan portfolio with all licenses and permits required by applicable
law and a net worth of at least $__________ to act as successor to the Master
Servicer under the Agreement. Pending such appointment, the Trustee is obligated
to act in such capacity unless prohibited by law. Such successor will be
entitled to receive the same compensation the Master Servicer would otherwise
have received (or such lesser compensation as the Trustee and such successor may
agree). (Sections ____ and ____).
No holder of a Certificate has any right under the Agreement to
institute any proceeding with respect to such Agreement unless such holder
previously has given to the Trustee written notice of default and unless holders
of any Class of Certificates affected thereby, evidencing, as to such Class,
Percentage Interests aggregating not less than 51%, have made written requests
upon the Trustee to institute such proceeding in its own name as Trustee
thereunder, have offered to the Trustee reasonable indemnity and the Trustee for
60 days has neglected or refused to institute any such proceeding. (Section
_____). However, the Trustee will be under no obligation to exercise any of the
trusts or powers vested in it by the Agreement or to make any investigation of
matters arising thereunder 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 Certificates, unless such holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby. (Section ____).
Amendment
The Master Servicer, the Depositor and the Trustee may from time to time
amend the Agreement with the consent of any Servicer LOC Issuer (if its rights
are materially and adversely affected) but without the consent of any holders of
the Certificates, to cure any ambiguity, to correct or supplement any provisions
therein which may be inconsistent with any other provisions therein, or to add
any other provisions with respect to matters or questions arising under the
Agreement which shall not be inconsistent with the provisions of the Agreement,
provided that such action will not, as evidenced by an opinion of counsel,
materially and adversely affect the interests of any Certificateholder or, as
evidenced by a letter from each Rating Agency, result in a downgrading of the
rating of any rated Class of Certificates. The Agreement may also be amended
from time to time by the Master Servicer, the Depositor and the Trustee, with
the consent of any Servicer LOC Issuer and the holders of any Class of
Certificates affected thereby, evidencing, as to such Class, Percentage
Interests aggregating not less than 51%, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Agreement or of modifying in any manner the rights of holders of the
Certificates; provided that no such amendment will (i) reduce in any manner the
amount of, or delay the timing of, collections of payments of Home Equity Loans
or distributions which are required to be made on any Certificate without the
consent of the holder of such Certificate, or (ii) reduce the aforesaid
percentage required to consent to any such amendment, without the consent of the
holders of all Certificates then outstanding. (Section ____).
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Termination; Retirement of the Certificates
The obligations of the Master Servicer and the Trustee pursuant to the
Agreement generally will terminate upon the last action required to be taken by
the Trustee on the final Distribution Date pursuant to the Agreement following
the earlier of (i) the repurchase by the Master Servicer, or the sale by the
Trustee, of the Trust Percentage of each Home Equity Loan, and all property
acquired in respect of the Trust Percentage of any Home Equity Loan, remaining
in the Trust Fund and (ii) the final payment or other liquidation of the Trust
Balance of the last Home Equity Loan subject thereto or the disposition of all
property acquired upon foreclosure of any such Home Equity Loan. In no event,
however, will the Trust Fund created by the Agreement continue in perpetuity.
Written notice of termination of the Agreement will be given to each
Certificateholder, and the final distribution will be made only upon surrender
and cancellation of the Certificates at an office or agency appointed by the
Trustee which will be specified in the notice of termination. (Section ____).
Notwithstanding the foregoing, the Trustee will sell the assets remaining in the
Trust Fund on the ______________ Distribution Date and the Trust Fund will
terminate.
On any Distribution Date upon which the Pool Balance immediately prior
to such Distribution Date is 10% or less of the Cut-Off Date Pool Balance, the
Master Servicer will have the option to purchase from the Trust Fund all
remaining Home Equity Loans held by the Trust Fund at a price equal to the
greatest of (x) the sum of (A) the aggregate of the Trust Balances of the Home
Equity Loans as of the first day of the Collection Period immediately preceding
such final Distribution Date, and (B) one month's interest at the applicable Net
Loan Rate on the Trust Balance of each Home Equity Loan (including any
Foreclosed Home Equity Loans); (y) the aggregate fair market value (as
determined by the Master Servicer) of all the assets of the Trust Fund and (z)
the sum of (i) the Class (__) Certificate Balance together with any related
Unpaid Class (__) Interest Shortfall and interest accrued thereon during the
related Accrual Period at the Class (__) Pass-Through Rate, (ii) the Class (__)
Certificate Balance together with any Unpaid Class (__) Interest Shortfall and
interest accrued thereon at the Class (__) Pass-Through Rate and (iii) the Class
(__) Certificate Balance together with any Unpaid Class (__) Interest Shortfall
and interest accrued thereon at the Class (__) Pass-Through Rate. Such purchase
price (not to exceed the sum of the Class (__), Class (__) and Class (__)
Certificate Balances together with interest thereon at the applicable
Pass-Through Rates), will be distributed to the Certificateholders, thereby
effecting early retirement of the Certificates (Section ____).
[The termination of the Trust Fund will be effected in a manner
consistent with applicable federal income tax regulations and its status as a
REMIC. (Section ____)].
The Trustee
The Trustee, __________________, a _________________, may have normal
banking relationships with the Depositor, the Master Servicer, the Originators
and their affiliates.
The Trustee may resign at any time, in which event the Master Servicer
will be obligated to appoint a successor Trustee. The Master Servicer may also
remove the Trustee if the Trustee ceases to be eligible to continue as such
under the Agreement or if the Trustee becomes legally unable to act or
insolvent. Upon such removal, the Master Servicer will be obligated to appoint a
successor Trustee. Any resignation or removal of the Trustee and appointment of
a successor Trustee will not become effective until acceptance of the
appointment by the successor Trustee. (Section ____).
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The Master Servicer is obligated to pay to the Trustee reasonable
compensation for its services and to reimburse the Trustee for all reasonable
expenses, disbursements and advances. In addition, the Master Servicer is
obligated to indemnify the Trustee from, and to hold it harmless against, all
losses, liabilities, damages, claims and expenses arising in connection with its
performance of the Agreement other than those resulting from the Trustee's
negligence or bad faith. (Section ____).
Registration of Certificates
Beneficial Owners may hold their Offered Certificates through DTC (in
the United States) or Cedel or Euroclear (in Europe) if they are participants of
such systems, or indirectly through organizations which are participants in such
systems.
The Offered Certificates will initially be registered in the name of
Cede & Co., the nominee of DTC ("Cede"). Cedel and Euroclear will hold omnibus
positions on behalf of their participants through customers' securities accounts
in Cedel's and Euroclear's names on the books of their respective depositaries
which in turn will hold such positions in customers' securities accounts in the
depositaries' names on the books of DTC. Citibank, N.A. will act as depositary
for Cedel and Morgan Guaranty Trust Company of New York will act as depositary
for Euroclear (in such capacities, individually the "Depositary" and
collectively the "Depositaries").
Transfers between Participants (as hereinafter defined) will occur in
accordance with DTC rules. Transfers between Cedel Participants and Euroclear
Participants will occur in accordance with their respective rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in
Cedel or Euroclear as a result of a transaction with a Participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedel Participants on such business day. Cash received in Cedel or
Euroclear as a result of sales of securities by or through a Cedel Participant
or Euroclear Participant to a Participant will be received with value on the DTC
settlement date but will be available in the relevant Cedel or Euroclear cash
account only as of the business day following settlement in DTC. For information
with respect to tax documentation procedures relating to the Offered
Certificates, see "Global Clearance, Settlement and Tax Documentation
Procedures" in Annex I hereto.
Beneficial Owners who are not Participants but desire to purchase, sell
or otherwise transfer ownership of Certificates may do so only through
Participants or indirect participants (unless and until
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Definitive Certificates, as defined below, are issued). In addition, Beneficial
Owners will receive all distributions of principal of, and interest on, Offered
Certificates from the Trustee through DTC and Participants. Beneficial Owners
will not receive or be entitled to receive certificates representing their
respective interests in the Offered Certificates, except under the limited
circumstances described below.
Unless and until Definitive Certificates are issued, it is anticipated
that the only "Certificateholder" of the Offered Certificates will be Cede.
Beneficial Owners therefore will not be Certificateholders as that term is used
in the Agreement and will only be permitted to exercise the rights of
Certificateholders indirectly through Participants and DTC.
While the Offered Certificates are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "Rules"), DTC is required to
make book-entry transfers among Participants on whose behalf it acts with
respect to the Offered Certificates and is required to receive and transmit
distributions of principal of, and interest on, the Offered Certificates.
Participants and indirect participants with whom Beneficial Owners have accounts
with respect to Offered Certificates are similarly required to make book-entry
transfers and receive and transmit such distributions on behalf of their
respective Beneficial Owners. Accordingly, although Beneficial Owners will not
possess certificates, the Rules provide a mechanism by which Beneficial Owners
will receive distributions and will be able to transfer their interests.
Unless and until Definitive Certificates are issued, Beneficial Owners
who are not Participants may transfer ownership of Offered Certificates only
through Participants and indirect participants by instructing such Participants
and indirect participants to transfer Offered Certificates, by book-entry
transfer, through DTC for the account of the purchasers of such Offered
Certificates, which account is maintained with their respective Participants.
Under the Rules and in accordance with DTC's normal procedures, transfers of
ownership of Offered Certificates will be executed through DTC and the accounts
of the respective Participants at DTC will be debited and credited. Similarly,
the Participants and indirect participants will make debits or credits, as the
case may be, on their records on behalf of the selling and purchasing Beneficial
Owners.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
1934 Act. DTC accepts securities for deposit from its participating
organizations ("Participants") and facilitates the clearance and settlement of
securities transactions between Participants in such securities through
electronic book-entry changes in accounts of Participants, thereby eliminating
the need for physical movement of certificates. Participants include securities
brokers and dealers (including the Underwriter(s)), banks and trust companies
and clearing corporations and may include certain other organizations. Indirect
access to the DTC system is also available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("indirect
participants").
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 28
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping,
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administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Cedel interfaces with domestic markets in
several countries. As a professional depository, Cedel is subject to regulation
by the Luxembourg Monetary Institute. Cedel Participants are recognized
financial institutions around the world, including underwriters (and the
Underwriter(s)), securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Indirect access to Cedel
is also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 32 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing, and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers
(including the Underwriter(s)) and other professional financial intermediaries.
Indirect access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Offered Certificates held through Cedel or
Euroclear will be credited to the cash accounts of Cedel Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See "Federal Income Tax Consequences" herein and in the Prospectus.
Cedel or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under the Agreement on behalf of a
Cedel Participant or Euroclear Participant only
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in accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Offered Certificates will be issued in registered, certificated form to
Beneficial Owners, or their nominees, rather than to DTC (such Offered
Certificates being referred to herein as "Definitive Certificates"), only if (i)
DTC or the Master Servicer advises the Trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as nominee and
depository with respect to the Offered Certificates and the Master Servicer is
unable to locate a qualified successor, (ii) the Master Servicer, at its sole
option, elects to terminate the book-entry system through DTC or (iii) after the
occurrence of an Event of Default, DTC, at the direction of Participants acting
on behalf of Beneficial Owners having a majority in Percentage Interests of the
Offered Certificates, advises the Trustee in writing that the continuation of a
book-entry system through DTC (or a successor thereto) to the exclusion of any
physical certificates being issued to Beneficial Owners is no longer in the best
interests of Beneficial Owners. Upon issuance of Definitive Certificates to
Beneficial Owners, such Offered Certificates will be transferable directly (and
not exclusively on a book-entry basis) and registered holders will deal directly
with the Trustee with respect to transfers, notices and distributions.
DTC has advised the Master Servicer and the Trustee that, unless and
until Definitive Certificates are issued, DTC will take any action permitted to
be taken by a Certificateholder under the Agreement only at the direction of one
or more Participants to whose DTC accounts the Certificates are credited. DTC
has advised the Master Servicer that DTC will take such action with respect to
any Percentage Interests of the Offered Certificates only at the direction of
and on behalf of such Participants with respect to such Percentage Interests of
the Offered Certificates. DTC may take actions, at the direction of the related
Participants, with respect to some Offered Certificates which conflict with
actions taken with respect to other Offered Certificates.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of indirect participants and certain banks, the ability of Beneficial
Owners to pledge such Offered Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Offered Certificates, may be limited due to the lack of a definitive certificate
for such Offered Certificates.
Although DTC, Cedel and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Offered Certificates among
participants of DTC, Cedel and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
FEDERAL INCOME TAX CONSEQUENCES
An election will [not] be made to treat the assets of the Trust Fund as
a REMIC for federal income tax purposes. The Class (__) Certificates, the Class
(__) Certificates and the Class (__) Certificates will be regular interests in
the Trust Fund and the Class (__) Certificates will be residual interests in the
Trust Fund.
The Class (__), Class (__) and Class (__) Certificates may [will not] be
treated as having been issued with original issue discount. The prepayment
assumption that will be used for purposes of computing original issue discount,
if any, for federal income tax purposes is a CPR of ____%. No representation is
made that the Mortgage Loans will, in fact, prepay at this or any other rate.
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See "Federal Income Tax Consequences" in the Prospectus.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain restrictions on employee benefit plans that are
subject to ERISA ("Plans") and on persons who are fiduciaries with respect to
such Plans. See "ERISA Considerations" in the Prospectus.
Class (__) Certificates
The U.S. Department of Labor has granted to the underwriter(s) (the
"Underwriter(s)") an administrative exemption (Prohibited Transaction Exemption
90-29, Exemption Application ____________________) (the "Exemption") from
certain of the prohibited transaction rules of ERISA with respect to the initial
purchase, the holding and the subsequent resale by Plans of certificates
representing interests in asset-backed pass-through trusts that consist of
certain receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The receivables covered by the Exemption apply to
mortgage loans such as the Trust Balances in the Trust Fund. The Exemption will
apply to the acquisition, holding and resale of the Class (__) Certificates by a
Plan, provided that certain conditions (certain of which are described below)
are met.
Among the conditions which must be satisfied for the Exemption to apply
to the Class (__) Certificates are the following:
(1) The acquisition of the Class (__) Certificates by a Plan is
on terms (including the price for the Class (__) Certificates) that are
at least as favorable to the Plan as they would be in an arm's-length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Class (__)
Certificates acquired by the Plan are not subordinate to the rights and
interests evidenced by other certificates of the Trust Fund;
(3) The Class (__) Certificates acquired by the Plan have
received a rating at the time of such acquisition that is in one of the
three highest generic rating categories from either Standard & Poor's,
Moody's, Duff & Phelps Inc. or Fitch;
(4) The Trustee is not an affiliate of any member of the
Restricted Group (as defined below);
(5) The sum of all payments made to the Underwriter(s) in
connection with the distribution of the Class (__) Certificates
represents not more than reasonable compensation for underwriting the
Class (__) Certificates. The sum of all payments made to and retained by
the Company pursuant to the sale of the Class (__) Certificates to the
Trust Fund represents not more than the fair market value of such
Mortgage Loans. The sum of all payments made to and retained by the
Master Servicer represents not more than reasonable compensation for the
Master Servicer's services under the Agreement and reimbursement of the
Master Servicer's reasonable expenses in connection therewith; and
(6) The Plan investing in the Class (__) Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of
the Securities and Exchange Commission under the Securities Act of 1933,
as amended (the "Securities Act of 1933").
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Moreover, the Exemption would provide relief from certain
self-dealing/conflict of interest prohibited transactions only if, among other
requirements, (i) in the case of the acquisition of Class (__) Certificates in
connection with the initial issuance, at least fifty (50) percent of the Class
(__) Certificates are acquired by persons independent of the Restricted Group
(as defined below), (ii) the Plan's investment in Class (__) Certificates does
not exceed twenty-five (25) percent of all of the Class (__) Certificates
outstanding at the time of the acquisition and (iii) immediately after the
acquisition, no more than twenty-five (25) percent of the assets of the Plan are
invested in certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity. The Exemption does not
apply to Plans sponsored by the Depositor, the Underwriter(s), the Trustee, the
Master Servicer, any obligor with respect to Home Equity Loans included in the
Trust Fund constituting more than five percent of the aggregate unamortized
principal balance of the assets in the Trust Fund, or any affiliate of such
parties (the "Restricted Group").
The Depositor believes that the Exemption will apply to the acquisition
and holding by Plans of the Class (__) Certificates sold by the Underwriter(s)
and that all conditions of the Exemption other than those within the control of
the investors have been met. In addition, as of the date hereof, no obligor with
respect to Home Equity Loans included in the Trust Fund constitutes more than
five percent of the aggregate unamortized Trust Balances.
Employee benefit plans that are governmental plans (as defined in
section 3(32) of ERISA) and certain 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 the Class (__) Certificates without regard to the ERISA
restrictions described above, subject to applicable provisions of other federal
and state laws.
Any Plan fiduciary who proposes to cause a Plan to purchase Class (__)
Certificates should consult with its own counsel with respect to the potential
consequences under ERISA and the Code, of the Plan's acquisition and ownership
of Class (__) Certificates. Assets of a Plan or individual retirement account
should not be invested in the Class (__) Certificates unless it is clear that
the assets of the Trust Fund will not be plan assets or unless it is clear that
the Exemption or a prohibited transaction class exemption will apply and exempt
all potential prohibited transactions.
The Class (__) and Class (__) Certificates
Because the Class (__) and Class (__) Certificates are subordinate
interest, the Exemption is not available. Accordingly, the Class (__) and Class
(__) Certificates are not eligible for purchase by Plans and no beneficial
interests therein may be sold or otherwise transferred to a Plan.
The Agreement and each Class (__) and Class (__) Certificate will
provide that in accepting and holding such Certificate, the Beneficial Owner of
such Class (__) or Class (__) Certificate will be deemed to have represented and
warranted that it is not (i) an employee benefit plan (as defined in Section
3(3) of ERISA) that is subject to the provision of Title 1 of ERISA, (ii) a plan
described in Section 4975(e)(1) of the Code or (iii) any entity whose underlying
assets include plan assets by reason of a plan's investment in the entity.
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of
the Offered Certificates will be applied by the Depositor to the purchase price
of the Trust Balances and expenses connected with pooling the Trust Balances and
issuing the Certificates.
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UNDERWRITING
The underwriter(s) named in the Underwriting Agreement referred to below
(the "Underwriter(s)") has agreed, on the terms and conditions of the
Underwriting Agreement and a Terms Agreement (together, the "Underwriting
Agreement") relating to the Offered Certificates, to purchase the entire
principal amount of the Offered Certificates.
In the Underwriting Agreement, the Underwriter(s) has agreed, subject to
the terms and conditions set forth therein, to purchase all the Offered
Certificates offered hereby if any Offered Certificates are purchased.
The distribution of the Offered Certificates by the Underwriter(s) may
be effected from time to time in one or more negotiated transactions, or
otherwise, at varying prices to be determined, in each case, at the time of
sale. The Underwriter(s) may effect such transactions by selling the Offered
Certificates to or through dealers, and such dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from the
Underwriter(s). In connection with the sale of the Offered Certificates, the
Underwriter(s) may be deemed to have received compensation from the Depositor in
the form of underwriting compensation. The Underwriter(s) and any dealers that
participate with the Underwriter(s) in the distribution of the Offered
Certificates may be deemed to be underwriters and any commissions received by
them and any profit on the resale of the Offered Certificates positioned by them
may be deemed to be underwriting discounts and commissions under the Securities
Act of 1933.
The Underwriting Agreement provides that the Depositor will indemnify
the Underwriter(s) against certain liabilities, including liabilities under the
Securities Act of 1933, or contribute to payments the Underwriter(s) may be
required to make in respect thereof.
All of the Trust Balances (not originated by the Depositor) evidenced by
the Certificates will have been acquired by the Depositor in certain privately
negotiated transactions with the Depositor.
The Underwriter(s) has represented and agreed that (i) it has not
offered or sold and, prior to the expiration of the period of six months from
the Closing Date, will not offer or sell any Offered Certificates to persons in
the United Kingdom, except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulation 1995; (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the Offered
Certificates in, from or otherwise involving the United Kingdom; and (iii) it
has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the Offered
Certificates to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995,
or is a person to whom such document may otherwise lawfully be issued or passed
on.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company and the
Underwriter(s) by _________________. The material federal income tax
consequences of the Certificates and certain other legal matters will be passed
upon for the Depositor by Dechert Price & Rhoads, New York, New York.
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CERTIFICATE RATINGS
It is a condition to the issuance of the Certificates that the Class
(__) Certificates be rated (not lower than ) "___" by _______, that the Class
(__) Certificates be rated (not lower than ) "___" by _______, and that the
Class (__) Certificates be rated (not lower than ) "___" by _______. A rating is
not a recommendation to purchase, hold or sell the Certificates, inasmuch as
such rating does not comment as to the market price or suitability for a
particular investor. There is no assurance that a rating will remain for any
given period of time or that such rating will not be lowered or withdrawn by any
of the Rating Agencies if in its judgment circumstances so warrant.
There can be no assurance as to whether any rating agency other than the
Rating Agencies will rate the Class (__), Class (__) or Class (__) Certificates
or, if one does, what rating would be assigned by any such other rating agency.
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INDEX OF PRINCIPAL TERMS
Definition
Accrual Period ...............................................................5
Additional Balances...........................................................3
Advance......................................................................24
Agreement..................................................................1, 3
Amount Available for Class (__) Interest.....................................47
Amount Available for Class (__) Principal....................................46
Available Funds...........................................................5, 45
Available Servicer LOC Amount................................................42
Beneficial Owners............................................................15
Business day.................................................................44
CAP..........................................................................23
Cede.........................................................................57
Cedel........................................................................14
Cedel Participants...........................................................58
Certificate Account..........................................................41
Certificate Principal Balance.................................................2
Certificateholder............................................................58
Certificateholders............................................................2
Certificates ...............................................................1
Class (__) Certificate Balance................................................6
Class (__) Certificates.......................................................1
Class (__) Distribution Amount...............................................44
Class (__) Excess Available Amount........................................8, 46
Class (__) Formula Amount....................................................45
Class (__) Interest Requirement..............................................47
Class (__) Pass-Through Rate..............................................6, 43
Class (__) Principal..........................................................8
Class (__) Termination Date...................................................8
Code.........................................................................15
Collection Period.............................................................4
Combined Loan-to-Value Ratio.................................................30
Cooperative..................................................................59
CPR..........................................................................35
Credit Limit.............................................................12, 23
Cut-Off Date..................................................................3
Cut-Off Date Pool Balance....................................................13
Cut-Off Date Trust Balance....................................................3
Cycle Date....................................................................4
Defective Home Equity Loan....................................................7
Definitive Certificates......................................................60
Depositaries.................................................................57
Depositary...................................................................57
Depositor.....................................................................3
Determination Date...........................................................43
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Distribution Date..........................................................2, 5
DTC..........................................................................14
Eligible Substitute Home Equity Loan.........................................39
ERISA....................................................................14, 61
Euroclear....................................................................14
Euroclear Operator...........................................................59
Euroclear Participants.......................................................59
Event of Default.............................................................54
Exemption................................................................14, 61
Fitch........................................................................11
Foreclosed Home Equity Loan..................................................52
Home Equity Loan Collections.................................................41
Home Equity Loan Payment Record..............................................41
Home Equity Loans......................................................1, 3, 23
Included States...............................................................4
Included States Portfolio....................................................26
Indirect participants........................................................58
LIBOR........................................................................44
LIBOR Determination Date.....................................................44
Liquidated Loan Loss Amount..................................................48
Liquidation Proceeds.........................................................13
Loan agreement ..........................................................25, 29
Loan Balance..................................................................4
Loan Rate................................................................12, 49
Margin.......................................................................25
Master Servicer...............................................................1
Moody's......................................................................11
Mortgage Files...............................................................38
Mortgaged Properties..........................................................1
Net Liquidation Proceeds.....................................................52
Net Loan Rate................................................................49
Offered Certificates.......................................................1, 3
Originators...................................................................4
Overdue Trust Percentage......................................................4
Participants.................................................................58
Percentage Interest...........................................................5
Plan.........................................................................14
Plans........................................................................61
Pool..........................................................................1
Pool Balance.................................................................13
Principal Factor.............................................................50
Purchase Price ..............................................................38
Rating Agencies..............................................................11
Record Date...................................................................5
Reference Banks..............................................................44
Reference Rate ..............................................................12
Regular interests.............................................................2
Remaining Available Funds....................................................21
REMIC.....................................................................2, 15
Reserve Interest Rate........................................................44
Residual interests............................................................2
Restricted Group.............................................................62
Rules........................................................................58
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Sample Pool..................................................................16
Sample Pool Balance..........................................................29
Sample Pool Home Equity Loans................................................29
Securities Act of 1933.......................................................61
Servicer Letter of Credit....................................................11
Servicer LOC Issuer..........................................................42
Servicing Fee ...............................................................5
Servicing Fee Rate...........................................................11
SMMEA........................................................................14
Standard & Poor's............................................................11
Subordinate Certificates......................................................3
Substitution Adjustment Amount...............................................39
Telerate Page 3750...........................................................44
Terms and Conditions.........................................................59
Three-Month LIBOR............................................................12
Total U.S. Real Estate Portfolio.............................................26
Trust Balance.................................................................3
Trust Fund....................................................................1
Trust Insurance Proceeds......................................................3
Trust Interest ..............................................................45
Trust Liquidation Proceeds...................................................52
Trust Percentage..............................................................4
Trust Principal Payments......................................................3
U.S. Servicing Portfolio.....................................................26
Underwriter(s) ..............................................................63
Underwriting Agreement.......................................................63
Unpaid Class (__) Interest Shortfall.........................................45
Unpaid Class (__) Principal Shortfall....................................45, 47
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Beneficial
Home Equity Loan Asset Backed Certificates (the "Global Securities") will be
available only in book entry form. Investors in the Global Securities may hold
such Global Securities through any of The Depository Trust Company ("DTC"),
Cedel or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations and prior home equity loan asset backed
certificate issues.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain requirements
and deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name
of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, Cedel and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to prior home equity loan asset
backed certificates issues. Investor securities custody accounts will be
credited with their holdings against payment in same-day funds on the settlement
date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
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<PAGE>
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior home
equity loan asset backed certificates issues in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear A-1 Participant, the purchaser
will send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date, on the basis of (i) the actual number of
days in such accrual period and a year assumed to consist of 360 days. For
transactions settling on the 31st of the month, payment will include interest
accrued to and excluding the first day of the following month. Payment will then
be made by the respective Depositary of the DTC Participant's account against
delivery of the Global Securities. After settlement has been completed, the
Global Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Cedel
Participant's or Euroclear Participant's account. The securities credit will
appear the next day (European time) and the cash debt will be back-valued to,
and the interest on the Global Securities will accrue from, the value date
(which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the Cedel or Euroclear cash debt will be valued instead as of the actual
settlement date.
Cedel Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Cedel or Euroclear. Under this
approach, they may take on credit exposure to Cedel or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit
to them, Cedel Participants or Euroclear Participants can elect not to
preposition funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Cedel Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the value
date. Therefore, in many cases the investment income on the Global Securities
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each Cedel
Participant's or Euroclear Participant's particular cost of funds.
A-2
<PAGE>
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment to and excluding the settlement date on the basis of (i) the
actual number of days in such accrual period and a year assumed to consist of
360 days. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
The payment will then be reflected in the account of the Cedel Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would be back-valued to
the value date (which would be the preceding day, when settlement occurred in
New York). Should the Cedel Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will extinguish any overdraft incurred over that one-day period. If settlement
is not completed on the intended value date (i.e., the trade fails), receipt of
the cash proceeds in the Cedel Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase
Global Securities from DTC Participants for delivery to Cedel Participants or
Euroclear Participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would give
the Global Securities sufficient time to be reflected in their Cedel or
Euroclear account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the
trade so that the value date for the purchase from the DTC Participant
is at least one day prior to the value date for the sale to the Cedel
Participant or Euroclear Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through Cedel
or Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial
A-3
<PAGE>
institution that holds customers' securities in the ordinary course of its trade
or business in the chain of intermediaries between such beneficial owner and the
U.S. entity required to withhold tax complies with applicable certification
requirements and (ii) such beneficial owner takes one of the following steps to
obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Global Securities that are non-U.S. Persons can obtain a complete
exemption from the withholding tax by filing a signed Form W-8
(Certificate of Foreign Status). If the information shown on Form W-8
changes, a new Form W-8 must be filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income
(Form 4224). A non-U.S. Person, including a non-U.S. corporation or bank
with a U.S. branch, for which the interest income is effectively
connected with its conduct of a trade or business in the United States,
can obtain an exemption from the withholding tax by filing Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with
the Conduct of a Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Beneficial Owners
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms)
by filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate).
If the treaty provides only for a reduced rate, withholding tax will be
imposed at that rate unless the filer alternatively files Form W-8. Form
1001 may be filed by the Beneficial Owner or its agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9
(Payer's Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Beneficial
Owners of a Global Security or, in the case of a Form 1001 or a Form
4224 filer, his agent, files by submitting the appropriate form to the
person through whom it holds (the clearing agency, in the case of
persons holding directly on the books of the clearing agency). Form W-8
and Form 1001 are effective for three calendar years and Form 4224 is
effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includable in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. Federal income tax withholding that may be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
Global Securities.
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A-5
<PAGE>
PROSPECTUS
Asset Backed Certificates
Asset Backed Notes
(Issuable in Series)
Beneficial Mortgage Services, Inc.
Depositor
---------------------------
The Asset Backed Certificates (the "Certificates") and Asset Backed
Notes (the "Notes" and, together with the Certificates, the "Securities")
offered hereby and by Supplements to this Prospectus (the "Offered Securities")
will be offered from time to time in one or more series. Each series of
Certificates will represent in the aggregate the entire beneficial ownership
interest in a trust fund (with respect to any series, the "Trust Fund")
consisting of one or more segregated pools (each, a "Pool") of various types of
single family and/or multifamily mortgage loans (or certain balances thereof)
(collectively, the "Mortgage Loans"), unsecured home improvement installment
sales contracts and installment loans ("Unsecured Home Improvement Loans"),
mortgage participations ("Mortgage Participations"), mortgage pass-through
certificates or mortgage-backed securities evidencing interests therein or
secured thereby (the "MBS"), manufactured housing installment sale contracts or
installment loan agreements ("Contracts"), certain direct obligations of the
United States, agencies thereof or agencies created thereby (the "Government
Securities"), or a combination of Mortgage Loans, Unsecured Home Improvement
Loans, Mortgage Participations, MBS, Contracts and/or Government Securities
(with respect to any series, collectively, "Assets"). The Mortgage Loans,
Mortgage Participations and MBS are collectively referred to herein as the
"Mortgage Assets." If a series of Securities includes Notes, such Notes will be
issued and secured pursuant to an indenture and will represent indebtedness of
the Trust Fund. If so specified in the related Prospectus Supplement, the Trust
Fund for a series of Securities may include letters of credit, insurance
policies, guarantees, reserve funds or other types of credit support, or any
combination thereof (with respect to any series, collectively, "Credit
Support"), and currency or interest rate exchange agreements and other financial
assets, or any combination thereof (with respect to any series, collectively,
"Cash Flow Agreements"). See "Description of the Trust Funds," "Description of
the Securities" and "Description of Credit Support." All defined terms used
herein are indexed in the Index of Principal Terms commencing on page __.
(cover continued on next page)
-------------------
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 OR THE RELATED
PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-------------------
Prior to issuance there will have been no market for the Securities of
any series and there can be no assurance that a secondary market for any Offered
Securities will develop or that, if it does develop, it will continue. This
Prospectus may not be used to consummate sales of the Offered Securities of any
series unless accompanied by the Prospectus Supplement for such series.
Offers of the Offered Securities may be made through one or more
different methods, including offerings through underwriters, as more fully
described under "Plan of Distribution" herein and in the related Prospectus
Supplement.
-------------------
The date of this Prospectus is April __, 1997
<PAGE>
(cover continued from previous page)
Each series of Securities will consist of one or more classes of
Securities that may (i) provide for the accrual of interest thereon based on
fixed, variable or adjustable rates; (ii) be senior or subordinate to one or
more other classes of Securities in respect of certain distributions on the
Securities; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions; (iv) be entitled
to interest distributions, with disproportionately low, nominal or no principal
distributions; (v) provide for distributions of accrued interest thereon
commencing only following the occurrence of certain events, such as the
retirement of one or more other classes of Securities of such series; (vi)
provide for distributions of principal as described in the related Prospectus
Supplement; and/or (vii) provide for distributions based on a combination of two
or more components thereof with one or more of the characteristics described in
this paragraph, to the extent of available funds, in each case as described in
the related Prospectus Supplement. Any such classes may include classes of
Offered Securities. See "Description of the Securities."
Principal and interest with respect to Securities will be distributable
monthly, quarterly, semi-annually or at such other intervals and on the dates
specified in the related Prospectus Supplement. Distributions on the Securities
of any series will be made only from the assets of the related Trust Fund.
The Securities of each series will not represent an obligation of or
interest in the Depositor, any Master Servicer, any Sub-Servicer or any of their
respective affiliates, except to the limited extent described herein and in the
related Prospectus Supplement. Neither the Securities nor any assets in the
related Trust Fund will be guaranteed or insured by any governmental agency or
instrumentality or by any other person, unless otherwise provided in the related
Prospectus Supplement. The assets in each Trust Fund will be held in trust for
the benefit of the holders of the related series of Certificates pursuant to a
Pooling and Servicing Agreement or a Trust Agreement, as more fully described
herein.
The yield on each class of Securities of a series will be affected by,
among other things, the rate of payment of principal (including prepayments,
repurchase and defaults) on the Assets in the related Trust Fund and the timing
of receipt of such payments as described under the caption "Yield
Considerations" herein and in the related Prospectus Supplement. A Trust Fund
may be subject to early termination under the circumstances described herein and
in the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, one or more
elections may be made to treat the related Trust Fund or a designated portion
thereof as a "real estate mortgage investment conduit" for federal income tax
purposes. See also "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 Offered Security.
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Offered Securities covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus and Prospectus
Supplement when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement
relating to the Offered Securities of each series will, among other things, set
forth with respect to such Securities, as appropriate: (i) a description of the
class or classes of Securities, the payment provisions with respect to each such
class and the pass-through Rate or interest rate or method of determining the
pass-through rate or interest rate with respect to each such class; (ii) the
aggregate principal amount and distribution dates relating to such series and,
if applicable, the initial and final scheduled distribution dates for each
class; (iii) information as to the assets comprising the Trust Fund, including
the general characteristics of the assets included therein, including the Assets
and any Credit Support and Cash Flow Agreements (with respect to the Securities
of any series, the "Trust Assets"); (iv) the circumstances, if any, under which
the Trust Fund may be subject to early
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<PAGE>
termination; (v) additional information with respect to the method of
distribution of such Certificates; (vi) whether one or more REMIC elections will
be made and designation of the regular interests and residual interests; (vii)
the aggregate original percentage ownership interest in the Trust Fund to be
evidenced by each class of Securities; (viii) information as to any Master
Servicer, any Sub-Servicer and the Trustee, as applicable; (ix) information as
to the nature and extent of subordination with respect to any class of
Securities that is subordinate in right of payment to any other class; and (x)
whether such Securities will be initially issued in definitive or book-entry
form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended, with respect to the Offered
Securities. This Prospectus and the Prospectus Supplement relating to each
series of Securities contain summaries of the material terms of the documents
referred to herein and therein, but do not contain all of the information set
forth in the Registration Statement pursuant to the rules and regulations of the
Commission. For further information, reference is made to such Registration
Statement and the exhibits thereto. Such Registration Statement and exhibits can
be inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at its Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at its Regional Offices located as follows:
Chicago Regional Office, Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661; and New York Regional Office, Seven World Trade Center,
13th Floor, New York, New York 10048. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Depositor, that file
electronically with the Commission.
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 Offered Securities
or an offer of the Offered Securities to any person in any state or other
jurisdiction in which such offer would be unlawful. The delivery of this
Prospectus and any Prospectus Supplement hereto at any time does not imply that
information herein is correct as of any time subsequent to its date.
A Master Servicer or the Trustee will be required to mail to holders of
Offered Securities of each series periodic unaudited reports concerning the
related Trust Fund. Unless and until definitive Securities are issued, or unless
otherwise provided in the related Prospectus Supplement, such reports will be
sent on behalf of the related Trust Fund to Cede & Co. ("Cede"), as nominee of
The Depository Trust Company ("DTC") and registered holder of the Offered
Securities, pursuant to the applicable Agreement. Such reports may be available
to holders of interests in the Securities (the "Securityholders") upon request
to their respective DTC participants. See "Description of the Securities --
Reports to Securityholders" and "Description of the Agreements -- Evidence as to
Compliance." The Depositor will file or cause to be filed with the Commission
such periodic reports with respect to each Trust Fund as are required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the rules and
regulations of the Commission thereunder, as interpreted by the staff of the
Commission thereunder. Periodic reports with respect to a Trust will not be
filed with the Commission following completion of the reporting period required
by Rule 15d-1 under the Exchange Act.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports
filed or caused to be filed by the Depositor 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 an offering of Offered Securities evidencing interests therein.
Upon request, the Depositor 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 Offered Securities, a copy of any or all
documents or reports incorporated herein by reference, in each case to the
extent such documents or reports relate to one or more of such classes of such
Offered Securities, other than the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents). Requests
to the Depositor should be directed in writing to Beneficial Mortgage
Corporation, One Christina Centre, 301 North Walnut Street, Wilmington, Delaware
19801, Attention: Scott A. Siebels, Esq. or by telephone at (302) 425-2500.
The Depositor has determined that its financial statements are not material to
the offering of any Offered Securities.
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<PAGE>
TABLE OF CONTENTS
Page
----
Prospectus Supplement............................................... 2
Available Information............................................... 3
Incorporation of Certain Information
by Reference...................................................... 3
Summary of Prospectus............................................... 5
Risk Factors........................................................ 14
Description of the Trust Funds...................................... 20
Use of Proceeds..................................................... 25
Yield Considerations................................................ 25
The Depositor....................................................... 30
The Master Servicer................................................. 30
Description of the Securities....................................... 30
Description of the Agreements....................................... 37
Description of Credit Support....................................... 57
Certain Legal Aspects of Mortgage
Loans............................................................. 59
Certain Legal Aspects of the
Contracts......................................................... 69
Certain Federal Income Tax
Consequences...................................................... 73
State Tax Considerations............................................ 104
ERISA Considerations................................................ 104
Legal Investment.................................................... 106
Plan of Distribution................................................ 108
Legal Matters....................................................... 109
Financial Information............................................... 109
Rating.............................................................. 109
Index of Principal Definitions...................................... 111
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<PAGE>
SUMMARY OF PROSPECTUS
The following summary of certain pertinent information is qualified in
its entirety by reference to the more detailed information appearing elsewhere
in this Prospectus and by reference to the information with respect to each
series of Securities contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of such series. An Index of Principal
Definitions is included at the end of this Prospectus.
Title of Certificates............... Asset-Backed Certificates (the
"Certificates") and Asset Backed Notes
(the "Notes" and, together with the
Certificates, the "Securities"),
issuable in series.
Depositor........................... Beneficial Mortgage Services, Inc., an
indirect wholly owned subsidiary of
Beneficial Corporation (the
"Depositor"). Neither Beneficial
Corporation nor any of its affiliates,
including the Depositor, will insure or
guarantee the Certificates or the
Mortgage Loans or be otherwise
obligated in respect thereof.
Master Servicer..................... Unless otherwise set forth in the
related Prospectus Supplement,
Beneficial Mortgage Corporation will
act as the master servicer (the "Master
Servicer") for each series of
Securities. See "Description of the
Agreements" and "-- Collection and
Other Servicing Procedures."
Trustee............................. The trustee (the "Trustee") for each
series of Certificates will be named in
the related Prospectus Supplement. See
"Description of the Agreements -- The
Trustee."
The Trust Assets.................... Each series of Certificates will
represent in the aggregate the entire
beneficial ownership interest in a
Trust Fund. If a series of Securities
includes Notes, such Notes will
represent indebtedness of the Trust
Fund and will be secured by a security
interest in the Assets of the Trust
Fund. A Trust Fund will consist
primarily of any of the following
assets (the Mortgage Assets, Unsecured
Home Improvement Loans, Contracts and
Government Securities may be referred
to collectively or individually as
"Assets"):
(a) Mortgage Assets......... The Mortgage Assets with respect to a
series of Certificates will consist of
a pool of single family and/or
multifamily loans (or certain balances
thereof) (collectively, the "Mortgage
Loans"), mortgage participations
("Mortgage Participations") or mortgage
pass-through certificates or other
mortgage-backed securities evidencing
interests in or secured by Mortgage
Loans (collectively, the "MBS") or a
combination of Mortgage Loans, Mortgage
Participations and/or MBS. In the event
the Assets with respect to a series of
Certificates include Mortgage
Participations and/or MBS, then such
Mortgage Participations and/or MBS,
together with any Unsecured Home
Improvement Loans and Government
Securities included in such pool of
Assets, will represent less than 10% of
the aggregate amount of such pool of
Assets. The Mortgage Loans will not be
guaranteed or insured by the Depositor
or any of its affiliates or, unless
otherwise provided in the Prospectus
Supplement, by any governmental agency
or instrumentality or other person. The
Mortgage Loans will be secured by first
and/or junior liens on (i) one- to
four-family residential properties or
security interests in shares issued by
cooperative housing corporations
("Single Family Properties") and/or
(ii) residential properties consisting
of five or more dwelling units,
including mixed residential and
commercial structures ("Multifamily
Properties"). The Mortgage Loans may
include (i) closed-end and/or revolving
home equity loans or certain balances
thereof ("Home Equity Loans") and/or
(ii)
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<PAGE>
home improvement installment sales
contracts and installment loan
agreements ("Home Improvement
Contracts"). The Mortgaged Properties
may be located in any one of the fifty
state or the District of Columbia. The
Prospectus Supplement will indicate
additional jurisdictions (which may be
outside the United States), if any, in
which the Mortgaged Properties may be
located. All Mortgage Loans will have
individual principal balances at
origination of not less than $1,000
and original terms to maturity of not
more than 40 years. All Mortgage Assets
will have been originated or purchased,
either directly or indirectly, by the
Depositor on or before the date of
initial issuance of the related series
of Certificates. The related Prospectus
Supplement will indicate if any such
persons are affiliates of the
Depositor.
Each Mortgage Loan may provide for
accrual of interest thereon at an
interest rate (a "Mortgage Rate") that
is fixed over its term or that adjusts
from time to time, or that may be
converted from an adjustable to a fixed
Mortgage Rate, or from a fixed to an
adjustable Mortgage Rate, from time to
time at the mortgagor's election, in
each case as described in the related
Prospectus Supplement. Adjustable
Mortgage Rates on the Mortgage Loans in
a Trust Fund may be based on one or
more indices. Each Mortgage Loan may
provide for scheduled payments to
maturity, payments that adjust from
time to time to accommodate changes in
the Mortgage Rate or to reflect the
occurrence of certain events, and may
provide for negative amortization or
accelerated amortization, in each case
as described in the related Prospectus
Supplement. Each Mortgage Loan may be
fully amortizing or require a balloon
payment due on its stated maturity
date, in each case as described in the
related Prospectus Supplement. Each
Mortgage Loan may contain prohibitions
on prepayment or require payment of a
premium or a yield maintenance penalty
in connection with a prepayment, in
each case as described in the related
Prospectus Supplement. The Mortgage
Loans may provide for payments of
principal, interest or both, on due
dates that occur monthly, quarterly,
semi-annually or at such other interval
as is specified in the related
Prospectus Supplement. See "Description
of the Trust Funds -- Assets."
(b) Unsecured Home Improvement
Loans................... The Assets with respect to a series of
Securities may consist of or include
home improvement installment sales
contracts or installment loans that are
unsecured ("Unsecured Home Improvement
Loans"). In the event the Assets with
respect to a series of Securities
include Unsecured Home Improvement
Loans, then such Unsecured Home
Improvement Loans, together with any
Mortgage Participations, MBS, Unsecured
Home Improvement Loans and Government
Securities included in such pool of
Assets, will represent less than 10% of
the aggregate amount of such pool of
Assets. The Unsecured Home Improvement
Loans may have any of the features
described under "(a) Mortgage Assets"
above, except that they will not be
secured by a lien on or other security
interest in any property. Unless the
context otherwise requires, references
in this Prospectus to Mortgage Loans,
Whole Loans and related terms shall
include Unsecured Home Improvement
Loans and related terms to the extent
relevant (e.g., a reference to a
Mortgaged Property or hazard insurance
does not relate to an Unsecured Home
Improvement Contract).
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<PAGE>
(c) Contracts............... The Contracts with respect to a series
of Securities will consist of
manufactured housing installment sale
contracts and installment loan
agreements secured by a security
interest in a new or used structure,
transportable in one or more sections,
built on a permanent chasis and
designed to be used as a dwelling with
or without a permanent foundation
(each, a "Manufactured Home"), and, to
the extent, if any, indicated in the
related Prospectus Supplement, by real
property. The Contracts will not be
insured or guaranteed by the Depositor
or any of its affiliates. If so
specified in the related Prospectus
Supplement, by any governmental agency
or instrumentality or any other person.
The Manufactured Homes may be located
in any of the fifty states or any other
jurisdiction specified in the related
Prospectus Supplement. All Contracts
will have been originated or purchased,
either directly or indirectly, by the
Depositor on or before the date of
initial issuance of the related series
of Certificates. The related Prospectus
Supplement will indicate if any such
persons are affiliates of the
Depositor. Each Contract may provide
for an annual percentage rate thereon
(a "Contract Rate") that is fixed over
its term or that adjusts as described
in the related Prospectus Supplement.
The manner of determining scheduled
payments due on the Contract will be
described in the Prospectus Supplement.
The Prospectus Supplement will describe
the minimum principal balance of the
Contracts at origination and the
maximum original term to maturity of
the Contracts.
(d) Government Securities If so provided in the related
Prospectus Supplement, the Trust Fund
may include, in addition to Mortgage
Assets and/or Contracts, certain direct
obligations of the United States,
agencies thereof or agencies created
thereby including, without limitation,
FHLMC Certificates, FNMA Certificates,
GNMA Certificates and U.S. Treasury
Securities (as each is defined herein)
(collectively, "Government
Securities"). See Description of the
Trust Funds -- Government Securities".
In the event a Trust Fund includes
Government Securities, then such
Government Securities together with
any Mortgaged Participations, MBS and
Unsecured Home Improvement Loans
included in such Trust Fund, will
represent less than 10% of the
aggregate amount of Assets of such
Trust Fund.
(e) Collection Accounts Each Trust Fund will include one or
more accounts established and
maintained on behalf of the
Securityholders into which the person
or persons designated in the related
Prospectus Supplement will, to the
extent described herein and in such
Prospectus Supplement, deposit all
payments and collections received with
respect to the Assets and other assets
in the Trust Fund. Such an account may
be maintained as an interest bearing or
a non-interest bearing account, and
funds held therein may be held as cash
or invested in certain short-term,
investment grade obligations, in each
case as described in the related
Prospectus Supplement. See "Description
of the Agreements -- Collection Account
and Related Accounts."
(f) Credit Support.......... If so provided in the related
Prospectus Supplement, partial or full
protection against certain defaults and
losses on the Assets in the related
Trust Fund may be provided to one or
more classes of Securities of the
related series in the form of
subordination of one or more other
classes of Securities of such series,
which other classes may include one or
more classes of Offered Securities, or
by one or more other types of credit
support, such as a letter of credit,
insurance policy, guarantee, reserve
fund or another type of credit support,
or a combination thereof (any such
coverage with respect to the
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Securities of any series, "Credit
Support"). The amount and types of
coverage, the identification of the
entity providing the coverage (if
applicable) and related information
with respect to each type of Credit
Support, if any, will be described in
the Prospectus Supplement for a series
of Securities. The Prospectus
Supplement for any series of Securities
evidencing an interest in a Trust Fund
that includes MBS will describe any
similar forms of credit support that
are provided by or with respect to, or
are included as part of the trust fund
evidenced by or providing security for,
such MBS. See "Risk Factors -- Credit
Support Limitations" and "Description
of Credit Support."
(g) Cash Flow Agreements If so provided in the related
Prospectus Supplement, the Trust Fund
may include guaranteed investment
contracts pursuant to which moneys held
in the funds and accounts established
for the related series will be invested
at a specified rate. The Trust Fund may
also include certain other agreements,
such as interest rate exchange
agreements, interest rate cap or floor
agreements, currency exchange
agreements or similar agreements
provided to reduce the effects of
interest rate or currency exchange rate
fluctuations on the Assets or on one or
more classes of Securities. (Currency
exchange agreements might be included
in the Trust Fund if some or all of the
Mortgage Assets (such as Mortgage Loans
secured by Mortgaged Properties located
outside the United States) were
denominated in a non-United States
currency.) The principal terms of any
such guaranteed investment contract or
other agreement (any such agreement, a
"Cash Flow Agreement"), including,
without limitation, provisions relating
to the timing, manner and amount of
payments thereunder and provisions
relating to the termination thereof,
will be described in the Prospectus
Supplement for the related series. In
addition, the related Prospectus
Supplement will provide certain
information with respect to the obligor
under any such Cash Flow Agreement. The
Prospectus Supplement for any series of
Securities evidencing an interest in a
Trust Fund that includes MBS will
describe any cash flow agreements that
are included as part of the trust fund
evidenced by or providing security for
such MBS. See "Description of the Trust
Funds -- Cash Flow Agreements."
(h) Pre-Funding Account To the extent provided in a Prospectus
Supplement, the Depositor will be
obligated (subject only to the
availability thereof) to sell at a
predetermined price, and the Trust Fund
for the related series of Securities
will be obligated to purchase (subject
to the satisfaction of certain
conditions described in the applicable
Agreement), additional Assets (the
"Subsequent Assets") from time to time
(as frequently as daily) within the
number of months specified in the
Prospectus Supplement after the
issuance of such series of Securities
having an aggregate principal balance
approximately equal to the amount on
deposit in the Pre-Funding Account
(as defined in "Description of the
Trust Funds -- Pre-Funding Account")
(the "Pre-Funded Amount") for such
series on date of such issuance.
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Description of Securities Each series of Certificates will
evidence an interest in the related
Trust Fund and will be issued pursuant
to a pooling and servicing agreement or
a trust agreement. Pooling and
servicing agreements and trust
agreements are referred to herein as
the "Agreements." If a series of
Securities includes Notes, such Notes
will represent indebtedness of the
related Trust Fund and will be secured
by a security interest in the Assets of
the Trust Fund (or a specified group
thereof) pursuant to an indenture.
Each series of Securities will include
one or more classes. Each class of
Securities (other than certain Stripped
Interest Securities, as defined below)
will have a stated principal amount (a
"Security Balance") and except for
certain Stripped Principal Securities,
as defined below, will accrue interest
thereon based on a fixed, variable or
adjustable interest rate (in the case
of Certificates, a "Pass-Through
Rate"). The related Prospectus
Supplement will specify the Security
Balance, if any, and the Pass-Through
Rate or interest rate for each class of
Securities or, in the case of a
variable or adjustable Pass-Through
Rate or interest rate, the method for
determining the Pass-Through Rate or
interest rate.
Distributions on Securities Each series of Securities will consist
of one or more classes of Securities
that may (i) provide for the accrual of
interest thereon based on fixed,
variable or adjustable rates; (ii) be
senior (collectively, "Senior
Securities") or subordinate
(collectively, "Subordinate
Securities") to one or more other
classes of Securities in respect of
certain distributions on the
Securities; (iii) be entitled to
principal distributions, with
disproportionately low, nominal or no
interest distributions (collectively,
"Stripped Principal Securities"); (iv)
be entitled to interest distributions,
with disproportionately low, nominal or
no principal distributions
(collectively, "Stripped Interest
Securities"); (v) provide for
distributions of accrued interest
thereon commencing only following the
occurrence of certain events, such as
the retirement of one or more other
classes of Securities of such series
(collectively, "Accrual Securities");
(vi) provide for distributions of
principal as described in the related
Prospectus Supplement; and/or (vii)
provide for distributions based on a
combination of two or more components
thereof with one or more of the
characteristics described in this
paragraph, including a Stripped
Principal Security component and a
Stripped Interest Security component,
to the extent of available funds, in
each case as described in the related
Prospectus Supplement. If so specified
in the related Prospectus Supplement,
distributions on one or more classes of
a series of Securities may be limited
to collections from a designated
portion of the Mortgage Loans in the
related Mortgage Pool or Contracts in
the related Contract Pool (each such
portion of Mortgage Loans, a "Mortgage
Loan Group" and each such portion of
the Contracts, a "Contract Group"). See
"Description of the Securities --
General." Any such classes may include
classes of Offered Securities. With
respect to Securities with two or more
components, references herein to
Security Balance, notional amount and
Pass-Through Rate or interest rate
refer
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<PAGE>
to the principal balance, if any,
notional amount, if any, and the
Pass-Through Rate or interest rate, if
any, for any such component.
The Securities will not be guaranteed
or insured by the Depositor or any of
its affiliates, by any governmental
agency or instrumentality or by any
other person, unless otherwise provided
in the related Prospectus Supplement.
See "Risk Factors -- Assets included in
Trust Fund to be Sole Source of
Payment" and "Description of the
Securities."
(a) Interest................ Interest on each class of Offered
Securities (other than Stripped
Principal Securities and certain
classes of Stripped Interest
Securities) of each series will accrue
at the applicable Pass-Through Rate or
interest rate on the outstanding
Security Balance thereof and will be
distributed to Securityholders as
provided in the related Prospectus
Supplement. The specified date on which
distributions are to be made is a
"Distribution Date." Distributions with
respect to interest on Stripped
Interest Securities may be made on each
Distribution Date on the basis of a
notional amount as described in the
related Prospectus Supplement.
Distributions of interest with respect
to one or more classes of Securities
may be reduced to the extent of certain
delinquencies, losses, prepayment
interest shortfalls, and other
contingencies described herein and in
the related Prospectus Supplement. See
"Risk Factors -- Impact of Prepayments
on Average Life of Securities and
Yield," and "Description of the
Securities -- Distributions of Interest
on the Securities."
(b) Principal............... The Securities of each series
initially will have an aggregate
Security Balance no greater than the
outstanding principal balance of the
Assets as of, unless the related
Prospectus Supplement provides
otherwise, the close of business on the
first day of the month of formation of
the related Trust Fund (the "Cut-off
Date"), after application of scheduled
payments due on or before such date,
whether or not received. The Security
Balance of a Security outstanding from
time to time represents the maximum
amount that the holder thereof is then
entitled to receive in respect of
principal from future cash flow on the
assets in the related Trust Fund.
Unless otherwise provided in the
related Prospectus Supplement,
distributions of principal will be made
on each Distribution Date to the class
or classes of Securities entitled
thereto until the Security Balances of
such Securities have been reduced to
zero. Distributions of principal of any
class of Securities will be made on a
pro rata basis among all of the
Securities of such class or by random
selection, as described in the related
Prospectus Supplement or otherwise
established by the related Trustee.
Stripped Interest Securities with no
Security Balance will not receive
distributions in respect of principal.
See "Description of the Securities --
Distributions of Principal of the
Securities."
Termination......................... If so specified in the related
Prospectus Supplement, a series of
Securities may be subject to optional
early termination
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<PAGE>
through the repurchase of the Assets in
the related Trust Fund by the party
specified therein, under the
circumstances and in the manner set
forth therein. If so provided in the
related Prospectus Supplement, upon the
reduction of the Security Balance of a
specified class or classes of
Securities to a specified percentage or
amount or on and after a date specified
in such Prospectus Supplement, the
party specified therein will solicit
bids for the purchase of all of the
Assets of the Trust Fund, or of a
sufficient portion of such Assets to
retire such class or classes, or
purchase such Assets at a price set
forth in the related Prospectus
Supplement. In addition, if so provided
in the related Prospectus Supplement,
certain classes of Securities may be
purchased subject to similar
conditions. See "Description of the
Securities -- Termination."
Registration of Securities If so provided in the related
Prospectus Supplement, one or more
classes of the Offered Securities will
initially be represented by one or more
certificates or notes, as applicable,
registered in the name of Cede & Co.,
as the nominee of DTC. No person
acquiring an interest in Offered
Securities so registered will be
entitled to receive a definitive
certificate or note, as applicable,
representing such person's interest
except in the event that definitive
certificates or notes, as applicable,
are issued under the limited
circumstances described herein. See
"Special Considerations -- Book-Entry
Registration" and "Description of the
Securities -- Book-Entry Registration
and Definitive Securities."
Tax Status of the Certificates The Certificates of each series will
constitute, as specified in the related
Prospectus Supplement, either (i)
"regular interests" ("REMIC Regular
Certificates") and "residual interests"
("REMIC Residual Certificates") in a
Trust Fund treated as a real estate
mortgage investment conduit ("REMIC")
under Sections 860A through 860G of the
Internal Revenue Code of 1986, as
amended (the "Code"), (ii) interests
("Grantor Trust Certificates") in a
Trust Fund treated as a grantor trust
under applicable provisions of the Code
or (iii) an interest in a Trust Fund
treated as a partnership for purposes
of federal and state income tax.
(a) REMIC................... REMIC Regular Certificates generally
will be treated as debt obligations of
the applicable REMIC for federal income
tax purposes. Certain REMIC Regular
Certificates may be issued with
original issue discount for federal
income tax purposes. See "Federal
Income Tax Consequences" herein and in
the related Prospectus Supplement. The
Offered Certificates evidencing an
interest in a Trust Fund containing
Mortgage Loans (not including Unsecured
Home Improvement Loans, SBA Loans and
SBA 504 Loans) will be treated as (i)
"qualifying real property loans" within
the meaning of Section 593(d)(1) of the
Internal Revenue Code of 1986, as
amended (the "Code"), (ii) assets
described in section 7701(a)(19)(C) of
the Code and (iii) "real estate assets"
within the meaning of Section
856(c)(5)(A) of the Code, in each case
to the extent described herein and in
the Prospectus. See "Federal Income
Tax Consequences" herein and in
the related Prospectus Supplement.
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<PAGE>
(b) Grantor Trust........... If the related Prospectus Supplement
specifies that the related Trust Fund
will be a grantor trust, the Trust Fund
will be classified as a grantor trust
and not as an association taxable as a
corporation for federal income tax
purposes, and therefore holders of
Certificates will be treated as the
owners of undivided pro rata interests
in the Assets held by the Trust Fund.
(c) Partnership............. If so specified in a Prospectus
Supplement, the related Trust Fund will
be treated as a partnership for
purposes of federal and state income
tax, and each Certificateholder, by the
acceptance of a Certificate of such
Trust Fund, will agree to treat the
Trust Fund as a partnership in which
such Certificateholder is a partner for
federal income and state tax purposes.
Alternative characterizations of such
Trust Fund and such Certificates are
possible, but would not result in
materially adverse tax consequences to
Certificateholders. Investors are
advised to consult their tax advisors
and to review "Federal Income Tax
Consequences" herein and in the
related Prospectus Supplement.
Tax Status of Notes................. Notes of a series will be treated as
indebtedness for federal and state
income tax purposes and the Noteholder,
in accepting the Note, will agree to
treat such Note as indebtedness. See
"Federal Income Tax Consequences"
herein and in such Prospectus
Supplement. Investors are advised to
consult their tax advisors and to
review "Federal Income Tax
Consequences" herein and in the related
Prospectus Supplement.
ERISA Considerations................ A fiduciary of an employee benefit plan
and certain other retirement plans and
arrangements, including individual
retirement accounts, 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
should carefully review with its legal
advisors whether the purchase or
holding of Offered Securities could
give rise to a transaction that is
prohibited or is not otherwise
permissible either under ERISA or
Section 4975 of the Code. See "ERISA
Considerations" herein and in the
related Prospectus Supplement. Certain
classes of Securities may not be
transferred unless the Trustee and the
Depositor are furnished with a letter
of representations or an opinion of
counsel to the effect that such
transfer will not result in a violation
of the prohibited transaction
provisions of ERISA and the Code and
will not subject the Trustee, the
Depositor or the Master Servicer to
additional obligations. See
"Description of the Securities --
General" and "ERISA Considerations."
Legal Investment.................... Each Prospectus Supplement will specify
which class or classes of Offered
Securities, if any, will constitute
"mortgage-related securities" for
purposes of the Secondary Mortgage
Market Enhancement Act of 1984
("SMMEA"). Institutions whose
investment activities are subject to
legal investment laws and
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<PAGE>
regulations or review by certain
regulatory authorities may be subject
to restrictions on investment in
certain classes of the Offered
Securities. See "Legal Investment"
herein.
Rating.............................. At the date of issuance, as to each
series, each class of Offered
Securities will be rated not lower than
investment grade by one or more
nationally recognized statistical
rating agencies (each, a "Rating
Agency"). See "Rating" herein.
13
<PAGE>
RISK FACTORS
Investors should consider, in connection with the purchase of Offered
Securities, among other things, the following factors.
No Market for the Securities
At the time of issuance of a series of Securities, there will be no
secondary market for any of the Securities. There can be no assurance that a
secondary market for the Securities of any series will develop or, if it does
develop, that it will provide holders with liquidity of investment or will
continue while Securities of such series remain outstanding.
Assets included in Trust Fund to be Sole Source of Payment
The Securities will not represent an interest in or obligation of the
Depositor, the Master Servicer or any of their affiliates. The only obligations
with respect to the Securities or the Assets will be the obligations (if any) of
the Warranting Party (as defined in "Description of the Agreements --
Representations and Warranties; Repurchases") pursuant to certain limited
representations and warranties made with respect to the Mortgage Loans or
Contracts, the Master Servicer's and any Sub-Servicer's servicing obligations
under the related Agreement and, if and to the extent expressly described in the
related Prospectus Supplement, certain limited obligations of the Master
Servicer in connection with an agreement to purchase or act as remarketing agent
with respect to a convertible ARM Loan (as defined in "Description of the Trust
Funds -- Mortgage Loans -- Mortgage Loan Information in Prospectus Supplements")
upon conversion to a fixed rate or a different index. Since certain
representations and warranties with respect to the Mortgage Assets or Contracts
may have been made and/or assigned in connection with transfers of such Mortgage
Assets or Contracts prior to the related closing date, the rights of the Trustee
and the Securityholders with respect to such representations or warranties will
be limited to their rights as an assignee thereof. None of the Depositor, the
Master Servicer or any affiliate thereof will have any obligation with respect
to representations or warranties made by any other entity. If so specified in
the related Prospectus Supplement, the Securities will not be guaranteed or
insured by any governmental agency or instrumentality, or by the Depositor, the
Master Servicer, any Sub-Servicer or any of their affiliates. If so specified in
the related Prospectus Supplement, the underlying Assets may be guaranteed or
insured by a governmental agency or instrumentality thereof. Proceeds of the
assets included in the related Trust Fund for each series of Securities
(including the Assets and any form of credit enhancement) will be the sole
source of payments on the Securities, and there will be no recourse to the
Depositor or any other entity in the event that such proceeds are insufficient
or otherwise unavailable to make all payments provided for under the Securities.
Unless so specified in the related Prospectus Supplement, a series of
Securities will not have any claim against or security interest in the Trust
Funds for any other series. If the related Trust Fund is insufficient to make
payments on such Securities, no other assets will be available for payment of
the deficiency. Additionally, certain amounts remaining in certain funds or
accounts, including the Collection Account and any accounts maintained as Credit
Support, may be withdrawn under certain conditions, as described in the related
Prospectus Supplement. In the event of such withdrawal, such amounts will not be
available for future payment of principal of or interest on the Securities. If
so provided in the Prospectus Supplement for a series of Securities consisting
of one or more classes of Subordinate Securities, on any Distribution Date in
respect of which losses or shortfalls in collections on the Assets have been
incurred, the amount of such losses or shortfalls will be borne first by one or
more classes of the Subordinate Securities, and, thereafter, by the remaining
classes of Securities in the priority and manner and subject to the limitations
specified in such Prospectus Supplement.
Impact of Prepayments on Average Life of Securities and Yield
Prepayments (including those caused by defaults) on the Assets in any
Trust Fund generally will result in a faster rate of principal payments on one
or more classes of the related Securities than if payments on such Assets were
made as scheduled. Thus, the prepayment experience on the Assets may affect the
average life of
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<PAGE>
each class of related Securities. The rate of principal payments on pools of
mortgage loans or manufactured housing contracts varies between pools and from
time to time is influenced by a variety of economic, demographic, geographic,
social, tax, legal and other factors. There can be no assurance as to the rate
of prepayment on the Assets in any Trust Fund or that the rate of payments will
conform to any model described herein or in any Prospectus Supplement. If
prevailing interest rates fall significantly below the applicable mortgage
interest rates, principal prepayments are likely to be higher than if prevailing
rates remain at or above the rates borne by the Mortgage Loans underlying or
comprising the Mortgage Assets in any Trust Fund. As a result, the actual
maturity of any class of Securities evidencing an interest in a Trust Fund
containing Mortgage Assets could occur significantly earlier than expected. The
relationship of prevailing interest rates and prepayment rates on Contracts will
be discussed in the related Prospectus Supplement. In addition, certain
prepayments may result in the collection of less interest than would otherwise
be the case in the month of prepayment.
A series of Securities may include one or more classes of Securities
with priorities of payment and, as a result, yields on other classes of
Securities, including classes of Offered Securities, of such series may be more
sensitive to prepayments on Assets. A series of Securities may include one or
more classes offered at a significant premium or discount. Yields on such
classes of Securities will be sensitive, and in some cases extremely sensitive,
to prepayments on Mortgage Assets and, where the amount of interest payable with
respect to a class is disproportionately high, as compared to the amount of
principal, as with certain classes of Stripped Interest Securities, a holder
might, in some prepayment scenarios, fail to recoup its original investment. A
series of Securities may include one or more classes of Securities, including
classes of Offered Securities, that provide for distribution of principal
thereof from amounts attributable to interest accrued but not currently
distributable on one or more classes of Accrual Securities and, as a result,
yields on such Securities will be sensitive to (a) the provisions of such
Accrual Securities relating to the timing of distributions of interest thereon
and (b) if such Accrual Securities accrue interest at a variable or adjustable
Pass-Through Rate or interest rate, changes in such rate. See "Yield
Considerations" herein and, if applicable, in the related Prospectus Supplement.
The Pre-Funding Account
If all moneys originally deposited in any Pre-Funding Account are not
used by the end of the time period specified in the related Prospectus
Supplement, which shall not exceed one year, then any remaining moneys will be
applied as prepayments of the related Securities and holders of Securities and
holders of Securities entitled to receive payments of principal will receive a
prepayment of principal in an amount equal to the amount remaining in any such
Pre-Funding Account. In addition, Subsequent Assets may be originated using
underwriting guidelines different from those which were applied to the Assets
included in the initial related Pool. Therefore, following the transfer of
Subsequent Assets, the aggregate characteristics of the pool of Assets may
vary from those of the initial related Pool.
Ratings Limited to Securities
Any rating assigned by a Rating Agency to a class of Securities will
reflect such Rating Agency's assessment solely of the likelihood that holders of
Securities of such class will receive payments to which such Securityholders are
entitled under the related Agreement. Such rating will not constitute an
assessment of the likelihood that principal prepayments (including those caused
by defaults) on the related Mortgage Assets will be made, the degree to which
the rate of such prepayments might differ from that originally anticipated or
the likelihood of early optional termination of the series of Securities. Such
rating will not address the possibility that prepayment at higher or lower rates
than anticipated by an investor may cause such investor to experience a lower
than anticipated yield or that an investor purchasing a Security at a
significant premium might fail to recoup its initial investment under certain
prepayment scenarios. Each Prospectus Supplement will identify any payment to
which holders of Offered Securities of the related series are entitled that is
not covered by the applicable rating.
Risks relating to Mortgage Loans and the Values of Mortgaged Properties
An investment in securities such as the Securities which generally
represent interests in Mortgage Loans may be affected by, among other things, a
decline in real estate values and changes in the mortgagors' 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, 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
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<PAGE>
that such losses are not covered by the applicable Credit Support, if any,
holders of Securities of the series evidencing interests in the related Mortgage
Loans will bear all risk of loss resulting from default by mortgagors and a
decrease in the value of any repossessed properties 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 Mortgage Loans 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 mortgagor under the
Mortgage Loan, as to which the mortgagor is generally qualified on the basis of
the initial payment amount. In some instances the mortgagors' income may not be
sufficient to enable them to continue to make their loan payments as such
payments increase and thus the likelihood of default will increase.
Risks Relating to Certain Geographic Regions
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. The Mortgage Loans underlying certain
series of Certificates 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.
Risks Relating to Certain Types of Mortgaged Loans
The rate of default on Mortgage Loans that are refinance or limited
documentation mortgage loans, and on Mortgage Loans with high Loan-to-Value
Ratios (as defined in "Description of the Trust Fund -- Mortgage Loans --
Loan-to-Value Ratios"), may be higher than for other types of Mortgage Loans.
Additionally, a decline in the value of the Mortgaged Properties will increase
the risk of loss particularly with respect to any related junior Mortgage Loans.
See "-- Junior Mortgage Loans."
Risks relating to Mortgaged Loans Secured by Multifamily Properties
Mortgage Loans secured by 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 secured by 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
typically 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.
Mortgaged Properties subject to Uninsured Risks
Any Securities secured by an interest in Mortgaged Properties will have
the benefit of certain hazard insurance which the Master Servicer is required to
cause to be maintained; provided, however, that the standard form of fire and
extended coverage policy typically does not cover any physical damage resulting
from the following: war, revolution, governmental actions, floods or other
water-related causes, earth movements (including earthquakes, landslides and
mudflows), nuclear reactions, wet or dry rot, vermin, rodents, insects or
domestic animals, theft and, in certain cases, vandalism. Accordingly, holders
of the Securities of the series evidencing interests in the related Mortgage
Loans will bear all risk of loss resulting from such uninsured risks.
Balloon Payments
Certain of the Mortgage Loans (the "Balloon Mortgage Loans") as of the
Cut-off Date may not be fully amortizing over their terms to maturity and, thus,
will require substantial principal payments (i.e., balloon payments) at their
stated maturity. Mortgage Loans with balloon payments involve a greater degree
of risk because the ability of a mortgagor to make a balloon payment typically
will depend upon its ability either to timely refinance the loan or to timely
sell the related Mortgaged Property. The ability of a mortgagor to accomplish
either of these goals will be affected by a number of factors, including the
level of available mortgage interest rates at the time of sale or refinancing,
the mortgagor's equity in the related Mortgaged Property, the financial
condition of the mortgagor, the value of the Mortgaged Property, tax laws,
prevailing general economic conditions and the availability of credit for single
family or multifamily real properties generally.
Junior Mortgage Loans
Certain of the Mortgage Loans may be secured by junior liens and the
related first and other senior liens, if any (collectively, the "senior lien"),
may not be included in the Mortgage Pool. The primary risk to holders of
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 lien
to satisfy fully both the senior lien and the Mortgage Loan. In the event that a
holder of the senior lien forecloses on a Mortgaged Property, the proceeds of
the
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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
lien. The claims of the holder of the senior lien will be satisfied in full out
of proceeds of the liquidation of the Mortgage Loan, 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 Mortgage Loan, it would do so subject to any related senior
lien. 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 lien or purchase the Mortgaged Property subject to the senior lien. In
the event that such proceeds from a foreclosure or similar sale of the related
Mortgaged Property were insufficient to satisfy both loans in the aggregate, the
Trust Fund, as the holder of the junior lien, and, accordingly, holders of the
Certificates, would bear the risk of delay in distributions while a deficiency
judgment against the borrower was being obtained and the risk of loss if the
deficiency judgment were not realized upon. Moreover, deficiency judgments may
not be available in certain jurisdictions. In addition, a junior mortgagee may
not foreclose on the property securing a junior mortgage unless it forecloses
subject to the senior mortgage.
Contracts and Manufactured Homes In General
An investment in Certificates evidencing an interest in a Trust Fund
containing Contracts may be affected by, among other things, a downturn in
national, regional or local economic conditions. The geographic location of the
Manufactured Homes in any Contract Pool at origination of the related Contract
will be set forth in the related Prospectus Supplement under "The Contract
Pool". Regional and local economic conditions are often volatile and,
historically, regional and local economic conditions, as well as national
economic conditions, have affected the delinquency, loan loss and repossession
experience of manufactured housing installment sales contracts and/or
installment loan contracts (hereinafter generally referred to as "contracts" or
"manufactured housing contracts"). Moreover, regardless of its location,
manufactured housing generally depreciates in value. Thus, such Securityholders
should expect that, as a general matter, the market value of any Manufactured
Home will be lower than the outstanding principal balance of the related
Contract. Sufficiently high delinquencies and liquidation losses on the
Contracts in a Contract Pool will have the effect of reducing, and could
eliminate, the protection against loss afforded by any credit enhancement
supporting any class of the related Securities. If such protection is eliminated
with respect to a class of Securities, the holders of such Securities will bear
all risk of loss on the related Contracts and will have to rely on the value of
the related Manufactured Homes for recovery of the outstanding principal of and
unpaid interest on any defaulted Contracts in the related Contract Pool. See
"Description of Credit Support."
Security Interests and Certain Other Legal Aspects of the Contracts
The Originator in respect of a Contract will represent that such
Contract is secured by a security interest in a Manufactured Home. Perfection of
security interests in the Manufactured Homes and enforcement of rights to
realize upon the value of the Manufactured Homes as collateral for the Contracts
are subject to a number of federal and state laws, including the Uniform
Commercial Code as adopted in each state and each state's certificate of title
statutes. The steps necessary to perfect the security interest in a Manufactured
Home will vary from state to state. Because of the expense and administrative
inconvenience involved, the Master Servicer will not amend any certificates of
title to change the lienholder specified therein from the Originator to the
Trustee and will not deliver any certificate of title to the Trustee or note
thereon the Trustee's interest. Consequently, in some states, in the absence of
such an amendment, the assignment to the Trustee of the security interest in the
Manufactured Home may not be effective or such security interest may not be
perfected and, in the absence of such notation or delivery to the Trustee, the
assignment of the security interest in the Manufactured Home may not be
effective against creditors of the Originator or a trustee in bankruptcy of the
Originator. In addition, numerous federal and state consumer protection laws
impose requirements on lending under installment sales contracts and installment
loan agreements such as the Contracts, and the failure by the lender or seller
of goods to comply with such requirements could give rise to liabilities of
assignees for amounts due under such agreements and claims by such assignees may
be subject to set-off as result of such lender's or seller's noncompliance.
These laws would apply to the Trustee as assignee of the Contracts. The
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Originator will warrant that each Contract complies with all requirements of law
and will make certain warranties relating to the validity, subsistence,
perfection and priority of the security interest in each Manufactured Home
securing a Contract. A breach of any such warranty that materially adversely
affects any Contract would create an obligation of the Originator and the
Depositor to repurchase such Contract unless such breach is cured. If the Credit
Support is exhausted and recovery of amounts due on the Contracts is dependent
on repossession and resale of Manufactured Homes securing Contracts that are in
default, certain other factors may limit the ability of the Certificateholders
to realize upon the Manufactured Home or may limit the amount realized to less
than the amount due. See "Certain Legal Aspects of the Contracts."
Unsecured Home Improvement Loans
The obligations of the borrower under any Unsecured Home Improvement
Loan included in a Trust Fund will not be secured by an interest in the related
real estate or any other property, and the Trust Fund will be a general
unsecured creditor as to such obligations. In the event of a default under an
Unsecured Home Improvement Loan, the related Trust Fund will have recourse only
against the borrower's assets generally, along with all other general unsecured
creditors of the borrower. In a bankruptcy or insolvency proceeding relating to
a borrower on an Unsecured Home Improvement Loan, the obligations of the
borrower under such Unsecured Home Improvement Loan may be discharged in their
entirety, notwithstanding the fact that the portion of such borrower's assets
made available to the related Trust Fund as a general unsecured creditor to pay
amounts due and owing thereunder are insufficient to pay all such amounts. A
borrower on an Unsecured Home Improvement Loan may not demonstrate the same
degree of concern over performance of the borrower's obligations under such Home
Improvement Loan as if such obligations were secured by the real estate or other
assets owned by such borrower.
Credit Support Limitations
The Prospectus Supplement for a series of Certificates will describe any
Credit Support in the related Trust Fund, which may include letters of credit,
insurance policies, guarantees, reserve funds or other types of credit support,
or combinations thereof. Use of Credit Support will be subject to the conditions
and limitations described herein and in the related Prospectus Supplement.
Moreover, such Credit Support may not cover all potential losses or risks; for
example, Credit Support may or may not cover fraud or negligence by a mortgage
loan or contract originator or other parties.
A series of Securities may include one or more classes of Subordinate
Securities (which may include Offered Securities), if so provided in the related
Prospectus Supplement. Although subordination is intended to reduce the risk to
holders of Senior Securities of delinquent distributions or ultimate losses, the
amount of subordination will be limited and may decline under certain
circumstances. In addition, if principal payments on one or more classes of
Securities of a series are made in a specified order of priority, any limits
with respect to the aggregate amount of claims under any related Credit Support
may be exhausted before the principal of the lower priority classes of
Securities of such series has been repaid. As a result, the impact of
significant losses and shortfalls on the Assets may fall primarily upon those
classes of Securities having a lower priority of payment. Moreover, if a form of
Credit Support covers more than one series of Securities (each, a "Covered
Trust"), holders of Securities evidencing an interest in a Covered Trust will be
subject to the risk that such Credit Support will be exhausted by the claims of
other Covered Trusts.
The amount of any applicable Credit Support supporting one or more
classes of Offered Securities, including the subordination of one or more
classes of Securities, will be determined on the basis of criteria established
by each Rating Agency rating such classes of Securities based on an assumed
level of defaults, delinquencies, other losses or other factors. There can,
however, be no assurance that the loss experience on the related Assets will not
exceed such assumed levels. See "-- Limited Nature of Ratings," "Description of
the Securities" and "Description of Credit Support."
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. The Master Servicer will
generally be permitted to reduce, terminate or substitute all or a portion of
the credit
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enhancement for any series of Securities, if the applicable Rating Agency
indicates that the then-current rating thereof will not be adversely affected.
The rating of any series of Securities 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 Assets substantially in excess of the levels contemplated
by such Rating Agency at the time of its initial rating analysis. None of the
Depositor, the Master Servicer or any of their affiliates will have any
obligation to replace or supplement any Credit Support or to take any other
action to maintain any rating of any series of Securities.
Subordination of the Subordinate Certificates; Effect of Losses on the Assets
The rights of Subordinate Securityholders to receive distributions to
which they would otherwise be entitled with respect to the Assets will be
subordinate to the rights of the Master Servicer (to the extent that the Master
Servicer is paid its servicing fee, including any unpaid servicing fees with
respect to one or more prior Due Periods (as defined below under "Description of
the Securities -- Available Distribution Amount"), and is reimbursed for certain
unreimbursed liquidation expenses) and the Senior Securityholders to the extent
described in the related Prospectus Supplement. As a result of the foregoing,
investors must be prepared to bear the risk that they may be subject to delays
in payment and may not recover their initial investments in the Subordinate
Securities. See "-- Allocation of Losses and Shortfalls."
The yields on the Subordinate Securities may be extremely sensitive to
the loss experience of the Assets and the timing of any such losses. If the
actual rate and amount of losses experienced by the Assets exceed the rate and
amount of such losses assumed by an investor, the yields to maturity on the
Subordinate Securities may be lower than anticipated.
Certain Federal Tax Considerations Regarding REMIC Residual Certificates
Holders of REMIC Residual Certificates will be required to report on
their federal income tax returns as ordinary income their pro rata share of the
taxable income of the REMIC, regardless of the amount or timing of their receipt
of cash payments, as described in "Federal Income Tax Consequences -- REMICs."
Accordingly, under certain circumstances, holders of Offered Securities that
constitute REMIC Residual Certificates may have taxable income and tax
liabilities arising from such investment during a taxable year in excess of the
cash received during such period. Individual holders of REMIC Residual
Certificates may be limited in their ability to deduct servicing fees and other
expenses of the REMIC. In addition, REMIC Residual Certificates are subject to
certain restrictions on transfer. Because of the special tax treatment of REMIC
Residual Certificates, the taxable income arising in a given year on a REMIC
Residual Certificate will not be equal to the taxable income associated with
investment in a corporate bond or stripped instrument having similar cash flow
characteristics and pre-tax yield. Therefore, the after-tax yield on the REMIC
Residual Certificate may be significantly less than that of a corporate bond or
stripped instrument having similar cash flow characteristics. Additionally,
prospective purchasers of a REMIC Residual Certificate should be aware that
recently issued temporary regulations provide restrictions on the ability to
mark-to-market certain "negative value" REMIC residual interests. See "Federal
Income Tax Consequences -- REMICs."
Book-Entry Registration
If so provided in the Prospectus Supplement, one or more classes of the
Securities will be initially represented by one or more certificates registered
in the name of Cede, the nominee for DTC, and will not be registered in the
names of the Securityholders or their nominees. Because of this, unless and
until Definitive Securities are issued, Securityholders will not be recognized
by the Trustee as "Securityholders" (as that term is to be used in the related
Agreement). Hence, until such time, Securityholders will be able to exercise the
rights of Securityholders only indirectly through DTC and its participating
organizations. See "Description of the Securities -- Book-Entry Registration and
Definitive Securities."
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DESCRIPTION OF THE TRUST FUNDS
Assets
The primary assets of each Trust Fund (the "Assets") will include (i)
single family and/or multifamily mortgage loans (or certain balances thereof)
(collectively, the "Mortgage Loans"), including without limitation, Home Equity
Loans and Home Improvement Contracts, (ii) unsecured home improvement loans
("Unsecured Home Improvement Loans"), (iii) mortgage participations ("Mortgage
Participations"), (iv) pass-through certificates or other mortgage-backed
securities evidencing interests in or secured by one or more Mortgage Loans or
other similar participations, certificates or securities ("MBS"), (v)
manufactured housing installment sale contracts and installment loan agreements
(the "Contracts"), (vi) direct obligations of the United States, agencies
thereof or agencies created thereby which are not subject to redemption prior to
maturity at the option of the issuer and are (a) interest- bearing securities,
(b) non-interest-bearing securities, (c) originally interest-bearing securities
from which coupons representing the right to payment of interest have been
removed, or (d) interest-bearing securities from which the right to payment of
principal has been removed (the "Government Securities") or (vii) a combination
of Mortgage Loans, Unsecured Home Improvement Loans, Mortgage Participations,
Contracts, MBS and Government Securities; provided, however, in the event a
Trust Fund includes any Unsecured Home Improvement Loans, Mortgage
Participations, MBS or Government Securities, then such Unsecured Home
Improvement Loans, Mortgage Participations, MBS and Government Securities will
represent less than 10% of the aggregate amount of the Assets of such Trust
Fund. As used herein, "Mortgage Loans" refers to both whole Mortgage Loans (or
certain balances thereof) and Mortgage Loans underlying Mortgage Participations
or MBS. Mortgage Loans that secure, or interests in which are evidenced by, MBS
are herein sometimes referred to as "Underlying Mortgage Loans." Mortgage Loans
(or certain balances thereof) that are not Underlying Mortgage Loans are
sometimes referred to as "Whole Loans." Any pass-through certificates or other
asset-backed certificates in which an MBS evidences an interest or which secure
an MBS are sometimes referred to herein also as MBS or as "Underlying MBS."
Mortgage Loans, Mortgage Participations and MBS are sometimes referred to herein
as "Mortgage Assets." The Mortgage Assets will not be guaranteed or insured by
Beneficial Mortgage Corporation (the "Depositor") or any of its affiliates or,
unless otherwise provided in the Prospectus Supplement, by any governmental
agency or instrumentality or by any other person. Each Asset will be selected by
the Depositor for inclusion in a Trust Fund from among those originated by the
Depositor or purchased, either directly or indirectly, from a prior holder
thereof (an "Originator"), which may be an affiliate of the Depositor and, with
respect to Assets, which prior holder may or may not be the originator of such
Mortgage Loan or Contract or the issuer of such MBS.
The Securities will be entitled to payment only from the assets of the
related Trust Fund and will not be entitled to payments in respect of the assets
of any other trust fund established by the Depositor. If so specified in the
related Prospectus Supplement, however, the assets of a Trust Fund will consist
of certificates representing beneficial ownership interests in, or indebtedness
of, another trust fund that contains the Assets.
Mortgage Loans
General
Each Mortgage Loan will be secured by (i) a lien on a Mortgaged Property
consisting of a one- to four-family residential property (a "Single Family
Property" and the related Mortgage Loan a "Single Family Mortgage Loan") or a
residential property consisting of five or more dwelling units in multi-story
structures (a "Multifamily Property" and the related Mortgage Loan a
"Multifamily Mortgage Loan") or (ii) a security interest in shares issued by
private cooperative housing corporations ("Cooperatives"). If so specified in
the related Prospectus Supplement, a Mortgaged Property may include some
commercial use. Mortgaged Properties will be located in any one of the fifty
states or the District of Columbia. To the extent specified in the related
Prospectus Supplement, the Mortgage Loans will be secured by first and/or junior
mortgages or deeds of trust or other similar security instruments creating a
first or junior lien on Mortgaged Property. The Mortgaged Properties may include
apartments owned by Cooperatives. The Mortgaged Properties may include leasehold
interests in properties, the title to which is held by third party lessors.
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Each Mortgage Loan will have been originated by the Depositor or a person other
than the Depositor (the "Originator"). The related Prospectus Supplement will
indicate if any Originator is an affiliate of the Depositor. The Mortgage Loans
will be evidenced by promissory notes (the "Mortgage Notes") secured by
mortgages, deeds of trust or other security instruments (the "Mortgages")
creating a lien on the Mortgaged Properties.
Loan-to-Value Ratio
The "Loan-to-Value Ratio" of a Mortgage Loan at any given time is the
ratio (expressed as a percentage) of the outstanding principal balance of the
Mortgage Loan as of the date of origination to the Value of the related
Mortgaged Property. The "Value" of a Mortgaged Property, other than with respect
to Refinance Loans, is generally the lesser of (a) the appraised value
determined in an appraisal obtained by the originator at origination of such
loan and (b) the sales price for such property. "Refinance Loans" are loans made
to refinance existing loans. Unless otherwise set forth in the related
Prospectus Supplement, the Value of the Mortgaged Property securing a Refinance
Loan is the appraised value thereof determined in an appraisal obtained at the
time of origination of the Refinance Loan. The Value of a Mortgaged Property as
of the date of initial issuance of the related series of Certificates may be
less than the value at origination and will fluctuate from time to time based
upon changes in economic conditions and the real estate market.
Mortgage Loan Information in Prospectus Supplements
Each Prospectus Supplement will contain information, as of the dates
specified in such Prospectus Supplement and to the extent then applicable and
specifically known to the Depositor, with respect to the Mortgage Loans,
including (i) the aggregate outstanding principal balance and the largest,
smallest and average outstanding principal balance of the Mortgage Loans as of
the applicable Cut-off Date, (ii) the type of property securing the Mortgage
Loans, (iii) the weighted average (by principal balance) of the original and
remaining terms to maturity of the Mortgage Loans, (iv) the earliest and latest
origination date and maturity date of the Mortgage Loans, (v) the range of the
Loan-to-Value Ratios at origination of the Mortgage Loans, (vi) the Mortgage
Rates or range of Mortgage Rates and the weighted average Mortgage Rate borne by
the Mortgage Loans, (vii) the state or states in which most of the Mortgaged
Properties are located, (viii) information with respect to the prepayment
provisions, if any, of the Mortgage Loans, (ix) with respect to Mortgage Loans
with adjustable Mortgage Rates ("ARM Loans"), the index, the frequency of the
adjustment dates, the range of margins added to the index, and the maximum
Mortgage Rate or monthly payment variation at the time of any adjustment thereof
and over the life of the ARM Loan and (x) information regarding the payment
characteristics of the Mortgage Loans, including without limitation balloon
payment and other amortization provisions. If specific information respecting
the Mortgage Loans is not known to the Depositor at the time Securities are
initially offered, more general information of the nature described above will
be provided in the Prospectus Supplement, and specific information will be set
forth in a report which will be available to purchasers of the related
Securities at or before the initial issuance thereof and will be filed as part
of a Current Report on Form 8-K with the Securities and Exchange Commission
within fifteen days after such initial issuance; provided, however, that not
more than 5% of the Mortgage Loans included in a Pool will deviate from the
characteristics of such Pool a set forth in the related Prospectus Supplement,
subject to the qualification that certain information with respect to the
Mortgage Loans will be based on a sampling of the included Mortgage Loans.
The related Prospectus Supplement may specify whether the Mortgage Loans
include (i) closed-end and/or revolving home equity loans or certain balances
thereof ("Home Equity Loans"), which may be secured by Mortgages that are junior
to other liens on the related Mortgaged Property and/or (ii) home improvement
installment sales contracts or installment loan agreements (the "Home
Improvement Contracts") originated by a home improvement contractor and secured
by a Mortgage on the related Mortgaged Property that is junior to other liens on
the Mortgaged Property. Except as otherwise described in the related Prospectus
Supplement, the home improvements purchased with the Home Improvement Contracts
will generally be replacement windows, house siding, roofs, swimming pools,
satellite dishes, kitchen and bathroom remodeling goods and solar heating
panels. The related Prospectus Supplement will specify whether the Home
Improvement Contracts are partially insured under Title I of the National
Housing Act and, if so, the limitations on such insurance.
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Payment Provisions of the Mortgage Loans
All of the Mortgage Loans will (i) have individual principal balances at
origination of not less than $1,000, (ii) have original terms to maturity of not
more than 40 years and (iii) provide for payments of principal, interest or
both, on due dates that occur monthly, quarterly or semi-annually or at such
other interval as is specified in the related Prospectus Supplement. Each
Mortgage Loan may provide for no accrual of interest or for accrual of interest
thereon at an interest rate (a "Mortgage Rate") that is fixed over its term or
that adjusts from time to time, or that may be converted from an adjustable to a
fixed Mortgage Rate or a different adjustable Mortgage Rate, or from a fixed to
an adjustable Mortgage Rate, from time to time pursuant to an election or as
otherwise specified on the related Mortgage Note, in each case as described in
the related Prospectus Supplement. Each Mortgage Loan may provide for scheduled
payments to maturity or payments that adjust from time to time to accommodate
changes in the Mortgage Rate or to reflect the occurrence of certain events or
that adjust on the basis of other methodologies, and may provide for negative
amortization or accelerated amortization, in each case as described in the
related Prospectus Supplement. Each Mortgage Loan may be fully amortizing or
require a balloon payment due on its stated maturity date, in each case as
described in the related Prospectus Supplement. Each Mortgage Loan may contain
prohibitions on prepayment (a "Lock-out Period" and, the date of expiration
thereof, a "Lock-out Date") or require payment of a premium or a yield
maintenance penalty (a "Prepayment Premium") in connection with a prepayment, in
each case as described in the related Prospectus Supplement. In the event that
holders of any class or classes of Offered Securities will be entitled to all or
a portion of any Prepayment Premiums collected in respect of Mortgage Loans, the
related Prospectus Supplement will specify the method or methods by which any
such amounts will be allocated.
Mortgage Participations
Mortgage Participations will evidence an undivided participation
interest in Underlying Mortgage Loans. To the extent available to the Depositor,
the related Prospectus Supplement will contain information in respect of the
Underlying Mortgage Loans substantially similar to the information described
above in respect of Mortgage Loans. Such Prospectus Supplement will also specify
the amount of the participation interest and describe the servicing provisions
of the participation and servicing agreements.
Unsecured Home Improvement Loans
The Unsecured Home Improvement Loans may consist of conventional
unsecured home improvement loans and FHA insured unsecured home improvement
loans. Except as otherwise set forth in the related Prospectus Supplement, the
Unsecured Home Improvement Loans will be fully amortizing and will bear interest
at a fixed or variable annual percentage rate. Unless the context otherwise
requires, references in this Prospectus to Mortgage Loans, Whole Loans and
related terms shall include Unsecured Home Improvement Loans and related terms
to the extent relevant (e.g., a reference to a Mortgaged Property or hazard
insurance does not relate to an Unsecured Home Improvement Loan).
MBS
Any MBS will have been issued pursuant to a pooling and servicing
agreement, a trust agreement, an indenture or similar agreement (an "MBS
Agreement"). A seller (the "MBS Issuer") and/or servicer (the "MBS Servicer") of
the underlying Mortgage Loans (or Underlying MBS) will have entered into the MBS
Agreement with a trustee or a custodian under the MBS Agreement (the "MBS
Trustee"), if any, or with the original purchaser of the interest in the
underlying Mortgage Loans or MBS evidenced by the MBS.
Distributions of any principal or interest, as applicable, will be made
on MBS on the dates specified in the related Prospectus Supplement. The MBS may
be issued in one or more classes with characteristics similar to the classes of
Securities described in this Prospectus. Any principal or interest distributions
will be made on the MBS by the MBS Trustee or the MBS Servicer. The MBS Issuer
or the MBS Servicer or another person specified in the related Prospectus
Supplement may have the right or obligation to repurchase or substitute assets
underlying the MBS after a certain date or under other circumstances specified
in the related Prospectus Supplement.
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Enhancement in the form of reserve funds, subordination or other forms
of credit support similar to that described for the Securities under
"Description of Credit Support" may be provided with respect to the MBS. The
type, characteristics and amount of such credit support, if any, will be a
function of certain characteristics of the Underlying Mortgage Loans or
Underlying MBS evidenced by or securing such MBS and other factors and generally
will have been established for the MBS on the basis of requirements of either
any Rating Agency that may have assigned a rating to the MBS or the initial
purchasers of the MBS.
The Prospectus Supplement for a series of Securities evidencing
interests in Mortgage Assets that include MBS will specify, to the extent
available to the Depositor, (i) the aggregate approximate initial and
outstanding principal amount or notional amount, as applicable, and type of the
MBS to be included in the Trust Fund, (ii) the original and remaining term to
stated maturity of the MBS, if applicable, (iii) whether such MBS is entitled
only to interest payments, only to principal payments or to both, (iv) the
pass-through or bond rate of the MBS or formula for determining such rates, if
any, (v) the applicable payment provisions for the MBS, including, but not
limited to, any priorities, payment schedules and subordination features, (vi)
the MBS Issuer, MBS Servicer and MBS Trustee, as applicable, (vii) certain
characteristics of the credit support, if any, such as subordination, reserve
funds, insurance policies, letters of credit or guarantees relating to the
related Underlying Mortgage Loans, the Underlying MBS or directly to such MBS,
(viii) the terms on which the related Underlying Mortgage Loans or Underlying
MBS for such MBS or the MBS may, or are required to, be purchased prior to their
maturity, (ix) the terms on which Mortgage Loans or Underlying MBS may be
substituted for those originally underlying the MBS, (x) the servicing fees
payable under the MBS Agreement, (xi) the type of information in respect of the
Underlying Mortgage Loans described under "-- Mortgage Loans -- Mortgage Loan
Information in Prospectus Supplements" above, and the type of information in
respect of the Underlying MBS described in this paragraph, (xii) the
characteristics of any cash flow agreements that are included as part of the
trust fund evidenced or secured by the MBS and (xiii) whether the MBS is in
certificated form or held through a depository such as The Depository Trust
Company or the Participants Trust Company.
Contracts
General
Each Contract will be secured by a security interest in a new or used
Manufactured Home. Such Prospectus Supplement will specify the states or other
jurisdictions in which the Manufactured Homes are located as of the related
Cut-off Date. The method of computing the "Loan-to-Value Ratio" of a Contract
will be described in the related Prospectus Supplement.
Contract Information in Prospectus Supplements
Each Prospectus Supplement will contain certain information, as of the
dates specified in such Prospectus Supplement and to the extent then applicable
and specifically known to the Depositor, with respect to the Contracts,
including (i) the aggregate outstanding principal balance and the largest,
smallest and average outstanding principal balance of the Contracts as of the
applicable Cut-off Date, (ii) whether the Manufactured Homes were new or used as
of the origination of the related Contracts, (iii) the weighted average (by
principal balance) of the original and remaining terms to maturity of the
Contracts, (iv) the earliest and latest origination date and maturity date of
the Contracts, (v) the range of the Loan-to-Value Ratios at origination of the
Contracts, (vi) the Contract Rates or range of Contract Rates and the weighted
average Contract Rate borne by the Contracts, (vii) the state or states in which
most of the Manufactured Homes are located at origination, (viii) information
with respect to the prepayment provisions, if any, of the Contracts, (ix) with
respect to Contracts with adjustable Contract Rates ("ARM Contracts"), the
index, the frequency of the adjustment dates, and the maximum Contract Rate or
monthly payment variation at the time of any adjustment thereof and over the
life of the ARM Contract, and (x) information regarding the payment
characteristics of the Contracts. If specific information respecting the
Contracts is not known to the Depositor at the time Securities are initially
offered, more general information of the nature described above will be provided
in the Prospectus Supplement, and specific information will be set forth in a
report which will be
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available to purchasers of the related Securities at or before the initial
issuance thereof and will be filed as part of a Current Report on Form 8-K with
the Securities and Exchange Commission within fifteen days after such initial
issuance; provided, however, that not more than 5% of the Contracts included in
a pool will deviate from the characteristics of such pool as set forth in the
related Prospectus Supplement, subject to the qualification that certain
information with respect to the Mortgage Loans will be based on a sampling of
the included Mortgage Loans.
Payment Provisions of the Contracts.
All of the Contracts will (i) have individual principal balances at
origination of not less than $1,000, (ii) have original terms to maturity of not
more than 40 years and (iii) provide for payments of principal, interest or
both, on due dates that occur monthly or at such other interval as is specified
in the related Prospectus Supplement. Each Contract may provide for no accrual
of interest or for accrual of interest thereon at an annual percentage rate (a
"Contract Rate") that is fixed over its term or that adjusts from time to time,
or as otherwise specified in the related Prospectus Supplement. Each Contract
may provide for scheduled payments to maturity or payments that adjust from time
to time to accommodate changes in the Contract Rate as otherwise described in
the related Prospectus Supplement.
Government Securities
The Prospectus Supplement for a series of Securities evidencing
interests in Assets of a Trust Fund that include Government Securities will
specify, to the extent available, (i) the aggregate approximate initial and
outstanding principal amounts or notional amounts, as applicable, and types of
the Government Securities to be included in the Trust Fund, (ii) the original
and remaining terms to stated maturity of the Government Securities, (iii)
whether such Government Securities are entitled only to interest payments, only
to principal payments or to both, (iv) the interest rates of the Government
Securities or the formula to determine such rates, if any, (v) the applicable
payment provisions for the Government Securities and (vi) to what extent, if
any, the obligation evidenced thereby is backed by the full faith and credit of
the United States. With respect to any series of Securities, Government
Securities shall include, without limitation, any one or combination of the
following: (1) Federal Home Loan Mortgage Corporation ("FHLMC") mortgage
participation certificates representing undivided interests in specified pools
of fixed, variable or adjustable rate, first lien and fully amortizing, whole
one- to four-family residential mortgage loans or participation interests in
one- to four-family residential mortgage loans purchased by FHLMC, and with
respect to which FHLMC guarantees the timely payment of interest at the
applicable certificate rate and the ultimate collection of principal on the
mortgage loans ("FHLMC Certificates"); (2) Federal National Mortgage Association
("FNMA") mortgage pass-through certificates representing undivided interests in
specified pools of mortgage loans consisting of fixed, variable or adjustable
rate, first lien and fully amortizing, one- to four-family residential mortgage
loans, and with respect to which FNMA guarantees the timely payment of schedule
principal and interest at the applicable certificate rate and the full
collection of principal on the mortgage loans ("FNMA Certificates"); (3)
Government National Mortgage Association ("GNMA") fully modified pass-through
mortgage-backed certificates that are issued and serviced by a mortgage banking
company or other financial institution approved by GNMA as seller-servicer of
mortgage loans insured by the Federal Housing Administration ("FHA") or mortgage
loans partially guaranteed by the Veterans Administration ("VA"), that evidence
fractional undivided interests in pools of fixed-rate FHA loans and VA loans
secured by mortgages which are level-pay, first lien and fully amortizing on
single-family dwellings and with respect to which GNMA guarantees the full and
timely payment of principal of and interest at the applicable certificate rate
on each GNMA Certificate ("GNMA Certificates"); and (4) direct obligations
issued by the United States of America ("U.S. Treasury Securities").
Pre-Funding Account
To the extent provided in a Prospectus Supplement, the Depositor will be
obligated (subject only to the availability thereof) to sell at a predetermined
price, and the Trust Fund for the related series of Securities will be obligated
to purchase (subject to the satisfaction of certain conditions described in the
applicable Agreement), additional Assets (the "Subsequent Assets") from time to
time (as frequently as daily) within the time period specified in the related
Prospectus Supplement after the issuance of such series of Securities having an
aggregate principal balance approximately equal to the amount on deposit in the
Pre-Funding Account (the "Pre-Funded Amount") for such series on the date of
such issuance. The Prospectus Supplement for a series of Securities for which
there is a Pre-Funding Account will set forth (i) the term and duration of
such Pre-Funding Account, which in no event shall be longer than one year from
the date the related Trust Fund was established, (ii) the percentage of the
aggregate amount of Assets of such Trust Fund that will consist of Subsequent
Assets, which in no event shall be more than 25%, (iii) that the Subsequent
Assets will be originated pursuant to underwriting guidelines substantially
similar to the other Assets included in the related Pool and (iv) all moneys
on deposit in such Pre-Funding Account will be invested in one or more Permitted
Investments (as defined in "Collection Account and Related Accounts -- General")
(See "Risk Factors -- Pre-Funding Account").
Accounts
Each Trust Fund will include one or more accounts established and
maintained on behalf of the Securityholders into which the person or persons
designated in the related Prospectus Supplement will, to the extent described
herein and in such Prospectus Supplement deposit all payments and collections
received with respect to the Assets and other assets in the Trust Fund. Such an
account may be maintained as an interest bearing or a non-interest bearing
account, and funds held therein may be held as cash or invested in certain
short-term, investment grade obligations, in each case as described in the
related Prospectus Supplement. See "Description of the Agreements -- Collection
Account and Related Accounts."
Credit Support
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Assets in the related
Trust Fund may be provided to one or more classes of Securities in the related
series in the form of subordination of one or more other classes of Securities
in such series or by one or more of the following types of credit support:
overcollateralization, a letter of credit, insurance policy, guarantee, reserve
fund or any combination thereof (any such coverage with respect to the
Securities of any series, "Credit Support"). Each type of Credit Support to be
provided for in a Prospectus Supplement for a series of Securities is described
herein. See "Description of Credit Support." The amount and types of coverage,
the identification of the entity providing
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the coverage (if applicable) and related information with respect to each type
of Credit Support, if any, will be described in the Prospectus Supplement for a
series of Securities. See "Risk Factors -- Credit Support Limitations"
and "Description of Credit Support."
Cash Flow Agreements
If so provided in the related Prospectus Supplement, the Trust Fund may
include guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related series will be invested at a
specified rate. The Trust Fund may also include certain other agreements, such
as interest rate exchange agreements, interest rate cap or floor agreements,
currency exchange agreements or similar agreements provided to reduce the
effects of interest rate or currency exchange rate fluctuations on the Assets or
on one or more classes of Securities. (Currency exchange agreements might be
included in the Trust Fund if some or all of the Mortgage Assets (such as
Mortgage Loans secured by Mortgaged Properties located outside the United
States) were denominated in a non-United States currency.) The principal terms
of any such guaranteed investment contract or other agreement (any such
agreement, a "Cash Flow Agreement"), including, without limitation, provisions
relating to the timing, manner and amount of payments thereunder and provisions
relating to the termination thereof, will be described in the Prospectus
Supplement for the related series. The counterparty to any such Cash Flow
Agreement will be identified in the Prospectus Supplement for the related series
as well as any material risks for holders of the related Securities that are
specific to such Cash Flow Agreement or the counterparty thereto. In addition,
the related Prospectus Supplement will provide certain information with respect
to the obligor under any such Cash Flow Agreement. In addition, the related
Prospectus Supplement will provide certain information with respect to the
obligor under any such Cash Flow Agreement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Securities will be
applied by the Depositor to the purchase of Assets, or the payment of the
financing incurred in such purchase, and to pay for certain expenses incurred in
connection with such purchase of Assets and sale of Securities. The Depositor
expects to sell the Securities from time to time, but the timing and amount of
offerings of Securities will depend on a number of factors, including the volume
of Assets acquired by the Depositor, prevailing interest rates, availability of
funds and general market conditions.
YIELD CONSIDERATIONS
General
The yield on any Offered Security will depend on the price paid by the
Securityholder, the Pass-Through Rate of the Security, the receipt and timing
of receipt of distributions on the Security and the weighted average life of
the Assets in the related Trust Fund (which may be affected by prepayments,
defaults, liquidations or repurchases). See "Risk Factors."
Pass-Through Rate and Interest Rate
Securities of any class within a series may have fixed, variable or
adjustable Pass-Through Rates or interest rates, which may or may not be based
upon the interest rates borne by the Assets in the related Trust Fund. The
Prospectus Supplement with respect to any series of Securities will specify the
Pass-Through Rate or interest rate for each class of such Securities or, in the
case of a variable or adjustable Pass-Through Rate or interest rate, the method
of determining the Pass-Through Rate or interest rate; the effect, if any, of
the prepayment of any Asset on the Pass-Through Rate or interest rate of one or
more classes of Securities; and whether the distributions of interest on the
Securities of any class will be dependent, in whole or in part, on the
performance of any obligor under a Cash Flow Agreement.
If so specified in the related Prospectus Supplement, the effective
yield to maturity to each holder of Securities entitled to payments of interest
will be below that otherwise produced by the applicable Pass-Through Rate or
interest rate and purchase price of such Security because, while interest may
accrue on
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each Asset during a certain period, the distribution of such interest will be
made on a day which may be several days, weeks or months following the period of
accrual.
Timing of Payment of Interest
Each payment of interest on the Securities (or addition to the Security
Balance of a class of Accrual Securities) on a Distribution Date will include
interest accrued during the Interest Accrual Period for such Distribution Date.
As indicated above under "-- Pass-Through Rate and Interest Rate," if the
Interest Accrual Period ends on a date other than the day before a Distribution
Date for the related series, the yield realized by the holders of such
Securities may be lower than the yield that would result if the Interest Accrual
Period ended on such day before the Distribution Date.
Payments of Principal; Prepayments
The yield to maturity on the Securities will be affected by the rate of
principal payments on the Assets (including principal prepayments on Mortgage
Loans and Contracts resulting from both voluntary prepayments by the borrowers
and involuntary liquidations). The rate at which principal prepayments occur on
the Mortgage Loans and Contracts will be affected by a variety of factors,
including, without limitation, the terms of the Mortgage Loans and Contracts,
the level of prevailing interest rates, the availability of mortgage credit and
economic, demographic, geographic, tax, legal and other factors. In general,
however, if prevailing interest rates fall significantly below the Mortgage
Rates on the Mortgage Loans comprising or underlying the Assets in a particular
Trust Fund, such Mortgage Loans are likely to be the subject of higher principal
prepayments than if prevailing rates remain at or above the rates borne by such
Mortgage Loans. In this regard, it should be noted that certain Assets may
consist of Mortgage Loans with different Mortgage Rates and the stated
pass-through or pay-through interest rate of certain MBS may be a number of
percentage points higher or lower than certain of the Underlying Mortgage Loans.
The rate of principal payments on some or all of the classes of Securities of a
series will correspond to the rate of principal payments on the Assets in the
related Trust Fund and is likely to be affected by the existence of Lock-out
Periods and Prepayment Premium provisions of the Mortgage Loans underlying or
comprising such Assets, and by the extent to which the servicer of any such
Mortgage Loan is able to enforce such provisions. Mortgage Loans with a Lock-out
Period or a Prepayment Premium provision, to the extent enforceable, generally
would be expected to experience a lower rate of principal prepayments than
otherwise identical Mortgage Loans without such provisions, with shorter
Lock-out Periods or with lower Prepayment Premiums.
Because of the depreciating nature of manufactured housing, which limits
the possibilities for refinancing, and because the terms and principal amounts
of manufactured housing contracts are generally shorter and smaller than the
terms and principal amounts of mortgage loans secured by site-built homes,
changes in interest rates have a correspondingly smaller effect on the amount of
the monthly payments on manufactured housing contracts than on the amount of the
monthly payments on mortgage loans secured by site-built homes. Consequently,
changes in interest rates may play a smaller role in prepayment behavior of
manufactured housing contracts than they do in the prepayment behavior of loans
secured by mortgage on site-built homes. Conversely, local economic conditions
and certain of the other factors mentioned above may play a larger role in the
prepayment behavior of manufactured housing contracts than they do in the
prepayment behavior of loans secured by mortgages on site-built homes.
If the purchaser of a Security offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Assets, the
actual yield to maturity will be lower than that so calculated. Conversely, if
the purchaser of a Security offered at a premium calculates its anticipated
yield to maturity based on an assumed rate of distributions of principal that is
slower than that actually experienced on the Assets, the actual yield to
maturity will be lower than that so calculated. In either case, if so provided
in the Prospectus Supplement for a series of Securities, the effect on yield on
one or more classes of the Securities of such series of prepayments of the
Assets in the related Trust Fund may be mitigated or exacerbated by any
provisions for sequential or selective distribution of principal to such
classes.
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When a full prepayment is made on a Mortgage Loan or a Contract, the
obligor is charged interest on the principal amount of the Mortgage Loan or
Contract so prepaid for the number of days in the month actually elapsed up to
the date of the prepayment. The effect of prepayments in full will be to reduce
the amount of interest paid in the following month to holders of Securities
entitled to payments of interest because interest on the principal amount of any
Mortgage Loan or Contract so prepaid will be paid only to the date of prepayment
rather than for a full month. A partial prepayment of principal is applied so as
to reduce the outstanding principal balance of the related Mortgage Loan or
Contract as of the due date in the month in which such partial prepayment is
received.
The timing of changes in the rate of principal payments on the Assets
may significantly affect an investor's actual yield to maturity, even if the
average rate of distributions of principal is consistent with an investor's
expectation. In general, the earlier a principal payment is received on the
Mortgage Assets and distributed on a Security, the greater the effect on such
investor's yield to maturity. The effect on an investor's yield of principal
payments occurring at a rate higher (or lower) than the rate anticipated by the
investor during a given period may not be offset by a subsequent like decrease
(or increase) in the rate of principal payments.
The Securityholder will bear the risk of being able to reinvest
principal received in respect of a Security at a yield at least equal to the
yield on such Security.
Prepayments -- Maturity and Weighted Average Life
The rates at which principal payments are received on the Assets
included in or comprising a Trust Fund and the rate at which payments are made
from any Credit Support or Cash Flow Agreement for the related series of
Securities may affect the ultimate maturity and the weighted average life of
each class of such series. Prepayments on the Mortgage Loans or Contracts
comprising or underlying the Assets in a particular Trust Fund will generally
accelerate the rate at which principal is paid on some or all of the classes of
the Securities of the related series.
If so provided in the Prospectus Supplement for a series of Securities,
one or more classes of Securities may have a final scheduled Distribution Date,
which is the date on or prior to which the Security Balance thereof is scheduled
to be reduced to zero, calculated on the basis of the assumptions applicable to
such series set forth therein.
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. The weighted average life of a
class of Securities of a series will be influenced by the rate at which
principal on the Mortgage Loans or Contracts comprising or underlying the Assets
is paid to such class, which may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayment" includes prepayments, in
whole or in part, and liquidations due to default).
In addition, the weighted average life of the Securities may be affected
by the varying maturities of the Mortgage Loans or Contracts comprising or
underlying the Assets in a Trust Fund. If any Mortgage Loans or Contracts
comprising or underlying the Assets in a particular Trust Fund have actual terms
to maturity less than those assumed in calculating final scheduled Distribution
Dates for the classes of Securities of the related series, one or more classes
of such Securities may be fully paid prior to their respective final scheduled
Distribution Dates, even in the absence of prepayments. Accordingly, the
prepayment experience of the Assets will, to some extent, be a function of the
mix of Mortgage Rates or Contract Rates and maturities of the Mortgage Loans or
Contracts comprising or underlying such Assets. See "Description of the Trust
Funds."
Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment model
or the Standard Prepayment Assumption ("SPA") prepayment model, each as
described below. CPR represents a constant assumed rate of prepayment
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each month relative to the then outstanding principal balance of a pool of loans
for the life of such loans. SPA represents an assumed rate of prepayment each
month relative to the then outstanding principal balance of a pool of loans. A
prepayment assumption of 100% of SPA assumes prepayment rates of 0.2% per annum
of the then outstanding principal balance of such loans in the first month of
the life of the loans and an additional 0.2% per annum in each month thereafter
until the thirtieth month. Beginning in the thirtieth month and in each month
thereafter during the life of the loans, 100% of SPA assumes a constant
prepayment rate of 6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption
purports to be a historical description of prepayment experience or a prediction
of the anticipated rate of prepayment of any pool of loans, including the
Mortgage Loans or Contracts underlying or comprising the Assets.
The Prospectus Supplement with respect to each series of Securities may
contain tables, if applicable, setting forth the projected weighted average life
of each class of Offered Securities of such series and the percentage of the
initial Security Balance of each such class that would be outstanding on
specified Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions that prepayments on the Mortgage Loans
comprising or underlying the related Assets are made at rates corresponding to
various percentages of CPR, SPA or such other standard specified in such
Prospectus Supplement. Such tables and assumptions are intended to illustrate
the sensitivity of the weighted average life of the Securities to various
prepayment rates and will not be intended to predict or to provide information
that will enable investors to predict the actual weighted average life of the
Securities. It is unlikely that prepayment of any Mortgage Loans or Contracts
comprising or underlying the Assets for any series will conform to any
particular level of CPR, SPA or any other rate specified in the related
Prospectus Supplement.
Other Factors Affecting Weighted Average Life
Type of Mortgage Asset or Contract
If so specified in the related Prospectus Supplement, a number of
Mortgage Loans may have balloon payments due at maturity, and because the
ability of a mortgagor to make a balloon payment typically will depend upon its
ability either to refinance the loan or to sell the related Mortgaged Property,
there is a risk that a number of Mortgage Loans having balloon payments may
default at maturity. In the case of defaults, recovery of proceeds may be
delayed by, among other things, bankruptcy of the mortgagor or adverse
conditions in the market where the property is located. In order to minimize
losses on defaulted Mortgage Loans, the servicer may, to the extent and under
the circumstances set forth in the related Prospectus Supplement, be permitted
to modify Mortgage Loans that are in default or as to which a payment default is
imminent. Any defaulted balloon payment or modification that extends the
maturity of a Mortgage Loan will tend to extend the weighted average life of the
Securities, thereby lengthening the period of time elapsed from the date of
issuance of a Security until it is retired.
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. With respect to
certain Contracts, the Contract Rate may be "stepped up" during its term or may
otherwise vary or be adjusted. Under the applicable underwriting standards, the
mortgagor under each Mortgage Loan or Contract generally will be qualified on
the basis of the Mortgage Rate or Contract Rate in effect at origination. The
repayment of any such Mortgage Loan or Contract may thus be dependent on the
ability of the mortgagor or obligor to make larger level monthly payments
following the adjustment of the Mortgage Rate or Contract Rate. In addition,
certain 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 will be less than the scheduled
monthly payments thereon (the "Buydown Period"). 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, and may
accordingly increase the risk of default with respect to the related Mortgage
Loan.
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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 applicable index at origination and the related margin over such index at
which interest accrues), 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 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 Securities will lengthen the weighted average life thereof and may
adversely affect yield to holders thereof, depending upon the price at which
such Securities 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 Securities,
the weighted average life of such Securities will be reduced and may adversely
affect yield to holders thereof, depending upon the price at which such
Securities were purchased.
Defaults
The rate of defaults on the Mortgage Loans or Contracts will also affect
the rate, timing and amount of principal payments on the Assets and thus the
yield on the Securities. In general, defaults on mortgage loans or contracts are
expected to occur with greater frequency in their early years. The rate of
default on Mortgage Loans which are refinance or limited documentation mortgage
loans, and on Mortgage 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 and Contracts will
be affected by the general economic condition of the region of the country in
which the related Mortgage Properties or Manufactured Homes 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.
Foreclosures
The number of foreclosures or repossessions and the principal amount of
the Mortgage Loans or Contracts comprising or underlying the Assets that are
foreclosed or repossessed in relation to the number and principal amount of
Mortgage Loans or Contracts that are repaid in accordance with their terms will
affect the weighted average life of the Mortgage Loans or Contracts comprising
or underlying the Assets and that of the related series of Securities.
Refinancing
At the request of a mortgagor, the Master Servicer or a Sub-Servicer may
allow the refinancing of a Mortgage Loan or Contract in any Trust Fund by
accepting prepayments thereon and permitting a new loan secured by a mortgage on
the same property. In the event of such a refinancing, the new loan would not be
included in the related Trust Fund and, therefore, such refinancing would have
the same effect as a prepayment in full of the related Mortgage Loan or
Contract. A Sub-Servicer or the Master Servicer may, from time to time,
implement programs designed to encourage refinancing. Such programs may include,
without limitation, modifications of existing loans, general or targeted
solicitations, the offering of pre-approved applications, reduced origination
fees or closing costs, or other financial incentives. In addition, Sub-Servicers
may encourage the refinancing of Mortgage Loans or Contracts, including
defaulted Mortgage Loans or Contracts, that would permit creditworthy borrowers
to assume the outstanding indebtedness of such Mortgage Loans or Contracts.
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Due-on-Sale Clauses
Acceleration of mortgage payments as a result of certain transfers of
underlying Mortgaged Property is another factor affecting prepayment rates that
may not be reflected in the prepayment standards or models used in the relevant
Prospectus Supplement. A number of the Mortgage Loans comprising or underlying
the Assets may include "due-on-sale" clauses that allow the holder of the
Mortgage Loans to demand payment in full of the remaining principal balance of
the Mortgage Loans upon sale, transfer or conveyance of the related Mortgaged
Property. With respect to any Whole Loans, unless otherwise provided in the
related Prospectus Supplement, the Master Servicer will generally enforce any
due-on-sale clause to the extent it has knowledge of the conveyance or proposed
conveyance of the underlying Mortgaged Property and it is entitled to do so
under applicable law; provided, however, that the Master Servicer will not take
any action in relation to the enforcement of any due-on-sale provision which
would adversely affect or jeopardize coverage under any applicable insurance
policy. See "Certain Legal Aspects of Mortgage Loans -- Due-on-Sale Clauses" and
"Description of the Agreements -- Due-on-Sale Provisions." If so specified in
the related Prospectus Supplement, the Contracts prohibit the sale or transfer
of the related Manufactured Homes without the consent of the Master Servicer and
permit the acceleration of the maturity of the Contracts by the Master Servicer
upon any such sale or transfer that is not consented to. If so specified in the
related Prospectus Supplement, the Master Servicer will permit most transfers of
Manufactured Homes and not accelerate the maturity of the related Contracts. In
certain cases, the transfer may be made by a delinquent obligor in order to
avoid a repossession of the Manufactured Home. In the case of a transfer of a
Manufactured Home after 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. See
"Certain Legal Aspects of the Contracts -- Transfers of Manufactured Homes;
Enforceability of Due-on-Sale Clauses."
THE DEPOSITOR
Beneficial Mortgage Services, Inc., the Depositor, is an indirect
wholly-owned subsidiary of Beneficial Corporation and was formed on February 6,
1997 under the laws of the State of Delaware. The Depositor was formed for the
limited purpose of purchasing and selling mortgage loans, mortgage pass-through
certificates, certain other mortgage-backed securities, home improvement
installment sale contracts and certain direct obligations of the United States,
and issuing, or causing trusts or partnerships to issue securities
collateralized by, or evidencing on ownership interest in, such assets. The
principal executive offices of the Depositor are located at One Christina
Centre, 301 North Walnut Street, Wilmington, Delaware 19801. Its telephone
number is (302) 425-2500.
The Depositor does not have, nor is it expected in the future to have,
any significant assets.
THE MASTER SERVICER
Beneficial Mortgage Corporation, the Master Servicer, is an indirect
wholly-owned subsidiary of Beneficial Corporation. Unless otherwise set forth
in the related Prospectus Supplement, the Master Servicer will service the
Assets for each series of Securities.
DESCRIPTION OF THE SECURITIES
General
The Certificates of each series (including any class of Certificates not
offered hereby) will represent the entire beneficial ownership interest in the
Trust Fund created pursuant to the related Agreement. If a series of Securities
includes Notes, such Notes will represent indebtedness of the related Trust Fund
and will be issued and secured pursuant to an indenture (an "Indenture"). Each
series of Securities will consist of one or more classes of Securities that may
(i) provide for the accrual of interest thereon based on fixed, variable or
adjustable rates; (ii) be senior (collectively, "Senior Securities") or
subordinate (collectively, "Subordinate Securities") to one or more other
classes of Securities in respect of certain distributions on the Securities;
(iii) be entitled to principal distributions, with disproportionately low,
nominal or no interest distributions (collectively, "Stripped Principal
Securities"); (iv) be entitled to interest distributions, with
disproportionately low, nominal or no principal distributions (collectively,
"Stripped Interest Securities"); (v) provide for distributions of accrued
interest thereon commencing only following the occurrence of certain events,
such as the retirement of one or more other classes of Securities of such series
(collectively, "Accrual Securities"); (vi) provide for payments of principal as
described in the related Prospectus Supplement, from all or only a portion of
the Assets in such Trust Fund, to the extent of available funds, in each case as
described in the related Prospectus Supplement; and/or (vii) provide for
distributions based on a combination of two or more components thereof with one
or more of the characteristics described in this paragraph including a Stripped
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Principal Security component and a Stripped Interest Security component. If so
specified in the related Prospectus Supplement, distributions on one or more
classes of a series of Securities may be limited to collections from a
designated portion of the Whole Loans in the related Mortgage Pool (each such
portion of Whole Loans, a "Mortgage Loan Group") or a designated portion of
Contracts in the related Contract Pool (each such portion of Contracts, a
"Contract Group"). Any such classes may include classes of Offered Securities.
Each class of Offered Securities of a series will be issued in minimum
denominations corresponding to the Security Balances or, in case of Stripped
Interest Securities, notional amounts or percentage interests specified in the
related Prospectus Supplement. The transfer of any Offered Securities may be
registered and such Securities may be exchanged without the payment of any
service charge payable in connection with such registration of transfer or
exchange, but the Depositor or the Trustee or any agent thereof may require
payment of a sum sufficient to cover any tax or other governmental charge. One
or more classes of Securities of a series may be issued in definitive form
("Definitive Securities") or in book-entry form ("Book-Entry Securities"), as
provided in the related Prospectus Supplement. See "Special Considerations --
Book-Entry Registration" and "Description of the Securities -- Book-Entry
Registration and Definitive Securities." Definitive Securities will be
exchangeable for other Securities of the same class and series of a like
aggregate Security Balance, notional amount or percentage interest but of
different authorized denominations. See "Risk Factors -- No Market for the
Securities" and "Assets included in Trust Fund to be Sole Source of Payment."
Distributions
Distributions on the Securities of each series will be made by or on
behalf of the Trustee on each Distribution Date as specified in the related
Prospectus Supplement from the Available Distribution Amount for such series and
such Distribution Date. Except as otherwise specified in the related Prospectus
Supplement, distributions (other than the final distribution) will be made to
the persons in whose names the Securities are registered at the close of
business on the last business day of the month preceding the month in which the
Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date
specified in the related Prospectus Supplement (the "Determination Date"). All
distributions with respect to each class of Securities on each Distribution Date
will be allocated pro rata among the outstanding Securities in such class or by
random selection, as described in the related Prospectus Supplement or otherwise
established by the related Trustee. Payments will be made either by wire
transfer in immediately available funds to the account of a Securityholder at a
bank or other entity having appropriate facilities therefor, if such
Securityholder has so notified the Trustee or other person required to make such
payments no later than the date specified in the related Prospectus Supplement
(and, if so provided in the related Prospectus Supplement, holds Securities in
the requisite amount specified therein), or by check mailed to the address of
the person entitled thereto as it appears on the Security Register; provided,
however, that the final distribution in retirement of the Securities (whether
Definitive Securities or Book-Entry Securities) will be made only upon
presentation and surrender of the Securities at the location specified in the
notice to Securityholders of such final distribution.
Available Distribution Amount
All distributions on the Securities of each series on each Distribution
Date will be made from the Available Distribution Amount described below, in
accordance with the terms described in the related Prospectus Supplement. Unless
provided otherwise in the related Prospectus Supplement, the "Available
Distribution Amount" for each Distribution Date equals the sum of the following
amounts:
(i) the total amount of all cash on deposit in the related
Collection Account as of the corresponding Determination Date, exclusive
of:
(a) all scheduled payments of principal and interest
collected but due on a date subsequent to the related Due Period
(unless the related Prospectus Supplement provides otherwise, a
"Due Period" with respect to any Distribution Date will commence
on the second day of the month in which the immediately preceding
Distribution Date occurs, or the day
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after the Cut-off Date in the case of the first Due Period, and
will end on the first day of the month of the related
Distribution Date),
(b) unless the related Prospectus Supplement provides
otherwise, all prepayments, together with related payments of the
interest thereon and related Prepayment Premiums, Liquidation
Proceeds, Insurance Proceeds and other unscheduled recoveries
received subsequent to the related Due Period, and
(c) all amounts in the Collection Account that are due or
reimbursable to the Depositor, the Trustee, an Originator, a
Sub-Servicer, the Master Servicer or any other entity as
specified in the related Prospectus Supplement or that are
payable in respect of certain expenses of the related Trust Fund;
(ii) if the related Prospectus Supplement so provides, interest
or investment income on amounts on deposit in the Collection Account,
including any net amounts paid under any Cash Flow Agreements;
(iii) if and to the extent the related Prospectus Supplement so
provides, amounts paid by a Master Servicer or any other entity as
specified in the related Prospectus Supplement with respect to interest
shortfalls resulting from prepayments during the related Prepayment
Period; and
(iv) unless the related Prospectus Supplement provides otherwise,
to the extent not on deposit in the related Collection Account as of the
corresponding Determination Date, any amounts collected under, from or
in respect of any Credit Support with respect to such Distribution Date.
As described below, the entire Available Distribution Amount will be
distributed among the related Securities (including any Securities not offered
hereby) on each Distribution Date, and accordingly will be released from the
Trust Fund and will not be available for any future distributions.
Distributions of Interest on the Securities
Each class of Securities (other than classes of Stripped Principal
Securities that have no Pass-Through Rate or interest rate) may have a different
Pass-Through Rate or interest rate, which will be a fixed, variable or
adjustable rate at which interest will accrue on such class or a component
thereof (the "Pass-Through Rate" in the case of Certificates). The related
Prospectus Supplement will specify the Pass-Through Rate or interest rate for
each class or component or, in the case of a variable or adjustable Pass-Through
Rate or interest rate, the method for determining the Pass-Through Rate or
interest rate and the basis for calculating interest on the Securities.
Distributions of interest in respect of the Securities of any class will
be made on each Distribution Date (other than any class of Accrual Securities,
which will be entitled to distributions of accrued interest commencing only on
the Distribution Date, or under the circumstances, specified in the related
Prospectus Supplement, and any class of Stripped Principal Securities that are
not entitled to any distributions of interest) based on the Accrued Security
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 Securities, the amount of Accrued Security Interest otherwise
distributable on such class will be added to the Security Balance thereof on
each Distribution Date. With respect to each class of Securities and each
Distribution Date (other than certain classes of Stripped Interest Securities),
"Accrued Security Interest" will be equal to interest accrued for a specified
period on the outstanding Security Balance thereof immediately prior to the
Distribution Date, at the applicable Pass-Through Rate or interest rate, reduced
as described below. Unless otherwise provided in the Prospectus Supplement,
Accrued Security Interest on Stripped Interest Securities will be equal to
interest accrued for a specified period on the outstanding notional amount
thereof immediately prior to each Distribution Date, at the applicable
Pass-Through Rate or interest rate, reduced as described below. The method of
determining
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the notional amount for any class of Stripped Interest Securities will be
described in the related Prospectus Supplement. Reference to notional amount is
solely for convenience in certain calculations and does not represent the right
to receive any distributions of principal. Unless otherwise provided in the
related Prospectus Supplement, the Accrued Security Interest on a series of
Securities will be reduced in the event of prepayment interest shortfalls, which
are shortfalls in collections of interest for a full accrual period resulting
from prepayments prior to the due date in such accrual period on the Mortgage
Loans or Contracts comprising or underlying the Assets in the Trust Fund for
such series. The particular manner in which such shortfalls are to be allocated
among some or all of the classes of Securities 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 Certificate Interest
that is otherwise distributable on (or, in the case of Accrual Securities, that
may otherwise be added to the Security Balance of) a class of Offered Securities
may be reduced as a result of any other contingencies, including delinquencies,
losses and deferred interest on or in respect of the Mortgage Loans or Contracts
comprising or underlying the Assets in the related Trust Fund. Unless otherwise
provided in the related Prospectus Supplement, any reduction in the amount of
Accrued Security Interest otherwise distributable on a class of Securities by
reason of the allocation to such class of a portion of any deferred interest on
the Mortgage Loans or Contracts comprising or underlying the Assets in the
related Trust Fund will result in a corresponding increase in the Security
Balance of such class. See "Risk Factors -- Impact of Prepayments on Average
Life of Securities and Yield" and "Yield Considerations."
Distributions of Principal of the Securities
The Securities of each series, other than certain classes of Stripped
Interest Securities, will have a "Security Balance" which, at any time, will
equal the then maximum amount that the holder will be entitled to receive in
respect of principal out of the future cash flow on the Assets and other assets
included in the related Trust Fund. The outstanding Security Balance of a
Security will be reduced to the extent of distributions of principal thereon
from time to time and, if and to the extent so provided in the related
Prospectus Supplement, by the amount of losses incurred in respect of the
related Assets, may be increased in respect of deferred interest on the related
Mortgage Loans to the extent provided in the related Prospectus Supplement and,
in the case of Accrual Securities prior to the Distribution Date on which
distributions of interest are required to commence, will be increased by any
related Accrued Security Interest. Unless otherwise provided in the related
Prospectus Supplement, the initial aggregate Security Balance of all classes of
Securities of a series will not be greater than the outstanding aggregate
principal balance of the related Assets as of the applicable Cut-off Date. The
initial aggregate Security Balance of a series and each class thereof will be
specified in the related Prospectus Supplement. Unless otherwise provided in the
related Prospectus Supplement, distributions of principal will be made on each
Distribution Date to the class or classes of Securities entitled thereto in
accordance with the provisions described in such Prospectus Supplement until the
Security Balance of such class has been reduced to zero. Stripped Interest
Securities with no Security Balance are not entitled to any distributions of
principal.
Components
To the extent specified in the related Prospectus Supplement,
distribution on a class of Securities may be based on a combination of two or
more different components as described under "-- General" above. To such extent,
the descriptions set forth under "-- Distributions of Interest on the
Securities" and "-- Distributions of Principal of the Securities" above also
relate to components of such a class of Securities. In such case, reference in
such sections to Security Balance and Pass-Through Rate or interest rate refer
to the principal balance, if any, of any such component and the Pass-Through
Rate or interest rate, if any, on any such component, respectively.
Distributions on the Securities of Prepayment Premiums
If so provided in the related Prospectus Supplement, Prepayment Premiums
that are collected on the Mortgage Assets in the related Trust Fund will be
distributed on each Distribution Date to the class or classes of Securities
entitled thereto in accordance with the provisions described in such Prospectus
Supplement.
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Allocation of Losses and Shortfalls
If so provided in the Prospectus Supplement for a series of Securities
consisting of one or more classes of Subordinate Securities, on any Distribution
Date in respect of which losses or shortfalls in collections on the Assets have
been incurred, the amount of such losses or shortfalls will be borne first by a
class of Subordinate Securities in the priority and manner and subject to the
limitations specified in such Prospectus Supplement. See "Description of Credit
Support" for a description of the types of protection that may be included in a
Trust Fund against losses and shortfalls on Assets comprising such Trust Fund.
Reports to Securityholders
Unless otherwise provided in the Prospectus Supplement, with each
distribution to holders of any class of Securities of a series, the Master
Servicer or the Trustee, as provided in the related Prospectus Supplement, will
forward or cause to be forwarded to each such holder, to the Depositor and to
such other parties as may be specified in the related Agreement, a statement
setting forth, in each case to the extent applicable and available:
(i) the amount of such distribution to holders of Securities of
such class applied to reduce the Security Balance thereof;
(ii) the amount of such distribution to holders of Securities of
such class allocable to Accrued Security Interest;
(iii) the amount of such distribution allocable to Prepayment
Premiums;
(iv) the amount of related servicing compensation received by a
Master Servicer (and, if payable directly out of the related Trust Fund,
by any Sub-Servicer) and such other customary information as any such
Master Servicer or the Trustee deems necessary or desirable, or that a
Securityholder reasonably requests, to enable Securityholders to prepare
their tax returns;
(v) the aggregate principal balance of the Assets at the close
of business on such Distribution Date;
(vi) the number and aggregate principal balance of Whole Loans or
Contracts 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;
(vii) with respect to any Whole Loan or Contract liquidated
during the related Due Period, (a) the portion of such liquidation
proceeds payable or reimbursable to the Master Servicer (or any other
entity) in respect of such Mortgage Loan and (b) the amount of any loss
to Securityholders;
(viii) with respect to each Mortgaged Property for which the
Trustee has acquired beneficial ownership through foreclosure (any such
Mortgaged Property, an "REO Property") relating to a Whole Loan or
Contract and included in the Trust Fund as of the end of the related Due
Period, (a) the loan number of the related Mortgage Loan or Contract and
(b) the date of acquisition;
(ix) with respect to each REO Property relating to a Whole Loan
or Contract and included in the Trust Fund as of the end of the related
Due Period, (a) the book value, (b) the principal balance of the related
Mortgage Loan or Contract immediately following such Distribution Date
(calculated as if such Mortgage Loan or Contract were still outstanding
taking into account certain limited modifications to the terms thereof
specified in the Agreement), (c) the aggregate amount of unreimbursed
servicing expenses in respect thereof and (d) if applicable, the
aggregate amount of interest accrued and payable on related servicing
expenses;
(x) with respect to any such REO Property sold during the related
Due Period (a) the aggregate amount of sale proceeds, (b) the portion of
such sales proceeds payable or reimbursable to
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the Master Servicer in respect of such REO Property or the related
Mortgage Loan or Contract and (c) the amount of any loss to
Securityholders in respect of the related Mortgage Loan;
(xi) the aggregate Security Balance or notional amount, as the
case may be, of each class of Securities (including any class of
Securities not offered hereby) at the close of business on such
Distribution Date, separately identifying any reduction in such Security
Balance due to the allocation of any loss and increase in the Security
Balance of a class of Accrual Securities in the event that Accrued
Security Interest has been added to such balance;
(xii) the aggregate amount of principal prepayments made during
the related Due Period;
(xiii) the amount deposited in the reserve fund, if any, on such
Distribution Date;
(xiv) the amount remaining in the reserve fund, if any, as of
` the close of business on such Distribution Date;
(xv) the aggregate unpaid Accrued Security Interest, if any, on
each class of Securities at the close of business on such Distribution
Date;
(xvi) in the case of Securities with a variable Pass-Through Rate
or interest rate, the Pass-Through Rate or interest rate applicable to
such Distribution Date, and, if available, the immediately succeeding
Distribution Date, as calculated in accordance with the method specified
in the related Prospectus Supplement;
(xvii) in the case of Securities with an adjustable Pass-Through
Rate or interest rate, for statements to be distributed in any month in
which an adjustment date occurs, the adjustable Pass-Through Rate or
interest rate applicable to such Distribution Date, if available, and
the immediately succeeding Distribution Date as calculated in accordance
with the method specified in the related Prospectus Supplement;
(xviii) as to any series which includes Credit Support, the
amount of coverage of each instrument of Credit Support included therein
as of the close of business on such Distribution Date; and
(xix) the aggregate amount of payments by the obligors of (a)
default interest, (b) late charges and (c) assumption and modification
fees collected during the related Due Period.
In the case of information furnished pursuant to subclauses (i)-(iv)
above, the amounts shall be expressed as a dollar amount per minimum
denomination of Securities or for such other specified portion thereof. In
addition, in the case of information furnished pursuant to subclauses (i), (ii),
(xii), (xvi) and (xvii) above, such amounts shall also be provided with respect
to each component, if any, of a class of Securities. The Master Servicer or the
Trustee, as specified in the related Prospectus Supplement, will forward or
cause to be forwarded to each holder, to the Depositor and to such other parties
as may be specified in the Agreement, a copy of any statements or reports
received by the Master Servicer or the Trustee, as applicable, with respect to
any MBS. The Prospectus Supplement for each series of Offered Securities will
describe any additional information to be included in reports to the holders of
such Securities.
Within a reasonable period of time after the end of each calendar year,
the Master Servicer or the Trustee, as provided in the related Prospectus
Supplement, shall furnish to each person who at any time during the calendar
year was a holder of a Security a statement containing the information set forth
in subclauses (i)-(iv) above, aggregated for such calendar year or the
applicable portion thereof during which such person was a Securityholder. Such
obligation of the Master Servicer or the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Master Servicer or the Trustee pursuant to any requirements of
the Code as are from time to time in force. See "Description of the Securities
- -- Book-Entry Registration and Definitive Securities."
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Termination
The obligations created by the related Agreement for each series of
Certificates will terminate upon the payment to Certificateholders of that
series of all amounts held in the Collection Account or by the Master Servicer,
if any, or the Trustee and required to be paid to them pursuant to such
Agreement following the earlier of (i) the final payment or other liquidation of
the last Asset subject thereto or the disposition of all property acquired upon
foreclosure of any Whole Loan or Contract subject thereto and (ii) the purchase
of all of the assets of the Trust Fund by the party entitled to effect such
termination, under the circumstances and in the manner set forth in the related
Prospectus Supplement. In no event, however, will the trust created by the
Agreement continue beyond the date specified in the related Prospectus
Supplement. Written notice of termination of the Agreement will be given to each
Securityholder, and the final distribution will be made only upon presentation
and surrender of the Securities at the location to be specified in the notice of
termination.
If so specified in the related Prospectus Supplement, a series of
Securities may be subject to optional early termination through the repurchase
of the assets in the related Trust Fund by the party specified therein, under
the circumstances and in the manner set forth therein. If so provided in the
related Prospectus Supplement, upon the reduction of the Security Balance of a
specified class or classes of Securities by a specified percentage or amount,
the party specified therein will solicit bids for the purchase of all assets of
the Trust Fund, or of a sufficient portion of such assets to retire such class
or classes or purchase such class or classes at a price set forth in the related
Prospectus Supplement, in each case, under the circumstances and in the manner
set forth therein.
Book-Entry Registration and Definitive Securities
If so provided in the related Prospectus Supplement, one or more classes
of the Offered Securities of any series will be issued as Book-Entry Securities,
and each such class will be represented by one or more single Securities
registered in the name of a nominee for the depository, The Depository Trust
Company ("DTC").
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code ("UCC") and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for its participating organizations ("Participants") and facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in their accounts, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system also is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Unless otherwise provided in the related Prospectus Supplement,
investors that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
Book-Entry Securities may do so only through Participants and Indirect
Participants. In addition, such investors ("Security Owners") will receive all
distributions on the Book-Entry Securities through DTC and its Participants.
Under a book-entry format, Security Owners will receive payments after the
related Distribution Date because, while payments are required to be forwarded
to Cede & Co., as nominee for DTC ("Cede"), on each such date, DTC will forward
such payments to its Participants which thereafter will be required to forward
them to Indirect Participants or Security Owners. Unless otherwise provided in
the related Prospectus Supplement, the only "Securityholder" (as such term is
used in the Agreement) will be Cede, as nominee of DTC, and the Security Owners
will not be recognized by the Trustee as Securityholders under the Agreement.
Security Owners will be permitted to exercise the rights of Securityholders
under the related Agreement, Trust Agreement or Indenture, as applicable, only
indirectly through the Participants who in turn will exercise their rights
through DTC.
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Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Book-Entry Securities
and is required to receive and transmit distributions of principal of and
interest on the Book-Entry Securities. Participants and Indirect Participants
with which Security Owners have accounts with respect to the Book-Entry
Securities similarly are required to make book-entry transfers and receive and
transmit such payments on behalf of their respective Security Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Security
Owner to pledge its interest in the Book-Entry Securities to persons or entities
that do not participate in the DTC system, or otherwise take actions in respect
of its interest in the Book-Entry Securities, may be limited due to the lack of
a physical certificate evidencing such interest.
DTC has advised the Depositor that it will take any action permitted to
be taken by a Securityholder under an Agreement only at the direction of one or
more Participants to whose account with DTC interests in the Book-Entry
Securities are credited.
Securities initially issued in book-entry form will be issued in fully
registered, certificated form to Security Owners or their nominees ("Definitive
Securities"), rather than to DTC or its nominee only if (i) the Depositor
advises the Trustee in writing that DTC is no longer willing or able to properly
discharge its responsibilities as depository with respect to the Securities and
the Depositor is unable to locate a qualified successor or (ii) the Depositor,
at its option, elects to terminate the book-entry system through DTC.
Upon the occurrence of either of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Securities for the Security Owners. Upon
surrender by DTC of the certificate or certificates representing the Book-Entry
Securities, together with instructions for reregistration, the Trustee will
issue (or cause to be issued) to the Security Owners identified in such
instructions the Definitive Securities to which they are entitled, and
thereafter the Trustee will recognize the holders of such Definitive Securities
as Securityholders under the Agreement.
DESCRIPTION OF THE AGREEMENTS
Agreements Applicable to a Series
REMIC Certificates, Grantor Trust Certificates. Certificates that are
REMIC Certificates or Grantor Trust Certificates will be issued, and the related
Trust Fund will be created, pursuant to a pooling and servicing agreement (a
"Pooling and Servicing Agreement") among the Depositor, the Master Servicer and
the Trustee. The Assets of such Trust Fund will be transferred to the Trust Fund
and thereafter serviced in accordance with the terms of the Pooling and
Servicing Agreement. In the context of the conveyance and servicing of the
related Assets, the Pooling and Servicing Agreement may be referred to herein as
the "Agreement". Notwithstanding the foregoing, if the Assets of the Trust Fund
for such a series consists only of Government Securities or MBS, such Assets
will be conveyed to the Trust Fund and administered pursuant to a trust
agreement between the Depositor and the Trustee (a "Trust Agreement"), which may
also be referred to herein as the "Agreement."
Certificates That Are Partnership Interests for Tax Purposes and Notes.
Certificates that are partnership interests for tax purposes will be issued, and
the related Trust Fund will be created, pursuant to a Trust Agreement between
the Depositor and the Trustee. The Assets of the related Trust Fund will be
transferred to the Trust Fund and thereafter serviced in accordance with a
servicing agreement (a "Servicing Agreement") between the Depositor, the
Servicer and the Trustee. In the context of the conveyance and servicing of the
related Assets, a Servicing Agreement may be referred to herein as the
"Agreement."
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A series of Notes issued by a Trust Fund will be issued pursuant to the
indenture (the "Indenture") between the related Trust Fund and an indenture
trustee (the "Indenture Trustee") named in the related Prospectus Supplement.
Notwithstanding the foregoing, if the Assets of a Trust Fund consist
only of MBS or Government Securities, such Assets will be conveyed to the Trust
Fund and administered in accordance with the terms of the Trust Agreement, which
in such context may be referred to herein as the Agreement.
General. Any Master Servicer and the Trustee with respect to any series
of Securities will be named in the related Prospectus Supplement. In any series
of Securities for which there are multiple Master Servicers, there may also be
multiple Mortgage Loan Groups or Contract Groups, each corresponding to a
particular Master Servicer; and, if the related Prospectus Supplement so
specifies, the servicing obligations of each such Master Servicer will be
limited to the Whole Loans in such corresponding Mortgage Loan Group or the
Contracts in the corresponding Contract Group. In lieu of appointing a Master
Servicer, a servicer may be appointed pursuant to the Agreement for any Trust
Fund. Such servicer will service all or a significant number of Whole Loans or
Contracts directly without a Sub-Servicer. The obligations of any such servicer
shall be commensurate with those of the Master Servicer described herein.
References in this Prospectus to Master Servicer and its rights and obligations
shall be deemed to also be references to any servicer servicing Whole Loans or
Contracts directly. A manager or administrator may be appointed pursuant to the
Trust Agreement for any Trust Fund to administer such Trust Fund. The provisions
of each Agreement will vary depending upon the nature of the Securities to be
issued thereunder and the nature of the related Trust Fund. Forms of a Pooling
and Servicing Agreement, a Sale and Servicing Agreement and a Trust Agreement
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
The following summaries describe certain provisions that may appear in
each Agreement. The Prospectus Supplement for a series of Securities will
describe any provision of the Agreement relating to such series that materially
differs from the description thereof contained in this Prospectus. 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 Agreement for each Trust
Fund and the description of such provisions in the related Prospectus
Supplement. As used herein with respect to any series, the term "Security"
refers to all of the Securities of that series, whether or not offered hereby
and by the related Prospectus Supplement, unless the context otherwise requires.
The Depositor will provide a copy of the Agreement (without exhibits) relating
to any series of Securities without charge upon written request of a holder of a
Security of such series addressed to Beneficial Mortgage Services, Inc., One
Christina Centre, 301 North Walnut Street, Wilmington, Delaware 19801,
Attention: Scott A. Siebels, Corporate Secretary.
Assignment of Assets; Repurchases
At the time of issuance of any series of Securities, the Depositor will
assign (or cause to be assigned) to the designated Trustee the Assets to be
included in the related Trust Fund, together with all principal and interest to
be received on or with respect to such Assets after the Cut-off Date, other than
principal and interest due on or before the Cut-off Date and other than any
Retained Interest. The Trustee will, concurrently with such assignment, deliver
the Certificates to the Depositor in exchange for the Assets and the other
assets comprising the Trust Fund for such series. Each Asset will be identified
in a schedule appearing as an exhibit to the related Agreement. Unless otherwise
provided in the related Prospectus Supplement, such schedule will include
detailed information (i) in respect of each Whole Loan included in the related
Trust Fund, including without limitation, the address of the related Mortgaged
Property and type of such property, the Mortgage Rate and, if applicable, the
applicable index, margin, adjustment date and any rate cap information, the
original and remaining term to maturity, the original and outstanding principal
balance and balloon payment, if any, the Value and Loan-to-Value Ratio as of the
date indicated and payment and prepayment provisions, if applicable; (ii) in
respect of each Contract included in the related Trust Fund, including without
limitation the Contract number, the outstanding principal amount and the
Contract Rate; and (iii) in respect of each MBS included in the related Trust
Fund, including without limitation, the MBS
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Issuer, MBS Servicer and MBS Trustee, the pass-through or bond rate or formula
for determining such rate, the issue date and original and remaining term to
maturity, if applicable, the original and outstanding principal amount and
payment provisions, if applicable.
With respect to each Whole Loan, if so specified in the related
Prospectus Supplement, the Master Servicer (which may also be the Originator)
will maintain custody of certain loan documents, which will include the original
Mortgage Note endorsed, without recourse, in blank or to the order of the
Trustee, the original Mortgage (or a certified copy thereof) with evidence of
recording indicated thereon and an assignment of the Mortgage to the Trustee in
recordable form. The right of the Master Servicer (or of any Originator acting
on behalf of the Master Servicer) to maintain possession of the documents
enumerated above shall continue so long as (x) the Master Servicer (or such
Originator) remains an affiliate of Beneficial Corporation and the long-term
unsecured debt of Beneficial Corporation is assigned ratings of at least A- by
Standard & Poor's Ratings Services and Fitch Investors Services Inc. and A3 by
Moody's Investor Services, Inc. or (y) the Master Servicer has not been removed
as Master Servicer following the occurrence of an Event of Default. The Master
Servicer shall notify in writing the Trustee if the long-term unsecured debt of
Beneficial Corporation does not satisfy either of such ratings. At such time,
unless otherwise specified in the related Prospectus Supplement, the Master
Servicer at its own expense shall (or shall cause the related Originator to)
deliver the related loan documents to the Trustee to be held by the Trustee in
trust for the use and benefit of all present and future holders of the
Securities and the Trustee shall retain possession thereof except to the extent
the Master Servicer or Subservicers require any loan documents.
While the Whole Loan documents will not be reviewed by the Trustee or
the Master Servicer, if the Master Servicer finds that any such document is
missing or defective in any material respect, the Master Servicer shall
immediately notify the Depositor and the relevant Originator. If the Originator
cannot cure the omission or defect within a specified number of days after
receipt of such notice, then the Depositor and the relevant Originator will be
obligated, within a specified number of days of receipt of such notice, to
repurchase the related Whole Loan from the Trustee at the Purchase Price (as
defined in "Representations and Warranties; Repurchases") or substitute for such
Mortgage Loan. There can be no assurance that an Originator will fulfill this
repurchase or substitution obligation, and the Master Servicer will not be
obligated to repurchase or substitute for such Mortgage Loan if the Originator
defaults on its obligation. If so specified in the related Prospectus
Supplement, this repurchase or substitution obligation constitutes the sole
remedy available to the Certificateholders or the Trustee for omission of, or a
material defect in, a constituent document. To the extent specified in the
related Prospectus Supplement, in lieu of curing any omission or defect in the
Asset or repurchasing or substituting for such Asset, the Originator and the
Depositor may agree to cover any losses suffered by the Trust Fund as a result
of such breach or defect.
If so specified in the related Prospectus Supplement, the documents with
respect to Home Equity Loans, Home Improvement Contracts and Unsecured Home
Improvement Loans will not be delivered to the Trustee (or a custodian), but
will be retained by the Master Servicer, which may also be the Originator. In
addition, assignments of the related Mortgages to the Trustee will generally not
be recorded.
With respect to each Contract, if so specified in the related Prospectus
Supplement, the Master Servicer (which may also be the Originator) will maintain
custody of the original Contract and copies of documents and instruments related
to each Contract and the security interest in the Manufactured Home securing
each Contract. In order to give notice of the right, title and interest of the
Trustee in the Contracts, the Depositor will cause UCC-1 financing statements to
be executed by the related Originator identifying the
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Depositor as secured party and by the Depositor identifying the Trustee as the
secured party and, in each case, identifying all Contracts as collateral. If so
specified in the related Prospectus Supplement, the Contracts will not be
stamped or otherwise marked to reflect their assignment from the Company to the
Trust. Therefore, if, through negligence, fraud or otherwise, a subsequent
purchaser were able to take physical possession of the Contracts without notice
of such assignment, the interest of the Trustee in the Contracts could be
defeated. See "Certain Legal Aspects of the Contracts."
While the Contract documents will not be reviewed by the Trustee or the
Master Servicer, if the Master Servicer finds that any such document is missing
or defective in any material respect, the Master Servicer shall immediately
notify the Depositor and the relevant Originator. If the Originator cannot cure
the omission or defect within a specified number of days after receipt of such
notice, then if so specified in the related Prospectus Supplement, the Depositor
and the relevant Originator will be obligated, within a specified number of days
of receipt of such notice, to repurchase the related Contract from the Trustee
at the Purchase Price (as defined in "Representations and Warranties;
Repurchases") or substitute for such Contract. There can be no assurance that an
Originator will fulfill this repurchase or substitution obligation, and the
Master Servicer will not be obligated to repurchase or substitute for such
Contract if the Originator defaults on its obligation. If so specified in the
related Prospectus Supplement, this repurchase or substitution obligation shall
constitute the sole remedy available to the Certificateholders or the Trustee
for omission of, or a material defect in, a constituent document. To the extent
specified in the related Prospectus Supplement, in lieu of curing any omission
or defect in the Asset or repurchasing or substituting for such Asset, the
Originator and the Depositor may agree to cover any losses suffered by the Trust
Fund as a result of such breach or defect.
With respect to each Government Security or MBS in certificated form,
the Depositor will deliver or cause to be delivered to the Trustee (or the
custodian) the original certificate or other definitive evidence of such
Government Security or MBS, as applicable, together with bond power or other
instruments, certifications or documents required to transfer fully such
Government Security or MBS, as applicable, to the Trustee for the benefit of the
Certificateholders. With respect to each Government Security or MBS in
uncertificated or book-entry form or held through a "clearing corporation"
within the meaning of the UCC, the Depositor and the Trustee will cause such
Government Security or MBS to be registered directly or on the books of such
clearing corporation or of a financial intermediary in the name of the Trustee
for the benefit of the Certificateholders. Unless otherwise provided in the
related Prospectus Supplement, the related Agreement will require that either
the Depositor or the Trustee promptly cause any MBS and Government Securities in
certificated form not registered in the name of the Trustee to be re-registered,
with the applicable persons, in the name of the Trustee.
Representations and Warranties; Repurchases
Unless otherwise provided in the related Prospectus Supplement the
Depositor will, with respect to each Whole Loan or Contract, make (with respect
to each Whole Loan or Contract originated by the Depositor) or assign certain
representations and warranties, as of a specified date (the person making such
representations and warranties, the "Warranting Party") covering, by way of
example, the following types of matters: (i) the accuracy of the information set
forth for such Whole Loan or Contract on the schedule of Assets appearing as an
exhibit to the related Agreement; (ii) in the case of a Whole Loan, the
existence of title insurance insuring the lien priority of the Whole Loan and,
in the case of a Contract, that the Contract creates a valid first security
interest in or lien on the related Manufactured Home; (iii) the authority of the
Warranting Party to sell the Whole Loan or Contract; (iv) the payment status of
the Whole Loan or Contract; (v) in the case of a Whole Loan, the existence of
customary provisions in the related Mortgage Note and Mortgage to permit
realization against the Mortgaged Property of the benefit of the security of the
Mortgage; and (vi) the existence of hazard and extended perils insurance
coverage on the Mortgaged Property or Manufactured Home.
Any Warranting Party shall be either the Depositor or an Originator or
an affiliate thereof or such other person acceptable to the Depositor and shall
be identified in the related Prospectus Supplement.
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Representations and warranties made in respect of a Whole Loan or
Contract may have been made as of a date prior to the applicable Cut-off Date. A
substantial period of time may have elapsed between such date and the date of
initial issuance of the related series of Certificates evidencing an interest in
such Whole Loan or Contract. If so specified in the related Prospectus
Supplement, in the event of a breach of any such representation or warranty, the
Warranting Party will be obligated to reimburse the Trust Fund for losses caused
by any such breach or either cure such breach or repurchase or replace the
affected Whole Loan or Contract as described below. Since the representations
and warranties may not address events that may occur following the date as of
which they were made, the Warranting Party will have a reimbursement, cure,
repurchase or substitution obligation in connection with a breach of such a
representation and warranty only if the relevant event that causes such breach
occurs prior to such date. Such party would have no such obligations if the
relevant event that causes such breach occurs after such date.
Unless otherwise provided in the related Prospectus Supplement, each
Agreement will provide that the Master Servicer and/or Trustee will be required
to notify promptly the relevant Warranting Party of any breach of any
representation or warranty made by it in respect of a Whole Loan or Contract
that materially and adversely affects the value of such Whole Loan or Contract
or the interests therein of the Certificateholders. If such Warranting Party
cannot cure such breach within a specified period following the date on which
such party was notified of such breach, then such Warranting Party will be
obligated to repurchase such Whole Loan or Contract from the Trustee within a
specified period from the date on which the Warranting Party was notified of
such breach, at the Purchase Price therefor. As to any Whole Loan or Contract,
if so specified in the related Prospectus Supplement, the "Purchase Price" will
be equal to the sum of the unpaid principal balance thereof, plus unpaid accrued
interest thereon at the Mortgage Rate or Contract Rate from the date as to which
interest was last paid to the due date in the Due Period in which the relevant
purchase is to occur, plus certain servicing expenses that are reimbursable to
the Master Servicer. If so provided in the Prospectus Supplement for a series, a
Warranting Party, rather than repurchase a Whole Loan or Contract as to which a
breach has occurred, will have the option, within a specified period after
initial issuance of such series of Certificates, to cause the removal of such
Whole Loan or Contract from the Trust Fund and substitute in its place one or
more other Whole Loans or Contracts, as applicable, in accordance with the
standards described in the related Prospectus Supplement. If so provided in the
Prospectus Supplement for a series, a Warranting Party, rather than repurchase
or substitute a Whole Loan or Contract as to which a breach has occurred, will
have the option to reimburse the Trust Fund or the Certificateholders for any
losses caused by such breach. If so specified in the related Prospectus
Supplement, this reimbursement, repurchase or substitution obligation will
constitute the sole remedy available to holders of Certificates or the Trustee
for a breach of representation by a Warranting Party.
Neither the Depositor nor the Master Servicer (except to the extent that
either is the Warranting Party) will be obligated to purchase or substitute for
a Whole Loan or Contract if a Warranting Party defaults on its obligation to do
so, and no assurance can be given that Warranting Parties will carry out such
obligations with respect to Whole Loans or Contracts.
Unless otherwise provided in the related Prospectus Supplement the
Warranting Party will, with respect to a Trust Fund that includes Government
Securities or MBS, make or assign certain representations or warranties, as of a
specified date, with respect to such Government Securities or MBS, covering (i)
the accuracy of the information set forth therefor on the schedule of Assets
appearing as an exhibit to the related Agreement and (ii) the authority of the
Warranting Party to sell such Assets. The related Prospectus Supplement will
describe the remedies for a breach thereof.
A Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Agreement. A breach of any such representation of
the Master Servicer which materially and adversely affects the interests of the
Certificateholders and which continues unremedied for the number of days
specified in the Agreement after the giving of written notice of such breach to
the Master Servicer by the Trustee or the Depositor, or to the Master Servicer,
the Depositor and the Trustee by the holders of Certificates evidencing not less
than 25% of the Voting Rights (as defined below under "Description of the
Agreements -- Events of Default under the Agreements") (if so specified in the
related Prospectus Supplement), will constitute an
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Event of Default under such Pooling and Servicing Agreement. See "Events of
Default" and "Rights Upon Event of Default."
Collection Account and Related Accounts
General
The Master Servicer and/or the 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 Assets
(collectively, the "Collection Account"), which must be either (i) an account or
accounts the deposits in which are insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the Federal Deposit Insurance Corporation
("FDIC") (to the limits established by the FDIC) and the uninsured deposits in
which are otherwise secured such that the Certificateholders have a claim with
respect to the funds in the Collection Account or a perfected first priority
security interest against any collateral securing such funds that is superior to
the claims of any other depositors or general creditors of the institution with
which the Collection Account is maintained or (ii) otherwise maintained with a
bank or trust company, and in a manner, satisfactory to the Rating Agency or
Agencies rating any class of Securities of such series. The collateral eligible
to secure amounts in the Collection Account is limited to United States
government securities and other investment grade obligations specified in the
Agreement ("Permitted Investments"). A Collection Account may be maintained as
an interest bearing or a non-interest bearing account and the funds held therein
may be invested pending each succeeding Distribution Date in certain short-term
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 a Master Servicer or its designee as additional
servicing compensation. The Collection Account may be maintained with an
institution that is an affiliate of the Master Servicer, if applicable, provided
that such institution meets the standards imposed by the Rating Agency or
Agencies. If permitted by the 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 respecting payments on mortgage loans belonging to the Master
Servicer or serviced or master serviced by it on behalf of others.
Deposits
A Master Servicer or the Trustee will deposit or cause to be deposited
in the Collection Account for one or more Trust Funds on a daily basis, unless
otherwise provided in the related Agreement, the following payments and
collections received by the Master Servicer or the Trustee or on its behalf
subsequent to the Cut-off Date (other than payments due on or before the Cut-off
Date, and exclusive of any amounts representing a Retained Interest):
(i) all payments on account of principal, including principal
prepayments, on the Assets;
(ii) all payments on account of interest on the Assets, including
any default interest collected, in each case net of any portion thereof
retained by a Master Servicer or a Sub-Servicer as its servicing
compensation and net of any Retained Interest;
(iii) all proceeds of the hazard insurance policies to be
maintained in respect of each Mortgaged Property securing a Whole Loan
in the Trust Fund (to the extent such proceeds are not applied to the
restoration of the property or released to the mortgagor in accordance
with the normal servicing procedures of a Master Servicer or the related
Sub-Servicer, subject to the terms and conditions of the related
Mortgage and Mortgage Note) (collectively, "Insurance Proceeds") and all
other amounts received and retained in connection with the liquidation
of defaulted Mortgage Loans in the Trust Fund, by foreclosure or
otherwise ("Liquidation Proceeds"), together with the net proceeds on a
monthly basis with respect to any Mortgaged Properties acquired for the
benefit of Securityholders by foreclosure or by deed in lieu of
foreclosure or otherwise;
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(iv) any amounts paid under any instrument or drawn from any fund
that constitutes Credit Support for the related series of Securities as
described under "Description of Credit Support";
(v) any amounts paid under any Cash Flow Agreement, as described
under "Description of the Trust Funds -- Cash Flow Agreements";
(vi) all proceeds of any Asset or, with respect to a Whole Loan,
property acquired in respect thereof purchased by the Depositor, any
Originator or any other specified person as described under "Assignment
of Assets; Repurchases" and "Representations and Warranties;
Repurchases," all proceeds of any defaulted Mortgage Loan purchased as
described under "Realization Upon Defaulted Whole Loans," and all
proceeds of any Asset purchased as described under "Description of the
Securities -- Termination" (also, "Liquidation Proceeds");
(vii) any amounts paid by a Master Servicer to cover certain
interest shortfalls arising out of the prepayment of Whole Loans or
Contracts in the Trust Fund as described under "Description of the
Agreements -- Retained Interest; Servicing Compensation and Payment of
Expenses";
(viii) to the extent that any such item does not constitute
additional servicing compensation to a Master Servicer, any payments on
account of modification or assumption fees, late payment charges or
Prepayment Premiums on the Mortgage Assets;
(ix) all payments required to be deposited in the Collection
Account with respect to any deductible clause in any blanket insurance
policy described under "Hazard Insurance Policies" (as defined in
"Retained Interest; Servicing Compensation and Payment of Expenses");
(x) any amount required to be deposited by a Master Servicer or
the Trustee in connection with losses realized on investments for the
benefit of the Master Servicer or the 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 Agreement and described in the
related Prospectus Supplement.
Withdrawals
A Master Servicer or the Trustee may, from time to time, make
withdrawals from the Collection Account for each Trust Fund for any of the
following purposes:
(i) to make distributions to the Securityholders on each
Distribution Date;
(ii) to reimburse a Master Servicer for unpaid servicing fees
earned and certain unreimbursed servicing expenses incurred with respect
to Whole Loans or Contracts and properties acquired in respect thereof,
such reimbursement to be made out of amounts that represent Liquidation
Proceeds and Insurance Proceeds collected on the particular Whole Loans
or Contracts 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 Support
with respect to such Whole Loans or Contracts and properties;
(iii) to reimburse a Master Servicer for any servicing expenses
described in clause (ii) above which, in the Master Servicer's good
faith judgment, will not be recoverable from the amounts described in
clause (ii), such reimbursement to be made from amounts collected on
other Assets or, if and to the extent so provided by the related
Agreement and described in the related Prospectus Supplement, just from
that portion of amounts collected on other Assets that is otherwise
distributable on one or more classes of Subordinate Securities, if any,
remain outstanding, and otherwise any outstanding class of Securities,
of the related series;
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(iv) if and to the extent described in the related Prospectus
Supplement, to pay a Master Servicer interest accrued on the servicing
expenses described in clause (ii) above while such remain outstanding
and unreimbursed;
(v) to reimburse a Master Servicer, the Depositor, 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 "Certain Matters Regarding a Master
Servicer and the Depositor";
(vi) if and to the extent described in the related Prospectus
Supplement, to pay (or to transfer to a separate account for purposes of
escrowing for the payment of) the Trustee's fees;
(vii) to reimburse the 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
"Certain Matters Regarding the Trustee";
(viii) unless otherwise provided in the related Prospectus
Supplement, to pay a Master Servicer, as additional servicing
compensation, interest and investment income earned in respect of
amounts held in the Collection Account;
(ix) to pay the person entitled thereto any amounts deposited in
the Collection Account that were identified and applied by the Master
Servicer as recoveries of Retained Interest;
(x) to pay for costs reasonably incurred in connection with the
proper management and maintenance of any Mortgaged Property acquired for
the benefit of Securityholders by foreclosure or by deed in lieu of
foreclosure or otherwise, such payments to be made out of income
received on such property;
(xi) if one or more elections have been made to treat the Trust
Fund or designated portions thereof as a REMIC, to pay any federal,
state or local taxes imposed on the Trust Fund or its assets or
transactions, as and to the extent described under "Federal
Income Tax Consequences -- REMICS -- Prohibited Transactions Tax and
Other Taxes";
(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 Whole Loan or a property acquired in respect thereof in
connection with the liquidation of such Whole Loan or property;
(xiii) to pay for the cost of various opinions of counsel
obtained pursuant to the related Agreement for the benefit of
Securityholders;
(xiv) to pay for the costs of recording the related Agreement if
such recordation materially and beneficially affects the interests of
Securityholders, provided that such payment shall not constitute a
waiver with respect to the obligation of the Warranting Party to remedy
any breach of representation or warranty under the Agreement;
(xv) to pay the person entitled thereto any amounts deposited in
the Collection Account in error, including amounts received on any Asset
after its removal from the Trust Fund whether by reason of purchase or
substitution as contemplated by "Assignment of Assets; Repurchase" and
"Representations and Warranties; Repurchases" or otherwise;
(xvi) to make any other withdrawals permitted by the related
Agreement; and
(xvii) to clear and terminate the Collection Account at the
termination of the Trust Fund.
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Other Collection Accounts
Notwithstanding the foregoing, if so specified in the related Prospectus
Supplement, the Agreement for any series of Securities may provide for the
establishment and maintenance of a separate collection account into which the
Master Servicer or any related Sub-Servicer will deposit on a daily basis the
amounts described under "-- Deposits" above for one or more series of
Securities. Any amounts on deposit in any such collection account will be
withdrawn therefrom and deposited into the appropriate Collection Account by a
time specified in the related Prospectus Supplement. To the extent specified in
the related Prospectus Supplement, any amounts which could be withdrawn from the
Collection Account as described under "-- Withdrawals" above, may also be
withdrawn from any such collection account. The Prospectus Supplement will set
forth any restrictions with respect to any such collection account, including
investment restrictions and any restrictions with respect to financial
institutions with which any such collection account may be maintained.
Collection and Other Servicing Procedures
The Master Servicer, directly or through Sub-Servicers, is required to
make reasonable efforts to collect all scheduled payments under the Whole Loans
and will follow or cause to be followed such collection procedures as it would
follow with respect to mortgage loans that are comparable to the Whole Loans or
manufactured housing contracts comparable to the Contracts and held for its own
account, provided such procedures are consistent with (i) the terms of the
related Agreement and any related hazard insurance policy or instrument of
Credit Support, if any, included in the related Trust Fund described herein or
under "Description of Credit Support," (ii) applicable law and (iii) the general
servicing standard specified in the related Prospectus Supplement or, if no such
standard is so specified, its normal servicing practices (in either case, the
"Servicing Standard"). In connection therewith, the Master Servicer will be
permitted in its discretion to waive any late payment charge or penalty interest
in respect of a late payment on a Whole Loan or Contract.
Each Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining hazard
insurance policies as described herein and in any related Prospectus Supplement,
and filing and settling claims thereunder; maintaining escrow or impoundment
accounts of mortgagors for payment of taxes, insurance and other items required
to be paid by any mortgagor pursuant to a Whole Loan; processing assumptions or
substitutions in those cases where the Master Servicer has determined not to
enforce any applicable due-on-sale clause; attempting to cure delinquencies;
supervising foreclosures or repossessions; inspecting and managing Mortgaged
Properties or Manufactured Homes under certain circumstances; and maintaining
accounting records relating to the Whole Loans or Contracts. The Master Servicer
will be responsible for filing and settling claims in respect of particular
Whole Loans or Contracts under any applicable instrument of Credit Support. See
"Description of Credit Support."
The Master Servicer may agree to modify, waive or amend any term of any
Whole Loan or Contract in a manner consistent with the Servicing Standard so
long as the modification, waiver or amendment will not (i) affect the amount or
timing of any scheduled payments of principal or interest on the Whole Loan or
Contract or (ii) in its judgment, materially impair the security for the Whole
Loan or Contract or reduce the likelihood of timely payment of amounts due
thereon. The Master Servicer also may agree to any modification, waiver or
amendment that would so affect or impair the payments on, or the security for, a
Whole Loan or Contract if, unless otherwise provided in the related Prospectus
Supplement, (i) in its judgment, a material default on the Whole Loan or
Contract has occurred or a payment default is imminent and (ii) in its judgment,
such modification, waiver or amendment is reasonably likely to produce a greater
recovery with respect to the Whole Loan or Contract on a present value basis
than would liquidation. The Master Servicer is required to notify the Trustee in
the event of any modification, waiver or amendment of any Whole Loan or
Contract.
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 Loan debt, or may reflect the diversion of that income from the
servicing of the Mortgage Loan debt. In addition, a Mortgagor under a
Multifamily
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Loan that is unable to make Mortgage Loan payments may also be unable to make
timely payment of all required taxes and otherwise to maintain and insure the
related Mortgaged Property. In general, the 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
Multifamily Property and take such other actions as are consistent with the
related Agreement. A significant period of time may elapse before the Servicer
is able to assess the success of any such corrective action or the need for
additional initiatives. The time within which the Servicer can make the initial
determination of appropriate action, evaluate the success of corrective action,
develop additional initiatives, institute foreclosure proceedings and actually
foreclose may vary considerably depending on the particular Multifamily Loan,
the Multifamily Property, the Mortgagor, the presence of an acceptable party to
assume the Multifamily Loan and the laws of the jurisdiction in which the
Multifamily Property is located.
Sub-Servicers
A Master Servicer may delegate its servicing obligations in respect of
the Whole Loans or Contracts to third-party servicers (each, a "Sub-Servicer"),
but such Master Servicer will remain obligated under the related Agreement. Each
sub-servicing agreement between a Master Servicer and a Sub-Servicer (a
"Sub-Servicing Agreement") must be consistent with the terms of the related
Agreement and must provide that, if for any reason the Master Servicer for the
related series of Securities is no longer acting in such capacity, the Trustee
or any successor Master Servicer may assume the Master Servicer's rights and
obligations under such Sub-Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the
Master Servicer will be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Master Servicer's compensation
pursuant to the related Agreement is sufficient to pay such fees. However, a
Sub-Servicer may be entitled to a Retained Interest in certain Whole Loans or
Contracts. Each Sub-Servicer will be reimbursed by the Master Servicer for
certain expenditures which it makes, generally to the same extent the Master
Servicer would be reimbursed under an Agreement. See "Retained Interest;
Servicing Compensation and Payment of Expenses."
Realization Upon Defaulted Whole Loans
Unless otherwise provided in the related Prospectus Supplement, the
Master Servicer is required to monitor any Whole Loan or Contract which is in
default, initiate corrective action in cooperation with the mortgagor or obligor
if cure is likely, inspect the Mortgaged Property or Manufactured Home 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 such corrective action or the need for additional initiatives.
Any Agreement relating to a Trust Fund that includes Whole Loans or
Contracts may grant to the Master Servicer and/or the holder or holders of
certain classes of Securities a right of first refusal to purchase from the
Trust Fund at a predetermined purchase price any such Whole Loan or Contract as
to which a specified number of scheduled payments thereunder are delinquent. Any
such right granted to the holder of an Offered Security will be described in the
related Prospectus Supplement. The related Prospectus Supplement will also
describe any such right granted to any person if the predetermined purchase
price is less than the Purchase Price described under "Representations and
Warranties; Repurchases."
If so specified in the related Prospectus Supplement, the Master
Servicer may offer to sell any defaulted Whole Loan or Contract described in the
preceding paragraph and not otherwise purchased by any person having a right of
first refusal with respect thereto, if and when the Master Servicer determines,
consistent with the Servicing Standard, that such a sale would produce a greater
recovery on a present value basis than would liquidation through foreclosure,
repossession or similar proceedings. The related Agreement will provide that any
such offering be made in a commercially reasonable manner for a specified period
and that the Master Servicer accept the highest cash bid received from any
person (including itself, an affiliate of the Master Servicer or any
Certificateholder) that constitutes a fair price for such defaulted Whole Loan
or Contract. In the absence of any bid determined in accordance with the related
Agreement to be fair, the
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Master Servicer shall proceed with respect to such defaulted Mortgage Loan or
Contract as described below. Any bid in an amount at least equal to the Purchase
Price described under "Representations and Warranties; Repurchases" will in all
cases be deemed fair.
The Master Servicer, on behalf of the Trustee, may at any time institute
foreclosure proceedings, exercise any power of sale contained in any mortgage,
obtain a deed in lieu of foreclosure, or otherwise acquire title to a Mortgaged
Property securing a Whole Loan by operation of law or otherwise and may at any
time repossess and realize upon any Manufactured Home, if such action is
consistent with the Servicing Standard and a default on such Whole Loan or
Contract has occurred or, in the Master Servicer's judgment, is imminent.
Unless otherwise provided in the related Prospectus Supplement, if title
to any Mortgaged Property is acquired by a Trust Fund as to which a REMIC
election has been made, the Master Servicer, on behalf of the Trust Fund, will
be required to sell the Mortgaged Property within two years of acquisition,
unless (i) the Internal Revenue Service grants an extension of time to sell such
property or (ii) the Trustee receives an opinion of independent counsel to the
effect that the holding of the property by the Trust Fund subsequent to two
years after its acquisition will not result in the imposition of a tax on the
Trust Fund or cause the Trust Fund to fail to qualify as a REMIC under the Code
at any time that any Certificate is outstanding. Subject to the foregoing, the
Master Servicer will be required to (i) solicit bids for any Mortgaged Property
so acquired in such a manner as will be reasonably likely to realize a fair
price for such property and (ii) accept the first (and, if multiple bids are
contemporaneously received, the highest) cash bid received from any person that
constitutes a fair price.
The limitations imposed by the related Agreement and the REMIC
provisions of the Code (if a REMIC election has been made with respect to the
related Trust Fund) on the ownership and management of any Mortgaged Property
acquired on behalf of the Trust Fund may result in the recovery of an amount
less than the amount that would otherwise be recovered. See "Certain Legal
Aspects of Mortgage Loans -- Foreclosure."
If recovery on a defaulted Whole Loan or Contract under any related
instrument of Credit Support is not available, the Master Servicer nevertheless
will be obligated to follow or cause to be followed such normal practices and
procedures as it deems necessary or advisable to realize upon the defaulted
Whole Loan or Contract. If the proceeds of any liquidation of the property
securing the defaulted Whole Loan or Contract are less than the outstanding
principal balance of the defaulted Whole Loan or Contract plus interest accrued
thereon at the Mortgage Rate or Contract Rate, as applicable, plus the aggregate
amount of expenses incurred by the Master Servicer in connection with such
proceedings and which are reimbursable under the Agreement, the Trust Fund will
realize a loss in the amount of such difference. The Master Servicer will be
entitled to withdraw or cause to be withdrawn from the Collection Account out of
the Liquidation Proceeds recovered on any defaulted Whole Loan or Contract,
prior to the distribution of such Liquidation Proceeds to Certificateholders,
amounts representing its normal servicing compensation on the Whole Loan or
Contract and unreimbursed servicing expenses incurred with respect to the Whole
Loan or Contract.
If any property securing a defaulted Whole Loan or Contract is damaged
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 Certificateholders on liquidation of the Whole Loan or Contract
after reimbursement of the Master Servicer for its expenses and (ii) that such
expenses will be recoverable by it from related Insurance Proceeds or
Liquidation Proceeds.
As servicer of the Whole Loans or Contracts, a Master Servicer, on
behalf of itself, the Trustee and the Securityholders, will present claims to
the obligor under each instrument of Credit Support, and will take such
reasonable steps as are necessary to receive payment or to permit recovery
thereunder with respect to defaulted Whole Loans or Contracts.
If a Master Servicer or its designee recovers payments under any
instrument of Credit Support with respect to any defaulted Whole Loan or
Contract, the Master Servicer will be entitled to withdraw or cause
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to be withdrawn from the Collection Account out of such proceeds, prior to
distribution thereof to Certificateholders, amounts representing its normal
servicing compensation on such Whole Loan or Contract and unreimbursed servicing
expenses incurred with respect to the Whole Loan or Contract. See "Hazard
Insurance Policies" and "Description of Credit Support."
Hazard Insurance Policies
Whole Loans
Each Agreement for a Trust Fund comprised of Whole Loans will require
the Master Servicer to cause the mortgagor on each Whole Loan to maintain a
hazard insurance policy providing for such coverage as is required under the
related Mortgage or, if any Mortgage permits the holder thereof to dictate to
the mortgagor the insurance coverage to be maintained on the related Mortgaged
Property, then such coverage as is consistent with the Servicing Standard. Such
coverage will be in general in an amount equal to the lesser of the principal
balance owing on such Whole Loan and the amount necessary to fully compensate
for any damage or loss to the improvements on the Mortgaged Property on a
replacement cost basis, but in either case not less than the amount necessary to
avoid the application of any co-insurance clause contained in the hazard
insurance policy. The ability of the Master Servicer to assure that hazard
insurance proceeds are appropriately applied may be dependent upon its being
named as an additional insured under any hazard insurance policy and under any
other insurance policy referred to below, or upon the extent to which
information in this regard is furnished by mortgagors. All amounts collected by
the Master Servicer under any such 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, subject to
the terms and conditions of the related Mortgage and Mortgage Note) will be
deposited in the Collection Account. The Agreement will provide that the Master
Servicer may satisfy its obligation to cause each mortgagor to maintain such a
hazard insurance policy by the Master Servicer's maintaining a blanket policy
insuring against hazard losses on the Whole Loans. If such blanket policy
contains a deductible clause, the Master Servicer will be required to deposit in
the Collection Account all sums that 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 of the property by
fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and
civil commotion, subject to the conditions and exclusions specified in each
policy. Although the policies relating to the Whole 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
war, revolution, governmental actions, floods and other water-related causes,
earth movement (including earthquakes, landslides and mudflows), wet or dry rot,
vermin, insects, domestic animals and certain other kinds of uninsured risks.
The hazard insurance policies covering the Mortgaged Properties securing
the Whole Loans will typically contain a co-insurance clause that 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 lesser of (i) the replacement cost of the improvements less physical
depreciation and (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.
Each Agreement for a Trust Fund comprised of Whole Loans will require
the Master Servicer to cause the mortgagor on each Whole Loan to maintain all
such other insurance coverage with respect to the related Mortgaged Property as
is consistent with the terms of the related Mortgage and the Servicing Standard,
which insurance may typically include flood insurance (if the related Mortgaged
Property was located at the time of origination in a federally designated flood
area).
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Any cost incurred by the Master Servicer in maintaining any such
insurance policy will be added to the amount owing under the Mortgage Loan where
the terms of the Mortgage Loan so permit; provided, however, that the addition
of such cost will not be taken into account for purposes of calculating the
distribution to be made to Certificateholders. Such costs may be recovered by
the Master Servicer or Sub-Servicer, as the case may be, from the Collection
Account, with interest thereon, as provided by the Agreement.
Under the terms of the Whole Loans, mortgagors will generally be
required to present claims to insurers under hazard insurance policies
maintained on the related Mortgaged Properties. The Master Servicer, on behalf
of the Trustee and Certificateholders, is obligated to present or cause to be
presented claims under any blanket insurance policy insuring against hazard
losses on Mortgaged Properties securing the Whole Loans. However, the ability of
the Master Servicer to present or cause to be presented such claims is dependent
upon the extent to which information in this regard is furnished to the Master
Servicer by mortgagors.
Contracts
Except as otherwise specified in the related Prospectus Supplement, the
terms of the Agreement for a Trust Fund comprised of Contracts will require the
Master Servicer to cause to be maintained with respect to each Contract one or
more hazard insurance policies which provide, at a minimum, the same coverage as
a standard form fire and extended coverage insurance policy that is customary
for manufactured housing, issued by a company authorized to issue such policies
in the state in which the Manufactured Home is located, and in an amount which
is not less than the maximum insurable value of such Manufactured Home or the
principal balance due from the obligor on the related Contract, whichever is
less; provided, however, that the amount of coverage provided by each such
hazard insurance policy shall be sufficient to avoid the application of any
co-insurance clause contained therein. When a Manufactured Home's location was,
at the time of origination of the related Contract, within a federally
designated special flood hazard area, the Master Servicer shall cause such flood
insurance to be maintained, which coverage shall be at least equal to the
minimum amount specified in the preceding sentence or such lesser amount as may
be available under the federal flood insurance program. Each hazard insurance
policy caused to be maintained by the Master Servicer shall contain a standard
loss payee clause in favor of the Master Servicer and its successors and
assigns. If any obligor is in default in the payment of premiums on its hazard
insurance policy or policies, the Master Servicer shall pay such premiums out of
its own funds, and may add separately such premium to the obligor's obligation
as provided by the Contract, but may not add such premium to the remaining
principal balance of the Contract.
The Master Servicer may maintain, in lieu of causing individual hazard
insurance policies to be maintained with respect to each Manufactured Home, and
shall maintain, to the extent that the related Contract does not require the
obligor to maintain a hazard insurance policy with respect to the related
Manufactured Home, one or more blanket insurance policies covering losses on the
obligor's interest in the Contracts resulting from the absence or insufficiency
of individual hazard insurance policies. The Master Servicer shall pay the
premium for such blanket policy on the basis described therein and shall pay any
deductible amount with respect to claims under such policy relating to the
Contracts.
Fidelity Bonds and Errors and Omissions Insurance
If so specified in the related Prospectus Supplement, the related
Agreement will require that the Master Servicer obtain and maintain in effect a
fidelity bond or similar form of insurance coverage (which may provide blanket
coverage) or any combination thereof insuring against loss occasioned by fraud,
theft or other intentional misconduct of the officers, employees and agents of
the Master Servicer. The related Agreement will allow the Master Servicer to
self-insure against loss occasioned by the errors and omissions of the officers,
employees and agents of the Master Servicer so long as certain criteria set
forth in the Agreement are met.
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Due-on-Sale Provisions
The Whole Loans may contain clauses requiring the consent of the
mortgagee to any sale or other transfer of the related Mortgaged Property, or
due-on-sale clauses entitling the mortgagee to accelerate payment of the Whole
Loan upon any sale, transfer or conveyance of the related Mortgaged Property. If
so specified in the related Prospectus Supplement, the Master Servicer will
generally enforce any due-on-sale clause to the extent it has knowledge of the
conveyance or proposed conveyance of the underlying Mortgaged Property and it is
entitled to do so under applicable law; provided, however, that the Master
Servicer will not take any action in relation to the enforcement of any
due-on-sale provision which would adversely affect or jeopardize coverage under
any applicable insurance policy. Any fee collected by or on behalf of the Master
Servicer for entering into an assumption agreement will be retained by or on
behalf of the Master Servicer as additional servicing compensation. See "Certain
Legal Aspects of Mortgage Loans -- Due-on-Sale Clauses." The Contracts may also
contain such clauses. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer will permit such transfer so long as the
transferee satisfies the Master Servicer's then applicable underwriting
standards. The purpose of such transfers is often to avoid a default by the
transferring obligor. See "Certain Legal Aspects of the Contracts -- Transfers
of Manufactured Homes; Enforceability of 'Due-on-Sale' Clauses."
Retained Interest; Servicing Compensation and Payment of Expenses
The Prospectus Supplement for a series of Certificates will specify
whether there will be any Retained Interest in the Assets, and, if so, the
initial owner thereof. If so, the Retained Interest will be established on a
loan-by-loan basis and will be specified on an exhibit to the related Agreement.
A "Retained Interest" in an Asset represents a specified portion of the interest
payable thereon. The Retained Interest will be deducted from mortgagor payments
as received and will not be part of the related Trust Fund.
The Master Servicer's and a Sub-Servicer's primary servicing
compensation with respect to a series of Certificates will come from the
periodic payment to it of a portion of the interest payment on each Asset. Since
any Retained Interest and a Master Servicer's primary compensation are
percentages of the principal balance of each Asset, such amounts will decrease
in accordance with the amortization of the Assets. The Prospectus Supplement
with respect to a series of Certificates evidencing interests in a Trust Fund
that includes Whole Loans or Contracts may provide that, as additional
compensation, the Master Servicer or the Sub-Servicers may retain all or a
portion of assumption fees, modification fees, late payment charges or
Prepayment Premiums collected from mortgagors and any interest or other income
which may be earned on funds held in the Collection Account or any account
established by a Sub-Servicer pursuant to the Agreement.
The Master Servicer may, to the extent provided in the related
Prospectus Supplement, pay from its servicing compensation certain expenses
incurred in connection with its servicing and managing of the Assets, including,
without limitation, payment of the fees and disbursements of the Trustee and
independent accountants, payment of expenses incurred in connection with
distributions and reports to Certificateholders, and payment of any other
expenses described in the related Prospectus Supplement. Certain other expenses,
including certain expenses relating to defaults and liquidations on the Whole
Loans or Contracts and, to the extent so provided in the related Prospectus
Supplement, interest thereon at the rate specified therein may be borne by the
Trust Fund.
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 Due Period to certain interest
shortfalls resulting from the voluntary prepayment of any Whole Loans or
Contracts in the related Trust Fund during such period prior to their respective
due dates therein.
Evidence as to Compliance
Each Agreement relating to Assets which include Whole Loans or Contracts
will provide that on or before a specified date in each year, beginning with the
first such date at least six months after the related Cut-off Date, a firm of
independent public accountants will furnish a statement to the Trustee to the
effect that, on the basis of the examination by such firm conducted
substantially in compliance with either the
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Uniform Single Attestation Program for Mortgage Bankers, the Audit Program for
Mortgages serviced for the Federal Home Loan Mortgage Corporation ("FHLMC") or
such other program used by the Master Servicer, the servicing by or on behalf of
the Master Servicer of mortgage loans under agreements substantially similar to
each other (including the related Agreement) was conducted in compliance with
the terms of such agreements or such program except for any significant
exceptions or errors in records that, in the opinion of the firm, either the
Audit Program for Mortgages serviced for FHLMC, or paragraph 4 of the Uniform
Single Attestation Program for Mortgage Bankers, or such other program, requires
it to report. In rendering its statement such firm may rely, as to matters
relating to the direct servicing of mortgage loans by Sub-Servicers, 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 or such other program used by such
Sub-Servicer (rendered within one year of such statement) of firms of
independent public accountants with respect to the related Sub-Servicer.
Each such Agreement will also provide for delivery to the Trustee, on or
before a specified date in each year, of an annual statement signed by two
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding calendar
year or other specified twelve-month period.
If so provided in the related Prospectus Supplement, copies of such
annual accountants' statement and such statements of officers will be obtainable
by Certificateholders without charge upon written request to the Master Servicer
at the address set forth in the related Prospectus Supplement.
Certain Matters Regarding a Master Servicer and the Depositor
The Master Servicer, if any, or a servicer for substantially all the
Whole Loans or Contracts under each Agreement will be named in the related
Prospectus Supplement. The entity serving as Master Servicer (or as such
servicer) may be the Depositor or an affiliate of the Depositor and may have
other normal business relationships with the Depositor or the Depositor's
affiliates. Reference herein to the Master Servicer shall be deemed to be to the
servicer of substantially all of the Whole Loans or Contracts, if applicable.
The related Agreement will specify the circumstances under which the
Master Servicer may resign from its obligations and duties thereunder. No such
resignation will become effective until the Trustee or a successor servicer has
assumed the Master Servicer's obligations and duties under the Agreement.
Each Agreement will further provide that neither any Master Servicer,
the Depositor nor any director, officer, employee, or agent of a Master Servicer
or the Depositor will be under any liability to the related Trust Fund or
Securityholders for any action taken, or for refraining from the taking of any
action, in good faith pursuant to the Agreement; provided, however, that neither
a Master Servicer, the Depositor nor any such person will be protected against
any breach of a representation, warranty or covenant made in such Agreement, or
against any liability specifically imposed thereby, or against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence in the performance of obligations or duties thereunder or by
reason of reckless disregard of obligations and duties thereunder. Each
Agreement will further provide that any Master Servicer, the Depositor and any
director, officer, employee or agent of a Master Servicer or the Depositor will
be entitled to indemnification by the related Trust Fund and will be held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to the Agreement or the Securities; provided, however,
that such indemnification will not extend to any loss, liability or expense (i)
specifically imposed by such Agreement or otherwise incidental to the
performance of obligations and duties thereunder, including, in the case of a
Master Servicer, the prosecution of an enforcement action in respect of any
specific Whole Loan or Whole Loans or Contract or Contracts (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to such
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Agreement); (ii) incurred in connection with any breach of a representation,
warranty or covenant made in such Agreement; (iii) incurred by reason of
misfeasance, bad faith or gross negligence in the performance of obligations or
duties thereunder, or by reason of reckless disregard of such obligations or
duties; (iv) incurred in connection with any violation of any state or federal
securities law; or (v) imposed by any taxing authority if such loss, liability
or expense is not specifically reimbursable pursuant to the terms of the related
Agreement. In addition, each Agreement will provide that neither any Master
Servicer nor the Depositor will be under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its respective
responsibilities under the Agreement and which in its opinion may involve it in
any expense or liability. Any such Master Servicer or the Depositor may,
however, in its discretion undertake any such action which it may deem necessary
or desirable with respect to the Agreement and the rights and duties of the
parties thereto and the interests of the Securityholders thereunder. In such
event, the legal expenses and costs of such action and any liability resulting
therefrom will be expenses, costs and liabilities of the Securityholders, and
the Master Servicer or the Depositor, as the case may be, will be entitled to be
reimbursed therefor and to charge the Collection Account.
Any person into which the Master Servicer or the Depositor may be merged
or consolidated, or any person resulting from any merger or consolidation to
which the Master Servicer or the Depositor is a party, or any person succeeding
to the business of the Master Servicer or the Depositor, will be the successor
of the Master Servicer or the Depositor, as the case may be, under the related
Agreement.
Events of Default under the Agreement
Unless otherwise provided in the related Prospectus Supplement for a
Trust Fund that includes Whole Loans or Contracts, Events of Default under the
related Agreement will include (i) any failure by the Master Servicer to
distribute or cause to be distributed to Certificateholders, or to remit to the
Trustee or Indenture Trustee, as applicable, for distribution to
Securityholders, any required payment that continues after a grace period, if
any; (ii) any failure by the Master Servicer duly to observe or perform in any
material respect any of its other covenants or obligations under the Agreement
which continues unremedied for 30 days after written notice of such failure has
been given to the Master Servicer by the Trustee or the Depositor, or to the
Master Servicer, the Depositor and the Trustee by the holders of Securities
evidencing not less than 25% of the Voting Rights (as defined below); (iii) any
breach of a representation or warranty made by the Master Servicer under the
Agreement which materially and adversely affects the interests of
Securityholders and which continues unremedied for 30 days after written notice
of such breach has been given to the Master Servicer by the Trustee or the
Depositor, or to the Master Servicer, the Depositor and the Trustee by the
holders of Securities evidencing not less than 25% of the Voting Rights; and
(iv) certain events of insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings and certain actions by or on behalf of
the Master Servicer indicating its insolvency or inability to pay its
obligations. Material variations to the foregoing Events of Default (other than
to shorten cure periods or eliminate notice requirements) will be specified in
the related Prospectus Supplement. If so specified in the related Prospectus
Supplement, the Trustee shall, not later than the later of 60 days after the
occurrence of any event which constitutes or, with notice or lapse of time or
both, would constitute an Event of Default and five days after certain officers
of the Trustee become aware of the occurrence of such an event, transmit by mail
to the Depositor and all Securityholders of the applicable series notice of such
occurrence, unless such default shall have been cured or waived.
The manner of determining the "Voting Rights" of a Security or class or
classes of Securities will be specified in the related Prospectus Supplement.
Rights Upon Event of Default under the Agreement
So long as an Event of Default under an Agreement remains unremedied,
the Depositor or the Trustee may, and at the direction of holders of Securities
evidencing not less than 51% (or such other percentage specified in the related
Prospectus Supplement) of the Voting Rights, the Trustee shall terminate all of
the rights and obligations of the Master Servicer under the Agreement and in and
to the Mortgage Loans (other than as a Securityholder or as the owner of any
Retained Interest), whereupon the Trustee will succeed to all of the
responsibilities, duties and liabilities of the Master Servicer under the
Agreement and
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will be entitled to similar compensation arrangements. In the event that the
Trustee is unwilling or unable so to act, it may or, at the written request of
the holders of Securities entitled to at least 51% (or such other percentage
specified in the related Prospectus Supplement) of the Voting Rights, it shall
appoint, or petition a court of competent jurisdiction for the appointment of, a
loan servicing institution acceptable to the Rating Agency with a net worth at
the time of such appointment of at least $15,000,000 (or such other amount
specified in the related Prospectus Supplement) to act as successor to the
Master Servicer under the Agreement. Pending such appointment, the Trustee is
obligated to act in such capacity. The Trustee and any such successor may agree
upon the servicing compensation to be paid, which in no event may be greater
than the compensation payable to the Master Servicer under the Agreement.
The related Prospectus Supplement will specify the percentage of the
holders of Securities affected by any Event of Default entitled to waive such
Event of Default; provided, however, that an Event of Default involving a
failure to distribute a required payment to Securityholders described in clause
(i) under "Events of Default under the Agreement" may be waived only by all of
the Securityholders. Upon any such waiver of an Event of Default, such Event of
Default shall cease to exist and shall be deemed to have been remedied for every
purpose under the Agreement.
No Securityholders will have the right under any Agreement to institute
any proceeding with respect thereto unless such holder previously has given to
the Trustee written notice of default and unless the holders of Securities
evidencing not less than 25% (or such other percentage specified in the related
Prospectus Supplement) of the Voting Rights have made written request upon the
Trustee to institute such proceeding in its own name as Trustee thereunder and
have offered to the Trustee reasonable indemnity, and the Trustee for 60 days
(or such other number of days specified in the related Prospectus Supplement)
has neglected or refused to institute any such proceeding. The Trustee, however,
is under no obligation to exercise any of the trusts or powers vested in it by
any Agreement or to make any investigation of matters arising thereunder 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 Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby.
Amendment
Each Agreement may be amended by the parties thereto, without the
consent of any of the holders of Securities covered by the Agreement, (i) to
cure any ambiguity or mistake, (ii) to correct, modify or supplement any
provision therein which may be inconsistent with any other provision therein or
with the related Prospectus Supplement, (iii) to make any other provisions with
respect to matters or questions arising under the Agreement which are not
materially inconsistent with the provisions thereof, or (iv) to comply with any
requirements imposed by the Code; provided that, in the case of clause (iii),
such amendment will not (as evidenced by an opinion of counsel to such effect)
adversely affect in any material respect the interests of any holder of
Securities covered by the Agreement. Unless otherwise specified in the related
Prospectus Supplement, each Agreement may also be amended by the Depositor, the
Master Servicer, if any, and the Trustee, with the consent of the holders of
Securities affected thereby evidencing not less than 51% (or such other
percentage specified in the related Prospectus Supplement) of the Voting Rights,
for any purpose; provided, however, that unless otherwise specified in the
related Prospectus Supplement, no such amendment may (i) reduce in any manner
the amount of, or delay the timing of, payments received on Mortgage Loans or
Contracts which are required to be distributed on any Security without the
consent of the holder of such Security or (ii) reduce the consent percentages
described in this paragraph without the consent of the holders of all Securities
covered by such Agreement then outstanding. However, with respect to any series
of Certificates as to which a REMIC election is to be made, the Trustee will not
consent to any amendment of the Agreement unless it shall first have received an
opinion of counsel to the effect that such amendment will not result in the
imposition of a tax on the related Trust Fund or cause the related Trust Fund to
fail to qualify as a REMIC at any time that the related Certificates are
outstanding.
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The Trustee
The Trustee under each Agreement or Trust Agreement will be named in the
related Prospectus Supplement. The commercial bank, national banking
association, banking corporation or trust company serving as Trustee may have a
banking relationship with the Depositor and its affiliates and with any Master
Servicer and its affiliates. Each Agreement will specify the conditions under
which Trustee can resign.
Duties of the Trustee
The Trustee will make no representations as to the validity or
sufficiency of any Agreement or Trust Agreement, the Securities or any Asset or
related document and is not accountable for the use or application by or on
behalf of any Master Servicer of any funds paid to the Master Servicer or its
designee in respect of the Securities or the Assets, or deposited into or
withdrawn from the Collection Account or any other account by or on behalf of
the Master Servicer. If no Event of Default has occurred and is continuing, the
Trustee is required to perform only those duties specifically required under the
related Agreement or Trust Agreement, as applicable. However, upon receipt of
the various certificates, reports or other instruments required to be furnished
to it, the Trustee is required to examine such documents and to determine
whether they conform to the requirements of the Agreement or Trust Agreement, as
applicable.
Certain Matters Regarding the Trustee
If so specified in the related Prospectus Supplement, the Trustee and
any director, officer, employee or agent of the Trustee shall be entitled to
indemnification out of the Collection Account for any loss, liability or expense
(including costs and expenses of litigation, and of investigation, counsel fees,
damages, judgments and amounts paid in settlement) incurred in connection with
the Trustee's (i) enforcing its rights and remedies and protecting the
interests, of the Securityholders during the continuance of an Event of Default,
(ii) defending or prosecuting any legal action in respect of the related
Agreement or series of Securities (iii) being the mortgagee of record with
respect to the Mortgage Loans in a Trust Fund and the owner of record with
respect to any Mortgaged Property acquired in respect thereof for the benefit of
Securityholders, or (iv) acting or refraining from acting in good faith at the
direction of the holders of the related series of Securities entitled to not
less than 25% (or such other percentage as is specified in the related Agreement
with respect to any particular matter) of the Voting Rights for such series;
provided, however, that such indemnification will not extend to any loss,
liability or expense that constitutes a specific liability of the Trustee
pursuant to the related Agreement, or to any loss, liability or expense incurred
by reason of willful misfeasance, bad faith or negligence on the part of the
Trustee in the performance of its obligations and duties thereunder, or by
reason of its reckless disregard of such obligations or duties, or as may arise
from a breach of any representation, warranty or covenant of the Trustee made
therein.
Resignation and Removal of the Trustee
The Trustee may at any time resign from its obligations and duties under
an Agreement by giving written notice thereof to the Depositor, the Master
Servicer, if any, and all Securityholders. Upon receiving such notice of
resignation, the Depositor is required promptly to appoint a successor trustee
acceptable to the Master Servicer, if any. If no successor trustee shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible to continue as
such under the related Agreement, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, or if a change in
the financial condition of the Trustee has adversely affected or will adversely
affect the rating on any class of the Securities, then the Depositor may remove
the Trustee and appoint a successor trustee acceptable to the Master Servicer,
if any. Holders of the Securities of any series entitled to at least 51% (or
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such other percentage specified in the related Prospectus Supplement) of the
Voting Rights for such series may at any time remove the Trustee without cause
and appoint a successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
trustee shall not become effective until acceptance of appointment by the
successor trustee.
Certain Terms of the Indenture
Events of Default. If so specified in the related Prospectus Supplement,
Events of Default under the Indenture for each Series of Notes will include: (i)
a default for thirty (30) days (or such other number of days specified in such
Prospectus Supplement) or more in the payment of any principal of or interest on
any Note of such series; (ii) failure to perform any other covenant of the
Depositor or the Trust Fund in the Indenture which continues for a period of
sixty (60) days (or such other number of days specified in such Prospectus
Supplement) after notice thereof is given in accordance with the procedures
described in the related Prospectus Supplement; (iii) any representation or
warranty made by the Depositor 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 sixty
(60) days (or such other number of days specified in such Prospectus Supplement)
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 Depositor or the Trust Fund; or (v) any other
Event of Default provided with respect to Notes of that series.
If an Event of Default with respect to the Notes of any series at the
time outstanding occurs and is continuing, either the Indenture Trustee or the
holders of a majority of the then aggregate outstanding amount of the Notes of
such series may declare the principal amount (or, if the Notes of that series
are Accrual Securities, 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 Notes of such series to be due and payable immediately. Such
declaration may, under certain circumstances, be rescinded and annulled by the
holders of a majority in aggregate outstanding amount of the Notes of such
series.
If, following an Event of Default with respect to any series of Notes,
the Notes of such series have been declared to be due and payable, the Indenture
Trustee may, in its discretion, notwithstanding such acceleration, elect to
maintain possession of the collateral securing the Notes of such series and to
continue to apply distributions 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 Notes 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 Notes of a series following an Event of Default, other
than a default in the payment of any principal or interest on any Note of such
series for thirty (30) days or more, unless (a) the holders of 100% (or such
other percentage specified in the related Prospectus Supplement) of the then
aggregate outstanding amount of the Notes 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 Notes of
such series 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 Notes as such payments would have become due if such Notes had
not been declared due and payable, and the Indenture Trustee obtains the consent
of the holders of 66 2/3% (or such other percentage specified in the related
Prospectus Supplement) of the then aggregate outstanding amount of the Notes of
such series.
In the event that the Indenture Trustee liquidates the collateral in
connection with an Event of Default involving a default for thirty (30) days (or
such other number of days specified in the related Prospectus Supplement) or
more in the payment of principal of or interest on the Notes of a series, 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
distribution to the Noteholders 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
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proceeding for the enforcement of the lien of the Indenture for the benefit of
the Noteholders after the occurrence of such an Event of Default.
In the event the principal of the Notes of a series is declared due and
payable, as described above, the holders of any such Notes 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 which is unamortized.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, in case an Event of Default shall occur and be continuing
with respect to a series of Notes, the Indenture Trustee shall be under no
obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the holders of Notes of such series, unless such
holders offered to the Indenture Trustee security or indemnity satisfactory to
it against the costs, expenses and liabilities which might be incurred by it in
complying with such request or direction. Subject to such provisions for
indemnification and certain limitations contained in the Indenture, the holders
of a majority of the then aggregate outstanding amount of the Notes of such
series shall have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Indenture Trustee or exercising
any trust or power conferred on the Indenture Trustee with respect to the Notes
of such series, and the holders of a majority of the then aggregate outstanding
amount of the Notes of such series may, in certain cases, waive any default with
respect thereto, except a default in the payment of principal or interest or a
default in respect of a covenant or provision of the Indenture that cannot be
modified without the waiver or consent of all the holders of the outstanding
Notes of such series affected thereby.
Discharge Indenture. The Indenture will be discharged with respect to a
series of Notes (except with respect to certain continuing rights specified in
the Indenture) upon the delivery to the Indenture Trustee for cancellation of
all the Notes of such series or, with certain limitations, upon deposit with the
Indenture Trustee of funds sufficient for the payment in full of all of the
Notes of such series.
In addition to such discharge with certain limitations, the Indenture
will provide that, if so specified with respect to the Notes of any series, the
related Trust Fund will be discharged from any and all obligations in respect of
the Notes of such series (except for certain obligations relating to temporary
Notes and exchange of Notes, to register the transfer of or exchange Notes of
such series, to replace stolen, lost or mutilated Notes of such series, to
maintain paying agencies and to hold monies for payment in trust) upon the
deposit with the Indenture Trustee, in trust, of money and/or direct obligations
of or obligations guaranteed by the United States of America which through the
payment of interest and principal in respect thereof in accordance with their
terms will provide money in an amount sufficient to pay the principal of and
each installment of interest on the Notes of such series on the maturity date
for such Notes and any installment of interest on such Notes in accordance with
the terms of the Indenture and the Notes of such series. In the event of any
such defeasance and discharge of Notes of such series, holders of Notes of such
series would be able to look only to such money and/or direct obligations for
payment of principal and interest, if any, on their Notes until maturity.
Indenture Trustee's Annual Report. The Indenture Trustee for each series
of Notes will be required to mail each year to all related Noteholders a brief
report relating to its eligibility and qualification to continue as Indenture
Trustee under the related Indenture, any amounts advanced by it under the
Indenture, the amount, interest rate and maturity date of certain indebtedness
owing by such Trust to the applicable Indenture Trustee in its individual
capacity, the property and funds physically held by such Indenture Trustee as
such and any action taken by it that materially affects such Notes and that has
not been previously reported.
The Indenture Trustee. The Indenture Trustee for a series of Notes will
be specified in the related Prospectus Supplement. The Indenture Trustee for any
series may resign at any time, in which event the Depositor will be obligated to
appoint a successor trustee for such series. The Depositor may also remove any
such Indenture Trustee if such Indenture Trustee ceases to be eligible to
continue as such under the related Indenture or if such Indenture Trustee
becomes insolvent. In such circumstances the Depositor will be
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obligated to appoint a successor trustee for the applicable series of Notes. Any
resignation or removal of the Indenture Trustee and appointment of a successor
trustee for any series of Notes does not become effective until acceptance of
the appointment by the successor trustee for such series.
The bank or trust company serving as Indenture Trustee may have a
banking relationship with the Depositor or any of its affiliates or the Master
Servicer or any of its affiliates.
DESCRIPTION OF CREDIT SUPPORT
General
For any series of Securities Credit Support may be provided with respect
to one or more classes thereof or the related Assets. Credit Support may be in
the form of the subordination of one or more classes of Securities, letters of
credit, insurance policies, guarantees, the establishment of one or more reserve
funds or another method of Credit Support described in the related Prospectus
Supplement, or any combination of the foregoing. If so provided in the related
Prospectus Supplement, any form of Credit Support may be structured so as to be
drawn upon by more than one series to the extent described therein.
Unless otherwise provided in the related Prospectus Supplement for a
series of Securities Credit Support will not provide protection against all
risks of loss and will not guarantee repayment of the entire Security Balance of
the Securities and interest thereon. If losses or shortfalls occur that exceed
the amount covered by Credit Support or that are not covered by Credit Support,
Securityholders will bear their allocable share of deficiencies. Moreover, if a
form of Credit Support covers more than one series of Securities (each, a
"Covered Trust"), holders of Securities evidencing interests in any of such
Covered Trusts will be subject to the risk that such Credit Support will be
exhausted by the claims of other Covered Trusts prior to such Covered Trust
receiving any of its intended share of such coverage.
If Credit Support is provided with respect to one or more classes of
Securities of a series, or the related Assets, the related Prospectus Supplement
will include a description of (a) the nature and amount of coverage under such
Credit Support, (b) any conditions to payment thereunder not otherwise described
herein, (c) the conditions (if any) under which the amount of coverage under
such Credit Support may be reduced and under which such Credit Support may be
terminated or replaced and (d) the material provisions relating to such Credit
Support. Additionally, the related Prospectus Supplement will set forth certain
information with respect to the obligor under any instrument of Credit Support,
including (i) a brief description of its principal business activities, (ii) its
principal place of business, place of incorporation and the jurisdiction under
which it is chartered or licensed to do business, (iii) if applicable, the
identity of regulatory agencies that exercise primary jurisdiction over the
conduct of its business and (iv) its total assets, and its stockholders' or
policyholders' surplus, if applicable, as of the date specified in the
Prospectus Supplement. See "Risk Factors -- Credit Support Limitations."
Subordinate Certificates
If so specified in the related Prospectus Supplement, one or more
classes of Securities 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 of principal and interest from
the Collection Account on any Distribution Date will be subordinated to such
rights of the holders of Senior Securities. 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 amount of
subordination of a class or classes of Subordinate Securities in a series, the
circumstances in which such subordination will be applicable and the manner, if
any, in which the amount of subordination will be effected.
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Cross-Support Provisions
If the Assets for a series are divided into separate groups, each
supporting a separate class or classes of Securities of a series, Credit Support
may be provided by cross-support provisions requiring that distributions be made
on Senior Securities evidencing interests in one group of Mortgage Assets prior
to distributions on Subordinate Securities evidencing interests in a different
group of Mortgage Assets 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.
Insurance or Guarantees with Respect to the Whole Loans
If so provided in the Prospectus Supplement for a series of Securities,
the Whole Loans or Contracts in the related Trust Fund will be covered for
various default risks by insurance policies or guarantees.
Letter of Credit
If so provided in the Prospectus Supplement for a series of Securities,
deficiencies in amounts otherwise payable on such Securities or certain classes
thereof will be covered by one or more letters of credit, issued by a bank or
financial institution specified in such Prospectus Supplement (the "L/C Bank").
Under a letter of credit, the L/C Bank will be obligated to honor draws
thereunder in an aggregate fixed dollar amount, net of unreimbursed payments
thereunder, generally equal to a percentage specified in the related Prospectus
Supplement of the aggregate principal balance of the Assets on the related
Cut-off Date or of the initial aggregate Security Balance of one or more classes
of Securities. If so specified in the related Prospectus Supplement, the letter
of credit may permit draws in the event of only certain types of losses and
shortfalls. 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
obligations of the L/C Bank under the letter of credit for each series of
Securities will expire at the earlier of the date specified in the related
Prospectus Supplement or the termination of the Trust Fund.
Insurance Policies and Surety Bonds
If so provided in the Prospectus Supplement for a series of Securities,
deficiencies in amounts otherwise payable on such Securities or certain classes
thereof will be covered by insurance policies and/or surety bonds provided by
one or more insurance companies or sureties. Such instruments may cover, with
respect to one or more classes of Securities of the related series, timely
distributions of interest and/or full distributions of principal on the basis of
a schedule of principal distributions set forth in or determined in the manner
specified in the related Prospectus Supplement.
Reserve Funds
If so provided in the Prospectus Supplement for a series of Securities,
deficiencies in amounts otherwise payable on such Securities or certain classes
thereof will be covered by one or more reserve funds in which cash, a letter of
credit, Permitted Investments, a demand note or a combination thereof will be
deposited, in the amounts so specified in such Prospectus Supplement. The
reserve funds for a series may also be funded over time by depositing therein a
specified amount of the distributions received on the related Assets as
specified in the related Prospectus Supplement.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. A
reserve fund may be provided to increase the likelihood of timely distributions
of principal of and interest on the Certificates. If so specified in the related
Prospectus Supplement, reserve funds may be established to provide limited
protection against only certain types of losses and shortfalls. Following each
Distribution Date amounts in a reserve fund in excess of any amount required to
be maintained therein may be released from the reserve fund under the conditions
and to the extent specified in the related Prospectus Supplement and will not be
available for further application to the Securities.
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Moneys deposited in any Reserve Funds will be invested in Permitted
Investments. If so specified in the related Prospectus Supplement, any
reinvestment income or other gain from such investments will be credited to the
related Reserve Fund for such series, and any loss resulting from such
investments will be charged to such Reserve Fund. However, such income may be
payable to any related Master Servicer or another service provider as additional
compensation. If so provided in the related Prospectus Supplement, the Reserve
Fund, if any, for a series will not be a part of the Trust Fund.
Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such Reserve
Fund, the balance required to be maintained in the Reserve Fund, the manner in
which such required balance will decrease over time, the manner of funding such
Reserve Fund, the purposes for which funds in the Reserve Fund may be applied to
make distributions to Securityholders and use of investment earnings from the
Reserve Fund, if any.
Credit Support with Respect to MBS
If so provided in the Prospectus Supplement for a series of Securities,
the MBS in the related Trust Fund and/or the Mortgage Loans underlying such MBS
may be covered by one or more of the types of Credit Support described herein.
The related Prospectus Supplement will specify as to each such form of Credit
Support the information indicated above with respect thereto, to the extent such
information is material and available.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains summaries, which are general in
nature, of certain legal aspects of loans secured by single-family or
multi-family residential properties. Because such legal aspects are governed
primarily 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 security
for the Mortgage Loans is situated. The summaries are qualified in their
entirety by reference to the applicable federal and state laws governing the
Mortgage Loans. See "Description of the Trust Funds -- Assets."
General
All of the Mortgage Loans are loans evidenced by a note or bond and
secured by instruments granting a security interest in real property which may
be mortgages, deeds of trust, security deeds or deeds to secure debt, depending
upon the prevailing practice and law in the state in which the Mortgaged
Property is located. Mortgages, deeds of trust and deeds to secure debt are
herein collectively referred to as "mortgages." Any of the foregoing types of
mortgages will create a lien upon, or grant a title interest in, the subject
property, the priority of which will depend on the terms of the particular
security instrument, as well as separate, recorded, contractual arrangements
with others holding interests in the mortgaged property, the knowledge of the
parties to such instrument as well as the order of recordation of the instrument
in the appropriate public recording office. However, recording does not
generally establish priority over governmental claims for real estate taxes and
assessments and other charges imposed under governmental police powers.
Types of Mortgage Instruments
A mortgage either creates a lien against or constitutes a conveyance of
real property between two parties -- 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
mortgagor), a trustee to whom the mortgaged property is conveyed, and a
beneficiary (the lender) for whose benefit the conveyance is made. As used in
this Prospectus, unless the context otherwise requires, "mortgagor" includes the
trustor under a deed of trust and a grantor under a security deed or a deed to
secure debt. Under
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a deed of trust, the mortgagor grants the property, irrevocably until the debt
is paid, in trust, generally with a power of sale as security for the
indebtedness evidenced by the related note. A deed to secure debt typically has
two parties. By executing a deed to secure debt, the grantor conveys title to,
as opposed to merely creating a lien upon, the subject property to the grantee
until such time as the underlying debt is repaid, generally with a power of sale
as security for the indebtedness evidenced by the related mortgage note. In case
the mortgagor under a mortgage is a land trust, there would be an additional
party because legal title to the property is held by a land trustee under a land
trust agreement for the benefit of the mortgagor. At origination of a mortgage
loan involving a land trust, the mortgagor 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 mortgage,
the law of the state in which the real property is located, certain federal laws
(including, without limitation, the Soldiers' and Sailors' Civil Relief Act of
1940) and, in some cases, in deed of trust transactions, the directions of the
beneficiary.
The Mortgages that encumber Multifamily Properties may contain an
assignment of rents and leases, pursuant to which the Mortgagor assigns to the
lender the Mortgagor's right, title and interest as landlord under each lease
and the income derived therefrom, while retaining a revocable license to collect
the rents for so long as there is no default. If the Mortgagor 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.
Interest in Real Property
The real property covered by a mortgage, deed of trust, security deed or
deed to secure debt is most often the fee estate in land and improvements.
However, such an instrument may encumber other interests in real property such
as a tenant's interest in a lease of land or improvements, or both, and the
leasehold estate created by such lease. An instrument covering an interest in
real property other than the fee estate requires special provisions in the
instrument creating such interest or in the mortgage, deed of trust, security
deed or deed to secure debt, to protect the mortgagee against termination of
such interest before the mortgage, deed of trust, security deed or deed to
secure debt is paid. The Depositor or the Originator will make certain
representations and warranties in the Agreement with respect to any Mortgage
Loans that are secured by an interest in a leasehold estate. Such representation
and warranties, if applicable, will be set forth in the Prospectus Supplement.
Cooperative Loans
If specified in the Prospectus Supplement relating to a series of
Offered Securities, the Mortgage Loans may also consist of cooperative apartment
loans ("Cooperative Loans") secured by security interests in shares issued by a
cooperative housing corporation (a "Cooperative") and in the related proprietary
leases or occupancy agreements granting exclusive rights to occupy specific
dwelling units in the Cooperatives' buildings. The security agreement will
create a lien upon, or grant a title interest in, the property which it covers,
the priority of which will depend on the terms of the particular security
agreement as well as the order of recordation of the agreement in the
appropriate recording office. Such a lien or title interest is not prior to the
lien for real estate taxes and assessments and other charges imposed under
governmental police powers.
Each cooperative owns in fee or has a leasehold interest in all the real
property and owns in fee or leases the building and all separate dwelling units
therein. The cooperative is directly responsible for property management and, in
most cases, payment of real estate taxes, other governmental impositions and
hazard and liability insurance. If there is a blanket mortgage or mortgages on
the cooperative apartment building or underlying land, as is generally the case,
or an underlying lease of the land, as is the case in some instances, the
cooperative, as property mortgagor, or lessee, as the case may be, is also
responsible for meeting these mortgage or rental obligations. A blanket mortgage
is ordinarily incurred by the cooperative in connection with either the
construction or purchase of the cooperative's apartment building or obtaining of
capital by the cooperative. The interest of the occupant under proprietary
leases or occupancy agreements as to which that cooperative is the landlord are
generally subordinate to the interest of the holder of a blanket mortgage and
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to the interest of the holder of a land lease. If the cooperative is unable to
meet the payment obligations (i) arising under a blanket mortgage, the mortgagee
holding a blanket mortgage could foreclose on that mortgage and terminate all
subordinate proprietary leases and occupancy agreements or (ii) arising under
its land lease, the holder of the landlord's interest under the land lease could
terminate it and all subordinate proprietary leases and occupancy agreements.
Also, a blanket mortgage on a cooperative may provide financing in the form of a
mortgage that does not fully amortize, with a significant portion of principal
being due in one final payment at maturity. The inability of the cooperative to
refinance a mortgage and its consequent inability to make such final payment
could lead to foreclosure by the mortgagee. Similarly, a land lease has an
expiration date and the inability of the cooperative to extend its term or, in
the alternative, to purchase the land could lead to termination of the
cooperatives's interest in the property and termination of all proprietary
leases and occupancy agreement. In either event, a foreclosure by the holder of
a blanket mortgage or the termination of the underlying lease could eliminate or
significantly diminish the value of any collateral held by the lender that
financed the purchase by an individual tenant stockholder of cooperative shares
or, in the case of the Mortgage Loans, the collateral securing the Cooperative
Loans.
The cooperative is owned by tenant-stockholders who, through ownership
of stock or shares in the corporation, receive proprietary lease or occupancy
agreements which confer exclusive rights to occupy specific units. Generally, a
tenant-stockholder of a cooperative must make a monthly payment to the
cooperative representing such tenant-stockholder's pro rata share of the
cooperative's payments for its blanket mortgage, real property taxes,
maintenance expenses and other capital or ordinary expenses. An ownership
interest in a cooperative and accompanying occupancy rights are financed through
a cooperative share loan evidenced by a promissory note and secured by an
assignment of and a security interest in the occupancy agreement or proprietary
lease and a security interest in the related cooperative shares. The lender
generally takes possession of the share certificate and a counterpart of the
proprietary lease or occupancy agreement and a financing statement covering the
proprietary lease or occupancy agreement and the cooperative shares is filed in
the appropriate state and local offices to perfect the lender's interest in its
collateral. Subject to the limitations discussed below, upon default of the
tenant-stockholder, the lender may sue for judgment on the promissory note,
dispose of the collateral at a public or private sale or otherwise proceed
against the collateral or tenant-stockholder as an individual as provided in the
security agreement covering the assignment of the proprietary lease or occupancy
agreement and the pledge of cooperative shares. See "Foreclosure -- Cooperative
Loans" below.
Foreclosure
General
Foreclosure is a legal procedure that allows the mortgagee to recover
its mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the mortgagor defaults in payment or performance of its obligations
under the note or mortgage, the mortgagee has the right to institute foreclosure
proceedings to sell the mortgaged property at public auction to satisfy the
indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage
vary from state to state. Two primary methods of foreclosing a mortgage are
judicial foreclosure and non-judicial foreclosure pursuant to a power of sale
granted in the mortgage instrument. There are several other foreclosure
procedures available in some states that are either infrequently used or
available only in certain limited circumstances, such as strict foreclosure.
Judicial Foreclosure
A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. 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 defendants. When the lender's right to
foreclose is contested, the legal proceedings can be time-consuming. Upon
successful completion of a judicial foreclosure proceeding, the court generally
issues a judgment of foreclosure and appoints a referee or other officer to
conduct a public sale of the mortgaged
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property, the proceeds of which are used to satisfy the judgment. Such sales are
made in accordance with procedures that vary from state to state.
Equitable Limitations on Enforceability of Certain Provisions
United States courts have traditionally imposed general equitable
principles to limit the remedies available to a mortgagee in connection with
foreclosure. These equitable principles are generally designed to relieve the
mortgagor from the legal effect of mortgage defaults, to the extent that such
effect is perceived as harsh or unfair. Relying on such principles, a court may
alter the specific terms of a loan to the extent it considers necessary to
prevent or remedy an injustice, undue oppression or overreaching, or may require
the lender to undertake affirmative and expensive actions to determine the cause
of the mortgagor's default and the likelihood that the mortgagor will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's and have required that lenders reinstate loans or recast payment
schedules in order to accommodate mortgagors who are suffering from a temporary
financial disability. In other cases, courts have limited the right of the
lender to foreclose if the default under the mortgage is not monetary, e.g., the
mortgagor failed to maintain the mortgaged property adequately or the mortgagor
executed a junior mortgage on the mortgaged property. The exercise by the court
of its equity powers will depend on the individual circumstances of each case
presented to it. Finally, some courts have been faced with the issue of whether
federal or state constitutional provisions reflecting due process concerns for
adequate notice require that a mortgagor receive notice in addition to
statutorily-prescribed minimum notice. For the most part, these cases have
upheld the reasonableness of the notice provisions or have found that a public
sale under a mortgage providing for a power of sale does not involve sufficient
state action to afford constitutional protections to the mortgagor.
Non-Judicial Foreclosure/Power of Sale
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale pursuant to the power of sale granted in the deed of
trust. A power of sale is typically granted in a deed of trust. It may also be
contained in any other type of mortgage instrument. A power of sale allows a
non-judicial public sale to be conducted generally following a request from the
beneficiary/lender to the trustee to sell the property upon any default by the
mortgagor under the terms of the mortgage note or the mortgage instrument and
after notice of sale is given in accordance with the terms of the mortgage
instrument, as well as applicable state law. In some states, prior to such sale,
the trustee under a deed of trust must record a notice of default and notice of
sale and send a copy to the mortgagor and to any other party who has recorded a
request for a copy of a notice of default and notice of sale. In addition, in
some states the trustee must provide notice to any other party having an
interest of record in the real property, including junior lienholders. A notice
of sale must be posted in a public place and, in most states, published for a
specified period of time in one or more newspapers. The mortgagor or junior
lienholder may then have the right, during a reinstatement period required in
some states, to cure the default by paying the entire actual amount in arrears
(without acceleration) plus the expenses incurred in enforcing the obligation.
In other states, the mortgagor or the junior lienholder is not provided a period
to reinstate the loan, but has only the right to pay off the entire debt to
prevent the foreclosure sale. Generally, the procedure for public sale, the
parties entitled to notice, the method of giving notice and the applicable time
periods are governed by state law and vary among the states. Foreclosure of a
deed to secure debt is also generally accomplished by a non-judicial sale
similar to that required by a deed of trust, except that the lender or its
agent, rather than a trustee, is typically empowered to perform the sale in
accordance with the terms of the deed to secure debt and applicable law.
Public Sale
A third party may be unwilling to purchase a mortgaged property at a
public sale because of the difficulty in determining the value of such property
at the time of sale, due to, among other things, redemption rights which may
exist and the possibility of physical deterioration of the property during the
foreclosure proceedings. For these reasons, it is common for the lender to
purchase the mortgaged property for an amount equal to or less than the
underlying debt and accrued and unpaid interest plus the expenses of
foreclosure.
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Generally, state law controls the amount of foreclosure costs and expenses which
may be recovered by a lender. Thereafter, subject to the mortgagor's right in
some states to remain in possession during a redemption period, if applicable,
the lender will become the owner of the property and have both the benefits and
burdens of ownership of the mortgaged property. For example, the lender will
become obligated to pay taxes, obtain casualty insurance and to make 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. Moreover, a
lender commonly incurs substantial legal fees and court costs in acquiring a
mortgaged property through contested foreclosure and/or bankruptcy proceedings.
Generally, state law controls the amount of foreclosure expenses and costs,
including attorneys' fees, that may be recovered by a lender.
A junior mortgagee may not foreclose on the property securing the junior
mortgage unless it forecloses subject to senior mortgages and any other prior
liens, in which case it may be obliged to make payments on the senior mortgages
to avoid their foreclosure. In addition, in the event that the foreclosure of a
junior mortgage triggers the enforcement of a "due-on-sale" clause contained in
a senior mortgage, the junior mortgagee may be required to pay the full amount
of the senior mortgage to avoid its foreclosure. Accordingly, with respect to
those Mortgage Loans, if any, that are junior mortgage loans, if the lender
purchases the property the lender's title will be subject to all senior
mortgages, prior liens 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 under which the sale was conducted.
Any proceeds remaining after satisfaction of senior mortgage debt are generally
payable to the holders of junior mortgages and other liens and claims in order
of their priority, whether or not the mortgagor is in default. Any additional
proceeds are generally payable to the mortgagor. The payment of the proceeds to
the holders of junior mortgages may occur in the foreclosure action of the
senior mortgage or a subsequent ancillary proceeding or may require the
institution of separate legal proceedings by such holders.
Rights of Redemption
The purposes of a foreclosure action are to enable the mortgagee to
realize upon its security and to bar the mortgagor, and all persons who have an
interest in the property which is subordinate to the mortgage being foreclosed,
from exercise of their "equity of redemption." The doctrine of equity of
redemption provides that, until the property covered by a mortgage has been sold
in accordance with a properly conducted foreclosure and foreclosure sale, those
having an interest which is subordinate to that of the foreclosing mortgagee
have an equity of redemption and may redeem the property by paying the entire
debt with interest. In addition, in some states, when a foreclosure action has
been commenced, the redeeming party must pay certain costs of such action. 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 cut off and
terminated.
The equity of redemption is a common-law (non-statutory) right which
exists prior to completion of the foreclosure, is not waivable by the mortgagor,
must be exercised prior to foreclosure sale and should be distinguished from the
post-sale statutory rights of redemption. In some states, after sale pursuant to
a deed of trust or foreclosure of a mortgage, the mortgagor and foreclosed
junior lienors are given a statutory period in which to redeem the property from
the foreclosure sale. In some states, statutory redemption may occur only upon
payment of the foreclosure sale price. In other states, redemption may be
authorized if the former mortgagor 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. The exercise of a right of redemption
would defeat the title of any purchaser from a foreclosure sale or sale under a
deed of trust. 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.
Under the REMIC Provisions currently in effect, property acquired by
foreclosure generally must not be held for more than two years. Unless otherwise
provided in the related Prospectus Supplement, with respect
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to a series of Securities for which an election is made to qualify the Trust
Fund or a part thereof as a REMIC, the Agreement will permit foreclosed property
to be held for more than two years if the Internal Revenue Service grants an
extension of time within which to sell such property or independent counsel
renders an opinion to the effect that holding such property for such additional
period is permissible under the REMIC Provisions.
Cooperative Loans
The cooperative shares owned by the tenant-stockholder and pledged to
the lender are, in almost all cases, subject to restrictions on transfer as set
forth in the Cooperative's Certificate of Incorporation and By-laws, as well as
the proprietary lease or occupancy agreement, and may be cancelled by the
cooperative for failure by the tenant-stockholder to pay rent or other
obligations or charges owed by such tenant-stockholder, including mechanics'
liens against the cooperative apartment building incurred by such
tenant-stockholder. The proprietary lease or occupancy agreement generally
permit the Cooperative to terminate such lease or agreement in the event an
obligor fails to make payments or defaults in the performance of covenants
required thereunder. Typically, the lender and the Cooperative enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder under the
proprietary lease or occupancy agreement will usually constitute a default under
the security agreement between the lender and the tenant-stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the Cooperative will take no action to terminate such lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or occupancy agreement is terminated, the Cooperative will recognize the
lender's lien against proceeds from the sale of the Cooperative apartment,
subject, however, to the Cooperative's right to sums due under such proprietary
lease or occupancy agreement. The total amount owed to the Cooperative by the
tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the value of the collateral below the outstanding
principal balance of the Cooperative Loan and accrued and unpaid interest
thereon.
Recognition agreements also provide that in the event of a foreclosure
on a Cooperative Loan, the lender must obtain the approval or consent of the
Cooperative as required by the proprietary lease before transferring the
Cooperative shares or assigning the proprietary lease. Generally, the lender is
not limited in any rights it may have to dispossess the tenant-stockholders.
In some states, foreclosure on the Cooperative shares is accomplished by
a sale in accordance with the provisions of Article 9 of the UCC and the
security agreement relating to those shares. Article 9 of the UCC requires that
a sale be conducted in a "commercially reasonable" manner. Whether a foreclosure
sale has been conducted in a "commercially reasonable" manner will depend on the
facts in each case. In determining commercial reasonableness, a court will look
to the notice given the debtor and the method, manner, time, place and terms of
the foreclosure. Generally, a sale conducted according to the usual practice of
banks selling similar collateral will be considered reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be
applied first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to reimbursement
is subject to the right of the Cooperatives to receive sums due under the
proprietary lease or occupancy agreement. If there are proceeds remaining, the
lender must account to the tenant-stockholder for the surplus. Conversely, if a
portion of the indebtedness remains unpaid, the tenant-stockholder is generally
responsible for the deficiency.
In the case of foreclosure on a building which was converted from a
rental building to a building owned by a Cooperative under a non-eviction plan,
some states require that a purchaser at a foreclosure sale take the property
subject to rent control and rent stabilization laws which apply to certain
tenants who elected to remain in a building so converted.
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Junior Mortgages
Some of the Mortgage Loans may be secured by junior mortgages or deeds
of trust, which are subordinate to first or other senior mortgages or deeds of
trust held by other lenders. The rights of the Trust Fund as the holder of a
junior deed of trust or a junior mortgage are subordinate in lien and in payment
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" herein.
Furthermore, because the terms of the junior mortgage or deed of trust
are subordinate to the terms of the first mortgage or deed of trust, in the
event of a conflict between the terms of the first mortgage or deed of trust and
the junior mortgage or deed of trust, the terms of the first mortgage or deed of
trust will generally govern. 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 first mortgagee expends such sums, such sums will
generally have priority over all sums due under the junior mortgage.
Anti-Deficiency Legislation and Other Limitations on Lenders
Statutes in some states limit the right of a beneficiary under a deed of
trust or a mortgagee under a mortgage to obtain a deficiency judgment against
the mortgagor following foreclosure or sale under a deed of trust. A deficiency
judgment would be a personal judgment against the former mortgagor equal to the
difference between the net amount realized upon the public sale of the real
property and the amount due to the lender. Some states require the lender to
exhaust the security afforded under a mortgage by foreclosure in an attempt to
satisfy the full debt before bringing a personal action against the mortgagor.
In certain other states, the lender has the option of bringing a personal action
against the mortgagor 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. In some cases, a lender
will be precluded from exercising any additional rights under the note or
mortgage if it has taken any prior enforcement action. 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 mortgagor. Finally, other statutory
provisions limit any deficiency judgment against the former mortgagor following
a judicial sale to the excess of the outstanding debt over the fair market value
of the property at the time of the public sale. The purpose of these statutes is
generally to prevent a lender from obtaining a large deficiency judgment against
the former mortgagor 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, 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
arrearages 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 arrearages 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
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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 11 or 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, 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
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.
Generally, Article 9 of the UCC governs foreclosure on Cooperative
shares and the related proprietary lease or occupancy agreement. Some courts
have interpreted section 9-504 of the UCC to prohibit a deficiency award unless
the creditor establishes that the sale of the collateral (which, in the case of
a Cooperative Loan, would be the shares of the Cooperative and the related
proprietary lease or occupancy agreement) was conducted in a commercially
reasonable manner.
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 that
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 related series of Certificates might
realize a loss if such costs were required to be paid by the Trust Fund.
Due-on-Sale Clauses
Unless the related Prospectus Supplement indicates otherwise, the
Mortgage Loans will contain due-on-sale clauses. These clauses generally provide
that the lender may accelerate the maturity of the loan if the mortgagor sells,
transfers or conveys the related Mortgaged Property. The enforceability of
due-on-sale 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, with respect to certain loans the Garn-St Germain Depository
Institutions Act of 1982 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. Due-on-sale clauses contained in mortgage loans originated by
federal savings and loan associations of federal savings banks are fully
enforceable pursuant to regulations of the United States
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Federal Home Loan Bank Board, as succeeded by the Office of Thrift Supervision,
which preempt state law restrictions on the enforcement of such clauses.
Similarly, "due-on-sale" clauses in mortgage loans made by national banks and
federal credit unions are now fully enforceable pursuant to preemptive
regulations of the Comptroller of the Currency and the National Credit Union
Administration, respectively.
The Garn-St Germain Act also sets forth nine specific instances in which
a mortgage lender covered by the act (including federal savings and loan
associations and federal savings banks) 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. The inability to enforce a "due-on-sale" clause may result
in a mortgage that bears an interest rate below the current market rate being
assumed by a new home buyer rather than being paid off, which may affect the
average life of the Mortgage Loans and the number of Mortgage Loans which may
extend to maturity.
Prepayment Charges
Under certain state laws, prepayment charges may not be imposed after a
certain period of time following the origination of mortgage loans secured by
liens encumbering owner-occupied residential properties, if such loans are paid
prior to maturity. With respect to Mortgaged Properties that are owner-occupied,
it is anticipated that prepayment charges may not be imposed with respect to
many of the Mortgage Loans. The absence of such a restraint on prepayment,
particularly with respect to fixed rate Mortgage Loans having higher Mortgage
Rates, may increase the likelihood of refinancing or other early retirement of
such loans.
Subordinate Financing
Where a 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 any 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
proceedings by the senior lender.
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 that 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 and/or to limit
discount points or other charges.
The Depositor believes that a court interpreting Title V would hold that
residential first mortgage loans that are originated on or after January 1, 1980
are subject to federal preemption. Therefore, in a state
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that has not taken the requisite action to reject application of Title V or to
adopt a provision limiting discount points or other charges prior to origination
of such mortgage loans, any such limitation under such state's usury law would
not apply to such mortgage loans.
In any state in which application of Title V has been expressly rejected
or a provision limiting discount points or other charges is adopted, no mortgage
loan originated after the date of such state action will be eligible for
inclusion in a Trust Fund unless (i) such mortgage loan provides for such
interest rate, discount points and charges as are permitted in such state or
(ii) such mortgage loan provides that the terms thereof shall be construed in
accordance with the laws of another state under which such interest rate,
discount points and charges would not be usurious and the mortgagor's counsel
has rendered an opinion that such choice of law provision would be given effect.
Statutes differ in their provisions as to the consequences of a usurious
loan. One group of statutes requires the lender to forfeit the interest due
above the applicable limit or impose a specified penalty. Under this statutory
scheme, the mortgagor may cancel the recorded mortgage or deed of trust upon
paying its debt with lawful interest, and the lender may foreclose, but only for
the debt plus lawful interest. A second group of statutes is more severe. A
violation of this type of usury law results in the invalidation of the
transaction, thereby permitting the mortgagor to cancel the recorded mortgage or
deed of trust without any payment or prohibiting the lender from foreclosing.
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 subject 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 to October 15, 1985, a law or constitutional provision
expressly rejecting the applicability of such provisions. Certain states have
taken such action.
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
mortgagors 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 any servicer to collect full amounts of interest on certain of the
Mortgage Loans. Any shortfalls in interest collections resulting from the
application of the Relief Act would result in a
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reduction of the amounts distributable to the holders of the related series of
Certificates, any form of Credit Support provided in connection with such
Certificates. In addition, the Relief Act imposes limitations that would impair
the ability of the servicer to foreclose on an affected Mortgage Loan 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 such
a Mortgage Loan goes into default, there may be delays and losses occasioned
thereby.
Forfeitures in Drug and RICO Proceedings
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the "Crime
Control Act"), the government may seize the property even before conviction. The
government must publish notice of the forfeiture proceeding and may give notice
to all parties "known to have an alleged interest in the property," including
the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The following discussion contains summaries, which are general in
nature, of certain legal matters relating to the Contracts. Because such legal
aspects are governed primarily 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 security for the Contracts is situated. The summaries are qualified in their
entirety by reference to the appropriate laws of the states in which Contracts
may be originated.
General
As a result of the assignment of the Contracts to the Trustee, the
Trustee will succeed collectively to all of the rights (including the right to
receive payment on the Contracts) of the obligee under the Contracts. Each
Contract evidences both (a) the obligation of the obligor to repay the loan
evidenced thereby, and (b) the grant of a security interest in the Manufactured
Home to secure repayment of such loan. Certain aspects of both features of the
Contracts are described more fully below.
The Contracts generally are "chattel paper" as defined in the Uniform
Commercial Code (the "UCC") in effect in the states in which the Manufactured
Homes initially were registered. Pursuant to the UCC, the sale of chattel paper
is treated in a manner similar to perfection of a security interest in chattel
paper. Under the Agreement, the Master Servicer will transfer physical
possession of the Contracts to the Trustee or its custodian or may retain
possession of the Contracts as custodian for the Trustee. In addition, the
Master Servicer will make an appropriate filing of a UCC-1 financing statement
in the appropriate states to give notice of the Trustee's ownership of the
Contracts. The Contracts will not be stamped or marked otherwise to reflect
their assignment from the Company to the Trustee. Therefore, if, through
negligence, fraud or otherwise, a subsequent purchaser were able to take
physical possession of the Contracts without notice of such assignment, the
Trustee's interest in Contracts could be defeated.
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Security Interests in the Manufactured Homes
The Manufactured Homes securing the Contracts may be located in all 50
states. Security interests in manufactured homes may be perfected either by
notation of the secured party's lien on the certificate of title or by delivery
of the required documents and payment of a fee to the state motor vehicle
authority, depending on state law. In some nontitle states, perfection pursuant
to the provisions of the UCC is required. The Originator may effect such
notation or delivery of the required documents and fees, and obtain possession
of the certificate of title, as appropriate under the laws of the state in which
any manufactured home securing a manufactured housing conditional sales contract
is registered. In the event the Originator fails, due to clerical error, 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 Originator 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 to move them, courts in many states have held that manufactured homes,
under certain circumstances, may 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. Substantially all of the
Contracts contain provisions prohibiting the borrower from permanently attaching
the Manufactured Home to its site. So long as the borrower 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 attached to its site,
other parties could obtain an interest in the Manufactured Home which is prior
to the security interest originally retained by the Originator and transferred
to the Depositor. With respect to a Series of Certificates and if so described
in the related Prospectus Supplement, the Master Servicer may be required to
perfect a security interest in the Manufactured Home under applicable real
estate laws. The Warranting Party will represent that as of the date of the sale
to the Depositor it has obtained a perfected first priority security interest by
proper notation or delivery of the required documents and fees with respect to
substantially all of the Manufactured Homes securing the Contracts.
The Depositor will cause the security interests in the Manufactured
Homes to be assigned to the Trustee on behalf of the Certificateholders. Neither
the Depositor nor the Trustee will amend the certificates of title (or file
UCC-3 statements) to identify the Trustee as the new secured party, and neither
the Depositor nor the Master Servicer will deliver the certificates of title to
the Trustee or note thereon the interest of the Trustee. Accordingly, the
Originator (or other originator of the Contracts) will continue to be named as
the secured party on the certificates of title relating to the Manufactured
Homes. In some 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 Master Servicer's rights as the
secured party. However, in some states, in the absence of an amendment to the
certificate of title (or the filing of a UCC-3 statement), such assignment of
the security interest in the Manufactured Home may not be held effective or such
security interests may not be perfected and in the absence of such notation or
delivery to the Trustee, the assignment of the security interest in the
Manufactured Home may not be effective against creditors of the Originator (or
such other originator of the Contracts) or a trustee in bankruptcy of the
Originator (or such other originator).
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 Originator
(or other originator of the Contracts) on the certificate of title or delivery
of the required documents and fees will be sufficient to protect the
Certificateholders 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 security interest
assigned to the Trustee is not perfected, 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
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Trustee as the new secured party on the certificate of title that, through fraud
or negligence, the security interest of the 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 only if and after the owner re-registers the Manufactured Home in
such state. If the owner were to relocate a Manufactured Home to another state
and not re-register the Manufactured Home in such state, and if steps are not
taken to re-perfect the Trustee's 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 Master Servicer must surrender possession if
it holds the certificate of title to such Manufactured Home or, in the case of
Manufactured Homes registered in states which provide for notation of lien, the
Originator (or other originator) would receive notice of surrender if the
security interest in the Manufactured Home is noted on the certificate of title.
Accordingly, the Trustee would have the opportunity to re-perfect its security
interest in the Manufactured Home in the state of relocation. In states which do
not require a certificate of title for registration of a manufactured home,
re-registration could defeat perfection. In the ordinary course of servicing the
manufactured housing contracts, the Master Servicer takes steps to effect such
re-perfection upon receipt of notice of re-registration or information from the
obligor as to relocation. Similarly, when an obligor under a manufactured
housing contract sells a manufactured home, the Master Servicer must surrender
possession of the certificate of title or, if it is noted as lienholder on the
certificate of title, 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 the Agreement, the Master Servicer is 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 and liens for personal property taxes take priority even over
a perfected security interest. The Warranting Party will represent in the
Agreement that it has no knowledge of any such liens with respect to any
Manufactured Home securing payment on any Contract. However, such liens could
arise at any time during the term of a Contract. No notice will be given to the
Trustee or Certificateholders in the event such a lien arises.
Enforcement of Security Interests in Manufactured Homes
The Master Servicer on behalf of the Trustee, to the extent required by
the related Agreement, may take action to enforce the Trustee's security
interest with respect to Contracts in default by repossession and resale of the
Manufactured Homes securing such Defaulted Contracts. So long as the
Manufactured Home has not become subject to the real estate law, a creditor can
repossess a Manufactured Home securing a Contract by voluntary surrender, by
"self-help" repossession that is "peaceful" (i.e., without breach of the peace)
or, in the absence of voluntary surrender and the ability to repossess without
breach of the peace, by judicial process. The holder of a Contract must give the
debtor a number of days' notice, which varies from 10 to 30 days depending on
the state, prior to commencement of any repossession. The UCC and consumer
protection laws in most states place restrictions on repossession sales,
including requiring prior notice to the debtor and commercial reasonableness in
effecting such a sale. The law in most states also requires that the debtor be
given notice of any sale prior to resale of the unit so that the debtor may
redeem at or before such resale. In the event of such repossession and resale of
a Manufactured Home, the Trustee would be entitled to be paid out of the sale
proceeds before such proceeds could be applied to the payment of the claims of
unsecured creditors or the holders of subsequently perfected security interests
or, thereafter, to the debtor.
Under the laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from a debtor for any deficiency on repossession
and resale of the manufactured home securing such debtor's loan. However, some
states impose prohibitions or limitations on deficiency judgments, and in many
cases the defaulting borrower would have no assets with which to pay a judgment.
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Certain other statutory provisions, including federal and state
bankruptcy and insolvency laws and general equitable principles, may limit or
delay the ability of a lender to repossess and resell collateral or enforce a
deficiency judgment.
Under the terms of the federal Soldiers' and Sailors' Civil Relief Act
of 1940, as amended (the "Relief Act"), an Obligor who enters military service
after the origination of such Obligor's Contract (including an Obligor who is a
member of the National Guard or is in reserve status at the time of the
origination of the Contract and is later called to active duty) may not be
charged interest above an annual rate of 6% during the period of such Obligor's
active duty status, unless a court orders otherwise upon application of the
lender. It is possible that such action could have an effect, for an
indeterminate period of time, on the ability of the Master Servicer to collect
full amounts of interest on certain of the Contracts. Any shortfall in interest
collections resulting from the application of the Relief Act, to the extent not
covered by the subordination of a Class of Subordinated Certificates, could
result in losses to the holders of a Series of Certificates. In addition, the
Relief Act imposes limitations which would impair the ability of the Master
Servicer to foreclose on an affected Contract during the Obligor's period of
active duty status. Thus, in the event that such a Contract goes into default,
there may be delays and losses occasioned by the inability to realize upon the
Manufactured Home in a timely fashion.
Consumer Protection Laws
The so-called "Holder-in-Due-Course" rule of the Federal Trade
Commission is intended to defeat the ability of the transferor of a consumer
credit contract which is the seller of goods which gave rise to the transaction
(and certain related lenders and assignees) to transfer such contract free of
notice of claims by the debtor thereunder. The effect of this rule is to subject
the assignee of such a contract to all claims and defenses which the debtor
could assert against the seller of goods. Liability under this rule is limited
to amounts paid under a Contract; however, the obligor also may be able to
assert the rule to set off remaining amounts due as a defense against a claim
brought by the Trustee against such obligor. Numerous other federal and state
consumer protection laws impose requirements applicable to the origination and
lending pursuant to the Contracts, including the Truth in Lending Act, the
Federal Trade Commission Act, the Fair Credit Billing Act, the Fair Credit
Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection
Practices Act and the Uniform Consumer Credit Code. In the case of some of these
laws, the failure to comply with their provisions may affect the enforceability
of the related Contract.
Transfers of Manufactured Homes; Enforceability of "Due-on-Sale" Clauses
The Contracts, in general, prohibit the sale or transfer of the related
Manufactured Homes without the consent of the Master Servicer and permit the
acceleration of the maturity of the Contracts by the Master Servicer upon any
such sale or transfer that is not consented to. If so specified in the related
Prospectus Supplement, the Master Servicer will permit most transfers of
Manufactured Homes and not accelerate the maturity of the related Contracts. 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 after 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 Depositary Institutions Act of
1982 preempts, subject to certain exceptions and conditions, state laws
prohibiting enforcement of "due-on-sale" clauses applicable to the Manufactured
Homes. Consequently, in some states the Master Servicer may be prohibited from
enforcing a "due-on-sale" clause in respect of certain Manufactured Homes.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, as amended ("Title V"), provides that, subject to the following
conditions, state usury limitations shall not apply to any loan which 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
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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.
The related Originator will represent that all of the Contracts comply with
applicable usury law.
FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Offered Certificates
is based on the advice of Dechert Price & Rhoads, counsel to the Depositor. This
summary is based on laws, regulations, including the REMIC regulations
promulgated by the Treasury Department (the "REMIC Regulations"), rulings and
decisions now in effect or (with respect to regulations) proposed, all of which
are subject to change either prospectively or retroactively. This summary does
not address the federal income tax consequences of an investment in Securities
applicable to all categories of investors, some of which (for example, banks and
insurance companies) may be subject to special rules. Prospective investors
should consult their tax advisors regarding the federal, state, local and any
other tax consequences to them of the purchase, ownership and disposition of
Securities.
Unless otherwise stated or unless the context otherwise requires, in the
following discussion a reference to the term "Mortgage Loan" or "Mortgage Asset"
will also be deemed to include a reference to a "Contract".
General
The federal income tax consequences to Securityholders will vary
depending on whether an election is made to treat the Trust Fund relating to a
particular Series of Securities as a REMIC under the Code. The Prospectus
Supplement for each Series of Securities will specify whether a REMIC election
will be made.
Grantor Trust Funds
If neither a REMIC election nor a partnership election is made, Dechert
Price & Rhoads will deliver its opinion that the Trust Fund will not be
classified as an association taxable as a corporation and that each such Trust
Fund will be classified as a grantor trust under subpart E, Part I of subchapter
J of the Code. In this case, owners of Certificates will be treated for federal
income tax purposes as owners of a portion of the Trust Fund's assets as
described below.
a. Single Class of Grantor Trust Certificates
Characterization. The Trust Fund may be created with one class of
Grantor Trust Certificates. In this case, each Grantor Trust Certificateholder
will be treated as the owner of a pro rata undivided interest in the interest
and principal portions of the Trust Fund represented by the Grantor Trust
Certificates and will be considered the equitable owner of a pro rata undivided
interest in each of the Mortgage Assets in the Pool. Any amounts received by a
Grantor Trust Certificateholder in lieu of amounts due with respect to any
Mortgage Asset because of a default or delinquency in payment will be treated
for federal income tax purposes as having the same character as the payments
they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Mortgage Loans in the Trust Fund represented by Grantor Trust
Certificates, including
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interest, original issue discount ("OID"), if any, prepayment fees, assumption
fees, any gain recognized upon an assumption and late payment charges received
by the Master Servicer. Under Code Sections 162 or 212 each Grantor Trust
Certificateholder will be entitled to deduct its pro rata share of servicing
fees, prepayment fees, assumption fees, any loss recognized upon an assumption
and late payment charges retained by the Master Servicer, provided that such
amounts are reasonable compensation for services rendered to the Trust Fund.
Grantor Trust Certificateholders that are individuals, estates or trusts will be
entitled to deduct their share of expenses as itemized deductions only to the
extent such expenses plus all other Code Section 212 expenses exceed two percent
of its adjusted gross income. In addition, the amount of itemized deductions
otherwise allowable for the taxable year for an individual whose adjusted gross
income exceeds the applicable amount (which amount will be adjusted for
inflation) will be reduced by the lesser of (i) 3% of the excess of adjusted
gross income over the applicable amount and (ii) 80% of the amount of itemized
deductions otherwise allowable for such taxable year. A Grantor Trust
Certificateholder using the cash method of accounting must take into account its
pro rata share of income and deductions as and when collected by or paid to the
Master Servicer. A Grantor Trust Certificateholder using an accrual method of
accounting must take into account its pro rata share of income and deductions as
they become due or are paid to the Master Servicer, whichever is earlier. If the
servicing fees paid to the Master Servicer are deemed to exceed reasonable
servicing compensation, the amount of such excess could be considered as an
ownership interest retained by the Master Servicer (or any person to whom the
Master Servicer assigned for value all or a portion of the servicing fees) in a
portion of the interest payments on the Mortgage Assets. The Mortgage Assets
would then be subject to the "coupon stripping" rules of the Code discussed
below.
As to each Series of Certificates evidencing an interest in a Trust Fund
comprised of Mortgage Loans (not including Contracts or Unsecured Home
Improvement Loans), Dechert Price & Rhoads, or such other counsel specified in
the related Prospectus Supplement, will have advised the Depositor that:
(i) a Grantor Trust Certificate owned by a "domestic building
and loan association" within the meaning of Code Section 7701(a)(19)
representing principal and interest payments on Mortgage Assets will be
considered to represent "loans . . . secured by an interest in real
property which is . . . residential property" within the meaning of Code
Section 7701(a)(19)(C)(v), to the extent that the Mortgage Assets
represented by that Grantor Trust Certificate are of a type described
in such Code ection;
(ii) a Grantor Trust Certificate owned by a financial institution
described in Code Section 593(a) representing principal and interest
payments on Mortgage Assets will be considered to represent "qualifying
real property loans" within the meaning of Code Section 593(d) and the
Treasury regulations under Code Section 593, to the extent that the
Mortgage Assets represented by that Grantor Trust Certificate are of a
type described in such Code section;
(iii) a Grantor Trust Certificate owned by a real estate
investment trust representing an interest in Mortgage Assets will be
considered to represent "real estate assets" within the meaning of Code
Section 856(c)(5)(A), and interest income on the Mortgage Assets will be
considered "interest on obligations secured by mortgages on real
property" within the meaning of Code Section 856(c)(3)(B), to the extent
that the Mortgage Assets represented by that Grantor Trust Certificate
are of a type described in such Code section; and
(iv) a Grantor Trust Certificate owned by a REMIC will represent
"obligation[s] . . . which [are] principally secured by an interest in
real property" within the meaning of Code Section 860G(a)(3).
Under Code Section 7701(a)(19)(C)(v), "loans secured by an interest in
real property" include loans secured by mobile homes not used on a transient
basis. The Treasury regulations under Code Section 593 define "qualifying real
property loan" to include a loan secured by a mobile home unit "permanently
fixed to real property" except during a brief period in which the unit is
transported to its site. The Treasury regulations under Code Section 856 state
that the local law definitions are not controlling in determining the meaning of
the term "real property" for purposes of Code Section 856, and the Internal
Revenue Service ("IRS") has
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ruled that obligations secured by permanently installed mobile home units
qualify as "real estate assets" under this provision. Entities affected by the
foregoing Code provisions that are considering the purchase of Certificates
evidencing interests in Trust Fund comprised of Contracts should consult their
tax advisors regarding such provisions.
Stripped Bonds and Coupons. Certain Trust Funds may consist of
Government Securities which constitute "stripped bonds" or "stripped coupons" as
those terms are defined in Section 1286 of the Code, and, as a result, such
assets would be subject to the stripped bond provisions of the Code. Under these
rules, such Government Securities are treated as having original issue discount
based on the purchase price and the stated redemption price at maturity of each
Security. As such, Grantor Trust Certificateholders would be required to include
in income their pro rata share of the original issue discount on each Government
Security recognized in any given year on an economic accrual basis even if the
Grantor Trust Certificateholder is a cash method taxpayer. Accordingly, the sum
of the income includible to the Grantor Trust Certificateholder in any taxable
year may exceed amounts actually received during such year.
Buydown Loans. The assets constituting certain Trust Funds may include
Buydown Loans. The characterization of any investment in Buydown Loans will
depend upon the precise terms of the related buydown agreement, but to the
extent that such Buydown Loans are secured in part by a bank account or other
personal property, they may not be treated in their entirety as assets described
in the foregoing sections of the Code. There are no directly applicable
precedents with respect to the federal income tax treatment or the
characterization of investments in Buydown Loans. Accordingly, Grantor Trust
Certificateholders should consult their own tax advisors with respect to the
characterization of investments in Grantor Trust Certificates representing an
interest in a Trust Fund that includes Buydown Loans.
Premium. The price paid for a Grantor Trust Certificate by a holder will
be allocated to such holder's undivided interest in each Mortgage Asset based on
each Mortgage Asset's relative fair market value, so that such holder's
undivided interest in each Mortgage Asset will have its own tax basis. A Grantor
Trust Certificateholder that acquires an interest in Mortgage Assets at a
premium may elect to amortize such premium under a constant interest method,
provided that the underlying mortgage loans with respect to such Mortgage Assets
were originated after September 27, 1985. Premium allocable to mortgage loans
originated on or before September 27, 1985 should be allocated among the
principal payments on such mortgage loans and allowed as an ordinary deduction
as principal payments are made. Amortizable bond premium will be treated as an
offset to interest income on such Grantor Trust Certificate. The basis for such
Grantor Trust Certificate will be reduced to the extent that amortizable premium
is applied to offset interest payments. It is not clear whether a reasonable
prepayment assumption should be used in computing amortization of premium
allowable under Code Section 171. A Certificateholder that makes this election
for a Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Certificateholder acquires during the year of
the election or thereafter.
If a premium is not subject to amortization using a reasonable
prepayment assumption, the holder of a Grantor Trust Certificate acquired at a
premium should recognize a loss if a Mortgage Loan (or an underlying mortgage
loan with respect to a Mortgage Asset) prepays in full, equal to the difference
between the portion of the prepaid principal amount of such Mortgage Loan (or
underlying mortgage loan) that is allocable to the Certificate and the portion
of the adjusted basis of the Certificate that is allocable to such Mortgage Loan
(or underlying mortgage loan). If a reasonable prepayment assumption is used to
amortize such premium, it appears that such a loss would be available, if at
all, only if prepayments have occurred at a rate faster than the reasonable
assumed prepayment rate. It is not clear whether any other adjustments would be
required to reflect differences between an assumed prepayment rate and the
actual rate of prepayments.
Original Issue Discount. The IRS has stated in published rulings that,
in circumstances similar to those described herein, the special rules of the
Code relating to OID (currently Code Sections 1271 through 1273 and 1275) and
Treasury regulations issued on January 27, 1994, under such Sections (the "OID
Regulations"), will be applicable to a Grantor Trust Certificateholder's
interest in those Mortgage Assets meeting the
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conditions necessary for these sections to apply. Rules regarding periodic
inclusion of OID income are applicable to mortgages of corporations originated
after May 27, 1969, mortgages of noncorporate mortgagors (other than
individuals) originated after July 1, 1982, and mortgages of individuals
originated after March 2, 1984. Such OID could arise by the financing of points
or other charges by the originator of the mortgages in an amount greater than a
statutory de minimis exception to the extent that the points are not currently
deductible under applicable Code provisions or are not for services provided by
the lender. OID generally must be reported as ordinary gross income as it
accrues under a constant interest method. See " -- Multiple Classes of Grantor
Trust Certificates -- Accrual of Original Issue Discount" below.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Mortgage Assets may be subject to the market discount
rules of Code Sections 1276 through 1278 to the extent an undivided interest in
a Mortgage Asset is considered to have been purchased at a "market discount."
Generally, the amount of market discount is equal to the excess of the portion
of the principal amount of such Mortgage Asset allocable to such holder's
undivided interest over such holder's tax basis in such interest. Market
discount with respect to a Grantor Trust Certificate will be considered to be
zero if the amount allocable to the Grantor Trust Certificate is less than 0.25%
of the Grantor Trust Certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain on disposition of a market discount bond
acquired by the taxpayer after October 22, 1986 shall be treated as ordinary
income to the extent that it does not exceed the accrued market discount at the
time of such payment. The amount of accrued market discount for purposes of
determining the tax treatment of subsequent principal payments or dispositions
of the market discount bond is to be reduced by the amount so treated as
ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described in
the relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For Grantor Trust Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount
also 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 such Grantor Trust Certificate purchased with market discount. For
these purposes, the de minimis rule referred 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
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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.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder 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 for Certificates acquired on or after April 4,
1994. If such an election were to be made with respect to a Grantor Trust
Certificate with market discount, the Certificateholder would be deemed to have
made an election to include in income currently market discount with respect to
all other debt instruments having market discount that such Certificateholder
acquires during the year of the election or thereafter. Similarly, a
Certificateholder that makes this election for a Certificate that is acquired at
a premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Certificateholder owns or acquires. See "-- Taxation of Owners of REMIC Regular
Certificates -- Premium" herein. The election to accrue interest, discount and
premium on a constant yield method with respect to a Certificate is irrevocable.
b. Multiple Classes of Grantor Trust Certificates
1. Stripped Bonds and Stripped Coupons
Pursuant to Code Section 1286, the separation of ownership of the right
to receive some or all of the interest payments on an obligation from ownership
of the right to receive some or all of the principal payments results in the
creation of "stripped bonds" with respect to principal payments and "stripped
coupons" with respect to interest payments. For purposes of Code Sections 1271
through 1288, Code Section 1286 treats a stripped bond or a stripped coupon as
an obligation issued on the date that such stripped interest is created. If a
Trust Fund is created with two classes of Grantor Trust Certificates, one class
of Grantor Trust Certificates may represent the right to principal and interest,
or principal only, on all or a portion of the Mortgage Assets (the "Stripped
Bond Certificates"), while the second class of Grantor Trust Certificates may
represent the right to some or all of the interest on such portion (the
"Stripped Coupon Certificates").
Servicing fees in excess of reasonable servicing fees ("excess
servicing fees") will be treated under the stripped bond rules. If the excess
servicing fee is less than 100 basis points (i.e., 1% interest on the Mortgage
Asset principal balance) or the Certificates are initially sold with a de
minimis discount (assuming no prepayment assumption is required), any non-de
minimis discount arising from a subsequent transfer of the Certificates should
be treated as market discount. The IRS appears to require that reasonable
servicing fees be calculated on a Mortgage Asset by Mortgage Asset basis, which
could result in some Mortgage Assets being treated as having more than 100 basis
points of interest stripped off. See "-- Non-REMIC Certificates" and "Multiple
Classes of Grantor Trust Certificates -- Stripped Bonds and Stripped Coupons"
herein.
Although not entirely clear, a Stripped Bond Certificate generally
should be treated as an interest in Mortgage Assets issued on the day such
Certificate is purchased for purposes of calculating any OID. Generally, if the
discount on a Mortgage Asset is larger than a de minimis amount (as calculated
for purposes of the OID rules) a purchaser of such a Certificate will be
required to accrue the discount under the OID rules of the Code. See "--
Non-REMIC Certificates" and "-- Single Class of Grantor Trust Certificates --
Original Issue Discount" herein. However, a purchaser of a Stripped Bond
Certificate will be required to account for any discount on the Mortgage Assets
as market discount rather than OID if either (i) the amount of OID with respect
to the Mortgage Assets is treated as zero under the OID de minimis rule when the
Certificate was stripped or (ii) no more than 100 basis points (including any
amount of servicing fees in excess of reasonable servicing fees) is stripped off
of the Trust Fund's Mortgage Assets. Pursuant to Revenue Procedure 91-49, issued
on August 8, 1991, purchasers of Stripped Bond Certificates using an
inconsistent method of accounting must change their method of accounting and
request the consent of the IRS to the change in their accounting method on a
statement attached to their first timely tax return filed after August 8, 1991.
The precise tax treatment of Stripped Coupon Certificates is
substantially uncertain. The Code could be read literally to require that OID
computations be made for each payment from each Mortgage Asset.
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However, based on the recent IRS guidance, it appears that all payments from a
Mortgage Asset underlying a Stripped Coupon Certificate should be treated as a
single installment obligation subject to the OID rules of the Code, in which
case, all payments from such Mortgage Asset would be included in the Mortgage
Asset's stated redemption price at maturity for purposes of calculating income
on such certificate under the OID rules of the Code.
It is unclear under what circumstances, if any, the prepayment of
Mortgage Assets will give rise to a loss to the holder of a Stripped Bond
Certificate purchased at a premium or a Stripped Coupon Certificate. If such
Certificate is treated as a single instrument (rather than an interest in
discrete mortgage loans) and the effect of prepayments is taken into account in
computing yield with respect to such Grantor Trust Certificate, it appears that
no loss will be available as a result of any particular prepayment unless
prepayments occur at a rate faster than the assumed prepayment rate. However, if
such Certificate is treated as an interest in discrete Mortgage Assets, or if no
prepayment assumption is used, then when a Mortgage Asset is prepaid, the holder
of such Certificate should be able to recognize a loss equal to the portion of
the adjusted issue price of such Certificate that is allocable to such Mortgage
Asset.
Holders of Stripped Bond Certificates and Stripped Coupon Certificates
are urged to consult with their own tax advisors regarding the proper treatment
of these Certificates for federal income tax purposes.
Treatment of Certain Owners. Several Code sections provide beneficial
treatment to certain taxpayers that invest in Mortgage Assets of the type that
make up the Trust Fund. With respect to these Code sections, no specific legal
authority exists regarding whether the character of the Grantor Trust
Certificates, for federal income tax purposes, will be the same as that of the
underlying Mortgage Assets. While Code Section 1286 treats a stripped obligation
as a separate obligation for purposes of the Code provisions addressing OID, it
is not clear whether such characterization would apply with regard to these
other Code sections. Although the issue is not free from doubt, based on policy
considerations, each class of Grantor Trust Certificates should be considered to
represent "qualifying real property loans" within the meaning of Code Section
593(d), "real estate assets" within the meaning of Code Section 856(c)(5)(A) and
"loans . . . secured by, an interest in real property which is . . . residential
real property" within the meaning of Code Section 7701(a)(19)(C)(v), and
interest income attributable to Grantor Trust Certificates should be considered
to represent "interest on obligations secured by mortgages on real property"
within the meaning of Code Section 856(c)(3)(B), provided that in each case the
underlying Mortgage Assets and interest on such Mortgage Assets qualify for such
treatment. Prospective purchasers to which such characterization of an
investment in Certificates is material should consult their own tax advisors
regarding the characterization of the Grantor Trust Certificates and the income
therefrom. Grantor Trust Certificates will be "obligation[s] . . . which [are]
principally secured, directly or indirectly, by an interest in real property"
within the meaning of Code Section 860G(a)(3).
2. Grantor Trust Certificates Representing Interests in Loans
Other Than ARM Loans
The original issue discount rules of Code Sections 1271 through 1275
will be applicable to a Certificateholder's interest in those Mortgage Assets as
to which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount in income are applicable
to mortgages of corporations originated after May 27, 1969, mortgages of
noncorporate mortgagors (other than individuals) originated after July 1, 1982,
and mortgages of individuals originated after March 2, 1984. Under the OID
Regulations, such original issue discount could arise by the charging of points
by the originator of the mortgage in an amount greater than the statutory de
minimis exception, including a payment of points that is currently deductible by
the borrower under applicable Code provisions, or under certain circumstances,
by the presence of "teaser" rates on the Mortgage Assets. OID on each Grantor
Trust Certificate must be included in the owner's ordinary income for federal
income tax purposes as it accrues, in accordance with a constant interest method
that takes into account the compounding of interest, in advance of receipt of
the cash attributable to such income. The amount of OID required to be included
in an owner's income in any taxable year with respect to a Grantor Trust
Certificate representing an interest in Mortgage Assets other than Mortgage
Assets with interest rates that adjust periodically ("ARM Loans") likely will be
computed as
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described below under "-- Accrual of Original Issue Discount." The following
discussion is based in part on the OID Regulations and in part on the provisions
of the Tax Reform Act of 1986 (the "1986 Act"). The OID Regulations generally
are effective for debt instruments issued on or after April 4, 1994, but may be
relied upon as authority with respect to debt instruments, such as the Grantor
Trust Certificates, issued after December 21, 1992. Alternatively, proposed
Treasury regulations issued December 21, 1992 may be treated as authority for
debt instruments issued after December 21, 1992 and prior to April 4, 1994, and
proposed Treasury regulations issued in 1986 and 1991 may be treated as
authority for instruments issued before December 21, 1992. In applying these
dates, the issued date of the Mortgage Assets should be used, or, in the case of
Stripped Bond Certificates or Stripped Coupon Certificates, the date such
Certificates are acquired. The holder of a Certificate should be aware, however,
that neither the proposed OID Regulations nor the OID Regulations adequately
address certain issues relevant to prepayable securities.
Under the Code, the Mortgage Assets underlying the Grantor Trust
Certificate will be treated as having been issued on the date they were
originated with an amount of OID equal to the excess of such Mortgage Asset's
stated redemption price at maturity over its issue price. The issue price of a
Mortgage Asset is generally the amount lent to the mortgagee, which may be
adjusted to take into account certain loan origination fees. The stated
redemption price at maturity of a Mortgage Asset is the sum of all payments to
be made on such Mortgage Asset other than payments that are treated as qualified
stated interest payments. The accrual of this OID, as described below under "--
Accrual of Original Issue Discount," will utilize the original yield to maturity
of the Grantor Trust Certificate calculated based on a reasonable assumed
prepayment rate for the mortgage loans underlying the Grantor Trust Certificates
(the "Prepayment Assumption"), and will take into account events that occur
during the calculation period. The Prepayment Assumption will be determined in
the manner prescribed by regulations that have not yet been issued. The
legislative history of the 1986 Act (the "Legislative History") provides,
however, that the regulations will require that the Prepayment Assumption be the
prepayment assumption that is used in determining the offering price of such
Certificate. No representation is made that any Certificate will prepay at the
Prepayment Assumption or at any other rate. The prepayment assumption contained
in the Code literally only applies to debt instruments collateralized by other
debt instruments that are subject to prepayment rather than direct ownership
interests in such debt instruments, such as the Certificates represent. However,
no other legal authority provides guidance with regard to the proper method for
accruing OID on obligations that are subject to prepayment, and, until further
guidance is issued, the Master Servicer intends to calculate and report OID
under the method described below.
Accrual of Original Issue Discount. Generally, the owner of a Grantor
Trust Certificate must include in gross income the sum of the "daily portions,"
as defined below, of the OID on such Grantor Trust Certificate for each day on
which it owns such Certificate, including the date of purchase but excluding the
date of disposition. In the case of an original owner, the daily portions of OID
with respect to each component generally will be determined as set forth under
the OID Regulations. A calculation will be made by the Master Servicer or such
other entity specified in the related Prospectus Supplement of the portion of
OID that accrues during each successive monthly accrual period (or shorter
period from the date of original issue) that ends on the day in the calendar
year corresponding to each of the Distribution Dates on the Grantor Trust
Certificates (or the day prior to each such date). This will be done, in the
case of each full month accrual period, by (i) adding (a) the present value at
the end of the accrual period (determined by using as a discount factor the
original yield to maturity of the respective component under the Prepayment
Assumption) of all remaining payments to be received under the Prepayment
Assumption on the respective component and (b) any payments included in the
state redemption price at maturity received during such accrual period, and (ii)
subtracting from that total the "adjusted issue price" of the respective
component at the beginning of such accrual period. The adjusted issue price of a
Grantor Trust Certificate at the beginning of the first accrual period is its
issue price; the adjusted issue price of a Grantor Trust Certificate at the
beginning of a subsequent accrual period is the adjusted issue price at the
beginning of the immediately preceding accrual period plus the amount of OID
allocable to that accrual period reduced by the amount of any payment other than
a payment of qualified stated interest made at the end of or during that accrual
period. The OID accruing during such accrual period will then be divided by the
number of days in the period to determine the daily portion of OID for each day
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in the period. With respect to an initial accrual period shorter than a full
monthly accrual period, the daily portions of OID must be determined according
to an appropriate allocation under any reasonable method.
Original issue discount generally must be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest as it accrues rather than when received. However,
the amount of original issue discount includible in the income of a holder of an
obligation is reduced when the obligation is acquired after its initial issuance
at a price greater than the sum of the original issue price and the previously
accrued original issue discount, less prior payments of principal. Accordingly,
if such Mortgage Assets acquired by a Certificateholder are purchased at a price
equal to the then unpaid principal amount of such Mortgage Asset, no original
issue discount attributable to the difference between the issue price and the
original principal amount of such Mortgage Asset (i.e. points) will be
includible by such holder. Other original issue discount on the Mortgage Assets
(e.g., that arising from a "teaser" rate) would still need to be accrued.
3. Grantor Trust Certificates Representing Interests in ARM Loans
The OID Regulations do not address the treatment of instruments, such as
the Grantor Trust Certificates, which represent interests in ARM Loans.
Additionally, the IRS has not issued guidance under the Code's coupon stripping
rules with respect to such instruments. In the absence of any authority, the
Master Servicer will report OID on Grantor Trust Certificates attributable to
ARM Loans ("Stripped ARM Obligations") to holders in a manner it believes is
consistent with the rules described above under the heading "-- Grantor Trust
Certificates Representing Interests in Loans Other Than ARM Loans" and with the
OID Regulations. In general, application of these rules may require inclusion of
income on a Stripped ARM Obligation in advance of the receipt of cash
attributable to such income. Further, the addition of interest deferred by
reason of negative amortization ("Deferred Interest") to the principal balance
of an ARM Loan may require the inclusion of such amount in the income of the
Grantor Trust Certificateholder when such amount accrues. Furthermore, the
addition of Deferred Interest to the Grantor Trust Certificate's principal
balance will result in additional income (including possibly OID income) to the
Grantor Trust Certificateholder over the remaining life of such Grantor Trust
Certificates.
Because the treatment of Stripped ARM Obligations is uncertain,
investors are urged to consult their tax advisors regarding how income will be
includible with respect to such Certificates.
c. Sale or Exchange of a Grantor Trust Certificate
Sale or exchange of a Grantor Trust Certificate prior to its maturity
will result in gain or loss equal to the difference, if any, between the amount
received and the owner's adjusted basis in the Grantor Trust Certificate. Such
adjusted basis generally will equal the seller's purchase price for the Grantor
Trust Certificate, increased by the OID included in the seller's gross income
with respect to the Grantor Trust Certificate, and reduced by principal payments
on the Grantor Trust Certificate previously received by the seller. Such gain or
loss will be capital gain or loss to an owner for which a Grantor Trust
Certificate is a "capital asset" within the meaning of Code Section 1221, and
will be long-term or short-term depending on whether the Grantor Trust
Certificate has been owned for the long-term capital gain holding period
(currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within
the meaning of Code Section 582(c)(1), so that gain or loss recognized from the
sale of a Grantor Trust Certificate by a bank or a thrift institution to which
such section applies will be treated as ordinary income or loss.
d. Non-U.S. Persons
Generally, to the extent that a Grantor Trust Certificate evidences
ownership in underlying Mortgage Assets that were issued on or before July 18,
1984, interest or OID paid by the person required to withhold tax under Code
Section 1441 or 1442 to (i) an owner that is not a U.S. Person (as defined
below) or (ii) a
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Grantor Trust Certificateholder holding on behalf of an owner that is not a U.S.
Person will be subject to federal income tax, collected by withholding, at a
rate of 30% or such lower rate as may be provided for interest by an applicable
tax treaty. Accrued OID recognized by the owner on the sale or exchange of such
a Grantor Trust Certificate also will be subject to federal income tax at the
same rate. Generally, such payments would not be subject to withholding to the
extent that a Grantor Trust Certificate evidences ownership in Mortgage Assets
issued after July 18, 1984, by natural persons if such Grantor Trust
Certificateholder complies with certain identification requirements (including
delivery of a statement, signed by the Grantor Trust Certificateholder under
penalties of perjury, certifying that such Grantor Trust Certificateholder is
not a U.S. Person and providing the name and address of such Grantor Trust
Certificateholder). Additional restrictions apply to Mortgage Assets of where
the mortgagor is not a natural person in order to qualify for the exemption from
withholding.
As used herein, a "U.S. Person" means a citizen or resident of the
United States, a corporation or a partnership organized in or under the laws of
the United States or any political subdivision thereof or an estate or trust,
the income of which from sources outside the United States is includible in
gross income for federal income tax purposes regardless of its connection with
the conduct of a trade or business within the United States.
e. Information Reporting and Backup Withholding
The Master Servicer will furnish or make available, within a reasonable
time after the end of each calendar year, to each person who was a
Certificateholder at any time during such year, such information as may be
deemed necessary or desirable to assist Certificateholders in preparing their
federal income tax returns, or to enable holders to make such information
available to beneficial owners or financial intermediaries that hold such
Certificates as nominees on behalf of beneficial owners. If a holder, beneficial
owner, financial intermediary or other recipient of a payment on behalf of a
beneficial owner fails to supply a certified taxpayer identification number or
if the Secretary of the Treasury determines that such person has not reported
all interest and dividend income required to be shown on its federal income tax
return, 31% backup withholding may be required with respect to any payments. Any
amounts deducted and withheld from a distribution to a recipient would be
allowed as a credit against such recipient's federal income tax liability.
REMICs
The discussion under this heading "REMICs" does not apply to any Trust
Fund containing Unsecured Home Improvement Loans.
The Trust Fund relating to a Series of Certificates may elect to be
treated as a REMIC, or such other counsel specified in the related Prospectus
Supplement. In the event that the Trust Fund intends to make such an election,
Dechert Price & Rhoads, special counsel to the Depositor, will deliver its
opinion that the Trust Fund meets the qualifications of a REMIC. This opinion
will be based on the assumptions that the terms of the Trust Agreement and
related documents will be complied with, and that the Trust Fund will make a
timely REMIC election and will continue to comply with all of the rules
applicable to REMICs. Counsel's opinion will also be based upon its conclusions
that the assets of the Trust Fund enable the Trust Fund to qualify as a REMIC,
and that the Certificates issued by the Trust Fund qualify as Regular Interests
or a Residual Interest in the REMIC.
Qualification as a REMIC requires ongoing compliance with certain
conditions. In the event that the Trust Fund intends to make such an election,
Dechert Price & Rhoads, special counsel to the Depositor, will deliver its
opinion that the Trust Fund meets the qualifications of a REMIC. This opinion
will be based on the assumptions that the terms of the Trust Agreement and
related documents will be complied with, and that the Trust Fund will make a
timely REMIC election and will continue to comply with all of the rules
applicable to REMICs. Counsel's opinion will also be based upon its conclusions
that the assets of the Trust Fund enable the Trust Fund to qualify as a REMIC,
and that the Certificates issued by the Trust Fund qualify as Regular Interests
or a Residual Interest in the REMIC.
Although a REMIC is not generally subject to federal income tax (see,
however "-- Taxation of Owners of REMIC Residual Certificates" and "--
Prohibited Transactions" below), if a Trust Fund with respect to which a REMIC
election is made fails to comply with one or more of the ongoing requirements of
the Code for REMIC status during any taxable year, including the implementation
of restrictions on the purchase and transfer of the residual interests in a
REMIC as described below under "Taxation of Owners of REMIC Residual
Certificates," the Code provides that a Trust Fund will not be treated as a
REMIC for such year and thereafter. In that event, such entity may be taxable as
a separate corporation, and the related Certificates (the "REMIC Certificates")
may not be accorded the status or given the tax treatment described below. While
the Code authorizes the Treasury Department to issue regulations providing
relief in the event of an inadvertent termination of the status of a trust fund
as a REMIC, no such regulations have been issued. Any such relief, moreover, may
be accompanied by sanctions, such as the imposition of a corporate tax on all or
a portion of the REMIC's income for the period in which the requirements for
such status are not satisfied. The related
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Prospectus Supplement for each Series of Certificates will indicate whether the
Trust Fund will make a REMIC election and whether a class of Certificates will
be treated as a regular or residual interest in the REMIC.
In general, with respect to each Series of Certificates for which a
REMIC election is made, (i) such Certificates held by a thrift institution taxed
as a "domestic building and loan association" will constitute assets described
in Code Section 7701(a)(19)(C); (ii) such Certificates held by a real estate
investment trust will constitute "real estate assets" within the meaning of Code
Section 856(c)(5)(A); and (iii) interest on such Certificates held by a real
estate investment trust will be considered "interest on obligations secured by
mortgages on real property" within the meaning of Code Section 856(c)(3)(B).
Under Code Section 7701(a)(19)(C)(v), "loans secured by an interest in real
property" include loans secured by mobile homes not used on a transient basis.
The Treasury regulations under Code Section 856 state that the local law
definitions are not controlling in determining the meaning of the term "real
property" for purposes of Section 856, and the IRS has ruled that obligations
secured by permanently installed mobile home units qualify as "real estate
assets" under this provision. Entities affected by the foregoing Code provisions
that are considering the purchase of Certificates evidencing interests in a
Trust Fund comprised of Contracts should consult their tax advisors regarding
such provisions. If less than 95% of the REMIC's assets are assets qualifying
under any of the foregoing Code sections, the Certificates will be qualifying
assets only to the extent that the REMIC's assets are qualifying assets. In
addition, payments on Mortgage Assets held pending distribution on the REMIC
Certificates will be considered to be real estate assets for purposes of Code
Section 856(c).
The Small Business Job Protection Act of 1996, as part of the repeal of
the bad debt reserve method for thrift institutions, repealed the application of
Code section 593(d) to any taxable year beginning after December 31, 1995.
In some instances the Mortgage Assets may not be treated entirely as
assets described in the foregoing sections. See, in this regard, the discussion
of Buydown Loans contained in "-- Non-REMIC Certificates -- Single Class of
Grantor Trust Certificates" above. REMIC Certificates held by a real estate
investment trust will not constitute "Government Securities" within the meaning
of Code Section 856(c)(5)(A), and REMIC Certificates held by a regulated
investment company will not constitute "Government Securities" within the
meaning of Code Section 851(b)(4)(A)(ii). REMIC Certificates held by certain
financial institutions will constitute "evidences of indebtedness" within the
meaning of Code Section 582(c)(1).
A "qualified mortgage" for REMIC purposes is any obligation (including
certificates of participation in such an obligation) that is principally secured
by an interest in real property and that is transferred to the REMIC within a
prescribed time period in exchange for regular or residual interests in the
REMIC. The REMIC Regulations provide that manufactured housing or mobile homes
(not including recreational vehicles, campers or similar vehicles) that are
"single family residences" under Code Section 25(e)(10) will qualify as real
property without regard to state law classifications. Under Code Section
25(e)(10), a single family residence includes any manufactured home that has a
minimum of 400 square feet of living space and a minimum width in excess of 102
inches and that is of a kind customarily used at a fixed location.
Tiered REMIC Structures. For certain Series of Certificates, two
separate elections may be made to treat designated portions of the related Trust
Fund as REMICs (respectively, the "Subsidiary REMIC" and the "Master REMIC") for
federal income tax purposes. Upon the issuance of any such Series of
Certificates, Dechert Price & Rhoads, counsel to the Depositor, will deliver its
opinion generally to the effect that, assuming compliance with all provisions of
the related Agreement, the Master REMIC as well as any Subsidiary REMIC will
each qualify as a REMIC, and the REMIC Certificates issued by the Master REMIC
and the Subsidiary REMIC, respectively, will be considered to evidence ownership
of REMIC Regular Certificates or REMIC Residual Certificates in the related
REMIC within the meaning of the REMIC provisions.
Only REMIC Certificates, other than the residual interest in the
Subsidiary REMIC, issued by the Master REMIC will be offered hereunder. The
Subsidiary REMIC and the Master REMIC will be treated as
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one REMIC solely for purposes of determining whether the REMIC Certificates will
be (i) "real estate assets" within the meaning of Section 856(c)(5)(A) of the
Code; (ii) "loans secured by an interest in real property" under Section
7701(a)(19)(C) of the Code; and (iii) whether the income on such Certificates is
interest described in Section 856(c)(3)(B) of the Code.
a. Taxation of Owners of REMIC Regular Certificates
General. Except as otherwise stated in this discussion, regular
interests in REMICS ("REMIC Regular Certificates") will be treated for federal
income tax purposes as debt instruments issued by the REMIC and not as ownership
interests in the REMIC or its assets. Moreover, holders of REMIC Regular
Certificates that otherwise report income under a cash method of accounting will
be required to report income with respect to REMIC Regular Certificates under an
accrual method.
Original Issue Discount and Premium. The REMIC Regular Certificates may
be issued with OID. Generally, such OID, if any, will equal the difference
between the "stated redemption price at maturity" of a REMIC Regular Certificate
and its "issue price." Holders of any class of Certificates issued with OID will
be required to include such OID in gross income for federal income tax purposes
as it accrues, in accordance with a constant interest method based on the
compounding of interest as it accrues rather than in accordance with receipt of
the interest payments. The following discussion is based in part on the OID
Regulations and in part on the provisions of the Tax Reform Act of 1986 (the
"1986 Act"). Holders of REMIC Regular Certificates (the "REMIC Regular
Certificateholders") should be aware, however, that the OID Regulations do not
adequately address certain issues relevant to prepayable securities, such as the
REMIC Regular Certificates.
Rules governing OID are set forth in Code Sections 1271 through 1273 and
1275. These rules require that the amount and rate of accrual of OID be
calculated based on the Prepayment Assumption and the anticipated reinvestment
rate, if any, relating to the REMIC Regular Certificates and prescribe a method
for adjusting the amount and rate of accrual of such discount where the actual
prepayment rate differs from the Prepayment Assumption. Under the Code, the
Prepayment Assumption must be determined in the manner prescribed by
regulations, which regulations have not yet been issued. The Legislative History
provides, however, that Congress intended the regulations to require that the
Prepayment Assumption be the prepayment assumption that is used in determining
the initial offering price of such REMIC Regular Certificates. The Prospectus
Supplement for each Series of REMIC Regular Certificates will specify the
Prepayment Assumption to be used for the purpose of determining the amount and
rate of accrual of OID. No representation is made that the REMIC Regular
Certificates will prepay at the Prepayment Assumption or at any other rate.
In general, each REMIC Regular Certificate will be treated as a single
installment obligation issued with an amount of OID equal to the excess of its
"stated redemption price at maturity" over its "issue price." The issue price of
a REMIC Regular Certificate is the first price at which a substantial amount of
REMIC Regular Certificates of that class are first sold to the public (excluding
bond houses, brokers, underwriters or wholesalers). If less than a substantial
amount of a particular class of REMIC Regular Certificates 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. The issue price of a REMIC Regular Certificate also includes
the amount paid by an initial Certificateholder for accrued interest that
relates to a period prior to the issue date of the REMIC Regular Certificate.
The stated redemption price at maturity of a REMIC Regular Certificate includes
the original principal amount of the REMIC Regular Certificate, but generally
will not include distributions of interest if such distributions constitute
"qualified stated interest." Qualified stated interest generally means interest
payable at a single fixed rate or qualified variable rate (as described below)
provided that such interest payments are unconditionally payable at intervals of
one year or less during the entire term of the REMIC Regular Certificate.
Interest is payable at a single fixed rate only if the rate appropriately takes
into account the length of the interval between payments. Distributions of
interest on REMIC Regular Certificates with respect to which Deferred Interest
will accrue will not constitute qualified stated interest payments, and the
stated redemption price at maturity of such REMIC Regular Certificates includes
all distributions of interest as well as principal thereon.
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Where the interval between the issue date and the first Distribution
Date on a REMIC Regular Certificate is longer than the interval between
subsequent Distribution Dates, the greater of any original issue discount
(disregarding the rate in the first period) and any interest foregone during the
first period is treated as the amount by which the stated redemption price at
maturity of the Certificate exceeds its issue price for purposes of the de
minimis rule described below. The OID Regulations suggest that all interest on a
long first period REMIC Regular Certificate that is issued with non-de minimis
OID, as determined under the foregoing rule, will be treated as OID. Where the
interval between the issue date and the first Distribution Date on a REMIC
Regular Certificate is shorter than the interval between subsequent Distribution
Dates, interest due on the first Distribution Date in excess of the amount that
accrued during the first period would be added to the Certificates stated
redemption price at maturity. REMIC Regular Certificateholders should consult
their own tax advisors to determine the issue price and stated redemption price
at maturity of a REMIC Regular Certificate.
Under the de minimis rule, OID on a REMIC Regular Certificate will be
considered to be zero if such OID is less than 0.25% of the stated redemption
price at maturity of the REMIC Regular Certificate multiplied by the weighted
average maturity of the REMIC Regular Certificate. For this purpose, the
weighted average maturity of the REMIC Regular Certificate is computed as the
sum of the amounts determined by multiplying the number of full years (i.e.,
rounding down partial years) from the issue date until each distribution in
reduction of stated redemption price at maturity is scheduled to be made by a
fraction, the numerator of which is the amount of each distribution included in
the stated redemption price at maturity of the REMIC Regular Certificate and the
denominator of which is the stated redemption price at maturity of the REMIC
Regular Certificate. Although currently unclear, it appears that the schedule of
such distributions should be determined in accordance with the Prepayment
Assumption. The Prepayment Assumption with respect to a Series of REMIC Regular
Certificates will be set forth in the related Prospectus Supplement. Holders
generally must report de minimis OID pro rata as principal payments are
received, and such income will be capital gain if the REMIC Regular Certificate
is held as a capital asset. However, accrual method holders may elect to accrue
all de minimis OID as well as market discount under a constant interest method.
The Prospectus Supplement with respect to a Trust Fund may provide for
certain REMIC Regular Certificates to be issued at prices significantly
exceeding their principal amounts or based on notional principal balances (the
"Super-Premium Certificates"). The income tax treatment of such REMIC Regular
Certificates is not entirely certain. For information reporting purposes, the
Trust Fund intends to take the position that the stated redemption price at
maturity of such REMIC Regular Certificates is the sum of all payments to be
made on such REMIC Regular Certificates determined under the Prepayment
Assumption, with the result that such REMIC Regular Certificates would be issued
with OID. The calculation of income in this manner could result in negative
original issue discount (which delays future accruals of OID rather than being
immediately deductible) when prepayments on the Mortgage Assets exceed those
estimated under the Prepayment Assumption. The IRS might contend, however, that
certain proposed contingent payment rules contained in regulations issued on
December 15, 1994, with respect to original issue discount, should apply to such
Certificates. Although such rules are not applicable to instruments governed by
Code Section 1276(a)(6), they represent the only guidance regarding the current
views of the IRS with respect to contingent payment instruments. In the
alternative, the IRS could assert that the stated redemption price at maturity
of such REMIC Regular Certificates should be limited to their principal amount
(subject to the discussion below under "-- Accrued Interest Certificates"), so
that such REMIC Regular Certificates would be considered for federal income tax
purposes to be issued at a premium. If such a position were to prevail, the
rules described below under "-- Taxation of Owners of REMIC Regular Certificates
- -- Premium" would apply. It is unclear when a loss may be claimed for any
unrecovered basis for a Super-Premium Certificate. It is possible that a holder
of a Super-Premium Certificate may only claim a loss when its remaining basis
exceeds the maximum amount of future payments, assuming no further prepayments
or when the final payment is received with respect to such Super-Premium
Certificate.
Under the REMIC Regulations, if the issue price of a REMIC Regular
Certificate (other than REMIC Regular Certificate based on a notional amount)
does not exceed 125% of its actual principal amount, the interest rate is not
considered disproportionately high. Accordingly, such REMIC Regular Certificate
generally
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should not be treated as a Super-Premium Certificate and the rules described
below under "-- REMIC Regular Certificates -- Premium" should apply. However, it
is possible that holders of REMIC Regular Certificates issued at a premium, even
if the premium is less than 25% of such Certificate's actual principal balance,
will be required to amortize the premium under an original issue discount method
or contingent interest method even though no election under Code Section 171 is
made to amortize such premium.
Generally, a REMIC Regular Certificateholder must include in gross
income the "daily portions," as determined below, of the OID that accrues on a
REMIC Regular Certificate for each day a Certificateholder holds the REMIC
Regular Certificate, including the purchase date but excluding the disposition
date. In the case of an original holder of a REMIC Regular Certificate, a
calculation will be made of the portion of the OID that accrues during each
successive period ("an accrual period") that ends on the day in the calendar
year corresponding to a Distribution Date (or if Distribution Dates are on the
first day or first business day of the immediately preceding month, interest may
be treated as payable on the last day of the immediately preceding month) and
begins on the day after the end of the immediately preceding accrual period (or
on the issue date in the case of the first accrual period). This will be done,
in the case of each full accrual period, by (i) adding (a) the present value at
the end of the accrual period (determined by using as a discount factor the
original yield to maturity of the REMIC Regular Certificates as calculated under
the Prepayment Assumption) of all remaining payments to be received on the REMIC
Regular Certificates under the Prepayment Assumption and (b) any payments
included in the stated redemption price at maturity received during such accrual
period, and (ii) subtracting from that total the adjusted issue price of the
REMIC Regular Certificates at the beginning of such accrual period. The adjusted
issue price of a REMIC Regular Certificate at the beginning of the first accrual
period is its issue price; the adjusted issue price of a REMIC Regular
Certificate at the beginning of a subsequent accrual period is the adjusted
issue price at the beginning of the immediately preceding accrual period plus
the amount of OID allocable to that accrual period and reduced by the amount of
any payment other than a payment of qualified stated interest made at the end of
or during that accrual period. The OID accrued during an accrual period will
then be divided by the number of days in the period to determine the daily
portion of OID for each day in the accrual period. The calculation of OID under
the method described above will cause the accrual of OID to either increase or
decrease (but never below zero) in a given accrual period to reflect the fact
that prepayments are occurring faster or slower than under the Prepayment
Assumption. With respect to an initial accrual period shorter than a full
accrual period, the daily portions of OID may be determined according to an
appropriate allocation under any reasonable method.
A subsequent purchaser of a REMIC Regular Certificate issued with OID
who purchases the REMIC Regular Certificate at a cost less than the remaining
stated redemption price at maturity will also be required to include in gross
income the sum of the daily portions of OID on that REMIC Regular Certificate.
In computing the daily portions of OID for such a purchaser (as well as an
initial purchaser that purchases at a price higher than the adjusted issue price
but less than the stated redemption price at maturity), however, the daily
portion is reduced by the amount that would be the daily portion for such day
(computed in accordance with the rules set forth above) multiplied by a
fraction, the numerator of which is the amount, if any, by which the price paid
by such holder for that REMIC Regular Certificate exceeds the following amount:
(a) the sum of the issue price plus the aggregate amount of OID that would have
been includible in the gross income of an original REMIC Regular
Certificateholder (who purchased the REMIC Regular Certificate at its issue
price), less (b) any prior payments included in the stated redemption price at
maturity, and the denominator of which is the sum of the daily portions for that
REMIC Regular Certificate for all days beginning on the date after the purchase
date and ending on the maturity date computed under the Prepayment Assumption. A
holder who pays an acquisition premium instead may elect to accrue OID by
treating the purchase as a purchase at original issue.
Variable Rate REMIC Regular Certificates. REMIC Regular Certificates may
provide for interest based on a variable rate. Interest based on a variable rate
will constitute qualified stated interest and not contingent interest if,
generally, (i) such interest is unconditionally payable at least annually, (ii)
the issue price of the debt instrument does not exceed the total noncontingent
principal payments and (iii) interest is based on a "qualified floating rate,"
an "objective rate," a combination of a single fixed rate and one or more
"qualified floating rates," one "qualified inverse floating rate," or a
combination of "qualified floating rates" that do not
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operate in a manner that significantly accelerates or defers interest payments
on such REMIC Regular Certificate.
The amount of OID with respect to a REMIC Regular Certificate bearing a
variable rate of interest will accrue in the manner described above under "--
Original Issue Discount and Premium" by assuming generally that the index used
for the variable rate will remain fixed throughout the term of the Certificate.
Appropriate adjustments are made for the actual variable rate.
Although unclear at present, the Depositor intends to treat interest on
a REMIC Regular Certificate that is a weighted average of the net interest rates
on Mortgage Loans as qualified stated interest. In such case, the weighted
average rate used to compute the initial pass-through rate on the REMIC Regular
Certificates will be deemed to be the index in effect through the life of the
REMIC Regular Certificates. It is possible, however, that the IRS may treat some
or all of the interest on REMIC Regular Certificates with a weighted average
rate as taxable under the rules relating to obligations providing for contingent
payments. Such treatment may effect the timing of income accruals on such REMIC
Regular Certificates.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder 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 to be made with
respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Certificateholder acquires during the year of the
election or thereafter. Similarly, a Certificateholder that makes this election
for a Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Certificateholder owns or acquires. See "--
REMIC Regular Certificates -- Premium" herein. The election to accrue interest,
discount and premium on a constant yield method with respect to a Certificate is
irrevocable.
Market Discount. A purchaser of a REMIC Regular Certificate may also be
subject to the market discount provisions of Code Sections 1276 through 1278.
Under these provisions and the OID Regulations, "market discount" equals the
excess, if any, of (i) the REMIC Regular Certificate's stated principal amount
or, in the case of a REMIC Regular Certificate with OID, the adjusted issue
price (determined for this purpose as if the purchaser had purchased such REMIC
Regular Certificate from an original holder) over (ii) the price for such REMIC
Regular Certificate paid by the purchaser. A Certificateholder that purchases a
REMIC Regular Certificate at a market discount will recognize income upon
receipt of each distribution representing amounts included in such certificate's
stated redemption price at maturity. In particular, under Section 1276 of the
Code such a holder generally will be required to allocate each such distribution
first to accrued market discount not previously included in income, and to
recognize ordinary income to that extent. A Certificateholder 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 Certificateholder on or
after the first day of the first taxable year to which such election applies.
Market discount with respect to a REMIC Regular Certificate will be
considered to be zero if the amount allocable to the REMIC Regular Certificate
is less than 0.25% of such REMIC Regular Certificate's stated redemption price
at maturity multiplied by such REMIC Regular Certificate's weighted average
maturity remaining after the date of purchase. If market discount on a REMIC
Regular Certificate is considered to be zero under this rule, the actual amount
of market discount must be allocated to the remaining principal payments on the
REMIC Regular Certificate, and gain equal to such allocated amount will be
recognized when the corresponding principal payment is made. Treasury
regulations implementing the market discount rules have not yet been issued;
therefore, investors should consult their own tax advisors regarding the
application of these rules and the advisability of making any of the elections
allowed under Code Sections 1276 through 1278.
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The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain on disposition of a market discount bond
acquired by the taxpayer after October 22, 1986, shall be treated as ordinary
income to the extent that it does not exceed the accrued market discount at the
time of such payment. The amount of accrued market discount for purposes of
determining the tax treatment of subsequent principal payments or dispositions
of the market discount bond is to be reduced by the amount so treated as
ordinary income.
The Code also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury, rules described in
the Legislative History will apply. Under those rules, the holder of a market
discount bond may elect to accrue market discount either on the basis of a
constant interest method rate or according to one of the following methods. For
REMIC Regular Certificates issued with OID, the amount of market discount that
accrues during a period is equal to the product of (i) the total remaining
market discount and (ii) a fraction, the numerator of which is the OID accruing
during the period and the denominator of which is the total remaining OID at the
beginning of the period. For REMIC Regular Certificates issued without OID, the
amount of market discount that accrues during a period is equal to the product
of (a) the total remaining market discount and (b) a fraction, the numerator of
which is the amount of stated interest paid during the accrual period and the
denominator of which is the total amount of stated interest remaining to be paid
at the beginning of the period. For purposes of calculating market discount
under any of the above methods in the case of instruments (such as the REMIC
Regular Certificates) that provide for payments that may be accelerated by
reason of prepayments of other obligations securing such instruments, the same
Prepayment Assumption applicable to calculating the accrual of OID will apply.
A holder who acquired a REMIC Regular Certificate at a market discount
also 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 such Certificate 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.
Premium. A purchaser of a REMIC Regular Certificate that purchases the
REMIC Regular Certificate at a cost (not including accrued qualified stated
interest) greater than its remaining stated redemption price at maturity will be
considered to have purchased the REMIC Regular Certificate at a premium and may
elect to amortize such premium under a constant yield method. A
Certificateholder that makes this election for a Certificate that is acquired at
a premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Certificateholder acquires during the year of the election or thereafter. It is
not clear whether the Prepayment Assumption would be taken into account in
determining the life of the REMIC Regular Certificate for this purpose. However,
the Legislative History states that the same rules that apply to accrual of
market discount (which rules require use of a Prepayment Assumption in accruing
market discount with respect to REMIC Regular Certificates without regard to
whether such Certificates have OID) will also apply in amortizing bond premium
under Code Section 171. The Code provides that amortizable bond premium will be
allocated among the interest payments on such REMIC Regular Certificates and
will be applied as an offset against such interest payment.
Deferred Interest. Certain classes of REMIC Regular Certificates may
provide for the accrual of Deferred Interest with respect to one or more ARM
Loans. Any Deferred Interest that accrues with respect to a class of REMIC
Regular Certificates will constitute income to the holders of such Certificates
prior to the time distributions of cash with respect to such Deferred Interest
are made. It is unclear, under the OID Regulations, whether any of the interest
on such Certificates will constitute qualified stated interest or whether all or
a portion of the interest payable on such Certificates must be included in the
stated redemption price at maturity of the Certificates and accounted for as OID
(which could accelerate such inclusion). Interest on
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REMIC Regular Certificates must in any event be accounted for under an accrual
method by the holders of such Certificates and, therefore, applying the latter
analysis may result only in a slight difference in the timing of the inclusion
in income of interest on such REMIC Regular Certificates.
Effects of Defaults and Delinquencies. Certain Series of Certificates
may contain one or more classes of Subordinated Certificates, and in the event
there are defaults or delinquencies on the Mortgage Assets, amounts that would
otherwise be distributed on the Subordinated Certificates may instead be
distributed on the Senior Certificates. Subordinated Certificateholders
nevertheless will be required to report income with respect to such Certificates
under an accrual method without giving effect to delays and reductions in
distributions on such Subordinated Certificates attributable to defaults and
delinquencies on the Mortgage Assets, except to the extent that it can be
established that such amounts are uncollectible. As a result, the amount of
income reported by a Subordinated Certificateholder in any period could
significantly exceed the amount of cash distributed to such holder in that
period. The holder will eventually be allowed a loss (or will be allowed to
report a lesser amount of income) to the extent that the aggregate amount of
distributions on the Subordinated Certificate is reduced as a result of defaults
and delinquencies on the Mortgage Assets. Timing and characterization of such
losses is discussed in "-- REMIC Regular Certificates -- Treatment of Realized
Losses" below.
Sale, Exchange or Redemption. If a REMIC Regular Certificate is sold,
exchanged, redeemed or retired, the seller will recognize gain or loss equal to
the difference between the amount realized on the sale, exchange, redemption, or
retirement and the seller's adjusted basis in the REMIC Regular Certificate.
Such adjusted basis generally will equal the cost of the REMIC Regular
Certificate to the seller, increased by any OID and market discount included in
the seller's gross income with respect to the REMIC Regular Certificate, and
reduced (but not below zero) by payments included in the stated redemption price
at maturity previously received by the seller and by any amortized premium.
Similarly, a holder who receives a payment that is part of the stated redemption
price at maturity of a REMIC Regular Certificate will recognize gain equal to
the excess, if any, of the amount of the payment over the holder's adjusted
basis in the REMIC Regular Certificate. A REMIC Regular Certificateholder who
receives a final payment that is less than the holder's adjusted basis in the
REMIC Regular Certificate will generally recognize a loss. Except as provided in
the following paragraph and as provided under "-- Market Discount" above, any
such gain or loss will be capital gain or loss, provided that the REMIC Regular
Certificate is held as a "capital asset" (generally, property held for
investment) within the meaning of Code Section 1221.
Gain from the sale or other disposition of a REMIC Regular Certificate
that might otherwise be capital gain will be treated as ordinary income to the
extent that such gain does not exceed the excess, if any, of (i) the amount that
would have been includible in such holder's income with respect to the REMIC
Regular Certificate had income accrued thereon at a rate equal to 110% of the
AFR as defined in Code Section 1274(d) determined as of the date of purchase of
such REMIC Regular Certificate, over (ii) the amount actually includible in such
holder's income.
The Certificates will be "evidences of indebtedness" within the meaning
of Code Section 582(c)(1), so that gain or loss recognized from the sale of a
REMIC Regular Certificate by a bank or a thrift institution to which such
section applies will be ordinary income or loss.
The REMIC Regular Certificate information reports will include a
statement of the adjusted issue price of the REMIC Regular Certificate at the
beginning of each accrual period. In addition, the reports will include
information necessary to compute the accrual of any market discount that may
arise upon secondary trading of REMIC Regular Certificates. Because exact
computation of the accrual of market discount on a constant yield method would
require information relating to the holder's purchase price which the REMIC may
not have, it appears that the information reports will only require information
pertaining to the appropriate proportionate method of accruing market discount.
Accrued Interest Certificates. Certain of the REMIC Regular Certificates
("Payment Lag Certificates") may provide for payments of interest based on a
period that corresponds to the interval between Distribution
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Dates but that ends prior to each such Distribution Date. The period between the
Closing Date for Payment Lag Certificates and their first Distribution Date may
or may not exceed such interval. Purchasers of Payment Lag Certificates for
which the period between the Closing Date and the first Distribution Date does
not exceed such interval could pay upon purchase of the REMIC Regular
Certificates accrued interest in excess of the accrued interest that would be
paid if the interest paid on the Distribution Date were interest accrued from
Distribution Date to Distribution Date. If a portion of the initial purchase
price of a REMIC Regular Certificate is allocable to interest that has accrued
prior to the issue date ("pre-issuance accrued interest") and the REMIC Regular
Certificate provides for a payment of stated interest on the first payment date
(and the first payment date is within one year of the issue date) that equals or
exceeds the amount of the pre-issuance accrued interest, then the REMIC Regular
Certificates' issue price may be computed by subtracting from the issue price
the amount of pre-issuance accrued interest, rather than as an amount payable on
the REMIC Regular Certificate. However, it is unclear under this method how the
OID Regulations treat interest on Payment Lag Certificates. Therefore, in the
case of a Payment Lag Certificate, the Trust Fund intends to include accrued
interest in the issue price and report interest payments made on the first
Distribution Date as interest to the extent such payments represent interest for
the number of days that the Certificateholder has held such Payment Lag
Certificate during the first accrual period.
Investors should consult their own tax advisors concerning the treatment
for federal income tax purposes of Payment Lag Certificates.
Non-Interest Expenses of the REMIC. Under temporary Treasury
regulations, if the REMIC is considered to be a "single-class REMIC," a portion
of the REMIC's servicing, administrative and other non-interest expenses will be
allocated as a separate item to those REMIC Regular Certificateholders that are
"pass-through interest holders." Certificateholders that are pass-through
interest holders should consult their own tax advisors about the impact of these
rules on an investment in the REMIC Regular Certificates. See "Pass-Through of
Non-Interest Expenses of the REMIC" under "Taxation of Owners of REMIC Residual
Certificates" below.
Treatment of Realized Losses. Although not entirely clear, it appears
that holders of REMIC Regular Certificates that are corporations should in
general be allowed to deduct as an ordinary loss any loss sustained during the
taxable year on account of any such Certificates becoming wholly or partially
worthless, and that, in general, holders of Certificates that are not
corporations should be allowed to deduct as a short-term capital loss any loss
sustained during the taxable year on account of any such Certificates becoming
wholly worthless. Although the matter is not entirely clear, non-corporate
holders of Certificates may be allowed a bad debt deduction at such time that
the principal balance of any such Certificate is reduced to reflect realized
losses resulting from any liquidated Mortgage Assets. The Internal Revenue
Service, however, could take the position that non-corporate holders will be
allowed a bad debt deduction to reflect realized losses only after all Mortgage
Assets remaining in the related Trust Fund have been liquidated or the
Certificates of the related Series have been otherwise retired. Potential
investors and holders of the Certificates are urged to consult their own tax
advisors regarding the appropriate timing, amount and character of any loss
sustained with respect to such Certificates, including any loss resulting from
the failure to recover previously accrued interest or discount income. Special
loss rules are applicable to banks and thrift institutions, including rules
regarding reserves for bad debts. Such taxpayers are advised to consult their
tax advisors regarding the treatment of losses on Certificates.
Non-U.S. Persons. Generally, payments of interest (including any payment
with respect to accrued OID) on the REMIC Regular Certificates to a REMIC
Regular Certificateholder who is not a U.S. Person and is not engaged in a trade
or business within the United States will not be subject to federal withholding
tax if (i) such REMIC Regular Certificateholder does not actually or
constructively own 10 percent or more of the combined voting power of all
classes of equity in the Issuer; (ii) such REMIC Regular Certificateholder is
not a controlled foreign corporation (within the meaning of Code Section 957)
related to the Issuer; and (iii) such REMIC Regular Certificateholder complies
with certain identification requirements (including delivery of a statement,
signed by the REMIC Regular Certificateholder under penalties of perjury,
certifying that such REMIC Regular Certificateholder is a foreign person and
providing the name and address of such
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REMIC Regular Certificateholder). If a REMIC Regular Certificateholder is not
exempt from withholding, distributions of interest to such holder, including
distributions in respect of accrued OID, may be subject to a 30% withholding
tax, subject to reduction under any applicable tax treaty.
Further, a REMIC Regular Certificate will not be included in the estate
of a non-resident alien individual and will not be subject to United States
estate taxes. However, Certificateholders who are non-resident alien individuals
should consult their tax advisors concerning this question.
REMIC Regular Certificateholders who are not U.S. Persons and persons
related to such holders should not acquire any REMIC Residual Certificates, and
holders of REMIC Residual Certificates (the "REMIC Residual Certificateholder")
and persons related to REMIC Residual Certificateholders should not acquire any
REMIC Regular Certificates without consulting their tax advisors as to the
possible adverse tax consequences of doing so.
Information Reporting and Backup Withholding. The Master Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a REMIC Regular Certificateholder at any
time during such year, such information as may be deemed necessary or desirable
to assist REMIC Regular Certificateholders in preparing their federal income tax
returns, or to enable holders to make such information available to beneficial
owners or financial intermediaries that hold such REMIC Regular Certificates on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a distribution to a recipient would be allowed as a
credit against such recipient's federal income tax liability.
b. Taxation of Owners of REMIC Residual Certificates
Allocation of the Income of the REMIC to the REMIC Residual
Certificates. The REMIC will not be subject to federal income tax except with
respect to income from prohibited transactions and certain other transactions.
See "-- Prohibited Transactions and Other Taxes" below. Instead, each original
holder of a residual interest in a REMIC ("REMIC Residual Certificate") will
report on its federal income tax return, as ordinary income, its share of the
taxable income of the REMIC for each day during the taxable year on which such
holder owns any REMIC Residual Certificates. The taxable income of the REMIC for
each day will be determined by allocating the taxable income of the REMIC for
each calendar quarter ratably to each day in the quarter. Such a holder's share
of the taxable income of the REMIC for each day will be based on the portion of
the outstanding REMIC Residual Certificates that such holder owns on that day.
The taxable income of the REMIC will be determined under an accrual method and
will be taxable to the holders of REMIC Residual Certificates without regard to
the timing or amounts of cash distributions by the REMIC. Ordinary income
derived from REMIC Residual Certificates will be "portfolio income" for purposes
of the taxation of taxpayers subject to the limitations on the deductibility of
"passive losses." As residual interests, the REMIC Residual Certificates will be
subject to tax rules, described below, that differ from those that would apply
if the REMIC Residual Certificates were treated for federal income tax purposes
as direct ownership interests in the Certificates or as debt instruments issued
by the REMIC.
A REMIC Residual Certificateholder may be required to include taxable
income from the REMIC Residual Certificate in excess of the cash distributed.
For example, a structure where principal distributions are made serially on
regular interests (that is, a fast-pay, slow-pay structure) may generate such a
mismatching of income and cash distributions (that is, "phantom income"). This
mismatching may be caused by the use of certain required tax accounting methods
by the REMIC, variations in the prepayment rate of the underlying Mortgage
Assets and certain other factors. Depending upon the structure of a particular
transaction, the aforementioned factors may significantly reduce the after-tax
yield of a REMIC Residual Certificate to a REMIC Residual Certificateholder.
Investors should consult their own tax advisors concerning the federal
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income tax treatment of a REMIC Residual Certificate and the impact of such tax
treatment on the after-tax yield of a REMIC Residual Certificate.
A subsequent REMIC Residual Certificateholder also will report on its
federal income tax return amounts representing a daily share of the taxable
income of the REMIC for each day that such REMIC Residual Certificateholder owns
such REMIC Residual Certificate. Those daily amounts generally would equal the
amounts that would have been reported for the same days by an original REMIC
Residual Certificateholder, as described above. The Legislative History
indicates that certain adjustments may be appropriate to reduce (or increase)
the income of a subsequent holder of a REMIC Residual Certificate that purchased
such REMIC Residual Certificate at a price greater than (or less than) the
adjusted basis such REMIC Residual Certificate would have in the hands of an
original REMIC Residual Certificateholder. See "-- Sale or Exchange of REMIC
Residual Certificates" below. It is not clear, however, whether such adjustments
will in fact be permitted or required and, if so, how they would be made. The
REMIC Regulations do not provide for any such adjustments.
Taxable Income of the REMIC Attributable to Residual Interests. The
taxable income of the REMIC will reflect a netting of (i) the income from the
Mortgage Assets and the REMIC's other assets and (ii) the deductions allowed to
the REMIC for interest and OID on the REMIC Regular Certificates and, except as
described above under "-- Taxation of Owners of REMIC Regular Certificates --
Non-Interest Expenses of the REMIC," other expenses. REMIC taxable income is
generally determined in the same manner as the taxable income of an individual
using the accrual method of accounting, except that (i) the limitations on
deductibility of investment interest expense and expenses for the production of
income do not apply, (ii) all bad loans will be deductible as business bad
debts, and (iii) the limitation on the deductibility of interest and expenses
related to tax-exempt income will apply. The REMIC's gross income includes
interest, original issue discount income, and market discount income, if any, on
the Mortgage Loans, reduced by amortization of any premium on the Mortgage
Loans, plus income on reinvestment of cash flows and reserve assets, plus any
cancellation of indebtedness income upon allocation of realized losses to the
REMIC Regular Certificates. Note that the timing of cancellation of indebtedness
income recognized by REMIC Residual Certificateholders resulting from defaults
and delinquencies on Mortgage Assets may differ from the time of the actual loss
on the Mortgage Asset. The REMIC's deductions include interest and original
issue discount expense on the REMIC Regular Certificates, servicing fees on the
Mortgage Loans, other administrative expenses of the REMIC and realized losses
on the Mortgage Loans. The requirement that REMIC Residual Certificateholders
report their pro rata share of taxable income or net loss of the REMIC will
continue until there are no Certificates of any class of the related Series
outstanding.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate tax basis in its assets equal to the sum of the issue prices
of the REMIC Regular Certificates and the REMIC Residual Certificates (or, if a
class of Certificates is not sold initially, its fair market value). Such
aggregate basis will be allocated among the Mortgage Assets and other assets of
the REMIC in proportion to their respective fair market value. A Mortgage Asset
will be deemed to have been acquired with discount or premium to the extent that
the REMIC's basis therein is less than or greater than its principal balance,
respectively. Any such discount (whether market discount or OID) will be
includible in the income of the REMIC as it accrues, in advance of receipt of
the cash attributable to such income, under a method similar to the method
described above for accruing OID on the REMIC Regular Certificates. The REMIC
expects to elect under Code Section 171 to amortize any premium on the Mortgage
Assets. Premium on any Mortgage Asset to which such election applies would be
amortized under a constant yield method. It is not clear whether the yield of a
Mortgage Asset would be calculated for this purpose based on scheduled payments
or taking account of the Prepayment Assumption. Additionally, such an election
would not apply to the yield with respect to any underlying mortgage loan
originated on or before September 27, 1985. Instead, premium with respect to
such a mortgage loan would be allocated among the principal payments thereon and
would be deductible by the REMIC as those payments become due.
The REMIC will be allowed a deduction for interest and OID on the REMIC
Regular Certificates. The amount and method of accrual of OID will be calculated
for this purpose in the same manner as described
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above with respect to REMIC Regular Certificates except that the 0.25% per annum
de minimis rule and adjustments for subsequent holders described therein will
not apply.
A REMIC Residual Certificateholder will not be permitted to amortize the
cost of the REMIC Residual Certificate as an offset to its share of the REMIC's
taxable income. However, REMIC taxable income will not include cash received by
the REMIC that represents a recovery of the REMIC's basis in its assets, and, as
described above, the issue price of the REMIC Residual Certificates will be
added to the issue price of the REMIC Regular Certificates in determining the
REMIC's initial basis in its assets. See "-- Sale or Exchange of REMIC Residual
Certificates" below. For a discussion of possible adjustments to income of a
subsequent holder of a REMIC Residual Certificate to reflect any difference
between the actual cost of such REMIC Residual Certificate to such holder and
the adjusted basis such REMIC Residual Certificate would have in the hands of an
original REMIC Residual Certificateholder, see " -- Allocation of the Income of
the REMIC to the REMIC Residual Certificates" above.
Net Losses of the REMIC. The REMIC will have a net loss for any calendar
quarter in which its deductions exceed its gross income. Such net loss would be
allocated among the REMIC Residual Certificateholders in the same manner as the
REMIC's taxable income. The net loss allocable to any REMIC Residual Certificate
will not be deductible by the holder to the extent that such net loss exceeds
such holder's adjusted basis in such REMIC Residual Certificate. Any net loss
that is not currently deductible by reason of this limitation may only be used
by such REMIC Residual Certificateholder to offset its share of the REMIC's
taxable income in future periods (but not otherwise). The ability of REMIC
Residual Certificateholders that are individuals or closely held corporations to
deduct net losses may be subject to additional limitations under the Code.
Mark to Market Rules. Prospective purchasers of a REMIC Residual
Certificate should be aware that the IRS recently released proposed regulations
(the "Proposed Mark-to-Market Regulations") which provide that a REMIC Residual
Certificate acquired after January 3, 1995 cannot be marked to market. The
Proposed Mark-to-Market Regulations change the temporary regulations which
allowed a Residual Certificate to be marked to market provided that it was not a
"negative value" residual interest and did not have the same economic effect as
a "negative value" residual interest.
Pass-Through of Non-Interest Expenses of the REMIC. As a general rule,
all of the fees and expenses of a REMIC will be taken into account by holders of
the REMIC Residual Certificates. In the case of a single class REMIC, however,
the expenses and a matching amount of additional income will be allocated, under
temporary Treasury regulations, among the REMIC Regular Certificateholders and
the REMIC Residual Certificateholders on a daily basis in proportion to the
relative amounts of income accruing to each Certificateholder on that day. In
general terms, a single class REMIC is one that either (i) would qualify, under
existing Treasury regulations, as a grantor trust if it were not a REMIC
(treating all interests as ownership interests, even if they would be classified
as debt for federal income tax purposes) or (ii) is similar to such a trust and
is structured with the principal purpose of avoiding the single class REMIC
rules. Unless otherwise stated in the applicable Prospectus Supplement, the
expenses of the REMIC will be allocated to holders of the related REMIC Residual
Certificates in their entirety and not to holders of the related REMIC Regular
Certificates.
In the case of individuals (or trusts, estates or other persons that
compute their income in the same manner as individuals) who own an interest in a
REMIC Regular Certificate or a REMIC Residual Certificate directly or through a
pass-through interest holder that is required to pass miscellaneous itemized
deductions through to its owners or beneficiaries (e.g., a partnership, an S
corporation or a grantor trust), such expenses will be deductible under Code
Section 67 only to the extent that such expenses, plus other "miscellaneous
itemized deductions" of the individual, exceed 2% of such individual's adjusted
gross income. In addition, Code Section 68 provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a certain amount (the "Applicable Amount") will be reduced by the lesser
of (i) 3% of the excess of the individual's adjusted gross income over the
Applicable Amount or (ii) 80% of the amount of itemized deductions otherwise
allowable for the taxable year. The amount of additional taxable
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income recognized by REMIC Residual Certificateholders who are subject to the
limitations of either Code Section 67 or Code Section 68 may be substantial.
Further, holders (other than corporations) subject to the alternative minimum
tax may not deduct miscellaneous itemized deductions in determining such
holders' alternative minimum taxable income. The REMIC is required to report to
each pass-through interest holder and to the IRS such holder's allocable share,
if any, of the REMIC's non-interest expenses. The term "pass-through interest
holder" generally refers to individuals, entities taxed as individuals and
certain pass-through entities, but does not include real estate investment
trusts. REMIC Residual Certificateholders that are pass-through interest holders
should consult their own tax advisors about the impact of these rules on an
investment in the REMIC Residual Certificates.
Excess Inclusions. A portion of the income on a REMIC Residual
Certificate (referred to in the Code as an "excess inclusion") for any calendar
quarter will, with an exception discussed below for certain thrift institutions,
be subject to federal income tax in all events. Thus, for example, an excess
inclusion (i) may not, except as described below, be offset by any unrelated
losses, deductions or loss carryovers of a REMIC Residual Certificateholder;
(ii) will be treated as "unrelated business taxable income" within the meaning
of Code Section 512 if the REMIC Residual Certificateholder is a pension fund or
any other organization that is subject to tax only on its unrelated business
taxable income (see "-- Tax-Exempt Investors" below); and (iii) is not eligible
for any reduction in the rate of withholding tax in the case of a REMIC Residual
Certificateholder that is a foreign investor. See "-- Non-U.S. Persons" below.
The exception for thrift institutions is available only to the institution
holding the REMIC Residual Certificate and not to any affiliate of the
institution, unless the affiliate is a subsidiary all the stock of which, and
substantially all the indebtedness of which, is held by the institution, and
which is organized and operated exclusively in connection with the organization
and operation of one or more REMICs.
Except as discussed in the following paragraph, with respect to any
REMIC Residual Certificateholder, the excess inclusions for any calendar quarter
is the excess, if any, of (i) the income of such REMIC Residual
Certificateholder for that calendar quarter from its REMIC Residual Certificate
over (ii) the sum of the "daily accruals" (as defined below) for all days during
the calendar quarter on which the REMIC Residual Certificateholder holds such
REMIC Residual Certificate. For this purpose, the daily accruals with respect to
a REMIC Residual Certificate are determined by allocating to each day in the
calendar quarter its ratable portion of the product of the "adjusted issue
price" (as defined below) of the REMIC Residual Certificate at the beginning of
the calendar quarter and 120 percent of the "Federal long-term rate" in effect
at the time the REMIC Residual Certificate is issued. For this purpose, the
"adjusted issue price" of a REMIC Residual Certificate at the beginning of any
calendar quarter equals the issue price of the REMIC Residual Certificate,
increased by the amount of daily accruals for all prior quarters, and decreased
(but not below zero) by the aggregate amount of payments made on the REMIC
Residual Certificate before the beginning of such quarter. The "federal
long-term rate" is an average of current yields on Treasury securities with a
remaining term of greater than nine years, computed and published monthly by the
IRS.
The Small Business Job Protection Act of 1996 has eliminated the special
rule permitting Section 593 institutions ("thrift institutions") to use net
operating losses and other allowable deductions to offset their excess inclusion
income from REMIC Residual Certificates that have "significant value" within the
meaning of the REMIC Regulations, effective for taxable years beginning after
December 31, 1995, except with respect to Residual Certificates continuously
held by a thrift institution since November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides
three rules for determining the effect of excess inclusions on the alternative
minimum taxable income of a residual holder. First, alternative minimum taxable
income for such residual holder is determined without regard to the special rule
that taxable income cannot be less than excess inclusions. Second, a residual
holder's alternative minimum taxable income for a tax year cannot be less than
the excess inclusions for the year. Third, the amount of any alternative minimum
tax net operating loss deductions must be computed without regard to any excess
inclusions. These rules are effective for tax years beginning after December 31,
1986, unless a residual holder elects to have such rules apply only to tax years
beginning after August 20, 1996.
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In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Code Section 857(b)(2),
excluding any net capital gain), will be allocated among the shareholders of
such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Regulated investment companies, common trust funds and certain
cooperatives are subject to similar rules.
Payments. Any distribution made on a REMIC Residual Certificate to a
REMIC Residual Certificateholder will be treated as a non-taxable return of
capital to the extent it does not exceed the REMIC Residual Certificateholder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
exceeds such adjusted basis, it will be treated as gain from the sale of the
REMIC Residual Certificate.
Sale or Exchange of REMIC Residual Certificates. If a REMIC Residual
Certificate is sold or exchanged, the seller will generally recognize gain or
loss equal to the difference between the amount realized on the sale or exchange
and its adjusted basis in the REMIC Residual Certificate (except that the
recognition of loss may be limited under the "wash sale" rules described below).
A holder's adjusted basis in a REMIC Residual Certificate generally equals the
cost of such REMIC Residual Certificate to such REMIC Residual
Certificateholder, increased by the taxable income of the REMIC that was
included in the income of such REMIC Residual Certificateholder with respect to
such REMIC Residual Certificate, and decreased (but not below zero) by the net
losses that have been allowed as deductions to such REMIC Residual
Certificateholder with respect to such REMIC Residual Certificate and by the
distributions received thereon by such REMIC Residual Certificateholder. In
general, any such gain or loss will be capital gain or loss provided the REMIC
Residual Certificate is held as a capital asset. However, REMIC Residual
Certificates will be "evidences of indebtedness" within the meaning of Code
Section 582(c)(1), so that gain or loss recognized from sale of a REMIC Residual
Certificate by a bank or thrift institution to which such section applies would
be ordinary income or loss.
Except as provided in Treasury regulations yet to be issued, if the
seller of a REMIC Residual Certificate reacquires such REMIC Residual
Certificate, or acquires any other REMIC Residual Certificate, any residual
interest in another REMIC or similar interest in a "taxable mortgage pool" (as
defined in Code Section 7701(i)) during the period beginning six months before,
and ending six months after, the date of such sale, such sale will be subject to
the "wash sale" rules of Code Section 1091. In that event, any loss realized by
the REMIC Residual Certificateholder on the sale will not be deductible, but,
instead, will increase such REMIC Residual Certificateholder's adjusted basis in
the newly acquired asset.
c. Prohibited Transactions and Other Taxes
The Code imposes a tax on REMICs equal to 100% of the net income derived
from "prohibited transactions" (the "Prohibited Transactions Tax"). In general,
subject to certain specified exceptions, a prohibited transaction means the
disposition of a Mortgage Asset, the receipt of income from a source other than
a Mortgage Asset or certain other permitted investments, the receipt of
compensation for services, or gain from the disposition of an asset purchased
with the payments on the Mortgage Assets for temporary investment pending
distribution on the Certificates. It is not anticipated that the Trust Fund for
any Series of Certificates will engage in any prohibited transactions in which
it would recognize a material amount of net income.
In addition, certain contributions to a Trust Fund as to which an
election has been made to treat such Trust Fund as a REMIC made after the day on
which such Trust Fund issues all of its interests could result in the imposition
of a tax on the Trust Fund equal to 100% of the value of the contributed
property (the "Contributions Tax"). No Trust Fund for any Series of Certificates
will accept contributions that would subject it to such tax.
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In addition, a Trust Fund as to which an election has been made to treat
such Trust Fund as a REMIC may also be subject to federal income tax at the
highest corporate rate on net income from foreclosure property," determined
by reference to the rules applicable to real estate investment trusts. "Net
income from foreclosure property" generally means income from foreclosure
property other than qualifying income for a real estate investment trust.
Where any Prohibited Transactions Tax, Contributions Tax, tax on net
income from foreclosure property or state or local income or franchise tax that
may be imposed on a REMIC relating to any Series of Certificates arises out of
or results from (i) a breach of the related Master Servicer's, Trustee's or
Depositor's obligations, as the case may be, under the related Agreement for
such Series, such tax will be borne by such Master Servicer, Trustee or
Originator, Seller, as the case may be, out of its own funds or (ii) the
Depositor's obligation to repurchase a Mortgage Loan, such tax will be borne by
the Depositor. In the event that such Master Servicer, Trustee or Orginator, as
the case may be, fails to pay or is not required to pay any such tax as provided
above, such tax will be payable out of the Trust Fund for such Series and will
result in a reduction in amounts available to be distributed to the
Certificateholders of such Series.
d. Liquidation and Termination
If the REMIC adopts a plan of complete liquidation, within the meaning
of Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in
the REMIC's final tax return a date on which such adoption is deemed to occur,
and sells all of its assets (other than cash) within a 90-day period beginning
on such date, the REMIC will not be subject to any Prohibited Transaction Tax,
provided that the REMIC credits or distributes in liquidation all of the sale
proceeds plus its cash (other than the amounts retained to meet claims) to
holders of Regular and REMIC Residual Certificates within the 90-day period.
The REMIC will terminate shortly following the retirement of the REMIC
Regular Certificates. If a REMIC Residual Certificateholder's adjusted basis in
the REMIC Residual Certificate exceeds the amount of cash distributed to such
REMIC Residual Certificateholder in final liquidation of its interest, then it
would appear that the REMIC Residual Certificateholder would be entitled to a
loss equal to the amount of such excess. It is unclear whether such a loss, if
allowed, will be a capital loss or an ordinary loss.
e. Administrative Matters
Solely for the purpose of the administrative provisions of the Code, the
REMIC generally will be treated as a partnership and the REMIC Residual
Certificateholders will be treated as the partners. Certain information will be
furnished quarterly to each REMIC Residual Certificateholder who held a REMIC
Residual Certificate on any day in the previous calendar quarter.
Each REMIC Residual Certificateholder is required to treat items on its
return consistently with their treatment on the REMIC's return, unless the REMIC
Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC. The IRS may assert a deficiency resulting
from a failure to comply with the consistency requirement without instituting an
administrative proceeding at the REMIC level. The REMIC does not intend to
register as a tax shelter pursuant to Code Section 6111 because it is not
anticipated that the REMIC will have a net loss for any of the first five
taxable years of its existence. Any person that holds a REMIC Residual
Certificate as a nominee for another person may be required to furnish the
REMIC, in a manner to be provided in Treasury regulations, with the name and
address of such person and other information.
f. Tax-Exempt Investors
Any REMIC Residual Certificateholder that is a pension fund or other
entity that is subject to federal income taxation only on its "unrelated
business taxable income" within the meaning of Code Section 512 will be subject
to such tax on that portion of the distributions received on a REMIC Residual
Certificate that is considered an excess inclusion. See "-- Taxation of Owners
of REMIC Residual Certificates -- Excess Inclusions" above.
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g. Residual Certificate Payments -- Non-U.S. Persons
Amounts paid to REMIC Residual Certificateholders who are not U.S.
Persons (see "-- Taxation of Owners of REMIC Regular Certificates -- Non-U.S.
Persons" above) are treated as interest for purposes of the 30% (or lower treaty
rate) United States withholding tax. Amounts distributed to holders of REMIC
Residual Certificates should qualify as "portfolio interest," subject to the
conditions described in "-- Taxation of Owners of REMIC Regular Certificates"
above, but only to the extent that the underlying mortgage loans were originated
after July 18, 1984. Furthermore, the rate of withholding on any income on a
REMIC Residual Certificate that is excess inclusion income will not be subject
to reduction under any applicable tax treaties. See "-- Taxation of Owners of
REMIC Residual Certificates -- Excess Inclusions" above. If the portfolio
interest exemption is unavailable, such amount will be subject to United States
withholding tax when paid or otherwise distributed (or when the REMIC Residual
Certificate is disposed of) under rules similar to those for withholding upon
disposition of debt instruments that have OID. The Code, however, grants the
Treasury Department authority to issue regulations requiring that those amounts
be taken into account earlier than otherwise provided where necessary to prevent
avoidance of tax (for example, where the REMIC Residual Certificates do not have
significant value). See "-- Taxation of Owners of REMIC Residual Certificates --
Excess Inclusions" above. If the amounts paid to REMIC Residual
Certificateholders that are not U.S. Persons are effectively connected with
their conduct of a trade or business within the United States, the 30% (or lower
treaty rate) withholding will not apply. Instead, the amounts paid to such
non-U.S. Person will be subject to U.S. federal income taxation at regular
graduated rates. For special restrictions on the transfer of REMIC Residual
Certificates, see "-- Tax-Related Restrictions on Transfers of REMIC Residual
Certificates" below.
REMIC Regular Certificateholders and persons related to such holders
should not acquire any REMIC Residual Certificates, and REMIC Residual
Certificateholders and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates, without consulting their tax
advisors as to the possible adverse tax consequences of such acquisition.
Tax-Related Restrictions on Transfers of REMIC Residual Certificates
Disqualified Organizations. An entity may not qualify as a REMIC unless
there are reasonable arrangements designed to ensure that residual interests in
such entity are not held by "disqualified organizations" (as defined below).
Further, a tax is imposed on the transfer of a residual interest in a REMIC to a
"disqualified organization." The amount of the tax equals the product of (i) an
amount (as determined under the REMIC Regulations) equal to the present value of
the total anticipated "excess inclusions" with respect to such interest for
periods after the transfer and (ii) the highest marginal federal income tax rate
applicable to corporations. The tax is imposed on the transferor unless the
transfer is through an agent (including a broker or other middleman) for a
disqualified organization, in which event the tax is imposed on the agent. The
person otherwise liable for the tax shall be relieved of liability for the tax
if the transferee furnished to such person an affidavit that the transferee is
not a disqualified organization and, at the time of the transfer, such person
does not have actual knowledge that the affidavit is false. A "disqualified
organization" means (A) the United States, any State, possession or political
subdivision thereof, any foreign government, any international organization or
any agency or instrumentality of any of the foregoing (provided that such term
does not include an instrumentality if all its activities are subject to tax
and, except for FHLMC, a majority of its board of directors is not selected by
any such governmental agency), (B) any organization (other than certain farmers'
cooperatives) generally exempt from federal income taxes unless such
organization is subject to the tax on "unrelated business taxable income" and
(C) a rural electric or telephone cooperative.
A tax is imposed on a "pass-through entity" (as defined below) holding a
residual interest in a REMIC if at any time during the taxable year of the
pass-through entity a disqualified organization is the record holder of an
interest in such entity. The amount of the tax is equal to the product of (A)
the amount of excess inclusions for the taxable year allocable to the interest
held by the disqualified organization and (B) the highest marginal federal
income tax rate applicable to corporations. The pass-through entity otherwise
liable for the tax, for any period during which the disqualified organization is
the record holder of an interest in such
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entity, will be relieved of liability for the tax if such record holder
furnishes to such entity an affidavit that such record holder is not a
disqualified organization and, for such period, the pass-through entity does not
have actual knowledge that the affidavit is false. For this purpose, a
"pass-through entity" means (i) a regulated investment company, real estate
investment trust or common trust fund, (ii) a partnership, trust or estate and
(iii) certain cooperatives. Except as may be provided in Treasury regulations
not yet issued, any person holding an interest in a pass-through entity as a
nominee for another will, with respect to such interest, be treated as a
pass-through entity. The tax on pass-through entities is generally effective for
periods after March 31, 1988, except that in the case of regulated investment
companies, real estate investment trusts, common trust funds and publicly-traded
partnerships the tax shall apply only to taxable years of such entities
beginning after December 31, 1988. Under proposed legislation, large
partnerships (generally with 250 or more partners) will be taxable on excess
inclusion income as if all partners were disqualified organizations.
In order to comply with these rules, the Agreement will provide that no
record or beneficial ownership interest in a REMIC Residual Certificate may be
purchased, transferred or sold, directly or indirectly, without the express
written consent of the Master Servicer. The Master Servicer will grant such
consent to a proposed transfer only if it receives the following: (i) an
affidavit from the proposed transferee to the effect that it is not a
disqualified organization and is not acquiring the REMIC Residual Certificate as
a nominee or agent for a disqualified organization and (ii) a covenant by the
proposed transferee to the effect that the proposed transferee agrees to be
bound by and to abide by the transfer restrictions applicable to the REMIC
Residual Certificate.
Noneconomic REMIC Residual Certificates. The REMIC Regulations
disregard, for federal income tax purposes, any transfer of a Noneconomic REMIC
Residual Certificate to a "U.S. Person," as defined above, unless no significant
purpose of the transfer is to enable the transferor to impede the assessment or
collection of tax. A Noneconomic REMIC Residual Certificate is any REMIC
Residual Certificate (including a REMIC Residual Certificate with a positive
value at issuance) unless, at the time of transfer, taking into account the
Prepayment Assumption and any required or permitted clean up calls or required
liquidation provided for in the REMIC's organizational documents, (i) the
present value of the expected future distributions on the REMIC Residual
Certificate at least equals the product of the present value of the anticipated
excess inclusions and the highest corporate income tax rate in effect for the
year in which the transfer occurs and (ii) the transferor reasonably expects
that the transferee will receive distributions from the REMIC at or after the
time at which taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. A significant purpose to impede the
assessment or collection of tax exists if the transferor, at the time of the
transfer, either knew or should have known that the transferee would be
unwilling or unable to pay taxes due on its share of the taxable income of the
REMIC. A transferor is presumed not to have such knowledge if (i) the transferor
conducted a reasonable investigation of the transferee and (ii) the transferee
acknowledges to the transferor that the residual interest may generate tax
liabilities in excess of the cash flow and the transferee represents that it
intends to pay such taxes associated with the residual interest as they become
due. If a transfer of a Noneconomic REMIC Residual Certificate is disregarded,
the transferor would continue to be treated as the owner of the REMIC Residual
Certificate and would continue to be subject to tax on its allocable portion of
the net income of the REMIC.
Foreign Investors. The REMIC Regulations provide that the transfer of a
REMIC Residual Certificate that has a "tax avoidance potential" to a "foreign
person" will be disregarded for federal income tax purposes. This rule appears
to apply to a transferee who is not a U.S. Person unless such transferee's
income in respect of the REMIC Residual Certificate is effectively connected
with the conduct of a United States trade or business. A REMIC Residual
Certificate is deemed to have a tax avoidance potential unless, at the time of
transfer, the transferor reasonably expects that the REMIC will distribute to
the transferee amounts that will equal at least 30 percent of each excess
inclusion, and that such amounts will be distributed at or after the time the
excess inclusion accrues and not later than the end of the calendar year
following the year of accrual. If the non-U.S. Person transfers the REMIC
Residual Certificate to a U.S. Person, the transfer will be disregarded, and the
foreign transferor will continue to be treated as the owner, if the transfer has
the effect of allowing the transferor to avoid tax on accrued excess inclusions.
The provisions in the REMIC Regulations regarding transfers of REMIC Residual
Certificates that have tax avoidance potential to foreign persons are
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effective for all transfers after June 30, 1992. The Agreement will provide that
no record or beneficial ownership interest in a REMIC Residual Certificate may
be transferred, directly or indirectly, to a non-U.S. Person unless such person
provides the Trustee with a duly completed I.R.S. Form 4224 and the Trustee
consents to such transfer in writing.
Any attempted transfer or pledge in violation of the transfer
restrictions shall be absolutely null and void and shall vest no rights in any
purported transferee. Investors in REMIC Residual Certificates are advised to
consult their own tax advisors with respect to transfers of the REMIC Residual
Certificates and, in addition, pass-through entities are advised to consult
their own tax advisors with respect to any tax which may be imposed on a
pass-through entity.
Tax Characterization of a Trust Fund as a Partnership
Dechert Price & Rhoads, special counsel to the Depositor, or such other
counsel specified in the related Prospectus Supplement, will deliver its opinion
that a Trust Fund for which a partnership election is made will not be an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption that
the terms of the Trust Agreement and related documents will be complied with,
and on counsel's conclusions that (1) the Trust Fund will take such actions
necessary to prevent a business trust from being classified as an association
taxable as a corporation, (2) the nature of the income of the Trust Fund will
exempt it from the rule that certain publicly traded partnerships are taxable as
corporations or the issuance of the Certificates has been structured as a
private placement under an IRS safe harbor, so that the Trust Fund will not be
characterized as a publicly traded partnership taxable as a corporation and (3)
the Trust Fund will not be treated as a taxable mortgage pool taxable as a
corporation. As is more fully described below, in the event of a partnership
election, holders of notes will be treated as holding debt of the partnership.
For tax purposes, holders of Certificates will be treated as partners of the
partnership. (See "Tax Consequences to Holders of the Certificates").
If the Trust Fund were taxable as a corporation for federal income tax
purposes, the Trust Fund would be subject to corporate income tax on its taxable
income. The Trust Fund's taxable income would include all its income, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Trust Fund.
a. Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness. The Trust Fund will agree, and
the Noteholders will agree by their purchase of Notes, to treat the Notes as
debt for federal income tax purposes. Special counsel to the Depositor will,
except as otherwise provided in the related Prospectus Supplement, give its
opinion to the Depositor that the Notes will be classified as debt for federal
income tax purposes. The discussion below assumes this characterization of the
Notes is correct.
OID, etc. The discussion below assumes that all payments on the Notes
are denominated in U.S. dollars. Moreover, the discussion assumes that the
interest formula for the Notes meets the requirements for "qualified stated
interest" under the OID regulations, and that any OID on the Notes (i.e., any
excess of the principal amount of the Notes over their issue price) does not
exceed a de minimis amount (i.e., 1/4% of their principal amount multiplied by
the number of full years included in their term), all within the meaning of the
OID regulations. If these conditions are not satisfied with respect to any given
series of Notes, additional tax considerations with respect to such Notes will
be disclosed in the applicable Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder of a
Note issued with a de minimis amount of OID must include such OID in income, on
a pro rata basis, as principal payments are made on the Note. It is believed
that any prepayment premium paid as a result of a mandatory redemption will be
taxable as contingent interest when it becomes fixed and unconditionally
payable. A purchaser who buys a Note for more or less than its principal amount
will generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
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A holder of a Note that has a fixed maturity date of not more than one
year from the issue date of such Note (a "Short-Term Note") may be subject to
special rules. An accrual basis holder of a Short-Term Note (and certain cash
method holders, including regulated investment companies, as set forth in
Section 1281 of the Code) generally would be required to report interest income
as interest accrues on a straight-line basis over the term of each interest
period. Other cash basis holders of a Short-Term Note would, in general, be
required to report interest income as interest is paid (or, if earlier, upon the
taxable disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, acquisition discount, OID
and gain previously included by such Noteholder in income with respect to the
Note and decreased by the amount of bond premium (if any) previously amortized
and by the amount of principal payments previously received by such Noteholder
with respect to such Note. Any such gain or loss will be capital gain or loss if
the Note was held as a capital asset, except for gain representing accrued
interest and accrued market discount not previously included in income.
Capital losses generally may be used only to offset capital gains.
Foreign Holders. Interest payments made (or accrued) to a Noteholder who
is a nonresident alien, foreign corporation or other non-United States person (a
"foreign person") generally will be considered "portfolio interest," and
generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10 percent shareholder"
of the Trust or the Depositor (including a holder of 10% of the outstanding
Certificates) or a "controlled foreign corporation" with respect to which the
Trust Fund or the Depositor is a "related person" within the meaning of the Code
and (ii) provides the Owner Trustee or other person who is otherwise required to
withhold U.S. tax with respect to the Notes with an appropriate statement (on
Form W-8 or a similar form), signed under penalties of perjury, certifying that
the beneficial owner of the Note is a foreign person and providing the foreign
person's name and address. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide the relevant signed statement to the withholding agent;
in that case, however, the signed statement must be accompanied by a Form W-8 or
substitute form provided by the foreign person that owns the Note. If such
interest is not portfolio interest, then it will be subject to United States
federal income and withholding tax at a rate of 30 percent, unless reduced or
eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
Backup Withholding. Each holder of a Note (other than an exempt holder
such as a corporation, tax-exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident) will be required to
provide, under penalties of perjury, a certificate containing the holder's name,
address, correct federal taxpayer identification number and a statement that the
holder is not subject to backup withholding. Should a nonexempt Noteholder fail
to provide the required certification, the Trust Fund will be required to
withhold 31 percent of the amount
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otherwise payable to the holder, and remit the withheld amount to the IRS as a
credit against the holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the
opinion of special counsel to the Depositor, the IRS successfully asserted that
one or more of the Notes did not represent debt for federal income tax purposes,
the Notes might be treated as equity interests in the Trust Fund. If so treated,
the Trust Fund might be taxable as a corporation with the adverse consequences
described above (and the taxable corporation would not be able to reduce its
taxable income by deductions for interest expense on Notes recharacterized as
equity). Alternatively, and most likely in the view of special counsel to the
Depositor, the Trust Fund might be treated as a publicly traded partnership that
would not be taxable as a corporation because it would meet certain qualifying
income tests. Nonetheless, treatment of the Notes as equity interests in such a
publicly traded partnership could have adverse tax consequences to certain
holders. For example, income to certain tax-exempt entities (including pension
funds) would be "unrelated business taxable income," income to foreign holders
generally would be subject to U.S. tax and U.S. tax return filing and
withholding requirements, and individual holders might be subject to certain
limitations on their ability to deduct their share of the Trust Fund's expenses.
b. Tax Consequences to Holders of the Certificates
Treatment of the Trust Fund as a Partnership. The Depositor will agree,
and the Certificateholders will agree by their purchase of Certificates, to
treat the Trust Fund as a partnership for purposes of federal and state income
tax, franchise tax and any other tax measured in whole or in part by income,
with the assets of the partnership being the assets held by the Trust Fund, the
partners of the partnership being the Certificateholders, and the Notes being
debt of the partnership. However, the proper characterization of the arrangement
involving the Trust Fund, the Certificates, the Notes, the Trust Fund and the
Master Servicer is not clear because there is no authority on transactions
closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Trust Fund. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
Indexed Securities, etc. The following discussion assumes that all
payments on the Certificates are denominated in U.S. dollars, none of the
Certificates are Indexed Securities or Strip Certificates, and that a Series of
Securities includes a single class of Certificates. If these conditions are not
satisfied with respect to any given Series of Certificates, additional tax
considerations with respect to such Certificates will be disclosed in the
applicable Prospectus Supplement.
Partnership Taxation. As a partnership, the Trust Fund will not be
subject to federal income tax. Rather, each Certificateholder will be required
to separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust Fund. The Trust Fund's income will
consist primarily of interest and finance charges earned on the Mortgage Loans
(including appropriate adjustments for market discount, OID and bond premium)
and any gain upon collection or disposition of Mortgage Loans. The Trust Fund's
deductions will consist primarily of interest accruing with respect to the
Notes, servicing and other fees, and losses or deductions upon collection or
disposition of Mortgage Loans.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide, in general, that the Certificateholders will be allocated taxable
income of the Trust Fund for each month equal to the sum of (i) the interest
that accrues on the Certificates in accordance with their terms for such month,
including interest accruing at the Pass-Through Rate for such month and interest
on amounts previously due on the Certificates but not yet distributed; (ii) any
Trust Fund income attributable to discount on the Mortgage Loans that
corresponds to any excess of the principal amount of the Certificates
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over their initial issue price; (iii) prepayment premium payable to the
Certificateholders for such month; and (iv) any other amounts of income payable
to the Certificateholders for such month. Such allocation will be reduced by any
amortization by the Trust Fund of premium on Mortgage Loans that corresponds to
any excess of the issue price of Certificates over their principal amount. All
remaining taxable income of the Trust Fund will be allocated to the Company.
Based on the economic arrangement of the parties, this approach for allocating
Trust Fund income should be permissible under applicable treasury regulations,
although no assurance can be given that the IRS would not require a greater
amount of income to be allocated to Certificateholders. Moreover, even under the
foregoing method of allocation, Certificateholders may be allocated income equal
to the entire Pass-Through Rate plus the other items described above even though
the Trust Fund might not have sufficient cash to make current cash distributions
of such amount. Thus, cash basis holders will in effect be required to report
income from the Certificates on the accrual basis and Certificateholders may
become liable for taxes on Trust Fund income even if they have not received cash
from the Trust Fund to pay such taxes. In addition, because tax allocations and
tax reporting will be done on a uniform basis for all Certificateholders but
Certificateholders may be purchasing Certificates at different times and at
different prices Certificateholders may be required to report on their tax
returns taxable income that is greater or less than the amount reported to them
by the Trust Fund.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust Fund (including
fees to the Master Servicer but not interest expense) would be miscellaneous
itemized deductions. Such deductions might be disallowed to the individual in
whole or in part and might result in such holder being taxed on an amount of
income that exceeds the amount of cash actually distributed to such holder over
the life of the Trust Fund.
The Trust Fund intends to make all tax calculations relating to income
and allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Mortgage Loan, the
Trust Fund might be required to incur additional expense but it is believed that
there would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Loans were not issued with
OID, and, therefore, the Trust should not have OID income. However, the purchase
price paid by the Trust Fund for the Mortgage Loans may be greater or less than
the remaining principal balance of the Loans at the time of purchase. If so, the
Loan will have been acquired at a premium or discount, as the case may be. (As
indicated above, the Trust Fund will make this calculation on an aggregate
basis, but might be required to recompute it on a Mortgage Loan by Mortgage Loan
basis.)
If the Trust Fund acquires the Mortgage Loans at a market discount or
premium, the Trust Fund will elect to include any such discount in income
currently as it accrues over the life of the Mortgage Loans or to offset any
such premium against interest income on the Mortgage Loans. As indicated above,
a portion of such market discount income or premium deduction may be allocated
to Certificateholders.
Section 708 Termination. Under Section 708 of the Code, the Trust Fund
will be deemed to terminate for federal income tax purposes if 50% or more of
the capital and profits interests in the Trust Fund are sold or exchanged within
a 12-month period. If such a termination occurs, the Trust Fund will be
considered to distribute its assets to the partners, who would then be treated
as recontributing those assets to the Trust Fund as a new partnership. The Trust
Fund will not comply with certain technical requirements that might apply when
such a constructive termination occurs. As a result, the Trust Fund may be
subject to certain tax penalties and may incur additional expenses if it is
required to comply with those requirements. Furthermore, the Trust Fund might
not be able to comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates
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sold. A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust Fund income (includible
in income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust Fund. A holder acquiring Certificates
at different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share
of unrecognized accrued market discount on the Mortgage Loans would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust Fund does not expect to have any other assets
that would give rise to such special reporting requirements. Thus, to avoid
those special reporting requirements, the Trust Fund will elect to include
market discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust
Fund's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the Certificateholders
in proportion to the principal amount of Certificates owned by them as of the
close of the last day of such month. As a result, a holder purchasing
Certificates may be allocated tax items (which will affect its tax liability and
tax basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust Fund might be reallocated among the Certificateholders. The Trust
Fund's method of allocation between transferors and transferees may be revised
to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust Fund's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust Fund were to file an election under
Section 754 of the Code. In order to avoid the administrative complexities that
would be involved in keeping accurate accounting records, as well as potentially
onerous information reporting requirements, the Trust Fund will not make such
election. As a result, Certificateholders might be allocated a greater or lesser
amount of Trust Fund income than would be appropriate based on their own
purchase price for Certificates.
Administrative Matters. The Trustee is required to keep or have kept
complete and accurate books of the Trust Fund. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust Fund and will report each Certificateholder's allocable share of items of
Trust Fund income and expense to holders and the IRS on Schedule K-1. The Trust
Fund will provide the Schedule K-1 information to nominees that fail to provide
the Trust Fund with the information statement described below and such nominees
will be required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust Fund or be subject to penalties unless
the holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust Fund
with a statement containing certain information on the
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nominee, the beneficial owners and the Certificates so held. Such information
includes (i) the name, address and taxpayer identification number of the nominee
and (ii) as to each beneficial owner (x) the name, address and identification
number of such person, (y) whether such person is a United States person, a
tax-exempt entity or a foreign government, an international organization, or any
wholly owned agency or instrumentality of either of the foregoing, and (z)
certain information on Certificates that were held, bought or sold on behalf of
such person throughout the year. In addition, brokers and financial institutions
that hold Certificates through a nominee are required to furnish directly to the
Trust Fund information as to themselves and their ownership of Certificates. A
clearing agency registered under Section 17A of the Exchange Act is not required
to furnish any such information statement to the Trust Fund. The information
referred to above for any calendar year must be furnished to the Trust Fund on
or before the following January 31. Nominees, brokers and financial institutions
that fail to provide the Trust Fund with the information described above may be
subject to penalties.
The Company will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust Fund by the appropriate taxing authorities
could result in an adjustment of the returns of the Certificateholders, and,
under certain circumstances, a Certificateholder may be precluded from
separately litigating a proposed adjustment to the items of the Trust Fund. An
adjustment could also result in an audit of a Certificateholder's returns and
adjustments of items not related to the income and losses of the Trust Fund.
Tax Consequences to Foreign Certificateholders. It is not clear whether
the Trust Fund would be considered to be engaged in a trade or business in the
United States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust Fund would be engaged in a trade or business in the United States
for such purposes, the Trust Fund will withhold as if it were so engaged in
order to protect the Trust Fund from possible adverse consequences of a failure
to withhold. The Trust Fund expects to withhold on the portion of its taxable
income that is allocable to foreign Certificateholders pursuant to Section 1446
of the Code, as if such income were effectively connected to a U.S. trade or
business, at a rate of 35% for foreign holders that are taxable as corporations
and 39.6% for all other foreign holders. Subsequent adoption of Treasury
regulations or the issuance of other administrative pronouncements may require
the Trust Fund to change its withholding procedures. In determining a holder's
withholding status, the Trust Fund may rely on IRS Form W-8, IRS Form W-9 or the
holder's certification of nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust Fund's income. Each foreign holder must
obtain a taxpayer identification number from the IRS and submit that number to
the Trust Fund on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust Fund taking the
position that no taxes were due because the Trust Fund was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Trust Fund. If these interest payments are properly
characterized as guaranteed payments, then the interest will not be considered
"portfolio interest." As a result, Certificateholders will be subject to United
States federal income tax and withholding tax at a rate of 30 percent, unless
reduced or eliminated pursuant to an applicable treaty. In such case, a foreign
holder would only be entitled to claim a refund for that portion of the taxes in
excess of the taxes that should be withheld with respect to the guaranteed
payments.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to
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comply with certain identification procedures, unless the holder is an exempt
recipient under applicable provisions of the Code.
Recent Legislation
During 1996, President Clinton signed into law the "Small Business Job
Protection Act of 1996" (the "Act"). The Act creates a new type of entity for
federal income tax purposes called a "financial asset securitization investment
trust" or "FASIT." Beginning in September 1997, the Act generally enables
certain arrangements similar to a Trust Fund that is treated as a partnership to
elect to be treated as a FASIT. Under the Act, a FASIT generally would avoid
federal income taxation and could issue securities substantially similar to the
Certificates and Notes, and those securities would be treated as debt for
federal income tax purposes. If so provided in the related Prospectus
Supplement, the Agreement, the Trust Agreement and/or the Indenture will set
forth certain conditions which, if satisfied, will enable all or a portion of
the Trust Fund to qualify as a FASIT and to permit a FASIT election to be made
with respect thereto. However, the Depositor may, but is not obligated to, cause
a FASIT election and there can be no assurance that the Depositor will or will
not cause any permissible FASIT election to be made with respect to a Trust Fund
or the related Agreement, Trust Agreement and/or the Indenture in connection
with any election. Furthermore, any such election will be made only if an
opinion of federal tax counsel or special federal tax counsel is rendered that
such election will not have material adverse federal income consequences to any
holder of a Note or Certificate.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Federal
Income Tax Considerations," potential investors should consider the state and
local income tax consequences of the acquisition, ownership, and disposition of
the Offered Securities. State and local income tax law may differ substantially
from the corresponding federal law, and this discussion does not purport to
describe any aspect of the income tax laws of any state or locality. Therefore,
potential investors should consult their own tax advisors with respect to the
various state and local tax consequences of an investment in the Offered
Securities.
ERISA CONSIDERATIONS
General
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain restrictions on employee benefit plans subject to
ERISA ("Plans") and on persons who are parties in interest or disqualified
persons ("parties in interest") with respect to such Plans. Certain employee
benefit plans, such as governmental plans and church plans (if no election has
been made under Section 410(d) of the Code), are not subject to the restrictions
of ERISA, and assets of such plans may be invested in the Securities without
regard to the ERISA considerations described below, subject to other applicable
federal and state law. However, any such governmental or church plan which is
qualified under Section 401(a) of the Code and exempt from taxation under
Section 501(a) of the Code is subject to the prohibited transaction rules set
forth in Section 503 of the Code.
Investments by Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan.
Prohibited Transactions
General
Section 406 of ERISA prohibits parties in interest with respect to a
Plan from engaging in certain transactions involving a Plan and its assets
unless a statutory or administrative exemption applies to the
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transaction. Section 4975 of the Code imposes certain excise taxes (or, in some
cases, a civil penalty may be assessed pursuant to Section 502(i) of ERISA) on
parties in interest which engage in non-exempt prohibited transactions.
The United States Department of Labor ("Labor") has issued a final
regulation (29 C.F.R. Section 2510.3-101) containing rules for determining what
constitutes the assets of a Plan. This regulation provides that, as a general
rule, the underlying assets and properties of corporations, partnerships, trusts
and certain other entities in which a Plan makes an "equity investment" will be
deemed for purposes of ERISA to be assets of the Plan unless certain exceptions
apply.
Under the terms of the regulation, the Trust Fund may be deemed to hold
plan assets by reason of a Plan's investment in a Security; such plan assets
would include an undivided interest in the Mortgage Loans or Contracts and any
other assets held by the Trust Fund. In such an event, the Depositor, the Master
Servicer, the Trustee, any insurer of the Assets and other persons, in providing
services with respect to the assets of the Trust Fund, may be parties in
interest, subject to the fiduciary responsibility provisions of Title I of
ERISA, including the prohibited transaction provisions of Section 406 of ERISA
(and of Section 4975 of the Code), with respect to transactions involving such
assets unless such transactions are subject to a statutory or administrative
exemption.
The regulations contain a de minimis safe-harbor rule that exempts any
entity from plan assets status as long as the aggregate equity investment in
such entity by plans is not significant. For this purpose, equity participation
in the entity will be significant if immediately after any acquisition of any
equity interest in the entity, "benefit plan investors" in the aggregate, own at
least 25% of the value of any class of equity interest. "Benefit plan investors"
are defined as Plans as well as employee benefit plans not subject to ERISA
(e.g., governmental plans). The 25% limitation must be met with respect to each
class of certificates, regardless of the portion of total equity value
represented by such class, on an ongoing basis.
One such exception applies if the interest described is treated as
indebtedness under applicable local law and which has no substantial equity
features. Generally, a profits interest in a partnership, an undivided ownership
interest in property and a beneficial ownership interest in a trust are deemed
to be "equity interest" under the final regulation. If Notes of a particular
Series were deemed to be indebtedness under applicable local law without any
substantial equity features, an investing Plan's assets would include such
Notes, but not, by reason of such purchase, the underlying assets of the Trust
Fund.
Review by Plan Fiduciaries
Any Plan fiduciary considering whether to purchase any Securities 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. Among other things, before purchasing any
Securities, a fiduciary of a Plan subject to the fiduciary responsibility
provisions of ERISA or an employee benefit plan subject to the prohibited
transaction provisions of the Code should make its own determination as to the
availability of the exemptive relief provided in the Exemption, and also
consider the availability of any other prohibited transaction exemptions. In
particular, in connection with a contemplated purchase of Securities
representing a beneficial ownership interest in a pool of single family
residential first mortgage loans, such Plan fiduciary should consider the
availability of the Exemption or Prohibited Transaction Class Exemption 83-1
("PTCE 83-1") for certain transactions involving mortgage pool investment
trusts. The Prospectus Supplement with respect to a series of Securities may
contain additional information regarding the application of the Exemption, PTCE
83-1, or any other exemption, with respect to the Securities offered thereby.
PTCE 83-1 is not applicable to manufactured housing contract pool investment
trusts or multifamily mortgage pool investment trusts.
Purchasers that are insurance companies should consult with their
counsel with respect to the recent United States Supreme Court case interpreting
the fiduciary responsibility rules of ERISA, John Hancock Mutual Life Insurance
Co. v. Harris Trust & Savings Bank (decided December 13, 1993). In John Hancock,
the
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Supreme Court ruled that assets held in an insurance company's general account
may be deemed to be "plan assets" for ERISA purposes under certain
circumstances. Prospective purchasers should determine whether the decision
affects their ability to make purchases of the Securities. In particular, such
an insurance company should consider the exemptive relief granted by Labor for
transactions involving insurance company general accounts in Prohibited
Transactions Exemption 95-60, 60 Fed. Reg. 35925 (July 12, 1995).
LEGAL INVESTMENT
Each class of Offered Securities will be rated at the date of issuance
in one of the four highest rating categories by at least one Rating Agency. The
related Prospectus Supplement will specify which classes of the Securities, if
any, will constitute "mortgage related securities" ("SMMEA Securities") for
purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA").
SMMEA Securities will constitute legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business entities
(including, but not limited to, state chartered savings banks, commercial banks,
savings and loan associations and insurance companies, as well as trustees and
state government employee retirement systems) created pursuant to or existing
under the laws of the United States or of any state (including the District of
Columbia) 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. Alaska, Arkansas,
Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Kansas, Maryland,
Michigan, Missouri, Nebraska, New Hampshire, New York, North Carolina, Ohio,
South Dakota, Utah, Virginia and West Virginia enacted legislation before the
October 4, 1991 cutoff established by SMMEA for such enactments, limiting to
varying extents the ability of certain entities (in particular, insurance
companies) to invest in mortgage related securities, in most cases by requiring
the affected investors to rely solely upon existing state law, and not SMMEA.
Investors affected by such legislation will be authorized to invest in SMMEA
Certificates only to the extent provided in such legislation. 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. In this connection, federal credit
unions should review the National Credit Union Administration ("NCUA") Letter to
Credit Unions No. 96, as modified by Letter to Credit Unions No. 108, which
includes guidelines to assist federal credit unions in making investment
decisions for mortgage related securities, and the NCUA's regulation "Investment
and Deposit Activities" (12 C.F.R. Part 703), which sets forth certain
restrictions on investment by federal credit unions in mortgage related
securities.
Institutions where investment activities are subject to legal investment
laws or regulations or review by certain regulatory authorities may be subject
to restrictions on investment in certain classes of Offered Securities. Any
financial institution which is subject to the jurisdiction of the Comptroller of
the Currency, the Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation ("FDIC"), the Office of Thrift Supervision
("OTS"), the NCUA or other federal or state agencies with similar authority
should review any applicable rules, guidelines and regulations prior to
purchasing any Offered Security. The Federal Financial Institutions Examination
Council, for example, has issued a Supervisory Policy Statement on Securities
Activities effective February 10, 1992 (the "Policy Statement") setting forth
guidelines for and significant restrictions on investments in "high-risk
mortgage securities." The Policy Statement has been adopted by the Comptroller
of the Currency, the Federal Reserve Board, the FDIC, the OTS and the NCUA (with
certain modifications), with respect to the depository institutions that they
regulate. The Policy
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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 other outside party without internal analysis by the
institution would be unacceptable. There can be no assurance that any classes of
Offered Securities will not be treated as high-risk under the Policy Statement.
The predecessor to the 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
Securities. In accordance with Section 402 of the Financial Institutions Reform,
Recovery and Enhancement Act of 1989, the foregoing bulletin will remain in
effect unless and until modified, terminated, set aside or superseded by the
FDIC. Similar policy statements have been issued by regulators having
jurisdiction over the types of depository institutions.
In September 1993 the National Association of Insurance Commissioners
released a draft model investment law (the "Model Law") which sets forth model
investment guidelines for the insurance industry. Institutions subject to
insurance regulatory authorities may be subject to restrictions on investment
similar to those set forth in the Model Law and other restrictions.
If specified in the related Prospectus Supplement, other classes of
Offered Securities offered pursuant to this Prospectus will not constitute
"mortgage related securities" under SMMEA. The appropriate characterization of
this Offered Security under various legal investment restrictions, and thus the
ability of investors subject to these restrictions to purchase such Offered
Securities, may be subject to significant interpretive uncertainties.
Except as to the status of SMMEA Securities identified in the Prospectus
Supplement for a series as "mortgage related securities" under SMMEA, the
Depositor will make no representations as to the proper characterization of the
Offered Certificates for legal investment or financial institution regulatory
purposes, or as to the ability of particular investors to purchase any Offered
Certificates under applicable legal investment restrictions. The uncertainties
described above (and any unfavorable future determinations concerning legal
investment or financial institution regulatory characteristics of the Offered
Securities) may adversely affect the liquidity of the Offered Securities.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits and provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying."
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Offered Securities or to
purchase Offered Securities representing more than a specified percentage of the
investor's assets. 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 Offered Securities
of any class 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.
107
<PAGE>
PLAN OF DISTRIBUTION
The Depositor may offer the Offered Securities (i) to or through one or
more underwriters, (ii) to or through dealers, (iii) through agents or (iv)
directly or through its affiliates to purchasers. The Prospectus Supplement
will describe the method of distribution of the Offered Securities.
The distribution of Offered Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such market
prices or at negotiated prices.
If underwriters are used in the offering of Offered Securities, the
names of the managing underwriter or underwriters and any other underwriters,
and the terms of the transaction, including compensation of the underwriters and
dealers, if any, will be set forth in the Prospectus Supplement relating to such
offering. Only underwriters named in a Prospectus Supplement will be deemed to
be underwriters in connection with the Offered Securities described therein.
Firms not so named will have no direct or indirect participation in the
underwriting of such Offered Securities, although such a firm may participate in
the distribution of such Offered Securities under circumstances entitling it to
a dealer's commission. It is anticipated that any underwriting agreement
pertaining to any Offered Securities will (1) entitle the underwriters to
indemnification by the Company against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities Act"),
or to contribution for payments which the underwriters may be required to make
in respect thereof, (2) provide that the obligations of the underwriters will be
subject to certain conditions precedent, and (3) provide that the underwriters
generally will be obligated to purchase all Offered Securities if any are
purchased.
The Depositor also may sell Offered Securities to a dealer as principal.
In such event, the dealer may then resell such Offered Securities to the public
at varying prices to be determined by such dealer at the time of resale. The
name of the dealer and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
Offered Securities also may be offered through agents designated by the
Depositor from time to time. Any such agent will be named, and the terms of any
such agency will be set forth, in the Prospectus Supplement relating thereto.
Unless otherwise indicated in such Prospectus Supplement, any such agent will
act on a best efforts basis for the period of its appointment and any such agent
may utilize dealers or selling groups in connection with the resale of Notes
purchased by such agent as principal.
Dealers and agents named in a Prospectus Supplement may be deemed to be
underwriters (within the meaning of the Securities Act) of the Offered
Securities described therein and, under agreements which may be entered into
with the Depositor, may be entitled to indemnification by the Depositor against
certain civil liabilities, including liabilities under the Securities Act, or to
contribution for payments which they may be required to make in respect thereof.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, the Depositor in the ordinary course of business.
Each underwriter, dealer and agent participating in the distribution of
any Offered Securities that are to be issued as bearer securities will agree
that it will not offer, sell or deliver, directly or indirectly, bearer
securities in the United States or to United States persons (other than
qualifying financial institutions) in connection with the original issuance of
such Offered Securities.
As used herein, "United States" means the United States of America
(including the states and the District of Columbia), its territories,
possessions and other areas subject to its jurisdiction, and "United States
108
<PAGE>
person" means an individual who is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or any estate or
trust the income of which is subject to United States Federal income taxation
regardless of its source.
Offers to purchase Offered Securities may be solicited directly by the
Depositor or through its affiliates and sales thereof may be made by the
Depositor directly to institutional investors or others. The terms of any such
sales will be described in the Prospectus Supplement relating thereto.
If so indicated in a Prospectus Supplement, the Depositor will authorize
underwriters or other agents of the Depositor to solicit offers by certain
institutions to purchase the Offered Securities from the Company pursuant to
contracts providing for payment and delivery at a future date. Institutions with
which such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, education and charitable
institutions and others, but in all cases such institutions must be approved by
the Depositor. The obligations of any purchaser under any such contract will not
be subject to any conditions except that (1) the purchase of the Offered
Securities shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject and (2) if the Offered
Securities are also being sold to underwriters, the Depositor shall have sold to
such underwriters the Offered Securities not subject to delayed delivery.
Underwriters and other agents will not have any responsibility in respect of the
validity or performance of such contracts.
The anticipated date of delivery of Offered Securities will be as set
forth in the Prospectus Supplement relating to the offering of such Securities.
LEGAL MATTERS
Certain legal matters in connection with the Securities, including
certain federal income tax consequences, will be passed upon for the Depositor
by Dechert Price & Rhoads, New York, New York, or such other counsel specified
in the related Prospectus Supplement.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of
Securities 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 Securities.
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 Offered Securities
that they shall have been rated not lower than investment grade, that is, in one
of the four highest rating categories, by a Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying assets and the
credit quality of the guarantor, if any. Ratings on mortgage pass-through
certificates and other asset backed securities 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, securityholders 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.
109
<PAGE>
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. Each security rating should be evaluated
independently of any other security rating.
110
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
Page(s) on which
term is defined
Terms in the Prospectus
- ----- -----------------
Accrual Securities......................................................9, 30
Accrued Security Interest..................................................32
Act.......................................................................104
Adjusted issue price...................................................79, 93
Agreement..................................................................37
Agreements..................................................................9
Applicable Amount..........................................................92
Arm Contracts..............................................................23
Arm Loans..............................................................21, 78
Assets...............................................................1, 5, 20
Available Distribution Amount..............................................31
Backup....................................................................103
Balloon Mortgage Loans.....................................................16
Benefit plan investors....................................................105
Buydown Mortgage Loans.....................................................28
Buydown Period ............................................................28
Cash Flow Agreement.....................................................8, 25
Certificates.............................................................1, 5
Closing Date...............................................................83
CPR........................................................................27
Code.......................................................................11
Collection Account.........................................................42
Commission..................................................................3
Contract...................................................................73
Contract Group .........................................................9, 31
Contract Rate...........................................................7, 24
Contracts..............................................................17, 20
Contributions Tax..........................................................94
Cooperative................................................................60
Cooperative Loans..........................................................60
Covered Trust..........................................................18, 57
Credit Support ......................................................1, 8, 24
Crime Control Act..........................................................69
Cut-off Date...............................................................10
Deferred Interest..........................................................80
Depositor...............................................................5, 20
Determination Date.........................................................31
Distribution Date..........................................................10
DTC........................................................................36
Due Period.................................................................31
Due-on-sale....................................................30, 63, 67, 72
ERISA.................................................................12, 104
Exchange Act................................................................3
FASIT.....................................................................104
FHA....................................................................... 24
FHLMC..................................................................... 24
FHLMC Certificates........................................................ 24
FNMA...................................................................... 24
FNMA Certificates......................................................... 24
GNMA...................................................................... 24
GNMA Certificates......................................................... 24
Government Securities............................................1, 7, 20, 82
Grantor Trust Certificates.................................................11
Hazard Insurance Policies..............................................43, 48
Holder-in-Due-Course.......................................................72
Home Equity Loans.......................................................5, 21
Home Improvement Contracts..............................................6, 21
Indenture..............................................................30, 38
Indenture Trustee..........................................................38
Insurance Proceeds.........................................................42
L/C Bank...................................................................58
Liquidation Proceeds.......................................................42
Loan-to-Value Ratio....................................................21, 23
Manufactured Home...........................................................7
Manufactured Housing Contracts.............................................17
Master REMIC ............................................................82
Master Servicer.............................................................5
MBS......................................................................1, 5
MBS Agreement..............................................................22
111
<PAGE>
Page(s) on which
term is defined
Terms in the Prospectus
- ----- -----------------
MBS Issuer.................................................................22
MBS Servicer...............................................................22
MBS Trustee................................................................22
Model Law.................................................................107
Mortgage Asset ............................................................73
Mortgage Assets......................................................1, 6, 20
Mortgage Derivative Products and Mortgage Swaps...........................107
Mortgage Loan..............................................................73
Mortgage Loan Group.....................................................9, 31
Mortgage Loans.......................................................1, 5, 20
Mortgage Participations..................................................1, 5
Mortgage Notes.............................................................21
Mortgage Rate...........................................................6, 22
Mortgages..............................................................21, 59
Mortgagor..................................................................59
Multifamily Mortgage Loan..................................................20
Multifamily Property.......................................................20
Notes....................................................................1, 5
Objective rate ............................................................85
Offered Securities..........................................................1
OID Regulations............................................................75
Operator...................................................................66
Originator.............................................................20, 21
Owner......................................................................66
Pass-Through Rate.......................................................9, 32
Payment Lag Certificates...................................................88
Permitted Investments......................................................42
Plans.....................................................................104
Policy Statement..........................................................106
Pool........................................................................1
Pooling and Servicing Agreement............................................37
Pre-Funding Account.........................................................8
Pre-Funded Amount..........................................................8
Prepayment.................................................................27
Prepayment Assumption......................................................79
Prepayment Premium.........................................................22
Prohibited Transactions Tax................................................94
Purchase Price ............................................................41
Rating.....................................................................13
Rating Agency..............................................................13
Record Date................................................................31
Refinance Loans............................................................21
Relief Act.............................................................68, 72
REMIC Certificates.........................................................81
REMIC Regular Certificates.................................................11
REMIC Regular Certificateholders...........................................83
REMIC Regulations..........................................................73
REMIC Residual Certificates................................................11
REMIC Residual Certificateholder...........................................90
REMICs.....................................................................81
REO Property...............................................................34
Retained Interest..........................................................50
Risk Factors................................................................2
Securities...............................................................1, 5
Security...................................................................38
Security Balance........................................................9, 33
Securityholder ............................................................36
Securityholders.........................................................3, 19
Senior Lien................................................................16
Senior Securities.......................................................9, 30
Servicing Agreement........................................................37
Servicing Standard.........................................................45
Short-Term Note............................................................99
112
<PAGE>
Page(s) on which
term is defined
Terms in the Prospectus
- ----- -----------------
Single Family Mortgage Loan................................................20
Single Family Property.....................................................20
Single-class REMIC.........................................................89
Small Business Job Protection Act of 1996.................................104
SMMEA Securities..........................................................106
SPA........................................................................27
Stripped ARM Obligations...................................................80
Stripped Bond Certificates.................................................77
Stripped Coupon Certificates...............................................77
Stripped Interest Securities............................................9, 30
Stripped Principal Securities...........................................9, 30
Sub-Servicer...............................................................46
Sub-Servicing Agreement....................................................46
Subordinate Securities..................................................9, 30
Subsequent Assets.......................................................8, 24
Subsidiary REMIC...........................................................82
Super-Premium Certificates.................................................84
Trust Agreement............................................................37
Trust Assets................................................................2
Trust Fund..................................................................1
Trustee.....................................................................5
U.S. Person............................................................81, 97
U.S. Treasury Securities...................................................24
UCC........................................................................69
Underlying MBS ............................................................20
Underlying Mortgage Loans..................................................20
Unrelated business taxable income.............................93, 95, 96, 100
Unsecured Home Improvement Loans........................................6, 20
VA.........................................................................24
Value......................................................................21
Voting Rights ............................................................52
Warranting Party...........................................................40
Whole Loans................................................................20
Withdrawals................................................................45
Yield Considerations............................................2, 10, 15, 33
113
<PAGE>
- -------------------------------------------------------------------------------
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus Supplement or the
Prospectus and, if given or made, such information or representations must not
be relied upon. This Prospectus Supplement and the Prospectus do not constitute
an offer to sell or a solicitation of an offer to buy any securities other than
the Offered Certificates, nor an offer of the Offered Certificates in any state
or jurisdiction in which, or to any person to whom, such offer would be
unlawful. The delivery of this Prospectus Supplement or the Prospectus at any
time does not imply that information herein or therein is correct as of any time
subsequent to its date.
-------------------
TABLE OF CONTENTS
Page
Prospectus Supplement
Prospectus Supplement Summary..............................................S-3
Risk Factors...............................................................S-16
Allocations of Payments on the Home Equity Loans Between
the Trust Fund and the Originators.......................................S-22
The Depositor..............................................................S-22
The Master Servicer........................................................S-22
The Originators............................................................S-23
Use of Proceeds............................................................S-23
The Home Equity Lending Program............................................S-23
The Home Equity Loan Pool..................................................S-29
Maturity and Prepayment Considerations.....................................S-34
Description of the Certificates............................................S-37
Federal Income Tax Considerations..........................................S-60
ERISA Considerations.......................................................S-61
Use of Proceeds............................................................S-62
Underwriting...............................................................S-63
Legal Matters..............................................................S-63
Certificate Ratings........................................................S-64
Index of Principal Terms...................................................S-65
Annex I: Global Clearance, Settlement and Tax
Documentation Procedures..................................................A-1
Prospectus
Prospectus Supplement.........................................................2
Available Information.........................................................3
Incorporation of Certain Information by Reference.............................3
Summary of Prospectus.........................................................5
Risk Factors.................................................................14
Description of the Trust Funds...............................................20
Use of Proceeds..............................................................25
Yield Considerations.........................................................25
The Depositor................................................................30
The Master Servicer..........................................................30
Description of the Securities................................................30
Description of the Agreements................................................37
Description of Credit Support................................................57
Certain Legal Aspects of Mortgage Loans......................................59
Certain Legal Aspects of the Contracts.......................................68
Federal Income Tax Consequences..............................................73
State Tax Considerations....................................................104
ERISA Considerations........................................................104
Legal Investment............................................................106
Plan of Distribution........................................................108
Legal Matters...............................................................109
Financial Information.......................................................109
Rating......................................................................109
Index of Principal Definitions..............................................111
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
Beneficial Home Equity Loan Asset Backed
Certificates
Beneficial Mortgage Services, Inc.
Depositor
Beneficial Mortgage Corporation,
Master Servicer
- -------------------------------------------------------------------------------
PROSPECTUS SUPPLEMENT
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with
the offering of the Securities being registered under this Registration
Statement, other than underwriting discounts and commissions:
SEC Registration Fee..................................... $ 303
Printing and Engraving................................... $ 200,000
Legal Fees and Expenses.................................. $ 300,000
Trustee Fees and Expenses................................ $ 10,000
Blue Sky Fees and Expenses............................... $ 10,000
Rating Agency Fees....................................... $ 750,000
Miscellaneous............................................ $ 100,000
Accounting Fees and Expenses............................. $ 300,000
Total.................................................... $1,670,303
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's By-Laws provide for indemnification of directors and
officers of the Registrant to the full extent permitted by Delaware law. The
Registrant maintains liability insurance for its directors and officers in an
amount equal to $25 million.
Section 145 of the Delaware General Corporation Law provides, in
substance, that Delaware corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents in
connection with actions, suits or proceedings brought against them by a third
party or in the right of the corporation, by reason of the fact that they were
or are such directors, officers, employees or agents, against expenses incurred
in any such action, suit or proceeding. The Delaware General Corporation Law
also provides that the Registrant may purchase insurance on behalf of any such
director, officer, employee or agent.
ITEM 16. EXHIBITS.
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of Beneficial Mortgage Services, Inc.
3.2 By-laws of Beneficial Mortgage Services, Inc. as currently in effect.
4.1 Form of Pooling and Servicing Agreement (including form of Certificate
as an exhibit thereto).
4.2 Form of Trust Agreement (including form of Certificate as an exhibit
thereto).
4.3 Form of Indenture (including form of Note as an exhibit thereto).
5.1 Opinion of Dechert Price & Rhoads as to legality of the Certificates
(including consent of such firm).
8.1 Opinion of Dechert Price & Rhoads as to certain tax matters
(including consent of such firm).
23.1 Consent of Dechert Price & Rhoads (included in exhibits 5.1 and
8.1 hereof).
99 Form of Servicing Agreement.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) Undertaking pursuant to Rule 415.
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 the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the 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 of such information
in the 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) Undertaking in respect of incorporation of reference.
The undersigned 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 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that IS incorporated by reference in the 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
the initial bona fide offering thereof.
(c) Undertaking in respect of indemnification.
The undersigned registrant hereby agrees to provide to the underwriter
at the closing specified in the underwriting agreement, securities in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act 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, 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 of 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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in New York, New York on the 2nd day of April, 1997.
Beneficial Mortgage Services, Inc.
By: /s/ Samuel F. McMillan
-------------------------------------
Name: Samuel F. McMillan
Title: Vice President and Treasurer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Andrew C. Halvorsen, Samuel F. McMillan,
Richard J. Zak and Charles D. Brown, or any of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
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 to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on April 2, 1997.
Signature Title
--------- -----
/s/ Andrew C. Halvorsen
- -------------------------- President,
Andrew C. Halvorsen Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Samuel F. McMillan
- -------------------------- Vice President,
Samuel F. McMillan Treasurer and Director
(Principal Financial Officer)
/s/ Richard J. Zak
- -------------------------- Vice President,
Richard J. Zak Controller and Director
(Principal Accounting Officer)
/s/ Charles D. Brown
- -------------------------- Vice President,
Charles D. Brown Secretary and Director
II-3
<PAGE>
EXHIBIT INDEX
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of Beneficial Mortgage Services, Inc.
3.2 By-laws of Beneficial Mortgage Services, Inc. as currently in effect.
4.1 Form of Pooling and Servicing Agreement (including form of Certificate
as an exhibit thereto).
4.2 Form of Trust Agreement (including form of Certificate as an exhibit
thereto).
4.3 Form of Indenture (including form of Note as an exhibit thereto).
5.1 Opinion of Dechert Price & Rhoads as to legality of the Certificates
(including consent of such firm).
8.1 Opinion of Dechert Price & Rhoads as to certain tax matters (including
consent of such firm).
23.1 Consent of Dechert Price & Rhoads (included in exhibits 5.1 and 8.1
hereof).
99 Form of Servicing Agreement.
<PAGE>
Exhibit 1.1
BENEFICIAL MORTGAGE SERVICES, INC., DEPOSITOR
$------------
Asset Backed Securities
Series ____
UNDERWRITING AGREEMENT
[Date]
[Underwriter]
Ladies and Gentlemen:
Beneficial Mortgage Services, Inc. (the "Company"), a Delaware
corporation, with its principal place of business in Wilmington, Delaware, is a
limited-purpose finance company. The Company has authorized the issuance and
sale of asset backed securities having aggregate outstanding principal balances
of up to $________ (the "Securities"). The Securities may be issued in various
series, and, within each series, in one or more classes, and, within each class,
in one or more sub-classes, in one or more offerings on terms determined at the
time of sale (each such series, a "Series" and each such class, a "Class"). Each
Series of the Securities will be issued under a separate Pooling and Servicing
Agreement (each, a "Pooling and Servicing Agreement") with respect to such
Series among the Company, as depositor, Beneficial Mortgage Corporation, as
Master Servicer (the "Master Servicer"), and a trustee to be identified in the
prospectus supplement for each such Series (the "Trustee"), or a separate Trust
Agreement (each a "Trust Agreement") between the Company, an owner trustee (the
"Owner Trustee") to be named in the related prospectus supplement and another
entity to be named in such prospectus supplement, or an Indenture (each an
"Indenture") between the trust created by the related Trust Agreement and an
indenture trustee (the "Indenture Trustee") named in the related prospectus
supplement. If the Series of Securities are issued under a Trust Agreement or an
Indenture, the Indenture Trustee shall enter into a Servicing Agreement with the
Master Servicer (each, a "Servicing Agreement"). The Securities will be
described in the related prospectus supplement. The Securities of each Series
will evidence specified interests in, or be supported by, the assets (the
"Assets") described in the related prospectus supplement, and certain other
property held in trust with respect to such Series (each, a "Trust Fund").
The Securities are more fully described in a Prospectus and Prospectus
Supplement (hereinafter defined) which the Company has furnished to you.
Capitalized terms used but not defined herein shall have the meanings given to
them in the [Pooling and Servicing Agreement] [Trust Agreement] [Indenture]. The
term "you" as used herein, unless the context otherwise
<PAGE>
requires, shall mean you and such persons, if any, as are named as co-managers
in the applicable Terms Agreement (defined below).
Each offering of Securities pursuant to this Agreement will be made
through you or through an underwriting syndicate managed by you. Whenever the
Company determines to make an offering of Securities it will enter into an
agreement (the "Terms Agreement") providing for the sale of such Securities to,
and the purchase and offering thereof by, you and such other underwriters, if
any, selected by you as have authorized you to enter into such Terms Agreement
on their behalf (the "Underwriters," which term shall include you whether acting
alone in the sale of Securities or as a member of an underwriting syndicate) The
Terms Agreement relating to each offering of Securities shall specify, among
other things, the principal amount or amounts of Securities to be issued, the
price or prices at which the Securities are to be purchased by the Underwriters
from the Company and the initial public offering price or prices or the method
by which the price or prices at which such Securities are to be sold will be
determined. A Terms Agreement, which shall be substantially in the form of
Exhibit A hereto, may take the form of an exchange of any standard form of
written telecommunication between you and the Company. Each offering of
Securities will be governed by this Agreement, as supplemented by the applicable
Terms Agreement, and this Agreement and such Terms Agreement shall inure to the
benefit of and be binding upon the Underwriters participating in the offering of
such Securities.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (File No. 333-21511) relating
to the Securities, and the offering thereof from time to time in accordance with
Rule 415 under the Securities Act of 1933, as amended (the "1933 Act"), and has
filed, and proposes to file, such amendments thereto as may have been required
to the date hereof and as shall be required prior to the effective date thereof
pursuant to the 1933 Act and the rules of the Commission thereunder (the
"Regulations"). Such registration statement, as amended at the time when each
amendment becomes effective under the 1933 Act and at the Representation Date
defined below, is referred to herein as the "Registration Statement". The base
prospectus relating to the sale of a particular Series of Securities by the
Company is referred to herein as the "Basic Prospectus," and a supplement to the
Prospectus contemplated by Section 3(a) hereof is referred to herein as a
"Prospectus Supplement". The Basic Prospectus and the related Prospectus
Supplement are collectively referred to as the "Prospectus".
SECTION 1. Representations and Warranties. The Company, in its capacity
as Depositor, represents and warrants to you as of the date hereof, and to the
Underwriters, if any, named in the applicable Terms Agreement, all as of the
date of such Terms Agreement (in each case, such latter date being hereinafter
referred to as the "Representation Date"), as follows:
(1) The Registration Statement, at the time the Registration
Statement became effective did, and the Registration Statement,
Prospectus and Prospectus Supplement as of the applicable
Representation Date will, comply in all material respects with the
requirements of the 1933 Act and the Regulations. The Registration
Statement, at the time it became effective did not, and as of the
applicable Representation Date will not, contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, not
misleading. The Prospectus, as amended or supplemented as of the
applicable Representation Date and at the Closing Time referred to in
Section 2, shall not include any untrue statement of
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a material fact or 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
representations and warranties in this paragraph shall not apply to
statements in or omissions from the Registration Statement or the
Prospectus or the related Prospectus Supplement made in reliance upon
and in conformity with information furnished to the Company in writing
by the Underwriters expressly for use in the Registration Statement or
the Prospectus or the related Prospectus Supplement. The conditions to
the use by the Company of a registration statement on Form S-3 under
the 1933 Act, as set forth in the General Instructions to Form S-3,
have been satisfied with respect to the Registration Statement and the
Prospectus, and there are no contracts or documents of the Company
which are required to be filed as exhibits to the Registration
Statement pursuant to the 1933 Act or the Regulations which have not
been so filed.
(2) ____________ are independent public accountants with
respect to the Company as required by the 1933 Act and the Regulations.
(3) Since the respective dates as of which information is
given in the Registration Statement, the Prospectus and the Prospectus
Supplement, except as otherwise stated therein, there has been no
material adverse change in the business, properties, financial
condition or earnings of the Company or of Beneficial Corporation and
its subsidiaries taken as a whole, whether or not arising in the
ordinary course of business.
(4) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own, lease and
operate its properties and conduct its business as described in the
Prospectus and to enter into and perform its obligations under this
Agreement, the applicable [Pooling and Servicing Agreement] [Trust
Agreement]; and the Company is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure so to qualify would not have a material adverse
effect on the business, properties, financial condition or earnings of
the Company; and the Company and each of the Originators are duly
authorized under the statutes which regulate the business of making
loans or of financing the sale of goods (commonly called "small loan
laws", "consumer finance laws" or "sales finance laws"), or are
permitted under the general interest statutes and related laws and
court decisions, to conduct in the various jurisdictions in which the
Company and each of the Originators do business the businesses as
currently conducted therein by any of them, except where the failure to
be so authorized or permitted would not have a material adverse effect
on the business or financial condition of the Company or any of the
Originators.
(5) The direction by the Company to the Trustee to execute,
countersign, issue and deliver the Securities has been duly authorized
by the Company, and assuming the Trustee has been duly authorized to do
so, when executed, countersigned, issued and delivered by the Trustee
in accordance with the [Pooling and Servicing Agreement] [Trust
Agreement] and in the case of the Securities delivered to the
Underwriters as provided in this Agreement and the Terms Agreement, the
Securities shall be duly and validly issued
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and outstanding and shall be entitled to the benefits provided by the
[Pooling and Servicing Agreement] [Trust Agreement]. The Securities and
the [Pooling and Servicing Agreement] [Trust Agreement] conform in all
material respects to all statements relating thereto in the Prospectus.
(6) The [Pooling and Servicing Agreement] [Trust Agreement]
has been duly and validly authorized, executed and delivered by the
Company and, when executed by the other parties thereto and delivered
in accordance with the terms thereof, shall constitute the valid and
binding agreement of the Company enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited
by bankruptcy, insolvency or other laws relating to or affecting
enforcement of creditors' rights or by general equitable principles;
and the execution, delivery and performance of the [Pooling and
Servicing Agreement] [Trust Agreement] and the consummation of the
transactions contemplated therein shall not conflict with or constitute
a breach of, or default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to, any contract, indenture, mortgage, loan agreement,
note, lease, pooling and servicing agreement or other instrument to
which the Company is a party or by which it may be bound, or to which
any of the property or assets of the Company is subject, nor shall such
action result in any violation of the provisions of the certificate of
incorporation or by-laws of the Company or any applicable law,
administrative regulation or administrative or court decree except for
conflicts, violations, breaches and defaults which would not,
individually or in the aggregate, be materially adverse to the Company
or materially adverse to the transactions contemplated by this
Agreement.
(7) This Agreement and the Terms Agreement have been duly and
validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company; and
the execution, delivery and performance of this Agreement and the Terms
Agreement and the consummation of the transactions contemplated herein
and therein have been duly authorized by all necessary corporate action
of the Company and shall not conflict with or constitute a breach of,
or default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company
pursuant to, any contract, indenture, mortgage, loan agreement, note,
lease, pooling and servicing agreement or other instrument to which the
Company is a party or by which it may be bound, or to which any of the
property or assets of the Company is subject, nor shall such action
result in any violation of the provisions of the certificate of
incorporation or by-laws of the Company or any applicable law,
administrative regulation or administrative or court order or decree,
except for conflicts, violations, breaches and defaults which would
not, individually or in the aggregate, be materially adverse to the
Company or materially adverse to the transactions contemplated by this
Agreement.
(8) The Company is not in violation of its certificate of
incorporation or by-laws or of any indenture, agreement, or undertaking
mentioned or referred to in any registration statement filed by the
Company or referred to in the minutes of the meetings of the
stockholders, board of directors, or any committee of the board of
directors of the Company, to which it is a party or by which it or its
properties may be bound.
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(9) There are no legal or governmental proceedings pending in
the United States to which the Company is a party or of which any
property of the company is subject, which if determined adversely to
the company would individually or in the aggregate have a material
adverse effect on the business, properties, financial condition or
earnings of the Company, and to the best of the Company's knowledge, no
such proceedings are threatened or contemplated in the United States by
governmental authorities or threatened in the United States by others.
(10) The Company and each of the Originators possesses all
material licenses, certificates, authorities or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies
necessary to conduct the business now operated by it and as described
in the Prospectus or otherwise to consummate the transactions
contemplated by this Agreement, the Terms Agreement, the [Pooling and
Servicing Agreement] [Trust Agreement] [Indenture], the Prospectus and
the related Prospectus Supplement, and the Company has received no
notice of proceedings relating to the revocation or modification of any
such license, certificate, authority or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially and adversely affect the conduct of the
business, properties, financial condition or earnings of the Company or
any of the Originators.
(11) No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body is
required in the United States for the issue and sale of the Securities,
or States for the issue and sale of the Securities, or the consummation
by the Company of the other transactions contemplated by this
Agreement, the Terms Agreement, the [Pooling and Servicing Agreement]
[Trust Agreement] and the Prospectus or the related Prospectus
Supplement, except such as may be required under the 1933 Act or the
Regulations or state securities laws.
[(12) At the time of execution and delivery of the Pooling and
Servicing Agreement, the Company (i) shall have good and marketable
title to the Home Equity Loans being transferred by it to the Trustee
pursuant thereto, free and clear of any lien, mortgage, pledge, charge,
encumbrances, adverse claim or other security interest (collectively,
"Liens"), except to the extent described in Section 2.04 of the Pooling
and Servicing Agreement, (ii) shall not have assigned to any person any
of its right, title or interest in such Home Equity Loan or in the
Pooling and Servicing Agreement and (iii) shall have the power and
authority to sell such Home Equity Loans to the Trustee and upon
execution and delivery of the Pooling and Servicing Agreement by the
Trustee, the Trustee shall have acquired beneficial ownership of all of
the Company's right, title and interest in and to such Home Equity
Loans except to the extent disclosed in the Prospectus and upon
delivery to the Underwriters of the Securities the Underwriter shall
have good and marketable title to the Securities, in each case free of
Liens except, in the case of the Home Equity Loans, to the extent
described in Section 2.04 of the Pooling and Servicing Agreement.]
[(13) As of the Cut-off Date, each of the Home Equity Loans
shall meet the eligibility criteria described in the Pooling and
Servicing Agreement.]
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(14) Neither the Company nor the Trust Fund created by the
applicable [Pooling and Servicing Agreement] [Trust Agreement] shall
conduct its operations while any of the Securities are outstanding in a
manner that would constitute the Company or the Trust Fund as an
"investment company" under the Investment Company Act of 1940, as
amended (the "1940 Act").
[(15) At Closing Time, each of the representations and
warranties of the Company set forth in the Pooling and Servicing
Agreement shall be true and correct in all material respects.]
Any certificate signed by an officer of the Company, the Insurer or
provider of Alternate Credit Enhancement and delivered to you or counsel for the
Underwriters in connection with an offering of Securities shall be deemed, a
representation and warranty as to the matters covered thereby to each person to
whom the representations and warranties in this Section 1 are made.
SECTION 2. Sale and Delivery to Underwriters; Closing. (a) On the basis
of the representations and warranties contained and subject to the terms and
conditions herein set forth, the Company agrees to sell to each Underwriter,
severally and not jointly, and each Underwriter, severally and not jointly,
agrees to purchase from the Company, the Securities at the price per Security
set forth in the Terms Agreement.
(b) Payment of the purchase price for, and delivery of, any Securities
to be purchased by the Underwriters shall be made at the office of
_____________________________________, or at such other place as shall be agreed
upon by you and the Company at 10 A.M. on __________, ___, or such other time
not later than ten business days after such date as shall be agreed upon by you
and the Company in the Terms Agreement (each such time and date being referred
to as a "Closing Time"). Unless otherwise specified in the applicable Terms
Agreement, payment shall be made to the Company by wire transfer of same day
funds, or in such other manner as the parties thereto may agree in writing,
payable to the account of the Company, against delivery to you of the
Securities. Such Securities shall be in such denominations and registered in
such names as you may request in writing at least one business day prior to the
applicable Closing Time. Such Securities, which may be in temporary form, will
be made available for examination and packaging by you no later than 1:00 P.M.
on the last business day prior to the applicable Closing Time.
SECTION 3. Covenants of the Company. The Company covenants with each of
you as follows with respect to Securities:
(a) Contemporaneously with the execution of each Terms Agreement, the
Company will prepare a Prospectus Supplement setting forth the principal amount
of Securities covered thereby, the price or prices at which the Securities are
to be purchased by the Underwriters, the initial public offering price or prices
or the method by which the price or prices by which the Securities are to be
sold will be determined, the selling concession(s) and reallowance(s), if any,
any delayed delivery arrangements, and such other information as you and the
Company deem appropriate in connection with the offering of the Securities. The
Company will promptly transmit copies of the Prospectus Supplement to the
Commission for filing pursuant to Rule 424 under the 1933 Act and will furnish
to the Underwriters as many copies of the Prospectus and such Prospectus
Supplement as you shall reasonably request.
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<PAGE>
(b) If any event shall occur as a result of which it is necessary to
amend or supplement the Prospectus in order to make the Prospectus not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, the Company shall forthwith amend or supplement the
Prospectus (in form and substance satisfactory to counsel for the Company and
the Underwriters) so that, as of amended or supplemented, the Prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading, and the Company shall furnish to the Underwriters a reasonable
number of copies of such amendment or supplement.
(c) The Company will give you reasonable notice of its intention to
file any amendment to the Registration Statement or any amendment or supplement
to the Prospectus, whether pursuant to the 1933 Act or otherwise, will furnish
you with copies of any such amendment or supplement or other documents proposed
to be filed a reasonable time in advance of filing, and will not file any such
amendment or supplement or other documents in a form to which you or your
counsel shall reasonably object.
(d) The Company will notify you immediately, and confirm the notice in
writing, (i) of the effectiveness of any amendment to the Registration
Statement, (ii) of the mailing or the delivery to the Commission for filing of
any supplement to the Prospectus or any document, other than quarterly and
annual reports to be filed pursuant to the Securities Exchange Act of 1934, as
amended (the "1934 Act"), (iii) of the receipt of any comments from the
Commission with respect to the Registration Statement, the Prospectus or any
Prospectus Supplement, (iv) of any request by the Commission for any amendment
to the Registration Statement of any amendment or supplement to the Prospectus
or for additional information, and (v) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose. The Company will make every
reasonable effort to prevent the issuance of any stop order and, if any stop
order is issued, to obtain the lifting thereof at the earliest possible moment.
(e) The Company will deliver to you two signed copies and as many
conformed copies of the Registration Statement (as originally filed) and of each
amendment thereto including exhibits filed therewith as you may reasonably
request.
(f) The Company shall endeavor, in cooperation with the Underwriters,
to qualify the Securities for offering and sale under the applicable securities
laws of such states and other jurisdictions of the United States as you may
designate; provided, however, that the Company shall not be obligated to qualify
as a foreign corporation in any jurisdiction in which it is not so qualified. In
each jurisdiction in which the Securities have been so qualified, the Company
shall file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for so long as may be
required for the distribution of the Securities.
(g) The Company and the Originators shall use the net proceeds received
by them from the sale of the Securities in the manner specified in the
Prospectus and the related Prospectus Supplement under "Use of Proceeds".
[(h) The Master Servicer shall file with the Commission such reports on
Form SR as may be required pursuant to Rule 463 under the 1933 Act.]
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<PAGE>
(i) If required, the Master Servicer shall file with the Commission a
Report on Form 8-K within 15 days of Closing Time setting forth certain
information concerning the Securities which was not specifically set forth in
the Prospectus.
(j) During a period of 30 days from the date of the Terms Agreement,
the Company shall not, without the prior written consent of the Underwriters,
directly or indirectly, publicly sell, or offer to sell, any mortgage
pass-through certificates, mortgages pas-through notes, collateralized mortgage
obligations or asset-backed securities or similar securities representing
interests in or secured by mortgage loans or mortgage-backed securities.
[(k) So long as the Securities shall be outstanding, the Master
Servicer shall deliver to you the annual statement as to compliance delivered to
the Trustee pursuant to Section 3.09 of the Pooling and Servicing Agreement and
the annual statement of a firm of independent public accountants furnished to
the Trustee pursuant to Section 3.10 of the Pooling and Servicing Agreement, as
soon as such statements are furnished to the Trustee.]
[(l) The Master Servicer shall prepare, or cause to be prepared, and
file, or cause to be filed, a timely election to treat the Home Equity Loans as
a real estate mortgage investment conduit (a "REMIC") for federal income tax
purposes and shall file, or cause to be filed, such tax returns and take such
actions, all on a timely basis, as are required to elect and maintain such
status.]
SECTION 4. Payment of Expenses. The Company shall be obligated to pay
all expenses incident to the performance of its obligations under this Agreement
and any Terms Agreement, including without limitation, those related to (i) the
filing of the Registration Statement and all amendments thereto, (ii) the
printing and delivery to the Underwriters, in such quantities as you may
reasonably request, of copies of this Agreement, each Terms Agreement, any
agreements among Underwriters, the Prospectus and all Supplements thereto and
any selling agreements and Underwriters' questionnaires and powers of attorney,
(iii) the preparation, issuance and delivery of the Securities to the
Underwriters, (iv) the fees and disbursements of the Company's counsel (not to
exceed $_________) and accountants, (v) the qualification of the Securities
under Securities and Blue Sky laws and the determination of the eligibility of
the Securities for investment in accordance with the provisions of Section 3(f)
hereof, including filing fees, and the fees and disbursements of counsel for the
Underwriters in connection therewith and in connection with the preparation of
any Blue Sky Survey and Legal Investment Survey, (vi) the printing and delivery
to the Underwriters, in such quantities as you may reasonably request,
hereinabove stated, of copies of the Registration Statement, and Prospectus and
all amendments and Supplements thereto, and of any Blue Sky Survey and Legal
Investment Survey, (vii) the printing and delivery to the Underwriter, in such
quantities as you may reasonably request, of copies of each Pooling and
Servicing Agreement, (viii) the fees charged by investment rating agencies for
rating the Securities, (ix) the fees and expenses, if any, incurred in
connection with the listing of the Securities on any national securities
exchange, and (x) the fees and expenses of the Trustee and its counsel. The cost
of the accountant's comfort letter referred to in Section 3(g) hereof will be an
expense of the Underwriter.
If a Terms Agreement is terminated by you in accordance with the
provisions of Section 5 or Section 9(i) hereof, the Company shall reimburse you
for all reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters.
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SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase Securities pursuant to any Terms Agreement are
subject to the accuracy of the representations and warranties of the Company
herein contained, to the performance by the Company of its obligations
hereunder, and to the following further conditions:
(a) At the applicable Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
1933 Act or proceedings therefor initiated or threatened by the Commission.
(b) At the applicable Closing Time, you shall have received:
(1) The favorable opinion, dated as of the applicable Closing
Time, of ________________, counsel for the Company, in form and
substance satisfactory to such of you as may be named in the applicable
Terms Agreement, to the effect that:
(i) The direction by the Company to the Trustee to
execute, issue, countersign and deliver the Securities has
been duly authorized by the Company and, assuming that the
Trustee has been duly authorized to do so, when executed and
countersigned and delivered by the Trustee in accordance with
the [Pooling and Servicing Agreement] [Trust Agreement] and in
the case of the Securities delivered to you as provided in
this Agreement and the Terms Agreement, the Securities shall
be validly issued and outstanding and shall be entitled to the
benefits of the [Pooling and Servicing Agreement] [Trust
Agreement].
(ii) The [Pooling and Servicing Agreement] [Trust
Agreement] has been duly and validly authorized, executed and
delivered by the Company and, assuming due authorization,
execution and delivery thereof by the Trustee, the [Pooling
and Servicing Agreement] [Trust Agreement] constitutes a valid
and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other laws
relating to or affecting creditors' rights generally or by
general equitable principles.
(iii) This Agreement has been duly and validly
authorized, executed and delivered by the Company.
(iv) The Registration Statement is effective under
the 1933 Act and, to the best of such counsel's knowledge and
information, no stop order suspending the effectiveness of the
Registration Statement has been issued under the 1933 Act or
proceedings therefor initiated or threatened by the
Commission.
(v) The Registration Statement, as of the date it
becomes effective, and the Prospectus, as of the date thereof
(other than, in each case, the financial statements and other
financial, statistical and numerical information included
therein, as to which no opinion is rendered), complied as to
form in all material respects with the requirements of the
1933 Act and the Regulations thereunder.
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(vi) The conditions to the use by the Company of a
registration statement on Form S-3 under the 1933 Act, as set
forth in the General Instructions to Form S-3, have been
satisfied with respect to the Registration Statement and the
Prospectus.
(vii) The statements in the Prospectus under the
headings "Federal Income Tax Consequences" "ERISA
Considerations", "Certain Legal Aspects of Mortgage Loans,"
and "Certain Legal Aspects of the Contracts," to the extent
that they constitute matters of law or summaries of legal
matters, documents or proceedings, or legal conclusions have
been prepared or reviewed by such counsel
and are correct in all material respects.
(viii) No authorization, approval, consent or order
of any court or governmental authority or agency is required
in connection with the consummation of transactions
contemplated by, or the fulfillment of the terms of, this
Agreement, the Terms Agreement and the [Pooling and Servicing
Agreement] [Trust Agreement] or the sale of the Securities to
the Underwriters, except such as may be required under the
1933 Act or the Regulations or state securities laws.
(ix) The Pooling and Servicing Agreement is not
required to be qualified under the Trust Indenture Act of
1939, as amended.
(x) Neither the Company nor the Trust Fund created by
the [Pooling and Servicing Agreement] [Trust Agreement] is
required to register as an "investment company" under the
Investment Company Act of 1940, as amended.
[(xi) Assuming (i) that the election required by
Section 860D(b) of the Internal Revenue Code of 1986, as
amended (the "Code") is properly made and (ii) compliance with
the Pooling and Servicing Agreement, as in effect at the
Closing Time, and with any subsequent changes in the law,
including any amendments to the Code or applicable regulations
of the U.S. Department of the Treasury thereunder, the Trust
Fund will be treated for federal income tax purposes as a
"real estate mortgage investment conduit" within the meaning
of Section 860D of the Code, the Securities shall be treated
as "regular interests" in such REMIC and the Class (__)
Certificates shall be treated as the single class of "residual
interests" in such REMIC and the statements in the Prospectus
under the heading "Federal Tax Aspects", to the extent they
constitute matters of federal law or legal conclusions with
respect thereto, have been prepared and reviewed by such
counsel and, in the opinion of such counsel, provide a fair
and accurate summary of their conclusions.]
(xii) The consummation of the transactions
contemplated by, or the fulfillment of the terms of, this
Agreement, the Terms Agreement and the [Pooling and Servicing
Agreement][Trust Agreement][Indenture] will not violate the
certificate of incorporation or by-laws of the Company, or, to
such counsel's knowledge, any indenture, agreement or
undertaking to which the Company is a party or by which it is
bound and which is mentioned or referred to in any
registration statement or other report filed by the company
with the Commission
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or in the minutes of meetings of the stockholders, Board of
Directors or any committee of the Board of the Directors of
the Company, to which the Company is a party or by which is
bound.
In rendering the foregoing opinion, such counsel may also state that
except to the extent set forth in paragraph (viii) above, they have not made any
independent investigation or verification of facts or law contained in, and do
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in, the Registration Statement and Prospectus or related
Prospectus Supplement.
You shall also have received from such counsel a letter authorizing the
Underwriters to rely upon the opinions delivered by such counsel to each Rating
Agency rating the Securities in connection with the transactions contemplated by
this Agreement and the [Pooling and Servicing Agreement] [Trust Agreement]
[Indenture].
(2) Charles D. Brown, Vice President and Assistant General
Counsel of Beneficial Management Corporation of America, or other
counsel regularly employed by the Company, shall furnish to you an
opinion to the effect that:
(A) The Company has been duly incorporated in, and is
a validly existing corporation in good standing under the laws
of, the State of Delaware.
(B) The Company has corporate power and authority (i)
to own, lease and operate its properties, (ii) to conduct its
business as described in the Registration Statement, and (iii)
to enter into an perform its obligations under this Agreement,
the Terms Agreement and the [Pooling and Servicing Agreement]
[Trust Agreement].
(C) The Company possesses all necessary licenses and
approvals from governmental authorities to conduct its
business in each of the States as currently conducted therein
by it.
(D) To the extent of matters brought to such
counsel's attention and upon the basis of information
furnished to such counsel, such counsel is not aware of (i)
any material pending legal proceedings to which the Company is
a party or of which any of its property is the subject which
would be required to be disclosed in the Registration
Statement or the Prospectus pursuant to the applicable
requirements of the 1933 Act and the rules and regulations of
the Commission thereunder, which are not so disclosed; (ii)
any other material pending legal proceedings, including
ordinary routine litigation incidental to the business of the
Company to which the Company is a party or of which any of its
property is the subject; or (iii) any legal proceedings,
pending or threatened, (A) asserting the invalidity of the
[Pooling and Servicing Agreement] [Trust Agreement] or the
Securities, (B) seeking to prevent the issuance of the
Securities or the consummation by the Company of any of the
transactions contemplated by this Agreement, the Terms
Agreement or the [Pooling and Servicing Agreement] [Trust
Agreement], or (C) which might materially and adversely affect
the
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performance by the Company of its obligations under this
Agreement, the Terms Agreement or the [Pooling and Servicing
Agreement][Trust Agreement].
(E) To the extent of matters brought to such
counsel's attention and upon the basis of information
furnished to such counsel, such counsel is not aware of any
material contracts, indentures, mortgages, loan agreements,
notes, leases or other instruments required to be filed as
exhibits to the Registration Statement pursuant to the
applicable requirements of the 1933 Act and the rules and
regulations of the Commission thereunder, which are not so
filed.
(F) The statements in the Prospectus under the
heading "Description of the Securities", insofar as such
statements purport to summarize certain provisions of the
Securities and the [Pooling and Servicing Agreement] [Trust
Agreement] [Indenture] are accurate in all material respects.
(3) The favorable opinion, dated as of Closing Time, of
____________, counsel for the Trustee, in form and substance
satisfactory to counsel for the Underwriters.
(4) The favorable opinion, dated as of Closing Time, of
_____________, counsel for the Underwriters, with respect to the issue
and sale of the Securities, the Registration Statement, this Agreement,
the Terms Agreement, the Prospectus, the related Prospectus Supplement
and such other related matters as the Underwriters may require.
(5) In giving their opinions required by subsections (b)(1)
and (b)(2), respectively, of this Section, such counsel shall state
that it has participated in conferences with officers and other
representatives of the Company, your counsel, representatives of the
independent accountants for the Company and you at which the contents
of the Registration Statement and the Prospectus were discussed and,
although such counsel is not passing upon and does not assume
responsibility for, the factual accuracy, completeness or fairness of
the statements contained in the Registration Statement or the
Prospectus and has made no independent check or verification thereof
for the purpose of rendering this opinion, on the basis of the
foregoing (relying as to materiality to a large extent upon the
certificates of officers and other representatives of the Company),
nothing has come to their attention that leads such counsel to believe
that either the Registration Statement, at the time it became
effective, or the Prospectus at the time the Prospectus was delivered
to you contained or at the Closing Time, contains an untrue statement
of a material fact or omits 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, except that such counsel need
express no view with respect to the financial statements, schedules and
other financial and statistical data included in or incorporated by
reference into the Registration Statement or the Prospectus.
(6) The favorable opinion of counsel to the [Owner]
[Indenture] Trustee, dated as of the applicable Closing Time, addressed
to you and in form and scope satisfactory to your counsel, to the
effect that:
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<PAGE>
(i) The [Owner] [Indenture] Trustee is a
___________________ with trust powers, duly organized and
validly existing in good standing under the laws of
_________________, and has all requisite power and authority
to enter into the Agreement and perform the obligations of
Trustee.
(ii) The [Pooling and Servicing Agreement] [Trust
Agreement] [Indenture] has been duly authorized, executed, and
delivered by the [Owner] [Indenture] Trustee, and constitutes
the legal, valid, and binding obligation of the [Owner]
[Indenture] Trustee enforceable against the [Owner]
[Indenture] Trustee in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy and
insolvency laws and other similar laws affecting the
enforcement of creditors' rights generally and by general
equity principles.
In rendering such opinion, such counsel may rely, as to matters of
fact, to the extent deemed proper and stated therein, on certificates of
responsible officers of the [Owner] [Indenture] Trustee or public officials.
[(7) The favorable opinion of counsel to each provider of
Credit Enhancement, if any, named in a Prospectus Supplement, dated as
of the applicable Closing Time, addressed to you and in form and scope
satisfactory to your counsel, to the effect that:
(i) Such provider of Credit Enhancement has been duly
organized and is validly existing as a corporation under the
laws of the jurisdiction of its incorporation, is duly
qualified to do business in all jurisdictions where the nature
of its operations as contemplated by the Credit Enhancement
legally requires such qualification, and has the power and
authority (corporate and other) to issue, and to take all
action required of it under, the Credit Enhancement.
(ii) The execution, delivery and performance by such
provider of Credit Enhancement of the Credit Enhancement have
been duly authorized by all necessary corporate action on the
part of the provider of Credit Enhancement, and under present
law do not and will not contravene any law or governmental
regulation or order presently binding on such provider of
Credit Enhancement or the charter of the by-laws of such
provider of Credit Enhancement or contravene any provision of
or constitute a default under any indenture, contract or other
instrument to which the provider of Credit Enhancement is a
party or by which such provider of Credit Enhancement is
bound.
(iii) The execution, delivery and performance by such
provider of Credit Enhancement of the Credit Enhancement do
not require the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action
in respect of any federal, state or other governmental agency
or authority which has not previously been effected.
(iv) The Credit Enhancement has been duly issued by
such provider of Credit Enhancement and constitutes the valid
and binding agreement of such provider of Credit Enhancement,
enforceable against the provider of Credit Enhancement in
accordance with its terms, subject to applicable bankruptcy,
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<PAGE>
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and subject as to
enforceability to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
(v) The Credit Enhancement conforms in all material
respects to the description thereof in the applicable
Prospectus Supplement under the caption "Credit Enhancement."
To the extent required by applicable legal requirements, the
Credit Enhancement form has been filed with, and approved by,
all governmental authorities having jurisdiction over the
provider of Credit Enhancement in connection with such Credit
Enhancement.]
(c) At Closing Time there shall not have been, since the date hereof or
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change in the business,
properties, financial condition or earnings of the Company or of Beneficial
Corporation and its subsidiaries taken as a whole, and the Underwriters shall
have received a certificate of the President or a Vice President of the Company
and of the chief financial or chief accounting officers of the Company, dated as
of Closing Time, to the effect that (i) there has been no such material adverse
change with respect to the Company, (ii) the representations and warranties made
by the Company in Section 1 are true and correct in all material respects with
the same force and effect as though expressly made at and as of Closing Time,
(iii) the Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied at or prior to Closing Time and (iv) no
stop order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purposes have been initiated or threatened by
the Commission.
(d) You shall have received from independent certified public
accountants acceptable to you, a letter, dated as of the date of the applicable
Terms Agreement and as of the applicable Closing Time, delivered at such times,
in the form heretofore agreed to.
[(e) At Closing Time the Underwriters shall have received from the
Trustee a certificate signed by one or more duly authorized officers of the
Trustee, dated as of Closing Time, as to the due acceptance of the [Pooling and
Servicing Agreement][Trust Agreement] by the Trustee and the due execution and
delivery of the Securities delivered by the Trustee thereunder and such other
matters as the Underwriters shall reasonably request.]
(f) At the applicable Closing Time, with respect to a Series of
Securities, the Securities shall have received the certificate rating or ratings
specified in the related Terms Agreement.
(g) At the applicable Closing Time, counsel for the Underwriters shall
have been furnished with such documents as they may reasonably require for the
purpose of enabling them to pass upon the issuance and sale of the Securities as
herein contemplated and related proceedings or in order to evidence the accuracy
and completeness of any of the representations and warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to you and
counsel for the Underwriters.
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<PAGE>
(h) At the applicable Closing Time, the Company shall have furnished to
you such further information and documents as you may have reasonably requested.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, the applicable Terms Agreement
may be terminated by you by notice to the Company at any time at or prior to the
applicable Closing Time, and such termination shall be without liability of any
party to any other party except as provided in Section 4.
SECTION 6. Indemnification.
(a) As an inducement to the Underwriters to participate in the public
offering of the Securities, the Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls an Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, as follows:
(i) against any and all losses, liabilities, claims,
damages and expenses whatsoever arising out of or resulting
from any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any
amendment thereto), or the omission or alleged omission
therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or
arising out of or resulting from any untrue statement or
alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(ii) against any and all losses, liabilities, claims,
damages and expenses whatsoever to the extent of the aggregate
amount paid in settlement of any litigation, or investigation
or proceeding by any governmental agency, or body, commenced
or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue
statement or omission, if such settlement is effected with the
written consent of the Company; and
(iii) against any and all expense whatsoever
(including, subject to Section 6(c) hereof, the fees and
disbursements of counsel chosen by you) reasonably incurred in
investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any
such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of or resulting
from any untrue statement or omission or alleged untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information made in reliance upon and in conformity with written
information furnished to the Company by the Underwriters expressly for use in
the Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
15
<PAGE>
(b) Each Underwriter agrees to indemnify and hold harmless the Company,
each of the Company's directors, each of the Company's officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against
any and all losses, liabilities, claims, damages and expenses described in the
indemnity contained in subsection (a) of this Section, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions, made
in the Registration Statement (or any amendment thereto) or any Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by the Underwriters expressly for
use in the Registration Statement (or any amendment thereto) or any Prospectus
(or any amendment or supplement thereto).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it with respect to which
indemnity may be sought hereunder but failure to so notify an indemnifying party
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. An indemnifying party may participate at
its own expense in the defense of such action. If it so elects within a
reasonable time after receipt of such notice, an indemnifying party, jointly
with any other indemnifying parties receiving such notice, may assume the
defense of such action with counsel chosen by it and approved by the indemnified
parties defendant in such action, unless such indemnified parties reasonably
object to such assumption on the ground that representation of both the
indemnifying parties and the indemnified parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. If an
indemnifying party assumes the defense of such action, the indemnifying party
shall not be liable for any fees and expenses of counsel for the indemnified
parties incurred thereafter in connection with such action except as provided in
the preceding sentence. In no event shall the indemnifying parties be liable for
the fees and expenses of more than one counsel (in addition to any local
counsel) for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances.
(d) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceedings in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
SECTION 7. Contribution. (a) In order to provide for just and equitable
contributions in circumstances in which the indemnification provided for in
Section 6 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the indemnifying parties, then each indemnifying
party under such Section, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, liabilities, actions, claims, damages or
expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the Underwriters on the other hand in connection with the statements
or omissions that resulted in such losses, liabilities, actions, claims, damages
or expenses as well as any other relevant equitable considerations. The relative
benefits
16
<PAGE>
received by the Company on the one hand and the Underwriters on the other hand
in connection with the offering of the Securities shall be deemed to be in the
same respective proportions as the net proceeds from the offering of the
Securities (before deducting expenses) received by the Company and the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover of the Prospectus, bear to the
aggregate public offering price of the Securities. The relative fault of the
Company on the one hand and the Underwriters on the other hand 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 relates to information supplied by the Company or by the Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the respective principal amount of Securities they have purchased
hereunder, and not joint.
(b) The Company and the Underwriters agree that it would not be just or
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in paragraph (a). The amount paid or
payable by an indemnified party as a result of the losses, liabilities, actions,
claims, damages and expenses referred to in paragraph (a) shall be deemed to
include, subject to the limitations set forth in Section 6, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. The
remedies provided for in this Section 7 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any indemnified party
at law or in equity. For purposes of this Section 7, each person, if any, who
controls any of the Underwriters within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
the Underwriters and each director of the Company, each officer of the Company
who signed the Registration Statement, and each person, if any, who controls the
company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribute as the Company.
SECTION 8. Representations, Warranties, and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement and the Terms Agreement, or contained in certificates of officers of
the Company submitted pursuant hereto, and the indemnity and contribution
provisions of Sections 6 and 7, shall remain operative and in full force and
effect, regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of the Underwriters or controlling person
thereof, or by or on behalf of the Company and (iii) acceptance of and payment
for the Securities by the Underwriters.
SECTION 9. Termination of Agreement. You may terminate the Terms
Agreement, immediately upon notice to the Company, at any time at or prior to
the applicable Closing Time
17
<PAGE>
(i) if there has been, since the date of such Terms Agreement or since the
respective dates as of which information is given in the Registration Statement
or Prospectus any material adverse change in the business, financial condition
or earnings of the Company or of Beneficial Corporation and its subsidiaries
taken as a whole, whether or not arising in the ordinary course of business or
(ii) if there has occurred any material adverse change in the financial markets
in the United States or any outbreak of hostilities or other calamity or crisis,
the effect of which on the financial markets of the United States is such as to
make it, in your judgment, impracticable to market such Securities or enforce
contracts for the sale of such Securities, or (iii) if trading in the common
stock of Beneficial Corporation has been suspended on any exchange, or (iv) if
trading generally on either the American Stock Exchange or the New York Stock
Exchange has been suspended, or minimum or maximum prices for trading have been
fixed, or maximum ranges for prices for securities have been required, by either
of said exchanges or by order of the Commission or any other governmental
authority, or if a banking moratorium has been declared by either Federal or New
York authorities.
SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters participating in an offering of Securities shall fail at the
applicable Closing Time to purchase the Securities which it or they are
obligated to purchase hereunder and under the applicable Terms Agreement (the
"Defaulted Securities"), then such of you as are named therein shall have the
right, but not the obligation, within 24 hours thereafter, to make arrangements
for one or more of the non-defaulting Underwriters, or any other Underwriters,
to purchase all, but not less than all, of the Defaulted Securities in such
amounts as may be agreed upon and upon the terms herein set forth. If, however,
you have not completed such arrangements within such 24-hour period, then this
Agreement shall terminate without liability on the part of the non-defaulting
Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability with respect to any default of such Underwriters
under this Agreement and the applicable Terms Agreement.
In the event of a default by any Underwriters as set forth in this
Section which does not result in a termination of this Agreement, either the
non-defaulting Underwriters or the Company shall have the right to postpone the
applicable Closing Time for a period of time not exceeding seven days in order
that any required changes in the Registration Statement or Prospectus or in any
other documents or arrangements may be effected.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to you at the address set forth on the first page
hereof, Attention: Syndicate Department. Notices to the Company shall be
directed to the Company at One Christina Centre, 301 North Walnut Street,
Wilmington, Delaware 19801, Attention: Scott A. Siebels, Esquire.
SECTION 12. Parties. This Agreement shall inure to the benefit of and
be binding upon you and the Company and any Terms Agreement shall inure to the
benefit of and be binding upon the Company and any Underwriters and their
respective successors. Nothing expressed or mentioned in this Agreement or any
Terms Agreement is intended or shall be construed to give any person, firm or
corporation, other than the parties hereto or thereto and their respective
18
<PAGE>
successors and the controlling person and officers and directors referred to in
Sections 6 and 7 hereof and their heirs and legal representatives any legal or
equitable right, remedy or claim under or with respect to this Agreement or any
Terms Agreement or any provision herein or therein contained. This Agreement and
any Terms Agreement and all conditions and provisions hereof or thereof are
intended to be for the sole and exclusive benefit of the parties and their
respective successors and their heirs and legal representatives (to the extent
of their rights as specified herein and therein) and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any Underwriters
shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. Governing Law and Time. This Agreement and each Terms
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to agreements made and to be performed in said
State. Specified times of day refer to New York City time.
SECTION 14. Counterparts. This Agreement and any Terms Agreement may be
executed in counterparts, each of which shall constitute an original of any
party whose signature appears on it, and all of which shall together constitute
a single instrument.
19
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
you and the Company in accordance with its terms.
Very truly yours,
BENEFICIAL MORTGAGE SERVICES, INC., as
Depositor
By:___________________________________
Name:
Title:
CONFIRMED AND ACCEPTED, as of the date first above written:
[Underwriter]
By:___________________________________
Name:
Title:
20
<PAGE>
EXHIBIT A
BENEFICIAL MORTGAGE SERVICES, INC.
ASSET BACKED SECURITIES, SERIES ____
FORM OF TERMS AGREEMENT
Dated: _________________, ____
To: Beneficial Mortgage Services, Inc., as Depositor (the "Depositor") under
the Pooling and Servicing Agreement to be dated as of _______________,
____ (the "Agreement").
Re: Underwriting Agreement dated _____________, ____.
Series Designation: Beneficial Mortgage Services, Inc.,
Asset Backed Securities, Series ____.
Terms of the Securities and Underwriting Compensation:
Class (1) Original
- --------- Principal Pass-Through Price to
Amount Rate Public
------ ---- ------
$________* ** ***
- ----------------------
(1) The Class (_) Securities are the Offered Securities. The Class (_)
Security is subordinate to the Offered Securities.
* Approximate. Subject to permitted variance of plus or minus 5%.
** Subject to the more precise formulation described in the Prospectus
(as defined below).
*** The Class (_) Securities are being offered by the Underwriter from time
to time in negotiated transactions or otherwise at varying prices to be
determined, in each case, at the time of sale.
Moody's Standard &
Security Investors Poor's Ratings
Rating Service Services
------ ------- --------
<PAGE>
[REMIC Election:
The Depositor intends to cause the Trust Fund (exclusive of the
security interest in the Additional Collateral) to elect to be treated as a
REMIC as described in the Prospectus dated , ____ and the Prospectus Supplement
relating to the Class Securities, dated ______________, ____ (together, the
"Prospectus).]
Trust Fund:
As described in the Prospectus.
[Credit Enhancement:
Payments on the Class (_) Securities will be supported by (a limited
purpose surety bond), (a certificate insurance policy), (subordinate class(es))
and (by overcollateralization), as described in the Prospectus.]
Cut-off Date:
------------------, ----.
Distribution Date:
The __ th day of each month or, if such day is not a Business Day, the
first Business Day thereafter, commencing in ____.
Purchase Price:
The purchase price payable by the Underwriter for the Class (_)
Securities is a percentage of the principal amount of such Class, as follows:
Aggregate Original Percentage
Class Principal Amount of Principal
- ----- ---------------- ------------
$ %*
* The Class (_) Securities are being offered by the Underwriter from time
to time in negotiated transactions or otherwise at varying prices to be
determined, in each case, at the time of sale.
[The undersigned represents and agrees that (i) it has not offered or
sold and, prior to the expiration of the period of six months from the Closing
Date referred to below, will not offer or sell any Class Securities to persons
in the United Kingdom, except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances that
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulation 1995;
(ii) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the Class Securities in, from or otherwise involving the United Kingdom; and
(iii) it
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<PAGE>
has only issued or passed on and will only issue or pass on in the United
Kingdom any documents received by it in connection with the issue of the Class
(_) Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 [Investment Advertisements] [Exemptions] Order 1995,
or is a person to whom such document may otherwise lawfully be issued or passed
on.]
Closing Date and Location:
___________________, ____ at the offices of _________________________
____________________.
[Underwriter]
By:__________________________________
Name:
Title:
ACCEPTED:
BENEFICIAL MORTGAGE SERVICES, INC.
By:__________________________________
Name:
Title:
3
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
BENEFICIAL MORTGAGE SERVICES, INC.
The provisions of the certificate of incorporation of the Corporation
are hereinafter set forth and read as follows:
FIRST: The name of the corporation is Beneficial
Mortgage Services, Inc.(the "Corporation").
SECOND: The Corporation has its principal place of
business at One Christina Centre, 301 North Walnut Street, Wilmington,
Delaware 19801.
THIRD: The address of the Corporation's registered office
in the State of Delaware is One Christina Centre, 301 North Walnut Street,
County of New Castle, City of Wilmington, State of Delaware. The name of
the registered agent of the Corporation at such address is Southern Trust
Company.
FOURTH: The name and mailing address of the sole incorporator
is
Jennifer A. Olvey
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
The powers of the incorporator will terminate upon the filing of this
Certificate of Incorporation.
<PAGE>
FIFTH: The names and mailing address of the persons who are to
serve as directors until the first annual meeting of shareholders and until
their successors are elected and qualify are Andrew C. Halvorsen,
Samuel F. McMillan, Richard J. Zak and Charles D. Brown, One Christina Centre,
301 North Walnut Street, Wilmington, Delaware 19801.
SIXTH: The nature of the business and the purposes to be
conducted or promoted by the Corporation are to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
SEVENTH: The total number of shares of capital stock of all
classes which the Corporation shall have authority to issue is one thousand
(1,000) shares, all of which shall be Common Stock each having a par value of
one cent ($.01).
EIGHTH: The Corporation is to have perpetual existence.
NINTH: In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized to make,
alter or repeal the by-laws of the Corporation.
TENTH: The Corporation shall indemnify, to the full extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as amended from time to time, all persons who it may indemnify
pursuant thereto.
2
<PAGE>
ELEVENTH: No director of the Corporation shall be personally
liable to the Corporation or any stockholder for monetary damages for breach
of fiduciary duty as a director, except for any matter in respect of which
such director shall be liable under Section 174 of Title 8 of the Delaware
Code(relating to the Delaware General Corporation Law) or any amendment
thereto or successor provision thereto or shall be liable by reason that,
in addition to any and all other requirements for such liability, such
director (i) shall have breached the duty of loyalty to the Corporation or
its stockholders, (ii) shall not have acted in good faith or, in failing to
act, shall not have acted in good faith, (iii) shall have acted in a manner
involving intentional misconduct or a knowing violation of law or, in failing
to act, shall have acted in a manner involving intentional misconduct or a
knowing violation of law or (iv) shall have derived an improper personal
benefit. Neither the amendment nor repeal of this Article TENTH nor the
adoption of any provision of the Certificate of Incorporation inconsistent
with this Article TENTH, shall eliminate or reduce the effect of this Article
TENTH, in respect of any matter occurring, or any cause of action, suit or
claim that, but for this Article TENTH would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
TWELFTH: Election of directors need not be by written ballot.
THIRTEENTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereinafter prescribed by statute, and all rights
conferred by the stockholders herein are granted subject to this reservation.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
of Incorporation this 6th day of February, 1997.
/s/ Jennifer A. Olvey
-------------------------
Jennifer A. Olvey
Incorporator
4
<PAGE>
Exhibit 3.2
BY-LAWS
OF
BENEFICIAL MORTGAGE SERVICES, INC.
ARTICLE I
Stockholders
SECTION 1. Annual Meetings. The annual meeting of the
stockholders (the "Annual Meeting of Stockholders") of Beneficial Mortgage
Services, Inc. (the "Corporation") for the purpose of electing directors and for
the transaction of such other business as may be brought before the meeting
shall be held, in each year on such day, at such time and such place within or
without the State of Delaware as shall be fixed by the Board of Directors and
stated in the notice of the meeting.
SECTION 2. Special Meetings. Special meetings of the
stockholders may be called at any time by the Board of Directors, by the
Chairman of the Board, by the President or by any number of stockholders owning
an aggregate of not less than fifty percent (50%) of outstanding shares of
capital stock entitled to vote. Special meetings shall be held on such day, at
such time and such place either within or without the State of Delaware
specified in the notice thereof.
SECTION 3. Notice of Meetings. Except as otherwise expressly
required by law or the Certificate of Incorporation of the Corporation, written
notice to stockholders stating the place and time of the meeting, and in the
case of a special meeting, the purpose or purposes of such meeting, shall be
given either by delivering a notice personally or mailing a notice to each
stockholder of record entitled to vote thereat at his address as it appears on
the records of the Corporation not less than ten (10) nor more than sixty (60)
days prior to the meeting. No business other than that stated in the notice
shall be transacted at any special meeting. Notice of any meeting of
stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or represented by proxy; and if any stockholder
shall, in person or by attorney thereunto duly authorized, in writing or by
telegraph, cable or wireless, waive notice of any meeting, whether before or
after such meeting be held, the notice thereof need not be given to him. Notice
of any adjourned meeting of stockholders need not be given except as provided in
Section 5 of this Article I.
SECTION 4. Quorum. Subject to the provisions of law or the
Certificate of Incorporation in respect of the vote that shall be required for a
specific action, the number of shares the holders of which shall be present or
represented by proxy at any meeting of stockholders in order to constitute a
quorum for the transaction of any business, shall be majority of all the shares
issued and outstanding and entitled to vote at such meeting.
SECTION 5. Adjournment. At any meeting of stockholders,
whether or not there shall be a quorum present, the holders of a majority of
shares voting at the meeting, whether present in person at the meeting or
represented by proxy at the meeting, may adjourn the meeting from time to time.
Except as otherwise provided by law, notice of such adjourned
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meeting need not be given otherwise than by announcement of the time and place
of such adjourned meeting at the meeting at which the adjournment is taken. At
any adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the original meeting.
SECTION 6. Organization. The Chairman of the Board, or in his
absence or nonelection, the President, or in the absence of both of the
foregoing officers, a Vice President, shall call meetings of the stockholders to
order, and shall act as Chairman of such meetings. In the absence of the
Chairman of the Board, the President, or a Vice President, the holders of a
majority in number of the shares of the capital stock of the Corporation present
in person or represented by proxy and entitled to vote at such meeting shall
elect a chairman, who may be the Secretary of the Corporation. The Secretary of
the Corporation shall act as secretary of all meetings of the stockholders, but
in the absence of the Secretary, the Chairman may appoint any person to act as
secretary of the meeting.
SECTION 7. Voting. Each stockholder of record, as determined
in accordance with Section 4 of Article V hereof, shall, except as otherwise
provided by law or by the Certificate of Incorporation, at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
capital stock entitled to vote held by such stockholder, but no proxy shall be
voted on after three years from its date, unless said proxy provides for a
longer period. Unless otherwise provided by law or the Certificate of
Incorporation, no vote upon any matter before the meeting, including the
election of directors need be by ballot; provided, however, upon the demand of
any stockholder, the vote for directors and the vote upon any matter before the
meeting, shall be by ballot. Except as otherwise provided by law, by the
Certificate of Incorporation or by these By-laws, all elections for directors
shall be decided by plurality vote; and all other matters shall be decided by a
majority of the votes cast thereon.
SECTION 8. Stockholders List. A complete list of the
stockholders entitled to vote at any meeting of the stockholders, arranged in
alphabetical order, with the address of each, and the number of shares held by
each, shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 9. Addresses of Stockholders. Each stockholder shall
designate to the Secretary of the Corporation an address to which notices of
meetings and all other corporate notices may be served upon or mailed to him,
and if any stockholder shall fail to designate such address, corporate notices
may be served upon him by mail directed to him at his last known post office
address.
SECTION 10. Judges of Voting. The Board of Directors may at
any time appoint one or more persons to serve as Judges of Voting at the next
succeeding Annual Meeting of Stockholders or at any other meeting or meetings
and the Board of Directors may at any time fill any vacancy in the office of
Judges of Voting. If the Board of Directors fails to appoint Judges of Voting,
or if any Judges of Voting appointed be absent or refuse to act, or if his
office becomes
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vacant and be not filled by the Board of Directors, the Chairman of any meeting
of the stockholders may appoint one or more temporary Judges of Voting for such
meeting. All proxies shall be filed with the Judges of Voting of the meeting
before being voted upon.
SECTION 11. Consent of Stockholders in Lieu of Meeting. Except
as otherwise provided by law, by the Certificate of Incorporation or by these
By-laws, any action required to be taken, or which may be taken, at any meeting
of stockholders may be taken without a meeting, without prior notice and without
a vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of shares of outstanding stock 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 of stock entitled to vote thereon were present
and voted; provided, however, that prompt notice of the taking of corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
ARTICLE II
Board of Directors
SECTION 1. General Powers. The property, affairs and business
of the Corporation shall be managed by or under the direction of the Board of
Directors. The Board of Directors may exercise all the powers of the Corporation
and do all lawful acts and things which are not reserved to the stockholders by
law or by the Certificate of Incorporation.
SECTION 2. Number, Qualification, Term of Office and Election.
The number of Directors shall be such as the Board of Directors may from time to
time by resolution direct. Directors need not be stockholders. The initial
number of Directors shall be three (3), consisting of one class of Directors,
until such time as the Board of Directors may by resolution direct that the
Board of Directors be divided into three classes in accordance with this Section
2. At such time as the Board of Directors by resolution directs, the Board of
Directors shall be divided into three classes, as nearly equal in number as
possible, with the term of office of the first class to expire at the Annual
Meeting of Stockholders next ensuing, the term of office of the second class to
expire at the Annual Meeting of Stockholders one year thereafter, and the term
of office of the third class to expire at the Annual Meeting of Stockholders two
years thereafter. At the time of the initial classification, any vacancy on the
Board of Directors caused by such increase in the number of Directors shall be
filed in accordance with Section 11 of this Article II. At each annual election
held after the initial classification and election, the Directors chosen to
succeed those whose terms have expired shall be elected to hold office until the
third succeeding Annual Meeting of Stockholders after their election. If the
number of Directors is changed, any increase or decrease in Directors shall be
apportioned among the classes so as to maintain all classes as equal in number
as possible, and any additional Director elected to any class shall hold office
for a term which shall coincide with the terms of the other Directors in such
class. Each Director shall hold office for the term for which he is appointed or
elected and until his successor, if any, shall have been elected and shall have
qualified, or until his death or until he shall have resigned or shall have been
removed in the manner hereinafter provided. Directors need not be elected by
ballot, except upon demand of any stockholder.
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SECTION 3. Quorum and Manner of Action. Except as otherwise
provided by statute or by these By-laws, a majority of the number of the Board
of Directors shall be required to constitute a quorum for the transaction of
business at any meeting, and the act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors. In the absence of a quorum, a majority of the directors present may
adjourn any meeting from time to time until a quorum be had. Notice of any
adjourned meeting need not be given if the time and place thereof are announced
at the meeting at which adjournment is taken. The directors shall act only as a
board and individual directors shall have no power as such.
SECTION 4. Place of Meeting, etc. The Board of Directors may
hold its meetings, have one or more offices, and keep the books and records of
the Corporation, at such place or places within or without the State of
Delaware, as the Board of Directors may from time to time determine or as shall
be specified or fixed in the respective notices or waivers of notice hereof.
SECTION 5. Regular Meetings. Commencing in 1997, a regular
meeting of the Board of Directors shall be held as soon as practicable after
each Annual Meeting of Stockholders, for the election of officers and the
transaction of other business, and other regular meetings of said Board of
Directors shall be held at such times and places as said Board shall direct. No
notice shall be required for any regular meeting of the Board of Directors but a
copy of every resolution fixing or changing the time or place of regular
meetings shall be mailed to every director at least five days before the first
meeting held pursuant to such resolution.
SECTION 6. Special Meetings; Notice and Waiver of Notice.
Special meetings of the Board of Directors may be called by the Chairman of the
Board, the Secretary on the request of the Chairman of the Board, the President
or any two Directors. The Secretary or an Assistant Secretary shall give notice
of the time and place of each special meeting by mailing a written notice of the
same to each director at his last known post office address or usual place of
business at least two days before the meeting or by causing the same to be
delivered personally or to be transmitted by telegraph, cable, telephone or
orally at least 24 hours before the meeting to each Director. Neither the
business to be transacted at, nor the purpose of any special meeting of the
Board of Directors need be specified in any notice or written waiver of notice
unless so required by law, the Certificate of Incorporation or these By-laws.
Notice of any meeting of the Board of Directors need not be given to any
Director if he shall sign a written waiver thereof either before or after the
time stated therein, or if he shall be present at the meeting and participate in
the business transacted thereat, except if a director attends for the purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Any meeting of the Board
of Directors shall be a legal meeting without any notice thereof having been
given if all of the members shall be present thereat. Unless limited by law, by
the Certificate of Incorporation, by these By-laws, or by the terms of the
notice thereof, any and all business may be transacted at any special meeting.
SECTION 7. Action by Consent. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if a written consent thereto is signed by all
members of the Board of Directors or of such committee, as the case may be, and
such written consent is filed with the minutes or proceedings of the Board of
Directors or committee.
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SECTION 8. Organization. At each meeting of the Board of
Directors, the Chairman of the Board, or, in his absence or nonelection, the
President, or, in the absence of both of the foregoing officers, a director
chosen by a majority of the Directors shall act as chairman. The Secretary, or
in his absence, an Assistant Secretary, or in the absence of both the Secretary
and Assistant Secretaries, any person appointed by the Chairman shall act as
secretary of the meeting.
SECTION 9. Resignations. Any Director of the Corporation may
resign at any time by giving written notice to the Board of Directors or to the
President or to the Secretary of the Corporation. The resignation of any
Director shall take effect immediately unless a date certain specified therein
for it to take effect, in which event it shall be effective upon such date, and
the acceptance of such resignation shall not be necessary to make it effective,
irrespective of whether the resignation is tendered subject to such acceptance.
SECTION 10. Removal of Directors. Subject to the rights of any
class or series of stock having a preference over the Common Stock of the
Corporation to elect directors under specified circumstances, any Director may
be removed from office, with or without cause, at any time, by the affirmative
vote of a majority in interest of the holders of record of the stock having
voting power at a special meeting of the stockholders called for the purpose,
and the vacancy in the Board of Directors caused by any such removal may be
filled by the stockholders at such meeting or filled by the Board of Directors
in the manner provided in Section 11 of this Article II.
SECTION 11. Vacancies. Any vacancy in the Board of Directors
caused by death, resignation, removal, disqualification, an increase in the
number of Directors, or any other cause may be filled by the affirmative vote of
a majority of the remaining Directors, even though less than a quorum, by a sole
remaining Director or by the stockholders of the Corporation at the next Annual
Meeting of Stockholders or any special meeting called for the purpose. Except as
otherwise provided by the Certificate of Incorporation, each Director so elected
shall hold office for the remainder of the full term of the class of Directors
in which the vacancy occurred or to which the new directorship was apportioned
pursuant to Section 2 of this Article II and until his successor, if any, shall
have been duly elected and shall have qualified, or until his death or until he
shall have resigned or shall have been removed in the manner herein provided. No
decrease in the number of Directors constituting the Board of Directors shall
shorten the term of any incumbent Director. In case all the Directors shall die
or resign or be removed or be disqualified, any stockholder having voting powers
may call a special meeting of the stockholders, upon notice given as herein
provided for meetings of the stockholders, at which Directors may be elected for
the unexpired term.
SECTION 12. Compensation of Directors. Directors, as such,
shall receive such sum for their services and expenses as may be directed by
resolution of the Board of Directors; provided, however, that nothing herein
contained shall be construed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for their
services and expenses.
SECTION 13. Committees. By resolution or resolutions passed
by a majority of the whole Board of Directors at any meeting of the Board of
Directors, the Directors may
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designate one or more committees, including without limitation executive, audit
and compensation committees, each committee to consist of two or more Directors.
To the extent provided in said resolution or resolutions, unless otherwise
provided by law, such committee or committees shall have and may exercise all of
the powers of the Board of Directors in the management of the business and
affairs of the Corporation, including without limitation the power and authority
to authorize the seal of the Corporation to be affixed to all papers which may
require it, except that no such committee shall have any power or authority with
respect to (i) amending the Certificate of Incorporation of the Corporation or
these By-laws, (ii) approving or recommending to the stockholders of the
Corporation any agreement or plan of merger or consolidation, any sale, lease or
exchange of all or substantially all of the property and assets of the
Corporation or the dissolution or liquidation of the Corporation (or the
abandonment or revocation thereof) or (iii) the declaration of dividends and the
authorization of the issuance of shares of capital stock of the Corporation. The
Board of Directors may designate one or more Directors as alternate members of a
committee who may replace an absent or disqualified member at any meeting. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. A committee may make such rules for the conduct of its
business and may appoint such committees and assistants as it shall from time to
time deem necessary for the transaction of business of such committee. Regular
meetings of a committee shall be held at such times as such committee shall from
time to time by resolution determine.
SECTION 14. Participation in Meetings. Members of the Board of
Directors or of any committee may participate in any meeting of the Board of
Directors or committee, as the case may be, by means of conference telephone or
similar communication equipment by means of which all persons participating in
the meeting can hear each other, and such participation shall constitute
presence in person at such meeting.
ARTICLE III
Officers
SECTION 1. Executive Officers. The officers of the Corporation
shall be a President, a Treasurer, and a Secretary. In addition, the Board of
Directors may elect a Chairman of the Board 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. Whenever any officer of
the Corporation ceases to be an employee of the Corporation and of all
corporations which control or are under common control with the Corporation,
such officer shall thereupon also cease to be an officer of the Corporation
without any further action on his part or on the part of the Board of Directors
or the Chairman.
SECTION 2. Election, Term of Office and Qualification. So far
as is practicable, the officers shall be elected annually by the Board of
Directors at their first meeting after each Annual Meeting of Stockholders of
the Corporation. Each officer, except such officers as may be appointed in
accordance with the provisions of Section 3 of this Article III, shall hold
office until his successor shall have been duly elected and shall have qualified
in his stead, or until his death
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or until he shall have resigned or shall have become disqualified or shall have
been removed in the manner hereinafter provided. The Chairman of the Board shall
be chosen from among the directors.
SECTION 3. Subordinate Officers. The Board of Directors or the
President may from time to time appoint such other officers, including one or
more Vice Presidents, one or more Assistant Treasurers and one or more Assistant
Secretaries, and such agents and employees of the Corporation as may be deemed
necessary or desirable. Such officers, agents and employees shall hold office
for such period and upon such terms and conditions, have such authority and
perform such duties as provided in these By-laws or as the Board of Directors or
the President may from time to time prescribe. The Board of Directors or the
President may from time to time authorize any officer to appoint and remove
agents and employees and to prescribe the powers and duties thereof.
SECTION 4. Removal. Any officer may be removed, either with or
without cause, by the Board of Directors or, except in the case of any officer
elected by the Board of Directors, by any committee or superior officer upon
whom the power of removal may be conferred by the Board of Directors or by these
By-laws.
SECTION 5. Resignations. Any officer may resign at any time by
giving written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall take effect immediately unless a date
certain is specified therein for it to take effect, in which event it shall be
effective upon such date, and the acceptance of such resignation shall not be
necessary to make it effective, irrespective of whether the resignation is
tendered subject to such acceptance.
SECTION 6. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be filled
for the unexpired portion of the term in the manner prescribed in the By-laws
for the regular election or appointment to such office.
SECTION 7. The Chairman of the Board. The Chairman of the
Board, if one be elected, shall preside, if present, at all meetings of the
stockholders and at all meetings of the Board of Directors and he shall perform
such other duties and have such other powers as may from time to time be
designated and assigned to him by the Board of Directors.
SECTION 8. The President. The President shall have general
direction of the affairs of the Corporation and general supervision over its
several officers, subject, however, to the control of the Board of Directors. He
shall at each annual meeting and from time to time report to the stockholders
and to the Board of Directors all matters within his knowledge which the
interest of the Corporation may require to be brought to their notice; may sign
with the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary any or all certificates of stock of the Corporation; in the absence of
the Chairman of the Board, shall preside at all meetings of the stockholders and
at all meetings of the Board of Directors; shall have the power to sign and
execute in the name of the Corporation all contracts, or other instruments
authorized by the Board of Directors, and in general shall perform all duties
incident to the office of President and such other duties as from time to time
may be assigned to him by the Board of Directors or as are prescribed by these
By-laws.
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SECTION 9. The Vice Presidents. Each Vice President shall have
such powers and shall perform such duties as may from time to time be assigned
to him by the Board of Directors or by the President; and shall have the power
to sign and execute in the name of the Corporation all contracts or other
instruments authorized by the Board of Directors, except where the Board of
Directors or the By-laws shall expressly delegate or permit some other officer
to do so. A Vice President may also sign with the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary certificates of stock of
the Corporation.
SECTION 10. The Secretary. The Secretary shall keep or cause
to be kept the minutes of the meetings of the stockholders, of the Board of
Directors and of any committee when so required; shall see that all notices are
duly given in accordance with the provisions of these By-laws and as required by
law; shall be custodian of the corporate records and of the seal of the
Corporation and see that the seal is affixed to all documents on which it is
required, the execution of which on behalf of the Corporation under its seal is
duly authorized in accordance with the provisions of the By-laws; shall keep or
cause to be kept a register of the post office address of each stockholder; may
sign with the President or Vice President certificates of stock of the
Corporation; and, in general, the Secretary shall perform all duties incident to
the office of Secretary and such other duties as may from time to time be
assigned to him by the Board of Directors or by the President.
SECTION 11. Assistant Secretaries. At the request of the
Secretary, or in his absence or disability, an Assistant Secretary shall perform
the duties of the Secretary and, when so acting, shall have all the powers of,
and be subject to all the restrictions upon, the Secretary. An Assistant
Secretary shall perform such other duties as from time to time may be assigned
to him by the President, the Secretary or the Board of Directors.
SECTION 12. The Treasurer. The Treasurer shall have charge and
custody of, and be responsible for, all funds and securities of the Corporation,
and deposit all such funds in the name of the Corporation in such banks, trust
companies or other depositaries as shall be selected in accordance with the
provisions of these By-laws; at all reasonable times exhibit his books of
account and records, and cause to be exhibited the books of account and records
of any corporation controlled by the Corporation, to any of the Directors of the
Corporation upon application during business hours at the office of the
Corporation, or such other corporation where such books and records are kept;
render a statement of the condition of the finances of the Corporation at all
regular meetings of the Board of Directors and a full financial report at the
Annual Meeting of Stockholders; if called upon to do so, receive and give
receipts for moneys due and payable to the Corporation from any source
whatsoever; may sign with the President or Vice President certificates of stock
of the Corporation; and, in general, perform all the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
to him by the Board of Directors or the President.
SECTION 13. Assistant Treasurers. At the request of the
Treasurer, or in his absence or disability, an Assistant Treasurer shall perform
the duties of the Treasurer, and, when so acting, shall have all the powers of,
and be subject to all the restrictions upon, the Treasurer. An Assistant
Treasurer shall perform such duties as from time to time may be assigned to him
by the President, the Treasurer or the Board of Directors.
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SECTION 14. Salaries. The salaries of the officers shall be
fixed from time to time by the Board of Directors. No officer shall be prevented
from receiving such salary by reason of the fact that he is also a director of
the Corporation.
ARTICLE IV
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 1. Contracts, etc., How Executed. The Board of
Directors, except as otherwise provided in these By-laws, may authorize any
officer or agent of the Corporation to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances; and, unless so
authorized by the Board of Directors or by such Committee or by these By-laws,
no agent or employee, other than an officer of the Corporation acting within the
scope of his authority, shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or to any amount.
SECTION 2. Checks, Drafts, etc. All checks, drafts or other
orders for the payment of money and all notes or other evidences of indebtedness
issued in the name of the Corporation shall be signed by such officer or
officers, employee or employees of the Corporation as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 3. Deposits. All funds of the Corporation shall be
deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositaries as the Board of Directors may from time to
time designate, or as may be designated by any officer or officers of the
Corporation to whom such power may be delegated by the Board of Directors, and
for the purpose of such deposit, the President, or a Vice President, or the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Treasurer,
or the Secretary or an Assistant Secretary may endorse, assign and deliver
checks, drafts and other orders for the payment of money which are payable to
the order of the Corporation.
SECTION 4. General and Special Bank Accounts. The Board of
Directors may from time to time authorize the opening and keeping with such
banks, trust companies or other depositaries as it may designate or general and
special bank accounts, and may make such special rules and regulations with
respect thereto, not inconsistent with the provisions of these By-laws, as it
may deem expedient.
SECTION 5. Proxies. Except as otherwise provided in these
By-laws or in the Certificate of Incorporation of the Corporation, and unless
otherwise provided by resolution of the Board of Directors, the President may
from time to time appoint an attorney or attorneys, or agent or agents, of the
Corporation, in the name of and on behalf of the Corporation, to cast the votes
which the Corporation may be entitled to cast as a stockholder or otherwise of
any other corporation any of whose stock or other securities may be held by the
Corporation at meetings of the holders of the stock or other securities of such
other corporation, or to consent in writing to any action by such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such votes or giving such consent, and may execute or cause to
be executed
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in the name of and on behalf of the Corporation and under its corporate seal, or
otherwise, all such written proxies or other instruments as he may deem
necessary or proper in the premises.
ARTICLE V
Stock and Transfer of Stock
SECTION 1. Certificates of Stock. Certificates for shares of
the capital stock of the Corporation shall be in such form, not inconsistent
with law, as shall be approved by the Board of Directors. They shall be numbered
in order of their issue, and shall be signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation, and the seal of the Corporation shall be
affixed thereto. The signatures of any of such officers and the seal of the
Corporation upon such certificate may be facsimiles. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may nevertheless be issued
and delivered by the Corporation with the same effect as if he were such
officer, transfer agent or registrar.
SECTION 2. Transfers of Stock. Transfers of shares of the
capital stock of the Corporation shall be made only on the books of the
Corporation by the holder thereof, or by his attorney thereunto authorized by a
power of attorney duly executed and filed with the Secretary of the Corporation
or with a transfer agent of the Corporation, if any, and on surrender of the
certificate or certificates for such shares properly endorsed. A person in whose
name shares of stock stand on the books of the Corporation shall be deemed the
owner thereof as regards the Corporation and the Corporation shall not be bound
to recognize any equitable or other claim to, or interest in , such shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Delaware.
SECTION 3. Lost, Destroyed and Mutilated Certificates. The
holder of any stock issued by the Corporation shall immediately notify the
Corporation of any loss, destruction or mutilation of the certificate therefor,
or failure to receive a certificate of stock issued by the Corporation, and the
Board of Directors or the Secretary of the Corporation may, in its or his
discretion, cause to be issued to such holder of stock a new certificate or
certificates of stock upon compliance with such rules, regulations and/or
procedures as may have been prescribed by the Board of Directors with respect to
the issuance of new certificates in lieu of such other certificate or
certificates of stock.
SECTION 4. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date which shall not be
more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action, and such
stockholders and only such stockholders as shall be entitled to such notice of,
and to vote at, such
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meeting and (except as provided in Section 4 of Article I hereof) any
adjournment thereof, or to express consent to any such corporate action, or to
receive payment of such dividend, or to receive allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
ARTICLE VI
Seal
The Board of Directors shall provide a suitable seal
containing the name of the Corporation, which seal shall be in the charge of the
Secretary and which may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced. If and when so directed
by the Board of Directors, a duplicate of the seal may be kept and be used by
any officer of the Corporation designated by the Board.
ARTICLE VII
Miscellaneous Provisions
SECTION 1. Fiscal Year. The fiscal year of the Corporation
shall end on such date in each year as shall be determined by resolution of
the Board of Directors of the Corporation.
SECTION 2. Waivers of Notice. Whenever any notice whatever is
required to be given by law, or under the provisions of the Certificate of
Incorporation or of these By-laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
SECTION 3. Qualifying in Foreign Jurisdictions. The Board of
Directors shall have the power at any time and from time to time to take or
cause to be taken any and all measures which they may deem necessary for
qualification to do business as a foreign corporation in any one or more foreign
jurisdictions and for withdrawal therefrom.
SECTION 4. Indemnification. The Corporation shall, to the full
extent permitted by the General Corporation Law of Delaware and the Certificate
of Incorporation, in each case as amended from time to time, indemnify all
persons whom it has the power to indemnify pursuant thereto. Without limiting
the generality of the foregoing:
(a) 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, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys'
fees),
11
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judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action,
suit or 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 he reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) 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 or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or was
a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and
only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in paragraphs (a)
and (b), or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless
ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
paragraphs (a) and (b). Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or
(2) if such a quorum is not obtainable, or, even if obtainable a quorum
of disinterested directors so directs, by independent legal counsel in
a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred in defending
any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking
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<PAGE>
by or on the behalf of the director, officer, employee or agent to
repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized in this
Section.
(f) The indemnification provided by this Section shall not
have been deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while
holding such office, and 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 such a person.
(g) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether
or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Section.
(h) For the purposes of this Section, references to "the
Corporation" include all constituent corporations absorbed in a
consolidation or merger as well as the resulting or surviving
corporation so that any person who is or was a director, officer,
employee or agent of such a constituent corporation or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise shall stand in the same position
under the provisions of this Section with respect to the resulting or
surviving corporation as he would if he had served the resulting or
surviving corporation in the same capacity.
ARTICLE VIII
Amendments
All By-laws of the Corporation shall be subject to alteration
or repeal, and new By-laws not inconsistent with any provision of the
Certificate of Incorporation of the Corporation or any provision of law may be
made, either by the affirmative vote of a majority in interest of the holders of
record of the outstanding voting stock of the Corporation or by the affirmative
vote of the majority of the Board of Directors.
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Exhibit 4.1
BENEFICIAL MORTGAGE SERVICES, INC.
as Depositor,
BENEFICIAL MORTGAGE CORPORATION
as Master Servicer,
and
-----------------------------------------------,
as Trustee
----------------------------
POOLING AND SERVICING AGREEMENT
Dated as of ___________, _____
____________ LOAN ASSET BACKED CERTIFICATES,
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS............................... 1
Section 1.01. Definitions.................................................... 1
Section 1.02. Interest Calculations.......................................... 19
Section 1.03. Usage of Terms................................................. 19
ARTICLE II
SALE OF ____________ LOANS; ORIGINAL ISSUANCE OF CERTIFICATES......... 20
Section 2.01. Sale of ___________ Loans...................................... 20
Section 2.02. Acceptance by Trustee; Repurchase Obligations;
Substitution of Eligible Substitute ___________
Loans......................................................... 23
Section 2.03. Representations and Warranties Regarding the Master
Servicer....................................................... 25
Section 2.04. Representations and Warranties Regarding the ___________
Loans; Repurchase of Defective ___________ Loans............... 26
Section 2.05. Execution and Authentication of Certificates; Designation of
"Regular Interests" and "Residual Interests" under
REMIC.......................................................... 29
Section 2.06. Designation of Start-up Day and Final Maturity Date............ 29
Section 2.07. Certain Activities............................................. 29
ARTICLE III
ADMINISTRATION AND SERVICING OF ____________ LOANS........... 30
Section 3.01. The Master Servicer............................................ 30
Section 3.02. Collection of Certain __________ Loan Payments; ___________
Loan Payment Record............................................ 32
Section 3.03. Permitted Debits to the __________ Loan Payment
Record......................................................... 33
Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses....................................................... 34
Section 3.05. Assumption and Modification Agreements......................... 35
Section 3.06. Realization upon Defaulted __________ Loans................... 35
Section 3.07. Trustee to Cooperate........................................... 36
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
Master Servicer................................................ 36
Section 3.09. Annual Statement as to Compliance.............................. 36
Section 3.10. Annual Independent Public Accountants' Servicing
Report......................................................... 37
Section 3.11. Access to Certain Documentation and Information Regarding the
__________ Loans............................................... 37
Section 3.12. Maintenance of Certain Servicing Policies...................... 37
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ARTICLE IV
SERVICING CERTIFICATE; CERTIFICATE ACCOUNT DEPOSIT........... 30
Section 4.01. Servicing Certificate.......................................... 30
Section 4.02. Certificate Account............................................ 39
Section 4.03. Servicer LOC....................................................40
ARTICLE V
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS................ 40
Section 5.01. Distributions.................................................. 40
Section 5.02. Statements to Certificateholders............................... 41
ARTICLE VI
THE CERTIFICATES............................. 43
Section 6.01. The Certificates............................................... 43
Section 6.02. Registration of Transfer and Exchange of Certificates.......... 43
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates.............. 45
Section 6.04. Persons Deemed Owners.......................................... 45
Section 6.05. Appointment of Paying Agent.................................... 45
Section 6.06. Restrictions on Transfer of Class (_) and
Class (_) Certificates......................................... 46
Section 6.07. Restrictions on Transfer of Class (_) Certificates............. 47
Section 6.08. Actions of Certificateholder................................... 49
ARTICLE VII
THE MASTER SERVICER........................... 50
Section 7.01. Liability of the Master Servicer............................... 50
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer............................ 50
Section 7.03. Limitation on Liability of the Master Servicer and Others...... 50
Section 7.04. Master Servicer Not to Resign.................................. 51
Section 7.05. Delegation of Duties........................................... 51
ARTICLE VIII
DEFAULT................................. 51
Section 8.01. Events of Default............................................. 51
Section 8.02. Trustee to Act; Appointment of Successor...................... 53
Section 8.03. Notification to Certificateholders............................ 54
Section 8.04. Waiver of Past Events of Default.............................. 54
ARTICLE IX
THE TRUSTEE............................... 54
Section 9.01. Duties of Trustee............................................. 54
Section 9.02. Certain Matters Affecting the Trustee......................... 55
Section 9.03. Trustee Not Liable for Certificates or Loan................... 56
Section 9.04. Trustee May Own Certificates.................................. 57
Section 9.05. Master Servicer to Pay Trustee's Fees and Expenses............ 57
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Page
Section 9.06. Eligibility Requirements for Trustee.......................... 58
Section 9.07. Resignation or Removal of Trustee............................. 58
Section 9.08. Successor Trustee............................................. 58
Section 9.09. Merger or Consolidation of Trustee............................ 59
Section 9.10. Appointment of Co-Trustee or Separate Trustee................. 59
Section 9.11. Tax Returns................................................... 60
Section 9.12. Trustee May Enforce Claims Without
Possession of Certificates.................................... 60
Section 9.13. Suits for Enforcement......................................... 61
ARTICLE X
TERMINATION............................... 61
Section 10.01. Termination Upon Purchase by the Master Servicer
or Liquidation of All __________ Loans........................ 61
Section 10.02. Additional Termination Requirements........................... 63
ARTICLE XI
MISCELLANEOUS PROVISIONS......................... 64
Section 11.01. Amendment..................................................... 64
Section 11.02. Recordation of Agreement...................................... 65
Section 11.03. Limitation on Rights of Certificateholders.................... 65
Section 11.04. GOVERNING LAW................................................. 66
Section 11.05. Notices....................................................... 66
Section 11.06. Severability of Provisions.................................... 66
Section 11.07. Assignment.................................................... 67
Section 11.08. Certificates Nonassessable and Fully Paid..................... 67
Section 11.09. Counterparts.................................................. 67
EXHIBIT A - Form of Class (_) Certificate ...................................A-1
EXHIBIT B - Form of Class (_) Certificate....................................B-1
EXHIBIT C - Form of Class (_) Certificate....................................C-1
EXHIBIT D - Form of Class (_) Certificate....................................D-1
EXHIBIT E - Form of Notice of Payment in Full................................E-1
EXHIBIT F - Form of File Request.............................................F-1
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This Pooling and Servicing Agreement, dated as of ___________________,
_____, between Beneficial Mortgage Services, Inc., as depositor ("Beneficial"),
Beneficial Mortgage Corporation, as master servicer (the "Master Servicer"), and
___________________________________________, as trustee (the "Trustee"),
WITNESSETH THAT:
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows.
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires,
shall have the meanings specified in this Article.
Accrual Period: As to any Distribution Date (the "current Distribution
Date"), the period beginning on the preceding Distribution Date (or the Closing
Date, in the case of the first Distribution Date) and ending on the day
preceding the current Distribution Date.
Additional Balance: As to any __________ Loan and any day, the Loan
Balance less the Trust Balance.
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.
Agreement: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
Amount Available for Class (_) Interest: As to any Distribution Date,
the lesser of (a) Available Funds and (b) the Class (_) Interest Requirement.
Amount Available for Class (_) Principal: As to any Distribution Date,
the sum of (a) the lesser of (i) the excess, if any, of (A) Available Funds over
(B) the sum of the Amount Available for Class (_) Interest, the Amount Available
for Class (_) Interest and the Amount Available for Class (_) Interest and (ii)
the Class (_) Formula Amount and (b) as to the Class (_) Termination Date and
each Distribution Date thereafter, any Class (_) Remaining Available Funds.
Amount Available for Class (_) Interest: As to any Distribution Date,
the lesser of (a) the excess, if any, of Available Funds over the sum of (i) the
Amount Available for Class (_) Interest and (ii) the Amount Available for Class
(_) Interest and (b) the Class (_) Interest Requirement.
Amount Available for Class (_) Principal: As to any Distribution Date
prior to the Class (_) Termination Date, the lesser of (a) the Class (_)
Remaining Available Funds for such date and (b)
<PAGE>
the Class (_) Certificate Balance, and as to the Class (_) Termination Date and
each Distribution Date thereafter, the lesser of (a) Available Funds less the
sum of (i) the Class (_) Interest Requirement and (ii) as to the Class (_)
Termination Date, any amounts distributed in respect of the Class (_)
Certificates on such date and (b) the Class (_) Formula Amount.
Amount Available for Class (_) Interest: As to any Distribution Date,
the lesser of (a) the excess, if any, of Available Funds over the Amount
Available for Class (_) Interest and (b) the Class (_) Interest Requirement.
Amount Available for Class (_) Principal: As to the Class (_)
Termination Date and each Distribution Date thereafter, the lesser of (a) Class
(_) Remaining Available Funds for such date (in the case of the Class (_)
Termination Date, net of any such amounts distributed in respect of the Class
(_) Certificates on such date), plus, on the Class A Termination Date and on
each Distribution Date thereafter, the lesser of (i) Remaining Available Funds
for such date and (ii) the Class (_) Formula Amount and (b) the Class (_)
Certificate Balance.
Appraised Value: As to any Mortgaged Property and any time referred to
herein, the appraised value of such Mortgaged Property based upon the appraisal
made by or on behalf of the related Originator in connection with the
origination of the related __________ Loan.
Available Funds: As to any Distribution Date, the sum of (a) the
aggregate of all Trust Interest received during the related Collection Period
net of the Monthly Servicing Fee, (b) the aggregate of all Trust Principal
Payments received during the related Collection Period, (c) the aggregate of all
Trust Insurance Proceeds received during the related Collection Period, (d) the
aggregate of Trust Liquidation Proceeds received as of the end of the calendar
month preceding the month of such Distribution Date; (e) the aggregate Purchase
Price of any Defective __________ Loans repurchased by the Depositor or the
Master Servicer since the preceding Distribution Date and (f) the Substitution
Adjustment Amount deposited in the Collection Account during the preceding
Collection Period.
Available Servicer LOC Amount: As of any Distribution Date upon which a
Servicer LOC is maintained pursuant to Section 3.02(c), the maximum amount of
coverage available thereunder in accordance with the terms thereof.
Beneficial: Beneficial Mortgage Services, Inc., a Delaware
corporation, and its successors in interest.
BIF: The Bank Insurance Fund, as from time to time constituted or
created under the Financial Institution, Reform, Recovery and Enhancement Act of
1989, or if at any time after the execution of this instrument the Bank
Insurance Fund is not existing and performing duties now assigned to it, the
body performing such duties on such date.
Book-Entry Certificate: Any Class (_), Class (_) or Class (_)
Certificate registered in the name of the Depository or its nominee, the
ownership of which is reflected on the books of the Depository or on the books
of a Person maintaining an account with such Depository (directly or as an
indirect participant in accordance with the rules of such Depository).
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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 or the State of New
Jersey are required or authorized by law to be closed.
Certificate: Any Class (_), Class (_), Class (_) or Class (_)
Certificate.
Certificate Account: The custodial account or accounts created and
maintained with the Trustee pursuant to Section 4.02.
Certificate Owner: With respect to any Book-Entry Certificate, the
Person who is the beneficial owner of such Book-Entry Certificate.
Certificate Register and Certificate Registrar: The register maintained
and the registrar appointed pursuant to Section 6.02.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of Beneficial or the Master Servicer or any Person actually known to a
Responsible Officer of the Trustee to be an affiliate of Beneficial or the
Master Servicer shall be deemed not to be outstanding and the Percentage
Interest evidenced thereby shall not be taken into account in determining
whether the requisite amount of Percentage Interests necessary to effect any
such consent has been obtained.
Class: All Certificates whose form is identical except for variations
in Percentage Interest.
Class (_) Certificate: Any of the Certificates signed by the Trustee
and countersigned by the Trustee or the Certificate Registrar, substantially in
the form set forth in Exhibit A hereto.
Class (_) Certificate Balance: As of any Distribution Date, the
Original Class (_) Certificate Balance less all amounts previously distributed
to Holders of the Class (_) Certificates on all previous Distribution Dates as
part of the Class (_) Formula Amount, but in no event less than zero. For
purposes of determining whether amounts calculated pursuant to the Class (_)
Formula Amount were actually distributed on any particular Distribution Date,
the distribution on any such Distribution Date to Holders of the Class (_)
Certificates shall be allocated first to the Class (_) Interest Requirement and
then to principal as calculated pursuant to the Class (_) Formula Amount.
Class (_) Distribution Amount: As to any Distribution Date, the sum of
(a) the Amount Available for Class (_) Interest and (b) Amount Available for
Class (_) Principal.
Class (_) Formula Amount: As to any Distribution Date, the sum of (a)
interest at the Class (_) Pass-Through Rate on the sum of (i) the outstanding
Class (_) Certificate Balance immediately prior to such Distribution Date and
(ii) any Class (_) Unpaid Interest Shortfall in respect of the Class (_)
Certificates, (b) if distribution of the amount of interest calculated pursuant
to clause (a) above was not made in full on a previous Distribution Date, the
difference between (i) the amount of interest calculated pursuant to clause (a)
above for such previous Distribution Date and (ii) the amount of interest
actually distributed to holders of the Class (_) Certificates on such previous
Distribution Date, (c) the Formula Principal Amount, and (d) if distribution of
the amount of
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principal calculated pursuant to clause (c) above was not made in full on a
previous Distribution Date, the difference between (i) the amount of principal
calculated pursuant to clause (c) above for such previous Distribution Date and
(ii) the amount of principal actually distributed to holders of the Class (_)
Certificates on such previous Distribution Date, provided, however, that the
portion of the Class (_) Distribution Amount to be distributed as principal will
be limited to the Class (_) Certificate Balance immediately prior to such
Distribution Date.
Class (_) Interest Requirement: As to any Distribution Date, the sum of
(a) interest accrued during the related Accrual Period at the Class (_)
Pass-Through Rate on the Class (_) Certificate Balance, (b) interest accrued
during the related Accrual Period at the Class (_) Pass-Through Rate on any
Class (_) Unpaid Interest Shortfall and (c) any Class (_) Unpaid Interest
Shortfall.
Class (_) Interest Shortfall: As to any Distribution Date, the amount,
if any, by which distributions in respect of interest to Holders of the Class
(_) Certificates on such Distribution Date are less than the sum of (a) interest
accrued during the related Accrual Period at the Class (_) Pass-Through Rate on
the Class (_) Certificate Balance and (b) any interest due on such Distribution
Date on any Class (_) Unpaid Interest Shortfall.
Class (_) Pass-Through Rate: As to the initial Accrual Period, _______%
per annum and, as to any Accrual Period thereafter, the lesser of (a) LIBOR plus
____% and (b) the Weighted Average Net Loan Rate.
Class (_) Principal Factor: As to any Distribution Date, the
percentage, carried to seven places (rounded down), obtained by dividing the
Class (_) Certificate Balance as of such Distribution Date (after giving effect
to all payments of principal made on such Distribution Date) by the Original
Class (_) Certificate Balance.
Class (_) Principal Shortfall: As to any Distribution Date, the amount,
if any, by which distributions in respect of principal to Holders of the Class
(_) Certificates on such Distribution Date are less than the aggregate amount
specified in clause (d) of the definition of Class (_) Formula Amount.
Class (_) Termination Date: The Distribution Date on which the Class
(_) Certificate Balance has been reduced to zero.
Class (_) Unpaid Interest Shortfall: As to any Distribution Date, the
amount, if any, by which the aggregate of Class (_) Interest Shortfalls for
prior Distribution Dates exceeds the aggregate of amounts distributed in respect
of Class (_) Interest Shortfalls on prior Distribution Dates to Holders of the
Class (_) Certificates. For purposes of determining whether amounts
distributable in respect of Class (_) Unpaid Interest Shortfalls were actually
distributed on any particular Distribution Date, distributions on such
Distribution Date shall be allocated, first, to the amount specified in clause
(a) of the definition "Class (_) Interest Requirement," second, to any interest
due on any Class (_) Unpaid Interest Shortfall, and, third, to any Class (_)
Unpaid Interest Shortfall.
Class (_) Unpaid Principal Shortfall: As to any Distribution Date, the
amount, if any, by which the aggregate of Class (_) Principal Shortfalls for
prior Distribution Dates exceeds the aggregate of the amounts distributed on
prior Distribution Dates in respect of Class (_) Principal
- 4 -
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Shortfalls to Holders of the Class (_) Certificates. For purposes of determining
whether amounts distributable in respect of Class (_) Unpaid Principal
Shortfalls were actually distributed on any particular Distribution Date, the
distribution on such Distribution Date shall be allocated, first, to the Class
(_) Interest Requirement, second to the amounts described in clause (a) of the
definition of "Class (_) Formula Amount," and, third, to any Class (_) Unpaid
Principal Shortfall.
Class (_) Certificate: Any of the Certificates signed by the Trustee
and countersigned by the Trustee or the Certificate Registrar, substantially in
the form set forth in Exhibit C hereto.
Class (_) Certificate Balance: As to any Distribution Date, the
Original Class (_) Certificate Balance less the sum of all amounts previously
distributed to Class (_) Certificateholders on all previous Distribution Dates
in excess of the Class (_) Interest Requirement for each such Distribution Date,
but in no event less than zero.
Class (_) Distribution Amount: As to any Distribution Date to and
including the Class (_) Termination Date, the sum of (a) the Amount Available
for Class (_) Interest and (b) the Amount Available for Class (_) Principal.
Class (_) Formula Amount: As to any Distribution Date on or after the
Class (_) Termination Date, the lesser of (a) the sum of (i) the Formula
Principal Amount and (ii) any Class (_) Unpaid Principal Shortfall less (iii) as
to the Class (_) Termination Date, the aggregate amount distributed as principal
in respect of the Class (_) Certificates on such date and (b) the Class (_)
Certificate Balance.
Class (_) Interest Requirement: As to any Distribution Date, the sum of
(a) interest accrued during the related Accrual Period at the Class (_)
Pass-Through Rate on the Class (_) Certificate Balance, (b) interest accrued
during the related Accrual Period at the Class (_) Pass-Through Rate on any
Class (_) Unpaid Interest Shortfall and (c) any Class (_) Unpaid Interest
Shortfall.
Class (_) Interest Shortfall: As to any Distribution Date, any amount
by which the amount of interest distributed to Class (_) Certificateholders on
such Distribution Date is less than the sum of (a) interest accrued during the
related Accrual Period at the Class (_) Pass-Through Rate on the Class (_)
Certificate Balance and (b) any interest due on such Distribution Date on any
Class (_) Unpaid Interest Shortfall.
Class (_) Pass-Through Rate: As to the initial Accrual Period, _______%
per annum and, as to any Accrual Period thereafter, the lesser of (a) LIBOR plus
____% and (b) the Weighted Average Net Loan Rate.
Class (_) Principal Factor: As to any Distribution Date, the percentage
(carried to seven places, rounded down) obtained by dividing the Class (_)
Certificate Balance as of such Distribution Date (after giving effect to all
payments of principal made on such Distribution Date) by the Original Class (_)
Certificate Balance.
Class (_) Principal Shortfall: As to any Distribution Date, the amount,
if any, by which distributions in respect of principal to Holders of the Class
(_) Certificates on such Distribution Date are less than the amounts specified
in clause (a) of the definition of Class (_) Formula Amount.
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Class (_) Remaining Available Funds: As to any Distribution Date prior
to the Class (_) Termination Date, the lesser of (a) Remaining Available Funds
and (b) an amount equal to the product of [____ of ___ basis points] and the
Pool Balance for such Distribution Date. As to any Distribution Date on or after
the Class (_) Termination Date, the lesser of (a) the Remaining Available Funds
less the sum of (i) the Class (_) Formula Amount and (ii) the Class (_) Formula
Amount for such date and (b) an amount equal to the product of [____ of ___
basis points] and of the Pool Balance for such Distribution Date.
Class (_) Termination Date: The Distribution Date upon which the Class
(_) Certificate Balance is reduced to zero.
Class (_) Unpaid Interest Shortfall: As to any Distribution Date, the
amount if any, by which the aggregate of Class (_) Interest Shortfalls for prior
Distribution Dates exceeds the aggregate of the amounts distributed on prior
Distribution Dates to Holders of the Class (_) Certificates in respect of Class
(_) Interest Shortfalls. For purposes of determining whether amounts
distributable in respect of Class (_) Unpaid Interest Shortfalls were actually
distributed on any particular Distribution Date, the distribution on such
Distribution Date shall be allocated, first, to the amount specified in clause
(a) of the definition of "Class (_) Interest Requirement", second, to any
interest due on any Class (_) Unpaid Interest Shortfall, and, third, to any
Class (_) Unpaid Interest Shortfall.
Class (_) Unpaid Principal Shortfall: As to any Distribution Date, the
amount, if any, by which the aggregate of Class (_) Principal Shortfalls for
prior Distribution Dates exceeds the aggregate of amounts distributed on prior
Distribution Dates in respect of Class (_) Principal Shortfalls to Holders of
the Class (_) Certificates. For purposes of determining whether amounts
distributable in respect of Class (_) Unpaid Principal Shortfalls were actually
distributed on any particular Distribution Date, the distribution on such
Distribution Date shall be allocated, first, to the Class (_) Interest
Requirement, second, to the amounts described in clause (a) of the definition of
"Class (_) Formula Amount," and, third, to any Class (_) Unpaid Principal
Shortfall.
Class (_) Certificate: Any of the Certificates signed by the Trustee
and countersigned by the Trustee or the Certificate Registrar, substantially in
the form set forth in Exhibit B hereto.
Class (_) Certificate Balance: As to any Distribution Date, the
Original Class (_) Certificate Balance less the sum of all amounts previously
distributed to Class (_) Certificateholders on all previous Distribution Dates
in excess of the Class (_) Interest Requirement for each such Distribution Date,
but in no event less than zero.
Class (_) Distribution Amount: As to any Distribution Date, the sum of
(a) the Amount Available for Class (_) Interest and (b) the Amount Available for
Class (_) Principal.
Class (_) Formula Amount: As to any Distribution Date on or after the
Class (_) Termination Date, the lesser of (a) the sum of (i) the Formula
Principal Amount and (ii) any Class (_) Unpaid Principal Shortfall, less (iii)
as to the Class (_) Termination Date, the aggregate amount distributed as
principal in respect of the Class (_) Certificates on such date and (b) the
Class (_) Certificate Balance.
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Class (_) Interest Requirement: As to any Distribution Date, the sum of
(a) interest accrued during the related Accrual Period at the Class (_)
Pass-Through Rate on the Class (_) Certificate Balance, (b) interest accrued
during the related Accrual Period at the Class (_) Pass-Through Rate on any
Class (_) Unpaid Interest Shortfall and (c) any Class (_) Unpaid Interest
Shortfall.
Class (_) Interest Shortfall: As to any Distribution Date, any amount
by which the amount of interest distributed to Class (_) Certificateholders on
such Distribution Date is less than the sum of (a) interest accrued during the
related Accrual Period at the Class (_) Pass-Through Rate on the Class (_)
Certificate Balance and (b) any interest due on such Distribution Date on any
Class (_) Unpaid Interest Shortfall.
Class (_) Pass-Through Rate: As to the initial Accrual Period, _______%
per annum and, as to any Accrual Period thereafter, the lesser of (a) LIBOR plus
____% and (b) the Weighted Average Net Loan Rate.
Class (_) Principal Factor: As to any Distribution Date, the percentage
(carried to seven places, rounded down) obtained by dividing the Class (_)
Certificate Balance as of such Distribution Date (after giving effect to all
payments of principal made on such Distribution Date) by the Original Class (_)
Certificate Balance.
Class (_) Principal Shortfall: As to any Distribution Date, the amount,
if any, by which distributions in respect of principal to Holders of the Class
(_) Certificates on such Distribution Date are less than the amounts specified
in clause (a) of the definition of Class (_) Formula Amount.
Class (_) Termination Date: The Distribution Date on which the Class
(_) Certificate Balance is reduced to zero.
Class (_) Unpaid Interest Shortfall: As to any Distribution Date, the
amount if any, by which the aggregate of Class (_) Interest Shortfalls for prior
Distribution Dates exceeds the aggregate of the amounts distributed on prior
Distribution Dates to Holders of the Class (_) Certificates in respect of Class
(_) Interest Shortfalls. For purposes of determining whether amounts
distributable in respect of Class (_) Unpaid Interest Shortfalls were actually
distributed on any particular Distribution Date, the distribution on such
Distribution Date shall be allocated, first, to the amount specified in clause
(a) of the definition of "Class (_) Interest Requirement", second, to any
interest due on any Class (_) Unpaid Interest Shortfall and, third, to any Class
(_) Unpaid Interest Shortfall.
Class (_) Unpaid Principal Shortfall: As to any Distribution Date, the
amount, if any, by which the aggregate of Class (_) Principal Shortfalls for
prior Distribution Dates exceeds the aggregate of amounts distributed on prior
Distribution Dates in respect of Class (_) Principal Shortfalls to Holders of
the Class (_) Certificates. For purposes of determining whether amounts
distributable in respect of Class (_) Unpaid Principal Shortfalls were actually
distributed on any particular Distribution Date, the distribution on such
Distribution Date shall be allocated, first, to the Class (_) Interest
Requirement, second, to the amounts described in clause (a) of the definition of
"Class (_) Formula Amount," and, third, to any Class (_) Unpaid Principal
Shortfall.
Class (_) Certificate: Any of the Certificates signed by the Trustee
and countersigned by the Trustee or the Certificate Registrar, substantially in
the form set forth in Exhibit D hereto.
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Class (_) Certificate Balance: As of any Distribution Date, the
Original Class (_) Certificate Balance less all distribution, on all previous
Distribution Dates in respect of the Class (_) Distribution Amount, but in no
event less than zero.
Class (_) Distribution Amount: As to any Distribution Date, the excess,
if any, of the Available Funds for such date over the sum of the Class (_)
Distribution Amount, the Class (_) Distribution Amount and the Class (_)
Distribution Amount for such date.
Closing Date: _____ __, _____.
Code: The Internal Revenue Code of 1986, as amended from time to time.
Collection Period: As to any _____________ Loan and any Distribution
Date, the one-month period ending on the related Cycle Date in the month
preceding the month of such Distribution Date; provided, however, that the first
such period for each __________ Loan shall commence on the Cut-off Date and end
on the Cycle Date for such __________ Loan occurring in _____ _____. When used
with respect to all the ___________ Loans and a Distribution Date, the term
"Collection Period" shall mean, collectively, the respective Collection Periods
applicable to each of the _____________ Loans that commenced in the second
preceding calendar month (or, in the case of the first Collection Period, the
Cut-off Date) and ended in the calendar month immediately preceding the month of
such Distribution Date, and shall be referred to herein as a "preceding
Collection Period" or "related Collection Period" with reference to a
Distribution Date.
Combined Loan-to-Value Ratio: As to any _____________ Loan as of any
date, the fraction, expressed as a percentage, the numerator of which is the sum
of (i) the Credit Limit and (ii) the greater of (x) the aggregate unpaid
principal balance of all loans secured by all senior or pari passu related deeds
of trust or mortgages, if any, as of such date and (y) the aggregate maximum
credit limit of such loans, and the denominator of which is the Appraised Value
of the related Mortgaged Property as of the date of execution of the related
Loan Agreement.
Corporate Trust Office: The principal office of the Trustee in New
York, New York, at which at any particular time its corporate business shall be
administered, which office at the date of the execution of this instrument is
located at __________________________________________________________________.
Credit Limit: As to any ____________ Loan, the maximum Loan Balance
permitted under the terms of the related Loan Agreement.
Cut-off Date: The close of business on ______________, _____.
Cut-off Date Pool Balance: The aggregate of the Cut-off Date Trust
Balances of the __________ Loans.
Cut-off Date Trust Balance: As to any ____________ Loan, the unpaid
principal balance thereof as of the close of business on the Cut-off Date.
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Cycle Date: As to any __________ Loan, the day of the month on which
the related billing cycle for such __________ Loan ends.
Defective __________ Loan: Any __________ Loan with respect to which
the Depositor or the Master Servicer is required to repurchase the Trust Balance
or substitute for such Trust Balance one or more Eligible Substitute ___________
Loans pursuant to Section 2.02 or 2.04.
Definitive Certificates: As defined in Section 6.02(c).
Delinquency Amount: As of any date of determination, the sum of:
(a) the product of (i) the aggregate Trust Balance of all ___________
Loans (other than Foreclosure, Foreclosed or Liquidated __________ Loans) which
are between ___ and ___ days delinquent (on a contractual basis) and (ii)
_______%;
(b) the product of (i) the aggregate Trust Balance of all ___________
Loans (other than Foreclosure, Foreclosed or Liquidated __________ Loans) which
are delinquent between ___ and ___ days (on a contractual basis) and (ii)
_______%; and
(c) the product of (i) the aggregate Trust Balance of all ___________
Loans (other than Liquidated __________ Loans) delinquent ___ days or more, and
(ii) _______%.
Depositor: Beneficial, in its capacity as depositor hereunder.
Depository: The initial Depository shall be The Depository Trust
Company, the nominee of which is Cede & Co., as the registered Holder of
Book-Entry Certificates evidencing $_____________ in initial aggregate principal
amount of the Class (_) Certificates, $__________ initial aggregate principal
amount of the Class (_) Certificates and $__________ initial aggregate principal
amount of the Class (_) Certificates. The Depository shall at all times be a
"clearing corporation" as defined in Section 8-102(3) of the Uniform Commercial
Code of the State of New York.
Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: As to any Distribution Date, the fifth Business Day
preceding such Distribution Date.
Disqualified Organization: A disqualified organization as defined in
section 860E(e)(5) of the Code (or any successor statute thereto).
Distribution Date: The ___th day of each calendar month or, if such day
is not a Business Day, the next succeeding Business Day, beginning in
____________ _____.
Electronic Ledger: As to each Originator, the electronic master record
of home equity credit line accounts maintained by it.
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Eligible Account: An account that is (a) maintained with a depository
institution the long-term deposits or the long-term unsecured debt obligations
of which have been rated by each Rating Agency in its highest rating category,
or (b) an account or accounts the deposits in which are fully insured by either
the BIF or the SAIF, or (c) a segregated trust account maintained with the
Trustee in its fiduciary capacity in its corporate trust department, or (d)
otherwise acceptable to each Rating Agency, as evidenced by a letter from such
Rating Agency to the Trustee.
Eligible Substitute _____________ Loan: A ____________ Loan or Loans
substituted by the Depositor or the Master Servicer for a Defective ___________
Loan, which must on the date of such substitution (a) have an outstanding Trust
Balance (or in the case of a substitution of more than one __________ Loan for
a Defective __________ Loan, an aggregate Trust Balance) not in excess of, and
not substantially less than, the Trust Balance of such Defective ___________
Loan; (b) have a Loan Rate of not less than the Loan Rate of the Defective ____
____________ and not more than __% in excess of the Loan Rate of such Defective
__________ Loan; (c) have a remaining term to maturity not more than six months
earlier or later than the remaining term of the Defective __________ Loan; (d)
comply with each representation, warranty and obligation set forth in Section
2.04 (except that each such representation and warranty shall be deemed to be
made as of the date of substitution); (e) have an original Combined
Loan-to-Value Ratio not greater than that of the Defective __________ Loan; and
(f) have a Mortgage of the same or higher level of priority as the Mortgage
relating to the Defective __________ Loan.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
Event of Default: As defined in Section 8.01.
Final Auction: As defined in Section 10.01(b).
Fitch: Fitch Investors Service, L.P. or its successor in interest.
Foreclosed ___________ Loan: Any ___________ Loan that is not a
Liquidated __________ Loan and as to which the related Mortgaged Property is
held by the Trust Fund upon the foreclosure or comparable conversion thereof.
Foreclosure __________ Loan: A __________ Loan with respect to which
the Master Servicer or a Subservicer has commenced foreclosure proceedings.
Formula Principal Amount: As to any Distribution Date, the sum of (a)
each Trust Principal Payment received during the preceding Collection Period,
(b) any Trust Insurance Proceeds received during the preceding Collection
Period, (c) the Trust Balance on the last day of the related Collection Period
of each Defective __________ Loan to be purchased by the Depositor or the
Master Servicer on the Business Day prior to such Distribution Date, (d) all
Substitution Adjustment Amounts received during the preceding Collection Period
and (e) the Trust Balance on the last day of the related Collection Period of
each __________ Loan that became a Liquidated __________ Loan as of the end of
the calendar month preceding the month of such Distribution Date.
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__________ Loan Losses: For any Distribution Date, the sum of the
aggregate of Liquidated __________ Loan Losses for all __________ Loans that
became Liquidated __________ Loans as of such Distribution Date.
__________ Loan Payment Record: With respect to the Trust Fund, the
record maintained by the Master Servicer pursuant to Section 3.02(b).
__________ Loan Schedule: As of any date, the schedule of ____________
Loans included in the Trust Fund on such date. The initial schedule of ____
________Loans as of the Cut-off Date is the magnetic tape delivered to the
Trustee by the Depositor on the Closing Date setting forth as to each ____
______ Loan (a) the Cut-off Date Trust Balance, (b) the Credit Limit, (c) the
dates upon which any outstanding Loan Balance is due and payable pursuant to the
amortization schedule in effect at the Closing Date, (d) the margin over the
related index that is applicable to the setting of the Loan Rate, (e) the
applicable maximum Loan Rate and minimum Loan Rate, if any, (f) the monthly
billing cycle for such __________ Loan and (g) the billing name and address of
the Mortgagor.
__________ Loans: Such of the home equity loans the Trust Balances of
which have been sold and assigned to the Trustee pursuant to Section 2.01 as
from time to time are held as a part of the Trust Fund, the ___________ Loans
originally so held being identified in the __________ Loan Schedule. When used
in respect of any Distribution Date, the term __________ Loans shall mean all
___________ Loans (including those in respect of which the Trust Fund has
acquired the related Mortgaged Property) that (a) have not been prepaid in full
prior to the related Collection Period, (b) did not become Liquidated ____
_______ Loans prior to such related Collection Period and (c) were not
repurchased by the Depositor or the Master Servicer prior to such related
Collection Period.
Insurance Proceeds: As to any __________ Loan and Collection Period,
proceeds paid by any insurer pursuant to any insurance policy covering such ____
______ Loan (net of any component thereof covering any expenses incurred by or
on behalf of the Master Servicer) or by the Master Servicer pursuant to Section
3.04 during such Collection Period, that (a) are not Liquidation Proceeds, (b)
are not applied to the restoration or repair of the related Mortgaged Property
or released to the related Mortgagor in accordance with the normal servicing
procedures of the Master Servicer and (c) will be applied by the Master Servicer
in reduction of the Loan Balance of such __________ Loan.
LIBOR: As to any Accrual Period, the per annum rate established by the
Trustee with respect to such Accrual Period (a) based on the arithmetic mean
(rounded upwards, if necessary, to the nearest one-sixteenth of one percent) of
the offered rates for one-month United States dollar deposits that appear on the
Telerate Page 3750 as of 11:00 a.m., London time, on the related LIBOR
Determination Date, or (b) if on such date no such rate appears on the Telerate
Page 3750, based on the arithmetic mean (rounded upwards, if necessary, to the
nearest one-sixteenth of one percent) of the rates at which one-month U.S.
dollar deposits are offered at approximately 11:00 a.m., London time, on such
LIBOR Determination Date by the Reference Banks to prime banks in the London
interbank market commencing on the second LIBOR Business Day immediately
following such LIBOR Determination Date or (c) if fewer than two Reference Banks
provide such offered
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quotations, the greater of (i) LIBOR as determined on the preceding LIBOR
Determination Date and (ii) the Reserve Interest Rate.
LIBOR Business Day: A day on which banking institutions in The City of
New York and the City of London, England are open for dealing in foreign
currency and exchange.
LIBOR Determination Date: With respect to any Accrual Period, the
second LIBOR Business Day prior to the beginning of such Accrual Period.
Liquidated __________ Loan: As to any Distribution Date, any _____
_______ Loan (other than a Defective ___________ Loan that is purchased or
substituted pursuant to Section 2.02 or 2.04) in respect of which the Master
Servicer has determined as of the end of the calendar month preceding the month
of such Distribution Date that all Liquidation Proceeds that it expects to
recover have been recovered.
Liquidated _____________ Loan Loss: As to any Liquidated ___________
Loan, the amount, if any, by which (a) the sum of (i) the Trust Balance of such
Liquidated __________ Loan and (ii) accrued and unpaid interest thereon at the
applicable Net Loan Rate from time to time applicable through the end of the
Collection Period ending in the month preceding the month of the Distribution
Date upon which such ___________ Loan became a Liquidated _____________ Loan,
exceeds (b) the Trust Liquidation Proceeds received in connection with the
liquidation thereof. For purposes hereof, a Foreclosed __________ Loan shall be
deemed to have continued to accrue interest at the Net Loan Rate that would have
been applicable from time to time to the accrual of interest on the related ____
______ Loan.
Liquidation Expenses: As to any __________ Loan, unreimbursed expenses
that are incurred by the Master Servicer in connection with the liquidation of
such ___________ Loan and not recovered under any insurance policy, such
expenses to include, without limitation, legal fees and expenses, any
unreimbursed amount expended by the Master Servicer pursuant to Section 3.06
(including, without limitation, amounts advanced to correct defaults under any
deed of trust or mortgage that is prior to such __________ Loan) in respect of
such __________ Loan and any related and unreimbursed expenditures for real
estate property taxes or for property restoration or preservation.
Liquidation Period: The period beginning on the date of adoption by
holders of the Class (_) Certificates of a plan of complete liquidation of the
Trust Fund and ending on the day that is ___ days after the date such plan is
adopted.
Liquidation Proceeds: As to any ___________ Loan, cash (other than
Insurance Proceeds and if such __________ Loan is a Defective __________ Loan,
the Purchase Price of such __________ Loan) received in connection with the
liquidation of such ___________ Loan, whether through trustee's sale,
foreclosure sale or otherwise, including without limitation rentals on acquired
Mortgaged Properties; provided, however, that in no event shall Liquidation
Proceeds with respect to any __________ Loan exceed (x) the sum described in
clause (a) of the definition of "Liquidated __________ Loan Loss" and (y) any
related Liquidation Expenses.
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Loan Agreement: As to any __________ Loan, the related credit line
agreement executed by the Mortgagor and the related Originator and any
amendments or modifications thereto.
Loan Balance: As to any __________ Loan and any day, the principal
balance of such __________ Loan at the close of business on such day.
Loan Rate: As to any __________ Loan and any day, the per annum rate
of interest applicable to the calculation of interest on the related Loan
Balance for such day as set forth in the related Loan Agreement.
Master Servicer: Beneficial Mortgage Corporation or its successor in
interest or any successor servicer appointed as provided herein.
Monthly Servicing Fee: As to any ___________ Loan and any date, an
amount equal to one-twelfth of the product of (a) the Servicing Fee Rate and (b)
the Trust Balance of such __________ Loan.
Moody's: Moody's Investors Service, Inc. or its successor in interest.
Mortgage: As to any ___________ Loan, the deed of trust or other
instrument creating a first or second lien on an estate in fee simple interest
in real property securing such __________ Loan.
Mortgage File: As to any ____________ Loan, the mortgage documents
listed in Section 2.01 pertaining to such __________ Loan and any additional
documents required to be added to the Mortgage File pursuant to this Agreement,
which documents may be physical documents or, pursuant to the terms of Section
2.01, optical images or other representations thereof.
Mortgaged Property: As to any ___________ Loan, the underlying
property, including real property and any improvements thereon, securing such
__________ Loan.
Mortgagor: The obligor or obligors under a Loan Agreement.
Net Liquidation Proceeds: As to any Liquidated ___________ Loan,
Liquidation Proceeds net of Liquidation Expenses.
Net Loan Rate: As to any ____________ Loan and any day, the Loan Rate
less the Servicing Fee Rate.
Officer's Certificate: A certificate signed by the President, a Senior
Vice President or a Vice President of Beneficial or the Master Servicer, as the
case may be, and delivered to the Trustee.
Opinion of Counsel: A written opinion of counsel delivered to the
Trustee, who may be counsel employed by the Master Servicer or the Depositor,
except that any opinion of counsel relating to the qualification of the Trust
Fund as a REMIC or compliance with or taxation pursuant to the REMIC Provisions
must be an opinion of independent counsel experienced in matters relating to the
subject of such opinion.
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Original Class (_) Certificate Balance: $_____________.
Original Class (_) Certificate Balance: $__________.
Original Class (_) Certificate Balance: $__________.
Original Class (_) Certificate Balance: $______.
Originator: Each of _________________________ and ________________, or
their respective predecessors, as applicable.
Overdue Trust Percentage: As to any Collection Period and any payment
received in respect of a __________ Loan that was due in a previous Collection
Period, the percentage (carried to four places) obtained by dividing the average
daily Trust Balance for all consecutive prior Collection Periods from and
including the Collection Period in which such payment was due to and including
the Collection Period in which such payment was received in full by the average
daily Loan Balance for such consecutive prior Collection Periods. The Overdue
Trust Percentage shall only be applied to payments received in a Collection
Period that were due in a previous Collection Period or Periods.
Ownership Interest: With respect to any Class (_), Class (_) or Class
(_) Certificate, any ownership or security interest therein, including any
interest therein as the Holder thereof and any other interest therein, whether
direct or indirect, legal or beneficial, as owner or as pledgee.
Paying Agent: Any Person appointed by the Trustee as permitted by
Section 6.05.
Percentage Interest: As to any Certificate, the percentage interest
evidenced thereby in distributions required to be made thereon, such percentage
interest being equal, in the case of a Certificate other than a Class (_)
Certificate, to the percentage obtained by dividing the original principal
denomination of such Certificate by the aggregate of the original principal
denominations of all Certificates of the same Class, and, in the case of a Class
(_) Certificate, to the percentage set forth on the face thereof.
Permitted Investments: One or more of the following:
(a) direct obligations of, or obligations fully
guaranteed as to timely payment of 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;
(b) repurchase agreements on obligations specified
in clause (a) maturing not more than three months from the date of
acquisition thereof, provided that the unsecured short-term debt
obligations of the party agreeing to repurchase such obligations are at
the time rated by each Rating Agency in its highest unsecured
short-term rating category;
(c) certificates of deposit, time deposits and
bankers' acceptances (which, if Moody's is a Rating Agency, shall each
have an original maturity of not more than ___ days and, in the case of
bankers' acceptances, shall in no event have an original maturity of
more than 365 days) of any U.S. depository institution or trust company
incorporated under the
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laws of the United States or any State provided that either (i) such
investments are fully insured by the Federal Deposit Insurance
Corporation or (ii) the debt obligations of such depository institution
or trust company (or if Standard & Poor's is a Rating Agency in the
case of the principal depository institution in a depository
institution holding company, the unsecured short-term debt obligations
of the depository institution holding company) at the date of
acquisition thereof have been rated by each Rating Agency in its
highest unsecured short-term debt rating category;
(d) 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 its highest
short-term rating category;
(e) money market funds rated by each Rating Agency
in its highest category;
(f) money market mutual funds, including, without
limitation, the VISTA Money Market Funds or any other fund for which
the Trustee or an Affiliate of the Trustee serves as an investment
advisor, administrator, shareholder, servicing agent and/or custodian
or subcustodian (provided that any such fund is rated in the highest
rating category by each of Standard & Poor's and Moody's),
notwithstanding that (i) the Trustee or an Affiliate of the Trustee
charges and collects fees and expenses from such funds for services
rendered, (ii) the Trustee charges and collects fees and expenses for
services rendered pursuant to this Agreement, and (iii) services
performed for such funds and pursuant to this Agreement may converge at
any time; and
(g) other obligations or securities that are
acceptable to each Rating Agency as a Permitted Investment hereunder
and will not result in a reduction, withdrawal or suspension of the
then-current rating of any Class of Certificates, as evidenced by a
letter to such effect from such Rating Agency.
With respect to clause (f) above, the Depositor and the Master Servicer
specifically authorizes the Trustee or an Affiliate of the Trustee to charge and
collect all fees and expenses from such funds for services rendered to such
funds, in addition to any fees and expenses the Trustee may charge and collect
for services rendered pursuant to this Agreement.
In no event shall an instrument be a Permitted Investment if such
instrument evidences (x) a right to receive only interest payments with respect
to the obligations underlying such instrument or (y) both principal and interest
payments derived from obligations underlying such instrument, if the interest
and principal payments with respect to such instrument provide a yield to
maturity at the date of investment of greater than ___% of the yield to maturity
at par of such underlying obligations.
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: As to any Distribution Date, the aggregate of the Trust
Balances of all __________ Loans as of the beginning of the related Collection
Period.
Pool Purchase Price: As defined in Section 10.01(b).
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Principal Payment: As to any ___________ Loan and any Collection
Period, all amounts (excluding Insurance Proceeds and Liquidation Proceeds)
received by the Master Servicer from or on behalf of the related Mortgagor
during such Collection Period that were applied in reduction of the Loan Balance
of such __________ Loan.
Purchase Price: With respect to any Defective __________ Loan required
to be repurchased on any date pursuant to Section 2.02 or 2.04, an amount equal
to the sum of (a) the Trust Balance thereof as of the end of the Collection
Period preceding the date of repurchase and (b) accrued and unpaid interest
thereon to the end of such Collection Period at the Net Loan Rate from time to
time applicable to such Trust Balance.
Rating Agency: Any statistical credit rating agency, or its successor,
that rated any Class of Certificates at the request of the Master Servicer at
the time of the initial issuance of the Certificates. If such agency or a
successor is no longer in existence, "Rating Agency" shall be such statistical
credit rating agency, or other comparable Person, designated by the Master
Servicer, notice of which designation shall be given to the Trustee. References
herein to the highest rating category of a Rating Agency shall mean AAA, AAAm,
AAAm-G or A-1+, in the case of Standard & Poor's, AAA, or F-1+, in the case of
Fitch, and Aaa or P-1 +, in the case of Moody's, and in the case of any other
Rating Agency shall mean an equivalent rating.
Record Date: As to any Book-Entry Certificate and any Distribution
Date, the day immediately preceding such Distribution Date or, if Definitive
Certificates are issued pursuant to Section 6.01, the last day of the calendar
month preceding the month in which such Distribution Date occurs. As to any
Class (_) Certificate and any Distribution Date, the fifth Business Day
preceding such Distribution Date.
Reference Banks: Banks designated by the Trustee (a) that are engaged
in transactions in Eurodollar deposits in the international Eurocurrency market,
(b) with an established place of business in London, and (c) that, to the
knowledge of the Trustee, do not control, are not controlled by, and are not
under common control with, the Depositor.
Remaining Available Funds: As to any Distribution Date, Available Funds
less the sum of (a) the Amount Available for Class (_) Interest, (b) the Amount
Available for Class (_) Interest, (c) the Amount Available for Class (_)
Interest and (d) the Class (_) Formula Amount.
[REMIC: As defined in Section 3.01.]
[REMIC Change of Law: Any proposed, temporary or final statute,
regulation, revenue ruling, revenue procedure or other official announcement or
interpretation relating to REMICs and the REMIC Provisions issued after the
Closing Date.]
[REMIC Provisions: Provisions of the federal income tax law relating to
REMICs, which appear at sections 860A through 860G of Subchapter M of Chapter 1
of the Code, and related provisions and regulations promulgated thereunder, as
the foregoing may be in effect from time to time.]
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Reserve Interest Rate: With respect to any Accrual Period, the per
annum rate that the Trustee determines to be either (a) the arithmetic mean
(rounded upwards if necessary to the nearest whole multiple of one-sixteenth
percent) of the one-month U.S. dollar lending rates which at least two New York
City banks selected by the Trustee are quoting on the relevant LIBOR
Determination Date to the principal London offices of leading banks in the
London interbank market or (b) in the event that the Trustee can determine no
such arithmetic mean, the lowest one-month U.S. dollar lending rate which New
York City banks selected by the Trustee are quoting on such LIBOR Determination
Date.
Responsible Officer: When used with respect to the Trustee, any officer
within the Corporate Trust Office including any Vice President, Managing
Director, Assistant Vice President, Secretary, Assistant Secretary or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge and familiarity with the particular subject.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing or performing
duties now assigned to it, the body performing such duties on such date.
Securities Act: The Securities Act of 1933, as amended.
Servicer LOC: Any letter of credit, surety or similar agreement
obtained by the Master Servicer pursuant to Section 3.02(c).
Servicer LOC Issuer: At any time as to any Servicer LOC, the
institution that is then obligated under such Servicer LOC.
Servicing Certificate: A certificate completed by and executed on
behalf of the Master Servicer in accordance with Section 4.01.
Servicing Fee Rate: ____% per annum.
Servicing Officer: Any officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the __________ Loans whose
name appears on a list of servicing officers furnished on the Closing Date to
the Trustee by the Master Servicer, as such list may be amended from time to
time.
Standard & Poor's: Standard & Poor's Debt Ratings Group or its
successor in interest.
Subservicer: Each Originator, in its capacity as servicer of the ____
_______ Loans originated by it and sold by the Depositor to the Trustee
hereunder, and any other subservicer appointed as such by the Master Servicer.
Substitution Adjustment Amount: As defined in the fourth sentence of
Section 2.02(b).
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Tax Matters Person Residual Interest: A ________% interest in the Class
(_) Certificates, which shall be issued to and held by the Master Servicer
throughout the term hereof.
"Telerate 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 or
such other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank offered rates for
U.S. dollar deposits).
Termination Date: The Distribution Date upon which the final
distribution is made to Certificateholders.
Total Expected Losses: As of any date of determination, the sum of (a)
the aggregate amount of Liquidated __________ Loan Losses occurring on or prior
to such date and (b) the Delinquency Amount.
Transfer: Any direct or indirect transfer, sale, pledge, hypothecation
or other form of assignment of any Ownership Interest in a Class (_), Class (_)
or Class (_) Certificate.
Transferee: Any Person who is acquiring by Transfer any Ownership
Interest in a Class (_), Class (_) or Class (_) Certificate.
Trust Balance: As to any __________ Loan and any day, the Cut-off Date
Trust Balance less (a) all Trust Principal Payments received and credited
against the Trust Balance since the Cutoff Date and (b) any Trust Insurance
Proceeds received since the Cut-off Date in respect of such __________ Loan.
For purposes hereof, a Foreclosed __________ Loan shall be deemed to have a
Trust Balance equal to the Trust Balance of the related ___________ Loan
immediately prior to the foreclosure or comparable conversion, and a Liquidated
___________ Loan shall be deemed to have a Trust Balance equal to the Trust
Balance of the related __________ Loan immediately prior to the final recovery
of the related Liquidation Proceeds.
Trust Fund: The corpus of the trust created by this Agreement,
consisting of, to the extent described herein, the Trust Balance of each ____
______ Loan, such assets as shall from time to time be identified as credited to
the __________ Loan Payment Record or deposited in the Certificate Account in
accordance with this Agreement, any Insurance Proceeds, any Servicer LOC, and
any property that secured a ___________ Loan and that has been acquired by
foreclosure or deed in lieu of foreclosure.
Trust Insurance Proceeds: As to any __________ Loan and any Collection
Period, the product of (a) the Trust Percentage and (b) Insurance Proceeds with
respect to such __________ Loan received during such Collection Period.
Trust Interest: As to any payment on a __________ Loan made by or on
behalf of the related Mortgagor that is due (a) in the Collection Period in
which it is received, the product of (i) the portion of such payment allocable
to interest at the Net Loan Rate for the related Collection Period and (ii) the
Trust Percentage for the related Collection Period, or (b) in a Collection
Period prior to the Collection Period in which it was received, the product of
(i) the portion of such payment allocable to interest at the Net Loan Rate at
the beginning of the initial Collection Period in which
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such payment was due and (ii) the Overdue Trust Percentage for the Collection
Period in which such payment is received.
Trust Liquidation Proceeds: As to any Liquidated __________ Loan, the
product of the Trust Percentage and Net Liquidation Proceeds.
Trust Percentage: As to any __________ Loan and any Collection Period,
the percentage (carried to four places) obtained by dividing the average daily
Trust Balance for the second preceding Collection Period by the average daily
Loan Balance for such second preceding Collection Period; provided, that for any
Foreclosed __________ Loan, the Trust Percentage shall be the Trust Percentage
in effect for the Collection Period in which such ___________ Loan became a
Foreclosed __________ Loan. As of the Cut-off Date, the Trust Percentage of
each __________ Loan shall be ___%.
Trust Principal Payment: As to any payment made on a __________ Loan
by or on behalf of the related Mortgagor (other than Trust Insurance Proceeds),
(a) that is either a prepayment or was due in the Collection Period in which it
was received, the product of (i) the portion of such payment applicable to the
reduction of the Loan Balance of such ___________ Loan and (ii) the Trust
Percentage for the related Collection Period, or (b) that was due in a
Collection Period prior to the Collection Period in which it was received, the
product of (x) the portion of such payment applicable to the reduction of the
Loan Balance of such __________ Loan and (y) the Overdue Trust Percentage for
the Collection Period in which such payment was received; provided, however,
that such amount shall not exceed the amount necessary to reduce the related
Trust Balance to zero.
Trustee: ____________________________________________________, or any
successor trustee appointed in accordance with this Agreement that has accepted
such appointment in accordance herewith.
Weighted Average Net Loan Rate: As to any Distribution Date, the
average of the Net Loan Rates of all the __________ Loans in effect during the
applicable monthly billing cycles ending in the calendar month preceding such
Distribution Date (adjusted to an effective rate reflecting accrued interest
calculated on the basis of the actual number of days in the related Accrual
Period and a year assumed to consist of 360 days, and weighted by the respective
Trust Balances thereof).
Section 1.02. Interest Calculations. All calculations of interest
hereunder shall be made on the basis of the actual number of days in the Accrual
Period and a year assumed to consist of 360 days. The establishment of LIBOR on
each LIBOR Determination Date by the Trustee and the Trustee's calculation of
the rate of interest applicable to the Certificates for the related Accrual
Period shall (in the absence of manifest error) be final and binding.
Section 1.03. Usage of Terms. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
typing, lithography, facsimile and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the term "including"
means "including without limitation".
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ARTICLE II
SALE OF ____________ LOANS; ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Sale of __________ Loans. The Depositor, concurrently
with the execution and delivery of this Agreement, does hereby sell, assign, set
over and otherwise convey to the Trustee, without recourse (except as provided
herein) all of its right, title and interest in and to the Trust Balance of each
__________ Loan, including the Trust Percentage or Overdue Trust Percentage, as
applicable, of all interest and principal received by the Depositor or any
Originator on or with respect to each __________ Loan after the Cut-off Date
(other than any payment of principal and interest allocable to any Additional
Balance as herein provided, any premium accompanying the prepayment of all or a
portion of a Loan Balance, and any fees, charges or amounts held for the account
of Mortgagors as described in Section 3.02(b)), together with all of its right,
title and interest in and to the proceeds of any related insurance policies (to
the extent of the related Trust Balances). In addition, the Depositor does
hereby agree to enter into the __________ Loan Payment Record on the Closing
Date the initial deposit to the Certificate Account described in Section 4.02(a)
and thereafter to effect the deposit to the Certificate Account required
pursuant to such Section.
In connection with such sale and assignment, the Depositor will as
promptly as practicable, but in no event later than ___ days following the
Closing Date, file in the appropriate office in the State in which its principal
place of business is located a UCC-1 financing statement executed by the
Depositor as debtor, naming the Trustee as secured party and listing as
collateral the __________ Loans the Trust Balances of which are conveyed by the
Depositor hereunder. The characterization of the Depositor as debtor and the
Trustee as secured party in any such financing statement is solely for
protective purposes and shall in no way be construed as being contrary to the
intent of the parties that this transaction be treated as a sale to the Trustee
of the Depositor's entire right, title and interest in the Trust Balances of the
__________ Loans. In connection with such filing, the Depositor agrees that it
shall cause to be filed all necessary continuation statements and to take or
cause to be taken such actions and to execute such documents as are necessary to
perfect and protect the Certificateholders' interests in the Trust Balance of
each such __________ Loan and the proceeds thereof allocable thereto. In the
event a Servicer LOC is obtained pursuant to Section 3.02(c), the Master
Servicer promptly shall deliver to the Trustee such Servicer LOC.
In connection with such sale and assignment by the Depositor, the
Depositor acknowledges that it is holding (or that it will cause the related
Originators to hold on the Depositor's behalf) as custodian for the Trustee the
following documents or instruments with respect to each __________ Loan the
Trust Balance of which is being so sold and assigned:
(i) The related Loan Agreement (including any
related assumption, modification and substitution agreements), and any
evidence of indebtedness executed by the related Mortgagor in
connection therewith;
(ii) any related amendments to the Loan Agreement
or Mortgage, any related modification or assumption agreement and any
related previous assignments of the __________ Loan;
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(iii) the related Mortgage with evidence of
recording indicated thereon; and
(iv) with respect to each __________ Loan the
original Credit Limit of which was $________ or more, evidence of
title insurance;
provided, however, that as to any ___________ Loan in respect of which, as
evidenced by an Opinion of Counsel delivered to and in form and substance
satisfactory to the Trustee, (x) an optical image or other representation of the
related documents specified in clauses (i) through (iii) above are enforceable
in the relevant jurisdiction to the same extent as the original of such document
and (y) such optical image or other representation does not impair the ability
of an owner of such ___________ Loan to transfer its interest in such ______
_______ Loan, such optical image or other representation may be held by the
Depositor (or by the related Originator acting on behalf of Depositor) as
custodian in lieu of the physical documents specified above.
Except as hereinafter provided, the Depositor (or any Originator acting
on behalf of the Depositor) as custodian of the Mortgage Files, shall be
entitled to maintain possession of all of the foregoing documents and
instruments and shall not be required to deliver any of them to the Trustee. In
the event, however, that possession of any of such documents or instruments is
required by the Master Servicer or any person (including the Trustee) acting as
successor Master Servicer pursuant to Section 7.04 in order to carry out the
duties of Master Servicer hereunder, then the Master Servicer (or such
successor) shall be entitled to request that the Depositor deliver (or that the
Depositor cause the related Originator to deliver) such documents or instruments
and shall be entitled to retain such documents or instruments for as long as
necessary for servicing purposes. Any such documents or instruments shall be
returned to the Depositor or, if applicable, the related Originator (unless
returned to the related Mortgagor in connection with the payment in full of the
related __________ Loan) when possession thereof is no longer required.
The right of the Depositor (or of any Originator acting on behalf of
the Depositor) to maintain possession of the documents enumerated above shall
continue so long as (x) the Depositor (or such Originator) remains an affiliate
of Beneficial Corporation and the long-term unsecured debt of Beneficial
Corporation is assigned ratings of at least A- by Standard & Poor's and Fitch
and A3 by Moody's or (y) the Depositor has not been removed as Master Servicer
following the occurrence of an Event of Default. The Master Servicer shall
notify in writing each Originator and the Trustee if the long-term unsecured
debt of Beneficial Corporation does not satisfy either of such ratings. At such
time, as promptly as practicable but in no event more than ___ days in the case
of clause (i) below and ___ days in the case of clause (ii) below following the
occurrence of such event, the Depositor at its own expense shall (or shall cause
the related Originator to) (i) either (x) submit for recording an assignment of
Mortgage in favor of the Trustee (which may be a blanket assignment, if
permitted by law in the applicable jurisdiction as evidenced by an Opinion of
Counsel delivered to the Trustee) with respect to each of the related ____
__________ Loan the appropriate real property or other records or (y) deliver to
the Trustee the fully executed and prepared assignment of mortgage in favor of
the Trustee in form for recordation, together with an Opinion of Counsel to the
effect that neither the recording of an assignment nor the taking of any other
action is required to protect the Trustee's right, title and interest in and to
the related Mortgage and the related __________ Loan or, if a court were to
recharacterize the sale of the __________ Loans as a financing, to perfect a
first priority security interest in favor of the Trustee in such Mortgage and
__________ Loan and (ii) deliver the related Mortgage Files to the Trustee to
be held by the Trustee in trust,
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upon the terms herein set forth, for the use and benefit of all present and
future Certificateholders, and the Trustee shall retain possession thereof
except to the extent the Master Servicer or Subservicers require any Mortgage
Files for normal servicing as contemplated by Section 3.07.
The Trustee shall have no duty or obligation to review any Mortgage
File until such Mortgage File is delivered to the Trustee pursuant to clause
(ii) of the immediately preceding paragraph. Within ___ days following the first
delivery of the Mortgage Files to the Trustee pursuant to clause (ii) of the
immediately preceding paragraph, the Trustee will review each Mortgage File
delivered to it to ascertain that all required documents set forth in this
Section 2.01 have been executed and received, and that such documents relate to
the __________ Loans identified on the __________ Loan Schedule. In so doing
the Trustee may conclusively rely on the purported due execution and genuineness
of any signature thereon. If within such __-day period the Trustee finds any
document constituting a part of a Mortgage File not to have been executed or
received or to be unrelated to the ____________ Loans identified in such ____
______ Loan Schedule, the Trustee shall promptly notify the Depositor, which
shall have a period of ___ days after receipt of such notice within which to
correct or cure, or to cause the related Originator to correct or cure, any such
defect. Each original recorded assignment of Mortgage shall be delivered to the
Trustee within ___ Business Days following the date on which it is returned to
the Depositor or the related Originator by the office with which such assignment
was filed for recording and within ___ days following receipt by the Trustee of
the recorded assignment or the assignment in recordable form, as the case may
be, the Trustee shall review such assignment to confirm the information
specified above with respect to the documents constituting the Mortgage File.
Upon receipt by the Trustee of the recorded assignment or the assignment in
recordable form, as the case may be, such recorded assignment or assignment in
recordable form shall become part of the Mortgage File. The Trustee shall notify
the Depositor of any defect in such assignment based on such review. The
Depositor shall have a period of ___ days following receipt of such notice to
correct or cure, or to cause the related Originator to correct or cure, such
defect. In the event that the Depositor fails to record, or to cause the related
Originator to record, an assignment of a __________ Loan as herein provided
within such 30-day period, the Trustee shall, upon written instructions from the
Depositor, prepare and, if required hereunder, file such assignment for
recordation in the appropriate real property or other records and the Depositor
shall deliver within ___ Business Days of the Closing Date a power of attorney
of each Originator, which shall appoint the Trustee as its attorney-in-fact with
full power and authority to act in its stead for the purpose of such
preparation, execution and filing. Any expense incurred by the Trustee not
otherwise paid for by the Depositor or the related Originator as required
hereunder in connection with the preparation and filing of such assignments
shall be reimbursed to the Trustee from amounts that would otherwise be
distributable to holders of the Class (_) Certificates.
The Trustee shall have no responsibility for reviewing any Mortgage
File except as expressly provided in this Section 2.01. In reviewing any
Mortgage File pursuant to this Section, the Trustee shall have no responsibility
for determining whether any document is valid and binding, whether the text of
any assignment or endorsement is in proper or recordable form (except, if
applicable, to determine if the Trustee is the assignee or endorsee), whether
any document has been recorded in accordance with the requirements of any
applicable jurisdiction, or whether a blanket assignment is permitted in any
applicable jurisdiction, but shall only be required to determine whether a
document appears to have been executed, that it appears to be what it purports
to be and, where applicable, that it purports to be recorded, but shall not be
required to determine whether any Person executing any document was authorized
to do so or whether any signature thereon is genuine.
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The Depositor further confirms to the Trustee that the Depositor and
each Originator have caused the portions of their Electronic Ledgers relating to
the __________ Loans to be clearly and unambiguously marked to indicate that
the Trust Balance of each ____________ Loan transferred and assigned by such
Originator to the Depositor, and thereafter by the Depositor to the Trustee
hereunder, has been sold to the Trustee and constitutes part of the Trust Fund
in accordance with the terms of the trust created hereunder.
Section 2.02. Acceptance by Trustee; Repurchase Obligations;
Substitution of Eligible Substitute ___________ Loans. (a) The Trustee
acknowledges the assignment and sale of the Trust Balance of each ___________
Loan to it, and declares that the Trustee holds and will hold the Trust Fund in
trust, upon the terms herein set forth, for the use and benefit of all present
and future Certificateholders. If the time to cure any defect of which the
Trustee has notified the Master Servicer following the Trustee's review of the
Mortgage Files pursuant to Section 2.01 has expired or if any loss is suffered
by the Trustee, on behalf of the Certificateholders, in respect of any ____
______ Loan as a result of (i) a material defect in any document constituting a
part of a Mortgage File or (ii) the related Originator's retention of such
Mortgage File or an assignment of a __________ Loan not having been recorded,
the Master Servicer shall, on the Business Day preceding the Distribution Date
in the month following the Collection Period in which the time to cure such
defect expired or such loss occurred, either (i) repurchase the Trust Balance of
the related __________ Loan (including any property acquired in respect thereof
and any insurance policy or insurance proceeds with respect thereto) from the
Trust Fund at a price equal to the Purchase Price, which shall be accomplished
by deposit by the Master Servicer in the Certificate Account pursuant to Section
4.02 on such preceding Business Day, or (ii) so long as such Distribution Date
occurs within two years following the Closing Date, substitute for the Trust
Balance of such ____________ Loan one or more Eligible Substitute ___________
Loans and remit any Substitution Adjustment Amount in respect thereof to the
Certificate Account pursuant to Section 4.02 on such preceding Business Day. The
Master Servicer may first request of the related Originator that it effect the
repurchase or substitution of any Eligible Substitute __________ Loan described
in the preceding sentence, but in the event any such Originator shall not have
effected such repurchase or substitution in the time provided therefor, the
Master Servicer shall be obligated to deposit the related Purchase Price into
the Certificate Account in immediately available funds not later than such
Distribution Date and thereby be deemed to have purchased the Trust Balance of
such __________ Loan in lieu of such Originator. Such purchase by the Master
Servicer shall not relieve the related Originator of any liability to the Master
Servicer with respect to the Trust Balance of the __________ Loan so purchased,
and the Master Servicer shall be entitled to require the related Originator to
pay to the Master Servicer the related Purchase Price and thereby purchase the
Trust Balance of such __________ Loan from the Master Servicer. Upon receipt by
the Trustee of (i) in the case of a repurchase, written notification signed by a
Servicing Officer to the effect that the Purchase Price for any such Defective
__________ Loan has been so deposited in the Certificate Account or (ii) in the
case of a substitution, written notification signed by a Servicing Officer to
the effect that the Substitution Adjustment Amount, if any, has been so
deposited in the Certificate Account and, if required at such time, that the
related Mortgage File has been delivered to the Trustee and the assignment
referred to in Section 2.01 has been recorded, the Trustee shall execute and
deliver such instrument of transfer or assignment presented to it by the Master
Servicer, in each case without recourse, representation or warranty, as shall be
necessary to vest in the Master Servicer or the related Originator, as the case
may be, legal and beneficial ownership of such purchased Defective ___________
Loan (including any property acquired in respect thereof and proceeds of any
insurance
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policy with respect thereto). It is understood and agreed that the obligation of
the Master Servicer to repurchase or substitute for any __________ Loan as to
which a material defect in a Mortgage File or any constituent document thereof
continues to exist following the cure period as described in the preceding
paragraph shall constitute the sole remedy respecting such defect available to
Certificateholders or the Trustee on behalf of Certificateholders against the
Master Servicer, and such obligation on the part of the Master Servicer shall
survive any resignation or termination of the Master Servicer hereunder. It is
further understood and agreed that any such repurchase obligation shall be
solely that of the original Master Servicer and shall survive any resignation or
termination of such Master Servicer hereunder, and the Trustee shall in no event
be obligated to repurchase any __________ Loan hereunder.
[Notwithstanding the foregoing, in the case of any repurchase or
substitution that would result in the realization of a gain by the Trust Fund,
the Master Servicer shall not be required to so repurchase or replace any ____
______ Loan unless it is a Defective __________ Loan and the Trustee shall have
received (i) in the case of a repurchase, either an Opinion of Counsel to the
effect that such repurchase shall not be subject to tax as a result of being
deemed a "prohibited transaction" under section 860F(a)(2) of the Code or an
Officer's Certificate to the effect that such repurchase shall not give rise to
net income taxable under section 860F(a)(1) of the Code and (ii) in either case,
an Opinion of Counsel that such repurchase or substitution will not be deemed a
contribution to the REMIC after the "start-up day" that would give rise to the
tax specified under section 860G(d)(1) of the Code. Any such opinion or
certificate shall be provided solely at the expense of the Master Servicer. In
the absence of such opinion or certificate, the Master Servicer shall not be
required to repurchase or replace any __________ Loan unless it is a Defective
__________ Loan and there is an actual or imminent default with respect thereto
or unless such breach adversely affects the enforceability of such ___________
Loan.]
(b) As to any Eligible Substitute __________ Loan, the Master Servicer
shall deliver, or cause the related Originator to deliver, to the Trustee an
acknowledgment that the Depositor (or the related Originator on behalf of the
Depositor) is holding as custodian for the Trustee such documents and
agreements, if any, as are permitted to be held by the Depositor (or the related
Originator) in accordance with Section 2.01. An assignment of Mortgage in favor
of the Trustee with respect to any such Eligible Substitute __________ Loan
shall be required to be recorded in the appropriate real property or other
records or delivered to the Trustee with the Opinion of Counsel referred to in
Section 2.01 under the same circumstances that all other assignments of Mortgage
are required to be recorded hereunder. For any Collection Period during which
the Master Servicer substitutes one or more Eligible Substitute ___________
Loans for one or more Defective __________ Loans, the Master Servicer shall
determine the amount, if any, by which the sum of the aggregate Trust Balances
of all such Eligible Substitute __________ Loans at the end of such Collection
Period is less than the aggregate Trust Balances at the end of such Collection
Period of the related __________ Loans being removed from the Trust Fund. The
amount of any such shortfall for a Collection Period computed by the Master
Servicer, together with any accrued and unpaid interest on the Trust Balance of
the ___________ Loan being replaced at the related Net Loan Rate (the
"Substitution Adjustment Amount"), shall be deposited by the Master Servicer in
the Certificate Account on the Business Day next preceding the Distribution Date
in the month following the Collection Period in which the circumstances giving
rise to such substitution occur. All amounts received in respect of any Eligible
Substitute ___________ Loans during the Collection Period in which the
circumstances giving rise to a substitution occur shall not be a part of the
Trust Fund and
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shall not be credited to the __________ Loan Payment Record or deposited by the
Master Servicer in the Certificate Account. All amounts received by the Master
Servicer during the Collection Period in which the circumstances giving rise to
such substitution occur in respect of the Trust Balance of any __________ Loan
so removed from the Trust Fund shall be deposited by the Master Servicer in the
Certificate Account. The Master Servicer shall amend the ___________ Loan
Schedule to reflect the removal of the Trust Balances of any ____________ Loans
from the Trust Fund and the substitution of the Trust Balances of any Eligible
Substitute __________ Loans. Upon such substitution, the Trust Balance of any
Eligible Substitute __________ Loan shall constitute a portion of the Trust
Fund and shall be subject to the terms of this Agreement in all respects, and
the Depositor shall be deemed to have made with respect to any such Eligible
Substitute __________ Loan, as of the date of substitution, the covenants,
representations, warranties and obligations set forth in Section 2.04. The
Trustee shall upon satisfaction of the conditions set forth in Section 2.02(a)
promptly effect the reconveyance of any __________ Loan so removed from the
Trust Fund to the Master Servicer (or, if so instructed by the Master Servicer,
to the related Originator), in the manner set forth in Section 2.02(a). The
procedures applied by the Master Servicer in selecting each Eligible Substitute
____________ Loan shall not be adverse to the interests of the Trustee and the
Certificateholders and shall be comparable to the selection procedures
applicable to the __________ Loans originally conveyed hereunder.
(c) As of the Closing Date, the Trustee certifies that (i) it acquired
the Trust Balances of the ___________ Loans in good faith, for value, and
without notice or knowledge or any adverse claim, lien, change, encumbrance or
security interest (including without limitation, federal tax liens or liens
arising under ERISA), (ii) except as permitted herein, it has not and will not,
in any capacity, assert any claim or interest in the __________ Loans and (iii)
it has not encumbered or transferred its right, title or interest in the ____
______ Loans. The representation and warranty made in clause (i) above is made
by the Trustee without any independent investigation and without recourse or
warranty, except that the Trustee believes such representation to be true.
Section 2.03. Representations and Warranties Regarding the Master
Servicer. The Master Servicer represents and warrants to the Trustee and the
Certificateholders as of the Closing Date that:
(i) The Master Servicer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power to own its assets and to
transact the business in which it is currently engaged. The Master
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 or the
performance of its obligations hereunder requires such qualification
and in which the failure so to qualify would have a material adverse
effect on the business, properties, assets, or condition (financial or
other) of the Master Servicer or the performance of its obligations
hereunder;
(ii) The Master Servicer has the power and authority
to make, execute, deliver and perform its obligations under this
Agreement and all of the transactions contemplated under this
Agreement, and has taken all necessary corporate action to authorize
the execution and delivery of this Agreement and the performance by it
of its obligations hereunder. When executed and delivered, this
Agreement will constitute the legal, valid and binding obligation
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of the Master 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 Master Servicer is not required to obtain
the consent of any other party 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
Agreement, except such as have been obtained or filed, as the case may
be, prior to the Closing Date; provided, however, that the Master
Servicer makes no representations or warranties with respect to any
requirements under the Blue Sky laws of any State;
(iv) The execution, delivery and performance of this
Agreement by the Master Servicer will not violate any provision of any
existing law or regulation or any order or decree of any court
applicable to the Master Servicer or any provision of the Certificate
of Incorporation or Bylaws of the Master Servicer, or constitute a
material breach of any mortgage, indenture, contract or other agreement
to which the Master Servicer is a party or by which the Master 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 Master Servicer threatened, against
the Master Servicer or any of its properties or with respect to this
Agreement or the Certificates which in the opinion of the Master
Servicer has a reasonable likelihood of resulting in a material adverse
effect on the transactions contemplated by this Agreement.
It is understood and agreed that the representations and warranties set forth in
this Section 2.03 shall survive the sale and assignment of the Trust Balances of
the __________ Loans to the Trustee. Upon discovery of a breach of any of the
foregoing representations and warranties which materially and adversely affects
the interests of the Certificateholders, the party discovering such breach shall
give prompt written notice to the other parties. Within 60 days of its
discovery or its receipt of notice of breach, the Master Servicer shall cure
such breach in all material respects.
Section 2.04. Representations and Warranties Regarding the ___________
Loans; Repurchase of Defective __________ Loans. The Depositor, as seller of
the Trust Balances of the __________ Loans hereunder, represents and warrants
to the Trustee and the Certificateholders as of the Closing Date (except as
otherwise expressly stated) that, as to each __________ Loan the Trust Balance
of which is conveyed to the Trust Fund by it:
(i) The information set forth on the ____________
Loan Schedule was true and correct in all material respects at the date
or dates respecting which such information is furnished;
(ii) As of the Closing Date, each Mortgage is a
valid lien on the related Mortgaged Property subject only to (a) the
lien of the related first deed of trust or mortgage, if any, (b) the
lien of current real property taxes and assessments, (c) covenants,
conditions and restrictions, rights of way, easements and other matters
of public record as of the date
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of recording of such Mortgage, such exceptions appearing of record
being acceptable to mortgage lending institutions generally in the area
wherein the Mortgaged Property is located or specifically reflected in
the appraisal obtained in connection with the origination of the
related __________ Loan and (d) other matters to which like properties
are commonly subject which do not materially interfere with the
benefits of the security intended to be provided by such Mortgage;
(iii) Immediately prior to the sale and assignment by
the Depositor to the Trustee, the Depositor had good title to each ____
______ Loan the Trust Balance of which was sold and assigned by it, and
the Depositor has transferred all right, title and interest in the
Trust Balance of each __________ Loan to the Trustee;
(iv) As of the last Cycle Date immediately preceding
the Cut-off Date, no payment of principal or interest on or in respect
of any __________ Loan is more than ___ days past due;
(v) The Depositor and, if applicable, the related
Originator from whom the Depositor purchased each __________ Loan, was
properly licensed or otherwise authorized, to the extent required by
applicable law, to originate or purchase such __________ Loan; each
___________ Loan at the time it was made complied in all material
respects with applicable state and federal laws, including, without
limitation, usury, equal credit opportunity and disclosure laws, and
the consummation of the transactions herein contemplated, including,
without limitation, the receipt of interest by Certificateholders, and
the ownership of the Trust Balances of the ____________ Loans by the
Trustee as trustee of the Trust Fund, will not involve the violation of
such laws;
(vi) As to each ____________ Loan having an original
Credit Limit of $________ or more, a lender's title insurance policy or
binder, foreclosure impairment insurance, or other assurance of title
customary in the relevant jurisdiction therefor, was issued on or as of
the date of the recording of the related Mortgage, and each such policy
or binder is valid and remains in full force and effect;
(vii) As of the Closing Date, the Depositor has not
received a written notice of default of any first lien loan related to
a Mortgaged Property that has not been cured by a party other than the
Depositor or the related Originator;
(viii) Each Loan Agreement is in substantially the
form previously provided to the Trustee by or on behalf of the
Depositor;
(ix) At the date of the execution of any Loan
Agreement, the Combined Loan-to-Value Ratio for the related ____
______ Loan was not in excess of ___%;
(x) No selection procedure reasonably believed by
the Depositor or the Originators to be adverse to the interests of the
Certificateholders was utilized in selecting the __________ Loans;
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(xi) To the best of the Depositor's knowledge, an
independent interior and exterior appraisal in accordance with industry
standards was made in connection with the origination of each ____
______ Loan with a Credit Limit in excess of $_______;
[(xii) The fair market value of the "interest in real
property" as defined in Treas. Reg. ss. 1.860G-2(a)(4) and Treas. Reg.
ss. 1.856-3(c) securing each __________ Loan reduced by the amount of
any lien on the interest in real property that is senior to such ____
______ Loan, and further reduced by a proportionate amount of any lien
on the interest in real property that is in parity with such ____
______ Loan, was at least equal to ___% of the adjusted issue price of
the __________ Loan on the date of the execution of the related Loan
Agreement (provided the ____________ Loan has not been significantly
modified as defined in the REMIC Provisions) or on the Closing Date;]
and
[(xiii) Each __________ Loan is a "qualified mortgage
loan" in accordance with the REMIC Provisions.]
The representations and warranties set forth in this Section 2.04 shall
survive the sale and assignment of the respective Mortgage Files to the Trustee.
Upon discovery by the related Originator, the Master Servicer or a Responsible
Officer of the Trustee of a breach of any of the foregoing representations and
warranties, without regard to any limitation set forth in such representation or
warranty regarding the knowledge of the Depositor as to the facts stated
therein, which materially and adversely affects the interests of the
Certificateholders in the related __________ Loan, the party discovering such
breach shall give prompt written notice to the other parties. Within ___ days of
its discovery or its receipt of notice of breach, the Depositor shall use all
reasonable efforts to cure such breach in all material respects or shall, not
later than the Business Day next preceding the Distribution Date applicable to
the Collection Period in which any such cure period expired, either (i)
repurchase the Trust Balance of such __________ Loan (including any property
acquired in respect thereof and any insurance policy or insurance proceeds with
respect thereto) from the Trustee at a price equal to the Purchase Price or (ii)
remove such __________ Loan from the Trust Fund and substitute in its place one
or more Eligible Substitute __________ Loans, in the same manner and subject to
the same conditions as set forth in Section 2.02. Any such repurchase or
substitution by the Depositor shall be accomplished in the manner set forth in
Section 2.02 with respect to the repurchase or substitution of __________ Loans
under that Section. Upon making any such repurchase or substitution, the
Depositor shall be entitled to receive an instrument of assignment or transfer
from the Trustee to the same extent as set forth in Section 2.02 with respect to
the repurchase or substitution of __________ Loans under that Section. The
obligation of the Depositor to repurchase or replace any such __________ Loan
(or property acquired in respect thereof) shall constitute the sole remedy
respecting such breach available to Certificateholders or the Trustee on behalf
of Certificateholders, and such obligation on the part of the Depositor shall
survive any resignation or termination of the Depositor as Master Servicer
hereunder.
The Depositor shall be obligated either to repurchase or to replace
with one or more Eligible Substitute __________ Loans each __________ Loan as
to which any of the following conditions shall have existed as of the Closing
Date, which condition materially and adversely affects the interests of the
Certificateholders in the related __________ Loan:
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(i) Any mechanics' lien or claim for work, labor or
material affecting the related Mortgaged Property that is or may be a
lien prior to, or equal or coordinate with, the lien of the related
Mortgage;
(ii) Any delinquent tax or assessment lien against
the related Mortgaged Property;
(iii) Any valid offset, defense or counterclaim to
any Loan Agreement or Mortgage;
(iv) Any physical damage or lack of good repair
with respect to the related Mortgaged Property; or
(v) Any related first deed of trust or mortgage
containing a future advance provision.
Any such repurchase or substitution shall be effected prior to the Distribution
Date applicable to the Collection Period at the end of which any such condition
shall have been discovered and shall be accomplished in the manner set forth in
Section 2.02 with respect to the repurchase or substitution of __________ Loans
thereunder, and such repurchase or substitution obligation shall constitute the
sole remedy respecting any of the foregoing conditions available to
Certificateholders, or the Trustee on behalf of Certificateholders, and shall
survive any resignation or termination of Beneficial as Master Servicer
hereunder. It is understood and agreed that any such repurchase or substitution
obligation shall be solely that of the Depositor, and the Trustee shall in no
event be obligated to repurchase or replace any __________ Loan hereunder.
Section 2.05. Execution and Authentication of Certificates;
[Designation of "Regular Interests" and "Residual Interests" under REMIC.] (a)
The Trustee has caused to be executed (not in its individual capacity, but
solely as Trustee), countersigned and delivered to or upon the written order of
the Depositor, in exchange for the Trust Balances of the __________ Loans,
concurrently with the sale and assignment to the Trustee of the Trust Balances
of the ___________ Loans, Certificates in authorized denominations evidencing
the entire ownership of the Trust Fund.
[(b) The Depositor hereby designates the Class (_), Class (_) and Class
(_) Certificates as "regular interests", and the Class (_) Certificates as the
"residual interests", in the Trust Fund for purposes of the REMIC Provisions.]
[Section 2.06. Designation of Start-up Day and Final Maturity Date. The
Closing Date is hereby designated as the "start-up day" of the REMIC within the
meaning of section 860G(a)(9) of the Code. The "final maturity date" for federal
income tax purposes of all interests created hereby will be the ________ ___
Distribution Date.]
Section 2.07. Certain Activities. The Trust will not: (i) issue
securities (except for the Certificates); (ii) borrow money, (iii) make loans;
(iv) invest in securities for the purpose of exercising control; (v) underwrite
securities; (vi) except as provided in this Agreement, engage in the purchase
and sale (or turnover) of investments; (vii) offer securities in exchange for
property (except
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Certificates for the Trust Balances of the ___________ Loans); or (viii)
repurchase or otherwise reacquire its securities.
ARTICLE III
ADMINISTRATION AND SERVICING OF ____________ LOANS
Section 3.01. The Master Servicer. Beneficial is hereby appointed as
Master Servicer hereunder. [The parties intend that the Trust Fund formed
hereunder shall constitute, and that the affairs of the Trust Fund shall be
conducted and this Agreement shall be construed so as to qualify the Trust Fund
as, a "real estate mortgage investment conduit" (a "REMIC") as defined in and in
accordance with the REMIC Provisions. In furtherance of such intention, the
Master Servicer covenants and agrees that it shall, to the extent permitted by
applicable law, act as agent (and the Master Servicer is hereby appointed to act
as agent) on behalf of the Trust Fund and in that capacity it shall: (a)
prepare, sign and file, or cause to be prepared, signed and filed, all required
federal tax returns for the REMIC using a calendar year as the taxable year for
the Trust Fund when and as required by the REMIC Provisions and other applicable
federal income tax laws; (b) cause the Trust Fund to make an election to be
treated as a REMIC on the federal partnership information tax return of the
Trust Fund for its first taxable year in accordance with the REMIC Provisions;
(c) prepare and forward, or cause to be prepared and forwarded, to the
Certificateholders all information reports as and when required to be provided
to them in accordance with the REMIC Provisions; (d) conduct the affairs of the
Trust Fund at all times that any Certificates are outstanding so as to maintain
the status of the Trust Fund as a REMIC under the REMIC Provisions; (e) not
knowingly or intentionally take any action or omit to take any action that would
cause the termination of the REMIC status of the Trust Fund; (f) serve as tax
matters person pursuant to Treasury Regulations ss. 1.860F-4(d) and Temporary
Treasury regulation ss. 301.6231(a)(7)-1T for the Trust Fund; and (g) if not
otherwise paid from amounts available to be distributed to Holders of the Class
(_) Certificates, pay the amount of any federal income tax, including prohibited
transaction penalty taxes, imposed on the Trust Fund when and as the same shall
be due and payable (but such obligation shall not prevent the Master Servicer or
any other appropriate Person from contesting any such tax in appropriate
proceedings and shall not prevent the Master Servicer from withholding payment
of such tax, if permitted by law, pending the outcome of such proceedings).] If
the Master Servicer is not permitted, by applicable law, to fulfill any of its
duties described in this Section 3.01 (as evidenced by an Opinion of Counsel to
such effect delivered to the Trustee), the Trustee shall, at the expense of the
Master Servicer, carry out such duties pursuant to the written instructions of
the Master Servicer, in which event the Trustee shall have no liability to
Certificateholders in connection with the carrying out of such duties other than
pursuant to the standard of care set forth in Section 9.01 hereof with respect
to acts or omissions of the Trustee generally.
The Master Servicer shall, or shall cause the related Subservicer to,
service and administer the ___________ Loans and shall have full power and
authority, acting alone or through such Subservicer, to do any and all things in
connection with such servicing and administration that it may deem necessary or
desirable. Any amounts received by any Subservicer in respect of a ___________
Loan shall be deemed to have been received by the Master Servicer whether or not
actually received by it. Without limiting the generality of the foregoing, the
Master Servicer shall continue, and is hereby authorized and empowered by the
Trustee, to execute and deliver on behalf of itself, the Certificateholders and
the Trustee or any of them, any and all instruments of satisfaction or
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cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the __________ Loans and with respect
to the Mortgaged Properties. The Trustee shall, upon written request of a
Servicing Officer, furnish the Master Servicer with any powers of attorney and
other documents as are reasonably necessary or appropriate to enable the Master
Servicer to carry out its servicing and administrative duties hereunder.
In connection with the servicing and administration of the ___________
Loans, the Master Servicer shall not, and shall not permit any Subservicer to,
consent to an increase in the Credit Limit specified in any Loan Agreement
unless (i) the Master Servicer or such Subservicer and such Mortgagor execute a
new Loan Agreement providing for such increase and (ii) the Master Servicer, not
later than (x) the Business Day immediately preceding the Distribution Date
applicable to the Collection Period during which a new Loan Agreement was
executed or (y) in the event the Master Servicer is not entitled to retain and
commingle with its own funds amounts referred to in Section 3.02(c), not later
than the second Business Day following the date on which such new Loan Agreement
was executed, deposit in the Certificate Account the amount necessary (including
any accrued and unpaid interest) to prepay in full on behalf of the Mortgagor
the Trust Balance of the related __________ Loan. Upon making any such deposit
the Master Servicer shall be entitled to receive an instrument of assignment or
transfer from the Trustee to the same extent as set forth in Section 2.02. The
Master Servicer and each Subservicer may consent to the placing of a lien or
liens junior to that of the Mortgage on the related Mortgaged Property so long
as the total of the principal amounts of any first lien loan, the Credit Limit
and the combined principal balances secured by any such junior lien loan or
loans does not exceed ___%, if such Mortgage is a second deed of trust or
mortgage, and ___%, if such Mortgage is a first deed of trust or mortgage, of
the Appraised Value of the Mortgaged Property as specified in an appraisal made
by or on behalf of the Master Servicer at the time of and in connection with
such consent. The Master Servicer and each Subservicer may also consent to the
placing of a lien or liens senior to that of the Mortgage on the Mortgaged
Property so long as the Combined Loan-to-Value Ratio of such ____________
following the placement of such lien or liens is equal to or less than the
Combined Loan-to-Value Ratio of such __________ Loan at origination.
[The Master Servicer and each Subservicer may also consent to any
modification of the terms of any Loan Agreement or Mortgage not expressly
prohibited hereby if (i) the effect of any such modification will not be to
materially and adversely affect the security afforded by the Mortgaged Property
or decrease or slow (other than as permitted by clause (ii) of Section 3.02(a))
the timing of receipt of any payments required thereunder, (ii) such
modification will not cause the Trust Fund to fail to qualify as a REMIC under
the REMIC Provisions, (iii) after such modification for the Loan Agreement or
Mortgage, the related __________ Loan is a "qualified mortgage" as defined in
the REMIC Provisions, and (iv) the modification does not cause the Trust Fund to
owe additional tax to any state or federal governmental agency.]
The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer under this Agreement) to the Trustee under this
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.
[In the event that any tax is imposed on "prohibited transactions" (as
defined in section 860F(a)(2) of the Code) of the Trust Fund, such tax shall be
charged against amounts otherwise distributable to Holders of the Class (_)
Certificates to the extent hereinafter provided. In the event
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that any such tax shall be due and owing at a time when amounts otherwise
distributable to Holders of the Class (_) Certificates are not available and the
negligence of the Master Servicer caused the imposition of such tax, the Master
Servicer shall pay such tax from its own funds. In such event, the Master
Servicer is hereby authorized to retain from amounts otherwise distributable to
Holders of the Class (_) Certificates on any subsequent Distribution Date
sufficient funds to reimburse the Master Servicer for the payment of such tax
(to the extent that the Master Servicer has not been previously reimbursed or
indemnified therefor). The obligation of the Master Servicer to pay any such tax
from its own funds in the event amounts otherwise distributable to Holders of
the Class (_) Certificates are not sufficient shall be solely that of the Master
Servicer and shall survive any resignation or termination of the Master Servicer
hereunder; provided, however, that such obligation shall be solely that of the
original Master Servicer in the case of "prohibited transactions" caused by, or
stemming from any act or omission of, such original Master Servicer, including,
but not limited to, the repurchase of a Defective __________ Loan, and in such
case shall survive any such resignation or termination of the original Master
Servicer hereunder.]
Section 3.02. Collection of Certain __________ Loan Payments; _____
______ Loan Payment Record. (a) The Master Servicer and each Subservicer shall
follow such collection procedures as it follows from time to time with respect
to home equity loans in its servicing portfolio comparable to the ___________
Loans. Consistent with the foregoing, the Master Servicer and any such
Subservicer may in its discretion (i) waive any late payment charge or any
prepayment or other fees that may be collected in the ordinary course of
servicing such __________ Loans and (ii) if a Mortgagor is in default or about
to be in default under a ___________ Loan, arrange with such Mortgagor a
schedule for the payment of interest due and unpaid; provided such arrangement
is consistent with the Master Servicer's or such Subservicer's policies with
respect to the home equity loans it owns or services.
(b) The Master Servicer shall establish and maintain for the Trust Fund
a ___________ Loan Payment Record in which the following payments on and
collections in respect of each ____________ Loan shall be credited within ___
Business Days of receipt thereof by the Master Servicer for the account of the
Certificateholders:
(i) all Trust Interest;
(ii) Trust Principal Payments, including, without
limitation, Trust Principal Payments made by the Master Servicer on
behalf of Mortgagors in connection with the execution of a new Loan
Agreement providing for an increased Credit Limit;
(iii) the Purchase Price of any Trust Balance
repurchased by the Master Servicer or by an Originator pursuant to
Sections 2.02 and 2.04;
(iv) the Substitution Adjustment Amount in respect
of any __________ Loan replaced by an Eligible Substitute ____________
Loan pursuant to Section 2.02 or 2.04;
(v) all Trust Liquidation Proceeds; and
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(vi) all Trust Insurance Proceeds (including, for
this purpose, any amounts required to be credited by the Master
Servicer pursuant to the penultimate sentence of Section 3.04).
The foregoing requirements respecting credits to the __________ Loan Payment
Record are exclusive, it being understood that, without limiting the generality
of the foregoing, the Master Servicer need not enter in the __________ Loan
Payment Record amounts representing fees (including annual fees), prepayment
premiums or late charge penalties payable by Mortgagors, or amounts received by
the Master Servicer for the account of Mortgagors for application towards the
payment of taxes, insurance premiums, assessments and similar items. All amounts
credited by the Master Servicer to the __________ Loan Payment Record shall be
held by the Master Servicer in trust for the Certificateholders until such
amounts are disbursed in accordance with Section 4.02 or debited in accordance
with this Section 3.03.
(c) Until the Business Day prior to each Distribution Date on which
amounts are required to be deposited in the Certificate Account pursuant to
Section 4.02, the Master Servicer may retain and commingle such amounts
(including the Initial Reserve Amount) with its own funds so long as (i) no
Event of Default shall have occurred and be continuing and (ii) either (x) the
Master Servicer remains an affiliate of Beneficial Corporation and the
short-term debt obligations of Beneficial Corporation are rated at least A-1 by
Standard & Poor's, F-1 by Fitch and P-1 by Moody's (or such lower rating as each
such organization may otherwise agree to in writing) or (y) the Master Servicer
arranges for and maintains a Servicer LOC acceptable in form and substance to
each Rating Agency (which acceptability shall be confirmed in writing);
provided, however, that amounts permitted to be retained and commingled pursuant
to this subclause (y) shall not exceed the Available Servicer LOC Amount. In the
event the Master Servicer is entitled to retain and commingle the amounts
referred to in the preceding sentence, it shall be entitled to retain for its
own account any investment income thereon, and any such investment income shall
not be subject to any claim of the Trustee or Certificateholders. Any amounts
retained and commingled by the Master Servicer pursuant to this Section 3.02(c)
shall be held by the Master Servicer in constructive trust for the benefit of
the Trust Fund. In the event that the Master Servicer is not permitted to retain
and commingle such amounts with its own funds, it shall, any provisions herein
to the contrary notwithstanding, deposit such amounts not later than the second
Business Day following receipt in the Certificate Account created and maintained
pursuant to Section 4.02, subject to withdrawal to the same extent as debits to
the __________ Loan Payment Record are permitted pursuant to Section 3.03.
(d) The __________ Loan Payment Record shall be made available for
inspection during normal business hours of the Master Servicer upon request of
the Trustee, any Servicer LOC Issuer or the firm of independent accountants
acting pursuant to Section 3.10.
Section 3.03. Permitted Debits to the __________ Loan Payment Record.
The Master Servicer may, from time to time, make debits to the __________ Loan
Payment Record to reflect (i) the making of deposits into the Certificate
Account pursuant to Section 4.02 and (ii) the payment to itself of any portion
of the Monthly Servicing Fee initially deposited by it in the Certificate
Account and not retained by it pursuant to the first sentence of Section 3.08.
In addition, if the Master Servicer deposits in the Certificate Account or
credits to the ____________ Loan Payment Record any amount not required to be
deposited therein or credited thereto or any amount in respect of payments by
Mortgagors made by checks subsequently returned for insufficient funds or other
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reason for non-payment it may at any time withdraw such amount from the
Certificate Account or debit such amount in the __________ Loan Payment Record,
any provision herein to the contrary notwithstanding.
All funds deposited or credited by the Master Servicer in the
Certificate Account or the __________ Loan Payment Record, respectively, shall
be held by the Trustee or the Master Servicer, as the case may be, in trust for
the Certificateholders until disbursed in accordance with Section 5.01 or
withdrawn or debited in accordance with this Section 3.03.
Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses. The Master Servicer shall cause to be maintained for each Mortgaged
Property hazard insurance with an appropriate endorsement in favor of the Master
Servicer or the related Subservicer and extended coverage in an amount that is
at least equal to the lesser of (i) the maximum insurable value of the
improvements securing the related __________ Loan from time to time or (ii) the
sum of the Loan Balance of such __________ Loan and the outstanding principal
balance of any mortgage loan senior to such __________ Loan from time to time,
but in no event shall such amount be less than is necessary to prevent the
Mortgagor from becoming a coinsurer thereunder. The Master Servicer shall also
maintain on property acquired upon foreclosure, or by deed in lieu of
foreclosure, hazard insurance with an appropriate endorsement in favor of the
Master Servicer or the related Subservicer with extended coverage in an amount
which is at least equal to the lesser of (i) the maximum insurable value from
time to time of the improvements that are a part of such property or (ii) the
sum of the Loan Balance of such __________ Loan and the outstanding principal
balance of any mortgage loan senior to such __________ Loan at the time of such
foreclosure or deed in lieu of foreclosure plus accrued interest and the
good-faith estimate of the Master Servicer of related Liquidation Expenses to be
incurred in connection therewith. Amounts collected by the Master Servicer under
any such policies shall be credited to the __________ Loan Payment Record and
deposited in the Certificate Account in accordance with Section 3.02(b) to the
extent that they constitute Trust Liquidation Proceeds or Trust Insurance
Proceeds.
In cases in which any Mortgaged Property is located in a federally
designated flood area, the hazard insurance to be maintained for such Mortgaged
Property shall include flood insurance (to the extent available). All such flood
insurance shall be in such amounts as are required under applicable guidelines
of the Federal National Mortgage Association. The Master 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 __________ 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 Master
Servicer shall obtain and maintain a blanket policy issued by an insurer
acceptable to the Rating Agencies insuring against hazard losses on all of the
___________ 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 Master 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, credit to the __________ Loan Payment Record and
deposit in the Certificate Account the applicable Trust Percentage of the amount
not otherwise payable under the blanket policy because of such deductible
clause. The Trust Percentage of any amounts paid
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under any such policy shall be credited to the __________ Loan Payment Record
and deposited in the Certificate Account in accordance with Section 3.02(b).
Section 3.05. Assumption and Modification Agreements. In any case in
which a Mortgaged Property has been or is about to be conveyed by the Mortgagor,
the Master Servicer and each Subservicer shall exercise its right to accelerate
the maturity of the related __________ Loan and require that the Loan Balance
thereof be paid in full on or prior to such conveyance by the Mortgagor under
any "due-on-sale" clause applicable thereto. If such "due-on-sale" clause, by
its terms, is not operable or the Master Servicer is prevented, as provided in
the following paragraph of this Section 3.05, from enforcing any such clause,
the Master Servicer is authorized to take or enter into an assumption and
modification agreement from or with the Person to whom such property has been or
is about to be conveyed, pursuant to which such Person becomes liable under the
Loan Agreement and the Mortgagor remains liable thereon. In connection with any
such agreement, the provisions for the adjustment of the Loan Rate thereon shall
not be modified to increase or decrease the Loan Rate. Any such agreement shall,
for all purposes, be considered part of the related Mortgage File. Any fee
collected by the Master Servicer for entering into any such agreement will be
retained by the Master Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph of this Section 3.05 or any
other provision of this Agreement, the Master Servicer shall not be deemed to be
in default, breach or any other violation of its obligations hereunder by reason
of any assumption of a __________ Loan, or transfer of any Mortgaged Property
without the assumption thereof, by operation of law or any assumption or
transfer which the Master Servicer reasonably believes it may be restricted by
law from preventing, for any reason whatsoever.
Section 3.06. Realization upon Defaulted __________ Loans. The Master
Servicer shall, or shall cause the applicable Subservicer to, foreclose upon or
otherwise comparably convert to ownership Mortgaged Properties securing such of
the __________ Loans as come into and continue in default when, in the opinion
of the Master Servicer, no satisfactory arrangements can be made for collection
of delinquent payments pursuant to Section 3.02. In connection with such
foreclosure or other conversion, the Master Servicer or such Subservicer shall
follow such practices (including, in the case of any default on a related prior
deed of trust, the advancing of funds to correct such default) and procedures as
it shall deem necessary or advisable and as shall be normal and usual from time
to time in its general mortgage servicing activities. In determining whether to
foreclose upon or otherwise comparably convert the ownership of a Mortgaged
Property, the Master Servicer and each Subservicer shall take into account (and
shall not be required to foreclose or otherwise convert the ownership of such
Mortgaged Property in the case of) the existence of any hazardous substances,
hazardous wastes or solid wastes, as such terms are defined in the Comprehensive
Environmental Response Compensation and Liability Act, the Resource Conservation
and Recovery Act of 1976, or other federal, state or local environmental
legislation, on such Mortgaged Property. The foregoing is subject to the proviso
that neither the Master Servicer nor any Subservicer shall be required to expend
its own funds in connection with any foreclosure or other conversion or towards
the correction of any default on a related prior mortgage loan or restoration of
any property unless it shall determine that such foreclosure, correction or
restoration will increase Trust Liquidation Proceeds.
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In the event that the Trust Fund acquires any Mortgaged Property by
foreclosure or by deed in lieu of foreclosure, such Mortgaged Property shall be
disposed of by or on behalf of the Trust Fund within two years after its
acquisition by the Trust Fund unless the Trustee shall have received an Opinion
of Counsel to the effect that the holding by the Trust Fund of such Mortgaged
Property subsequent to two years after its acquisition will not result in the
imposition of taxes on "prohibited transactions" (as defined in section 860F of
the Code) of the Trust Fund or cause the Trust Fund to fail to qualify as a
REMIC at any time that any Certificates are outstanding.
Section 3.07. Trustee to Cooperate. (a) Upon the payment in full of the
Loan Balance of any __________ Loan, the Master Servicer will promptly notify
the Trustee by a certification substantially in the form of Exhibit E hereto of
a Servicing Officer. Such notification shall be made each month at the time that
the Master Servicer delivers the Servicing Certificate to the Trustee pursuant
to Section 4.01. Upon any such payment in full, the Master Servicer is
authorized to execute, pursuant to the authorization contained in Section 3.01,
an instrument of satisfaction regarding the related Mortgage, which instrument
of satisfaction shall be recorded by the Master Servicer if required by
applicable law and be delivered to the Person entitled thereto, it being
understood and agreed that no expenses incurred in connection with such
instrument of satisfaction shall be reimbursed from amounts at the time credited
to the __________ Loan Payment Record.
(b) If the Trustee is holding the Mortgage Files, from time to time and
as appropriate for the servicing or foreclosure of any __________ Loan, the
Trustee shall, within ___ Business Days of receipt by the Trustee of a written
request substantially in the form of Exhibit F hereto transmitted by the Master
Servicer to the Trustee or made in writing signed by a Servicing Officer and
delivered to the Trustee as provided in Section 11.05, deliver the related
Mortgage File to the Master Servicer and shall execute such documents, in the
forms provided by the Master Servicer, as shall be certified by a Servicing
Officer to be necessary to the prosecution of any such proceedings. The Master
Servicer shall return the Mortgage File to the Trustee when the need therefor by
the Master Servicer no longer exists unless the ___________ Loan shall be
liquidated, in which case the Master Servicer shall deliver a certificate of a
Servicing Officer similar to that hereinabove specified, and the Master Servicer
shall be entitled to retain the Mortgage File.
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
Master Servicer. The Master Servicer shall be entitled to retain, out of each
payment that is allocable to interest on the Trust Balance of a ___________
Loan, as servicing compensation for the related Collection Period, the Monthly
Servicing Fee. Additional servicing compensation in the form of late payment
charges or other receipts not required to be credited to the __________ Loan
Payment Record (or in respect to which a debit may be made pursuant to Section
3.03) shall be retained by the Master Servicer. The Master Servicer shall be
required to pay all expenses incurred by it in connection with its activities
hereunder (including payment of Trustee fees, and all other fees and expenses
not expressly stated hereunder to be for the account of the Certificateholders)
and shall not be entitled to reimbursement therefor except as specifically
provided herein.
Section 3.09. Annual Statement as to Compliance. The Master Servicer
will deliver to the Trustee, on or before March 31 of each year, beginning with
March 31, ____, an Officer's Certificate stating that (i) a review of the
activities of the Master Servicer during the preceding calendar year and of its
performance under this Agreement has been made under such officer's supervision
and (ii) to the best of such officer's knowledge, based on such review, the
Master Servicer
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has fulfilled all its material obligations under this Agreement throughout such
year, or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof.
Section 3.10. Annual Independent Public Accountants' Servicing Report.
On or before March 31 of each year, beginning with March 31, ____, the
Master Servicer at its expense shall cause a firm of independent public
accountants (who may also render other services to the Master Servicer) to
furnish a report to the Trustee to the effect that such firm has examined
certain documents and records relating to the servicing of home equity loans
under this Agreement and pooling and servicing agreements substantially similar
to this Agreement, and that such examination, which has been conducted
substantially in compliance with the Uniform Single Audit Program for Mortgage
Bankers (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 Agreement which, in the opinion of
such firm, are material, except for such items of noncompliance as shall be set
forth in such report.
Section 3.11. Access to Certain Documentation and Information Regarding
the __________ Loans. (a) The Master Servicer or the Trustee, as applicable,
shall provide to Certificateholders that are federally insured savings
associations, the Office of Thrift Supervision, the Federal Deposit Insurance
Corporation and the supervisory agents and examiners of such office and such
corporation access to the documentation regarding the __________ Loans required
by applicable regulations of the Office of Thrift Supervision, such access being
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Master Servicer. Nothing in this Section
3.11 shall derogate from the obligation of the Master Servicer or the Trustee to
observe any applicable law prohibiting disclosure of information regarding the
Mortgagors and the failure of the Master Servicer or the Trustee to provide
access as provided in this Section 3.11 as a result of such obligation shall not
constitute a breach of this Section 3.11.
(b) The Master Servicer shall supply such supplemental information, in
such form as the Trustee shall reasonably request, to the Paying Agent and the
Trustee, on or before the start of the third Business Day preceding the related
Distribution Date, as is required in the Trustee's reasonable judgment to enable
the Paying Agent or the Trustee, as the case may be, to make required
distributions and to furnish the required reports to Certificateholders.
Section 3.12. Maintenance of Certain Servicing Policies. The Master
Servicer shall during the term of its service as master servicer maintain in
force (i) a policy or policies of insurance covering errors and omissions in the
performance of its obligations as master servicer hereunder and (ii) a fidelity
bond in respect of its officers, employees or agents. Each such policy or
policies and bond shall, together, comply with the requirements from time to
time of the Federal National Mortgage Association for Persons performing
servicing for mortgage loans purchased by such Association.
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ARTICLE IV
SERVICING CERTIFICATE; CERTIFICATE ACCOUNT DEPOSIT
Section 4.01. Servicing Certificate. Not later than each Determination
Date, the Master Servicer shall deliver to the Trustee, Moody's, Fitch and
Standard & Poor's a Servicing Certificate identifying the related Collection
Period, the Certificates, the date of this Agreement, and the following
information (in the case of information furnished pursuant to clauses (viii) and
(ix) below, the amounts will be expressed as a dollar amount per Certificate
with a $_____ denomination) with respect to the following Distribution Date:
(i) the aggregate of all Trust Interest received
during the related Collection Period;
(ii) the aggregate of all Trust Principal Payments
received during the related Collection Period;
(iii) the aggregate of all Trust Insurance Proceeds
received during the related Collection Period;
(iv) the aggregate of the Trust Liquidation Proceeds
received during the calendar month preceding the month of such
Determination Date;
(v) the number and aggregate Trust Balance of any
__________ Loans that were identified as Defective __________ Loans
pursuant to Section 2.02 or Section 2.04 during the related Collection
Period and (A) the aggregate Purchase Price of any such Defective ____
____________ that will be repurchased by the related Originator or the
Master Servicer prior to the following Distribution Date and (B) the
Substitution Adjustment Amount, if any, to be deposited in the
Collection Account prior to such Distribution Date in respect of any
such Defective __________ Loans for which the related Originator or
the Master Servicer substituted one or more Eligible Substitute ____
______ Loans;
(vi) the Monthly Servicing Fee;
(vii) the sum of the amounts specified pursuant to
clauses (i)-(v), inclusive, above, net of the amount specified in
clause (vi) above;
(viii) the Class (_) Distribution Amount (including
the Class (_) Formula Amount and the Class (_) Interest Requirement,
stated separately) for such Distribution Date, together with the Class
(_) Pass-Through Rates applicable to such Distribution Date;
(ix) the Class (_) and Class (_) Distribution
Amounts (including the Class (_) Interest Requirement and the Class (_)
Interest Requirement and, on and after the Class (_) Termination Date
and the Class (_) Termination Date, the Class (_) Formula Amount and
the Class (_) Formula Amount, respectively, stated separately) for such
Distribution Date, together with the Class (_) and Class (_)
Pass-Through Rates applicable to such Distribution Date;
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(x) the Amount Available for Class (_) Interest
and the Amount Available for Class (_) Interest;
(xi) the Remaining Available Funds, if any, for
such Distribution Date;
(xii) the Class (_), Class (_) and Class (_)
Remaining Available Funds, if any, for such Distribution Date;
(xiii) the Class (_) Certificate Balance, Class (_)
Certificate Balance and Class (_) Certificate Balance as well as the
Class (_) Principal Factor, Class (_) Principal Factor and Class (_)
Principal Factor, each after giving effect to the distribution to be
made on such Distribution Date;
(xiv) any Liquidated __________ Loan Losses for
such Distribution Date, including cumulative losses up to such date;
(xv) in the event the Servicer LOC is then in
effect, the Available Servicer LOC Amount after giving effect to all
drawings made under the Servicer LOC to and including the date of such
statement;
(xvi) the book value (within the meaning of 12 C.F.R.
ss. 571.13 or comparable provision) of the Trust Percentage of any real
estate acquired through foreclosure or grant of a deed in lieu of
foreclosure and held by the Trust Fund as of the last day of the
related Collection Period;
(xvii) the number and aggregate Trust Balances of ____
______ Loans delinquent (a) ___ to ___ days and (b) ___ days or more,
respectively, as of the end of the related Collection Period; and
(xviii) the Pool Balance for the following Distribution
Date.
Section 4.02. Certificate Account. (a) On or before the Closing Date,
the Master Servicer shall establish, and thereafter maintain in the name of the
Trustee, an account (the "Certificate Account"), which shall be an Eligible
Account held by the Trustee in trust for the benefit of the Certificateholders.
The Master Servicer shall deposit to the Certificate Account in same day funds
all funds received by it constituting Available Funds not later than 11:00 A.M.
New York time on (i) the Business Day preceding each Distribution Date, if the
Master Servicer is entitled to retain and commingle funds pursuant to Section
3.02 or (ii) the second Business Day following receipt of such amounts in the
event the Master Servicer is not so entitled to retain and commingle funds. In
addition, on the Closing Date, the Master Servicer shall enter into the ____
______ Loan Payment Record an initial deposit equal to [$__ million], and shall
deposit in the Certificate Account (i) if the Master Servicer is entitled to
retain and commingle funds pursuant to Section 3.02(e), not later than the
Business Day prior to the initial Distribution Date or (ii) if the Master
Servicer is not so entitled, on the second Business Day following the Closing
Date, the lesser of (x) amount by which the sum of the Class (_) Interest
Requirement, the Class (_) Formula Amount, the Class (_) Interest Requirement
and the Class (_) Interest Requirement for the initial Distribution Date and an
amount equal to the product [____ of ____ basis points] and the Pool Balance
exceeds Available Funds with
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respect to such Distribution Date and (y) [$__ million]. If the amount described
in clause (x) of the preceding sentence is deposited into the Certificate
Account, the Master Servicer shall make a corresponding adjustment to the ____
______ Loan Payment Record. The amounts deposited in the Certificate Account
shall be net of the Monthly Servicing Fee and are subject to withdrawal to the
same extent that debits to the __________ Loan Payment Record are permitted.
(b) The Master Servicer may cause the institution maintaining the
Certificate Account to invest in the name of the Trustee any funds in the
Certificate Account, which funds shall be invested in Permitted Investments
designated in writing by the Master Servicer in its discretion and which shall
mature not later than the Business Day preceding the Distribution Date following
the date of such investment (except that any investment in an obligation of an
institution with which the Certificate Account is maintained, and which
institution is rated A-1+ by Standard & Poor's and Fitch and P-1 by Moody's, may
mature not later than 11:00 A.M. New York time on such Distribution Date) and
shall not be sold or disposed of prior to their maturity. All income and gain
realized from any such investment shall be for the benefit of the Master
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 Certificate Account by the Master Servicer out of its own funds
immediately as realized.
Section 4.03. Servicer LOC. If at any time the Master Servicer shall be
commingling with its own funds proceeds of the ____________ Loans pursuant to
Section 3.02(c) and shall fail to deposit in the Certificate Account on or
before 11:00 A.M. New York time on the Business Day prior to a Distribution Date
funds in the amount specified in clause (vii) of the related Servicing
Certificate, the Trustee shall, pursuant to the terms of the Servicer LOC, make
a proper demand under such Servicer LOC that the Servicer LOC Issuer pay as
promptly as practicable to the Trustee for deposit in the Certificate Account an
amount equal to the lesser of (i) the aggregate of all Trust Interest, Trust
Principal Payments, Trust Insurance Proceeds and Trust Liquidation Proceeds
received by the Master Servicer or any Subservicer during the related Collection
Period and (ii) any amount by which the aggregate of such Trust Interest, Trust
Principal Payments, Trust Insurance Proceeds and Trust Liquidation Proceeds
exceeds the total amount deposited by the Master Servicer to the Certificate
Account with respect to such Distribution Date (but in no event shall such
amount exceed the Available Servicer LOC Amount).
ARTICLE V
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS
Section 5.01. Distributions. (a) On each Distribution Date, the Trustee
shall, based upon the information set forth in the Servicing Certificate
relating to such Distribution Date, distribute from the Certificate Account and
only from the Certificate Account to each Holder of a Class (_), Class (_),
Class (_) or Class (_) Certificate of record on the related Record Date (other
than as provided in Section 10.01 respecting the final distribution in respect
of the Certificates) by check or money order mailed to such Certificateholder at
the address appearing in the Certificate Register, or, upon written request by a
Certificateholder, by wire transfer (in the event such Certificateholder owns of
record one or more Class (_), Class (_) or Class (_) Certificates having
principal denominations aggregating at least $________, or owns a Class (_)
Certificate and has given the Trustee, at least ___ days prior to such
distribution, written instruction for making such wire
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transfer), or by such other means of payment as a Certificateholder and the
Trustee shall agree, such Certificateholder's Percentage Interest in the Class
(_) Distribution Amount, the Class (_) Distribution Amount, the Class (_)
Distribution Amount or the Class (_) Distribution Amount, in such order of
priority, as applicable.
(b) Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing such
distribution to the Certificate Owners that it represents and to each indirect
participating brokerage firm (a "brokerage firm" or "indirect participating
firm") for which it acts as agent. Each brokerage firm shall be responsible for
disbursing funds to the Certificate Owners that it represents. All such credits
and disbursements with respect to a Book-Entry Certificate are to be made by the
Depository and the Depository Participants in accordance with the provisions of
the Certificates. None of the Trustee, any Paying Agent, the Certificate
Registrar, the Originators or the Master Servicer shall have any responsibility
therefor except as otherwise provided by applicable law.
Section 5.02. Statements to Certificateholders. On or prior to the
Business Day preceding each Distribution Date, the Master Servicer shall forward
to the Trustee for mailing by regular mail to each Holder of a Certificate, a
statement setting forth:
(i) (a) the amount of such distribution allocable
to principal of the Class (_) Certificates, the Class (_) Certificates
and the Class (_) Certificates, (b) the amount of such distribution
allocable to any Class (_) Unpaid Principal Shortfall, Class (_) Unpaid
Principal Shortfall and Class (_) Unpaid Principal Shortfall and (c)
any remaining Class (_) Unpaid Principal Shortfall, Class (_) Unpaid
Principal Shortfall and Class (_) Unpaid Principal Shortfall after
giving effect to such distribution (separately for each Class of
Certificates, where applicable) with respect to such Distribution Date;
(ii) (a) the amount of such distribution allocable
to the Class (_) Interest Requirement, Class (_) Interest Requirement
and Class (_) Interest Requirement, (b) the amount of such distribution
allocable to Class (_) Unpaid Interest Shortfall, Class (_) Unpaid
Interest Shortfall and Class (_) Unpaid Interest Shortfall and (c) any
remaining Class (_) Unpaid Interest Shortfall, Class (_) Unpaid
Interest Shortfall and Class (_) Unpaid Interest Shortfall after giving
effect to such distribution;
(iii) the amount of any Class (_) Principal
Shortfall, Class (_) Principal Shortfall and Class (_) Principal
Shortfall;
(iv) the amount of any Class (_) Interest Shortfall,
Class (_) Interest Shortfall and Class (_) Interest Shortfall for such
Distribution Date;
(v) the Class (_) Certificate Balance, Class (_)
Certificate Balance and Class (_) Certificate Balance and the Class (_)
Principal Factor, Class (_) Principal Factor and Class (_) Principal
Factor, each after giving effect to the distribution of principal on
such Distribution Date;
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(vi) the Pool Balance for the following Distribution
Date and the number of outstanding __________ Loans;
(vii) the number and aggregate Trust Balances of ____
______ Loans delinquent (a) ___ to ___ days and (b) ___ days or more,
respectively, as of the end of the related Collection Period;
(viii) any Liquidated __________ Loan Losses for such
Distribution Date, including cumulative losses up to such date;
(ix) the Trust Percentage of the book value (within
the meaning of 12 C.F.R. ss. 571.13 or any comparable provision) of any
real estate, and the number of Mortgaged Properties, acquired through
foreclosure or grant of a deed in lieu of foreclosure as of the last
day of the related Collection Period; and
(x) the Class (_) Pass-Through Rate, Class (_)
Pass-Through Rate and Class (_) Pass-Through Rate applicable to the
distribution on the following Distribution Date.
In the case of information furnished pursuant to clauses (i) and (ii)
above, the amounts shall be expressed as a dollar amount per Class (_), Class
(_) and Class (_) Certificate, as applicable, with a $______ denomination. Any
such statement furnished to a Class (_), Class (_) or Class (_)
Certificateholder may, if requested by the Master Servicer, omit information
pertinent only to Certificates of a Class not held by such Certificateholder.
On each Distribution Date, the Master Servicer shall forward to the
Trustee for mailing to each Holder of a Class (_) Certificate a copy of the
report or reports forwarded to the Holders of Certificates on such Distribution
Date. The Master Servicer shall also forward to the Trustee for mailing to each
such Holder, and each of the Rating Agencies a statement setting forth the
amount of the distribution to each such Holder, together with such other
information as the Master Servicer deems necessary or appropriate.
Within ___ days after the end of each calendar year, the Master
Servicer shall forward to the Trustee for mailing by regular mail to each Person
who at any time during such calendar year was a Certificateholder a statement
containing the applicable distribution information provided pursuant to clauses
(i) and (ii) of this Section 5.02, aggregated for such calendar year or
applicable portion thereof during which such Person was a Certificateholder.
Such obligation of the Master Servicer shall be deemed to have been satisfied to
the extent that substantially comparable information shall be provided by the
Master Servicer pursuant to any requirements of the Code. The Trustee shall have
no obligation to mail to Certificateholders any statement required to be so
mailed hereunder if the Master Servicer has not provided such statement to the
Trustee.
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ARTICLE VI
THE CERTIFICATES
Section 6.01. The Certificates. The Class (_) Certificates shall be
substantially in the form set forth in Exhibit A, the Class (_) Certificates
shall be substantially in the form set forth in Exhibit B, the Class (_)
Certificates shall be substantially in the form set forth in Exhibit C, and the
Class (_) Certificates shall be substantially in the form set forth in Exhibit
D. Such Certificates shall, on original issue, be executed and delivered by the
Trustee to or upon the written order of the Depositor concurrently with the sale
and assignment to the Trustee of the Trust Fund. So long as the Class (_), Class
(_) and Class (_) Certificates are Book-Entry Certificates, such Certificates
shall be evidenced by (i) in the case of the Class (_) Certificates, five
Certificates each representing $___________ principal amount and a single
Certificate representing $__________ principal amount, (ii) in the case of the
Class (_) Certificates, a single Certificate representing $__________ principal
amount, and (iii) in the case of the Class (_) Certificates, a single
Certificate representing $__________ principal amount, the beneficial ownership
of such Certificates to be held through Book-Entry Certificates in minimum
dollar denominations of $______ and integral dollar multiples in excess thereof.
The Class (_) Certificates have not been and will not be registered
under the Securities Act or the securities laws of any state of the United
States. Neither the Depositor, the Master Servicer nor the Trustee is under any
obligation to register or qualify the Class (_) Certificates under the
Securities Act or any other securities laws or to take any action not otherwise
required under this Agreement to permit the transfer of any Class (_)
Certificate without registration or qualification.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trust Fund by a Responsible Officer of the Trustee under the seal
of the Trustee imprinted thereon. Certificates bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures were
affixed, authorized to sign on behalf of the Trustee shall bind the Trust Fund,
notwithstanding that such individuals or any of them 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 such Certificate. No Certificate shall be
entitled to any benefit under this Agreement, or be valid for any purpose,
unless such Certificate shall have been manually countersigned by the Trustee
substantially in the form provided for herein, and such countersignature upon
any Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their countersignature.
Section 6.02. Registration of Transfer and Exchange of Certificates.
(a) The Trustee shall cause to be kept at the Corporate Trust Office a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided. The Trustee shall
initially serve as Certificate Registrar for the purpose of registering
Certificates and transfers and exchanges of Certificates as herein provided.
Upon surrender for registration of transfer of any Certificate at any
office or agency of the Trustee maintained for such purpose pursuant to the
foregoing paragraph and upon satisfaction of the conditions set forth below, the
Trustee shall execute, countersign and deliver, in the name of the
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designated transferee or transferees, one or more new Certificates representing
the applicable aggregate Percentage Interest.
At the option of the Certificateholders, Certificates may be exchanged
for other Certificates of a like Class in authorized denominations (in the case
of the Class (_), Class (_) and Class (_) Certificates) or aggregate Percentage
Interests (in the case of the Class (_) Certificates), upon surrender of the
Certificates to be exchanged at any such office or agency. Whenever any
Certificates are so surrendered for exchange, the Trustee shall execute,
countersign and deliver the Certificates that the Certificateholder making the
exchange is entitled to receive. Every Certificate presented or surrendered for
registration of transfer or exchange shall (if so required by the Trustee or the
Certificate Registrar) be duly endorsed by, or be accompanied by a written
instrument of transfer satisfactory to the Trustee and the Certificate Registrar
duly executed by, the Holder thereof or such Holder's attorney duly authorized
in writing.
(b) Except as provided in paragraph (c) below, the Book-Entry
Certificates shall at all times remain registered in the name of the Depository
or its nominee and at all times: (i) registration of the Book-Entry Certificates
may not be transferred by the Trustee except to another Depository; (ii) the
Depository shall maintain book-entry records with respect to the Certificate
Owners and with respect to ownership and transfers of such Book-Entry
Certificates; (iii) registration of ownership and transfers of the Book-Entry
Certificates on the books of the Depository shall be governed by applicable
rules established by the Depository; (iv) the Depository may collect its usual
and customary fees, charges and expenses from its Depository Participants; (v)
the Trustee shall deal with the Depository, Depository Participants and indirect
participating firms as representatives of the Certificate Owners of the
Book-Entry Certificates for purposes of exercising the rights of Holders under
this Agreement, and requests and directions for and votes of such
representatives shall not be deemed to be inconsistent if they are made with
respect to different Certificate Owners; and (vi) the Trustee may rely and shall
be fully protected in relying upon information furnished by the Depository with
respect to its Depository Participants and furnished by the Depository
Participants with respect to indirect participating firms and Persons shown on
the books of such indirect participating firms as direct or indirect Certificate
Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.
(c) If (i)(A) the Master Servicer advises the Trustee in writing that
the Depository is no longer willing or able to properly discharge its
responsibilities as Depository and (B) the Master Servicer is unable to locate a
qualified successor, (ii) the Master Servicer at its option advises the 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, Certificate
Owners representing Percentage Interests aggregating not less than 51% of the
aggregate Percentage Interests of each outstanding Class of Book-Entry
Certificates advise the Trustee and the Depository through the Depository
Participants in writing that the continuation of a book-entry system through the
Depository is no longer desired by the Certificate Owners, the Trustee shall
notify all Certificate Owners, through the Depository, of the occurrence of any
such event and of the availability of definitive, fully registered
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Certificates (the "Definitive Certificates") to Certificate Owners requesting
the same. Upon surrender to the Trustee of the Book-Entry Certificates by the
Depository, accompanied by registration instructions from the Depository for
registration, the Trustee shall issue the Definitive Certificates. Neither the
Master Servicer nor the 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 Certificates the
Trustee shall recognize the Holders of the Definitive Certificates as
Certificateholders hereunder.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Trustee may require payment of a sum by the
Holders of such Certificates sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer or exchange of Certificates.
All Certificates surrendered for registration of transfer and exchange
shall be destroyed by the Trustee.
(d) So long as Definitive Certificates have not been issued, the
Depositor, the Master Servicer and the Trustee shall not have any liability for
any aspect of the records relating to or payment on account of Certificate
Owners, for monitoring or restricting any transfer of beneficial ownership in a
Book-Entry Certificate or for maintaining, supervising or reviewing any records
relating to Certificate Owners.
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (i)
any mutilated Certificate is surrendered to the Trustee or the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee, the Master Servicer and
the Certificate Registrar such security or indemnity as may be required by them
to save each of them harmless, then, in the absence of written notice to the
Trustee or the Certificate Registrar that such Certificate has been acquired by
a bona fide purchaser, the Trustee shall execute, countersign and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like tenor and Percentage Interest. Upon the
issuance of any new Certificate under this Section 6.03, the Trustee may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Trustee and the Certificate Registrar) connected
therewith. Any duplicate Certificate issued pursuant to this Section 6.03 shall
constitute complete and indefeasible evidence of ownership in the Trust Fund, as
if originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 6.04. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Master Servicer, the Trustee, the
Certificate Registrar and any agent of the Master Servicer, the Trustee or the
Certificate Registrar 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 5.01 and for all other
purposes whatsoever, and none of the Master Servicer, the Trustee, the
Certificate Registrar or any agent of any of them shall be affected by notice to
the contrary.
Section 6.05. Appointment of Paying Agent. The Trustee is empowered
to appoint a Paying Agent meeting the eligibility requirements set forth under
Section 9.06 for the purpose of
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making distributions to Certificateholders pursuant to Section 5.01; provided
that prior to any such appointment (other than the appointment of the Trustee as
Paying Agent) the Trustee shall first have received a letter from each Rating
Agency to the effect that the appointment of such Paying Agent will not result
in the reduction, suspension or withdrawal of the rating given the Class (_),
Class (_) or Class (_) Certificates by such Rating Agency. The Trustee hereby
initially appoints itself as Paying Agent. In the event of any appointment by
the Trustee of a Person other than itself as Paying Agent, on or prior to the
Business Day prior to the related Distribution Date, the Master Servicer, as
agent of the Trustee, shall, to the extent received by the Master Servicer,
deposit or cause to be deposited with such Paying Agent a sum sufficient to make
the payments to Certificateholders in the amounts and in the manner provided for
in Section 5.01, such sum to be held in trust for the benefit of
Certificateholders.
The Trustee shall cause any Paying Agent other than itself to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee that such Paying Agent will hold all sums held by it for the
payment to Certificateholders in trust for the benefit of the Certificateholders
entitled thereto until such sums shall be paid to such Certificateholders or
withheld pursuant to the Code.
Section 6.06. Restrictions on Transfer of Class (_) and Class (_)
Certificates. (a) The Class (_) and Class (_) Certificates shall be assigned or
transferred only in accordance with this Section 6.06. Each Person who has or
who acquires any Ownership Interest in a Class (_) or Class (_) Certificate that
is a Book-Entry Certificate shall be deemed by the acceptance or acquisition of
such Ownership Interest to have made the representation set forth in clause (b)
below and otherwise to have agreed to be bound by the provisions of this Section
6.06. Any assignment and Transfer shall be made directly to the Person that is
the principal in the transaction and not to a nominee or agent for such
principal.
(b) Each of Class (_) and Class (_) Certificates that is a Definitive
Certificate shall state that the Transferee thereof is deemed by the acceptance
or acquisition of such Certificate to represent that such Transferee is not an
employee benefit plan or a collective investment fund or insurance company
account which is treated as holding "plan assets" subject to ERISA, or section
4975 of the Code, or a trustee or any other Person acting on behalf of any such
plan.
(c) Any attempted or purported Transfer of any Ownership Interest in a
Class (_) or Class (_) Certificate in violation of the provisions of this
Section 6.06 shall be absolutely null and void and shall vest no rights in the
purported Transferee. If any purported Transferee shall become a Holder of a
Class (_) or Class (_) Certificate in violation of the provisions of this
Section 6.06, then, upon discovery by or due notification of the Trustee that
the registration of Transfer of such Ownership Interest in a Class (_) or Class
(_) Certificate was not in fact permitted by this Section 6.06, the last
preceding Holder that is a permitted Holder shall be restored to all rights as
Holder thereof retroactive to the date of registration of Transfer of such
Ownership Interest in the related Class (_) or Class (_) Certificate. Absent
negligence or willful misconduct, the Trustee shall be under no liability to any
Person for any registration of Transfer of an Ownership Interest in a Class (_)
or Class (_) Certificate that is in fact not permitted by this Section 6.06 or
for making any distributions in respect of such Class (_) or Class (_)
Certificate to the Holder thereof or taking any other action with respect to
such Holder under the provisions of this Agreement.
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Section 6.07. Restrictions on Transfer of Class (_) Certificates. (a)
The Class (_) Certificates shall be assigned or transferred only in accordance
with this Section 6.07. Such assignment and Transfer shall be made directly to
the Person that is the principal in the transaction and not to a nominee or
agent for such principal.
(b) No registration of Transfer of a Class (_) 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 the Securities Act and such laws. In the event registration of such a
Transfer is to be made within three years from the date of the initial issuance
of Certificates pursuant hereto, (i) the Trustee or the Master Servicer may
require a written Opinion of Counsel acceptable to and in form and substance
satisfactory to the Master Servicer that such Transfer may be made pursuant to
an exemption, describing the applicable exemption and the basis therefor, from
the Securities Act and state securities laws or is being made pursuant to the
Securities Act and such laws, which Opinion of Counsel shall not be an expense
of the Trustee or the Master Servicer, and (ii) the Trustee shall require the
Transferee to execute an investment letter acceptable to and in form and
substance satisfactory to the Master Servicer certifying to the Trustee and the
Master Servicer the facts surrounding such Transfer, which investment letter
shall not be an expense of the Trustee or the Master Servicer. The Holder of a
Class (_) Certificate desiring to effect such registration of Transfer shall,
and does hereby agree to, indemnify the Trustee and the Master Servicer 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.
(c) No registration of Transfer of a Class (_) Certificate shall be
made unless the Trustee shall have received either (i) a representation letter
from the Transferee of such Class (_) Certificate, acceptable to and in form and
substance satisfactory to the Master Servicer, to the effect that such
Transferee is not an employee benefit plan subject to ERISA or section 4975 of
the Code, or a trustee or any other Person acting on behalf of any such plan,
which representation letter shall not be an expense of the Trustee or the Master
Servicer, or (ii) in the case of any such Class (_) Certificate presented for
registration in the name of an employee benefit plan subject to ERISA or section
4975 of the Code (or comparable provisions of any subsequent enactments), or a
trustee or any other Person acting on behalf of any such plan, an Opinion of
Counsel satisfactory to the Master Servicer to the effect that the purchase or
holding of such Class (_) Certificate will not result in the assets of the Trust
Fund being deemed to be "plan assets" and subject to the prohibited transaction
provisions as well as the fiduciary provisions of ERISA and the Code and will
not subject the Trustee or the Master Servicer to any obligation in addition to
those undertaken in this Agreement, which representation letter or Opinion of
Counsel shall not be an expense of the Trustee or the Master Servicer.
(d) Each Person who has or who acquires any Ownership Interest in a
Class (_) Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions and to
have irrevocably appointed the Master Servicer or its designee as its
attorney-in-fact to negotiate the terms of any mandatory sale under clause (vi)
below and to execute all instruments of Transfer and to do all other things
necessary in connection with any such sale, and the rights of each Person
acquiring any Ownership Interest in a Class (_) Certificate are expressly
subject to the following provisions:
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(i) Each Person holding or acquiring any Ownership
Interest in a Class (_) Certificate shall not be a Disqualified
Organization and shall promptly notify the Master Servicer and the
Trustee of any change or impending change in its status.
(ii) No Ownership Interest in a Class (_)
Certificate may be transferred without the express written consent of
the Trustee. In connection with any proposed registration of Transfer
of any Ownership Interest in a Class (_) Certificate, the Trustee
shall, as a condition to such consent, require delivery to it, in form
and substance satisfactory to it, each of the following:
A. an affidavit from the proposed Transferee to
the effect that such Transferee is not a Disqualified
Organization and that it is not acquiring its Ownership
Interest in a Class (_) Certificate that is the subject of
the proposed Transfer as a nominee, trustee or agent for
any Person who is a Disqualified Organization; and
B. a covenant of the proposed Transferee to the
effect that the proposed Transferee agrees to be bound
and to abide by the Transfer restrictions applicable
to a Class (_) Certificate.
(iii) Notwithstanding the delivery of the items
described in clause (ii) above, if a Responsible Officer of the Trustee
has actual knowledge that the proposed Transferee is a Disqualified
Organization, no registration of Transfer of any Ownership Interest in
a Class (_) Certificate to such proposed Transferee shall be effected;
provided that the Trustee shall have no obligation to determine whether
any proposed Transferee is a Disqualified Organization.
(iv) Each Person holding or acquiring any Ownership
Interest in a Class (_) Certificate shall agree (A) to require delivery
of the items described in clause (ii) above from any other Person to
whom such Person attempts to transfer any Ownership Interest in a Class
(_) Certificate and (B) not to transfer any Ownership Interest in a
Class (_) Certificate or to cause the Transfer of any Ownership
Interest in a Class (_) Certificate to any other Person if it has
actual knowledge that such Person is a Disqualified Organization.
(v) Any attempted or purported Transfer of any
Ownership Interest in a Class (_) Certificate in violation of the
provisions of this Section 6.07 shall be absolutely null and void and
shall vest no rights in the purported Transferee. If any purported
Transferee shall become a Holder of a Class (_) Certificate in
violation of the provisions of this Section 6.07, then, upon discovery
by or due notification of the Trustee that the registration of Transfer
of such Ownership Interest in a Class (_) Certificate was not in fact
permitted by this Section 6.07, the last preceding Holder that is not a
Disqualified Organization shall be restored to all rights as Holder
thereof retroactive to the date of registration of Transfer of such
Ownership Interest in the related Class (_) Certificate. The Trustee
shall be under no liability to any Person for any registration of
Transfer of an Ownership Interest in a Class (_) Certificate that is in
fact not permitted by this Section 6.07 or for making any distributions
in respect of such Class (_) Certificate to the Holder thereof or
taking any other action with respect to such Holder under the
provisions of this Agreement absent negligence or willful misconduct.
The
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Trustee shall be entitled to recover from any Holder of a Class (_)
Certificate that was in fact a Disqualified Organization at the time it
became Holder all distributions made in respect of such Class (_)
Certificate. Any such distributions so recovered by the Trustee shall
be distributed and delivered by the Trustee to the last preceding
Holder of such Class (_) Certificate that is not a Disqualified
Organization.
(vi) If any Disqualified Organization acquires any
Ownership Interest in a Class (_) Certificate in violation of the
restrictions in this Section 6.07, then the Master Servicer shall have
the right, without notice to the Holder of such Class (_) Certificate
or any other Person having an Ownership Interest therein, to sell such
Class (_) Certificate to a purchaser selected by the Master Servicer on
such terms as the Master Servicer may choose. Such purchaser may be the
Master Servicer itself or any affiliate of the Master Servicer that is
not a Disqualified Organization. The proceeds of such sale, net of
commissions (which may include commissions payable to the Master
Servicer or its affiliates), expenses and taxes due, if any, will be
remitted by the Trustee to the last preceding Holder of such Class (_)
Certificate that is not a Disqualified Organization, except that in the
event that the Trustee determines that the Holder of such Class (_)
Certificate may be liable for any amount due under this Section 6.07 or
any other provisions of this Agreement, the Master Servicer may
withhold a corresponding amount from such remittance as security for
such claim. The terms and conditions of any sale under this clause (vi)
shall be determined in the sole discretion of the Master Servicer, and
it shall not be liable to any Person having an Ownership Interest in
such Class (_) Certificate as a result of its exercise of such
discretion.
Section 6.08. Actions of Certificateholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by Certificateholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Certificateholders in person or by agent duly appointed in writing; and
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
when required, to the Depositor or the Master Servicer. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Trustee, the Depositor and the Master Servicer, if made in the manner provided
in this Section.
(b) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner that the
Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind every Holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done,
by the Trustee, the Depositor or the Master Servicer in reliance thereon,
whether or not notation of such action is made upon such Certificate.
(d) The Trustee may require such additional proof of any matter
referred to in this Section 6.08 as it shall deem necessary.
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ARTICLE VII
THE MASTER SERVICER
Section 7.01. Liability of the Master Servicer. The Master Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by the Master Servicer herein.
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer. 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 herein to the contrary notwithstanding.
Section 7.03. Limitation on Liability of the Master Servicer and
Others. Neither the Master Servicer nor any of the directors or officers or
employees or agents of the Master Servicer shall be under any liability to the
Trust Fund or the Certificateholders for any action taken or for refraining from
the taking of any action by the Master Servicer in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Master Servicer or any such Person against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties of the Master Servicer or by
reason of reckless disregard of obligations and duties of the Master Servicer
hereunder. The Master Servicer and any director or officer or employee or agent
of the Master 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. Subject to the second succeeding sentence, the Master
Servicer and any director or officer or employee or agent of the Master Servicer
shall be indemnified by the Trust Fund and held harmless against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Certificates, other than any loss, liability or expense
related to any specific __________ Loan or ____________ Loans (except as any
such loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) and any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder. The Master Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to duties to
service the __________ Loans in accordance with this Agreement, and which in
its opinion may involve it in any expense or liability; provided, however, that
the Master Servicer may in its sole discretion undertake any such action which
it may deem necessary or desirable in respect of this Agreement, and the rights
and duties of the parties hereto and the interests of the Certificateholders
hereunder. In such event, any loss, liability or expense incurred in connection
with any such action shall be losses, liabilities and expenses of the Trust Fund
and the Master Servicer shall be entitled to be reimbursed therefor only from
amounts otherwise distributable to Holders of the Class (_) Certificates on any
subsequent Distribution Date (to the extent the Master Servicer has not
previously been reimbursed or indemnified therefor). The Master Servicer's right
to indemnity or reimbursement pursuant to this Section 7.03 shall survive any
resignation or termination of the Master Servicer with respect to any losses,
liabilities or expenses
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arising prior to such resignation or termination (or arising from events that
occurred prior to such resignation or termination).
Section 7.04. Master Servicer Not to Resign. Subject to the provisions
of Section 7.02, the Master 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 Master Servicer so causing such a conflict being of a type and
nature carried on by the Master Servicer or its subsidiaries or Affiliates at
the date of this Agreement or (ii) upon satisfaction of the following
conditions; (a) the Master Servicer has proposed a successor master servicer to
the Trustee in writing and such proposed successor servicer is reasonably
acceptable to the Trustee; (b) each Rating Agency shall have delivered a letter
to the Trustee stating that the appointment of such proposed successor master
servicer as Master Servicer hereunder will not result in the reduction or
withdrawal of the then-current rating of any rated Class of Certificates; and
such proposed successor master servicer has agreed in writing to assume the
obligations of Master Servicer hereunder and the Master Servicer has delivered
to the Trustee an Opinion of Counsel to the effect that all conditions precedent
to the resignation of the Master Servicer and the appointment of and acceptance
by the proposed successor master servicer have been satisfied; provided,
however, that in the case of clause (i) above no such resignation shall become
effective until the Trustee or a successor Master Servicer shall have assumed
the Master Servicer's responsibilities and obligations hereunder in accordance
with Section 8.02. Any such resignation shall not relieve the Master Servicer of
responsibility for any of the obligations specified in Sections 8.01 and 8.02 as
obligations that survive the resignation or termination of the Master Servicer.
Any such determination permitting the resignation of the Master Servicer shall
be evidenced by an Opinion of Counsel to such effect delivered to the Trustee.
Section 7.05. Delegation of Duties. In the ordinary course of business,
the Master Servicer at any time may delegate any of its duties hereunder to any
Person, including any of its Affiliates, who agrees to conduct such duties in
accordance with standards comparable to those with which the Master Servicer
complies pursuant to Section 3.01. Such delegation shall not relieve the Master
Servicer of its liabilities and responsibilities with respect to such duties and
shall not constitute a resignation within the meaning of Section 7.04. The
Master Servicer shall provide each Rating Agency and the Trustee with written
notice prior to the delegation of any of its duties to any Person other than any
of the Master Servicer's Affiliates or their respective successors and assigns.
ARTICLE VIII
DEFAULT
Section 8.01. Events of Default. If any one of the following events
("Events of Default") shall occur and be continuing:
(i) any failure by the Master Servicer to deposit
in the Certificate Account any deposit or enter any amount to the ____
______ Loan Payment Record required to be made under the terms of this
Agreement which continues unremedied for a period of ___ Business Days
after the date upon which written notice of such failure shall have
been given to the Master Servicer by the Trustee, or to the Master
Servicer and the Trustee by Holders of
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Certificates of any Class affected thereby, evidencing, as to such
Class, Percentage Interests aggregating not less than 51%; or
(ii) failure on the part of the Master Servicer duly
to observe or perform in any material respect any other covenants or
agreements of the Master Servicer set forth in the Certificates or in
this Agreement, which failure (x) materially and adversely affect the
rights of Certificateholders and (y) continues unremedied for a period
of ___ days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Master
Servicer by the Trustee, or to the Master Servicer and the Trustee by
the Holders of Certificates of any Class affected thereby, evidencing,
as to such Class, Percentage Interests aggregating not less than 51%;
or
(iii) the entry against the Master Servicer of a
decree or order by a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator,
receiver or liquidator in any insolvency, 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 ___
consecutive days; or
(iv) the consent by the Master Servicer to the
appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to the Master Servicer or of or
relating to substantially all of its property, or the Master 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) Total Expected Losses exceed ____% of the
Cut-Off Date Pool Balance on or prior to the fifth anniversary of the
Cut-Off or _____% of the Cut-Off Date Pool Balance on or prior to the
tenth anniversary of the Cut-Off Date;
then, and in each and every such case, so long as an Event of Default shall not
have been remedied by the Master Servicer, either the Trustee or the Holders of
Certificates of any Class affected thereby, evidencing, as to such Class,
Percentage Interests aggregating not less than 51%, by notice then given in
writing to the Master Servicer (and to the Trustee if given by the Holders of
Certificates) may terminate all of the rights and obligations of the Master
Servicer as master servicer under this Agreement, on or after the receipt by the
Master Servicer of such written notice, all authority and power of the Master
Servicer under this Agreement, whether with respect to the Certificates or the
Trust Percentage of the __________ Loans or otherwise, shall pass to and be
vested in the Trustee pursuant to and under this Section 8.01; and, without
limitation, the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Master 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 the Trust
Balance of each __________ Loan and related documents, or otherwise. The Master
Servicer agrees to cooperate with the Trustee in effecting the termination of
the responsibilities and rights of the Master Servicer hereunder, including,
without limitation, the transfer to the Trustee for the administration by it of
all necessary
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documentation and all cash amounts that shall at the time be held by the Master
Servicer and credited by it to the __________ Loan Payment Record, or that have
been deposited by the Master Servicer in the Certificate Account or thereafter
received by the Master Servicer with respect to the ____________ Loans. All
reasonable costs and expenses (including attorneys' fees) incurred in connection
with transferring the Mortgage Files to the successor Master Servicer and
amending this Agreement to reflect such succession as Master Servicer pursuant
to this Section 8.01 shall be paid by the predecessor Master Servicer upon
presentation of reasonable documentation of such costs and expenses.
Section 8.02. Trustee to Act; Appointment of Successor. (a) On and
after the time the Master Servicer receives a notice of termination pursuant to
Section 8.01 or gives notice of its resignation under clause (i) of Section
7.04, the Trustee shall be the successor in all respects to the Master Servicer
in its capacity as master servicer under this 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 Master Servicer by the
terms and provisions hereof; and provided, however, that the responsibilities
and duties of the Master Servicer pursuant to Sections 2.02 and 2.04 shall not
terminate; provided, further, that any liability of the Trustee in its capacity
as successor master servicer shall be limited to the extent such liability
results from an inability to fulfill its responsibilities and duties as
successor master servicer due to any failure on the part of the original Master
Servicer to deliver the documentation and cash amounts referred to in Section
8.01 or otherwise fulfill its obligations hereunder. As compensation therefor,
the Trustee shall be entitled to such compensation as the Master Servicer would
have been entitled to hereunder if no such notice of termination had been given,
including, without limitation, any investment earnings on any Permitted
Investments hereunder to which the Master Servicer would have been entitled.
Notwithstanding the above, the Trustee may, if it shall be unwilling so to act,
or shall, if it is legally unable so to act, appoint, or petition a court of
competent jurisdiction to appoint, any established housing and home finance
institution that is then servicing a home equity loan portfolio and having all
licenses, permits and approvals required by applicable law, and a net worth of
not less than $________ as the successor to the Master Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Master Servicer hereunder. Pending appointment of a successor to the Master
Servicer hereunder, unless the Trustee is prohibited by law from so acting, the
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 ___________ Loans in an amount equal to the
compensation which the Master Servicer would otherwise have received pursuant to
Section 3.08 (or such lesser compensation as the Trustee and such successor
shall agree). The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
The appointment of a successor Master Servicer, including the Trustee, shall not
affect any liability of a predecessor Master Servicer that may have arisen under
this Agreement prior to its termination as Master Servicer (including, without
limitation, any deductible under an insurance policy pursuant to Section 3.04),
nor shall any successor Master Servicer, including the Trustee, be liable for
any acts or omissions of any predecessor Master Servicer or for any breach by
such predecessor Master Servicer or the Depositor of any of their
representations or warranties contained herein or in any related document or
agreement.
(b) Any successor to the Master Servicer as master servicer, including
the Trustee, shall, during the term of its service as master servicer (i)
continue to service and administer the ___________ Loans for the benefit of
Certificateholders, and, retain any amounts representing prepayment
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premiums, fees or late charge penalties or for application towards taxes,
insurance premiums, assessments and similar items, and payments representing
interest in excess of interest at the Net Loan Rate, for the benefit of such
successor master servicer and (ii) maintain in force (x) a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
master servicer hereunder and (y) a fidelity bond in respect of its officers,
employees and agents to the same extent as the Master Servicer is so required
pursuant to Section 3.12.
Section 8.03. Notification to Certificateholders. Upon any termination
or appointment of a successor to the Master Servicer pursuant to this Article
VIII or Section 7.04, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register and to each Rating Agency at the respective address provided to the
Trustee in writing.
Section 8.04. Waiver of Past Events of Default. The Holders of
Certificates evidencing not less than 51% of the aggregate Percentage Interests
may, on behalf of all Holders of Certificates, waive any default by the Master
Servicer in the performance of its obligations hereunder and its consequences,
except a default in making any required deposits to or payments from the
Certificate Account in accordance with this Agreement. Upon any such waiver of a
past default, such default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
ARTICLE IX
THE TRUSTEE
Section 9.01. Duties of Trustee. The Trustee, prior to the occurrence
of an Event of Default and after the curing of all Events of Default which may
have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. If an Event of Default has occurred
(which has not been cured) and is actually known to a Responsible Officer, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished to the Trustee pursuant
to any provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct; provided, however, that:
(i) prior to the occurrence of an Event of Default
of which a Responsible Officer of the Trustee shall have actual
knowledge, and after the curing of all such Events of Default which may
have occurred, the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement, the
Trustee shall not be liable
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except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and,
in the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Agreement;
(ii) the Trustee shall not be liable for an error of
judgment made in good faith by a Responsible Officer of the Trustee,
unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to
any action taken, suffered or omitted to be taken by it in good faith
in accordance with the direction of the Holders of Certificates of any
Class affected thereby, evidencing, as to such Class, Percentage
Interests aggregating not less than 51% relating to the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement; and
(iv) the Trustee shall not be charged with knowledge
of any failure by the Master Servicer to comply with the obligations of
the Master Servicer referred to in clauses (i) and (ii) of Section 8.01
unless a Responsible Officer of the Trustee at the Corporate Trust
Office obtains actual knowledge of such failure or the Trustee receives
written notice of such failure from the Master Servicer or the Holders
of Certificates of any Class affected thereby, evidencing, as to such
Class, Percentage Interests aggregating not less than 51%.
The Trustee shall not be required 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 there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Master Servicer under this Agreement, except during
such time, if any, as the Trustee shall be the successor to, and be vested with
the rights, duties, powers and privileges of, the Master Servicer in accordance
with the terms of this Agreement.
Section 9.02. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 9.01:
(i) the Trustee may request and conclusively rely
upon, and shall be protected in acting or refraining from acting upon,
any resolution, Officer's Certificate, certificate of auditors or any
other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document
believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(ii) the Trustee may consult with counsel and any
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in reliance thereon;
(iii) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement
(except its obligation to act as successor Master
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Servicer pursuant to Section 8.02), or to institute, conduct or defend
any litigation hereunder or in relation hereto, at the request, order
or direction of any of the Certificateholders, pursuant to the
provisions of this Agreement, unless such Certificateholders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or
thereby; the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or bad
faith in the performance of any such act; nothing contained herein
shall, however, relieve the Trustee of its obligations, upon the
occurrence of an Event of Default (which has not been cured), to
exercise such of the rights and powers vested in it by this Agreement,
and to use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the circumstances in the
conduct of his own affairs;
(iv) the Trustee shall not be liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
(v) prior to the occurrence of an Event of Default
and after the curing of all Events of Default which may have occurred,
the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or documents, unless requested in writing to do so
by Holders of Certificates of any Class affected thereby, evidencing,
as to such Class, Percentage Interests aggregating not less than 51%;
provided, however, that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded
to it by the terms of this Agreement, the Trustee may require
reasonable indemnity against such cost, expense or liability as a
condition to such proceeding. The reasonable expense of every such
examination shall be paid by the Master Servicer or, if paid by the
Trustee, shall be reimbursed by the Master Servicer upon demand.
Nothing in this clause (v) shall derogate from the obligation of the
Master Servicer to observe any applicable law prohibiting disclosure of
information regarding the Mortgagors;
(vi) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys or a custodian; and
(vii) for purposes of this Agreement, the Trustee
shall not be deemed to have knowledge or notice of any event or fact
until such time as a Responsible Officer of the Trustee has actual
knowledge of such event or fact or the Trustee receives written notice
of such event or fact from the Master Servicer or the Holders of
Certificates of any Class affected thereby, evidencing, as to such
Class, Percentage Interests aggregating not less than 51%.
Section 9.03. Trustee Not Liable for Certificates or __________ Loans.
The recitals contained herein and in the Certificates (other than the signature
and countersignature of the Trustee on the Certificates) shall be taken as the
statements of the Master Servicer, and the Trustee assumes no responsibility for
the correctness of the same. The Trustee makes no representations as to the
validity or sufficiency of this Agreement or of the Certificates (other than the
signature and countersignature of the Trustee on the Certificates) or of any
__________ Loan or related
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document. The Trustee shall not be accountable for the use or application by the
Master Servicer of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the Master
Servicer or any Originator in respect of the __________ Loans or deposited in
or withdrawn from the Certificate Account by the Master Servicer. The Trustee
shall at no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Mortgage or any __________ Loan,
or the perfection and priority of any Mortgage or the maintenance of any such
perfection or priority, or for or with respect to the sufficiency of the Trust
Fund or its ability to generate the payments to be distributed to
Certificateholders under this Agreement, including, without limitation, the
existence, condition and ownership of any Mortgaged Property; the existence and
enforceability of any hazard insurance thereon (other than if the Trustee shall
assume the duties of the Master Servicer pursuant to Section 8.02); the
existence and content of any __________ Loan on any computer or other record
thereof (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.02); the validity of the assignment of any ____
______ Loan to the Trust Fund or of any intervening assignment; the completeness
of any __________ Loan; the performance or enforcement of any __________ Loan
(other than if the Trustee shall assume the duties of the Master Servicer
pursuant to Section 8.02); the compliance by the Depositor or the Master
Servicer with any warranty or representation made under this Agreement or in any
related document or the accuracy of any such warranty or representation prior to
the Trustee's receipt of notice or other discovery of any non-compliance
therewith or any breach thereof; any investment of monies by or at the direction
of the Master Servicer or any loss resulting therefrom, it being understood that
the Trustee shall remain responsible for any Trust Fund property that it may
hold in its individual capacity; the acts or omissions of the Depositor, the
Master Servicer (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.02), any Subservicer or any Mortgagor; any action
of the Master Servicer (other than if the Trustee shall assume the duties of the
master Servicer pursuant to Section 8.02), any Subservicer, or any custodian of
the Mortgage Files taken in the name of the Trustee; the failure of the Master
Servicer, any Subservicer, or any custodian of the Mortgage Files to act or
perform any duties required of it as agent of the Trustee hereunder; or any
action by the Trustee taken at the instruction of the Master Servicer (other
than if the Trustee shall assume the duties of the Master Servicer pursuant to
Section 8.02); provided, however, that the foregoing shall not relieve the
Trustee of its obligation to perform its duties under this Agreement or from any
liability for its failure to so perform. The Trustee shall not be liable or
accountable for the acts, omissions, misconduct or negligence of any Originator
acting in its capacity as custodian of any Mortgage Files hereunder. The Trustee
shall have no responsibility for filing any financing or continuation statement
in any public office at any time or otherwise to perfect or maintain the
perfection of any security interest or lien granted to it hereunder (unless the
Trustee shall have become the successor Master Servicer) or to prepare or file
any Securities and Exchange Commission filing for the Trust Fund or to record
this Agreement.
Section 9.04. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
and transact banking and trust business with the Master Servicer, the
Originators and any of their affiliates, with the same rights as it would have
if it were not Trustee.
Section 9.05. Master Servicer to Pay Trustee's Fees and Expenses. The
Master Servicer covenants and agrees to pay to the Trustee from time to time,
and the 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 it in the execution of the trusts
hereby created and in the exercise and performance of any of its powers and
duties hereunder,
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and the Master Servicer will pay or reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Agreement (including
the reasonable compensation and the expenses and disbursements of its counsel,
agents and of all Persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith or which
is the responsibility of Certificateholders hereunder. In addition, the Master
Servicer and the Depositor, jointly and severally, covenant and agree to
indemnify the Trustee, its officers, agents and employees, from, and hold it
harmless against, any and all losses, liabilities, damages, claims or expenses,
including the costs and expenses of defending itself against any claim or
liability, arising in connection with its performance hereunder other than those
resulting from the negligence or bad faith of the Trustee.
Section 9.06. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a Person having its principal office in New York
or in the same state as that in which the initial Trustee under this Agreement
has its principal office and organized and doing business under the laws of such
State or the United States of America, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$____________ and subject to supervision or examination by federal or state
authority. If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 9.06, the combined capital and
surplus of such Person 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 Trustee shall cease to be eligible in accordance with the provisions of
this Section 9.06, the Trustee shall resign in the manner and with the effect
specified in Section 9.07.
Section 9.07. Resignation or Removal of Trustee. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Master Servicer and each Rating Agency. Upon receiving
such notice of resignation, the Master Servicer shall promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor Trustee. If no successor Trustee shall have been so appointed and
having accepted appointment within ___ days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.06 and shall fail to resign after written
request therefor by the Master Servicer, or if at any time the Trustee shall be
legally unable to act, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Master Servicer may remove the Trustee. If the Master Servicer removes the
Trustee under the authority of the immediately preceding sentence, the Master
Servicer shall promptly appoint a successor Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 9.07 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 9.08.
Section 9.08. Successor Trustee. Any successor Trustee appointed as
provided in Section 9.07 shall execute, acknowledge and deliver to the Master
Servicer and to its predecessor Trustee an
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instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as Trustee. The Master
Servicer, the predecessor Trustee and the successor 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 Trustee all such
rights, powers, duties and obligations.
Each successor Trustee shall be entitled to receive from the Master
Servicer reasonable compensation for services rendered, and payment and
reimbursement for reasonable expenses, disbursements and advances, as more
specifically set forth in Section 9.05 hereof and according to the same standard
as provided in Section 9.05.
No successor Trustee shall accept appointment as provided in this
Section 9.08 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 9.06.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 9.08, the Master Servicer shall mail notice of the succession of
such Trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register. If the Master Servicer fails to mail such
notice within ___ days after acceptance of appointment by the successor Trustee,
the successor Trustee shall cause such notice to be mailed at the expense of the
Master Servicer.
Section 9.09. Merger or Consolidation of Trustee. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to all or substantially all
of the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such Person shall be eligible under the provisions
of Section 9.06, 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.
Section 9.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Fund or any Mortgaged Property may at the time be located, the
Master Servicer and the Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Fund, and
to vest in such Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust Fund, or any part thereof, and,
subject to the other provisions of this Section 9.10, such powers, duties,
obligations, rights and trusts as the Master Servicer and the Trustee may
consider necessary or desirable. The Master Servicer shall not unreasonably
refrain from joining with the Trustee in executing and delivering such
instruments, and if the Master Servicer shall not have joined in such
appointment within ___ days after the receipt by it of a request so to do, or in
case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 9.06 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 9.08. The Trustee shall notify Moody's of any appointment of a
co-trustee or separate trustee hereunder. The Trustee shall remain liable
hereunder for any actions delegated
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to a co-trustee or separate trustee despite such delegation. The Master Servicer
shall be responsible for the fees of any co-trustee or separate trustee
appointed hereunder.
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 Trustee shall be conferred or imposed
upon and exercised or performed by the 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
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 (whether as Trustee hereunder or as successor to the Master
Servicer hereunder), the 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 Fund 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 Trustee;
(ii) no trustee hereunder shall be held personally
liable by reason of any act or omission of any other trustee hereunder;
and
(iii) the Master Servicer and the Trustee acting
jointly may at any time accept the resignation of or remove any
separate trustee or co-trustee, except that following the occurrence of
an Event of Default that has not been cured, the Trustee acting alone
may accept the resignation of or remove any co-trustee or separate
trustee.
Any notice, request or other writing given to the 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 IX. 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 Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
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
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 9.11. Tax Returns. The Trustee, upon request, will furnish the
Master Servicer with all such information as may be in the possession of the
Trustee and reasonably required in connection with the preparation of all tax
returns of the Trust Fund, and shall, if required by law, upon request, execute
such returns.
Section 9.12. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the
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Trustee without the possession of any of the Certificates or the production
thereof in any proceeding relating thereto. Any such proceeding instituted by
the Trustee shall be brought in its own name or in its capacity as Trustee. Any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Certificateholders in respect of
which such judgment has been recovered.
Section 9.13. Suits for Enforcement. In case an Event of Default or
other default by the Master Servicer or the Depositor hereunder shall occur and
be continuing, the Trustee, in its discretion, may proceed to protect and
enforce its right and the rights of the Certificateholders under this Agreement
by a suit, action or proceeding in equity or at law or otherwise, whether for
the specific performance of any covenant or agreement contained in this
Agreement or in aid of the execution of any power granted in this Agreement or
for the enforcement of any other legal, equitable or other remedy, as the
Trustee, being advised by counsel, shall deem most effectual to protect and
enforce any of the rights of the Trustee or the Certificateholders.
ARTICLE X
TERMINATION
Section 10.01. Termination Upon Purchase by the Master Servicer or
Liquidation of All ___________ Loans. (a) Subject to Section 10.02, the
respective obligations and responsibilities of the Master Servicer and the
Trustee created hereby (other than the obligation of the Trustee to make certain
payments to Certificateholders after the final Distribution Date and the
obligations of the Master Servicer under Section 9.05 and to send certain
notices as hereinafter set forth) shall terminate upon the last action required
to be taken by the Trustee on the final Distribution Date pursuant to this
Article X following the earliest of (i) the purchase by the Master Servicer of
all ____________ Loans and all property acquired in respect of any ___________
Loan remaining in the Trust Fund, as described below, (ii) the sale of the
assets of the Trust Fund as described below or (iii) the final payment or other
liquidation of the last ___________ Loan remaining in the Trust Fund or the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any __________ Loan; provided, however, that in no event shall
the trust created hereby continue beyond the expiration of 21 years from the
death of the last 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.
(b) The Master Servicer (i) may at its option purchase all ___________
Loans pursuant to clause (i) of Section 10.01(a) on any Distribution Date upon
which the Pool Balance immediately prior to such Distribution Date shall be
equal to or less than _____ percent (___%) of the Cut-off Date Pool Balance and
(ii) should the Trust Balances of any __________ Loans remain outstanding on
the Distribution Date in _____ 20__ shall purchase all such Trust Balances on
such Distribution Date, in each case at a price equal to the greatest of (x) the
aggregate of the Loan Balances of the __________ Loans as of the first day of
the Collection Period applicable to such final Distribution Date, plus one
month's interest at the applicable Net Loan Rate on the Loan Balance of each
__________ Loan (including any Foreclosed __________ Loans), (y) the aggregate
fair market value (as determined by the Master Servicer as of the close of
business on the third Business Day next preceding the date upon which notice of
any such termination is furnished to Certificateholders pursuant to clause (c)
of this Section 10.01) of all of the assets of the Trust Fund, and (z) the sum
of (1) the Class (_) Certificate Balance together with any Class (_) Unpaid
Interest Shortfall and
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interest accrued during the related Accrual Period thereon at the Class (_)
Pass-Through Rate, (2) the Class (_) Certificate Balance together with any Class
(_) Unpaid Interest Shortfall and interest accrued during the related Accrual
Period thereon at the Class (_) Pass-Through Rate and (3) the Class (_)
Certificate Balance together with any Class (_) Unpaid Interest Shortfall and
interest accrued during the related Accrual Period thereon at the Class (_)
Pass-Through Rate (the greatest of (x), (y) and (z) being referred to herein as
the "Pool Purchase Price"). In connection with such purchase, the Master
Servicer shall provide to the Trustee the certification required by Section 3.07
and the Trustee shall, promptly following payment of the Pool Purchase Price,
execute proper instruments acknowledging termination and discharge of this
Agreement. Any obligation of the Master Servicer to so purchase each ___________
Loan as provided herein shall be solely that of the original Master Servicer and
shall survive any resignation or termination of the original Master Servicer
hereunder.
If for any reason the Master Servicer fails to make the purchase
required by clause (ii) of Section 10.01(b), then in accordance with such
procedures as the Trustee in its sole judgment shall deem appropriate, the
Trustee shall conduct an auction (the "Final Auction") of the assets of the
Trust Fund (other than amounts on deposit in the Certificate Account) in order
to effect a termination of the Trust Fund promptly thereafter. The Master
Servicer or any Affiliate thereof may bid at such Final Auction but shall not be
required to do so. The Trustee shall sell and transfer the assets of the Trust
Fund, without recourse, to the highest bidder therefor at the Final Auction and
shall deposit the purchase price therefor, less all expenses of the Final
Auction, including all reasonable fees and expenses of any third parties engaged
by the Trustee to assist in the Final Auction process, in the Certificate
Account.
(c) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation, shall be given promptly by the
Trustee (upon receipt of written directions from the Master Servicer, if the
Master Servicer is purchasing the assets of the Trust Fund, which direction
shall be received not later than the first day of the month preceding the month
of such final distribution date) by letter to Certificateholders mailed not
earlier than the 15th day and not later than the ___th day of the month next
preceding the month of such final distribution specifying (i) the Distribution
Date upon which final distribution of the Certificates will be made upon
presentation and surrender of Certificates at the office or agency of the
Trustee therein designated, (ii) the amount of any such final distribution and
(iii) that the Record Date otherwise applicable to such Distribution Date is not
applicable, distributions being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein specified. In the
event written directions are delivered by the Master Servicer to the Trustee as
described in the preceding sentence, the Master Servicer shall deposit in the
Certificate Account on or before the Distribution Date for such final
distribution in immediately available funds an amount which, when added to the
amount on deposit in the Certificate Account, will be equal to the purchase
price for the assets of the Trust Fund computed as above provided. Such deposit
shall be in lieu of the deposit otherwise required to be made in respect of such
Distribution Date pursuant to Section 4.02.
(d) Upon presentation and surrender of the Certificates, the Trustee
shall, to the extent of funds available in the Certificate Account cause to be
distributed to Certificateholders on the Distribution Date for such final
distribution in proportion to their respective Percentage Interests
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an amount equal to (i) in the case of Holders of the Class (_) Certificates, the
Class (_) Certificate Balance together with any Class (_) Unpaid Interest
Shortfall plus interest accrued during the related Accrual Period at the Class
(_) Pass-Through Rate on such amounts, (ii) in the case of the Class (_)
Certificates, the Class (_) Certificate Balance together with any Class (_)
Unpaid Interest Shortfall plus interest accrued during the related Accrual
Period at the Class (_) Pass-Through Rate on such amounts and (iii) in the case
of Holders of the Class (_) Certificates, the Class (_) Certificate Balance
together with any Class (_) Unpaid Interest Shortfall plus interest accrued
during the related Accrual Period at the Class (_) Pass-Through Rate on such
amounts. Upon such termination, any amounts remaining on deposit in the
Certificate Account (other than the amounts retained to meet claims) after
application pursuant to the preceding sentence shall be distributed to Holders
of the Class (_) Certificates in proportion to their respective Percentage
Interests therein. The distribution on such final Distribution Date shall be in
lieu of the distribution otherwise required to be made on such Distribution Date
in respect of each Class of Certificates.
(e) In the event that all of the Certificateholders shall not surrender
their Certificates for final payment and cancellation on or before such final
Distribution Date, the Trustee shall on such date cause all funds in the
Certificate Account not distributed in final distribution to Certificateholders
to be withdrawn therefrom and credited to the remaining Certificateholders by
depositing such funds in a separate escrow account (which shall be an Eligible
Account) for the benefit of such Certificateholders and the Master Servicer (if
the Master Servicer has exercised its right to repurchase the assets of the
Trust Fund), or the Trustee (in any other case) and shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If, within
the period then specified in the escheat laws of the State of New York after
such notice, such amount remains unclaimed, the Holders of the Class (_)
Certificates shall be entitled to all unclaimed funds and other assets which
remain subject hereto and the Trustee upon transfer of such funds shall be
discharged of any responsibility for such funds, and the Certificateholders
shall look to the Holder of the Class (_) Certificates for payment.
Section 10.02. Additional Termination Requirements. (a) In the event of
a purchase by the Master Servicer or sale of the ____________ Loans as provided
in Section 10.01(b), the Trust Fund shall be terminated in accordance with the
following additional requirements, [unless the Trustee has received an Opinion
of Counsel to the effect that the failure of the Trust Fund to comply with the
requirements of this Section 10.02 will not (i) result in the imposition of
taxes on "prohibited transactions" of the Trust Fund as defined in section 860F
of the Code, or (ii) cause the Trust Fund to fail to qualify as a REMIC at any
time that any Certificates are outstanding:]
(i) within ___ days prior to the final Distribution
Date, Holders of the Class (_) Certificates shall adopt a plan of
complete liquidation of the Trust Fund; and
(ii) at or after the time of adoption of such a plan
of complete liquidation and at or prior to the final Distribution Date,
the Trustee shall sell all of the assets of the Trust Fund to the
Master Servicer for cash in an amount equal to the Pool Purchase Price;
provided, however, that in the event that a calendar quarter ends after
the time of adoption of such a plan of complete liquidation but prior
to such final Distribution Date, the Trustee shall not sell any of the
assets of the Trust Fund prior to the close of that calendar quarter.
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(b) By its acceptance of a Class (_) Certificate, a Holder thereof
hereby agrees to adopt such a plan of complete liquidation upon the written
request of the Master Servicer and to take such other action in connection
therewith as may be reasonably requested by the Master Servicer.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment. This Agreement may be amended from time to
time by the Master Servicer and the Trustee, with the consent of any Servicer
LOC Issuer if its rights are materially and adversely affected, but without the
consent of any of the Certificateholders, to cure any ambiguity, to correct or
supplement any provisions herein or therein which may be inconsistent with any
other provisions herein or therein, as the case may be, or to add any other
provisions with respect to matters or questions arising under this Agreement,
including provisions relating to the issuance of Definitive Certificates to
Certificate Owners in the event that book-entry registration of the Certificates
is no longer permitted, which shall not be inconsistent with the provisions of
this Agreement; provided, however, that such action shall not, as evidenced by
an Opinion of Counsel, adversely affect in any material respect the interests of
any Certificateholder or a letter from each Rating Agency stating that such
action will not result in a downgrading of the rating of any rated Class of
Certificates.
[This Agreement may also be amended from time to time by the Master
Servicer and the Trustee, but without the consent of any of the
Certificateholders, to modify, eliminate or add to the provisions of this
Agreement to such extent as shall be necessary to (i) maintain the qualification
of the Trust Fund as a REMIC under the Code or avoid, or minimize the risk of,
the imposition of any tax on the Trust Fund under the Code that would be a claim
against the Trust Fund's assets, provided that there shall have been delivered
an Opinion of Counsel addressed to the Trustee to the effect that such action is
necessary or appropriate to maintain such qualification or avoid any such tax or
minimize the risk of its imposition, or (ii) prevent the Trust Fund from
entering into any "prohibited transaction" as defined in section 860F of the
Code provided that there shall have been delivered an Opinion of Counsel
addressed to the Trustee to the effect that such action is necessary or
appropriate to prevent the Trust Fund from entering into such prohibited
transaction.]
This Agreement may also be amended from time to time by the Master
Servicer and the Trustee, with the consent of (x) any Servicer LOC Issuer if its
rights are materially and adversely affected and (y) Holders of the Certificates
of each Class affected thereby, evidencing, as to such Class, Percentage
Interests aggregating not less than 51%, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, collections of payments on
___________ Loans or distributions which are required to be made on any
Certificate without the consent of the Holder of such Certificate or (ii) reduce
the aforesaid percentage required to consent to any such amendment, without the
consent of the Holders of all Certificates then outstanding.
At least ___ Business Days prior to the execution of any such amendment
requiring the consent of the Certificateholders, the Master Servicer shall
furnish written notification of the
- 64 -
<PAGE>
substance of such amendment to the Rating Agencies. Promptly after the execution
of any such amendment made with the consent of the Certificateholders, the
Master Servicer shall furnish written notification of the substance of such
amendment to each Certificateholder and fully executed original counterparts of
the instruments effecting any such amendment to the Rating Agencies and any
Servicer LOC Issuer.
It shall not be necessary for the consent of Certificateholders under
this Section 11.01 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 of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe. The Master Servicer
is authorized to establish a record date for the purpose of identifying the
Certificateholders eligible to consent to any proposed amendment hereunder.
Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and conclusively rely upon an Opinion of Counsel
stating that the execution of such amendment is authorized or permitted by this
Agreement and that all conditions precedent to the execution and delivery of
such amendment have been satisfied. The Trustee may, but shall not be obligated
to, enter into any such amendment that affects the Trustee's own rights, duties
or immunities under this Agreement.
Section 11.02. Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public recording
office or elsewhere, such recordation to be effected by the Master Servicer and
at its expense if such recordation materially and beneficially affects the
interests of Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 11.03. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust Fund, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust
Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
No Certificateholder shall have any right to vote (except as provided
in Sections 8.01, 9.01, 9.02, 11.01, 11.07 and this Section 11.03) or in any
manner otherwise control the operation and management of the Trust Fund, or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association;
nor shall any Certificateholder be under any liability to any third person by
reason of any action taken by the parties to this Agreement pursuant to any
provision hereof.
- 65 -
<PAGE>
No Certificateholder of any Class shall have any right by virtue or by
availing itself of any provisions of this Agreement to institute any suit,
action or proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Holder previously shall have given to the Trustee a
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of Certificates of such Class, evidencing,
as to such Class, Percentage Interests aggregating not less than 51% shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for ___ days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates shall have any right in any manner whatever
by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates, or to obtain or seek to obtain priority over or preference
to any other such Holder, or to enforce any right under this Agreement, except
in the manner herein provided and for the equal, ratable and common benefit of
all Certificateholders. For the protection and enforcement of the provisions of
this Section 11.03, each and every Certificateholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.
Section 11.04. GOVERNING LAW. THIS 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 11.05. 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 Depositor, to Beneficial Mortgage Services, Inc. at
One Christina Centre, 301 North Walnut Street, Wilmington, Delaware 19801,
Attention: President, with a copy to the Corporate Secretary, (b) in the case of
the Master Servicer, to Beneficial Mortgage Corporation at One Christina Centre,
301 North Walnut Street, Wilmington, Delaware 19801, Attention: President, with
a copy to the Corporate Secretary and (c) in the case of the Trustee, at the
Corporate Trust Office, 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 Certificateholder shall be given by
first class mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register, and to each Rating Agency in the same manner at the
respective address provided to the Trustee in writing. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Certificateholder receives such notice.
Section 11.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this 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 Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
- 66 -
<PAGE>
Section 11.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 7.02 and 7.04, this Agreement
may not be assigned by the Master Servicer without the prior written consent of
Holders of Certificates of any Class affected thereby, evidencing, as to such
Class, Percentage Interests aggregating not less than 66%.
Section 11.08. Certificates Nonassessable and Fully Paid. The parties
agree that the Certificateholders shall not be personally liable for obligations
of the Trust Fund, that the beneficial ownership interests represented by the
Certificates shall be nonassessable for any losses or expenses of the Trust Fund
or for any reason whatsoever, and that the Certificates upon execution,
countersignature and delivery thereof by the Trustee pursuant to Section 2.04
are and shall be deemed fully paid.
Section 11.09. Counterparts. This Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
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<PAGE>
IN WITNESS WHEREOF, Beneficial, the Master Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers all
as of the day and year first above written.
BENEFICIAL MORTGAGE SERVICES, INC.,
as Depositor
By:__________________________________
Name:
Title:
BENEFICIAL MORTGAGE CORPORATION,
as Master Servicer,
By:__________________________________
Name:
Title:
_____________________________________
as Trustee
By:__________________________________
Name:
Title:
- 68 -
<PAGE>
State of New York )
) ss.:
County of New York )
On the ____ day of _______, _____ before me, a notary public in and for
the state of New York, personally appeared
_________________________________________, known to me who, being by me duly
sworn, did depose and say that he is the __________________________________ of
Beneficial Mortgage Services, Inc., a corporation formed under the laws of the
State of Delaware, being among the parties that executed the foregoing
instrument; and that he signed his name thereto by order of the Board of
Directors of such corporation.
----------------------------------------
Notary Public
[Notarial Seal]
<PAGE>
State of New York )
) ss.:
County of New York )
On the ____ day of _______, _____ before me, a notary public in and for
the state of New York, personally appeared
_________________________________________, known to me who, being by me duly
sworn, did depose and say that he is the __________________________________ of
Beneficial Mortgage Corporation, a corporation formed under the laws of the
State of Delaware, being among the parties that executed the foregoing
instrument; and that he signed his name thereto by order of the Board of
Directors of such corporation.
----------------------------------------
Notary Public
[Notarial Seal]
<PAGE>
State of New York )
) ss.:
County of New York )
On the ____ day of __________, _____ before me, a notary public in and
for the state of New York, personally appeared
_________________________________________, known to me who, being by me duly
sworn, did depose and say that he is the _________________ of [Trustee], one of
the parties that executed the foregoing instrument; and that he signed his name
thereto by order of the Board of Directors of said bank.
----------------------------------------
Notary Public
[Notarial Seal]
<PAGE>
EXHIBIT A
[FORM OF CLASS (_) CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, AND ANY PAYMENT IS MADE TO CEDE
& CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST THEREIN.]
FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST"
IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.
Cut-off Date: ________, _____ Denomination: $__________________
First Distribution Date: ______, _____ Original Class (_) Certificates
Balance: $_____________
Certificate No. ______ CUSIP No. __________________
____________ LOAN ASSET BACKED CERTIFICATES,
CLASS (_) CERTIFICATE
evidencing a Percentage Interest in the distributions
allocable to the Class (_) Certificates with respect to a
pool of ____________________________________________________
loans originated by certain subsidiaries of Beneficial
Corporation (the "Originators"), including Beneficial
Mortgage Services, Inc., which has acquired the ___________
Loans from such other Originators, has sold the Trust
Balances of the __________ Loans to the Trust Fund.
This Certificate does not represent an obligation of or interest in
Beneficial Mortgage Services, Inc. or the Trustee referred to below or any of
their affiliates. Neither this Certificate nor the underlying __________ Loans
are guaranteed or insured by any governmental agency or instrumentality.
This certifies that _____________________ is the registered
owner of the Percentage Interest evidenced by this Certificate (obtained by
dividing the denomination of this Certificate by the Original Class (_)
Certificate Balance) in certain monthly distributions with respect to a pool of
________________________________________________________ loans (the "___________
Loans"), the Trust Balances
A-1
<PAGE>
of which have been sold by Beneficial Mortgage Services, Inc. to the Trust Fund
and with respect to which Beneficial Mortgage Corporation shall act as master
servicer (the "Master Servicer," which term includes any successor Master
Servicer under the Agreement referred to below). The Trust Fund was created
pursuant to a Pooling and Servicing Agreement dated as of _____________, _____
(the "Agreement") between Beneficial Mortgage Services, Inc. as depositor,
Beneficial Mortgage Corporation, as master servicer, and
_______________________________________________, as trustee (the "Trustee,"
which term shall include any successor Trustee under the Agreement), a
description of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, capitalized terms used herein have
the meanings assigned to them in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the ___th day of each calendar month or, if such day is not a Business Day, the
next succeeding Business Day (each, a "Distribution Date"), commencing on
______________, _____, to the Person in whose name this Certificate is
registered at the close of business on the Business Day immediately preceding
such Distribution Date (or, if the Certificates all shall be held in the form of
Definitive Certificates, the last day of the calendar month preceding the month
of such Distribution Date) (the "Record Date"), in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class
(_) Distribution Amount required to be distributed to Holders of Class (_)
Certificates on such Distribution Date.
Distributions on this Certificate will be made by the Trustee by check
or money order mailed to the Person entitled thereto at the address appearing in
the Certificate Register, or upon written request by the Certificateholder, by
wire transfer (in the case of any Holder of Certificates entitled to such form
of payment as provided in the Agreement) or by such other means of payment as
such Person and the Trustee shall agree. Except as otherwise provided in the
Agreement, the final distribution on this Certificate will be made in the
applicable manner described above, after due notice by the Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for that purpose by the Trustee
in the City and State of New York.
This Certificate is one of a duly authorized issue of Certificates
designated as Beneficial __________ Loan Asset Backed Certificates, issued in
______ classes (Class (_), Class (_), Class (_) and Class (_), herein called the
"Certificates"), and representing a beneficial ownership interest in (i) the
Trust Balances of the ____________ Loans and the proceeds thereof, (ii) such
assets as shall from time to time be identified as credited to the ___________
Loan Payment Record or deposited in the Certificate Account in accordance with
the Agreement, (iii) property which secured a __________ Loan and which has
been acquired by the Trust Fund through foreclosure or deed in lieu of
foreclosure and (iv) any Servicer LOC.
The Certificates are limited in right of payment to certain payments on
and collections in respect of the Trust Balances of the __________ Loans, all
as more specifically set forth in the Agreement. The Certificateholder, by its
acceptance of this Certificate, agrees that it will look solely to the Trust
Fund for payment hereunder and that the Trustee in its individual capacity is
not personally liable to the Certificateholders for any amount payable under
this Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.
A-2
<PAGE>
This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Master Servicer and the rights of the Certificateholders under the Agreement, at
any time by the Master Servicer and the Trustee with the consent of (x) any
Servicer LOC Issuer if its rights are materially and adversely affected and (y)
Holders of Certificates of each Class affected thereby, evidencing, as to such
Class, Percentage Interests aggregating not less than 51%. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon the registration of transfer hereof or in exchange therefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the office or agency maintained by the Trustee in the City and State
of New York, accompanied by a written instrument of transfer in form
satisfactory to the Master Servicer, the Trustee and 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,
if applicable, and evidencing the same aggregate fractional undivided interest
in the Trust Fund will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of a like Class in authorized denominations
(in the case of the Certificates) and evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment by the Holder of this Certificate
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Master Servicer, the Trustee and the Certificate Registrar and any
agent of the Master Servicer, the Trustee 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 Master Servicer, the Trustee, the Certificate
Registrar or any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust Fund created thereby shall terminate upon payment to the
Certificateholders, or provision therefor, in accordance with the Agreement upon
(i) the purchase by the Master Servicer or the sale by the Trustee of the Trust
Balance of each ___________ Loan and all property acquired in respect of any
__________ Loan remaining in the Trust Fund at a price determined as provided
in the Agreement or (ii) the later of the final payment or other liquidation of
the last __________ Loan remaining in the Trust Fund or the disposition of all
property acquired upon foreclosure or by deed in lieu of foreclosure of any ____
_______ Loan. The Master Servicer (i) may, at its option, purchase the Trust
Balance of each __________ Loan and property in respect of any __________ Loan
on any Distribution Date as of which the Pool Balance is equal to or less than
_____ percent (___%) of the Cut-off Date
A-3
<PAGE>
Pool Balance and (ii) should the Trust Balances of any __________ Loans remain
outstanding on the Distribution Date in __________, shall purchase all such
Trust Balances pursuant to the Agreement, which purchase will result in
retirement of the Certificates. If the Master Servicer fails for any reason to
purchase the Trust Balances of the ___________ Loans on the ____________
Distribution Date, then the Trustee shall conduct an auction of the assets of
the Trust Fund (other than amounts on deposit in the Certificate Account) in
order to effect a termination of the Trust Fund promptly thereafter.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized officer of the Trustee.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its official seal.
Dated:
----------------------------------
_________________________, not in its
individual capacity but solely as Trustee
[SEAL]
By _____________________________________
Authorized Officer
Countersigned:
By: _____________________________________
Authorized Officer of
----------------------------------
____________, not in its individual
capacity but solely as Trustee
A-4
<PAGE>
EXHIBIT B
[FORM OF CLASS (_) CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, AND ANY PAYMENT IS MADE TO CEDE
& CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST THEREIN.]
THE RIGHTS OF THE HOLDERS OF THE CLASS (_) CERTIFICATES TO RECEIVE DISTRIBUTIONS
ON THEIR CLASS (_) CERTIFICATES ARE SUBORDINATED TO THE RIGHTS OF THE HOLDERS OF
THE CLASS (_) CERTIFICATES TO RECEIVE SUCH DISTRIBUTIONS, AS DESCRIBED IN THE
POOLING AND SERVICING AGREEMENT.
FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST"
IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.
Cut-off Date: ______________, _____ Denomination: $___________
First Distribution Date: _________, _____ Original Class (_) Certificate
Balance: $_________
Certificate No. _____ CUSIP No. __________________
____________ LOAN ASSET BACKED CERTIFICATES,
CLASS (_) CERTIFICATE
evidencing a Percentage Interest in the distributions
allocable to the Class (_) Certificates with respect to a
Trust Fund consisting of a pool of _______________________
_______________________________ loans originated by certain
subsidiaries of Beneficial Corporation (the "Originators"),
including Beneficial Mortgage Services, Inc., which has
acquired the __________ Loans from such other Originators,
has sold the Trust Balances of the __________ Loans to the
Trust Fund.
B-1
<PAGE>
This Certificate does not represent an obligation of or interest in
Beneficial Mortgage Services, Inc. or the Trustee referred to below or any of
their affiliates. Neither this Certificate nor the underlying __________ Loans
are guaranteed or insured by any governmental agency or instrumentality.
This certifies that ___________________ is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the Original Class (_) Certificate Balance)
in certain monthly distributions with respect to a Trust Fund consisting of a
pool of _______________________________________________________ loans (the "____
_______ Loans"), the Trust Balances of which have been sold by Beneficial
Mortgage Services, Inc. to the Trust Fund and with respect to which Beneficial
Mortgage Corporation shall act as master servicer (in such capacity, the "Master
Servicer," which term includes any successor Master Servicer under the Agreement
referred to below). The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as of ___________, _____ (the "Agreement") between
Beneficial Mortgage Services, Inc., as depositor, Beneficial Mortgage
Corporation, as master servicer, and __________________________________________,
as trustee (the "Trustee," which term shall include any successor Trustee under
the Agreement), a description of certain of the pertinent provisions of which is
set forth hereafter. To the extent not defined herein, capitalized terms used
herein have the meanings assigned to them in the Agreement. This Certificate is
issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the ___th day of each calendar month or, if such day is not a Business Day, the
next succeeding Business Day (each, a "Distribution Date"), commencing on
____________, _____, to the Person in whose name this Certificate is registered
at the close of business on the Business Day immediately preceding such
Distribution Date (or, if the Certificates all shall be held in the form of
Definitive Certificates, the last day of the calendar month preceding the month
of such Distribution Date) (the "Record Date"), in an amount equal the product
of the Percentage Interest evidenced by this Certificate and the Class (_)
Distribution Amount required to be distributed to Holders of the Class (_)
Certificates on such Distribution Date. The rights of the Holders of the Class
(_) Certificates to receive distributions with respect to principal are
subordinated to the rights of the Holders of the Class (_) Certificates, as
described in the Agreement.
Distributions on this Certificate will be made by the Trustee by check
or money order mailed to the Person entitled thereto at the address appearing in
the Certificate Register, or upon written request by the Certificateholder, by
wire transfer (in the case of any Holder of Certificates entitled to such form
of payment as provided in the Agreement) or by such other means of payment as
such Person and the Trustee shall agree. Except as otherwise provided in the
Agreement, the final distribution on this Certificate will be made in the
applicable manner described above, after due notice by the Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for that purpose by the Trustee
in the City and State of New York.
This Certificate is one of a duly authorized issue of Certificates
designated as __________ Loan Asset Backed Certificates, issued in ____ classes
(Class (_), Class (_), Class (_) and Class (_), herein called the
"Certificates"), and representing a beneficial ownership interest in (i) the
Trust
B-2
<PAGE>
Balances of the __________ Loans and the proceeds thereof, (ii) such assets as
shall from time to time be identified as credited to the ___________ Loan
Payment Record or deposited in the Certificate Account in accordance with the
Agreement, (iii) property which secured a __________ Loan and which has been
acquired by the Trust Fund through foreclosure or deed in lieu of foreclosure
and (iv) any Servicer LOC.
The Certificates are limited in right of payment to certain payments on
and collections in respect of the Trust Balances of the __________ Loans, all
as more specifically set forth in the Agreement. The Certificateholder, by its
acceptance of this Certificate, agrees that it will look solely to the Trust
Fund for payment hereunder and that the Trustee in its individual capacity is
not personally liable to the Certificateholders for any amount payable under
this Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Master Servicer, and the rights of the Certificateholders under the Agreement,
at any time by the Master Servicer and the Trustee with the consent of (x) any
Servicer LOC Issuer if its rights are materially and adversely affected and (y)
Holders of Certificates of each Class affected thereby, evidencing, as to such
Class, Percentage Interests aggregating not less than 51%. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.
The Transferee of this Certificate is hereby deemed by the acceptance
or acquisition hereof to represent that such Transferee is not an employee
benefit plan or a collective investment fund or insurance company account which
is treated as holding "plan assets" (a "Plan") subject to 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 trustee or any
other Person acting on behalf of any such Plan. Any purported Transfer of a
Class (_) Certificate in violation of this restriction on Transfer will be null
and void and vest no rights in the purported Transferee.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of a like Class in authorized denominations
(in the case of the Certificates) and evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment by the Holder of this Certificate
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
B-3
<PAGE>
The Master Servicer, the Trustee and the Certificate Registrar and any
agent of the Master Servicer, Trustee 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 Master Servicer, the Trustee, the Certificate
Registrar or any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust Fund created thereby shall terminate upon payment to the
Certificateholders, or provision therefor, in accordance with the Agreement upon
(i) the purchase by the Master Servicer or the sale by the Trustee of the Trust
Balance of each ___________ Loan and all property acquired in respect of any
__________ Loan remaining in the Trust Fund at a price determined as provided
in the Agreement or (ii) the later of the final payment or other liquidation of
the last __________ Loan remaining in the Trust Fund or the disposition of all
property acquired upon foreclosure or by deed in lieu of foreclosure of any ____
_______ Loan. The Master Servicer (i) may, at its option, purchase the Trust
Balance of each __________ Loan and property in respect of any __________ Loan
on any Distribution Date as of which the Pool Balance is equal to or less than
______ percent (___%) of the Cut-off Date Pool Balance and (ii) should the Trust
Balances of any __________ Loans remain outstanding on the Distribution Date in
__________, shall purchase all such Trust Balances pursuant to the Agreement,
which purchase will result in retirement of the Certificates. If the Master
Servicer fails for any reason to purchase the Trust Balances of the ___________
Loans on the ____________ Distribution Date, then the Trustee shall conduct an
auction of the assets of the Trust Fund (other than amounts on deposit in the
Certificate Account) in order to effect a termination of the Trust Fund promptly
thereafter.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by any
authorized officer of the Trustee.
B-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its official seal.
Dated:
__________________________________ , not
in its individual capacity but solely as
Trustee
[SEAL]
By _____________________________________
Authorized Officer
Countersigned:
By: _______________________________
Authorized Officer of
------------------------
______________________, not in
its individual capacity
but solely as Trustee
B-5
<PAGE>
EXHIBIT C
[FORM OF CLASS (_) CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, AND ANY PAYMENT IS MADE TO CEDE
& CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST THEREIN.]
THE RIGHTS OF THE HOLDERS OF THE CLASS (_) CERTIFICATES TO RECEIVE DISTRIBUTIONS
ON THEIR CLASS (_) CERTIFICATES ARE SUBORDINATED TO THE RIGHTS OF THE HOLDERS OF
THE CLASS (_) AND CLASS (_) CERTIFICATES TO RECEIVE SUCH DISTRIBUTIONS, AS
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT.
FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST"
IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.
Cut-off Date: ________, _____ Denomination: $___________
First Distribution Date: ____, _____ Original Class (_) Certificate Balance:
$----------
Certificate No. _____ CUSIP No. __________________
____________ LOAN ASSET BACKED CERTIFICATES,
CLASS (_) CERTIFICATE
evidencing a Percentage Interest in the distributions
allocable to the Class (_) Certificates with respect to a
Trust Fund consisting of a pool of _______________________
_______________________________ loans originated by certain
subsidiaries of Beneficial Corporation (the "Originators"),
including Beneficial Mortgage Services, Inc., which has
acquired the __________ Loans from such other Originators,
has sold the Trust Balances of the __________ Loans to the
Trust Fund.
C-1
<PAGE>
This Certificate does not represent an obligation of or interest in
Beneficial Mortgage Services, Inc. or the Trustee referred to below or any of
their affiliates. Neither this Certificate nor the underlying __________ Loans
are guaranteed or insured by any governmental agency or instrumentality.
This certifies that ___________________ is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the Original Class (_) Certificate Balance)
in certain monthly distributions with respect to a Trust Fund consisting of a
pool of _______________________________________________________ loans (the "____
_______ Loans"), the Trust Balances of which have been sold by Beneficial
Mortgage Services, Inc. to the Trust Fund and with respect to which Beneficial
Mortgage Corporation shall act as master servicer (in such capacity, the "Master
Servicer," which term includes any successor Master Servicer under the Agreement
referred to below). The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as of _______, _____ (the "Agreement") between
Beneficial Mortgage Services, Inc., as depositor, Beneficial Mortgage
Corporation, as master servicer, and __________________________________________,
as trustee (the "Trustee," which term shall include any successor Trustee under
the Agreement), a description of certain of the pertinent provisions of which is
set forth hereafter. To the extent not defined herein, capitalized terms used
herein have the meanings assigned to them in the Agreement. This Certificate is
issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the ___th day of each calendar month or, if such day is not a Business Day, the
next succeeding Business Day (each, a "Distribution Date"), commencing on
_________, _____, to the Person in whose name this Certificate is registered at
the close of business on the Business Day immediately preceding such
Distribution Date (or, if the Certificates all shall be held in the form of
Definitive Certificates, the last day of the calendar month preceding the month
of such Distribution Date) (the "Record Date"), in an amount equal the product
of the Percentage Interest evidenced by this Certificate and the Class (_)
Distribution Amount required to be distributed to Holders of the Class (_)
Certificates on such Distribution Date. The rights of the Holders of the Class
(_) Certificates to receive distributions with respect to principal are
subordinated to the rights of the Holders of the Class (_) and Class (_)
Certificates, as described in the Agreement.
Distributions on this Certificate will be made by the Trustee by check
or money order mailed to the Person entitled thereto at the address appearing in
the Certificate Register, or upon written request by the Certificateholder, by
wire transfer (in the case of any Holder of Certificates entitled to such form
of payment as provided in the Agreement) or by such other means of payment as
such Person and the Trustee shall agree. Except as otherwise provided in the
Agreement, the final distribution on this Certificate will be made in the
applicable manner described above, after due notice by the Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for that purpose by the Trustee
in the City and State of New York.
This Certificate is one of a duly authorized issue of Certificates
designated as ____________ Loan Asset Backed Certificates, issued in _______
classes (Class (_), Class (_), Class (_) and Class (_), herein called the
"Certificates"), and representing a beneficial ownership interest in (i) the
Trust
C-2
<PAGE>
Balances of the __________ Loans and the proceeds thereof, (ii) such assets as
shall from time to time be identified as credited to the ___________ Loan
Payment Record or deposited in the Certificate Account in accordance with the
Agreement, (iii) property which secured a __________ Loan and which has been
acquired by the Trust Fund through foreclosure or deed in lieu of foreclosure
and (iv) any Servicer LOC.
The Certificates are limited in right of payment to certain payments on
and collections in respect of the Trust Balances of the __________ Loans, all
as more specifically set forth in the Agreement. The Certificateholder, by its
acceptance of this Certificate, agrees that it will look solely to the Trust
Fund for payment hereunder and that the Trustee in its individual capacity is
not personally liable to the Certificateholders for any amount payable under
this Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Master Servicer, and the rights of the Certificateholders under the Agreement,
at any time by the Master Servicer and the Trustee with the consent of (x) any
Servicer LOC Issuer if its rights are materially and adversely affected and (y)
Holders of Certificates of each Class affected thereby, evidencing, as to such
Class, Percentage Interests aggregating not less than 51%. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.
The Transferee of this Certificate is hereby deemed by the acceptance
or acquisition hereof to represent that such Transferee is not an employee
benefit plan or a collective investment fund or insurance company account which
is treated as holding "plan assets" (a "Plan") subject to 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 trustee or any
other Person acting on behalf of any such Plan. Any purported Transfer of a
Class (_) Certificate in violation of this restriction on Transfer will be null
and void and vest no rights in the purported Transferee.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of a like Class in authorized denominations
(in the case of the Certificates) and evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment by the Holder of this Certificate
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
C-3
<PAGE>
The Master Servicer, the Trustee and the Certificate Registrar and any
agent of the Master Servicer, Trustee 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 Master Servicer, the Trustee, the Certificate
Registrar or any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust Fund created thereby shall terminate upon payment to the
Certificateholders, or provision therefor, in accordance with the Agreement upon
(i) the purchase by the Master Servicer or the sale by the Trustee of the Trust
Balance of each ___________ Loan and all property acquired in respect of any
__________ Loan remaining in the Trust Fund at a price determined as provided
in the Agreement or (ii) the later of the final payment or other liquidation of
the last __________ Loan remaining in the Trust Fund or the disposition of all
property acquired upon foreclosure or by deed in lieu of foreclosure of any ____
_______ Loan. The Master Servicer (i) may, at its option, purchase the Trust
Balance of each __________ Loan and property in respect of any __________ Loan
on any Distribution Date as of which the Pool Balance is equal to or less than
______ percent (___%) of the Cut-off Date Pool Balance and (ii) should the Trust
Balances of any __________ Loans remain outstanding on the Distribution Date in
________________, shall purchase all such Trust Balances pursuant to the
Agreement, which purchase will result in retirement of the Certificates. If the
Master Servicer fails for any reason to purchase the Trust Balances of the ____
______ Loans on the __________________ Distribution Date, then the Trustee shall
conduct an auction of the assets of the Trust Fund (other than amounts on
deposit in the Certificate Account) in order to effect a termination of the
Trust Fund promptly thereafter.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by any
authorized officer of the Trustee.
C-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its official seal.
Dated:
----------------------------------
____________, not in its individual capacity but
solely as Trustee
[SEAL]
By _______________________________________
Authorized Officer
Countersigned:
By: _______________________________
Authorized Officer of
------------------------
______________________, not in
its individual capacity
but solely as Trustee
C-5
<PAGE>
EXHIBIT D
[FORM OF CLASS (_) CERTIFICATE]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS (_), CLASS (_)
AND CLASS (_) CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO
THE SECURITIES ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS THAT ARE
EXEMPT FROM REGISTRATION UNDER SUCH THE SECURITIES AND UNDER APPLICABLE STATE
LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS 6.02 AND
6.07 OF THE AGREEMENT REFERRED TO HEREIN.
THIS CLASS (_) CERTIFICATE HAS BEEN DESIGNATED BY THE COMPANY REFERRED TO BELOW
AS A "RESIDUAL INTEREST" IN THE TRUST FUND CREATED BY THE POOLING AND SERVICING
AGREEMENT PURSUANT TO PROVISIONS OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE").
[THIS CERTIFICATE REPRESENTS THE "TAX MATTERS PERSON RESIDUAL INTEREST" ISSUED
UNDER THE POOLING AND SERVICING AGREEMENT REFERRED TO BELOW AND MAY NOT BE
TRANSFERRED TO ANY PERSON EXCEPT IN CONNECTION WITH THE ASSUMPTION BY THE
TRANSFEREE OF THE DUTIES OF THE MASTER SERVICER UNDER SUCH AGREEMENT.]
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO A "DISQUALIFIED ORGANIZATION" AS
DEFINED IN SECTION 860E(e)(5) OF THE CODE. SUCH TERM INCLUDES THE UNITED STATES,
ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY
INTERNATIONAL ORGANIZATION, ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
FOREGOING (OTHER THAN CERTAIN TAXABLE INSTRUMENTALITIES), ANY COOPERATIVE
ORGANIZATION FURNISHING ELECTRIC ENERGY OR PROVIDING TELEPHONE SERVICE TO
PERSONS IN RURAL AREAS, OR ANY ORGANIZATION (OTHER THAN A FARMER'S COOPERATIVE)
THAT IS EXEMPT FROM FEDERAL INCOME TAX UNLESS SUCH ORGANIZATION IS SUBJECT TO
THE TAX ON UNRELATED BUSINESS INCOME. NO TRANSFER OF THIS CERTIFICATE WILL BE
REGISTERED BY THE CERTIFICATE REGISTRAR UNLESS THE PROPOSED TRANSFEREE HAS
DELIVERED (1) AN AFFIDAVIT AFFIRMING THAT THE PROPOSED TRANSFEREE IS NOT A
DISQUALIFIED ORGANIZATION AND IS NOT ACQUIRING THIS CERTIFICATE AS A NOMINEE,
TRUSTEE OR AGENT FOR ANY PERSON WHO IS A DISQUALIFIED ORGANIZATION, AND (2) A
COVENANT OF THE PROPOSED TRANSFEREE TO THE EFFECT THAT THE PROPOSED TRANSFEREE
AGREES TO BE BOUND BY AND TO ABIDE BY THE TRANSFER RESTRICTIONS APPLICABLE TO
THIS CERTIFICATE.
D-1
<PAGE>
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY GIVE RISE TO A
SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN AGENT ACTING
FOR THE TRANSFEREE. A PASS-THRU ENTITY THAT HOLDS THIS CERTIFICATE AND THAT HAS
A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY TAXABLE YEAR GENERALLY WILL
BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE PRODUCT OF (A) THE AMOUNT OF
EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF THIS CERTIFICATE OWNED THROUGH
SUCH PASS-THRU ENTITY BY SUCH DISQUALIFIED ORGANIZATION, AND (B) THE HIGHEST
MARGINAL FEDERAL TAX RATE ON CORPORATIONS. FOR PURPOSES OF THE PRECEDING
SENTENCE, THE TERM "PASS-THRU ENTITY" INCLUDES REGULATED INVESTMENT COMPANIES,
REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST FUNDS, PARTNERSHIPS, TRUSTS,
ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER 1T OF THE CODE APPLIES AND,
EXCEPT AS PROVIDED IN REGULATIONS, NOMINEES.
Class (_) _____% Percentage Interest
Subordinate
Cut-off Date: ______________, _____
First Distribution Date: ___________________, _____
____________ LOAN ASSET BACKED CERTIFICATES,
CLASS (_) CERTIFICATE
evidencing a percentage interest in any distributions
allocable to the Class (_) Certificates with respect to a
Trust Fund consisting of a pool of _______________________
_______________________________ loans originated by certain
subsidiaries of Beneficial Corporation (the "Originators"),
including Beneficial Mortgage Services, Inc., which has
acquired the __________ Loans from such other Originators,
has sold the Trust Balances of the __________ Loans to the
Trust Fund.
D-2
<PAGE>
This Certificate does not represent an obligation of or interest in
Beneficial Mortgage Services, Inc. or the Trustee referred to below or any of
their affiliates. Neither this Certificate nor the underlying __________ Loans
are guaranteed or insured by any governmental agency or instrumentality.
This certifies that ________________ is the registered owner of the
Percentage Interest evidenced by this Certificate in certain distributions with
respect to a Trust Fund consisting of a pool of _______________________________
______________________ loans (the "____________ Loans"), the Trust Balances of
which have been sold by Beneficial Mortgage Services, Inc. to the Trust Fund and
with respect to which Beneficial Mortgage Corporation shall act as master
servicer (in such capacity, the "Master Servicer," which term includes any
successor Master Servicer under the Agreement referred to below). The Trust Fund
was created pursuant to a Pooling and Servicing Agreement dated as of
_________________, _____ (the "Agreement") between Beneficial Mortgage Services,
Inc., as sponsor, Beneficial Mortgage Corporation, as master servicer, and
__________________________________, as trustee (the "Trustee," which term shall
include any successor Trustee under the Agreement), a description of certain of
the pertinent provisions of which is set forth hereafter. To the extent not
defined herein, capitalized terms used herein have the meanings assigned to them
in the Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the ___th day of each calendar month or, if such day is not a Business Day, the
next succeeding Business Day (each, a "Distribution Date"), commencing on
___________________, _____, to the Person in whose name this Certificate is
registered at the close of business on the fifth Business Day preceding such
Distribution Date (the "Record Date"), in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and, subject to the prior
rights of Holders of the Class (_), Class (_) and Class (_) Certificates, and
any amount required to be distributed to Holders of Class (_) Certificates on
such Distribution Date.
Distributions on this Certificate will be made by the Trustee by check
mailed to the address of the Person entitled thereto, as such name and address
shall appear on the Certificate Register or by such other means of payment as
such Person and the Trustee shall agree. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Master
Servicer of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency appointed by the Trustee
for that purpose in the City and State of New York.
This Certificate is one of a duly authorized issue of Certificates
designated as ____________ Loan Asset Backed Certificates, issued in _______
Classes (Class (_), Class (_), Class (_) and Class (_) Certificates, herein
collectively called the "Certificates") and representing a beneficial ownership
interest in (i) the Trust Balances of the ___________ Loans and the proceeds
thereof, (ii) such assets as shall from time to time be identified as credited
to the __________ Loan Payment Record or deposited in the Certificate Account
in accordance with the Agreement, (iii) property which secured a ___________
Loan and which has been acquired by foreclosure or deed in lieu of foreclosure
and (iv) any Servicer LOC.
D-3
<PAGE>
The Certificates are limited in right of payment to certain payments on
and collections in respect of the Trust Balances of the __________ Loans, all
as more specifically set forth in the Agreement. The Certificateholder, by its
acceptance of this Certificate, agrees that it will look solely to the funds on
deposit in the Certificate Account for payment hereunder and that the Trustee in
its individual capacity is not personally liable to the Certificateholders for
any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Master Servicer, and the rights of the Certificateholders under the Agreement,
at any time by the Master Servicer and the Trustee with the consent of any
Servicer LOC Issuer if its rights are materially and adversely affected and
Holders of Certificates of each Class affected thereby, evidencing, as to such
Class, Percentage Interests aggregating not less than 51%. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon the Transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.
The Holder of this Certificate hereby consents to any amendment of the
Agreement which, based on an Opinion of Counsel delivered to the Trustee, is
reasonably necessary (a) to ensure that the record ownership of, or any
beneficial interest in, a Class (_) Certificate is not transferred, directly or
indirectly, to a Disqualified Organization and (b) to provide for a means to
compel the Transfer of a Class (_) Certificate which is held by a Disqualified
Organization to a Holder that is not a disqualified Organization.
No Transfer of a Class (_) 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 the
Securities Act and laws. In the event that such a Transfer is to be made within
three years from the date of initial issuance of the Certificates pursuant to
the Agreement, (i) the Trustee or the Master Servicer may require an Opinion of
Counsel acceptable to and in form and substance satisfactory to the Trustee and
the Master Servicer that such Transfer is exempt (describing the applicable
exemption and the basis therefor) from or is being made pursuant to the
registration requirements of the Securities Act and of any applicable state
statute, which Opinion of Counsel shall not be an expense of the Trustee or the
Master Servicer, and (ii) the Trustee shall require the Transferee to execute an
investment letter in form and substance satisfactory to the Trustee and the
Master Servicer certifying the facts surrounding such Transfer, which investment
letter shall not be an expense of the Trustee or the Master Servicer. The Holder
hereof desiring to effect such Transfer shall, and does hereby agree to,
indemnify the Trustee and the Master Servicer and any Paying Agent acting on
behalf of the Trustee 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.
D-4
<PAGE>
No Transfer of a Class (_) Certificate shall be made unless the Trustee
shall have received either (i) a representation letter from the Transferee of
such Certificate, acceptable to and in form and substance satisfactory to the
Trustee and the Master Servicer, to the effect that such Transferee is not an
employee benefit plan subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or section 4975 of the Code, nor a trustee or any
other Person acting on behalf of any such plan, which representation letter
shall not be an expense of the Trustee or the Master Servicer, or (ii) in the
case of such Certificate being presented for registration in the name of an
employee benefit plan subject to ERISA or section 4975 of the Code (or
comparable provisions of any subsequent enactments), or a trustee or any other
Person acting on behalf of any such plan, an Opinion of Counsel satisfactory to
the Trustee and the Master Servicer to the effect that the purchase or holding
of such Certificate will not result in the assets of the Trust Fund being deemed
to be "plan assets" and subject to the prohibited transaction provisions as well
as the fiduciary provisions of ERISA and the Code and will not subject the
Trustee or the Master Servicer to any obligation in addition to those undertaken
in the Agreement, which representation letter or Opinion of Counsel shall not be
an expense of the Trustee or the Master Servicer.
Any purported Transfer of a Class (_) Certificate in violation of the
restriction on Transfer will be null and void and vest no rights in the
purported Transferee.
No service charge will be made for any such registration of Transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Master Servicer, the Trustee and the Certificate Registrar and any
agent of the Master Servicer, the Trustee 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 Master Servicer, the Trustee, the Certificate
Registrar or any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust Fund created thereby shall terminate upon payment to the
Certificateholders, or provision therefor, in accordance with the Agreement upon
(i) the purchase by the Master Servicer or the sale by the Trustee of the Trust
Balance of each ___________ Loan and all property acquired in respect of any
__________ Loan remaining in the Trust Fund at a price determined as provided
in the Agreement or (ii) the later of the final payment or other liquidation of
the Loan Balance of the last __________ Loan remaining in the Trust Fund or the
disposition of all property acquired upon foreclosure or by deed in lieu of
foreclosure of any __________ Loan. The Master Servicer (i) may, at its option,
purchase the Trust Balance of each __________ Loan and property in respect of
any __________ Loan on any Distribution Date of which the Pool Balance is equal
to or less than _____ percent (___%) of the Cut-off Date Pool Balance and (ii)
should the Trust Balances of any ____________ Loans remain outstanding on the
Distribution Date in _______________, ____, shall purchase all such Trust
Balances pursuant to the Agreement, which purchase will result in retirement of
the Certificates. If the Master Servicer fails for any reason to purchase the
Trust Balances of the ___________ Loans on the ______________________, ____
Distribution Date, then the Trustee shall conduct an auction of the assets of
the Trust Fund (other than amounts on deposit in the Certificate Account) in
order to effect a termination of the Trust promptly thereafter.
D-5
<PAGE>
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by any
authorized officer of the Trustee.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its official seal.
Dated: ________________________
______________________, not in its
individual capacity but solely as Trustee
[SEAL]
By _______________________________________
Authorized Officer
Countersigned:
By: _______________________________
Authorized Officer of
------------------------
______________________, not in
its individual capacity
but solely as Trustee
D-6
<PAGE>
EXHIBIT E
Notice of Payment in Full
of Trust Balance of __________ Loan
=========================
=========================
Attention: _________________________
Re: __________ Loan Asset Backed Certificates
Ladies and Gentlemen:
Reference is made to Section 3.07(b) of the Pooling and Servicing
Agreement dated as of __________________, _____ (the "Agreement") between
Beneficial Mortgage Services, Inc., as depositor and master servicer, and
_______________________________________________, as trustee. All capitalized
terms used but not defined herein shall have the meanings given to such terms in
the
Agreement.
The undersigned hereby certifies that the Trust Balance of the ____
_______ Loan(s) listed in Schedule A annexed hereto has been paid in full and
that all amounts received in connection with the payment of such ___________
Loan(s) that were required to be deposited in the Collection Account pursuant to
Section 3.02 of the Agreement have been so deposited.
The undersigned further certifies that he/she is a Servicing Officer of
the Master Servicer holding the office set forth beneath his/her signature and
that he/she is duly authorized to execute this certificate on behalf of the
Master Servicer.
BENEFICIAL MORTGAGE SERVICES, INC.
By:________________________________
Name: _________________________
Title: Servicing Officer
E-1
<PAGE>
EXHIBIT F
FORM OF FILE REQUEST
[DATE]
___________________________, as Trustee
___________________________
___________________________
___________________________
Attention: ________________________
Re: __________ Loan Asset Backed Certificates
Gentlemen:
In connection with the administration of the __________ Loans held by
you as Trustee under the Pooling and Servicing Agreement dated as of
___________, _____ (the "Agreement") between Beneficial Mortgage Services, Inc.,
as sponsor and master servicer, and
_______________________________________________, as trustee, we hereby request a
release of the Mortgage File held by you as trustee with respect to the
following described __________ Loan for the reason indicated below.
Loan No.: ________________
Reason for requesting file:
1. ___________ Loan paid in full. (The Master
Servicer hereby certifies that all amounts
received in connection with the payment in full
of the Trust Balance of the __________ Loan that
are required to be deposited in the Certificate
Account pursuant to Section 4.02 of the Agreement
have been so deposited).
2. __________ Loan repurchased. (The Master Servicer hereby
certifies that the Purchase Price of the __________ Loan
has been deposited in the Certificate Account pursuant to
the Agreement).
3. The __________ Loan is being foreclosed.
4. Other (Describe).
F-1
<PAGE>
The undersigned acknowledges that the above Mortgage File will be held
by the undersigned in accordance with the provisions of the Agreement and will
promptly be returned to the Trustee when the need therefor by the Master
Servicer no longer exists unless the ___________ Loan has been liquidated.
Capitalized terms used herein shall have the meanings assigned to them in the
Agreement.
BENEFICIAL MORTGAGE SERVICES, INC.
By: ______________________________________
Name:
Title: Servicing Officer
F-2
<PAGE>
Exhibit 4.2
TRUST AGREEMENT
among
BENEFICIAL MORTGAGE SERVICES, INC.,
as Depositor,
(_______________)
and
(_______________)
as Owner Trustee
Dated as of _________, ____
<PAGE>
Table of Contents
Page
----
ARTICLE I
DEFINITIONS...................... 1
SECTION 1.01. Capitalized Terms..................................... 1
SECTION 1.02. Other Definitional Provisions......................... 4
ARTICLE II
ORGANIZATION; CONVEYANCE OF MORTGAGE LOANS........ 5
SECTION 2.01. Name.................................................. 5
SECTION 2.02. Office................................................ 5
SECTION 2.03. Purposes and Powers................................... 5
SECTION 2.04. Appointment of Owner Trustee.......................... 6
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate.... 6
SECTION 2.06. Declaration of Trust.................................. 6
SECTION 2.07. Liability of the Owners............................... 6
SECTION 2.08. Title to Trust Property............................... 7
SECTION 2.09. Situs of Trust........................................ 7
SECTION 2.10. Representations and Warranties of the Depositor and
the Company........................................... 7
SECTION 2.11. Federal Income Tax Allocations........................ 9
SECTION 2.12. Conveyance of the Mortgage Loans...................... 9
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS...... 10
SECTION 3.01. Initial Ownership..................................... 10
SECTION 3.02. The Trust Certificates................................ 10
SECTION 3.03. Authentication of Trust Certificates.................. 10
SECTION 3.04. Registration of Transfer and Exchange of Trust
Certificates.......................................... 11
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificate 11
SECTION 3.06. Persons Deemed Owners................................. 12
SECTION 3.07. Access to List of Certificateholders' Names and
Addresses ............................................ 12
SECTION 3.08. Maintenance of Office or Agency....................... 12
SECTION 3.09. Appointment of Paying Agent.......................... 12
SECTION 3.10. Ownership by Company of Trust Certificates............ 13
SECTION 3.11. Book-Entry Trust Certificates......................... 13
SECTION 3.12. Notices to Clearing Agency............................ 14
SECTION 3.13. Definitive Trust Certificates......................... 14
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ARTICLE IV
ACTIONS BY OWNER TRUSTEE.................. 14
SECTION 4.01. Prior Notice to Owners with Respect to Certain Matters. 14
SECTION 4.02. Action by Owners with Respect to Certain Matters....... 15
SECTION 4.03. Action by Owners with Respect to Bankruptcy............ 15
SECTION 4.04. Restrictions on Owners' Power.......................... 15
SECTION 4.05. Majority Control....................................... 16
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES......... 16
SECTION 5.01. Establishment of Trust Account......................... 16
SECTION 5.02. Application of Trust Funds............................. 16
SECTION 5.03. Method of Payment...................................... 17
SECTION 5.04. No Segregation of Moneys; No Interest.................. 17
SECTION 5.05. Accounting and Reports to the Noteholders,
Owners, the Internal Revenue Service and Others........ 17
SECTION 5.06. Signature on Returns; Tax Matters Partner.............. 17
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE........... 18
SECTION 6.01. General Authority...................................... 18
SECTION 6.02. General Duties......................................... 18
SECTION 6.03. Action upon Instruction................................ 18
SECTION 6.04. No Duties Except as Specified in this Agreement or in
Instructions......................................................... 19
SECTION 6.05. No Action Except Under Specified Documents or
Instructions........................................... 19
SECTION 6.06. Restrictions........................................... 19
ARTICLE VII
CONCERNING THE OWNER TRUSTEE................ 20
SECTION 7.01. Acceptance of Trusts and Duties........................ 20
SECTION 7.02. Furnishing of Documents................................ 21
SECTION 7.03. Representations and Warranties......................... 21
SECTION 7.04. Reliance; Advice of Counsel............................ 21
SECTION 7.05. Not Acting in Individual Capacity...................... 22
SECTION 7.06. Owner Trustee Not Liable for Trust
Certificates or Mortgage Loans......................... 22
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes..... 22
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ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE.............. 22
SECTION 8.01. Owner Trustee's Fees and Expenses...................... 22
SECTION 8.02. Indemnification........................................ 23
SECTION 8.03. Payments to the Owner Trustee.......................... 23
ARTICLE IX
TERMINATION OF TRUST AGREEMENT............... 23
SECTION 9.01. Termination of Trust Agreement......................... 23
SECTION 9.02. Dissolution upon Bankruptcy of the Company............. 24
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES... 25
SECTION 10.01. Eligibility Requirements for Owner Trustee............ 25
SECTION 10.02. Resignation or Removal of Owner Trustee............... 25
SECTION 10.03. Successor Owner Trustee............................... 26
SECTION 10.04. Merger or Consolidation of Owner Trustee.............. 26
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee......... 26
ARTICLE XI
MISCELLANEOUS...................... 28
SECTION 11.01. Supplements and Amendments............................ 28
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners........ 29
SECTION 11.03. Limitations on Rights of Others....................... 29
SECTION 11.04. Notices............................................... 29
SECTION 11.05. Severability.......................................... 29
SECTION 11.06. Separate Counterparts................................. 29
SECTION 11.07. Successors and Assigns................................ 29
SECTION 11.08. Covenants of the Company.............................. 30
SECTION 11.09. No Petition........................................... 30
SECTION 11.10. No Recourse........................................... 30
SECTION 11.11. Headings.............................................. 30
SECTION 11.12. GOVERNING LAW......................................... 30
SECTION 11.13. Depositor Payment Obligation.......................... 30
EXHIBIT A Form Of Trust Certificate.................................. A-1
EXHIBIT B Certificate Of Trust Of ____________Loan Trust _______.... B-1
EXHIBIT C (Form of Certificate Depository Agreement)............... C-1
EXHIBIT D Mortgage Loan Schedule................................... D-1
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TRUST AGREEMENT (the "Trust Agreement") dated as of _________, ____,
among Beneficial Mortgage Services, Inc., as depositor (the "Depositor"),
______________, a ____________ corporation (the "Company"), and ___________, a
____________, as owner trustee (the "Owner Trustee").
WHEREAS, the Depositor and ______________ have entered into a Mortgage
Loan Purchase Agreement dated as of ___________, ____ (the "Mortgage Loan
Purchase Agreement"), pursuant to which ______________ will assign to the
Depositor any and all of the Company's rights and interests with respect to the
Mortgage Loans;
NOW, THEREFORE, the Depositor, the Company and the Owner Trustee
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Capitalized Terms. For all purposes of this Agreement,
the following terms shall have the meanings set forth below:
"Administration Agreement" shall mean the Administration Agreement
dated as of ___________, ____, among the Trust, the Indenture Trustee and
_________________, as Administrator.
"Agreement" shall mean this Trust Agreement, as the same may be amended
and supplemented from time to time.
"Assignment" shall mean the assignment of right, title and interest of
the Depositor in the Mortgage Loans to the Trust.
"Basic Documents" shall mean the Mortgage Loan Purchase Agreement,
Servicing Agreement, the Indenture, the Administration Agreement and the other
documents and certificates delivered in connection therewith.
"Book-Entry Trust Certificate" shall mean a beneficial interest in the
Trust Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 3.11.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq., as the same may be amended
from time to time.
"Certificate" shall mean any of the Book-Entry Trust Certificates or
Definitive-Trust Certificates.
<PAGE>
"Certificate Distribution Account" shall have the meaning assigned to
such term in Section 5.01.
"Certificate of Trust" shall mean the Certificate of Trust in the form
of Exhibit B filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Owner" shall mean, with respect to a Book-Entry Trust
Certificate, a Person who is the beneficial owner of such Book-Entry Trust
Certificate, as reflected on the books of the Clearing Agency, or on the books
of a Person maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Certificate Register" and "Certificate Registrar" shall mean the
register mentioned in and the registrar appointed pursuant to Section 3.04.
"Certificateholder" or "Holder" shall mean a Person in whose name a
Trust Certificate is registered.
"Clearing Agency" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee,
the principal corporate trust office of the Owner Trustee located at
_____________, or at such other address as the Owner Trustee may designate by
notice to the Owners, the Depositor and the Company, or the principal corporate
trust office of any successor Owner Trustee at the address designated by such
successor Owner Trustee by notice to the Owners, the Depositor and the Company.
"Definitive Trust Certificates" shall have the meaning set forth in
Section 3.11.
"Depositor" shall mean Beneficial Mortgage Services, Inc. in its
capacity as depositor hereunder.
"Eligible Distribution Account" shall mean an account that is (i)
maintained with a depository institution whose debt obligations at the time of
any deposit therein have the highest short-term debt rating by the Rating
Agencies, (ii) one or more accounts with a depository institution which accounts
are fully insured by either the Savings Association Insurance Fund or the Bank
Insurance Fund of the Federal Deposit Insurance Corporation established by such
fund, (iii) a segregated trust account maintained with the Owner Trustee or an
affiliate of the Owner Trustee in its fiduciary capacity or (iv) otherwise
acceptable to each Rating Agency as evidenced by a letter from each Rating
Agency
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to the Owner Trustee, without reduction or withdrawal of their then currently
ratings of the Certificates.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Expenses" shall have the meaning assigned to such term in Section
8.02.
"Indemnified Parties" shall have the meaning assigned to such term in
Section 8.02.
"Indenture" shall mean the Indenture dated as of ________, ____
between the Trust and _________, as Indenture Trustee.
"Initial Certificate Balance" shall mean $___________.
"Mortgage Loan Purchase Agreement" shall mean the agreement between
_____________, as seller, and Beneficial Mortgage Services, Inc., as purchaser,
providing for the sale of the Mortgage Loans by the Seller to the purchaser.
"Mortgage Loans" shall mean a pool of (adjustable) (fixed) rate loans
made or to be made in the future.
"Owner" shall mean each Holder of a Trust Certificate.
"Owner Trust Estate" shall mean all right, title and interest of the
Trust in and to the property and rights assigned to the Trust pursuant to the
Assignment, all funds on deposit from time to time in the Trust Accounts and the
Certificate Distribution Account and all other property of the Trust from time
to time, including any rights of the Owner Trustee and the Trust pursuant to the
Servicing Agreement and the Administration Agreement.
"Owner Trustee" shall mean ___________, a __________ banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor Owner Trustee hereunder.
"Paying Agent" shall mean any paying agent or co-paying agent appointed
pursuant to Section 3.09 and shall initially be _________.
"Rating Agency" shall mean any nationally recognized statistical rating
organization asked by the Depositor or any of its Affiliates to rate the
Certificates.
"Record Date" shall mean, with respect to any Distribution Date, the
close of business on the day prior to such Distribution Date occurs or, if
Definitive Trust Certificates are issued pursuant to Section 3.14, the last day
of the month preceding such Distribution Date.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
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"Servicing Agreement" shall mean the Servicing Agreement dated as of
__________, ____, among the Trust, as issuer, the Depositor and ____________, as
servicer, as the same may be amended or supplemented from time to time.
"Treasury Regulations" shall mean 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" shall mean the trust established by this Agreement.
"Trust Account" shall mean any account set up by the Owner Trustee
pursuant to the provisions of Section 5.01.
"Trust Certificate" shall mean a certificate evidencing the beneficial
interest of an Owner in the Trust, substantially in the form attached hereto as
Exhibit A.
"Underwriters" shall mean those underwriters named in and parties to
the Certificate Underwriting Agreement dated ___________, ____, with the
Depositor, pursuant to which the Trust Certificates will be offered publicly.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms used
and not otherwise defined herein have the meanings assigned to them in the
Servicing Agreement or, if not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this 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 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 Agreement or
in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation".
(e) The definitions contained in this 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.
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<PAGE>
(f) 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.
ARTICLE II
ORGANIZATION; CONVEYANCE OF MORTGAGE LOANS
SECTION 2.01. Name. The Trust created hereby shall be known as
"___________ Loan Trust ________," 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 Owners, the
Depositor and the Company.
SECTION 2.03. Purposes and Powers. (a) The purpose of the Trust is to
engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement and to sell the Notes and the Trust
Certificates;
(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to purchase the Mortgage Loans, and to pay the organizational,
start-up and transactional expenses of the Trust and to pay the balance to the
Depositor pursuant to the Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey the Trust
Estate pursuant to the Indenture and to hold, manage and distribute to the
Owners pursuant to the terms of the Servicing Agreement any portion of the Trust
Estate 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; 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 Owners and the Noteholders.
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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 Agreement or the Basic
Documents.
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.
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $____________. 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 Owner Trust
Estate and shall be deposited in the Certificate Distribution Account. The
Depositor shall pay organizational expenses of the Trust as they may arise or
shall, upon the request of the Owner Trustee, promptly reimburse the Owner
Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.06. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owners, 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 Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, the Trust shall be treated as a partnership,
with the assets of the partnership being the Mortgage Loans and other assets
held by the Trust, the partners of the partnership being the Certificateholders,
and the Notes being debt of the partnership. 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 partnership 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 Owners. (a) The Company shall be liable
directly to and will 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 Company
would be liable if the Trust were a partnership under the Delaware Revised
Uniform Limited Partnership Act in which the Company were a general partner;
provided, however, that the Company shall not be liable for any losses incurred
by a Certificateholder in the capacity of an investor in the Trust Certificates
or a Noteholder in the capacity of an investor in the Notes. In addition, any
third party creditors of the Trust (other than in connection with the
obligations described in the preceding sentence for which the Company shall not
be liable) shall be deemed third party beneficiaries of this paragraph. The
obligations of the Company under this paragraph shall be evidenced by the Trust
Certificates described in Section 3.10, which for purposes of the Business Trust
Statute shall be deemed to be a separate class of Trust Certificates from all
other Trust Certificates issued by the Trust; provided that the rights and
obligations evidenced by all Trust Certificates, regardless of class, shall,
except as provided in this Section, be identical.
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<PAGE>
(b) No Owner, other than to the extent set forth in paragraph (a),
shall have any personal liability for any liability or obligation of the Trust.
SECTION 2.08. Title to Trust Property. Legal title to all 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 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 New York. 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.
Payments will be received by the Trust only in Delaware or New York, and
payments will be made by the Trust only from Delaware or New York. The only
office of the Trust will be at the Corporate Trust Office in Delaware.
SECTION 2.10. Representations and Warranties of the Depositor and the
Company. (a) 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 Delaware, 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.
(iii) The Depositor has the power and authority to execute and deliver
this 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 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 Agreement have been duly authorized
by the Depositor by all necessary corporate action.
(iv) The consummation of the transactions contemplated by this
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 certificate 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.
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<PAGE>
(v) To the Depositor'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 Depositor or its properties: (A) asserting the invalidity of this
Agreement, (B) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or (C) seeking any determination or ruling that
might materially and adversely affect the performance by the Depositor of its
obligations under, or the validity or enforceability of, this Agreement.
(vi) The representations and warranties of the Depositor in Sections
______________ of the Mortgage Loan Purchase Agreement are true and correct.
(b) The Company hereby represents and warrants to the Owner Trustee
that:
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of ______________, with
the 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 Company 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.
(iii) The Company has the power and authority to execute and deliver
this Agreement and to carry out its terms; the Company has full power and
authority to purchase the Trust Certificates that the Company has agreed to
purchase pursuant to Section 3.10; and the execution, delivery and performance
of this Agreement has been duly authorized by the Company by all necessary
corporate action.
(iv) The consummation of the transactions contemplated by this
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) (certificate of incorporation) or bylaws of the Company, or any
indenture, agreement or other instrument to which the Company 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 Company's knowledge, any order, rule or regulation
applicable to the Company of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Company or its properties.
(v) There are no proceedings or investigations pending or, to the
Company's best knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Company or its properties: (A) asserting the invalidity of this
Agreement, (B) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or (C) seeking any determination or ruling that
might materially and adversely affect the performance by the Company of its
obligations under, or the validity or enforceability of, this Agreement.
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(vi) The representatives and warranties of the Company in Sections
_____________ of the Mortgage Loan Purchase Agreement are true and correct.
SECTION 2.11. Federal Income Tax Allocations. Net income of the Trust
for any month as determined for federal income tax purposes (and each item of
income, gain, loss and deduction entering into the computation thereof) shall be
allocated:
(a) among the Certificate Owners as of the first Record Date following
the end of such month, in proportion to their ownership of principal amount of
Trust Certificates on such date, net income in an amount up to the sum of (i)
the Certificateholders' Monthly Interest Distributable Amount for such month,
(ii) interest on the excess, if any, of the Certificateholders' Interest
Distributable Amount for the preceding Distribution Date over the amount in
respect of interest that is actually deposited in the Certificate Distribution
Account on such preceding Distribution Date, to the extent permitted by law, at
the Pass-Through Rate from such preceding Distribution Date through the current
Distribution Date, (iii) the portion of the market discount on the Mortgage
Loans accrued during such month that is allocable to the excess, if any, of the
initial aggregate principal amount of the Trust Certificates over their initial
aggregate issue price, (iv) any amount expected to be distributed to the
Certificateholders pursuant to the Servicing Agreement (to the extent not
previously allocated pursuant to this clause), [(v) any Certificateholders'
Prepayment Premium distributable to the Certificateholders with respect to such
month] and (vi) any other amounts of income payable to the Certificateholders
for such month; such sum to be reduced by any amortization by the Trust of
premium on Mortgage Loans that corresponds to any excess of the issue price of
Certificates over their principal amount; and
(b) to the Company, to the extent of any remaining net income.
If the net income of the Trust for any month is insufficient for the allocations
described in clause (a) above, subsequent net income shall first be allocated to
make up such shortfall before being allocated as provided in the preceding
sentence. Net losses of the Trust, if any, for any month as determined for
federal income tax purposes (and each item of income, gain, loss and deduction
entering into the computation thereof) shall be allocated to the Company to the
extent the Company is reasonably expected to bear the economic burden of such
net losses, and any remaining net losses shall be allocated among the
Certificate Owners as of the first Record Date following the end of such month
in proportion to their ownership of principal amount of Trust Certificates on
such Record Date. The Company is authorized to modify the allocations in this
paragraph if necessary or appropriate, in its sole discretion, for the
allocations to fairly reflect the economic income, gain or loss to the Company
or to the Certificate Owners, or as otherwise required by the Code.
SECTION 2.12. Conveyance of the Mortgage Loans. The Depositor,
concurrently with the execution and delivery hereof, does hereby transfer,
convey, sell and assign to the Trust, without recourse, all its right, title and
interest in and to (a) the Mortgage Loans, all interest accruing thereon and all
collections in respect thereof received on or after the Cut-Off Date; (b)
property which secured a Mortgage Loan and which has been acquired by
foreclosure or deed in lieu of foreclosure; (c) the interest of the Seller in
any insurance policies in respect of the Mortgage Loans; (d) the Mortgage Loan
Purchase Agreement, (including the right to purchase Additional Balances with
respect to the Initial Loans and the Additional Loans and all monies and
proceeds due thereon after
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the applicable Deposit Date, and the related Additional Balances in accordance
with the terms thereof); and (e) all proceeds of the foregoing. (Notwithstanding
the foregoing, the Depositor has no interest in and does not convey, and the
Trust shall not assume, the obligation under each related Loan Agreement to fund
Draws by the Mortgagor thereunder.)
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 Loans and the other property described above. In the event
that the transaction set forth herein is not deemed to be a sale, the Depositor
hereby grants to the Issuer 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.
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.01. Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.05 and until the issuance of
the Trust Certificates, the Depositor shall be the sole beneficiary of the
Trust.
SECTION 3.02. The Trust Certificates. The Trust Certificates shall be
issued in minimum denominations of $________ and in integral multiples of $____
in excess thereof; provided, however, that the Trust Certificates issued to the
Company pursuant to Section 3.10 may be issued in such denomination as required
to include any residual amount. The Trust Certificates shall be executed on
behalf of the Trust by manual or facsimile signature of an authorized officer of
the Owner Trustee. Trust 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 Agreement, notwithstanding that such individuals
or any of them shall have ceased to be so authorized prior to the authentication
and delivery of such Trust Certificates or did not hold such offices at the date
of authentication and delivery of such Trust Certificates.
A transferee of a Trust 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 Trust
Certificate duly registered in such transferee's name pursuant to Section 3.04.
SECTION 3.03. Authentication of Trust Certificates. Concurrently with
the initial sale of the Mortgage Loans to the Trust pursuant to the Servicing
Agreement, the Owner Trustee shall cause the Trust Certificates in an aggregate
principal amount equal to the Initial Certificate Balance to be executed on
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, any vice
president, secretary or any assistant treasurer, without further corporate
action by the Depositor, in authorized denominations. No Trust Certificate shall
entitle its Holder to any benefit under this Agreement or be valid for any
purpose unless there shall appear on such Trust Certificate a certificate of
authentication substantially In the form set forth in Exhibit A, executed by the
Owner Trustee or ___________, as the Owner Trustee's authenticating agent, by
manual signature; such authentication shall constitute conclusive
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evidence that such Trust Certificate shall have been duly authenticated and
delivered hereunder. All Trust Certificates shall be dated the date of their
authentication.
SECTION 3.04. Registration of Transfer and Exchange of Trust
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.08, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Trust Certificates and of
transfers and exchanges of Trust Certificates as herein provided. ___________
shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at
the office or agency maintained pursuant to Section 3.08, 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 Trust 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, Trust
Certificates may be exchanged for other Trust Certificates of authorized
denominations of a like aggregate amount upon surrender of the Trust
Certificates to be exchanged at the office or agency maintained pursuant to
Section 3.08.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Trust Certificate surrendered for registration of transfer or exchange
shall be cancelled and subsequently disposed of by the Owner Trustee in
accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust 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 Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make, and the Certificate Registrar shall not register
transfers or exchanges of, Trust Certificates for a period of ___ days preceding
the due date for any payment with respect to the Trust Certificates.
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates.
If (a) any mutilated Trust 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 Trust 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 that such Trust Certificate has been acquired by a
bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute and
the Owner Trustee or ____________, as the Owner Trustee's authenticating agent,
shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Trust Certificate, a new Trust Certificate
of like tenor and denomination. In connection with the issuance of any new Trust
Certificate under this Section, 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
Trust Certificate issued pursuant to this Section shall constitute conclusive
evidence of ownership in the Trust, as if
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originally issued, whether or not the lost, stolen or destroyed Trust
Certificate shall be found at any time.
SECTION 3.06. Persons Deemed Owners. Prior to due presentation of a
Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar or any Paying Agent may treat the Person in whose name any
Trust Certificate is registered in the Certificate Register as the owner of such
Trust Certificate for the purpose of receiving distributions pursuant to Section
5.02 and for all other purposes whatsoever, and none of the Owner Trustee, the
Certificate Registrar or any Paying Agent shall be bound by any notice to the
contrary.
SECTION 3.07. Access to List of Certificateholders' Names and
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
Servicer and the Depositor, within ___ days after receipt by the Owner Trustee
of a written request therefor from the Servicer or the Depositor, a list, in
such form as the Servicer or the Depositor may reasonably require, of the names
and addresses of the Certificateholders as of the most recent Record Date. If
three or more Certificateholders or one or more Holders of Trust Certificates
evidencing not less than ___% of the Certificate Balance apply in writing to the
Owner Trustee, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Trust Certificates and such application is
accompanied by a copy of the communication that such applicants propose to
transmit, then the Owner Trustee shall, within ___ Business Days after the
receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each Holder, by
receiving and holding a Trust Certificate, shall be deemed to have agreed not to
hold any of the Depositor, the Company, 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 3.08. Maintenance of Office or Agency. The Owner Trustee shall
maintain in the Borough of Manhattan, The City of New York, an office or offices
or agency or agencies where Trust 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 Trust Certificates and the Basic Documents
may be served. The Owner Trustee initially designates ___________ as its office
for such purposes. The Owner Trustee shall give prompt written notice to the
Company and to the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
SECTION 3.09. Appointment of Paying Agent. The Paying Agent shall make
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.02 and shall report the amounts of such distributions to
the Owner Trustee. Any Paying Agent shall have the revocable power to withdraw
funds from the Certificate Distribution Account for the purpose of making the
distributions referred to above. The Owner Trustee may revoke such power and
remove the Paying Agent if the Owner Trustee determines in its sole discretion
that the Paying Agent shall have failed to perform its obligations under this
Agreement in any material respect. The Paying Agent initially shall be
___________, and any co-paying agent chosen by _____________ and acceptable to
the Owner Trustee. _____________ shall be permitted to resign as Paying Agent
upon ___ days' written notice to the Owner Trustee. In the event that _________
shall no longer be the Paying Agent, the Owner Trustee shall appoint a successor
to act as Paying Agent (which shall be a bank or trust company). The Owner
Trustee shall cause such successor Paying Agent or any additional
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Paying Agent appointed by the Owner Trustee to execute and deliver to the Owner
Trustee an instrument in which such successor Paying Agent or additional Paying
Agent shall agree with the Owner Trustee that, as Paying Agent, such successor
Paying Agent or additional Paying Agent will hold all sums, if any, held by it
for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. The Paying Agent shall return all unclaimed funds to the
Owner Trustee and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Owner Trustee. The provisions of
Sections 7.01, 7.03, 7.04 and 8.01 shall apply to the Owner Trustee also in its
role as Paying Agent, for so long as the Owner Trustee shall act as Paying Agent
and, to the extent applicable, to any other paying agent appointed hereunder.
Any reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise.
SECTION 3.10. Ownership by Company of Trust Certificates. The Company
shall on the Closing Date purchase from the Underwriters Trust Certificates
representing at least __% of the Initial Certificate Balance and shall
thereafter retain beneficial and record ownership of Trust Certificates
representing at least __% of the Certificate Balance. Any attempted transfer of
any Trust Certificate that would reduce such interest of the Company below __%
of the Certificate Balance shall be void. The Owner Trustee shall cause any
Trust Certificate issued to the Company to contain a legend stating "THIS
CERTIFICATE IS NON-TRANSFERABLE".
SECTION 3.11. Book-Entry Trust Certificates. The Trust Certificates,
upon original issuance, will be issued in the form of a typewritten Trust
Certificate or Trust Certificates representing Book-Entry Trust Certificates, to
be delivered to The Depository Trust Company, the initial Clearing Agency, by,
or on behalf of, the Trust; provided, however, that one Definitive Trust
Certificate may be issued to the Company pursuant to Section 3.10. Such Trust
Certificate or Trust Certificates shall initially be registered on the
Certificate Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Certificate Owner will receive a definitive Trust
Certificate representing such Certificate Owner's interest in such Trust
Certificate, except as provided in Section 3.13. Unless and until definitive,
fully registered Trust Certificates (the "Definitive Trust Certificates") have
been issued to Certificate Owners pursuant to Section 3.13:
(a) The provisions of this Section shall be in full force and effect;
(b) The Certificate Registrar and the Owner Trustee shall be entitled
to deal with the Clearing Agency for all Purposes of this Agreement (including
the payment of principal of and interest on the Trust Certificates and the
giving of instructions or directions hereunder) as the sole Holder of the Trust
Certificates and shall have no obligation to the Certificate Owners;
(c) To the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control;
(d) The rights of Certificate Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Certificate Depository Agreement,
unless and until Definitive Trust Certificates are issued pursuant to Section
3.13, the initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and
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receive and transmit payments of principal of and interest on the Trust
Certificates to such Clearing Agency Participants; and
(e) Whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Trust Certificates
evidencing a specified percentage of the Certificate Balance, the Clearing
Agency shall be deemed to represent such percentage only to the extent that it
has received instructions to such effect from Certificate Owners and/or Clearing
Agency Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Trust Certificates and has
delivered such instructions to the Owner Trustee.
SECTION 3.12. Notices to Clearing Agency. Whenever a notice or other
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Trust Certificates shall have been issued to Certificate
Owners pursuant to Section 3.13, the Owner Trustee shall give all such notices
and communications specified herein to be given to Certificateholders to the
Clearing Agency, and shall have no obligations to the Certificate Owners.
SECTION 3.13. Definitive Trust Certificates. If (i) the Administrator
advises the Owner Trustee in writing that the Clearing Agency is no longer
willing or able to properly discharge its responsibilities with respect to the
Trust Certificates and the Administrator is unable to locate a qualified
successor, (ii) the Administrator at its option advises the Owner Trustee in
writing that it elects to terminate the book-entry system through the Clearing
Agency or (iii) after the occurrence of an Event of Default or a Servicer
Default, Certificate Owners representing beneficial interests aggregating at
least a majority of the Certificate Balance advise the Clearing Agency in
writing that the continuation of a book-entry system through the Clearing Agency
is no longer in the best interest of the Certificate Owners, then the Clearing
Agency shall notify all Certificate Owners and the Owner Trustee of the
occurrence of any such event and of the availability of the Definitive Trust
Certificates to Certificate Owners requesting the same. Upon surrender to the
Owner Trustee of the typewritten Trust Certificate or Trust Certificates
representing the Book-Entry Trust Certificates by the Clearing Agency,
accompanied by registration instructions, the Owner Trustee shall execute and
authenticate the Definitive Trust Certificates in accordance with the
instructions of the Clearing Agency. Neither the Certificate Registrar nor the
Owner 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 Trust Certificates, the Owner
Trustee shall recognize the Holders of the Definitive Trust Certificates as
Certificateholders. The Definitive Trust Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Owner Trustee, as evidenced by its execution thereof.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.01. Prior Notice to Owners with Respect to Certain Matters.
With respect to the following matters, the Owner Trustee shall not take action
unless at least ___ days before the taking of such action, the Owner Trustee
shall have notified the Certificateholders in writing of the proposed action and
the Owners shall not have notified the Owner Trustee in writing prior to the
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_____ day after such notice is given that such Owners 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 the Mortgage Loans) 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
the Mortgage Loans;
(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 Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the Owners;
(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 Owners; or
(f) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar, or the consent to the assignment by the Note
Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of its
obligations under the Indenture or this Agreement, as applicable.
SECTION 4.02. Action by Owners with Respect to Certain Matters. The
Owner Trustee shall not have the power, except upon the direction of the Owners,
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 Section 7.01 thereof or (d) except as expressly provided
in the Basic Documents, sell the Mortgage Loans 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 Owners.
SECTION 4.03. Action by Owners 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
Owners and the delivery to the Owner Trustee by each such Owner of a certificate
certifying that such Owner reasonably believes that the Trust is insolvent.
SECTION 4.04. Restrictions on Owners' Power. The Owners shall not
direct the Owner Trustee to take or to refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the Owner
Trustee under this 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.
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SECTION 4.05. Majority Control. Except as expressly provided herein,
any action that may be taken by the Owners under this Agreement may be taken by
the Holders of Trust Certificates evidencing not less than a majority of the
Certificate Balance. Except as expressly provided herein, any written notice of
the Owners delivered pursuant to this Agreement shall be effective if signed by
Holders of Trust Certificates evidencing not less than a majority of the
Certificate Balance at the time of the delivery of such notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.01. Establishment of Trust Account. The Owner Trustee, for
the benefit of the Certificateholders, shall establish and maintain in the name
of the Trust an Eligible Deposit Account (the "Certificate Distribution
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Certificate Distribution Account and
in all proceeds thereof. Except as otherwise expressly provided herein, the
Certificate Distribution Account shall be under the sole dominion and control of
the Owner Trustee for the benefit of the Certificateholders. If, at any time,
the Certificate Distribution Account ceases to be an Eligible Deposit Account,
the Owner Trustee (or the Depositor on behalf of the Owner Trustee, if the
Certificate Distribution Account is not then held by the Owner Trustee or an
affiliate thereof) shall within ___ Business Days (or such longer period, not to
exceed ___ calendar days, as to which each Rating Agency may consent) establish
a new Certificate Distribution Account as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new Certificate Distribution
Account.
SECTION 5.02. Application of Trust Funds. (a) On each Distribution Date,
the Owner Trustee will distribute to Certificateholders, on a pro rata basis,
amounts deposited in the Certificate Distribution Account.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee by
the Servicer pursuant to Section 4.01 of the Servicing Agreement with respect to
such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to an Owner, such tax shall reduce the amount
otherwise distributable to the Owner in accordance with this Section. The Owner
Trustee is hereby authorized and directed to retain from amounts otherwise
distributable to the Owners 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 an Owner
shall be treated as cash distributed to such Owner at the time it is withheld by
the Trust and remitted to the appropriate taxing authority. If there is a
possibility that withholding
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tax is Payable with respect to a distribution (such as a distribution to a
non-U.S. Owner), the Owner Trustee may in its sole discretion withhold such
amounts in accordance with this paragraph (c).
SECTION 5.03. Method of Payment. Subject to Section 9.01(c),
distributions required to be made to Certificateholders on any Distribution Date
shall be made to each Certificateholder of record on the preceding Record Date
either by 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 ____ Business Days prior to such Distribution Date
and such Holder's Trust Certificates in the aggregate evidence a denomination of
not less than $_________, or if not, by check mailed to such Certificateholder
at the address of such holder appearing in the Certificate Register.
SECTION 5.04. No Segregation of Moneys; No Interest. Subject to
Sections 5.01 and 5.02, moneys received by the Owner Trustee hereunder need not
be segregated in any manner except to the extent required by law or the
Servicing Agreement and may be deposited under such general conditions as may be
prescribed by law, and the Owner Trustee shall not be liable for any interest
thereon.
SECTION 5.05. Accounting and Reports to the Noteholders, Owners, the
Internal Revenue Service and Others. The Owner Trustee shall (a) maintain (or
cause to be maintained) the books of the Trust on a calendar year basis and the
accrual method of accounting, (b) deliver to each Owner, as may be required by
the Code and applicable Treasury Regulations, such information as may be
required (including Schedule K-1) to enable each Owner to prepare its federal
and state income tax returns, (c) file such tax returns relating to the Trust
(including a partnership information return, IRS Form 1065) and make such
elections as from time to time may be required or appropriate under any
applicable state or federal statute or any rule or regulation thereunder so as
to maintain the Trust's characterization as a partnership for federal income tax
purposes, (d) cause such tax returns to be signed in the manner required by law
and (e) collect or cause to be collected any withholding tax as described in and
in accordance with Section 5.02(c) with respect to income or distributions to
Owners. The Owner Trustee shall elect under Section 1278 of the Code to include
in income currently any market discount that accrues with respect to the
Mortgage Loans. The Owner Trustee shall not make the election provided under
Section 754 of the Code.
SECTION 5.06. Signature on Returns; Tax Matters Partner. (a) The Owner
Trustee shall sign on behalf of the Trust the tax returns of the Trust, unless
applicable law requires an Owner to sign such documents, in which case such
documents shall be signed by the Company.
(b) The Company shall be designated the "tax matters partner" of the
Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
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ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.01. 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, in each case, in such form as the
Company 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 recommends with
respect to the Basic Documents.
SECTION 6.02. 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 Agreement and the Basic Documents to which the Trust is a
party and to administer the Trust in the interest of the Owners, subject to the
Basic Documents and in accordance with the provisions of this 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 any act or to discharge any duty of the Owner Trustee
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 6.03. Action upon Instruction. (a) Subject to Article IV and in
accordance with the terms of the Basic Documents, the Owners 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 Owners
pursuant to Article IV.
(b) 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 Agreement or under
any Basic Document, the Owner Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Owners 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 Owners 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 ___ 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 Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
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(d) In the event that the Owner Trustee is unsure as to the application
of any provision of this 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 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 may give notice (in such form as
shall be appropriate under the circumstances) to the Owners requesting
instruction and, to the extent that the Owner Trustee acts or refrains from
acting in good faith in accordance with any such instruction received, the Owner
Trustee shall not be liable, on account of such action or inaction, to any
Person. If the Owner Trustee shall not have received appropriate instruction
within ___ 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 Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
SECTION 6.04. No Duties Except as Specified in this Agreement 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 by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.03; and no implied duties or obligations
shall be read into this 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 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 6.05. No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this 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 6.03.
SECTION 6.06. Restrictions. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section
2.03 or (b) that, to the actual knowledge of the Owner Trustee, would result in
the Trust's becoming taxable as a corporation for federal income tax purposes.
The Owners shall not direct the Owner Trustee to take action that would violate
the provisions of this Section.
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ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.01. 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 Agreement. The Owner
Trustee also agrees to disburse all moneys actually received by it constituting
part of the Owner Trust Estate upon the terms of the Basic Documents and this
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 or negligence or (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 7.03 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 for any error of judgment
made by a Trust Officer of the Owner Trustee;
(b) 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 any Owner;
(c) No provision of this 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 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;
(d) 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 Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Depositor or the Company 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, other than the certificate of
authentication on the Trust Certificates, and the Owner Trustee shall in no
event assume or incur any liability, duty, or obligation to any Noteholder or to
any Owner, other than as expressly provided for herein or expressly agreed to in
the Basic Documents;
(f) The Owner Trustee shall not be liable for the default or misconduct
of the Administrator, the Seller or Depositor, the Company, the 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 Agreement or the Basic Documents that are required to be
performed by the Administrator under the Administration Agreement, the Indenture
Trustee under the Indenture or the Servicer or the Seller or Depositor under the
Servicing Agreement; and
(g) The Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement
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or otherwise or in relation to this Agreement or any Basic Document, at the
request, order or direction of any of the Owners, unless such Owners 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 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 7.02. Furnishing of Documents. The Owner Trustee shall furnish
to the Owners promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Basic Documents.
SECTION 7.03. Representations and Warranties. The Owner Trustee
hereby represents and warrants to the Company, for the benefit of the Owners,
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 Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this 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.
SECTION 7.04. 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 Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and
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the Owner Trustee shall not be liable for the conduct or misconduct of such
agents or attorneys if such agents or attorneys shall 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 Agreement or any Basic Document.
SECTION 7.05. 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 Agreement or any Basic Document shall look only to the
Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
Mortgage Loans. The recitals contained herein and in the Certificates (other
than the signature and countersignature of the Owner Trustee on the Trust
Certificates) shall be taken as the statements of the Depositor and the Company,
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
Agreement, of any Basic Document or of the Trust Certificates (other than the
signature and countersignature of the Owner Trustee on the Trust Certificates)
or the Notes, or of any Mortgage Loan or related documents. The Owner Trustee
shall at no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Mortgage Loan, or for or with
respect to the sufficiency of the Owner Trust Estate or its ability to generate
the payments to be distributed to Certificateholders under this Agreement or the
Noteholders under the Indenture, including, without limitation: the existence,
condition and ownership of any property securing a Mortgage Loan; the existence
and enforceability of any insurance thereon; the validity of the assignment of
any Mortgage Loan to the Trust or of any intervening assignment; the performance
or enforcement of any Mortgage Loan; the compliance by the Depositor, the
Company or the Servicer 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 Indenture Trustee or the
Servicer or any subservicer taken in the name of the Owner Trustee.
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledges of Trust Certificates or Notes and may deal with the Depositor, the
Company, the Administrator, the Indenture Trustee and the Servicer in banking
transactions with the same rights as it would have if it were not Owner Trustee.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.01. 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 between the Depositor and the
Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the
Depositor for its other reasonable expenses hereunder, including the
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reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder.
SECTION 8.02. Indemnification. The Depositor shall be liable as primary
obligor for, and shall indemnify 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 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, except only that the Depositor shall not be
liable for or required to indemnify an Indemnified Party from and against
Expenses arising or resulting from any of the matters described in the third
sentence of Section 7.01. The indemnities contained in this Section shall
survive the resignation or termination of the Owner Trustee or the termination
of this Agreement. In any 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 shall be subject to the approval of the Depositor, which approval
shall not be unreasonably withheld.
SECTION 8.03. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.01. Termination of Trust Agreement. (a) This Agreement (other
than Article VIII) and the Trust shall terminate and be of no further force or
effect (i) upon the final distribution by the Owner Trustee of all moneys or
other property or proceeds of the Owner Trust Estate in accordance with the
terms of the Indenture, the Servicing Agreement and Article V or (ii) at the
time provided in Section 9.02. The bankruptcy, liquidation, dissolution, death
or incapacity of any Owner, other than the Company as described in Section 9.02,
shall not (x) operate to terminate this Agreement or the Trust or (y) entitle
such Owner'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 Owner Trust Estate or (z) otherwise affect the rights,
obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a), none of the Depositor, the
Company or any Owner shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates to
the Paying Agent for payment of the final distribution and cancellation, shall
be given by the Owner Trustee by letter to Certificateholders
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mailed within ____ Business Days of receipt of notice of such termination from
the Servicer stating (i) the Distribution Date upon or with respect to which
final payment of the Trust Certificates shall be made upon presentation and
surrender of the Trust Certificates at the office of the Paying Agent therein
designated, (ii) the amount of any such final payment and (iii) that the Record
Date otherwise applicable to such Distribution Date is not applicable, payments
being made only upon presentation and surrender of the Trust Certificates at the
office of the Paying Agent therein specified. The Owner Trustee shall give such
notice to the Certificate Registrar (if other than the Owner Trustee) and the
Paying Agent at the time such notice is given to Certificateholders. Upon
presentation and surrender of the Trust Certificates, the Paying Agent shall
cause to be distributed to Certificateholders amounts distributable on such
Distribution Date pursuant to Section 5.02.
In the event that all of the Certificateholders shall not surrender
their Trust Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Trust Certificates for cancellation and receive the final distribution with
respect thereto. If within one year after the second notice all the Trust
Certificates shall not have been surrendered for cancellation, the Owner Trustee
may take appropriate steps, or may appoint an agent to take appropriate steps,
to contact the remaining Certificateholders concerning surrender of their Trust
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Any funds remaining in the
Trust after exhaustion of such remedies shall be distributed by the Owner
Trustee to the Company.
(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 of the Business Trust Statute.
SECTION 9.02. Dissolution upon Bankruptcy of the Company. In the event
that an Insolvency Event shall occur with respect to the Company, this Agreement
shall be terminated in accordance with Section 9.01 ___ days after the date of
such Insolvency Event, unless, before the end of such ___-day period, the Owner
Trustee shall have received written instructions from (a) Holders of
Certificates (other than the Company) representing more than ___% of the
Certificate Balance (not including the Certificate Balance of the Trust
Certificates held by the Company) and (b) Holders of Notes representing more
than ___% of the Outstanding Amount of the Class (____) Notes, to the effect
that each such party disapproves of the liquidation of the Mortgage Loans and of
the Trust. Promptly after the occurrence of any Insolvency Event with respect to
the Company, (A) the Company shall give the Indenture Trustee and the Owner
Trustee written notice of such Insolvency Event, (B) the Owner Trustee shall,
upon the receipt of such written notice from the Company, give prompt written
notice to the Certificateholders and the Indenture Trustee, of the occurrence of
such event and (C) the Indenture Trustee shall, upon receipt of written notice
of such Insolvency Event from the Owner Trustee or the Company, give prompt
written notice to the Noteholders of the occurrence of such event; 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 9.02. 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 Trust Accounts and the Certificate
Distribution Account) and, on behalf of the Company, in a commercially
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reasonable manner and on commercially reasonable terms. The proceeds of such a
sale of the assets of the Trust shall be treated as collections under the
Servicing Agreement.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.01. 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 $_______________ and
subject to supervision or examination by federal or state authorities; and
having (or having a parent that has) a rating of at least _____________ by
___________. 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, the Owner Trustee shall resign immediately in
the manner and with the effect specified in Section 10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator. Upon receiving such
notice of resignation, the Administrator shall promptly appoint a successor
Owner Trustee by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Owner Trustee and one cop r to the successor
Owner Trustee. If no successor Owner Trustee shall have seen so appointed and
have accepted appointment within ___ 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 10.01 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.
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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 10.03 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.
SECTION 10.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Administrator and to its predecessor Owner Trustee an instrument accepting
such appointment under this 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 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 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 unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Administrator shall fail to mail such notice within ___ 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 10.04. Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee 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 Owner Trustee shall be a party, or any
corporation 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 corporation shall be eligible pursuant to
Section 10.01 and, provided, further, that the Owner Trustee shall mail notice
of such merger or consolidation to the Rating Agencies.
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this 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 separate 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
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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 ___ 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 under this Agreement shall be
required to meet the terms of eligibility as a successor Owner Trustee pursuant
to Section 10.01 and no notice of the appointment of any co-trustee or separate
trustee shall be required pursuant to Section 10.03.
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 Agreement shall be personally liable by
reason of any act or omission of any other trustee under this 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 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 Agreement, specifically including every provision of this 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
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 XI
MISCELLANEOUS
SECTION 11.01. Supplements and Amendments. This Agreement may be
amended by the Depositor, the Company and the Owner Trustee, with prior written
notice to the Rating Agencies, without the consent of any of the Noteholders or
the Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any material respect the interests
of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor,
the Company and the Owner Trustee, with prior written notice to the Rating
Agencies, with the consent of the Holders (as defined in the Indenture) of Notes
evidencing not less than a majority of the Principal Balance of the Notes and
the consent of the Holders of Certificates evidencing not less than a majority
of the Certificate Balance, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Mortgage Loans or distributions that shall be
required to be made for the benefit of the Noteholders or the Certificateholders
or (b) reduce the aforesaid percentage of the Principal Balance of the Notes and
the Certificate Balance required to consent to any such amendment, without the
consent of the holders of all the outstanding Notes and Certificates.
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 and each
of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders,
Noteholders or the Indenture Trustee pursuant to this Section 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
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.
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.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment that affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
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SECTION 11.02. No Legal Title to Owner Trust Estate in Owners. The
Owners shall not have legal title to any part of the Owner Trust Estate. The
Owners shall be entitled to receive distributions with respect to their
undivided ownership 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 Owners to and in their ownership interest in the Owner Trust Estate shall
operate to terminate this 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 11.03. Limitations on Rights of Others. Except for Section
2.07, the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Company, the Owners, the Administrator and, to the
extent expressly provided herein, the Indenture Trustee and the Noteholders, and
nothing in this 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
Agreement or any covenants, conditions or provisions contained herein.
SECTION 11.04. 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 by the intended recipient or ____ Business Days after
mailing if mailed by certified mail, postage prepaid (except that notice to the
Owner Trustee shall be deemed given only upon actual receipt by the Owner
Trustee), if to the Owner Trustee, addressed to the Corporate Trust Office; if
to the Depositor, addressed to Beneficial Mortgage Services Inc., One Christina
Centre, 301 North Walnut Street, Wilmington, Delaware 19801, Attention:
__________; if to the Company, 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 ln the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
SECTION 11.05. Severability. Any provision of this 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 11.06. Separate Counterparts. This 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 11.07. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
Depositor, the Company, the Owner Trustee and its successors and each Owner and
its successors and permitted assigns, all as herein provided. Any request,
notice, direction, consent, waiver or other instrument or action by an Owner
shall bind the successors and assigns of such Owner.
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SECTION 11.08. Covenants of the Company. The Company will not at any
time institute against the Trust any bankruptcy proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Trust Certificates, the Notes, the Trust Agreement
or any of the Basic Documents.
SECTION 11.09. No Petition. The Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Trust Certificate, and the
Indenture Trustee and each Noteholder, by accepting the benefits of this
Agreement, hereby covenant and agree that they will not at any time institute
against the Company or the Trust, or join in any institution against the Company
or the Trust of, any bankruptcy proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating to
the Trust Certificates, the Notes, this Agreement or any of the Basic Documents.
SECTION 11.10. No Recourse. Each Certificateholder by accepting a Trust
Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Depositor, the Servicer, the Company, 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 as may
be expressly set forth or contemplated in this Agreement, the Trust Certificates
or the Basic Documents.
SECTION 11.11. 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 11.12. GOVERNING LAW. THIS 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 11.13. Depositor Payment Obligation. The Depositor shall be
responsible for payment of the Administrator's fees under the Administration
Agreement and shall reimburse the Administrator for all expenses and liabilities
of the Administrator incurred thereunder.
* * * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
BENEFICIAL MORTGAGE SERVICES, INC.,
as Depositor,
By:________________________________
Name:
Title:
,
__________________________,
By:________________________________
Name:
Title:
___________________________________ ,
not in its individual capacity but
solely as Owner Trustee,
By:________________________________
Name:
Title:
- 31 -
<PAGE>
EXHIBIT A
FORM OF TRUST CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NUMBER $ _____________
R-_____________ CUSIP NO. ____________
_________________ LOAN TRUST _____________-__
________% ____________ LOAN ASSET-BACKED CERTIFICATES, evidencing a
fractional undivided beneficial ownership interest in the Trust, as defined
below, the property of which includes a pool of (fixed-rate) (adjustable rate)
________________________________ loans caused to be sold to the Trust by
__________ pursuant to the Mortgage Loan Purchase Agreement.
(This Trust Certificate does not represent an interest in or obligation of
BENEFICIAL MORTGAGE SERVICES, INC., or any of their respective affiliates,
except to the extent described below.)
THIS CERTIFIES THAT _____________________ is the registered owner of
_________________ DOLLARS nonassessable, fully paid, fractional undivided
interest in LOAN TRUST _____-__ (the "Trust") formed by BENEFICIAL MORTGAGE
SERVICES, INC., a Delaware corporation (the "Depositor"), and _____________, a
_________ corporation (the "Company").
A-1
<PAGE>
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned Trust
Agreement.
- -----------------, -----------------,
as Owner Trustee or as Owner Trustee
by:_____________________ by:_______________________
Authorized Signatory a Authenticating Agent
by: ______________________
Authorized Signatory
The Trust was created pursuant to a Trust Agreement, dated as of___________,
_____ (the "Trust Agreement"), among the Depositor, the Company and
_______________, as owner trustee (the "Owner Trustee"), a summary of certain of
the pertinent provisions of which is set forth below. To the extent not
otherwise defined herein, the capitalized terms used herein have the meanings
assigned to them in the Trust Agreement or the Servicing Agreement dated as of
__________, _____ (as amended and supplemented from time to time, the "Servicing
Agreements, among the Trust, the Depositor and _____________, as servicer (the
"Servicer"), as applicable.
This Certificate is one of a duly authorized issue of Loan Asset-Backed
Certificates (herein called the "Trust Certificates"). Also issued under the
Indenture dated as of ____________, _____ between the Trust and _________, as
indenture trustee, are the ____________ classes of Notes designated as
___________ (collectively, the "Notes"). This Trust 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 Trust Certificate by virtue of its
acceptance hereof assents and by which such Holder is bound. The property of the
Trust consists of a pool of (adjustable-) (fixed-) rate __________________
________________________ loans made or to be made in the future (the "Mortgage
Loans"), __________________________________________________loan agreements [and
secured primarily by second (deeds of trust) (mortgages) on residential
properties that are primarily one- to four-family properties] (the "Mortgaged
Properties"); the collections in respect of the Mortgage Loans received after
the Cut-Off Date; property that secured a Mortgage Loan which has been acquired
by foreclosure or deed in lieu of foreclosure; (a surety bond) (a letter of
credit); an assignment of the Depositor's rights under the Mortgage Loan
Purchase Agreement; rights under certain hazard insurance policies covering the
Mortgaged Properties; and certain other property. (The rights of the Holders of
the Trust Certificates are subordinated to the rights of the Holders of the
Notes, as set forth in the Servicing Agreement.)
Under the Trust Agreement, there will be distributed on the
____________ day of each month or, if such ____________ day is not a Business
Day, the next Business Day (each, a "Distribution Date"), commencing on, _____,
to the Person in whose name this Trust Certificates is registered at the close
of business on the first day of the month or, if Definitive Certificates are
issued, the _________ day of the prior month (the "Record Date"), such
Certificateholder's fractional undivided
A-2
<PAGE>
interest in the amount to be distributed to Certificateholders on such
Distribution Date. No distributions of principal will be made on any Certificate
until all of the Notes have been paid in full.
(The Holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders as described in the Servicing
Agreement and the Indenture.)
It is the intent of the Depositor, the Company, the Servicer 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 partnership and the Certificateholders (including the Company) will be treated
as partners in that partnership. The Company and the other Certificateholders,
by acceptance of a Trust Certificate, agree to treat, and to take no action
inconsistent with the treatment of, the Trust Certificates for such tax purposes
as partnership interests in the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of a
Trust Certificate or, in the case of a Certificate Owner, a beneficial interest
in a Trust Certificate, covenants and agrees that such Certificateholder or
Certificate Owner, as the case may be, will not at any time institute against
the Company, or join in any institution against the Company 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 Trust Certificates, the
Notes, the Trust Agreement or any of the Basic Documents.
Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the Owner Trustee by wire transfer or check mailed to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of this Trust Certificate or the making of any notation hereon,
except that with respect to Trust Certificates registered on the Record Date in
the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Except as otherwise provided in
the Trust Agreement and notwithstanding the above, the final distribution on
this Trust Certificate will be made after due notice by the Owner Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Trust Certificate at the office or agency maintained for that purpose by the
Owner Trustee in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Trust
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.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Trust Certificate shall not entitle the Holder hereof to any benefit under
the Trust Agreement or the Servicing Agreement or be valid for any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF
A-3
<PAGE>
LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Trust Certificate to be duly
executed.
_______________ LOAN TRUST ___________
by: ( ), not in its
individual capacity but solely as Owner Trustee
Dated: by: ______________________________
Authorized Signatory
(REVERSE OF TRUST CERTIFICATE)
The Trust Certificates do not represent an obligation of, or an
interest in, the Depositor, the Servicer, the Company, 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 Trust 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 Loans (and certain other amounts), all as more specifically set forth
herein and in the Servicing Agreement. A copy of each of the Servicing Agreement
and 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, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the Company and the rights of the Certificateholders under the
Trust Agreement at any time by the Depositor, the Company and the Owner Trustee
with the consent of the Holders of the Trust Certificates and the Notes, each
voting as a class, evidencing not less than a majority of the Certificate
Balance and the outstanding principal balance of the Notes of each such class.
Any such consent by the Holder of this Trust Certificate shall be conclusive and
binding on such Holder and on all future Holders of this Trust Certificate and
of any Trust Certificate issued upon the transfer hereof or in exchange
hereafter or in lieu hereof, whether or not notation of such consent is made
upon this Trust Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Trust Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in the
Certificate Register upon surrender of this Trust Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer in form satisfactory to the
Owner Trustee and the Certificate Registrar duly executed by the Holder hereof
or such Holder's attorney duly authorized in writing,
A-4
<PAGE>
and thereupon one or more new Trust 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 ____________, New York, New York.
Except as provided in the Trust Agreement, the Trust Certificates are
issuable only as registered Trust Certificates without coupons in denominations
of $___________ and in integral multiples of $___________ in excess thereof. As
provided in the Trust Agreement and subject to certain limitations therein set
forth, Trust Certificates are exchangeable for new Trust 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 Registrar and any agent of the Owner
Trustee 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 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 upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement and
the Servicing Agreement and the disposition of all property held as part of the
Owner Trust Estate. The Servicer of the Mortgage Loans may at its option
purchase the Owner Trust Estate at a price specified in the Servicing Agreement,
and such purchase of the Mortgage Loans and other property of the Trust will
effect early retirement of the Trust Certificates; however, such right of
purchase is exercisable only as of the last day of any Collection Period as of
which the Pool Balance is less than or equal to ______% of the Original Pool
Balance.
The Trust Certificates may not be acquired by (a) an employee benefit
plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of
Title I of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c)
any entity whose underlying assets include plan assets by reason of a Plan's
investment in the entity (each, a "Benefit Plan"). By accepting and holding this
Trust Certificate, the Holder hereof shall be deemed to have represented and
warranted that it is not a Benefit Plan.
A-5
<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 Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
_______________________________________________________________
to transfer said Trust Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
__________________________*
Signature Guaranteed
__________________________*
Signature Guaranteed
_________________________
* NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Trust 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-6
<PAGE>
EXHIBIT B
CERTIFICATE OF TRUST OF
____________LOAN TRUST ________
THIS Certificate of Trust of _______________ LOAN TRUST _____ (the
"Trust"), dated ___________, _____, is being duly executed and
(___________________), a ___________________, as trustee, to form a business
trust under the Delaware Business Trust Act (12 Del. Code, Section 3801 et
seq.).
1. Name. The name of the business trust formed hereby is ___________
LOAN TRUST _____-__ .
2. Delaware Trustee. The name and business address of the trustee of
the Trust in the State of Delaware is ____________, _____________, Delaware
___________, 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 _________,
_____.
By:________________________________
Name:
Title:
B-1
<PAGE>
EXHIBIT C
(Form of Certificate Depository Agreement)
C-1
<PAGE>
EXHIBIT D
MORTGAGE LOAN SCHEDULE
D-1
<PAGE>
Exhibit 4.3
_____________________ LOAN TRUST ____- _,
Issuer
AND
(-------------------)
INDENTURE TRUSTEE
--------------------------------------------
INDENTURE
Dated as of ________, ____
---------------------------------------------
ASSET BACKED NOTES
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS....................... 1
Section 1.01. Definitions.............................................1
Section 1.02. Incorporation by Reference of
Trust Indenture Act.....................................2
Section 1.03. Rules of Construction...................................2
ARTICLE II
ORIGINAL ISSUANCE OF NOTES.................3
Section 2.01. Form....................................................3
Section 2.02. Execution, Authentication and Delivery..................3
ARTICLE III
COVENANTS........................ 4
Section 3.01. Collection of Payments on Mortgage Loan
Accounts...............................................4
Section 3.02. Maintenance of Office or Agency........................4
Section 3.03. Money for Payments To Be Held in Trust;
Paying Agent; Certificate Paying Agent.................4
Section 3.04. Existence..............................................5
Section 3.05. Payment of Principal and Interest; Defaulted Interest..5
Section 3.06. Protection of Trust Estate.............................7
Section 3.07. Opinions as to Trust Estate............................8
Section 3.08. Performance of Obligations; Servicing Agreement........8
Section 3.09. Negative Covenants....................................10
Section 3.10. Annual Statement as to Compliance.....................10
Section 3.11. Recording of Assignments..............................11
Section 3.12. Representations and Warranties Concerning the
Mortgage Loans........................................11
Section 3.13. Indenture Trustee's Review of Related Documents.......11
Section 3.14. Trust Estate; Related Documents.......................12
Section 3.15. Amendments to Servicing Agreement.....................13
Section 3.16. Master Servicer as Agent and Bailee of Indenture
Trustee.............................................. 13
Section 3.17. Investment Company Act............................... 13
Section 3.18. Issuer May Consolidate, etc., Only on Certain Terms.. 13
Section 3.19. Successor or Transferee.............................. 15
Section 3.20. No Other Business.................................... 15
i
<PAGE>
Section 3.21. No Borrowing......................................... 15
Section 3.22. Guarantees, Loans, Advances and Other Liabilities.... 15
Section 3.23. Capital Expenditures................................. 15
Section 3.24. Restricted Payments.................................. 15
Section 3.25. Notice of Events of Default.......................... 16
Section 3.26. Further Instruments and Acts......................... 16
Section 3.27. Statements to Noteholders............................ 16
Section 3.28. Grant of the Additional Loans........................ 16
Section 3.29. Determination of Note Rate........................... 17
Section 3.30. Payments under the Credit Enhancement Instrument..... 17
Section 3.31. Replacement Credit Enhancement Instrument............ 17
ARTICLE IV
THE NOTES; SATISFACTION AND DISCHARGE OF INDENTURE... 18
Section 4.01. The Notes(; Increase of Maximum Variable
Funding Balance; Additional Variable Funding Notes).. 18
Section 4.02. Registration of and Limitations on Transfer
and Exchange of Notes; Appointment of Certificate.... 20
Section 4.03. Mutilated, Destroyed, Lost or Stolen Notes........... 21
Section 4.04. Persons Deemed Owners................................ 22
Section 4.05. Cancellation......................................... 22
Section 4.06. Book-Entry Notes..................................... 23
Section 4.07. Notices to Depository................................ 23
Section 4.08. Definitive Notes..................................... 23
Section 4.09. Tax Treatment........................................ 24
Section 4.10. Satisfaction and Discharge of Indenture.............. 24
Section 4.11. Application of Trust Money........................... 25
Section 4.12. Subrogation and Cooperation.......................... 25
Section 4.13. Repayment of Moneys Held by Paying Agent............. 26
ARTICLE V
REMEDIES........................ 26
Section 5.01. Events of Default.................................... 26
Section 5.02. Acceleration of Maturity; Rescission and Annulment... 26
Section 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee..................... 27
Section 5.04. Remedies; Priorities................................. 29
Section 5.05. Optional Preservation of the Trust Estate............ 30
Section 5.06. Limitation of Suits.................................. 31
Section 5.07. Unconditional Rights of Noteholders To
Receive Principal and Interest....................... 31
Section 5.08. Restoration of Rights and Remedies................... 31
Section 5.09. Rights and Remedies Cumulative....................... 32
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<PAGE>
Section 5.10. Delay or Omission Not a Waiver....................... 32
Section 5.11. Control by Noteholders............................... 32
Section 5.12. Waiver of Past Defaults.............................. 32
Section 5.13. Undertaking for Costs................................ 33
Section 5.14. Waiver of Stay or Extension Laws..................... 33
Section 5.15. Sale of Trust Estate................................. 33
Section 5.16. Action on Notes...................................... 35
Section 5.17. Performance and Enforcement of Certain Obligations... 35
ARTICLE VI
THE INDENTURE TRUSTEE................. 36
Section 6.01. Duties of Indenture Trustee...........................36
Section 6.02. Rights of Indenture Trustee...........................37
Section 6.03. Individual Rights of Indenture Trustee................37
Section 6.04. Indenture Trustee's Disclaimer........................37
Section 6.05. Notice of Event of Default............................37
Section 6.06. Reports by Indenture Trustee to Holders...............38
Section 6.07. Compensation and Indemnity............................38
Section 6.08. Replacement of Indenture Trustee......................38
Section 6.09. Successor Indenture Trustee by Merger.................39
Section 6.10. Appointment of Co-Indenture Trustee
or Separate Indenture Trustee.........................40
Section 6.11. Eligibility; Disqualification.........................41
Section 6.12. Preferential Collection of Claims Against Issuer......41
Section 6.13. Representation and Warranty...........................41
Section 6.14. Directions to Indenture Trustee.......................41
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS............. 41
Section 7.01. Issuer to Furnish Indenture Trustee Names and
Addresses of Noteholders............................. 41
Section 7.02. Preservation of Information; Communications to
Noteholders.......................................... 41
Section 7.03. Reports by Issuer.................................... 42
Section 7.04. Reports by Indenture Trustee......................... 42
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES.......... 43
Section 8.01. Collection of Money.................................. 43
Section 8.02. Trust Accounts....................................... 43
Section 8.03. Opinion of Counsel................................... 44
Section 8.04. Release of Trust Estate.............................. 44
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<PAGE>
Section 8.05. Surrender of Notes Upon Final Payment................. 45
ARTICLE IX
SUPPLEMENTAL INDENTURES..................45
Section 9.01. Supplemental Indentures Without Consent
of Noteholders........................................ 45
Section 9.02. Supplemental Indentures With Consent of Noteholders... 46
Section 9.03. Execution of Supplemental Indentures.................. 48
Section 9.04. Effect of Supplemental Indenture...................... 48
Section 9.05. Conformity with Trust Indenture Act................... 48
Section 9.06. Reference in Notes to Supplemental Indentures......... 48
ARTICLE X
REDEMPTION OF NOTES................... 48
Section 10.01. Redemption........................................... 48
Section 10.02. Form of Redemption Notice............................ 49
Section 10.03. Notes Payable on Redemption Date..................... 49
ARTICLE XI
MISCELLANEOUS...................... 49
Section 11.01. Compliance Certificates and Opinions, etc............ 49
Section 11.02. Form of Documents Delivered to Indenture Trustee..... 51
Section 11.03. Acts of Noteholders.................................. 52
Section 11.04. Notices, etc., to Indenture Trustee, Issuer,
Credit Enhancer and Rating Agencies................ 52
Section 11.05. Notices to Noteholders; Waiver....................... 53
Section 11.06. Alternate Payment and Notice Provisions.............. 54
Section 11.07. Conflict with Trust Indenture Act.................... 54
Section 11.08. Effect of Headings................................... 54
Section 11.09. Successors and Assigns............................... 54
Section 11.10. Separability......................................... 54
Section 11.11. Benefits of Indenture................................ 54
Section 11.12. Legal Holidays....................................... 54
Section 11.13. GOVERNING LAW........................................ 54
Section 11.14. Counterparts......................................... 55
Section 11.15. Recording of Indenture............................... 55
Section 11.16. Issuer Obligation.................................... 55
Section 11.17. No Petition.......................................... 55
Section 11.18. Inspection........................................... 55
Section 11.19. Authority of the Administrator....................... 56
iv
<PAGE>
EXHIBIT A..............................................................A-1
EXHIBIT B..............................................................B-1
APPENDIX A............................................................. 1
v
<PAGE>
This Indenture, dated as of _______, 199_, between _____________
LOAN TRUST ____-_, a Delaware business trust, as Issuer (the "Issuer"), and
(_____________), 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 ___
Asset Backed Notes (the "Notes").
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing Date,
as Indenture Trustee for the benefit of the Holders of the Notes, all of the
Issuer's right, title and interest in and to whether now existing or hereafter
created (a) the Mortgage Loans and all monies and proceeds due thereon after the
Cut-off Date, (b) the Servicing Agreement and the Mortgage Loan Purchase
Agreement, [(c) all funds on deposit in the Funding Account, including all
income from the investment and reinvestment of funds therein], (d) all funds on
deposit from time to time in the Collection Account allocable to the Mortgage
Loans, (e) all funds on deposit from time to time in the Payment Account and in
all proceeds thereof, [(f) the Policy;] and (g) all present and future claims,
demands, causes and choses 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 Notes,
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 Indenture Trustee on behalf of the Holders of
the Notes, 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.
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.
<PAGE>
Section 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of 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 Notes.
"Indenture security holder" means a Noteholder.
"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
(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.
2
<PAGE>
ARTICLE II
ORIGINAL ISSUANCE OF NOTES
Section 2.01. Form. The Notes together with the Indenture Trustee's
certificate of authentication, shall be in substantially the forms set forth in
Exhibit A hereto, 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 Notes, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
The Notes 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 Notes, as
evidenced by their execution of such Notes.
The terms of the Notes set forth in Exhibits A hereto are part of the
terms of this Indenture.
Section 2.02. Execution, Authentication and Delivery. The Notes shall
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes 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 Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Request authenticate and
deliver Notes for original issue in an aggregate initial principal amount of
$(________). The aggregate principal amount of Notes outstanding at any time
may not exceed $(_______) except as provided in Section 4.03 hereof.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes and the Notes shall be issuable in the
minimum initial Security Balances of $(________) and in integral multiples of
$(________) in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note 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 Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
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ARTICLE III
COVENANTS
Section 3.01. Collection of Payments on Mortgage Loan Accounts. 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 Notes, subject to Section 3.03, as provided in Section 3.05
herein from moneys 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, Notes may be surrendered
for registration of transfer or exchange, and where notices and demands to or
upon the Issuer in respect of the Notes 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 fall 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;
Certificate Paying Agent. (a) As provided in Section 3.01, all payments of
amounts due and payable with respect to any Notes 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 Notes 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 Notes 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 Notes;
(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 Notes 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 Notes 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 Note and remaining unclaimed for two years
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 Note 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 ___ days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The Indenture
Trustee shall 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 Notes have been
called but have not been surrendered for redemption or whose right to or
interest in moneys 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 Notes, 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 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, on behalf of the Issuer shall pay
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to the Noteholders and the Indenture Trustee, in its capacity as agent for the
Issuer shall pay to other Persons, the amounts to which they are entitled as set
forth below:
(i) to the Noteholders the sum of (a) one month's interest at the Note
Rate on the Security Balances of Notes immediately prior to such Payment Date
and (b) any previously accrued and unpaid interest for prior Payment Dates;
(ii) [if such Payment Date is after the Funding Period,] to the
Noteholders as principal on the Notes, 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
Noteholders as principal on the Notes the applicable Security Percentage of the
amount deposited from the Funding Account in respect of Security Principal
Collections);
(iii) to the Noteholders, as principal on the Notes, 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 Noteholders, as principal on the Notes, 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 Noteholders, as principal on the Notes, pro rata, based on
the Security Balances from Security Interest Collections, up to the Accelerated
Principal Distribution Amount for such Payment Date (such amount, if any, paid
pursuant to this clause (vii) being referred to herein as the "Accelerated
Principal Payment Amount");
[(viii) to the Credit Enhancer, any other amounts owed to the Credit
Enhancer pursuant to the Insurance Agreement;]
(ix) to reimburse the Administrator for expenditures made on behalf of
the Issuer with respect to the performance of its duties under the Indenture;
and
(x) any remaining amounts to the Owner Trustee for distribution as
described in Section 5.01 of the Trust Agreement; 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
Notes immediately prior to such Payment Date.
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The amounts paid to Noteholders shall be paid to each Class in
accordance with the Class Percentage as set forth in paragraph (b) below.
Interest will accrue on the Notes 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 Note
or Certificate that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall 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 Noteholder mailed to such Holder's address
as it appears in the Note 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 Note shall be due and payable in full on the
Final Scheduled Payment Date for such Note as provided in the related form of
Note set forth in Exhibit A. All principal payments on each Class of Notes shall
be made to the Noteholders of such Class entitled thereto in accordance with the
Percentage Interests represented by such Notes. Upon notice to the Indenture
Trustee by the Issuer, the Indenture Trustee shall notify the Person in whose
name a Note 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 ___ 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 Note at the Final Scheduled
Payment Date or other final Payment Date will be payable only upon presentation
and surrender of such Note and shall specify the place where such Note 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) 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 Noteholders in such Trust Estate against
the claims of all persons and parties.
(b) Except as otherwise provided in the Servicing Agreement or 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
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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.
(c) 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, the Owner Trustee and to the
Administrator an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the delivery of the Mortgage
Notes, the recording of the Assignments of Mortgage, 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 of this Indenture 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 and to the Administrator 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 of the Assignments of Mortgage, the recording, filing, re-recording
and refiling 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 is necessary to maintain the
lien and security interest created by this Indenture 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 of this Indenture until ________ 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. Except as otherwise expressly provided
therein, the Issuer shall not waive, amend, modify, supplement or terminate any
Basic Document, including without limitation the Servicing Agreement or any
provision thereof without the consent of the Indenture Trustee or the Holders of
at least a majority of the Security Balances of the Notes, the Master Servicer
[and the Credit Enhancer].
(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
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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 or as
expressly provided in this Indenture or such other instrument or agreement.
(d) If the Issuer shall have knowledge of the occurrence of an Event of
Servicing Termination, the Issuer shall promptly notify the Indenture Trustee
thereof, and shall specify in such notice the action, if any, the Issuer is
taking in respect of such Event of Servicing Termination. If such Event of
Servicing Termination arises from the failure of the Master Servicer to perform
any of its duties or obligations under the Servicing Agreement with respect to
the Mortgage Loans, the Issuer may remedy such failure, provided that if such
Event of Servicing Termination arises from the failure by the Master Servicer to
comply with requirements imposed upon it under Section 3.04 of the Servicing
Agreement with respect to hazard insurance for the Mortgaged Properties securing
the Mortgage Loans, the Issuer shall promptly, as the case may be, pay such
premiums or obtain substitute insurance coverage meeting the requirements of
said Section 3.04. So long as any such Event of Servicing Termination shall be
continuing, the Indenture Trustee may exercise its remedies set forth in Section
7.01 of the Servicing Agreement. [Unless granted or permitted by the Credit
Enhancer or the Holders of Securities to the extent provided above, the Issuer
may not waive any such Event of Servicing Termination or terminate the rights
and powers of the Master Servicer under the Servicing Agreement.]
(e) Upon any termination of the Master Servicer's rights and powers
pursuant to Section 7.01 of the Servicing Agreement, the Issuer shall appoint a
successor servicer (the "Successor Master Servicer"), and such Successor Master
Servicer shall accept its appointment by a written assumption in a form
acceptable to the Indenture Trustee. In the event that a Successor Master
Servicer has not been appointed and accepted its appointment at the time when
the Servicer ceases to act as Servicer, the Indenture Trustee without further
action shall automatically be appointed the Successor Master Servicer. The
Indenture Trustee may resign as the Master Servicer by giving written notice of
such resignation to the Issuer and in such event will be released from such
duties and obligations, such release not to be effective until the date a new
servicer enters into a servicing agreement with the Issuer as provided below.
Upon delivery of any such notice to the Issuer, the Issuer shall obtain a new
servicer as the successor Master Servicer under the Servicing Agreement. Any
successor Master Servicer other than the Indenture Trustee shall (i) be an
established financial institution having a net worth of not less than $(_____)
and whose regular business includes the servicing of mortgage loans and (ii)
enter into a servicing agreement with the Issuer having substantially the same
provisions as the provisions of the Servicing Agreement applicable to the
Servicer. If, within ___ days after the delivery of the notice referred to
above, the Issuer shall not have obtained such new servicer, the Indenture
Trustee may appoint, or may petition a court of competent jurisdiction to
appoint, a successor servicer [acceptable to the Credit Enhancer] to service the
Mortgage Loans. In connection with any such appointment, the Indenture Trustee
may make such arrangements for the compensation of such
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successor as it and such successor shall agree, and the Issuer shall enter into
an agreement with such successor for the servicing of the Mortgage Loans, such
agreement to be substantially similar to the Servicing Agreement [or otherwise
acceptable to the Credit Enhancer]; provided that any such compensation of the
successor servicer unless otherwise agreed to by the Credit Enhancer, shall not
be in excess of the Servicing Fee payable to the Master Servicer under the
Servicing Agreement. If the Indenture Trustee shall succeed to the Master
Servicer's duties as servicer of the Mortgage Loans as provided herein, it shall
do so in its individual capacity and not in its capacity as Indenture Trustee.
(f) 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 Notes are Outstanding,
the Issuer shall not:
(i) except as expressly permitted by this Indenture or the Servicing
Agreement, 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 Notes (other than amounts properly withheld
from such payments under the Code) or assert any claim against any present or
former Noteholder by reason of the payment of the taxes levied or assessed upon
any part of the Trust Estate; or
(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 Notes 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.
Section 3.10. Annual Statement as to Compliance. The Issuer will
deliver to the Indenture Trustee, within ___ 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.
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Section 3.11. Recording of Assignments. The Issuer shall 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 (____) days following the related Deposit Date with respect to any
Additional Loans.
Section 3.12. Representations and Warranties Concerning the Mortgage
Loans. The Issuer has pledged to the Indenture Trustee all of its right under
the Mortgage Loan Purchase Agreement and the Indenture Trustee has the benefit
of the representations and warranties made by the Seller in Section (____)
thereof and Section (_____) thereof concerning the Mortgage Loans and the right
to enforce any remedy 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. Indenture Trustee's Review of Related Documents. (a) The
Indenture Trustee agrees, for the benefit of the holders of the Notes, to
review, or the related Custodian shall review, unless the Indenture Trustee or
such Custodian made such review prior to the Closing Date, on or prior to
_________, ____ the Related Documents delivered to it on or prior to the Closing
Date and within ___ days of the related Deposit Date, the Related Documents
delivered to it in connection with any Additional Loan, in each case in
connection with the Grant of the Mortgage Loan listed on the Schedule of
Mortgage Loans as security for the Notes. Such review shall be limited to a
determination that all documents referred to in the definition of the term
Related Documents have been executed and are appropriately endorsed in the
manner called for in the Mortgage Loan Purchase Agreement and that the Related
Documents have been delivered with respect to each such Mortgage Loan (other
than the documents related to (i) any Mortgage Loan so listed which has been
subject to a prepayment in full and termination of related Mortgage Loan, the
proceeds of which have been deposited in the Collection Account in lieu of
delivery of the applicable Related Documents, (ii) any Mortgage Loan with
respect to which the related Mortgaged Property was foreclosed, repossessed or
otherwise converted subsequent to the Cut-Off Date and prior to the Closing Date
or with respect to which foreclosure proceedings have been commenced and for
which the related Related Documents are required in connection with the
prosecution of such foreclosure proceedings and for which the Issuer has
delivered a trust receipt called for by Section 3.14(c) and (iii) any Mortgage
Loan as to which the original Assignment of Mortgage has been submitted for
recording), that all such documents have been executed, and that all such
documents relate to the Mortgage Loans listed on the Schedule of Mortgage Loans.
In performing such review, the Indenture Trustee may rely upon the purported
genuineness and due execution of any such document and on the purported
genuineness of any signature thereon.
(b) If any Related Document is defective in any material respect which
may materially and adversely affect the value of the related Mortgage Loan, the
interest of the Indenture Trustee or the Noteholders in such Mortgage Loan, or
if any document required to be delivered to the Indenture Trustee has not been
delivered, the Indenture Trustee or the related Custodian on behalf of the
Indenture Trustee shall notify the Issuer, the Seller, the Credit Enhancer and
the Master Servicer immediately after obtaining knowledge thereof and the
Indenture Trustee, as assignee of the Issuer's rights under the Mortgage Loan
Purchase Agreement, shall exercise its remedies in respect of any such defect
against the Seller as provided in the Mortgage Loan Purchase Agreement.
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Section 3.14. Trust Estate; Related Documents. (a) When required by the
provisions of this Indenture, the Indenture Trustee 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 which are
not inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Indenture Trustee as provided in this Article III
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
moneys.
(b) In order to facilitate the servicing of the Mortgage Loans, the
Master Servicer is hereby authorized in the name and on behalf of the Indenture
Trustee and the Issuer, to 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 the 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
Indenture Trustee and the Owner Trustee shall promptly execute any such
documents on request of the Master Servicer), subject to the obligations of the
Master Servicer under the Servicing Agreement. If from time to time the Master
Servicer shall deliver to the Indenture Trustee or the related Custodian copies
of any written assurance, assumption agreement or substitution agreement or
other similar agreement pursuant to Section 3.05 of the Servicing Agreement, the
Indenture Trustee 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 Master Servicer do not meet the above qualifications,
such documents shall promptly be returned by the Indenture Trustee or the
related Custodian to the Master Servicer, with a direction to the Master
Servicer to forward the correct documentation.
(c) Upon Issuer Request accompanied by an Officers' Certificate of the
Master Servicer pursuant to Section 3.07 of the 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 Master
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 Indenture Trustee and the Issuer shall promptly
release the Related Documents to the Master Servicer upon the order of the
Issuer, along with such documents as the Master 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 Master Servicer requests the
Indenture Trustee or the related Custodian to release the Related Documents and
delivers to the Indenture Trustee or the related Custodian a trust receipt
reasonably satisfactory to the Indenture Trustee or the related Custodian and
signed by a Responsible Officer of the Master Servicer, the Issuer and the
Indenture Trustee or the related Custodian shall release the Related Documents
to the Master Servicer. If such Mortgage Loans shall be liquidated and the
Indenture Trustee or the related Custodian receives a certificate from the
Master Servicer as provided above, then, upon request of
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the Issuer, the Indenture Trustee or the related Custodian shall release the
trust receipt to the Master Servicer upon the order of the Issuer.
(d) The Indenture Trustee shall, at such time as there are no Notes
Outstanding [and no amounts due to the Credit Enhancer], release all of the
Trust Estate to the Issuer (other than any cash held for the payment of the
Notes pursuant to Section 3.03 or 4.11), subject, however, to the rights of the
Indenture Trustee under Section 6.07.
Section 3.15. Amendments to Servicing Agreement. The Indenture Trustee
may enter into any amendment or supplement to the Servicing Agreement only in
accordance with Section 8.01 of the Servicing Agreement. The Indenture Trustee
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 3.16. Master Servicer as Agent and Bailee of Indenture Trustee.
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
Indenture Trustee 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 3.14(c), 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, will
be deemed to have possession of such Related Documents, such moneys 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 3.17. 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 3.17
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 3.18. Issuer May Consolidate, etc., Only on Certain Terms. (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 Notes 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;
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(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 Notes 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);
(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 federal income tax or tax
consequence to the Issuer or any Noteholder;
(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 Notes 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 Notes, (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 Notes 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 Notes;
(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 Notes or the Certificates to
be reduced, suspended or withdrawn;
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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 federal income tax or tax
consequence to the Issuer or any Noteholder;
(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 3.19. Successor or Transferee. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.18(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 3.18(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 Notes immediately upon the delivery of written
notice to the Indenture Trustee that the Issuer is to be so released.
Section 3.20. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning and selling and managing the
Mortgage Loans in the manner contemplated by this Indenture and the Basic
Documents and all activities incidental thereto.
Section 3.21. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
Section 3.22. Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by the Servicing Agreement or this Indenture, 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 3.23. 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 3.24. 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
in or of the Issuer, (ii) redeem, purchase, retire or otherwise acquire for
value any such ownership or equity interest or
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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,
(w) 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, (x) payment to the Master Servicer or others pursuant to
the terms of the Servicing Agreement and (y) payments to the Indenture Trustee
pursuant to Section 1(a)(ii) of the Administration Agreement (and (z)
distributions to the holders of the Residual Ownership Interest as contemplated
by the Trust 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 3.25. 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 3.26. 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 3.27. Statements to Noteholders. The Indenture Trustee shall
forward by mail to each Noteholder the Statement delivered to it pursuant to
Section 4.01 of the Servicing Agreement.
[Section 3.28. Grant of the Additional Loans. (a) In consideration of
the delivery on each Deposit Date to or upon the order of the Issuer of all or a
portion of the amount in respect of Security Principal Collections on deposit in
the Funding Account, the Issuer shall, to the extent of the availability
thereof, on such Deposit Date during the Funding Period Grant to the Indenture
Trustee all of its right, title and interest in the Additional Loans and
simultaneously with the Grant of the Additional Loans the Issuer will deliver
the related Related Documents to the Indenture Trustee or the related Custodian.
(b) The obligation of the Indenture Trustee to accept the Grant of the
Additional Loans and the other property and rights related thereto described in
Paragraph (a) above is subject to the satisfaction of each of the following
conditions on or prior to each Deposit Date:
(i) the Indenture Trustee shall not have received written
notice from any Rating Agency [or the Credit Enhancer] to the effect that such
transfer of Additional Loans would adversely affect the then current rating of
the Notes or cause the rating assigned to the Securities to be below investment
grade [without taking into account the Credit Enhancement Instrument];
(ii) the Indenture Trustee shall have received a revised
Mortgage Loan Schedule, listing the Additional Loans;
(iii) the Master Servicer shall confirm to the Indenture
Trustee that it has deposited in the Collection Account all Principal
Collections and Interest Collections in respect of such Additional Loans on or
after the related Deposit Date for the Additional Loans;
(iv) the Indenture Trustee shall have received a duly
completed and executed Transfer Certificate in the form of Exhibit 1 to the
Mortgage Loan Purchase Agreement;
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(v) the Seller at its expense and the Issuer at its expense,
as appropriate, shall have provided the Rating Agencies [and the Credit
Enhancer] with an Opinion of Counsel relating to the sale of the Additional
Loans to the Issuer and the Grant of the Additional Loans to the Indenture
Trustee which opinion shall be in the form of Exhibit _ to the Mortgage Loan
Purchase Agreement; and
(vi) the Issuer shall have delivered to the Indenture Trustee
an Officer's Certificate and an Opinion of Counsel confirming the satisfaction
of each condition precedent specified in this paragraph (b).
(c) The obligation of the Indenture Trustee to accept the Grant of an
Additional Loan on the related Deposit Date is subject to each Additional Loan
and the Additional Loans in the aggregate, as the case may be, satisfying the
conditions set forth in the Mortgage Loan Purchase Agreement.]
[Section 3.29. Determination of Note 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 Note 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 3.30. Payments under the Credit Enhancement Instrument. (a) On
any Payment Date, other than a Dissolution Payment Date, the Indenture Trustee
on behalf of the Noteholders 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 Note Rate on the Security Balance of the Notes 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 pursuant to Section 3.05.]
[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.]
[Section 3.31. 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 Notes (in each case, a
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"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
Notes shall be rated no lower than the rating assigned by each Rating Agency to
the Notes 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
Notes and the Certificates or (b) cause the Issuer to be subject to a tax at the
entity level or to be classified as a taxable mortgage pool within the meaning
of Section 7701(i) of the Code. 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
_____ 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.]
ARTICLE IV
THE NOTES; SATISFACTION AND DISCHARGE OF INDENTURE
Section 4.01. The Notes(; Increase of Maximum Variable Funding Balance;
Additional Variable Funding Notes). (a) The Notes shall be registered in the
name of a nominee designated by the Depository. Beneficial Owners will hold
interests in the Notes through the book-entry facilities of the Depository in
minimum initial Principal Balances of $(_____) and integral multiples of
$(_____) in excess thereof. [The Capped Funding Notes will be issuable in
minimum initial Principal Balances of $(______) and integral multiples of
$(_____) in excess thereof, together with any additional amount necessary to
cover the aggregate initial Principal Balance of the Capped Funding Notes
surrendered at the time of the initial denominational exchange thereof (with
such initial Principal Balance in each case being deemed to be the Principal
Balance of the Capped Funding Notes at the time of such initial denominational
exchange thereof].
The Indenture Trustee may for all purposes (including the making of
payments due on the Notes) deal with the Depository as the authorized
representative of the Beneficial Owners with respect to the Notes for the
purposes of exercising the rights of Holders of Notes hereunder. Except as
provided in the next succeeding paragraph of this Section 4.01, the rights of
Beneficial Owners with respect to the Notes 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 Notes
as to which they are the Beneficial Owners. Requests and directions from, and
votes of, the Depository as Holder of the Notes shall not be deemed inconsistent
if they are made with respect to different Beneficial
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Owners. The Indenture Trustee may establish a reasonable record date in
connection with solicitations of consents from or voting by Noteholders and give
notice to the Depository of such record date. Without the consent of the Issuer
and the Indenture Trustee, no Note may be transferred by the Depository except
to a successor Depository that agrees to hold such Note 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 ___
days of the effective date of the Depository's resignation or removal, each
Beneficial Owner shall be entitled to certificates representing the Notes it
beneficially owns in the manner prescribed in Section 4.08.
The Notes 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 Note Registrar and delivered by the Indenture
Trustee to or upon the order of the Issuer.
(b) So long as no Amortization Event has occurred the Maximum Variable
Funding Balance on the Closing Date may be increased from time to time by an
aggregate amount not to exceed $(______) and Additional Variable Funding Notes
may be issued upon satisfaction of the following conditions:
(i) the Indenture Trustee shall have received an Additional
Credit Enhancement Instrument pursuant to the terms and conditions of the
Insurance Agreement, including without limitation Section thereof;
(ii) the Indenture Trustee shall have received an Opinion of
Counsel to the Credit Enhancer in the form attached hereto as Exhibit C;
(iii) the Indenture Trustee shall have received an Opinion
of Counsel in the form attached hereto as Exhibit D;
(iv) the Indenture Trustee shall have received the documents
specified in Section 11.01(a) (other than clause (iii) thereof).
The Security Balance of such Additional Variable Funding Notes in the
aggregate will reflect the sum of (i) the related Excess Additional Balance
Differential and (ii) the Additional Balance Differential for each Collection
Period from the Collection Period during which the Additional Variable Funding
Notes are issued until the new Maximum Variable Funding Balance is reached.
Notwithstanding the foregoing, the Security Balance of each specific Additional
Variable Funding Note will be limited to the Maximum Individual Variable Funding
Balance as provided in subsection (c) below.
The Additional Variable Funding Notes issued in connection with the
first increase in the Maximum Variable Funding Balance pursuant to this
subsection will bear the designation "A" (in addition to the numerical
designation pursuant to subsection (c) below) and any subsequent Additional
Variable Funding Notes issued in connection with any subsequent increases in the
Maximum Variable Funding Balance will bear alphabetical designations in the
order of their issuance.
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Any Additional Variable Funding Notes shall be in the form of Exhibit
A-2 hereof and for all purposes shall be Notes issued pursuant to this Indenture
and all references to Variable Funding Notes herein shall include Additional
Variable Funding Notes issued pursuant to this Section 4.01(b).
Upon the issuance of any Additional Variable Funding Notes the Issuer
will deliver written notice thereof to the Rating Agencies.
(c) Subject to the Maximum Variable Funding Balance at such time as the
Security Balance of any Variable Funding Note reaches the Maximum Individual
Variable Funding Balance, no subsequent amounts in respect of the Additional
Balance Differential shall be added to the Security Balance of such Variable
Funding Note and instead a new Variable Funding Note shall be issued and
executed on behalf of the Issuer by the Owner Trustee, not in its individual
capacity but solely as Owner Trustee, authenticated by the Note Registrar and
delivered by the Indenture Trustee to or upon the order of the Issuer. All
subsequent amounts in respect of the Additional Balance Differential shall be
added to the Security Balance of such new Variable Funding Note (subject to the
Maximum Variable Funding Balance) until the Security Balance thereof reaches the
Maximum Individual Variable Funding Balance.
The Variable Funding Note issued on the Closing Date shall bear the
Designation "1" and each new Variable Funding Note will bear sequential
numerical designations in the order of their issuance. On each Payment Date on
or after the Accelerated Amortization Date a new Variable Funding Note will be
issued on each Payment Date in a principal amount equal to the lesser of (a) the
Maximum Individual Variable Funding Balance and (b) the Additional Balance
Differential for such Payment Date, but in no event will the Principal Balance
of the Variable Funding Notes exceed the Maximum Variable Funding Balance
without satisfying the conditions of Section 4.01 hereof.]
Section 4.02. Registration of and Limitations on Transfer and Exchange
of Notes; Appointment of Certificate. The Note Registrar shall cause to be kept
at its Corporate Trust Office a Note Register in which, subject to such
reasonable regulations as it may prescribe, the Note Registrar shall provide for
the registration of Notes and of transfers and exchanges of Notes as herein
provided.
Subject to the restrictions and limitations set forth below, upon
surrender for registration of transfer of any Note at the Corporate Trust
Office, the Indenture Trustee shall execute and the Note Registrar shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes in authorized initial Security Balances
evidencing the same aggregate Percentage Interests.
[No Variable Funding Note, other than any Capped Funding Notes, may be
transferred. Subject to the provisions set forth below Capped Funding Notes may
be transferred, provided that with respect to the initial transfer thereof by
the Seller prior written notification of such transfer shall have been given to
the Rating Agencies and to the Credit Enhancer by the Seller along with an
Opinion of Counsel to the effect that such transfer will not constitute a
fraudulent conveyance under the laws of the relevant jurisdiction.
No transfer of a Capped Funding Note shall be made unless such transfer
is exempt from the registration requirements of the Securities Act of 1933, as
amended, and any applicable state
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securities laws or is made in accordance with said Act and laws. In the event of
any such transfer, (i) unless such transfer is made in reliance upon Rule 144A
under the 1933 Act, the Indenture Trustee or the Issuer may, require a written
Opinion of Counsel (which may be in-house counsel) acceptable to and in form and
substance reasonably satisfactory to the Indenture Trustee and the Issuer that
such transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from said Act and laws or is being made
pursuant to said Act and laws, which Opinion of Counsel shall not be an expense
of the Indenture Trustee or the Issuer and (ii) the Indenture Trustee shall
require the transferee to execute an investment letter acceptable to and in form
and substance reasonably satisfactory to the Issuer and the Indenture Trustee
certifying to the Issuer and the Indenture Trustee the facts surrounding such
transfer, which investment letter shall not be an expense of the Indenture
Trustee or the Issuer. The Holder of a Variable Funding Note desiring to effect
such transfer shall, and does hereby agree to, indemnify the Indenture Trustee
the Credit Enhancer and the Issuer 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. Notwithstanding the foregoing, the restriction of transfer specified
in this paragraph is not applicable to any Capped Funding Notes that have been
registered under the Securities Act of 1933.]
Subject to the foregoing, at the option of the Noteholders, Notes may
be exchanged for other Notes of like tenor or, in each case in authorized
initial Principal Balances evidencing the same aggregate Percentage Interests
upon surrender of the Notes to be exchanged at the Corporate Trust Office of the
Note Registrar. (With respect to any surrender of Capped Funding Notes for
exchange the new Notes delivered In exchange therefor will bear the designation
"Capped" in addition to any other applicable designations.) Whenever any Notes
are so surrendered for exchange, the Indenture Trustee shall execute and the
Note Registrar shall authenticate and deliver the Notes which the Noteholder
making the exchange is entitled to receive. Each Note presented or surrendered
for registration of transfer or exchange shall (if so required by the Note
Registrar) be duly endorsed by, or be accompanied by a written instrument of
transfer in form reasonably satisfactory to the Note Registrar duly executed by,
the Holder thereof or his attorney duly authorized in writing. Notes delivered
upon any such transfer or exchange will evidence the same obligations, and will
be entitled to the same rights and privileges, as the Notes surrendered.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Note 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 Notes.
All Notes surrendered for registration of transfer and exchange shall
be cancelled by the Note Registrar and delivered to the Indenture Trustee for
subsequent destruction without liability on the part of either.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, 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 Note Registrar or
the Indenture Trustee that such Note 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
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Note, a replacement Note of the same Class; provided, however, that if any such
destroyed, lost or stolen Note, but not a mutilated Note, shall have become or
within _____ days shall be due and payable, instead of issuing a replacement
Note, the Issuer may pay such destroyed, lost or stolen Note when so due or
payable without surrender thereof. If, after the delivery of such replacement
Note or payment of a destroyed, lost or stolen Note pursuant to the proviso to
the preceding sentence, a bona fide purchaser of the original Note in lieu of
which such replacement Note was issued presents for payment such original Note,
the Issuer and the Indenture Trustee shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note 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 Note under this Section 4.03, the
Issuer may require the payment by the Holder of such Note 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 Note issued pursuant to this Section 4.03 in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note 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 Notes 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 Notes.
Section 4.04. Persons Deemed Owners. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest, if any,
on such Note and for all other purposes whatsoever, whether or not such Note 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 Notes 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 Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes cancelled as provided in this Section 4.05, except as expressly
permitted by this Indenture. All cancelled Notes 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
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returned to it; provided, that such Issuer Request is timely and the Notes have
not been previously disposed of by the Indenture Trustee.
Section 4.06. Book-Entry Notes. The Notes, upon original issuance, will
be issued in the form of typewritten Notes representing the Book-Entry Notes, to
be delivered to The Depository Trust Company, the initial Depository, by, or on
behalf of, the Issuer. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the initial Depository, and
no Beneficial Owner will receive a definitive Note representing such Beneficial
Owner's interest in such Note, except as provided in Section 4.08. Unless and
until definitive, fully registered Notes (the "Definitive Notes") 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 Note 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 Notes and the giving of instructions
or directions hereunder) as the sole holder of the Notes, and shall have no
obligation to the Owners of Notes;
(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 Notes and the Depository and/or the Depository
Participants pursuant to the Note Depository Agreement. Unless and until
Definitive Notes 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 Notes to such Depository
Participants; and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a specified
percentage of the Security Balances of the Notes, 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 Notes and has delivered such instructions to the
Indenture Trustee.
Section 4.07. Notices to Depository. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes 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 Notes to the
Depository, and shall have no obligation to the Beneficial Owners.
Section 4.08. Definitive Notes. 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 Notes 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 Notes representing beneficial
interests aggregating at least a majority of the Security
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Balances of the Notes 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 Notes to Beneficial Owners requesting the same. Upon
surrender to the Indenture Trustee of the typewritten Notes representing the
Book-Entry Notes by the Depository, accompanied by registration instructions,
the Issuer shall execute and the Indenture Trustee shall authenticate the
Definitive Notes in accordance with the instructions of the Depository. None of
the Issuer, the Note 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
Notes, the Indenture Trustee shall recognize the Holders of the Definitive Notes
as Noteholders.
Section 4.09. Tax Treatment. The Issuer has entered into this
Indenture, and the Notes will be issued, with the intention that, for federal,
state and local income, single business and franchise tax purposes, the Notes
will qualify as indebtedness of the Issuer. The Issuer, by entering into this
Indenture, and each Noteholder, by its acceptance of its Note (and each
Beneficial Owner by its acceptance of an interest in the applicable Book-Entry
Note), agree to treat the Notes 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 Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.06, 3.09,
3.18, 3.20 and 3.21, (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 Noteholders 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 Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 4.03 and (ii) Notes 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 Notes not theretofore delivered to the Indenture
Trustee for cancellation
a. have become due and payable, or
b. will become due and payable at the Final
Scheduled Payment Date within one year, or
c. are to be called for redemption within one year
under arrangements satisfactory to the Indenture Trustee for the giving of
notice of redemption by the
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Indenture Trustee in the name, and at the expense, of the Issuer, and the
Issuer, in the case of a., or b. or c. 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 Notes then outstanding not theretofore delivered to the Indenture Trustee
for cancellation when due on the Final Scheduled Payment Date or the Redemption
Date, as applicable;
(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 (if required by the
TIA or the Indenture Trustee) an Independent Certificate from a firm of
certified public accountants, each meeting the applicable requirements of
Section 11.01 and, subject to Section 11.02, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Section 4.11. Application of Trust Money. All moneys 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 Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Holders of those particular Notes for
the payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such moneys 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 Notes or the Certificates, 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 Noteholders 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 Notes, or under this Indenture in respect to Notes and all
amounts payable under the Insurance Agreement enforce any judgment obtained and
collect from the Issuer moneys adjudged due;
(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;
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(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 Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Administrator other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes 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 moneys.
ARTICLE V
REMEDIES
Section 5.01. Events of Default. "Event of Default," wherever used
herein, shall have the meaning provided in Appendix A[; 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 Notes 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 ___ days after the occurrence thereof, 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, then and in every such case the
Indenture Trustee or the Holders of Notes representing not less than a majority
of the Security Balances of all Notes may declare the Notes to be immediately
due and payable, by a notice in writing to the Issuer (and to the Indenture
Trustee if given by Noteholders), and upon any such declaration the unpaid
principal amount of such Class of Notes, 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 3.32 to make a draw therefor.]
At any time after such declaration of acceleration of maturity 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 Notes representing a majority of the Security
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Balances of all Notes, by written notice to the Issuer and the Indenture
Trustee, may 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
Notes and all other amounts that would then be due hereunder or upon
the Notes 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
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes 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 Note when the same becomes due and payable, and
such default continues for a period of ___ days, or (ii) default is made in the
payment of the principal of or any installment of the principal of any Note when
the same becomes due and payable, the Issuer will, upon demand of the Indenture
Trustee, pay to it, for the benefit of the Holders of Notes [and of the Credit
Enhancer], the whole amount then due and payable on the Notes 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 11.17 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 Notes and collect in the manner provided by
law out of the property of the Issuer or other obligor the Notes, wherever
situated, the moneys 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 11.17 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 Noteholders [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.
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(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes 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 Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes 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:
(i) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of the Notes 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 Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts received
with respect to the claims of the Noteholders 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 Notes 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 Noteholders 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 Noteholders, 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 Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any Note-
holder in any such proceeding except, as aforesaid, to vote for the election of
a trustee in bankruptcy or similar Person.
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(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes 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 Notes (or the Variable Funding Notes, as
applicable).
(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 Notes, and it shall not be necessary to
make any Noteholder 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 11.17 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 Notes 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 Notes
moneys 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 Notes (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 Holders
of ___% of the Security Balances of the Securities (and the Credit Enhancer)
consent thereto, (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 Securities 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 either the Notes, as they would
have become due if the Notes 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 not less than ____% of
the Security Balances of the Notes. In determining such sufficiency or
insufficiency with respect to clause (B) and (C), the Indenture Trustee may, but
need not, obtain and
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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.]
(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 Noteholders for amounts due and unpaid on the
related Class of Notes for interest and to each Noteholder 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 Notes for interest from amounts
available in the Trust Estate for such Noteholders;
THIRD: to Holders of each Class of Notes for amounts due and unpaid on
the related Class of Notes for principal, from amounts available in the Trust
Estate for such Noteholders, and to each Noteholder 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 Notes for principal, until the Security
Balances of each Class of Notes is reduced to zero;
FOURTH: to the Issuer for amounts required to be distributed to the
Certificateholders 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 Noteholders pursuant to this Section 5.04. At least ___ days before
such record date, the Issuer shall mail to each Noteholder and the Indenture
Trustee 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 Notes
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 maintain possession
of the Trust Estate. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Notes 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 maintain possession of the Trust
Estate. In determining whether to maintain possession of the Trust Estate, the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking
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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.
Section 5.06. Limitation of Suits. No Holder of any Note 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 11.17 hereof:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than ___% of the Security
Balances of the Notes 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 ___ 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 ___-day period by the Holders of
a majority of the Security Balances of the Notes.
It is understood and intended that no one or more Holders of Notes 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 Notes 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 Notes,
each representing less than a majority of the Security Balances of the Notes,
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 Noteholders To Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the respective due dates thereof expressed in such Note 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 or any Noteholder 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 adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
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Indenture Trustee and the Noteholders 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 Noteholders 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 Noteholders 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 Note 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 Noteholders may be exercised from time to time, and as often
as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as
the case may be.
Section 5.11. Control by Noteholders. The Holders of a majority of the
Security Balances of Notes 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 Notes 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 Notes representing not less than ___% of the Security Balances
of Notes;
(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 Notes
representing less than ___% of the Security Balances of Notes 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 Noteholders 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 Noteholders not consenting to such action.
Section 5.12. Waiver of Past Defaults. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes of not less than a majority of the Security Balances of the
Notes 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
Notes or (b) in respect of a covenant or provision hereof which cannot be
modified or amended
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without the consent of the Holder of each Note [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 Notes 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 Note 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 Noteholder, or group of
Noteholders, in each case holding in the aggregate more than ___% of the
Security Balances of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note 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
will 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 Notes 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 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
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(1) the Holders of all Securities [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 Noteholders under the Notes [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
_____% of the Security Balances of the Securities 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 of Notes [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 $_____ 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 Notes 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 Notes 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 Notes, 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 purchase
price by crediting the Gross Sale price against the sum of (A) the amount which
would be distributable to the Holders of the Notes [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 Notes in order to complete any such
Sale or in order for
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the net Sale price to be credited against such Notes, 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 moneys.
Section 5.16. Action on Notes. The Indenture Trustee's right to seek
and recover judgment on the Notes 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 Noteholders 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 shall take all such lawful action as the
Indenture Trustee may request 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, 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 (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 (confirmed in writing promptly thereafter)) of the
Holders of ______% of the Security Balances of the Notes 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) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this Section
6.01.
(e) 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.
(f) 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.
(g) 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 to believe that
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repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(h) 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 Notes 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 Notes 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, Note
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 Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, 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 Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
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 each Noteholder [and
the Credit Enhancer]. The Trustee shall mail to each Noteholder such notice of
the Event of Default within ___ days after it occurs. Except in the case of an
Event of Default in payment of principal of or interest on any Note, the
Indenture Trustee may
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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
Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder 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 Notes may remove the 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;
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(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 Noteholders. 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 ___ 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 Notes 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
Noteholder 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.
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 Notes 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 Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes 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 Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
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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 Noteholders,
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 Noteholders 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
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.
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Section 6.11. Eligibility; Disqualification. The Indenture Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $________ 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 (_______) or better by (_______).
The Indenture Trustee shall comply with TIA Section 310(b), including the
optional provision permitted by the second sentence of TIA Section 310(b)(9);
provided, however, that there shall be excluded from the operation of TIA
Section 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 Section 310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed In TIA Section 311(b). An Indenture Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
Section 6.13. Representation and Warranty. The Indenture Trustee
represents and warrants to the Issuer, for the benefit of the Noteholders, that
this Indenture has been executed and delivered by one of its Responsible
Officers who is duly authorized to execute and deliver such document in such
capacity on its behalf.
Section 6.14. Directions to Indenture Trustee. The Indenture Trustee is
hereby directed:
(a) to accept assignment of the Mortgage Loans and hold the assets of
the Trust in trust for the Noteholders;
(b) to issue, execute and deliver the Notes 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.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses
of Noteholders. The Issuer will furnish or cause to be furnished to the
Indenture Trustee (a) not more than ___ 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 Notes as of such Record Date, (b) at such other
times as the Indenture Trustee [and the Credit Enhancer] may request in writing,
within ___ days after receipt by the Issuer of any such request, a list of
similar form and content as of a date not more than ___ days prior to the time
such list is furnished; provided, however, that so long as the Indenture Trustee
is the Note Registrar, no such list shall be required to be furnished.
Section 7.02. Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture
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Trustee as provided in Section 7.01 and the names and addresses of Holders of
Notes received by the Indenture Trustee in its capacity as Note 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) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA Section 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within ___ 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 Noteholders described in TIA Section
313(c)) such summaries of any information, documents and reports required to be
filed by the Issuer pursuant to 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 Section
313(a), within ___ days after each January 1 beginning with ____________, ____,
the Indenture Trustee shall mail to each Noteholder as required by TIA Section
313(c) [and to the Credit Enhancer] a brief report dated as of such date that
complies with TIA Section 313(a). The Indenture Trustee also shall comply with
TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall
be filed by the Indenture Trustee with the Commission and each stock exchange,
If any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes 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 Noteholders and the
Certificateholders [and the Credit Enhancer], the Payment Account as provided in
Section 3.01 of this Indenture.
(b) All moneys deposited from time to time in the Payment Account
pursuant to the Servicing Agreement and all deposits therein pursuant to this
Indenture, including any investments made with such moneys, are for the benefit
of the Noteholders and the Certificateholders (and 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 Noteholders in respect of the Notes
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 its Short
Term Investment Fund so long as it is an Eligible Investment].
[(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 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
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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 moneys are or will be invested or reinvested during the term of the Notes,
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.
(i) 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.
(ii) Amounts on deposit in the Funding Account in respect of
investment earnings shall be withdrawn on each Payment Date and deposited in the
Payment Account and included in the amounts paid to Noteholders and
Certificateholders.
(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 Notes and the Certificates) and shall not
be sold or disposed of prior to maturity.]
Section 8.03. Opinion of Counsel. The Indenture Trustee shall receive
at least ____ days notice when requested by the Issuer to take any action
pursuant to Section 8.04(a), accompanied by copies of any instruments to be
executed, and the Indenture Trustee shall also require, as a condition to such
action, an Opinion of Counsel, 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 and such action
will not materially and adversely impair the security for the Notes or the
rights of the Noteholders in contravention of the provisions of this Indenture;
provided, however, that such Opinion of Counsel shall not be required to express
an opinion as to the fair value of the Trust Estate. Counsel rendering any such
opinion may rely, without independent investigation, on the accuracy and
validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
Section 8.04. 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 IV 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 moneys.
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(b) The Indenture Trustee shall, at such time as (i) there are no Notes
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 Notes from
the lien of this Indenture. The Indenture Trustee shall release property from
the lien of this Indenture pursuant to this Section 8.04 only upon receipt of an
request from the Issuer accompanied by an Officers' Certificate, an Opinion of
Counsel, and (if required by the TIA) Independent Certificates in accordance
with TIA Section 314(c) and 314(d)(1) meeting the applicable requirements as
described herein, [and a letter from the President or any Vice President or any
Secretary of the Credit Enhancer, if any, stating that the Credit Enhancer has
no objection to such request from the Issuer].
Section 8.05. Surrender of Notes Upon Final Payment. By acceptance of
any Note, the Holder thereof agrees to surrender such Note to the Indenture
Trustee promptly, prior to such Noteholder's receipt of the final payment
thereon.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes 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 Notes contained;
(iii) to add to the covenants of the Issuer, for the
benefit of the Holders of the Notes, 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) (A) to cure any ambiguity, to correct any error or to
correct or supplement any provision herein or in any supplemental indenture that
may be defective or inconsistent with any other provision herein or in any
supplemental indenture or with the related Prospectus or Prospectus Supplement
or (B) to make any other provisions with respect to matters or questions arising
under
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this Indenture or in any supplemental indenture; provided, that in the case of
clause (B), such action shall not adversely affect the interests of the Holders
of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes 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
(vii) 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;
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
federal income tax or tax consequences to the Noteholders.
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 Notes 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 Notes 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 Noteholder [or (ii) cause the Issuer to be subject to an entity level tax
or be classified as a taxable mortgage pool within the meaning of Section
7701(i) of the Code].
Section 9.02. Supplemental Indentures With Consent of Noteholders. 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 Notes, 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 Notes under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each Note affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, 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 Notes, or change any place of
payment where, or the coin or currency in which, any Note 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
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funds available therefor, as provided in Article V, to the payment of any such
amount due on the Notes on or after the respective due dates thereof;
(ii) reduce the percentage of the Security Balances of the
Notes, 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";
(iv) reduce the percentage of the Security Balances of the
Notes 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 Note 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 Note 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 Note 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 or be classified
as a taxable mortgage pool within the meaning of Section 7701(i) of the Code).
The Indenture Trustee may in its discretion determine whether or not
any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, 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 Noteholders 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 Notes 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.
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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.
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 Notes 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 Notes
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 Notes to Supplemental Indentures. Notes
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 Notes 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 Notes.
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption. (a) The Notes are subject to redemption in
whole, but not in part, at the direction of the Servicer pursuant to Section
____ of the Servicing Agreement, on any Payment Date on which the Servicer
exercises its option to purchase the Trust Estate pursuant to said Section ____,
for purchase price equal to the Redemption Price; provided, that the Issuer has
available funds sufficient to pay the Redemption Price. The Servicer or the
Issuer shall furnish the Rating Agencies notice of such redemption. If the Notes
are to be redeemed pursuant to this Section 10.01(a), the Servicer or the Issuer
shall furnish notice of such election to the Indenture Trustee not later than
___ days prior to the Redemption Date and the Issuer shall deposit by 10:00 A.M.
New York City time on the Redemption date with the Indenture Trustee in the Note
Distribution Account the Redemption Price of the Notes to be redeemed, whereupon
all Notes shall be due and payable
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on the Redemption Date upon the furnishing of a notice complying with Section
10.02 to each Holder of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to
Section 9.02 of the Trust Agreement, all amounts on deposit in the Payment
Account shall be paid to the Noteholders up to the Security Balance of the Notes
and all accrued and unpaid interest thereon. If amounts are to be paid to
Noteholders pursuant to this Section 10.01(b), the Servicer or the Issuer shall,
to the extent practicable, furnish notice of such event to the amounts shall be
payable on the Redemption Date.
Section 10.02. Form of Redemption Notice. (a) Notice of redemption
under Section 10.01(a) shall be given by the Indenture Trustee by first-class
mail, postage prepaid, or by facsimile mailed or transmitted not later than ___
days prior to the applicable Redemption Date to each Holder of Notes, as of the
close of business on the Record Date preceding the applicable Redemption Date,
at such Holder's address or facsimile number appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for
payment of the Redemption price (which shall be the office or agency of the
Issuer to be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture Trustee in the
name and at the expense of the Issuer. Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10,01(b) is not required
to be given to Noteholders.
Section 10.03. Notes Payable on Redemption Date. The Notes shall,
following notice of redemption as required by Section 10.02 (in the case of
redemption pursuant to Section 10.01(a)), on the Redemption Date become due and
payable at the Redemption Price and (unless the Issuer shall default in the
payment of the Redemption Price) no interest shall accrue on the Redemption
Price for any period after the date to which the accrued interest is calculated
for purposes of calculating the Redemption Price.
ARTICLE XI
MISCELLANEOUS
Section 11.01. 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
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Officer's Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with,
(ii) an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with and (iii) (if required by
the TIA) an Independent Certificate from a firm of certified public accountants
meeting the applicable requirements of this Section 11.01, 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 11.01(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 ___ 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 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 ___% or more of the Security Balances of the Notes, 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 $_______ or less than one percent of the Security
Balances of the Notes.
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(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 ___ 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 ____% or more of the Security Balances
of the Notes, 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 $_______ or less than one percent of
the then Security Balances of the Notes.
(v) Notwithstanding any provision of this Indenture, the
Issuer may, without compliance with the requirements of the other provisions of
this Section 11.01, (A) collect, sell or otherwise dispose of Mortgage Loans and
Mortgaged Properties 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 11.02. 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 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.
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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 11.03. Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders 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 Noteholders 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 11.03.
(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 Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note 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 Note.
Section 11.04. Notices, etc., to Indenture Trustee, Issuer, Credit
Enhancer and Rating Agencies. Any request, demand, authorization, direction,
notice, consent, waiver or Act of Noteholders 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 Noteholders is to be
made upon, given or furnished to or filed with:
(i) the Indenture Trustee by any Noteholder 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,
or
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(ii) the Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed
first-class, postage prepaid to the Issuer addressed to: ________________ Loan
Trust ______ in care of (___________), (___________) 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 Noteholders to the Indenture Trustee, or
[(iii) the Credit Enhancer by the Issuer, the Indenture Trustee or by
any Noteholders shall be sufficient for every purpose hereunder to in writing
and mailed, first-class postage pre-paid, or personally delivered or telecopied
to: (___________), Attention: (__________), Telephone: (___________),
Telecopier: (__________ )].
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
Duff & Phelps, at the following address: (_____________);] [and] [(ii) in the
case of Fitch Investors Service, L.P., at the following address:
(____________);] [and] [(iii) in the case of Moody's, at the following address:
Moody's Investors Service, ABS Monitoring Department, 99 Church Street, New
York, New York 10007]; [and] [(iv) in the case of Standard & Poor's, at the
following address: Standard & Poor's Corporation, 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 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders 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 Noteholder affected by such
event, at his address as it appears on the Note 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 Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
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 Noteholders 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 Noteholders 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.
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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 11.06. Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note 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 will furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee will cause payments to be made and
notices to be given in accordance with such agreements.
Section 11.07. 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 Section 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 11.08. Effect of Headings. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
Section 11.09. Successors and Assigns. All covenants and agreements in
this Indenture and the Notes 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 11.10. Separability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 11.11. 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 Notes, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, and the Noteholders, 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 11.12. 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 Notes 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 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
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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 11.14. 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 11.15. 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 Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
Section 11.16. 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 Notes 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.
Section 11.17. No Petition. The Indenture Trustee, by entering into
this Indenture, and each Noteholder, by accepting a Note, 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 Notes, this
Indenture or any of the Basic Documents.
Section 11.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will 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
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Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.
Section 11.19. 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.
******
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.
_________________LOAN TRUST ______
as Issuer
By: (______________________________),
not in its individual capacity
but solely as Owner Trustee
By: _________________________________
Name:____________________________
Title:
(----------------------------------),
as Indenture Trustee
By: _________________________________
Name:____________________________
Title:
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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)
57
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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 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)
58
<PAGE>
EXHIBIT A
(FORM OF NOTE)
(UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO, OR TO SUCH OTHER
ENTITY AS IS REQUIRED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.)
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $_____________
No. R-__ CUSIP NO. _____________
______________ LOAN TRUST _____
____% ASSET BACKED NOTES
__________________ Loan Trust ______, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to [Cede & Co.], or
registered assigns, the principal sum of _________________________ DOLLARS
payable on each Payment Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is $___________ and the
denominator of which is $___________ by (ii) the aggregate amount, if any,
payable from the Payment Account in respect of principal on the Notes pursuant
to Section 3.05 of the Indenture dated as of ____________, ____ (the
"Indenture"), between the Issuer and , a banking corporation, as Indenture
Trustee (the "Indenture Trustee"); provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of the
__________, ____ Distribution Date (the "Final Scheduled Payment Date") and the
Redemption Date, if any, pursuant to Section 10.01(a) of the Indenture.
The Issuer will pay interest on this Note at a rate per annum shown
above on each Payment Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Payment Date (after giving effect to all payments of principal made on
the preceding Date), subject to certain limitations contained in Section 3.05 of
the
A-1
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Indenture. Interest on this Note will accrue for each Payment Date from the
Closing Date (in the case of the first Payment Date) or from the most recent
Payment Date on which interest has been paid to but excluding such Payment Date.
Interest will be computed on the basis of (a 360-day year of twelve 30-day
months). Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: _____________________ LOAN TRUST ______,
by: _______________________, not in its
individual capacity but solely as
Owner Trustee under the Trust Agreement,
by: _______________________________
Authorized Signatory
A-2
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within
mentioned Indenture.
Date: by: _______________________, not in its
individual capacity but solely as
Owner Trustee under the Trust Agreement,
by: _______________________________
Authorized Signatory
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its _________% Asset Backed Notes (herein called the "Notes"), all
issued under the Indenture, to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the Holders of
the Notes. The Notes are subject to all terms of the Indenture.
The Notes are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the day of each month,
or, if any such date is not a Business Day, the next succeeding Business Day,
commencing _________ __, ____).
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Payment Distribution Date
and the Redemption Date, if any, pursuant to Section 1O.O1(a) of the Indenture.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable on the date on which an Event of Default shall have
occurred and be continuing and the Indenture Trustee or the Holders of Notes
representing not less than a majority of the Securities Balance of the Notes
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.02 of the Indenture. All principal payments on the Notes shall be
made pro rata to the Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be [Cede & Co.]),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu
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hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Interest Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Seller, (the Company) or the Issuer, or
join in any institution against the Seller, (the Company) or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
under any United States federal or state bankruptcy or similar law in connection
with any obligations relating to the Notes, the indenture or the Basic
Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
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<PAGE>
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Securities Balance of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Securities Balance of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the 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
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of in its individual capacity, in its
individual capacity, any owner of a beneficial interest in the Issuer, or any of
their respective partners, beneficiaries, agents, officers, directors, employees
or successors or assigns be personally liable for, nor shall recourse be had to
any of them for, the payment of principal of or interest on this Note or
performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in the Indenture. The Holder of this Note by its
acceptance hereof agrees that, except as expressly provided in the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to,
A-5
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and enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
A-6
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- ---------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
- ---------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably
constitutes and appoints
- ---------------------------------------------------------------
_______________________________, attorney, to transfer said Note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated: ____________________________
Signature Guaranteed:*/
---------------------------------
- ----------------------------
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in STAMP or such other
"signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
A-7
<PAGE>
EXHIBIT B
MORTGAGE LOAN SCHEDULE
B-1
<PAGE>
APPENDIX A
DEFINITIONS
Accelerated Amortization Date: _________________________.
[Accelerated 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 reach the
Required Overcollateralization Amount.]
[Additional Balance: With respect to any Mortgage Loan, any future Draw made by
the related Mortgagor pursuant to the related Loan Agreement after the Cut-Off
Date in the case of an Initial Loan, or after the Deposit Date in the case of an
Additional Loan; provided, however, that if an Amortization Event occurs, then
any Draw after such Amortization Event shall not be acquired by the Issuer and
shall not be an Additional Balance.
Additional Balance Differential: With respect to any Payment Date, (x) prior to
the Accelerated Amortization Date the amount by which Draws under the Mortgage
Loans during the related Collection Period exceed Principal Collections during
such Collection Period and (y) on and after the Accelerated Amortization Date
the aggregate amount of Additional Balances conveyed to the Issuer during the
related Collection Period.
Additional Credit Enhancement Instrument: The credit enhancement instrument
which may be issued by the Credit Enhancer to the Indenture Trustee to guaranty
the Additional Variable Funding Notes for the benefit of holders of the
Additional Variable Funding Notes.
Additional Loans: All home equity line of credit loans sold by the Seller to the
Issuer after the Closing Date pursuant to Section _ of the Mortgage Loan
Purchase Agreement.
Additional Variable Funding Notes: The Additional Variable Funding Notes issued
pursuant to Section 4.01(b) of the Indenture, which shall be in addition to
those Variable Funding Notes that are insured by the Credit Enhancement
Instrument.
Additional Variable Funding Note Issuance Date: The date on which any
Additional Variable Funding Note is issued.]
Administration Agreement: The Administration Agreement dated as of
_____________________ among the Issuer, the Indenture Trustee and
_____________________, as Administrator, as it may be amended from time to time.
Administrator: _____________________________, as administrator under the
Administration Agreement or any successor Administrator appointed pursuant
to the terms of the Administration Agreement.
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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 Additional Balance Differential: With respect to any Payment Date, the
sum of Additional Balance Differentials that have been added to the Principal
Balance of the Variable Funding Notes prior to such Payment Date.
[Aggregate Credit Enhancement Instrument Amounts: The sum of (i) with respect to
the Credit Enhancement Instrument the lesser of the Maximum Credit Enhancement
Instrument Amount and the aggregate of the Security Principal Balances of the
Securities other than any Additional Variable Funding Notes and (ii) with
respect to any Additional Credit Enhancement Instrument the lesser of the
Maximum Additional Credit Enhancement Instrument Amount and the Security Balance
of the Additional Variable Funding Notes.
Aggregate Increased Maximum Credit Enhancement Instrument Amount: The Aggregate
Credit Enhancement Instrument Amounts of the Credit Enhancement Instrument and
of any Additional Credit Enhancement Instruments issued under the Insurance
Agreement not to exceed the Maximum Credit Enhancement Instrument Amount, plus
the Maximum Additional Credit Enhancement Instrument Amount.]
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
____ 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 ___ 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 ___ days with respect to any representation or warranty of the
Seller made in Section 3 of the Mortgage Loan Purchase Agreement or ___ days
with respect to any representation or warranty made in Section 4 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 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 ___ days with the consent of the Indenture Trustee and the
Credit Enhancer) in accordance with the provisions of the Indenture;
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(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 ___ 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, unbended or unstated for a period of ___ 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
ccurs under the
Servicing Agreement and the Master Servicer is the Seller;
(g) the aggregate of all draws under the Credit Enhancement Instrument
exceed it of the sum of (i) the Cut-Off Date Asset Balance and (ii) the amount
by which the Pool Balance as of the latest date that the Additional Loans have
been transferred to the Issuer exceeds the Cut-Off Date Asset Balance; or
(h) the failure to satisfy the conditions pursuant to Section 4.01(b)
of the Indenture and Section 2.02(B) of the Insurance Agreement to increasing
the Maximum Variable Funding Balance at the time that the then current Maximum
Variable Funding Balance has been reached.
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 Term Notes 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), (g) or (h), 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 described in clauses (g) or (h) 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: With respect to any Mortgaged Property, either (x) the value
set forth in an appraisal of such Mortgaged Property made to establish
compliance with the underwriting criteria then in effect in connection with the
later of the application for the Mortgage Loan secured by such Mortgaged
Property or any subsequent increase or decrease in the related Credit Limit or
to reduce or eliminate the amount of any primary insurance, or (y) if the sales
price of the Mortgaged Property is considered in accordance with the
underwriting criteria applicable to the Mortgage Loan, the lesser of (i) the
appraised value referred to in (x) above and (ii) the sales price of such
Mortgaged Property.
[Asset Balance: With respect to any Mortgage Loan, other than a Liquidated
Mortgage Loan, and as of any day, the related Cut-Off Date Asset Balance or
Deposit Date Asset Balance, plus (i) any Additional Balances in respect of such
Mortgage Loan conveyed to the Issuer, minus (ii) all collections credited as
principal in respect of any such Mortgage Loan in accordance with the related
Loan Agreement (except for any such collections that are allocable to the
Excluded Amount) and applied in reduction of the Asset Balance thereof. For
purposes of this definition, a Liquidated Mortgage Loan shall be deemed to have
an Asset Balance equal to the Asset Balance of the related Mortgage Loan
immediately prior to the final recovery of all related Liquidation Proceeds and
an Asset Balance of zero thereafter.]
Assignment of Mortgage: With respect to any Mortgage, an assignment, notice of
transfer or equivalent instrument, in recordable form, sufficient under the laws
of the jurisdiction in which the related Mortgaged Property is located to
reflect the conveyance of the Mortgage, which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering the Mortgage Loans secured by Mortgaged Properties located in the same
jurisdiction.
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 Note, the Person who is the beneficial
owner of such Note 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).
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Billing Cycle: With respect to any Mortgage Loan and Due Date, the
calendar month preceding such Due Date.
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.
Book-Entry Notes: Beneficial interests in the Notes, 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) day on which
banking institutions in the State of New York, ______________________________ or
_____________ are required or authorized by law to be closed.
Business Trust Statute: Chapter 38 of Title 12 of the Delaware Code, 12 Del.
Code Section 3801 et seq., as the same may be amended from time to time.
[Capped Funding Note: Any Variable Funding Note that has reached its Maximum
Individual Variable Funding Balance.]
[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 Notes and the Certificates or (ii) were not reflected in a reduction
(not below zero) of the Overcollateralization Amount.]
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 3.03 of the
Indenture.
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) ___%
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.
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Certificate of Trust: The Certificate of Trust filed for the Trust pursuant to
Section 3810(a) of the Business Trust Statute.
Certificates: The Asset-Backed Certificates, Series ____-____, each evidencing
undivided beneficial interests in the Issuer and executed by the Owner Trustee
in substantially 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 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: The Term Notes [and the Variable Funding Notes, as the case may be].
Class Percentage: With respect to each Class of Notes and Payment Date, the
ratio, expressed as a percentage, of the aggregate Principal Balance of such
Class of Notes to the aggregate Principal Balance of the Notes, 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.
[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 sum of
(i) the greater of (x) the Credit Limit and (y) the Cut-Off Date Asset Balance
of such Mortgage Loan and (ii) the outstanding principal balance as of the date
of the origination of such Mortgage Loan (or any subsequent date as of which
such outstanding principal balance may be determined in connection with an
increase or decrease in the Credit Limit or to reduce the amount of primary
insurance for such Mortgage Loan) of any mortgage loan or mortgage loans that
are secured by liens on the Mortgaged Property that are senior
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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 Note 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 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:
Corporate Trust Administration.
[Credit Enhancement Draw Amount: As defined in Section 3.30 of the Indenture.
Credit Enhancement Instrument: The _________________, dated as of the Closing
Date, issued by the Credit Enhancer to the Indenture Trustee for the benefit of
the Noteholders.
Credit Enhancer: ________________, any successor thereto or any replacement
credit enhancer substituted pursuant to Section 3.31 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.
Credit Limit: With respect to any Mortgage Loan, the maximum Asset Balance
permitted under the terms of the related Loan Agreement.]
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: ____________________ and its successors and assigns.
Cut-Off Date: With respect to the Initial Loans, _______________, ____.
Cut-Off Date Asset 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 Billing Cycle 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 Notes: 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.
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[Deposit Date: The applicable date as of which any Additional Loan is sold to
the Issuer pursuant to the Mortgage Loan Purchase Agreement.
Deposit Date Asset Balance: With respect to any Additional Loan, the Asset
Balance thereof as of the Deposit Date.]
Depositor: Beneficial Mortgage Services, Inc. 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 later of (i) the ____
day of the month in which such Payment Date occurs or if such day is not a
Business Day, the next succeeding Business Day and (ii) the Business Day prior
to such Payment Date.
Dissolution Payment Date: Following an Event of Default under the Indenture and
an acceleration of the Maturity Date of the Notes, a date on which the proceeds
of the sale of the Trust Estate are paid to Securityholders.
[Draw: With respect to any Mortgage Loan, a borrowing by the Mortgagor under the
related Loan Agreement.]
Due Date: The _______________ day of the month.
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 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
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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 ___ 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 ___ 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 ___ 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 ___ 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 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; and
(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
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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, the right to receive only interest payments with respect to the
underlying debt instrument.
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 4 of the Mortgage Loan Purchase
Agreement other than clauses ____________________; (iii) have a (Loan Rate, Net
Loan Rate and Gross Margin) no lower than and not more than ___% per annum
higher than the Loan Rate, Net Loan 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 __ 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):
(i) a default in the payment of any interest on any Note when the same
becomes due and payable, and such default shall continue for a period of ___
days; or
(ii) a default in the payment of the principal of or any installment of
the principal of any Note 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 _________ days after there shall
have been
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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 ___% of the
Outstanding Amount of the Notes, 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 ___
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.
[Excess Additional Balance Differential: With respect to any Additional Variable
Funding Notes, the amount by which the Additional Balance Differential for the
Collection Period immediately preceding the month in which the related
Additional Variable Funding Notes are issued, would have caused the Security
Balance of the Variable Funding Notes to exceed the Maximum Variable Funding
Balance immediately prior to the issuance of such Additional Variable Funding
Notes.]
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 in each case including all Draws whether
or not transferred to the Issuer (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 Asset Balances 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 8.02 of the Trust Agreement.
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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 Notes 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 Asset Balance (plus accrued and unpaid interest thereon at the
applicable Loan 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: Mortgage, 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 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.]
[Guaranteed Principal Payment Amount: With respect to any Payment Date, other
than the Dissolution Payment Date, the amount, if any, by which the Aggregate
Security Balance (after giving effect to all amounts allocable and distributable
to principal on the Securities 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, it any, by which the aggregate of the
Security Balances (after giving effect to all amounts allocable and
distributable to principal on the Securities) exceeds the amount on deposit in
the Payment Account
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available to be Paid as principal on the Securities (after giving effect to all
amounts allocable and distributable as principal on the Securities on such
date).]
Holder: Any of the Noteholders or Certificateholders.
Indemnified Party: The meaning specified in Section 8.02 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 Notes, the Seller,
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 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 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 11.01 of the Indenture, made by an
Independent appraiser or other 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 ____________ from time to time
for the adjustment of the Loan 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, $______; the Term
Notes, $_____; (and the Variable Funding Notes, zero).
Initial Subservicer: _________________________.
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 ___ consecutive days; or (b) the commencement by such Person of a
voluntary
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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 last sentence of Section 3.04 of the
Servicing Agreement, net of any component 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 Loan Agreement 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 Loan Rate is adjusted in accordance with the related Mortgage
Note.]
Issuer: _________________________ Loan Trust _____, 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.
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[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., ________, ________
time, ___ 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, or in the
city of London, England are required or authorized by law to be closed.]
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 Loan 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.
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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 Asset Balance thereof at the end of such
Collection Period, after giving effect to the Net Liquidation Proceeds applied
in reduction of the Asset 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.
Loan Agreement: With respect to any Mortgage Loan, the credit line account
agreement executed by the related Mortgagor and any amendment or modification
thereof.
Loan Rate: With respect to any Mortgage Loan and any day, the per annum rate of
interest applicable under the related Loan Agreement.
[Loan 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.]
[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 Note 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: ___________________________ and its successors and assigns.
Master Servicing Fee: With respect to any Collection Period, the product of (i)
the Master Servicing Fee Rate divided by 12 and (ii) the aggregate Asset Balance
of the Mortgage Loans, as of the ____ day of such Collection Period.
Master Servicing Fee Rate: With respect to any Mortgage Loan, ______% per annum.
[Maximum Additional Credit Enhancement Instrument Amount: An amount not to
exceed $______.]
[Maximum Credit Enhancement Instrument Amount: $___________ comprised of the
Initial Principal Balance of the Term Notes ($_________) (plus the Maximum
Variable Funding Balance as of the Closing Date ($_________), plus the Initial
Principal Balance of the Certificates ($__________)].
[Maximum Individual Variable Funding Balance: As to any Variable Funding Note
and date of determination $____________ reduced by the aggregate amount of
principal previously paid on such Variable Funding Note.]
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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
Loan 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).]
[Maximum Variable Funding Balance: The maximum Principal Balance of the Variable
Funding Notes which is as of any day of determination $________________ reduced
by the aggregate amount of principal previously paid on the Variable Funding
Notes; provided that the Maximum Variable Funding Balance may be increased
pursuant to Section 4.01 of the Indenture.]
[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.]
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.
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 Insurance Component: With respect to the Mortgage Loans listed on
Schedule 1 to the Servicing Agreement, the percentage specified therefor in such
Schedule.]
Mortgage Loan Group: Any of the Mortgage 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.
Mortgage Loan Schedule: With respect to any date, the schedule of Mortgage Loans
included in the Trust Estate 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
Cut-Off Date Trust Balance, [(ii) the Credit Limit, (iii) the Gross Margin,]
(iv) the name of the Mortgagor, [(v) the Lifetime Rate Cap,] if any, (vi) the
loan number, (vii) an indication as to the applicable Mortgage Loan Group, and
(viii) the lien position of the related Mortgage. (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[, in each case including Additional Balances,] if any, that have been sold
to the Depositor under the Mortgage Loan
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Purchase Agreement, in each case together with the Related Documents, and that
remain subject to the terms thereof.
Mortgage Note: With respect to a Mortgage Loan, [the Loan Agreement], [note or
other evidence of indebtedness] pursuant to which the related mortgagor agrees
to pay the indebtedness evidenced thereby and secured by the related Mortgage as
modified or amended.
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 Loan Rate: With respect to any Mortgage Loan and any day, the related Loan
Rate less the 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 over
the amount of Additional Balances created during the related Collection Period.
Note Owner: The Beneficial Owner of a Note.
[Note Percentage: With respect to any Payment Date, the ratio expressed as a
percentage of the aggregate of the Principal Balances of all Notes immediately
prior to such Payment Date to the sum of the Pool Balance on the ____ 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.]
Note 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 Note Rate with respect to any Interest Period exceed
the Maximum Rate for such Interest Period].
Note Register: The register maintained by the Note Registrar in which the Note
Registrar shall provide for the registration of Notes and of transfers and
exchanges of Notes.
Note Registrar: The Indenture Trustee, in its capacity as Note Registrar.
Noteholder: The Person in whose name a Note is registered in the Note Register,
except that, any Note 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 Noteholder 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 Notes that the Indenture Trustee or the Owner Trustee knows to be
so owned shall be so disregarded. Owners of Notes that have been
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pledged in good faith may be regarded as Holders if the pledges establishes to
the satisfaction of the Indenture Trustee or the Owner Trustee the pledgee's
right so to act with respect to such Notes and that the pledges is not the
Issuer, any other obligor upon the Notes or any Affiliate of any of the
foregoing Persons.
Notes: Collectively, the [Term] Notes [and the Variable Funding Notes].
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 (11.01) 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.
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 Notes, as of the date of determination, all
Notes theretofore executed, authenticated and delivered under this Indenture
except:
(i) Notes theretofore cancelled by the Note Registrar or delivered to
the Indenture Trustee for cancellation; and
(ii) Notes in exchange for or in lieu of which other Notes have been
executed, authenticated and delivered pursuant to the Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes 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 Notes 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.)
[Overcollateralization 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 Estate: The corpus of the Issuer created by the Trust Agreement
which consists of the Mortgage Loans, such assets as shall from time to time be
deposited in the Collection Account and/or the Payment Account allocable to the
Mortgage Loans in accordance with the Trust Agreement, property that secured a
Mortgage Loan and that has become REO, certain hazard insurance policies
maintained by the Mortgagors or by or on behalf of the Master Servicer in
respect of the Mortgage Loans, the Credit Enhancement Instrument, an assignment
of the Depositor's rights under the
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Mortgage Loan Purchase Agreement and the obligation of the Depositor to purchase
Additional Balances under the Mortgage Loan Purchase Agreement and all proceeds
of each of the foregoing.
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 ____ day of each month, or if such day is not a Business Day,
then the next Business Day.
Percentage Interest: With respect to any Note, the percentage obtained by
dividing the original Security Balance of such Note by the aggregate of the
original Security Balances of all Notes 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 Asset Balances of
all Mortgage Loans as of such date.
Predecessor Note: With respect to any particular Note, every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purpose of this definition, any Note authenticated
and delivered under Section 4.03 of the Indenture in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
[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 Payment Date and each Security [other
than the Variable Funding Notes], the Initial Principal Balance thereof, reduced
by all distributions of principal thereon prior to such Payment Date [and, in
the case of the Variable Funding Notes, (i) increased by the Aggregate
Additional Balance Differential immediately prior to such Payment Date and (ii)
reduced by all distributions of principal thereon prior to such Payment Date].
Principal Collection Distribution Amount: For any Payment Date, [(i) so long as
an Amortization Event has not occurred and so long as the Accelerated
Amortization Date has not occurred, Net
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Principal Collections and (ii) following an Amortization Event or on and after
the Accelerated Amortization Date,] Security Principal Collections[; provided,
however, on any Payment Date with respect to which the Overcollateralization
Amount that would result if determined without regard to this proviso exceeds
the Required Overcollateralization Amount the Principal Collection Distribution
Amount will be reduced by the amount of such excess until the
Overcollateralization Amount equals the Required Overcollateralization Amount.]
Principal Collections: With respect to any Payment Date and any Mortgage Loan,
the aggregate of the following amounts:
(i) the total amount of payments made by or on behalf of the Mortgagor,
received and applied as payments of principal on the Mortgage Loan during the
related Collection Period, as reported by 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, ____% of the Asset 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) - (iv) above.]
Proceeding: Any suit in equity, action at law or other judicial or
administrative proceeding.
Program Group: With respect to any _____________ Loan, the ___________ Loans
taken together.
Program Guide: Together, the Seller's Seller Guide and Servicing Guide, as in
effect from time to time.
Program Seller: With respect to any Mortgage Loan, the Person that sold such
Mortgage Loan to the Seller.
Purchase Price: The meaning specified in Section 2.2 of the Mortgage Loan
Purchase Agreement.
[Purchase Price Holdback: The aggregate of (1) all amounts to be paid to the
Seller, its designee or its permitted assigns, as holder of a __________%
interest in the Residual Ownership Interest over the term of the Trust
Agreement, and (2) all amounts to be paid to the Seller, its designee or its
permitted assigns, by the Purchaser pursuant to Section 2.3(d) over the term of
the Mortgage Loan
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Purchase Agreement, as adjusted to reflect all payments pursuant to Section
2.7(d) and (e) over the term of the Mortgage Loan Purchase Agreement. All of the
foregoing amounts, when paid to the Seller, its designee or its permitted
assigns, shall be deemed to have been caused to be paid by the Purchaser to the
Seller as part of the total consideration for the sale of the Mortgage Loans
under the Mortgage Loan Purchase Agreement (including any Additional Balances)
representing the portion of the Purchase Price not included in the amounts paid
as described in clause (b) of Section 2.2 of the Mortgage Loan Purchase
Agreement.]
Purchaser: ________________ 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.]
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.
Record Date: With respect to the Term Notes and any Payment Date, the Business
Day next preceding such Payment Date (and with respect to the Certificates or
the Variable Funding Notes 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 Notes 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., _________ 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.]
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Reference Banks: ____________________.
Registered Holder: The Person in whose name a Note is registered in the Note
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.
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 ______________, ____ 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 listed in the Program Guide
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) ___% of the Asset Balance thereof (without reduction for any amounts
charged off) and (ii) unpaid accrued interest at the Loan 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.
Required Overcollateralization Percentage: ___________________%.
Required Overcollateralization Amount: As to any Payment Date, the Required
Overcollateralization Percentage of the Pool Balance.
Residual Ownership Interest: Collectively, the beneficial ownership interests in
the Issuer established under the Trust Agreement that are entitled to receive
all amounts to be paid to the Issuer or its designee pursuant to Section 3.05 of
the Indenture, over the term thereof.
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
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particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
[Revolving Period: With respect to each Mortgage Loan, the period consisting of
either the first five, ten or fifteen years after the date of origination of
such Mortgage Loan, during which the related Mortgage Note provides for monthly
payments of interest only with no payments of principal (except with respect to
certain Mortgage Loans that require non-amortizing minimum payments of
principal) and during which the Mortgagor is permitted to make Draws.
Schedule Annex: With respect to any Additional Loans, the schedule provided by
the Seller to the Depositor or its assignee pursuant to 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 Notes.
Security Balance: The Principal Balance of the Term Notes [the Variable Funding
Notes] 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;
(ii) so long as an Amortization Event and the Accelerated Amortization
Date has not occurred, Net Principal Collections for such Payment Date or if
such an event or date has occurred, the aggregate of all Security Principal
Collections with respect to such Payment Date; and
(iii) all Substitution Adjustment Amounts to be deposited to the
Payment Account for such Payment Date.
Securityholder or Holder: Any Noteholder 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.
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).
24
<PAGE>
Seller: ________________ and its successors and assigns.
Seller's Agreement: With respect to each Mortgage Loan, the agreement between
the Seller, as purchaser, and the related Program 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.
Servicing Standards: The quality of the Master Servicer's (or, in the event that
a Subservicer performs servicing operations on behalf of the Master Servicer,
such Subservicer's) performance with respect to compliance with the terms and
conditions of the Servicing Agreement.
Single Certificate: A Certificate in the denomination of $_______.
Single Note: A Note in the amount of $______.
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
Subservicer 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 Mortgage 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 Asset Balance of the
Mortgage Loans serviced by such Subservicer as of the first day of such
Collection Period.
25
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Subservicing Fee Rate: With respect to any Mortgage Loan, _______% per annum.
[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.]
[Term Notes: The Notes designated as the "Term Notes" in the Indenture.]
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.
[Underlying Seller: ___________________].
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.
[Variable Funding Notes: The Notes designated as the "Variable Funding Notes" in
the Indenture including any Capped Funding Notes and Additional Variable Funding
Notes.]
Weighted Average Net Loan Rate: With respect to the Mortgage Loans in the
aggregate, and any Due Date, the average of the Net Loan Rate for each Mortgage
Loan as of the last day of the related Billing Cycle weighted on the basis of
the related Asset Balances outstanding as of the last day of the related Billing
cycle for each Mortgage Loan as determined by the Master Servicer in accordance
with the Master Servicer's normal servicing procedures.
26
<PAGE>
Exhibit 5.1
----------------, ----
Beneficial Mortgage Services, Inc.
One Christina Centre
301 North Walnut Street
Wilmington, Delaware 19801
Re: Beneficial Mortgage Services, Inc.
Registration Statement on Form S-3
(File No. 333-21511)
----------------------------------
Ladies and Gentlemen:
We have acted as counsel for Beneficial Mortgage Services, Inc., a
Delaware corporation (the "Registrant") in connection with the Registration
Statement on Form S-3 (File No. 333-21511) (the "Registration Statement"), filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), for the registration under the
Act of up to $_____________ aggregate principal amount of Asset Backed
Securities (the "Securities"). Each series of such Securities will be issued
pursuant to (i) a separate pooling and servicing agreement (the "Pooling and
Servicing Agreement"), among the Registrant, Beneficial Mortgage Corporation, as
master servicer (the "Master Servicer"), and a trustee to be identified in the
prospectus supplement for such series of Securities, (ii) a trust agreement (the
"Trust Agreement") among a trustee named in the related prospectus supplement,
the Registrant and another entity named in such prospectus supplement and/or
(iii) an indenture (the "Indenture") between the trust formed pursuant to the
Trust Agreement and the indenture trustee named in the related prospectus
supplement.
We have made such investigation of law as we deemed appropriate and have
examined the proceedings heretofore taken and are familiar with the procedures
proposed to be taken by the Registrant in connection with the authorization,
issuance and sale of the Securities.
Based on the foregoing, we are of the opinion that:
(i) When each Pooling and Servicing Agreement or Trust Agreement in
respect of which we have participated as your counsel has been duly authorized
by all necessary corporate action and has been duly executed and delivered, it
will constitute a valid and binding obligation of the Registrant enforceable
against the Registrant in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law); and
<PAGE>
Beneficial Mortgage Services, Inc.
- -----------------, -----
Page 2
(ii) When the issuance, execution and delivery of the Securities issued
pursuant to a Pooling and Servicing Agreement, a Trust Agreement or an Indenture
in respect of which we have participated as your counsel have been duly
authorized by all necessary corporate action, and when such Securities have been
duly executed and delivered and sold as described in the Registration Statement,
such Securities will be legally and validly issued and the holders of such
Securities will be entitled to the benefits provided by such Pooling and
Servicing Agreement, Trust Agreement or Indenture, as applicable, pursuant to
which such Securities were issued.
In rendering the foregoing opinions, we have assumed the accuracy and
truthfulness of all public records of the Registrant and of all certifications,
documents and other proceedings examined by us that have been executed or
certified by officials of the Registrant acting within the scope of their
official capacities and have not verified the accuracy or truthfulness thereof.
We have also assumed the genuineness of the signatures appearing upon such
public records, certifications, documents and proceedings. In addition, we have
assumed that each such Pooling and Servicing Agreement, Trust Agreement and
Indenture and the related Certificates and Notes, as applicable, will be
executed and delivered in substantially the form filed as exhibits to the
Registration Statement with such changes acceptable to us, and that such
Securities will be sold as described in the Registration Statement. We express
no opinion as to the laws of any jurisdiction other than the laws of the State
of New York and the federal laws of the United States of America.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matter" in the Prospectus forming a part of the Registration Statement,
without implying or admitting that we are "experts" within the meaning of the
Act or the rules and regulations of the Securities and Registration Statement,
including this exhibit.
Very truly yours,
Dechert Price & Rhoads
<PAGE>
Exhibit 8.1
________________, _____
Beneficial Mortgage Services, Inc.
One Christina Centre
301 North Walnut Street
Wilmington, Delaware 19801
Re: Beneficial Mortgage Services, Inc.
Registration Statement on Form S-3
(File No. 333-21511)
Ladies and Gentlemen:
We have acted as counsel to Beneficial Mortgage Services,
Inc., a Delaware corporation (the "Registrant"), in connection with the issuance
and sale of its Asset Backed Securities (the "Securities") that evidence
interests in, or securities backed by, certain pools of loans. Each series of
Securities will be issued pursuant to (i) a Pooling and Servicing Agreement
among the Registrant, Beneficial Mortgage Corporation, as master servicer (the
"Master Servicer") and a trustee to be specified in the prospectus supplement
for such series of Certificates, (ii) a trust agreement (the "Trust Agreement")
among a trustee named in the related prospectus supplement, the Registrant and
another entity named in such prospectus supplement and/or (iii) an indenture
(the "Indenture") between the trust formed pursuant to the Trust Agreement and
the indenture trustee named in the related prospectus supplement. We have
advised the Registrant with respect to certain federal income tax consequences
of the proposed issuance of the Securities. This advice is summarized under the
headings "Summary of Prospectus -- Tax Status of the Certificates" and "Tax
Status of the Notes" and "Federal Income Tax Consequences" in the Prospectus,
all as part of the Registration Statement on Form S-3 (File No. 333-21511) (the
"Registration Statement"), filed with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Act").
Such description does not purport to discuss all possible federal income tax
ramifications of the proposed issuance, but with respect to those tax
consequences which are discussed, in our opinion, the description is accurate in
all material respects.
We hereby consent to the filing of this letter as an exhibit
to the Registration Statement and to a reference to this firm (as counsel to the
Registrant) under the heading "Federal Income Tax Consequences" in the
Prospectus forming a part of the Registration Statement, without implying or
admitting that we are "experts" within the meaning of the Act or the rules and
regulations of the Commission issued thereunder, with respect to any part of the
Registration Statement, including this exhibit.
Very truly yours,
Dechert Price & Rhoads
<PAGE>
Exhibit 99.1
BENEFICIAL MORTGAGE CORPORATION
as Master Servicer,
LOAN TRUST _-_,
as Issuer,
and
,
as Indenture Trustee
SERVICING AGREEMENT
Dated as of , _
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS1............................. 1
Section 1.01. Definitions................................................... 1
Section 1.02. Other Definitional Provisions................................. 1
Section 1.03. Interest Calculations......................................... 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES.................... 2
Section 2.01. Representations and Warranties Regarding the Master Servicer.. 2
Section 2.02. Representations and Warranties of the Indenture Trustee....... 3
Section 2.03. Enforcement of Representations and Warranties................. 4
ARTICLE III
ADMINISTRATION AND SERVICING OF __________ LOANS............. 5
Section 3.01. The Master Servicer........................................... 5
Section 3.02. Collection of Certain __________ Loan Payments................ 7
Section 3.03. Withdrawals from the Collection Account....................... 9
Section 3.04. Maintenance of Hazard Insurance; Property Protection Expenses. 10
Section 3.05. Assumption and Modification Agreements; Certain Assignments... 11
Section 3.06. Realization Upon Defaulted __________ Loans................... 12
Section 3.07. Issuer and Indenture Trustee to Cooperate..................... 13
Section 3.08. Servicing Compensation; Payment of Certain Expenses by Master
Servicer...................................................... 14
Section 3.09. Annual Statement as to Compliance............................. 14
Section 3.10. Annual Servicing Report....................................... 15
Section 3.11. Access to Certain Documentation and Information Regarding the
__________ Loans.............................................. 15
Section 3.12. Maintenance of Certain Servicing Insurance Policies........... 15
ARTICLE IV
SERVICING CERTIFICATE......................... 16
Section 4.01. Statements to Holders......................................... 16
ARTICLE V
PAYMENT ACCOUNT.................................... 18
Section 5.01. Payment Account............................................... 18
i
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ARTICLE VI
THE MASTER SERVICER.......................... 18
Section 6.01. Liability of the Master Servicer.............................. 18
Section 6.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer........................... 18
Section 6.03. Limitation on Liability of the Master Servicer and Others..... 19
Section 6.04. Master Servicer Not to Resign................................. 20
Section 6.05. Delegation of Duties.......................................... 20
Section 6.06. Master Servicer to Pay Indenture Trustee's and Owner Trustee's
Fees and Expenses, Indemnification............................ 20
ARTICLE VII
DEFAULT................................ 21
Section 7.01. Events of Default............................................. 21
Section 7.02. Indenture Trustee to Act; Appointment of Successor............ 24
Section 7.03. Notification to Holders....................................... 25
ARTICLE VIII
MISCELLANEOUS PROVISIONS......................... 25
Section 8.01. Amendment..................................................... 25
Section 8.02. Governing Law................................................. 26
Section 8.03. Notices....................................................... 26
Section 8.04. Severability of Provisions.................................... 26
Section 8.05. Third-Party Beneficiaries..................................... 26
Section 8.06. Counterparts.................................................. 26
Section 8.07. Effect of Headings and Table of Contents...................... 27
Section 8.08. Termination Upon Purchase by the Master Servicer or Liquidation
of All __________ Loans....................................... 27
Section 8.09. Certain Matters Affecting the Indenture Trustee............... 27
Section 8.10. Limitation of Liability of Owner Trustee...................... 27
Section 8.11. Authority of the Administrator................................ 28
EXHIBIT A
__________ LOAN SCHEDULE........................ 30
EXHIBIT B
FORM OF REQUEST FOR RELEASE...................... 31
ii
<PAGE>
EXHIBIT C
FORM OF LENDER CERTIFICATION
FOR ASSIGNMENT OF __________ LOAN................... 33
iii
<PAGE>
This Servicing Agreement, dated as of ___________, _, among BENEFICIAL
MORTGAGE CORPORATION, as Master Servicer (the "Master Servicer"), Loan Trust _-_
(the "Issuer") and _____ , as Indenture Trustee (the "Indenture Trustee"),
W I T N E S S E T H T H A T:
WHEREAS, the Issuer has been formed pursuant to a Trust Agreement dated
as of _______________, ___ (the "Trust Agreement") between Beneficial Mortgage
Services, Inc., as depositor (the "Depositor"), __________ , and _____________,
as owner trustee (the "Owner Trustee");
WHEREAS, the Issuer will acquire the Initial Loans and the Retained
Balances (and will cquire Additional Loans and Additional Balances);
WHEREAS, pursuant to the terms of an Indenture dated as of ___________,
___ (the "Indenture"), between the Issuer, as debtor, and
________________________, as indenture trustee (the "Indenture Trustee"), the
Issuer will issue the ____________ Asset-Backed Notes, (the "Notes"), consisting
of the (Term) Notes (and the Variable Funding Notes) and secured by the
__________ Loans;
WHEREAS, the Issuer will also issue the ____________ Asset-Backed
Certificates (the "Certificates") representing undivided interests in the assets
of the Issuer subject to the lien of the Indenture; and
WHEREAS, pursuant to the terms of this Servicing Agreement, the Master
Servicer will service the __________ 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 attached to the Indenture as Appendix
A, 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.
(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
1
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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 Asset Balance of a __________ 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.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01. Representations and Warranties Regarding the Master
Servicer. The Master Servicer represents and warrants to the Issuer and the
Indenture Trustee and for the benefit of the Securityholders, as of the Cut-Off
Date, ________________, _, the Closing Date (and any Deposit Date), that:
(i) The Master Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power to own its assets and to transact the business in which it
is currently engaged. The Master 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
2
<PAGE>
the business, properties, assets, or condition (financial or other) of the
Master Servicer or the performance of its obligations hereunder;
(ii) The Master Servicer has the power and authority to make, execute,
deliver and perform its obligations under this Servicing Agreement and all of
the transactions contemplated under this Servicing Agreement, and has taken all
necessary corporate action to authorize the execution and delivery of this
Servicing Agreement and the performance by it of its obligations hereunder. When
executed and delivered, this Servicing Agreement will constitute the legal,
valid and binding obligation of the Master 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 Master Servicer is not required to obtain the consent of any
other party 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 such as have been obtained or
filed, as the case may be, prior to the Closing Date; provided, however, that
the Master Servicer makes no representations and warranties with respect to any
requirements under any Blue Sky laws of any State;
(iv) The execution, delivery of this Servicing Agreement by the Master
Servicer will not violate any provision of any existing law or regulation or any
order or decree of any court applicable to the Master Servicer or any provision
of the Certificate of Incorporation or Bylaws of the Master Servicer, or
constitute a material breach of any mortgage, indenture, contract or other
agreement to which the Master Servicer is a party or by which the Master
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
Master Servicer threatened, against the Master Servicer or any of its properties
or with respect to this Servicing Agreement or the Notes or the Certificates
which in the opinion of the Master Servicer has a reasonable likelihood of
resulting in a material adverse effect on the transactions contemplated by this
Servicing Agreement.
It is understood and agreed that the representations and warranties set forth in
this Section 2.01 shall survive the sale and assignment of the ____________
Loans to the Indenture Trustee. Upon discovery of a breach of any of the
foregoing representations and warranties which materially and adversely affects
the interests of the Holders, the party discovering such breach shall give
prompt written notice to the other parties. Within 60 days of its discovery or
its receipt of notice of breach, the Master Servicer shall cure such breach in
all material respects.
Section 2.02. Representations and Warranties of the Indenture Trustee.
The Indenture Trustee hereby represents and warrants to the Master Servicer and
the Issuer for the benefit of the Securityholders, as of the Cut-Off Date,
__________, ___, the Closing Date (and any Deposit Date), that:
(i) The Indenture Trustee is a in good standing under the laws of
- ----------------------------------------;
3
<PAGE>
(ii) The Indenture Trustee 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 Indenture Trustee of this
Servicing Agreement and the performance by the Indenture Trustee of its
obligations under this Servicing Agreement will not violate any provision of any
law or regulation governing the Indenture Trustee or any order, writ, judgment
or decree of any court, arbitrator or governmental authority or agency
applicable to the Indenture Trustee 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 national banking associations.
Such execution, delivery, authentication and performance will not conflict with,
or result in a breach or violation of, any material indenture, mortgage, deed of
trust, lease or other agreement or instrument to which the Indenture Trustee is
bound.
Section 2.03. Enforcement of Representations and Warranties. The Master
Servicer, on behalf of and subject to the direction of the Indenture Trustee [or
the Credit Enhancer], shall enforce the representations and warranties of the
Seller pursuant to the __________ Loan Purchase Agreement. Upon the discovery by
the Seller, the Master Servicer, the Indenture Trustee, [the Credit Enhancer],
the Issuer or any Custodian of a breach of any of the representations and
warranties made in the __________ Loan Purchase Agreement, in respect of any
__________ Loan which materially and adversely affects the interests of the
Holders [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 Master Servicer shall promptly notify the
Seller of such breach and request that, pursuant to the terms of the __________
Loan Purchase Agreement, the Seller either (i) cure such breach in all material
respects within _ days from the date the Seller was notified of such breach or
(ii) purchase such __________ Loan from the Issuer at the price and in the
manner set forth in Section 4 of the __________ Loan Purchase Agreement;
provided that the Seller shall, subject to the conditions set forth in the
__________ Loan Purchase Agreement, have the option to substitute an Eligible
Substitute __________ Loan or Loans for such __________ Loan. In the event that
the Seller elects to substitute one or more Eligible Substitute __________ Loans
pursuant to Section 4 of the __________ Loan Purchase Agreement, the Seller
shall deliver to the Indenture Trustee for the benefit of the Issuer and the
Holders with respect to such Eligible Substitute __________ Loans, the original
Mortgage Note, the Mortgage, and such other documents and agreements as are
required by the __________ 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 __________ Loans in the month of
substitution shall not be transferred to the Issuer and will be retained by the
Master Servicer and remitted by the Master Servicer to the Seller on the next
succeeding Payment Date provided a payment has been received by the Issuer for
such month in respect of the __________ Loan to be removed. The Master Servicer
shall amend or cause to be amended the __________ Loan Schedule to reflect the
removal of such __________ Loan and the substitution of the Eligible Substitute
__________ Loans and the Master Servicer shall promptly deliver the amended
__________ Loan Schedule to the Owner Trustee and Indenture Trustee.
4
<PAGE>
It is understood and agreed that the obligation of the Seller to cure
such breach or purchase or substitute for such __________ Loan as to which such
a breach has occurred and is continuing shall constitute the sole remedy
respecting such breach available to the Issuer and Indenture Trustee against the
Seller. In connection with the purchase of or substitution for any such
__________ Loan by the Seller, the Issuer and the Indenture Trustee shall assign
to the Seller all of the right, title and interest in respect of the __________
Loan Purchase Agreement applicable to such __________ Loan. Upon receipt of the
Repurchase Price, or upon completion of such substitution, the applicable
Custodian shall deliver the Mortgage Files to the Master Servicer, together with
all relevant endorsements and assignments.
ARTICLE III
ADMINISTRATION AND SERVICING OF __________ LOANS
Section 3.01. The Master Servicer. Beneficial is hereby appointed as
Master Servicer hereunder.
The Master Servicer shall, or shall cause the related Subservicer to,
service and administer the ___________ Loans and shall have full power and
authority, acting alone or through such Subservicer, to do any and all things in
connection with such servicing and administration that it may deem necessary or
desirable. Any amounts received by any Subservicer in respect of a ___________
Loan shall be deemed to have been received by the Master Servicer whether or not
actually received by it. Without limiting the generality of the foregoing, the
Master Servicer shall continue, and is hereby authorized and empowered by the
Indenture Trustee, to execute and deliver on behalf of itself, 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 ___________
Loans and with respect to the Mortgaged Properties. The Indenture Trustee shall,
upon written request of a Servicing Officer, furnish the Master Servicer with
any powers of attorney and other documents as are reasonably necessary or
appropriate to enable the Master Servicer to carry out its servicing and
administrative duties hereunder.
In connection with the servicing and administration of the ___________
Loans, the Master Servicer shall not, and shall not permit any Subservicer to,
consent to an increase in the Credit Limit specified in any Loan Agreement
unless (i) the Master Servicer or such Subservicer and such Mortgagor execute a
new Loan Agreement providing for such increase and (ii) the Master Servicer, not
later than (x) the Business Day immediately preceding the Payment Date
applicable to the Collection Period during which a new Loan Agreement was
executed or (y) in the event the Master Servicer is not entitled to retain and
commingle with its own funds amounts referred to in Section 3.02(c), not later
than the second Business Day following the date on which such new Loan Agreement
was executed, deposit in the Collection Account the amount necessary (including
any accrued and unpaid interest) to prepay in full on behalf of the Mortgagor
the Trust Balance of the related ___________ Loan. Upon making any such deposit
the Master Servicer shall be entitled to receive an instrument of assignment or
transfer from the Indenture Trustee. The Master Servicer and each Subservicer
may consent to the placing of a lien or liens junior to that of the Mortgage on
the related Mortgaged Property so long as the total of the principal amounts of
any first lien loan, the Credit Limit and the combined principal balances
secured by
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any such junior lien loan or loans does not exceed ___%, if such Mortgage is a
second deed of trust or mortgage, and ___%, if such Mortgage is a first deed of
trust or mortgage, of the Appraised Value of the Mortgaged Property as specified
in an appraisal made by or on behalf of the Master Servicer at the time of and
in connection with such consent. The Master Servicer and each Subservicer may
also consent to the placing of a lien or liens senior to that of the Mortgage on
the Mortgaged Property so long as the Combined Loan-to-Value Ratio of such
___________ Loan following the placement of such lien or liens is equal to or
less than the Combined Loan-to- Value Ratio of such ____________ Loan at
origination.
The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer under this Agreement) to the Indenture Trustee under
this Agreement is intended by the parties to be that of an independent
contractor and not that of a joint venturer, partner or agent.
Section 3.02. Collection of Certain __________ Loan Payments. (a) The
Master Servicer and each Subservicer shall follow such collection procedures as
it follows from time to time with respect to ____________ loans in its servicing
portfolio comparable to the __________ Loans. Consistent with the foregoing, the
Master Servicer and any such Subservicer may in its discretion (i) waive any
late payment charge or any prepayment or other fees that may be collected in the
ordinary course of servicing such ____________ Loans and (ii) if a Mortgagor is
in default or about to be in default under a ____________ Loan, arrange with
such Mortgagor a schedule for the payment of interest due and unpaid; provided
such arrangement is consistent with the Master Servicer's or such Subservicer's
policies with respect to the __________ loans it owns or services.
(b) The Master Servicer shall establish an account (the "Collection
Account") in which the Master Servicer shall deposit or cause to be deposited
any amounts representing payments on and any collections in respect of the
__________ 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 Days 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 __________ Loans
received by the Master 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 __________ Loans purchased
by the Master Servicer pursuant to Section 3.14;
(iii) Net Liquidation Proceeds net of any related Foreclosure Profit;
(iv) all proceeds of any __________ Loans repurchased by the Seller
pursuant to the __________ Loan Purchase Agreement;
(v) insurance proceeds, other than Net Liquidation Proceeds, resulting
from any insurance policy maintained on a Mortgaged Property; and
(vi) amounts required to be paid by the Master Servicer pursuant to
Section 8.08.
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provided, however, that with respect to each Collection Period, the Master
Servicer shall be permitted to retain from payments in respect of interest on
the __________ Loans, the Master 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 Master Servicer need not deposit in the Collection Account
amounts representing Foreclosure Profits, fees (including annual fees) or late
charge penalties or assumption fees, payable by Mortgagors, or amounts received
by the Master 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 Master 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 Master Servicer or
serviced or master serviced by it on behalf of others. Notwithstanding such
commingling of funds, the Master 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 __________ Loans and shall hold all
collections in the Collection Account to the extent they represent collections
on the __________ Loans for the benefit of the Issuer, the Indenture Trustee
[and the Credit Enhancer], as their interests may appear. [The Master Servicer
shall remit all Foreclosure Profits to itself as additional servicing compensati
on.]
The Master Servicer may cause the institution maintaining the Collection
Account to invest any funds in the Collection Account in Eligible Investments
(including obligations of the Master 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
Master 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 Master
Servicer out of its own funds immediately as realized.
(c) Until the Business Day prior to each Distribution Date on which
amounts are required to be deposited in the Collection Account pursuant to
Section 3.02(b), the Master Servicer may retain and commingle such amounts with
its own funds so long as (i) no Event of Default shall have occurred and be
continuing and (ii) either (x) the Master Servicer remains an affiliate of
Beneficial Corporation and the short-term debt obligations of Beneficial
Corporation are rated at least A-1 by Standard & Poor's, F-1 by Fitch and P-1 by
Moody's (or such lower rating as each such organization may otherwise agree to
in writing) or (y) the Master Servicer arranges for and maintains a letter of
credit acceptable in form and substance to each Rating Agency (which
acceptability shall be confirmed in writing); provided, however, that amounts
permitted to be retained and commingled pursuant to this clause (y) shall not
exceed the amount available under such letter of credit. In the event the Master
Servicer is entitled to retain and commingle the amounts referred to in the
preceding sentence, it shall be entitled to retain for its own account any
investment income thereon, and any such investment income shall not be subject
to any claim of the Indenture Trustee or Securityholders. Any amounts retained
and commingled by the Master Servicer pursuant to this Section 3.02(c) shall be
held by the Master Servicer in constructive trust for the benefit of the
Securityholders. In the event that the Master Servicer is not permitted to
retain and commingle such amounts with its own funds, it shall, any provisions
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herein to the contrary notwithstanding, deposit such amounts not later than the
second Business Day following receipt in the Collection Account created and
maintained pursuant to Section 3.02(b), subject to withdrawal to the same extent
as withdrawals are permitted pursuant to Section 3.03.
Section 3.03. Withdrawals from the Collection Account. The Master
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 __________ Loans for the following purposes:
(i) to deposit in the Payment 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;
[(ii) prior to either an Amortization Event or the Collection Period
preceding the Accelerated Amortization Date, to pay to the Seller, the amount of
any Additional Balances as and when created during the related Collection
Period, provided, that the aggregate amount so paid to the Seller in respect of
Additional Balances at any time during any Collection Period shall not exceed
the amount of Principal Collections theretofore received for such Collection
Period;]
[(iii) 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 3.06 or otherwise reimbursable
pursuant to the terms of this Servicing Agreement (to the extent not payable
pursuant to Section 3.08), such withdrawal right being limited to amounts
received on particular __________ 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 __________ Loan;]
(iv) to pay to itself out of each payment received on account of
interest on a __________ Loan as contemplated by Section 3.08, an amount equal
to the related Master 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;
[(v) 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;]
(vi) to the extent deposited in the Collection Account, to pay to
itself as additional servicing compensation any Foreclosure Profits;
[(vii) to pay to itself or the Seller, with respect to any __________
Loan or property acquired in respect thereof that has been purchased or
otherwise transferred to the Seller, the Master Servicer or other entity, all
amounts received thereon and not required to be distributed to Holders as of the
date on which the related Purchase Price or Repurchase Price is determined;]
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[(viii) to withdraw any other amount deposited in the Collection Account
that was not required to be deposited therein pursuant to Section 3.02;]
[(ix) 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
(x) after the occurrence of an Amortization Event, to pay to the
Seller, the Excluded Amount.]
Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses. The Master Servicer shall cause to be maintained for each __________
Mortgaged Property hazard insurance with an appropriate endorsement in favor of
the Master Servicer or the related Subservicer and extended coverage in an
amount that is at least equal to the lesser of (i) the maximum insurable value
of the improvements securing the related __________ Loan from time to time or
(ii) the combined principal balance owing on such __________ Loan and any
___________ loan senior to such __________ Loan from time to time, but in no
event shall such amount be less than is necessary to prevent the Mortgagor from
becoming a coinsurer thereunder. The Master Servicer shall also cause to be
maintained on property acquired upon foreclosure, or deed in lieu of
foreclosure, hazard insurance with an appropriate endorsement in favor of the
Master Servicer or the related Subservicer with extended coverage in an amount
which is at least equal to the lesser of (i) the maximum insurable value from
time to time of the improvements that are a part of such property or (ii) the
combined principal balance owing on such __________ Loan and any ___________
loan senior to such __________ Loan from time to time at the time of such
foreclosure or deed in lieu of foreclosure plus accrued interest and the
good-faith estimate of the Master Servicer of related Liquidation Expenses to be
incurred in connection therewith. Amounts collected by the Master Servicer under
any such policies 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 in a federally
designated flood area, the hazard insurance to be maintained for the related
__________ Loan shall include flood insurance (to the extent available). All
such flood insurance shall be in amounts as are required under applicable
guidelines of the Federal National Mortgage Association. The Master 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
__________ 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 Master Servicer shall obtain and maintain a blanket policy issued by an
insurer acceptable to the Rating Agencies insuring against hazard losses on all
of the __________ 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 Master 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.
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Section 3.05. Assumption and Modification Agreements. In any case in
which a Mortgaged Property has been or is about to be conveyed by the Mortgagor,
the Master Servicer and each Subservicer shall exercise its right to accelerate
the maturity of the related ____________ Loan and require that the balance
thereof be paid in full on or prior to such conveyance by the Mortgagor under
any "due-on-sale" clause applicable thereto. If such "due-on-sale" clause, by
its terms, is not operable or the Master Servicer is prevented, as provided in
the following paragraph of this Section 3.05, from enforcing any such clause,
the Master Servicer is authorized to take or enter into an assumption and
modification agreement from or with the Person to whom such property has been or
is about to be conveyed, pursuant to which such Person becomes liable under the
Loan Agreement and the Mortgagor remains liable thereon. In connection with any
such agreement, the provisions for the adjustment of the rate thereon shall not
be modified to increase or decrease the rate. Any such agreement shall, for all
purposes, be considered part of the related Mortgage File. Any fee collected by
the Master Servicer for entering into any such agreement will be retained by the
Master Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph of this Section 3.05 or any
other provision of this Agreement, the Master Servicer shall not be deemed to be
in default, breach or any other violation of its obligations hereunder by reason
of any assumption of a ____________ Loan, or transfer of any Mortgaged Property
without the assumption thereof, by operation of law or any assumption or
transfer which the Master Servicer reasonably believes it may be restricted by
law from preventing, for any reason whatsoever.
Section 3.06 Realization upon Defaulted __________ Loans. The Master
Servicer shall, or shall cause the applicable Subservicer to, foreclose upon or
otherwise comparably convert to ownership Mortgaged Properties securing such of
the ____________ Loans as come into and continue in default when, in the opinion
of the Master Servicer, no satisfactory arrangements can be made for collection
of delinquent payments pursuant to Section 3.02. In connection with such
foreclosure or other conversion, the Master Servicer or such Subservicer shall
follow such practices (including, in the case of any default on a related prior
deed of trust, the advancing of funds to correct such default) and procedures as
it shall deem necessary or advisable and as shall be normal and usual from time
to time in its general mortgage servicing activities. In determining whether to
foreclose upon or otherwise comparably convert the ownership of a Mortgaged
Property, the Master Servicer and each Subservicer shall take into account (and
shall not be required to foreclose or otherwise convert the ownership of such
Mortgaged Property in the case of) the existence of any hazardous substances,
hazardous wastes or solid wastes, as such terms are defined in the Comprehensive
Environmental Response Compensation and Liability Act, the Resource Conservation
and Recovery Act of 1976, or other federal, state or local environmental
legislation, on such Mortgaged Property. The foregoing is subject to the proviso
that neither the Master Servicer nor any Subservicer shall be required to expend
its own funds in connection with any foreclosure or other conversion or towards
the correction of any default on a related prior mortgage loan or restoration of
any property unless it shall determine that such foreclosure, correction or
restoration will increase Net Liquidation Proceeds.
Section 3.07. Indenture Trustee to Cooperate. (a) Upon the payment
in full of the balance of any ____________ Loan, the Master Servicer will
promptly notify the Indenture Trustee by a certification substantially in the
form of Exhibit C hereto of a Servicing Officer. Such notification shall be made
each month at the time that the Master Servicer delivers the
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Servicing Certificate to the Indenture Trustee pursuant to Section 4.01. Upon
any such payment in full, the Master Servicer is authorized to execute, pursuant
to the authorization contained in Section 3.01, an instrument of satisfaction
regarding the related Mortgage, which instrument of satisfaction shall be
recorded by the Master Servicer if required by applicable law and be delivered
to the Person entitled thereto, it being understood and agreed that no expenses
incurred in connection with such instrument of satisfaction shall be reimbursed
from amounts deposited in the Collection Account.
(b) If the Indenture Trustee is holding the Mortgage
Files, from time to time and as appropriate for the servicing or foreclosure of
any ____________ Loan, the Trustee shall, within ___ Business Days of receipt by
the Indenture Trustee of a written request substantially in the form of Exhibit
B hereto transmitted by the Master Servicer to the Indenture Trustee or made in
writing signed by a Servicing Officer and delivered to the Indenture Trustee as
provided in Section 8.03, deliver the related Mortgage File to the Master
Servicer and shall execute such documents, in the forms provided by the Master
Servicer, as shall be certified by a Servicing Officer to be necessary to the
prosecution of any such proceedings. The Master Servicer shall return the
Mortgage File to the Indenture Trustee when the need therefor by the Master
Servicer no longer exists unless the ____________ Loan shall be liquidated, in
which case the Master Servicer shall deliver a certificate of a Servicing
Officer similar to that hereinabove specified, and the Master Servicer shall be
entitled to retain the Mortgage File.
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
Master Servicer. The Master Servicer shall be entitled to retain in accordance
with Section 3.03 as servicing compensation the Master Servicing Fee. 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 Master Servicer. The Master 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 Holders, 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 3.09. Annual Statement as to Compliance. (a) The Master Servicer
will deliver to the Indenture Trustee, on or before March 31, of each year,
beginning March 31, ____, an Officer's Certificate stating that (i) a review of
the activities of the Master Servicer during the preceding calendar year and of
its performance under this Servicing Agreement has been made under such
officer's supervision and (ii) to the best of such officer's knowledge, based on
such review, the Master Servicer has fulfilled all its material obligations
under this Servicing Agreement throughout such 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.
Section 3.10 Annual Independent Public Accountants' Servicing Report. On
or before March 31 of each year, beginning with March 31, ____, the Master
Servicer at its expense shall cause a firm of independent public accountants
(who may also render other services to the Master Servicer) to furnish a report
to the Indenture Trustee to the effect that such firm has examined certain
documents and records relating to the servicing of __________ loans under this
Servicing Agreement, and that such examination, which has been conducted
substantially in compliance with
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the Uniform Single Audit Program for Mortgage Bankers (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.
Section 3.11 Access to Certain Documentation and Information Regarding
the ____________ Loans. (a) The Master Servicer shall provide to
Certificateholders that are federally insured savings associations, the Office
of Thrift Supervision, the Federal Deposit Insurance Corporation and the
supervisory agents and examiners of such office and such corporation access to
the documentation regarding the ____________ Loans required by applicable
regulations of the Office of Thrift Supervision, such access being afforded
without charge but only upon reasonable request and during normal business hours
at the offices of the Master Servicer. Nothing in this Section 3.11 shall
derogate from the obligation of the Master Servicer to observe any applicable
law prohibiting disclosure of information regarding the Mortgagors and the
failure of the Master Servicer or the Indenture Trustee to provide access as
provided in this Section 3.11 as a result of such obligation shall not
constitute a breach of this Section 3.11.
(b) The Master Servicer shall supply such supplemental information, in
such form as the Indenture Trustee shall reasonably request, to the Paying Agent
and the Indenture Trustee, on or before the start of the third Business Day
preceding the related Payment Date, as is required in the Indenture Trustee's
reasonable judgment to enable the Paying Agent or the Indenture Trustee, as the
case may be, to make required payments and to furnish the required reports to
the Holders.
Section 3.12. Maintenance of Certain Servicing Insurance Policies. The
Master 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 master servicer hereunder and (ii) a fidelity
bond in respect of its officers, employees or agents. Each such policy or
policies and bond shall, together, comply with the requirements from time to
time of FNMA, for Persons performing servicing for mortgage loans purchased by
such entity.
ARTICLE IV
SERVICING CERTIFICATE
Section 4.01. Statements to Holders. (a) With respect to each Payment
Date, the Master Servicer shall forward to the Indenture Trustee and the
Indenture Trustee shall forward by mail to each Certificateholder, Noteholder,
[holder of the Residual Ownership Interest, 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 Variable Funding
Notes, Term] Notes, [the Residual Ownership Interest] and Certificates, to the
extent applicable:
(i) the aggregate of all Security Interest Collections received
during the related Collection Period;
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(ii) the aggregate of all Security Principal Collections received
during the related Collection Period;
(iii) the aggregate of all Insurance Proceeds received during the
related Collection Period;
(iv) the aggregate of the Liquidation Proceeds received during the
calendar month preceding the month of such Payment Date;
(v) the number and aggregate principal balance of any __________ Loans
that were identified as Deleted ____________ Loans required to be repurchased
pursuant to the __________ Loan Purchase Agreement or by the Master Servicer
pursuant to this Servicing Agreement during the related Collection Period and
(A) the aggregate Repurchase Price of any such Deleted ___________ Loans that
will be repurchased by the related Originator or the Master Servicer prior to
the following Payment Date and (B) the aggregate amount of any shortfall in
respect of the aggregate Principal Balance of any Deleted _________ Loans for
which the related Originator or the Master Servicer substituted one or more
Eligible Substitute __________ Loans, if any, to be deposited in the Collection
Account prior to such Payment Date;
(vi) the monthly Servicing Fee;
(vii) the sum of the amounts specified pursuant to clauses (i)-(v),
inclusive, above, net of the amount specified in clause (vi) above;
(viii) the amount of interest on the Notes payable on such Payment Date
and any previously accrued and unpaid interest for prior Payment Dates;
(ix) the Principal Collections Distribution Amount for such Payment
Date;
(x) the Certificate Distribution Amount for such Payment Date;
(xi) the amounts remaining available in the Payment Account on the
related Payment Date after the payment of amounts required to be paid pursuant
to the Indenture on such Payment Date;
(xii) the outstanding Principal Balance of the Notes and the
Certificates after giving effect to the payments to be made on such Payment
Date;
(xiii) any Liquidated Loss Amounts for such Payment Date, including
cumulative losses up to such date;
(xiv) in the event the Master Servicer has obtained a letter of credit,
surety or similar agreement, the amount available under such letter of credit,
surety or similar agreement after giving effect to any drawings made thereunder
to and including the date of such statement;
(xv) the book value (within the meaning of 12 C.F.R. Section 571.13 or
comparable provision) of any real estate acquired through foreclosure or grant
of a deed in lieu of foreclosure and held by the Indenture Trust for the benefit
of the Holders of the Securities as of the last day of the related Collection
Period;
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(xvi) the number and aggregate outstanding balances of all __________
Loans delinquent (a) ___ to ___ days and (b) ___ days or more, respectively, as
of the end of the related Collection Period; and
(xvii) the Pool Balance for the following Payment Date.
ARTICLE V
PAYMENT ACCOUNT
Section 5.01. 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
Noteholders, the Certificateholders [and the Credit Enhancer] pursuant to the
Indenture, dated as of __________, ___, between Loan Trust _-_ 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 Master 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 Master
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 Payment Account by the Master Servicer out of its own funds
immediately as realized.
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ARTICLE VI
THE MASTER SERVICER
Section 6.01. Liability of the Master Servicer. The Master Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by the Master Servicer herein.
Section 6.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer. 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 herein to the contrary notwithstanding.
Section 6.03. Limitation on Liability of the Master Servicer and Others.
Neither the Master Servicer nor any of the directors or officers or employees or
agents of the Master Servicer shall be under any liability to the Issuer, the
Owner Trustee, the Indenture Trustee or the Holders 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 Master 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 Master Servicer
and any director or officer or employee or agent of the Master 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. Subject to the
second succeeding sentence, 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 this Servicing Agreement or the Securities, other
than any loss, liability or expense related to any specific __________ Loan or
__________ Loans (except as any such loss, liability or expense shall 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 Master 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 Master 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 Holders 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 Issuer and
the Master Servicer shall be entitled to be reimbursed therefor. The Master
Servicer's right to indemnity or reimbursement pursuant to this Section 6.03
shall survive any resignation or termination of the Master Servicer pursuant to
Section 6.04 or 7.01 with respect to any losses, liabilities or expenses arising
prior to such resignation or termination (or arising from events that occurred
prior to such resignation or termination).
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Section 6.04. Master Servicer Not to Resign. Subject to the provisions
of Section 6.02, the Master 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 Master Servicer so causing such a conflict being of a type and
nature carried on by the Master Servicer or its subsidiaries or Affiliates at
the date of this Servicing Agreement or (ii) upon satisfaction of the following
conditions: (a) the Master Servicer has proposed a successor servicer to the
Administrator and the Indenture Trustee in writing and such proposed successor
servicer is reasonably acceptable to the Administrator, the Indenture Trustee
[and the Credit Enhancer]; (b) each Rating Agency shall have delivered a letter
to the Issuer, [the Credit Enhancers] and the Indenture Trustee stating that the
proposed appointment of such successor servicer as Master Servicer hereunder
will not result in the reduction or withdrawal of the then current rating of the
Securities; and (c) such proposed successor master servicer has agreed in
writing to assume the obligations of Master Servicer hereunder and the Master
Servicer has delivered to the Indenture Trustee an Opinion of Counsel to the
effect that all conditions precedent to the resignation of the Master Servicer
and the appointment of and acceptance by the proposed successor master servicer
have been satisfied; provided, however, that in the case of clause (i) above no
such resignation shall become effective until the Trustee or a successor Master
Servicer shall have assumed the Master Servicer's responsibilities and
obligations hereunder in accordance with Section 7.02. Any such resignation
shall not relieve the Master 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 Master Servicer. Any such determination
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Trustee.
Section 6.05 Delegation of Duties. In the ordinary course of business,
the Master Servicer at any time may delegate any of its duties hereunder to any
Person, including any of its Affiliates, who agrees to conduct such duties in
accordance with standards comparable to those with which the Master Servicer
complies pursuant to Section 3.01. Such delegation shall not relieve the Master
Servicer of its liabilities and responsibilities with respect to such duties and
shall not constitute a resignation within the meaning of Section 6.04. The
Master Servicer shall provide each Rating Agency and the Indenture Trustee with
written notice prior to the delegation of any of its duties to any Person other
than any of the Master Servicer's Affiliates or their respective successors and
assigns.
Section 6.06. Master Servicer to Pay Indenture Trustee's and Owner
Trustee's Fees and Expenses, Indemnification. The Master Servicer covenants and
agrees to pay to the Owner Trustee, the Indenture Trustee and any co-trustee of
either the Owner Trustee or 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
Master 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
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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.
INSER X
ARTICLE VII
DEFAULT
Section 7.01. Events of Default. If any one of the following events
("Events of Default") shall occur and be continuing:
(i) any failure by the Master 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 ____ Business Days after the date upon which written notice of such
failure shall have been given to the Master Servicer by the Issuer or the
Indenture Trustee [or to the Master Servicer, the Issuer and the Indenture
Trustee by the Credit Enhancer] or to the Indenture Trustee, Master Servicer and
the Issuer by the Holders of not less than 51% of the aggregate Principal
Balance of the Notes and the Certificates; or
(ii) failure on the part of the Master Servicer duly to observe or
perform in any material respect any other covenants or agreements of the Master
Servicer set forth in the Securities or in this Servicing Agreement, which
failure (x) materially and adversely affects the interests of Holders [or the
Credit Enhancer] and (y) continues unremedied for a period of ____________ days
after the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Master Servicer by the Issuer [or the
Indenture Trustee or to the Master Servicer, the Issuer and the Indenture
Trustee by the Credit Enhancer] or to the Indenture Trustee, Master Servicer and
the Issuer by the Holders of not less than 51% of the aggregate Principal
Balance of the Notes and the Certificates; or
(iii) the entry against the Master 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 ___ consecutive days; or
(iv) the consent to the appointment of a conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Master Servicer or of
or relating to all or substantially all of its property, or the Master 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) total expected losses exceed ___% of the Cut-Off Date Asset Balance
on or prior to the fifth anniversary of the Cut-Off Date or ___% of the Cut-Off
Date Asset Balance on or prior to the tenth anniversary of the Cut-Off Date.
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then, and in every such case, so long as an Event of Default shall not have been
remedied by the Master Servicer, either the Indenture Trustee [with the consent
of the Credit Enhancer, the Credit Enhancer with the consent of Holders of not
less than 51% of the aggregate Principal Balance of the Notes and the
Certificates,] or by the Holders of not less than 51% of the aggregate Principal
Balance of the Notes and the Certificates, by notice then given in writing to
the Master Servicer and to the Indenture Trustee if given by [the Credit
Enhancer or] the Holders, may terminate all of the rights and obligations of the
Master Servicer as master servicer under this Servicing Agreement, on or after
the receipt by the Master Servicer of such written notice, all authority and
power of the Master Servicer under this Servicing Agreement, whether with
respect to the Securities or the __________ Loans or otherwise, shall pass to
and be vested in [the Successor Master Servicer][the Indenture Trustee] pursuant
to and under this Section 7.01; and, without limitation, the Indenture Trustee
is hereby authorized and empowered to execute and deliver, on behalf of the
Master 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 __________ Loan and related
documents, or otherwise. The Master Servicer agrees to cooperate with [the
Successor Master Servicer] [the Indenture Trustee] in effecting the termination
of the responsibilities and rights of the Master Servicer hereunder, including,
without limitation, the transfer to [the Successor Master Servicer] [the
Indenture Trustee] for the administration by it of all necessary documentation
and all cash amounts that shall at the time be held by the Master Servicer and
to be deposited by it in the Collection Account, or that have been deposited by
the Master Servicer in the Collection Account or thereafter received by the
Master Servicer with respect to the __________ 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 Master
Servicer pursuant to this Section 7.01 shall be paid by the predecessor Master
Servicer [or if the predecessor Master Servicer is the Indenture Trustee, the
initial Master Servicer] upon presentation of reasonable documentation of such
costs and expenses.
Section 7.02. Indenture Trustee to Act; Appointment of Successor. (a) On
and after the time the Master Servicer receives a notice of termination pursuant
to Section 7.01 or gives notice of its resignation under clause (i) of Section
6.04, the Indenture Trustee shall be the successor in all respects to the Master
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 Master
Servicer by the terms and provisions hereof provided, however, that any
liability of the Indenture Trustee in its capacity as successor master servicer
shall be limited to the extent such liability results from an inability to
fulfill its responsibilities and duties as successor master servicer due to any
failure on the part of the original Master Servicer to deliver the documentation
and cash amounts referred to in Section 7.01 or otherwise fulfill its
obligations hereunder. As compensation therefor, the Indenture Trustee shall be
entitled to such compensation as the Master Servicer would have been entitled to
hereunder if no such notice of termination had been given, including, without
limitation, any investment earnings on any Eligible Investments hereunder to
which the Master Servicer would have been entitled. Notwithstanding the above,
the Indenture Trustee may, if it shall be unwilling so to act, or shall, if it
is legally unable so to act, appoint, or petition a court of competent
jurisdiction to appoint, any established housing and home finance institution
that is then servicing a __________ loan portfolio and having all licenses,
permits and approvals required by applicable law, and a net worth of not less
than $________ as the successor to the Master Servicer
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hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Master Servicer hereunder. Pending appointment of a
successor to the Master 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 ____________ Loans in an amount equal to the compensation which the
Master Servicer would otherwise have received pursuant to Section 3.08 (or such
lesser compensation as the Indenture Trustee and such successor shall agree).
The Indenture Trustee and such successor shall take such action, consistent with
this Servicing Agreement, as shall be necessary to effectuate any such
succession. The appointment of a successor Master Servicer, including the
Indenture Trustee, shall not affect any liability of a predecessor Master
Servicer that may have arisen under this Servicing Agreement prior to its
termination as Master Servicer (including, without limitation, any deductible
under an insurance policy pursuant to Section 3.04), nor shall any successor
Master Servicer, including the Indenture Trustee, be liable for any acts or
omissions of any predecessor Master Servicer or for any breach by such
predecessor Master Servicer or the Depositor of any of their representations or
warranties contained herein or in any related document or agreement.
(b) Any successor, including the Indenture Trustee, to the Master
Servicer as servicer shall during the term of its service as servicer (i)
continue to service and administer the __________ Loans for the benefit of the
Holders, (ii) maintain in force a policy or policies of insurance covering
errors and omissions in the performance of its obligations as Master Servicer
hereunder and a fidelity bond in respect of its officers, employees and agents
to the same extent as the Master Servicer is so required pursuant to Section
3.12.
Section 7.03. Notification to Holders. Upon any termination or
appointment of a successor to the Master Servicer pursuant to this Article VII
or Section 6.04, the Indenture Trustee shall gave prompt written notice thereof
to the Holders, [the Credit Enhancer,] the Issuer and each Rating Agency.
Section 7.04 Waiver of Past Events of Default. The Holders of
Certificates evidencing not less than 51% of the aggregate Principal Balance of
the Notes and the Certificates may, on behalf of all Holders, waive any default
by the Master Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required deposits to or payments
from the Collection Account in accordance with this Servicing Agreement. Upon
any such waiver of a past default, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereon.
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
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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 Master Servicer, Beneficial Mortgage Corporation, One Christina
Centre, 301 North Walnut Street, Wilmington, Delaware 19801, Attention: Managing
Director - Mortgage Finance, [(b) in the case of the Credit Enhancer,
______________________ Attention: ________________, (c) in the case of Moody's,
______________ 99 Church Street, New York, New York 10007, Attention:
________________, (d) in the case of Standard & Poor's, 26 Broadway, 15th Floor,
New York, New York 10004, Attention: ___________________________,] (e) in the
case of the Owner Trustee, the Corporate Trust Office, and (f) in the case of
the Issuer, to _____________________ Loan Trust _-_, c/o _________________,
Attention: Corporate Trust Department, with a copy to the Administrator at
______________________, 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. [Any notice required or permitted to be mailed to a
Holder shall be given by first class mail, postage prepaid, at the address of
such Holder 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 Holder 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 Holders thereof.
Section 8.05. Third-Party Beneficiaries. This Servicing Agreement will
inure to the benefit of and be binding upon the parties hereto, the Holders,
[the Credit Enhancer,] the Owner Trustee and their respective successors and
permitted assigns. Except as otherwise provided in this Servicing Agreement, no
other Person will have any right or obligation hereunder. In the event the
Indenture is terminated and the __________ Loans are held by the Issuer, the
Owner Trustee agrees, on behalf of the Issuer, to exercise all the rights and
fulfill the obligations of the Indenture Trustee hereunder with the same effect
as if the Owner Trustee were named wherever the term "Indenture Trustee" appears
herein other than the obligations of the Indenture Trustee to act as successor
Master Servicer pursuant to Section 7.02.
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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 Master Servicer or
Liquidation of All __________ Loans. The respective obligations and
responsibilities of the Master Servicer, the Issuer and the Indenture Trustee
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 Master Servicer from the Issuer of all
__________ Loans and all property acquired in respect of any __________ Loan at
a price equal to the greater of (a) ___% of the unpaid Asset Balance of each
__________ Loan, plus accrued and unpaid interest thereon at the Weighted
Average Net Loan 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 __________ Loans as determined by two bids from competitive
participants in the residential loan market.
The right of the Master Servicer to purchase the assets of the Issuer 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 Asset Balances of the __________ Loans. If such right is exercised
by the Master Servicer, the Master 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 Master Servicer, the files
pertaining to the __________ Loans being purchased.
The Master Servicer, at its expense, shall prepare and deliver to the
Indenture Trustee and the Owner Trustee for execution, at the time the
__________ Loans are to be released to the Master Servicer, appropriate
documents assigning each such __________ Loan from the Indenture Trustee to the
Master 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.
Section 8.10. Limitation of Liability of Owner Trustee. Notwithstanding
anything contained herein to the contrary, this Agreement has been executed by
_____________________ not in its individual capacity but solely in its capacity
as Owner Trustee of the Issuer and in no event shall _________________ in its
individual capacity, or except as expressly provided in
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the Trust Agreement, as Owner Trustee of the Issuer, have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Owner Trustee or the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer; provided, that this provision shall not
diminish the Owner Trustee's obligations to take actions that it is expressly
required to perform hereunder, provided, further that the Owner Trustee will
remain liable for its own willful misconduct, negligence or bad faith. For all
purposes of this Servicing Agreement, in the performance of its duties or
obligations hereunder or 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 VII of the Trust Agreement.
Section 8.11. 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.
Section 8.12. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.02 and 6.04, this Agreement
may not be assigned by the Master Servicer without the prior written consent of
the Holders of not less than 66% of the aggregate Principal Balance of the Notes
and the Certificates.
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IN WITNESS WHEREOF, the Master Servicer, the Issuer and the Indenture
Trustee have caused this Servicing Agreement to be duly executed by their
respective officers all as of the day and year first above written.
BENEFICIAL MORTGAGE CORPORATION,
as Master Servicer
By:______________________________
Name:
Title:
______________, LOAN TRUST _-_,
as Issuer
By:____________________________
not in its individual capacity
but solely as Owner Trustee
By:______________________________
Name:
Title:
---------------------------------
as Indenture Trustee
By:______________________________
Name:
Title:
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EXHIBIT A
__________ LOAN SCHEDULE
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EXHIBIT B
FORM OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with the administration of the pool of __________ Loans held by
you for the referenced pool, 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)
__________ Loan Prepaid in Full __________ 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."
- ---------------------------------
- --------------------
Authorized Signature
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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
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EXHIBIT C
FORM OF LENDER CERTIFICATION
FOR ASSIGNMENT OF __________ LOAN
_____________________, 19__
- -------------------------
- -------------------------
Attention: ________________________ Loan Trust _-_
Re: _______________________ Loan Trust ---_-_
Ladies and Gentlemen:
This letter is delivered to you in connection with the assignment by
____________________ (the "Indenture Trustee") to ______________________ (the
"Lender") of ______________________ (the "__________ Loan") pursuant to Section
3.05(c) of the Servicing Agreement (the "Servicing Agreement"), dated as of
_________________, _ between Beneficial Mortgage Services, Inc., as depositor
(the "Depositor"), _________________ Loan Trust _-_, as issuer, and the
Indenture Trustee. All terms used herein and not otherwise defined shall have
the meanings set forth in the Servicing Agreement. The Lender hereby certifies,
represents and warrants to, and covenants with, the Master Servicer,
___________________________ and the Indenture Trustee that:
(i) the __________ Loan is secured by a Mortgaged Property located in a
jurisdiction in which an assignment in lieu of satisfaction is required to
preserve lien priority, minimize or avoid mortgage recording taxes or otherwise
comply with, or facilitate a refinancing under, the laws of such jurisdiction;
(ii) the substance of the assignment is, and is intended to be, a
refinancing of such __________ Loan and the form of the transaction is solely to
comply with, or facilitate the transaction under, such local laws;
(iii) the __________ Loan following the proposed assignment will be
modified to have a rate of interest no more than 0.25 percent below or above the
rate of interest on such __________ Loan prior to such proposed assignment; and
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(iv) such assignment is at the request of the borrower under the
related __________ Loan.
Very truly yours,
---------------------------
(Lender)
By:________________________
Title:_____________________
Name:______________________
Title:_____________________
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