<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1997.
REGISTRATION NO. 333-21315
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE
AMENDMENT NO. 3
TO
FORM S-11
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
ASSET SECURITIZATION CORPORATION
(Exact name of registrant as specified in governing instruments)
2 WORLD FINANCIAL CENTER
BUILDING B, 21ST FLOOR
NEW YORK, NEW YORK 10281-1198
(Address of principal executive offices)
ROBERT K. ROTTMANN
CHIEF FINANCIAL OFFICER AND TREASURER
ASSET SECURITIZATION CORPORATION
2 WORLD FINANCIAL CENTER
BUILDING B, 21ST FLOOR
NEW YORK, NEW YORK 10281-1198
(Name and address of agent for service)
Copies to:
<TABLE>
<CAPTION>
<S> <C> <C>
Barry M. Funt, Esq. Faith D. Grossnickle, Esq.
Anna H. Glick, Esq. Asset Securitization Corporation Timothy G. Little, Esq.
Cadwalader, Wickersham & Taft 2 World Financial Center Shearman & Sterling
100 Maiden Lane Building B, 21st Floor 599 Lexington Avenue
New York, New York 10038 New York, New York 10281-1198 New York, New York 10022
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM CAPTION IN PROSPECTUS
- ------------ -------------------------------------------------
<S> <C> <C>
Item 1. Forepart of the Registration Statement and Outside Front Cover Page
Outside Front Cover Page of Prospectus.
Item 2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover Pages
of Prospectus.
Item 3. Summary Information, Risk Factors and Ratio Executive Summary; Summary of Prospectus; Risk
of Earnings to Fixed Charges. Factors
Item 4. Determination of Offering Price. *
Item 5. Dilution. *
Item 6. Selling Security Holders. *
Item 7. Plan of Distribution. Plan of Distribution
Item 8. Use of Proceeds. Use of Proceeds
Item 9. Selected Financial Data. *
Item 10. Management's Discussion and Analysis of *
Financial Condition and Results of
Operations.
Item 11. General Information as to Registrant. The Depositor
Item 12. Policy with Respect to Certain Activities. Outside Front Cover Page; Description of the
Subordinated Certificates
Item 13. Investment Policies of Registrant. Outside Front Cover Page; Description of the
Subordinated Certificates; Description of the
Mortgage Pool
Item 14. Description of Real Estate. Description of the Mortgage Pool
Item 15. Operating Data. *
Item 16. Tax Treatment of Registrant and Its Certain Federal Income Tax Consequences
Security Holders.
Item 17. Market Price of and Dividends on the *
Registrant's Common Equity and Related
Stockholder Matters.
Item 18. Description of Registrant's Securities. Outside Front Cover Page; Risk Factors;
Description of the Subordinated Units;
Description of the Subordinated Certificates;
Description of the Mortgage Pool; Certain Federal
Income Tax Consequences
Item 19. Legal Proceedings. *
Item 20. Security Ownership of Certain Beneficial *
Owners and Management.
Item 21. Directors and Executive Officers. *
Item 22. Executive Compensation. *
Item 23. Certain Relationships and Related *
Transactions.
Item 24. Selection, Management and Custody of Description of the Subordinated Certificates;
Registrant's Investments. Description of the Mortgage Pool; The Pooling and
Servicing Agreement-Servicing of the Mortgage
Loans
Item 25. Policies with Respect to Certain *
Transactions.
Item 26. Limitations of Liability. The Pooling and Servicing Agreement-Certain
Matters Regarding the Depositor, the Servicer and
the Special Servicer
Item 27. Financial Statements and Information. Financial Information
Item 28. Interests of Named Experts and Counsel. *
Item 29. Disclosure of Commission Position on *
</TABLE>
Indemnification for Securities Act
Liabilities.
- ------------
* Not applicable or answer is in the negative.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time this registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any State.
SUBJECT TO COMPLETION DATED APRIL , 1997
PROSPECTUS
$133,312,786 (APPROXIMATE)
- -----------------------------------------------------------------------------
[GRAPHIC OMITTED]
NOMURA LOGO
- -----------------------------------------------------------------------------
Asset Securitization Corporation, Depositor
Nomura Asset Capital Corporation, Mortgage Loan Seller
AMRESCO MANAGEMENT, INC., SERVICER AND SPECIAL SERVICER
LASALLE NATIONAL BANK, TRUSTEE
SUBORDINATED UNITS CONSISTING OF $35,082,312 (APPROXIMATE) CLASS B-1,
$35,082,312 (APPROXIMATE)
CLASS B-2, $14,032,925 (APPROXIMATE) CLASS B-3, $21,049,387 (APPROXIMATE)
CLASS B-4, $14,032,925
(APPROXIMATE) CLASS B-5, AND $14,032,925 (APPROXIMATE) CLASS B-6
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
The Commercial Mortgage Pass-Through Certificates, Series 1997-D4, Class
B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates
(the "Subordinated Certificates"), together with the Senior Certificates, the
Junior Subordinated Certificates, the Class V-1, Class V-2, Class R and Class
LR Certificates (each as defined herein, and collectively, the
"Certificates"), will represent beneficial ownership interests in a trust
fund (the "Trust Fund") to be created by Asset Securitization Corporation
(the "Depositor"). The Trust Fund will consist primarily of a pool (the
"Mortgage Pool") of 121 fixed-rate mortgage loans, with original terms to
maturity of generally not more than thirty years (the "Mortgage Loans"),
secured by first liens on 252 commercial and multifamily residential
properties (the "Mortgaged Properties"). The Mortgaged Properties consist of
anchored and unanchored retail properties, office buildings, full and
(cover page continued)
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" HEREIN COMMENCING ON PAGE 20.
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PASS-THROUGH PRICE TO UNDERWRITING PROCEEDS TO
RATE(1) PUBLIC(2) DISCOUNT(3) DEPOSITOR(4)
- ---------------------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Per Subordinated Unit(5) ....
Total ....................... $ $ $ $
- ---------------------------- ---------------- ---------------- ---------------- ---------------
</TABLE>
- -----------------------------------------------------------------------------
(1) The Pass-Through Rate is the rate for the Distribution Date occurring
in April, 1997. The Pass-Through Rate for the Subordinated Units for
each subsequent Distribution Date will be equal to %.
(2) Plus accrued interest, if any, from the date of issuance.
(3) The Depositor and the Mortgage Loan Seller have each agreed to
indemnify the Underwriters against, and provide contribution with
respect to, certain liabilities, including civil liabilities under
the Securities Act of 1933, as amended (the "Act"). See "Plan of
Distribution."
(4) Before deducting expenses payable by the Depositor estimated at
$ .
(5) The Subordinated Units are comprised of $35,082,312 of Class B-1,
$35,082,312 of Class B-2, $14,032,925 of Class B-3, $21,049,387 of
Class B-4, $14,032,925 of Class B-5 and $14,032,925 of Class B-6
Certificates. No Class of Subordinated Certificates will be
separately tradable unless and until a Class of Subordinated
Certificates is rated investment grade by Standard & Poor's Rating
Services or Fitch Investors Service LP (with respect to such Class,
the "Separation Date"). Following such Separation Date, such
investment grade Class shall be separately traded.
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE
DEPOSITOR, THE MORTGAGE LOAN SELLER, THE ORIGINATOR, THE SERVICER, THE
SPECIAL SERVICER, THE TRUSTEE, THE FISCAL AGENT OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THE CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
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.
There is currently no secondary market for the Subordinated Units or the
Subordinated Certificates. Each of the Underwriters currently expects to make
a secondary market in the Subordinated Units and, if separately traded, the
Subordinated Certificates, but has no obligation to do so. There can be no
assurance that an active secondary market for the Subordinated Units or, if
separately traded, the Subordinated Certificates will develop or that any
such market, if established, will continue. See "Plan of Distribution"
herein.
The Subordinated Units are offered by the Underwriters subject to prior
sale, when, as and if issued, delivered to and accepted by the Underwriters
and subject to the right to reject orders in whole or in part. It is expected
that delivery of the Subordinated Units will be made through the facilities
of The Depository Trust Company ("DTC") in the United States and Centrale de
Livraison de Valeurs Mobiliers S.A. ("CEDEL") and The Euroclear System
("Euroclear") in Europe, on or about , 1997.
BEAR, STEARNS & CO. INC. NOMURA SECURITIES INTERNATIONAL, INC.
The Date of this Prospectus is , 1997
<PAGE>
[GRAPHIC OMITTED]
[MAP]
<PAGE>
PHOTO
International Plaza
- -------------------
New York, NY
PHOTO
Marina Harbor Apartments
- ------------------------
Marina del Rey, CA
PHOTO
One Kendall Square
- ------------------
Cambridge, MA
PHOTO
Puente Hills
- --------------------
City of Industry, CA
THE PHOTOGRAPHS OF THE MORTGAGED PROPERTIES INCLUDED IN THIS PROSPECTUS
SUPPLEMENT ARE NOT REPRESENTATIVE OF ALL THE MORTGAGED PROPERTIES INCLUDED
IN ANY POOL LOAN OR ANY PARTICULAR TYPE OF MORTGAGED PROPERTY.
<PAGE>
PHOTO
Wells Research Center
- ---------------------
Newton, MA
PHOTO
K-Mart Distribution Center
- --------------------------
Brighton, Colorado
PHOTO
Westin Hotel
- ----------------
Indianapolis, IN
PHOTO
Montague Park Tech Center
- -------------------------
San Jose, CA
<PAGE>
(continuation of cover page)
limited service hotels, multifamily residential housing, nursing homes,
industrial properties, factory outlet centers, mobile home and recreational
vehicle parks and an assisted living facility. The characteristics of the
Mortgage Loans and the Mortgaged Properties are more fully described herein
under "Description of the Mortgage Pool." The Mortgage Loans were either
purchased or originated by the Mortgage Loan Seller and will be sold to the
Depositor on or prior to the date of initial issuance of the Certificates.
The Certificates will consist of twenty-six classes (each, a "Class"),
designated as the Class A-1A Certificates, Class A-1B Certificates, Class
A-1C Certificates, Class A-1D Certificates, Class A-1E Certificates, Class
A-CS1 Certificates, Class PS-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 Certificates, Class A-5 Certificates, Class A-6
Certificates, Class A-7 Certificates and Class A-8 Certificates
(collectively, the "Senior Certificates"), Class B-1 Certificates, Class B-2
Certificates, Class B-3 Certificates, Class B-4 Certificates, Class B-5
Certificates, Class B-6 Certificates, Class B-7 Certificates, Class B-7H
Certificates, Class V-1 Certificates, Class V-2 Certificates, Class LR
Certificates and Class R Certificates. Only the Class B-1 Certificates, Class
B-2 Certificates, Class B-3 Certificates, Class B-4 Certificates, Class B-5
Certificates and Class B-6 Certificates (collectively, the "Subordinated
Certificates") are being offered hereby in the form of Subordinated Units
(the "Subordinated Units"); the Senior Certificates have been publicly
offered under a separate prospectus and are not offered hereby; and the Class
B-7, Class B-7H (collectively, the "Junior Subordinated Certificates"), Class
V-1, Class V-2, Class R and Class LR Certificates are not offered hereby.
Distributions on the Subordinated Certificates will be made, to the extent
of Available Funds, on the 14th day of each month, or, if any such 14th day
is not a business day, then on the next succeeding business day, beginning on
April 16, 1997 (each, a "Distribution Date"); provided, however, the
Distribution Date will be no earlier than the third business day following
the 11th day of each month and, provided, further, that if the 11th day of
any month is not a business day, the Distribution Date will be the fourth
business day following the 11th day of such month. Distributions allocable to
interest on the Subordinated Certificates on each Distribution Date will be
based on the Pass-Through Rate for each respective Class as described herein
and the aggregate principal balance (the "Certificate Balance") of such Class
outstanding immediately prior to such Distribution Date. Distributions in
respect of principal of the Subordinated Certificates will be made as
described herein under "Description of the Subordinated Certificates --
Distributions -- Priorities."
THE YIELD TO INVESTORS WILL BE SENSITIVE TO THE TIMING AND MAGNITUDE OF
LOSSES ON THE MORTGAGE LOANS DUE TO LIQUIDATIONS. IN ADDITION, TO THE EXTENT
LOSSES ON THE MORTGAGE LOANS EXCEED THE PRINCIPAL BALANCE OF THE CLASSES OF
CERTIFICATES SUBORDINATE TO ANY CLASS OF SUBORDINATED CERTIFICATES, SUCH
CLASS OF SUBORDINATED CERTIFICATES WILL BEAR A LOSS EQUAL TO THE AMOUNT OF
SUCH EXCESS UP TO AN AMOUNT EQUAL TO THE OUTSTANDING CERTIFICATE BALANCE
THEREOF. NO REPRESENTATION IS MADE AS TO THE RATE OF PREPAYMENTS ON, OR RATE
OR AMOUNT OF LIQUIDATIONS OF, THE MORTGAGE LOANS OR AS TO THE ANTICIPATED
YIELD TO MATURITY OF ANY SUBORDINATED CERTIFICATE. THE YIELD TO MATURITY ON
EACH CLASS OF THE SUBORDINATED CERTIFICATES WILL BE SENSITIVE TO THE RATE AND
TIMING OF PRINCIPAL PAYMENTS (INCLUDING BOTH VOLUNTARY AND INVOLUNTARY
PREPAYMENTS, DEFAULTS AND LIQUIDATIONS) ON THE MORTGAGE LOANS AND PAYMENTS
WITH RESPECT TO REPURCHASES THEREOF THAT ARE APPLIED IN REDUCTION OF THE
CERTIFICATE BALANCE OF SUCH CLASS. SEE "PREPAYMENT AND YIELD CONSIDERATIONS"
HEREIN.
AMRESCO Management, Inc. will act as Servicer of the Mortgage Loans. The
obligations of the Servicer with respect to the Certificates will be limited
to its contractual servicing obligations and the obligation under certain
circumstances to make Advances in respect of the Mortgage Loans. In certain
limited circumstances AMRESCO Management, Inc., in its capacity as the
initial Special Servicer may be required to make Property Advances. If the
Servicer is not the Special Servicer and the Special Servicer fails to make
the required Advance, the Servicer, subject to a recoverability
determination, will be required to make the Advance. The Servicer will not
act as an insurer or credit enhancer of the Mortgage Pool. If the Servicer
fails to make a required Advance, the Trustee, subject to a recoverability
determination, will be required to make such Advance. If the Trustee fails to
make a required Advance, the Fiscal Agent, subject to a recoverability
determination, will be required to make the Advance. See "The Pooling and
Servicing Agreement -- Advances" herein.
It is a condition to the issuance of the Subordinated Certificates that
(i) the Senior Certificates are issued and offered and (ii) the Class B-1
Certificates be rated "BB+" by each of Standard & Poor's Rating Services
("S&P") and Fitch Investors Service, L.P. ("Fitch"), the Class B-2
Certificates be rated "BB" by each of S&P and Fitch, the Class B-3
Certificates be rated "BB-" by each of S&P and Fitch, the Class B-4
Certificates be rated "B+" by S&P, the Class B-5
(cover page continued)
<PAGE>
(continuation of cover page)
Certificates be rated "B" by S&P and the Class B-6 Certificates be rated "B-"
by S&P. For a description of the limitations of the ratings of the
Subordinated Certificates, see "Rating" herein. The Rated Final Distribution
Date of each Class of Subordinated Certificates is April 14, 2029.
Elections will be made to treat designated portions of the Trust Fund,
exclusive of the Reserve Accounts, Lock Box Accounts, Cash Collateral
Accounts, Excess Interest and Default Interest as two separate "real estate
mortgage investment conduits" (each a "REMIC" or, alternatively, the
"Upper-Tier REMIC" and the "Lower-Tier REMIC," respectively) for federal
income tax purposes. The Senior Certificates, Subordinated Certificates and
Junior Subordinated Certificates will constitute "regular interests" in the
Upper-Tier REMIC, and the Class R and Class LR Certificates will constitute
the sole Class of "residual interests" in the Upper-Tier REMIC and Lower-Tier
REMIC, respectively. The Subordinated Certificates, together with the Senior
Certificates and Junior Subordinated Certificates, are sometimes collectively
referred to herein as the "Regular Certificates." The Class V-1 Certificates
will represent the right to receive Net Default Interest and the Class V-2
Certificates will represent the right to receive Excess Interest, which
portions of the Trust Fund will be treated as a grantor trust for federal
income tax purposes. See "Certain Federal Income Tax Consequences" herein.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
SUBORDINATED UNITS, INCLUDING OVER-ALLOTMENTS OR SHORT SALES OF THE
SUBORDINATED UNITS, BIDS FOR AND PURCHASES OF THE SUBORDINATED UNITS IN THE
OPEN MARKET AND THE IMPOSITION OF PENALTY BIDS. SUCH TRANSACTIONS MAY
STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SUBORDINATED UNITS AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
The distribution of this Prospectus and the offer or sale of the
Subordinated Units and Subordinated Certificates may be restricted by law in
certain jurisdictions. Persons into whose possession this Prospectus or any
Subordinated Units or Subordinated Certificates come must inform themselves
about, and observe, any such restrictions. In particular, there are
restrictions on the distribution of this Prospectus and the offer or sale of
the Subordinated Units and Subordinated Certificates in the United Kingdom
(see "Plan of Distribution" herein).
The Depositor does not intend to register the Subordinated Units and
Subordinated Certificates under the Securities and Exchange Law of Japan (the
"SEL"). Accordingly, the Subordinated Units and Subordinated Certificates may
not be offered or sold directly or indirectly in Japan, and this Prospectus
may not be distributed or circulated in Japan, except in circumstances that
do not constitute an offer to the public within the meaning of the SEL.
The transferability of the Subordinated Units and Subordinated
Certificates is subject to certain limitations. See "Description of the
Subordinated Certificates -- Transfer Restrictions."
All capitalized terms herein have the meanings described herein. See
"Index of Significant Definitions" and "Glossary of Key Real Estate, Mortgage
and Mortgage Loan Underwriting Terms" herein.
UNTIL NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING
TRANSACTIONS IN THE SUBORDINATED UNITS OR, IF SEPARATELY TRADED, THE
SUBORDINATED CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A COPY OF THIS PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
2
<PAGE>
PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Summary of Prospectus.............................................................. 6
Risk Factors ...................................................................... 20
The Mortgage Loans................................................................ 20
The Certificates.................................................................. 35
Industry Overview.................................................................. 41
The Depositor...................................................................... 42
The Mortgage Loan Seller........................................................... 42
The Trustee........................................................................ 43
The Fiscal Agent................................................................... 43
The Servicer and Initial Special Servicer.......................................... 43
Description of the Mortgage Pool................................................... 44
General........................................................................... 44
Security for the Mortgage Loans................................................... 45
The Mortgage Loan Program--Underwriting Standards................................. 45
Significant Mortgage Loans........................................................ 48
Certain Terms and Conditions of the Mortgage Loans................................ 57
Additional Mortgage Loan Information.............................................. 62
Changes in Mortgage Pool Characteristics.......................................... 75
Description of the Subordinated Units.............................................. 75
Description of the Subordinated Certificates....................................... 76
General........................................................................... 76
Subordination..................................................................... 77
Distributions..................................................................... 77
Realized Losses................................................................... 85
Prepayment Interest Shortfalls.................................................... 86
Delinquency Reduction Amounts and Appraisal Reduction Amounts..................... 86
Appraisal Reductions.............................................................. 87
Delivery, Form and Denomination................................................... 87
Book-Entry Registration........................................................... 88
Definitive Certificates........................................................... 90
Transfer Restrictions............................................................. 91
Prepayment and Yield Considerations................................................ 92
Mortgagor Defaults................................................................ 92
Yield Tables...................................................................... 93
Yield............................................................................. 101
Rated Final Distribution Date..................................................... 102
Weighted Average Life of Subordinated Certificates................................ 102
The Pooling and Servicing Agreement................................................ 112
General........................................................................... 112
Assignment of the Mortgage Loans.................................................. 112
Representations and Warranties; Repurchase........................................ 112
Servicing of the Mortgage Loans; Collection of Payments........................... 118
Advances.......................................................................... 119
Accounts.......................................................................... 121
Withdrawals from the Collection Account........................................... 122
Enforcement of "Due-on-Sale" and "Due-on-Encumbrance" Clauses..................... 122
Inspections....................................................................... 123
3
<PAGE>
PAGE
------
Insurance Policies................................................................ 124
Evidence as to Compliance......................................................... 125
Certain Matters Regarding the Depositor, the Servicer and the Special Servicer ... 125
Events of Default................................................................. 126
Rights Upon Event of Default...................................................... 127
Amendment......................................................................... 127
Voting Rights..................................................................... 128
Realization Upon Mortgage Loans................................................... 128
Modifications..................................................................... 134
Termination....................................................................... 135
Optional Termination.............................................................. 135
The Trustee....................................................................... 136
Duties of the Trustee............................................................. 136
Duties of the Fiscal Agent........................................................ 137
Servicing Compensation and Payment of Expenses.................................... 137
Special Servicing................................................................. 137
Servicer and Special Servicer Permitted to Buy Certificates....................... 139
Reports to Certificateholders; Available Information.............................. 139
Trustee Reports.................................................................. 139
Servicer Reports................................................................. 140
Other Information................................................................ 141
ERISA Considerations............................................................... 143
Certain Legal Aspects of Mortgage Loans............................................ 143
General........................................................................... 143
Types of Mortgage Instruments..................................................... 143
Leases and Rents.................................................................. 144
Personalty........................................................................ 144
Installment Contracts............................................................. 144
Subordinated Financing............................................................ 145
Foreclosure....................................................................... 145
Judicial Foreclosure.............................................................. 145
Non-Judicial Foreclosure/Power of Sale............................................ 145
Limitations on Lender's Rights.................................................... 146
Rights of Redemption.............................................................. 147
Anti-Deficiency Legislation....................................................... 148
Leasehold Risks................................................................... 148
Bankruptcy Laws................................................................... 149
Environmental Legislation......................................................... 150
Due-on-Sale and Due-on-Encumbrance................................................ 151
Acceleration on Default........................................................... 151
Default Interest, Prepayment Charges and Prepayments.............................. 151
Applicability of Usury Laws....................................................... 152
Alternative Mortgage Instruments.................................................. 152
Soldiers' and Sailors' Civil Relief Act of 1940................................... 152
Forfeitures in Drug and RICO Proceedings.......................................... 153
Certain Laws and Regulations...................................................... 153
Type of Mortgaged Property........................................................ 153
Americans with Disabilities Act................................................... 153
Certain Federal Income Tax Consequences............................................ 154
General........................................................................... 154
4
<PAGE>
PAGE
------
Status of Subordinated Certificates............................................... 154
Qualification as a REMIC.......................................................... 155
Taxation of Subordinated Certificates and Subordinated Units...................... 156
General.......................................................................... 156
Original Issue Discount.......................................................... 156
Acquisition Premium.............................................................. 158
Market Discount.................................................................. 158
Premium.......................................................................... 159
Election to Treat All Interest Under the Constant Yield Method................... 159
Treatment of Losses.............................................................. 159
Sale or Exchange of Subordinated Units........................................... 160
Taxes That May Be Imposed on a REMIC.............................................. 160
Liquidation of the REMIC.......................................................... 161
Taxation of Certain Foreign Investors............................................. 161
Backup Withholding................................................................ 161
Reporting Requirements............................................................ 161
Legal Investment................................................................... 162
Use of Proceeds.................................................................... 163
Plan of Distribution............................................................... 164
Legal Matters...................................................................... 165
Financial Information.............................................................. 165
Rating............................................................................. 165
Available Information.............................................................. 165
Index of Significant Definitions................................................... 167
Glossary of Key Real Estate, Mortgage and Mortgage Loan Underwriting Terms ....... 172
Annex A--Loan Characteristics...................................................... A-1
Annex B--Global Clearance, Settlement and Tax Documentation Procedures ............ B-1
Annex C--Form of Reports to Certificateholders .................................... C-1
INDEX OF TABLES
Mortgage Notes .................................................................... 66
Range of DSCRs..................................................................... 69
Range of Loan-to-Value Ratios...................................................... 69
Range of Loan-to-Value Ratios at Earlier of Anticipated Repayment Dates or
Maturity.......................................................................... 69
Mortgaged Properties By State...................................................... 70
Range of Year Built................................................................ 70
Cut-Off Date Loan Amount By Property Type.......................................... 71
Range of Loan Amounts or Loan Balances............................................. 72
Range of Anticipated Remaining Term in Months...................................... 72
Range of Remaining Term in Months.................................................. 73
Anticipated Repayment By Year...................................................... 73
Range of Mortgage Rates............................................................ 74
Delinquency Status as of March 1, 1997............................................. 74
Range of Remaining Lock-Out Period In Months....................................... 74
</TABLE>
5
<PAGE>
SUMMARY OF PROSPECTUS
Prospective investors are advised to carefully read, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
relating to the Subordinated Units and Subordinated Certificates in making
their investment decision. The following Summary of Prospectus does not
include all relevant information relating to the securities and collateral
described herein, particularly with respect to the risks and special
considerations involved with an investment in such securities, and is
qualified in its entirety by reference to the detailed information appearing
elsewhere in this Prospectus. Prior to making an investment decision, a
prospective investor should carefully review this Prospectus. Capitalized
terms used and not otherwise defined herein have the respective meanings
assigned to them in this Prospectus. See "Index of Significant Definitions"
and "Glossary of Key Real Estate, Mortgage and Mortgage Loan Underwriting
Terms" in this Prospectus.
OVERVIEW OF THE OFFERING
Nomura Asset Capital Corporation (the "Mortgage Loan Seller") is a leading
underwriter of commercial mortgages having originated approximately $15.7
billion in the past three years. The commercial mortgage-backed securities
("CMBS") market has recently experienced significant growth with
securitization volumes of $20.1 billion, $18.5 billion and $30.5 billion in
1994, 1995, and 1996, respectively. Through December 1996, affiliates of the
Mortgage Loan Seller, including the Depositor, have securitized $7.3 billion
of commercial mortgage loans originated by the Mortgage Loan Seller and by
unaffiliated originators through twenty separate transactions. The
securitization described herein is being marketed in three separate
offerings: (i) investment grade classes with a principal balance in the
aggregate of $1,285,633,826, which are being sold pursuant to a separate
Prospectus; (ii) below investment grade classes with a principal balance in
the aggregate of $137,237,536, which are being offered hereby in the form of
Subordinated Units; and (iii) an unrated junior subordinated "first loss"
class with a principal balance equal to $21,668,143 (approximately 1.5% of
the Initial Pool Balance) which are not being offered hereby. It is expected
that the "first loss" class will be sold to the Special Servicer or an
affiliate of the Special Servicer in a private transaction. However, there
can be no assurance that the Special Servicer or an affiliate of the Special
Servicer will purchase such Certificates.
Historically, the below investment grade classes of CMBS securitizations
have been sold through private transactions. Typically, the size of such
class is smaller than would normally trade in the public markets. In light of
the greater liquidity that could result from the relatively large size of the
below investment grade portion of this securitization, this offering of
Subordinated Units is being made on a registered basis. This offering
provides investors with the opportunity to invest in subordinated CMBS having
the following characteristics:
o Diversification of Underlying Mortgage Pool. This offering is secured
by Mortgages on 252 Mortgaged Properties. The Mortgaged Properties are
located in 39 states. No single Mortgage Loan represents greater than
5% of the Initial Pool Balance. The Mortgage Pool is also diversified
by property type, and includes loans secured by retail, office, hotel,
multifamily, industrial, mobile home park and healthcare properties.
Accordingly, default risk has been diversified over the entire
Mortgage Pool and is not concentrated in a single Mortgaged Property
or property type.
o Prepayment Restrictions. All of the Mortgage Loans prohibit prepayment
during all or substantially all of their terms to maturity or the
Anticipated Repayment Date, whichever is earlier. Accordingly, the
yield to investors should not be significantly affected by voluntary
prepayment.
o Debt Service Coverage. The weighted average debt service coverage
ratio of the Mortgage Pool (analogous to EBITDA less maintenance
capital expenditures divided by annual mortgage loan principal and
interest payments) is 1.42. For commercial mortgages, as the debt
service coverage ratio on an individual Mortgage Loan starts to rise
substantially over 1.0, defaults should be less likely absent
unanticipated risks or economic downturns.
o Initial Equity Cushion. Each of the Mortgage Loans originated or
purchased by the Mortgage Loan Seller is generally consistent with its
underwriting standards. Those underwriting standards provide for a
maximum loan to value ratio of between 70% and 80% depending on the
property type on an individual Mortgage Loan. The weighted average
ratio of Mortgage Loan principal balance to appraised value for the
Mortgage Pool is 67%.
o Deleveraging. The Mortgage Loan Seller's mortgage documentation
generally prohibits, with certain exceptions, the incurrence of
additional secured debt. However, see "Risk Factors -- Other
Financing." Since principal generally is amortized with each Monthly
Payment (and the application of Excess Cash Flow, if applicable), the
ratio of the amount outstanding on any Mortgage Loan to the initial
appraised value of the Mortgaged Property underlying such Mortgage
Loan will decrease over time.
6
<PAGE>
INDUSTRY OVERVIEW
The commercial real estate market is estimated to be valued at
approximately $3 trillion. While much of this real estate is owned free of
any mortgage or other debt, a sizable portion is financed through commercial
mortgages. Commercial mortgages are predominantly secured by income producing
properties, including multifamily residential, office buildings, retail
properties, industrial properties, warehouse properties, mixed use
properties, mobile home parks, hotels, self-storage facilities, nursing
homes, assisted living facilities and senior housing centers. The commercial
real estate mortgage market is estimated to be valued at approximately $1
trillion. The traditional holders of the majority of commercial mortgage
loans have been banks, life insurance companies and savings and loan
institutions. In 1996, commercial banks held approximately 41% of outstanding
commercial mortgage loans, followed by life insurance companies (21%),
savings and loans (7%) and private mortgage-backed securities conduits (7%).
Other major holders include pension funds and federal agencies. Recently,
however, life insurance companies and pension funds have increasingly been
investing in beneficial interests in securitized pools of commercial mortgage
loans.
CMBS issuances have grown significantly since 1990, with over $114 billion
in aggregate issuances from the beginning of 1990 through the end of 1996. In
1996 alone, over $30 billion of CMBS were issued. See "Industry Overview"
herein.
PARTICIPANTS
DEPOSITOR ..................... Asset Securitization Corporation, a Delaware
corporation and a wholly owned subsidiary of
Nomura Asset Capital Corporation (the
"Mortgage Loan Seller"), and an affiliate of
Nomura Securities International, Inc.
("NSI"). See "The Depositor" herein.
MORTGAGE LOAN SELLER .......... Nomura Asset Capital Corporation, a Delaware
corporation, the parent of the Depositor and
an affiliate of NSI.
Nomura Asset Capital Corporation, the
Mortgage Loan Seller, was incorporated in
1992 and is engaged primarily in the
business of originating commercial mortgage
loans. The Mortgage Loan Seller has been
involved in the origination of approximately
$15.7 billion in commercial mortgage loans
and other commercial real estate investments
from inception through March 1, 1997.
Affiliates of the Mortgage Loan Seller have
been involved in a total of 20 offerings of
CMBS from 1993 through December 1996
totaling approximately $7.3 billion in
initial principal amount. These offerings
included nine offerings totaling
approximately $6.2 billion issued since
March 1994 and which are backed by mortgage
loans predominantly originated directly by
the Mortgage Loan Seller. See "The Mortgage
Loan Seller."
SERVICER AND SPECIAL SERVICER . AMRESCO Management, Inc., a Texas
corporation ("AMI"), will be the Servicer
and initial Special Servicer (the "Servicer"
and the "Special Servicer" in such
respective capacities) and in such
capacities will be responsible for servicing
the Mortgage Loans as described under "The
Pooling and Servicing Agreement." The
Servicer will also be required to make
certain Advances in accordance with the
terms of the Pooling and Servicing
Agreement. See "The Pooling and Servicing
Agreement -- Advances." AMI is a wholly
owned subsidiary of AMRESCO, INC.
("AMRESCO"), a publicly traded (NASDAQ)
company. The servicing of all performing
loans will be performed by the AMRESCO
Services Division of AMI.
As of January 31, 1997, AMRESCO's portfolio
consisted of approximately 9,374 loans with
an aggregate principal balance of
approximately $16.9 billion. Within this
servicing portfolio are loans which have
been securitized in a total of 43 loan
portfolios with an aggregate principal
balance of $10.6 billion. The portfolio is
significantly diversified both
geographically and by product type.
7
<PAGE>
The Special Servicer will be responsible for
servicing functions with respect to Mortgage
Loans that, in general, are in default or as
to which default is imminent and for
administering any REO Property. The holders
of greater than 50% of the Percentage
Interest of the most subordinate Class of
Certificates then outstanding (which Class
will initially be the Junior Subordinated
Certificates) will be entitled, at their
option, to remove the Special Servicer with
or without cause, and appoint a successor
Special Servicer, provided that each Rating
Agency confirms in writing that such removal
and appointment, in and of itself, would not
cause a downgrade, qualification or
withdrawal of the then current ratings
assigned to any Class of Certificates
(provided, however, that for purposes of
determining the most subordinate class, the
Class A-1A, Class A-1B, Class A-1C, A-1D,
Class A-CS1 and Class PS-1 Certificates
collectively and the Class B-7 and Class
B-7H Certificates together, will, in each
case, be treated as one class). The Servicer
and Special Servicer will be permitted to
purchase any Class of Certificates. See
"Risk Factors -- The Certificates --
Servicer or Special Servicer May Purchase
Certificates; Conflict of Interest" and "The
Pooling and Servicing Agreement -- Special
Servicing" herein. It is anticipated that
the Special Servicer or an affiliate of the
Special Servicer will purchase all or a
majority of the Class B-7 Certificates.
However, there can be no assurance that the
Special Servicer or an affiliate of the
Special Servicer will purchase such
Certificates.
ORIGINATORS ................... The Mortgage Loan Seller and Bloomfield
Acceptance Company, LLC, a Michigan limited
liability company (individually,
"Bloomfield," and together with the Mortgage
Loan Seller, the "Originators").
All of the Mortgage Loans were originated by
the Mortgage Loan Seller or Bloomfield as
shown in the following table during the
period commencing September 3, 1996 and
ending on the Cut-off Date:
ORIGINATORS OF THE MORTGAGE LOANS (1)
<TABLE>
<CAPTION>
% OF
INITIAL NUMBER OF
POOL MORTGAGE
ORIGINATOR BALANCE LOANS
- ---------------------------------- --------- -----------
<S> <C> <C>
Nomura Asset Capital Corporation .. 96.4% 108
Bloomfield Acceptance Company,
LLC............................... 3.6% 13
</TABLE>
(1) All statistical information set forth in this and the following tables
in the Summary regarding the "% of Initial Pool Balance" is based on
the Cut-off Date Principal Balance of the related Mortgage Loan or Loans.
THE MORTGAGE POOL
MORTGAGE LOAN POOL
CHARACTERISTICS ............... The mortgage loan pool will consist of
approximately 121 fixed rate mortgage loans
secured by approximately 252 commercial and
multifamily properties with an aggregate
principal balance of approximately
$1,403,292,505 (subject to a permitted
variance of plus or minus 5%). Each Mortgage
Loan is generally non-recourse and is
secured by one or more first mortgage liens
encumbering the related borrower's interest
in the related property or properties. The
Mortgage Pool includes the following three
types of loans: balloon, anticipated
repayment date ("ARD") and fully amortizing.
"ARD Loans" generally are Mortgage Loans
that substantially fully amortize by their
respective maturity dates (and not their
Anticipated Repayment Dates) but provide for
an Anticipated Repayment Date on which a
substantial amount of principal will be due
if the
8
<PAGE>
borrower elects to prepay the Mortgage Loan
in full on such date. Such Mortgage Loans
provide for an increased interest rate after
the Anticipated Repayment Date and require
the application of all Excess Cash Flow to
amortize principal after the Anticipated
Repayment Date. See "Description of the
Mortgage Pool -- Certain Terms and
Conditions of the Mortgage Loans" herein.
Approximately 96% of the Initial Pool
Balance consists of ARD Loans. See
"Description of the Mortgage Pool --
Significant Mortgage Loans -- The Marina
Harbor Loan and Properties" for a discussion
of certain provisions of the Marina Harbor
Loan which differ from the general ARD loan
provisions.
The Mortgage Pool is diversified with
mortgage loans in 39 different states. The
largest concentration by principal amount is
in California with approximately 21% of the
pool. The mortgage loan pool is also
diversified by property type. The largest
concentrations by principal amount are in
retail (not including factory outlet) (33%),
office (24%) and hotel (15%) properties. The
other property types included in the
Mortgage Pool include multifamily
residential housing, nursing homes,
industrial properties, factory outlet
centers, mobile home and recreational
vehicle parks and an assisted living
facility. The mortgage loan pool includes 24
loans of over $20 million each, which make
up approximately 65% of the total principal
balance. The mortgage pool has a weighted
average debt service coverage ratio of 1.42x
and a weighted average loan to current
appraised value ratio of 67%.
GENERAL CHARACTERISTICS (AS OF CUT-OFF DATE,
UNLESS OTHERWISE INDICATED)
<TABLE>
<CAPTION>
<S> <C>
Initial Pool Balance (1).................................. $1,403,292,505
Number of Mortgage Loans.................................. 121
Number of Mortgaged Properties............................ 252
Average Mortgage Loan Balance............................. $11,597,459
Weighted Average Months Since Loan Origination ........... 1
Weighted Average Mortgage Rate............................ 8.666%
Range of Mortgage Rates................................... 7.575%-10.1%
Weighted Average Remaining Term to the Earlier of
Maturity or Anticipated Repayment Date................... 140 months
Range of Remaining Term to the Earlier of Maturity or
Anticipated Repayment Date............................... 80-241 months
Weighted Average Original Amortization Term (2) .......... 321 months
Range of Original Amortization............................ 156-360 months
Weighted Average DSCR (3)................................. 1.42
Range of DSCR (3)......................................... 1.22-2.20
Weighted Average LTV (4).................................. 67%
Range of LTV.............................................. 34%-86%
Weighted Average LTV at Earlier of Anticipated
Repayment Date or Maturity (5)........................... 51%
Percentage of Initial Pool Balance made up of:
ARD Loans .............................................. 96.2%
Fully Amortizing Loans (other than ARD Loans) .......... 2.5%
Balloon Loans .......................................... 1.2%
Loans Delinquent as of Cut-off Date....................... 0%
</TABLE>
9
<PAGE>
- ----------
(1) Subject to a permitted variance of plus
or minus 5%.
(2) "Weighted Average Remaining Amortization
Term" reflects the fact that certain
Mortgage Loans provide for Monthly
Payments based on amortization schedules
at least 60 months longer than the
remaining stated terms of such Mortgage
Loans. See "Description of the Mortgage
Pool -- Certain Terms and Conditions of
the Mortgage Loans -- Amortization of
Principal" herein.
(3) DSCR for any Mortgage Loan is equal to
the Net Cash Flow from the related
Mortgaged Property divided by the Annual
Debt Service for such Mortgaged Property
(as defined below).
(4) "LTV" or "Loan-to-Value Ratio" means,
with respect to any Mortgage Loan, the
principal balance of such Mortgage Loan
as of the Cut-off Date divided by the
appraised value of the Mortgaged
Property or Properties securing such
Mortgage Loan.
(5) "LTV at Earlier of Anticipated Repayment
Date or Maturity" for any Mortgage Loan
is calculated in the same manner as LTV
as of the Cut-off Date, except that the
Mortgage Loan Cut-off Date Principal
Balance used to calculate the LTV as of
the Cut-off Date has been adjusted to
give effect to the amortization of the
applicable Mortgage Loan as of its
maturity date or, in the case of a
Mortgage Loan that has an Anticipated
Repayment Date, as of its Anticipated
Repayment Date. Such calculation thus
assumes that the appraised value of the
Mortgaged Property or Properties
securing a Mortgage Loan on the maturity
date or Anticipated Repayment Date, as
applicable, is the same as the appraised
value as of the Cut-off Date. There can
be no assurance that the value of any
particular Mortgaged Property will not
have declined from the appraised value.
NSI HAS MADE AVAILABLE AN ELECTRONIC VERSION
OF THIS PROSPECTUS ON THE WORLD WIDE WEB AT
"HTTP://WWW.NOMURANY.COM". THE PASSWORD FOR
ACCESS TO SUCH WEB SITE IS "CMBS". CERTAIN
STATISTICAL INFORMATION INCLUDED IN THIS
PROSPECTUS CAN BE DOWNLOADED FROM SUCH WEB
SITE.
REPRESENTATIONS AND
WARRANTIES .................... The Mortgage Loan Seller will sell the
Mortgage Loans to the Depositor and, in
connection therewith, will make certain
representations and warranties, as more
fully described herein. The Depositor will
assign the Mortgage Loans, together with its
rights and remedies in respect of breaches
of the Mortgage Loan Seller's
representations and warranties to the
Trustee for the benefit of
Certificateholders. With respect to Mortgage
Loans acquired by the Mortgage Loan Seller
from Bloomfield, the Mortgage Loan Seller
will also assign to the Depositor and the
Depositor will assign to the Trustee for the
benefit of the Certificateholders, any
rights and remedies in respect of breaches
of representations or warranties made by
Bloomfield. See "The Pooling and Servicing
Agreement -- Representations and Warranties;
Repurchase."
THE OFFERING
SUBORDINATED UNITS ............ $133,312,786 (approximate) Subordinated Unit
consisting of $35,082,312 (approximate)
Class B-1 Certificates, $35,082,312
(approximate) Class B-2 Certificates,
$14,032,925 (approximate) Class B-3
Certificates, $21,049,387 (approximate)
Class B-4 Certificates, $14,032,925
(approximate) Class B-5 Certificates, and
$14,032,925 (approximate) Class B-6
Certificates. No Class of Subordinated
Certificates will be separately tradable
unless and until a Class of Subordinated
Certificates is rated investment grade by
either Standard & Poor's Rating Services
("S&P") or Fitch Investors Service, L.P.
("Fitch") (with respect to such Class, the
"Separation Date"). Following the Separation
Date, such investment grade Class shall be
separately traded. All references herein to
the Subordinated Units are deemed to include
the Subordinated Certificates.
TITLE OF CERTIFICATES ......... Asset Securitization Corporation, Commercial
Mortgage Pass-Through Certificates, Series
1997-D4. The Subordinated Certificates,
together with the other Classes of
Certificates will represent beneficial
ownership interests in the Trust Fund to be
created by the Depositor. The Trust Fund
will consist primarily of a Mortgage Pool of
121 Mortgage Loans, with original terms to
maturity of
10
<PAGE>
generally not more than thirty years,
secured by first liens on 252 commercial and
multifamily Mortgaged Properties.
SUBORDINATION ................. As a means of providing protection to the
holders of the Senior Certificates against
losses associated with delinquent and
defaulted Mortgage Loans, the rights of the
holders of the Subordinated Certificates to
receive distributions of interest and
principal with respect to the Mortgage Loans
will be subordinate to the corresponding
rights of the holders of the Senior
Certificates. The rights of the holders of
the Class B-1 Certificates to receive
distributions of interest and principal will
be subordinate to those of the Senior
Certificates; the rights of the holders of
the Class B-2 Certificates to receive
distributions of interest and principal will
be subordinate to those of the Senior
Certificates and Class B-1 Certificates; the
rights of the holders of the Class B-3
Certificates to receive distributions of
interest and principal will be subordinate
to those of the Senior Certificates, Class
B-1 and Class B-2 Certificates; the rights
of the holders of the Class B-4 Certificates
to receive distributions of interest and
principal will be subordinate to those of
the Senior Certificates, Class B-1, Class
B-2 and Class B-3 Certificates; the rights
of the holders of the Class B-5 Certificates
to receive distributions of interest and
principal will be subordinate to those of
the Senior Certificates, Class B-1, Class
B-2, Class B-3 and Class B-4 Certificates;
and the rights of the holders of the Class
B-6 Certificates to receive distributions of
interest and principal will be subordinate
to those of the Senior Certificates, Class
B-1, Class B-2, Class B-3, Class B-4 and
Class B-5 Certificates. The rights of the
Junior Subordinated Certificates to receive
distributions of interest and principal will
be subordinate to those of the Senior
Certificates and the Subordinated
Certificates. This subordination will be
effected in two ways: (i) by the
preferential right of holders of a Class of
Certificates to receive on any Distribution
Date the amounts of interest and principal
distributable in respect of such
Certificates on such Distribution Date prior
to any distribution being made on such
Distribution Date in respect of any Classes
of Certificates subordinate thereto and (ii)
by the allocation of Realized Losses, first,
to the Junior Subordinated Certificates,
second, to the Class B-6 Certificates,
third, to the Class B-5 Certificates,
fourth, to the Class B-4 Certificates,
fifth, to the Class B-3 Certificates, sixth,
to the Class B-2 Certificates, seventh, to
the Class B-1 Certificates, and finally, to
the Senior Certificates in accordance with
the terms of the Pooling and Servicing
Agreement. No other form of credit
enhancement will be available for the
benefit of the holders of the Subordinated
Certificates. See "Description of the
Subordinated Certificates" and "Description
of the Subordinated Certificates --
Distributions -- Priorities" herein.
However, because the Subordinated Units
consist of the Class B-1, Class B-2, Class
B-3, Class B-4, Class B-5 and Class B-6
Certificates, the priorities of allocation
of Realized Losses and distribution of
principal will have a different effect on
the overall investment results of a holder
of a Subordinated Unit than on a holder of
Certificates of a single Class of
Certificates (if such Class were separately
tradable).
CERTIFICATE SUMMARY ........... Each Class of Certificates has the
approximate aggregate initial Certificate
Balance, subject to a permitted variance of
plus or minus 5%, and other characteristics
set forth below. The Subordinated
Certificates, together with the Senior
Certificates, the Junior Subordinated
Certificates, the Class V-1, Class V-2,
Class R and Class LR Certificates will be
issued pursuant to the Pooling and Servicing
Agreement.
11
<PAGE>
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
INITIAL AGGREGATE PERCENT PASS-THROUGH WEIGHTED
CERTIFICATE PRINCIPAL PERCENT OF RATE AS AVG.
OR OF CREDIT OF CUT-OFF LIFE* PRINCIPAL
CLASS RATINGS NOTIONAL AMOUNT TOTAL SUPPORT DESCRIPTION DATE (YRS.) WINDOW*
- -------------- --------- --------------------- --------- --------- ---------------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Senior Certificates (not offered hereby)
-----------------------------------------------------------------------------------------------------------------
A-1A, A-1B,
A-1C, A-1D
and A-1E n/a $1,038,436,453 74% 26% Fixed Rate
- -------------- --------- --------------------- --------- --------- ---------------- -------------- ---------- -----------
A-2, A-3,
A-4, A-5, A-6, Weighted Average
A-7 and A-8 n/a $ 210,493,873 15% 11% Coupon
- -------------- --------- --------------------- --------- --------- ---------------- -------------- ---------- -----------
Interest Only:
A-CS1 and Weighted
PS-1 n/a $1,530,292,505 n/a Average Coupon
- -------------- --------- --------------------- --------- --------- ---------------- -------------- ----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBORDINATED CERTIFICATES (COLLECTIVELY, THE SUBORDINATED UNITS OFFERED HEREBY)
- -----------------------------------------------------------------------------------------------
B-1 BB+/BB+ $35,082,312 2.5% 8.5% Fixed Rate 7.525% 14.95 2/12-3/12
- ------ --------- ------------- ------ ------ ------------ -------- ------- ------------
B-2 BB/BB $35,082,312 2.5% 6% Fixed Rate 7.525% 14.99 3/12-4/12
- ------ --------- ------------- ------ ------ ------------ -------- ------- ------------
B-3 BB-/BB- $14,032,925 1% 5% Fixed Rate 7.525% 15.05 4/12-4/12
- ------ --------- ------------- ------ ------ ------------ -------- ------- ------------
B-4 B+/NR $21,049,387 1.5% 3.5% Fixed Rate 7.525% 15.66 4/12-3/13
- ------ --------- ------------- ------ ------ ------------ -------- ------- ------------
B-5 B/NR $14,032,925 1% 2.5% Fixed Rate 7.525% 16.69 3/13-11/15
- ------ --------- ------------- ------ ------ ------------ -------- ------- ------------
B-6 B-/NR $14,032,925 1% 1.5% Fixed Rate 7.525% 19.80 11/15-4/17
- ------ --------- ------------- ------ ------ ------------ -------- ------- ------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Junior Subordinated Certificates (not offered hereby)
- ---------------------------------------------------------------------------------------------------
Weighted
$21,049,393 Average
B-7 and B-7H Unrated (approx.) 1.5% 0% Coupon 20.05 20.05 11/17-4/17
- -------------- --------- --------------- ------ ---- ---------- ------- ------- -----------
</TABLE>
Rating Agencies (S&P/Fitch)
* Based on 0% Constant Prepayment Rate and with all ARD Loans assumed to
prepay on the related Anticipated Repayment Date. See "Prepayment and
Yield Considerations" herein.
CUT-OFF DATE .................. March 27, 1997.
CLOSING DATE .................. On or about March 27, 1997.
DISTRIBUTION DATE ............. The 14th day of each month, or if such 14th
day is not a business day, the business day
immediately following such 14th day,
commencing on April 16, 1997; provided,
however, that the Distribution Date will be
no earlier than the third business day
following the 11th day of each month;
provided, further, that if the 11th day of
any month is not a business day, the
Distribution Date will be the fourth
business day following the 11th day of such
month. A business day is any
12
<PAGE>
day other than a Saturday, a Sunday or any
day on which banking institutions in the
States of Georgia, Illinois or New York are
authorized or obligated by law, executive
order or governmental decree to close.
TRUSTEE ....................... LaSalle National Bank, a nationally
chartered bank (the "Trustee"). See "The
Pooling and Servicing Agreement -- The
Trustee" herein.
FISCAL AGENT .................. ABN AMRO Bank N.V., a Netherlands banking
corporation (the "Fiscal Agent") and the
corporate parent of the Trustee.
REPORTS TO CERTIFICATEHOLDERS . On each Distribution Date, the Trustee will
be required to prepare and forward to each
Certificateholder, the Depositor, the
Servicer, the Special Servicer, each
Underwriter, each Rating Agency and, if
requested, any potential investors in the
Certificates a Distribution Date Statement
as described under "The Pooling and
Servicing Agreement -- Reports to
Certificateholders; Available Information --
Trustee Reports." In addition, the Servicer
will be required to deliver to the Trustee
and the Trustee will be required to deliver
to each Certificateholder, the Depositor,
each Underwriter, each Rating Agency and, if
requested, any potential investor in the
Certificates, on each Distribution Date, a
Delinquent Loan Status Report, an Historical
Loan Modification Report, an Historical Loss
Estimate Report, an REO Status Report, a
Watch List and a Comparative Financial
Status Report, each as described under "The
Pooling and Servicing Agreement -- Reports
to Certificateholders; Available Information
-- Servicer Reports." The Trustee will also
be required to make available at its
offices, during normal business hours, for
review by any Holder of a Certificate, the
Depositor, the Special Servicer, the
Servicer, each Underwriter, any Rating
Agency, any potential investor in the
Certificates or any other Person to whom the
Depositor believes such disclosure is
appropriate, among other things, the
following items: Mortgaged Property
operating statements, rent rolls, retail
sales information, Mortgaged Property
inspection reports and all modifications,
waivers and amendments of the terms of a
Mortgage Loan entered into by the Servicer
or the Special Servicer. See "The Pooling
and Servicing Agreement -- Reports to
Certificateholders; Available Information --
Other Information."
A Current Report on Form 8-K (the "Form
8-K") will be filed by the Depositor,
together with the Pooling and Servicing
Agreement, with the Securities and Exchange
Commission within fifteen days after the
initial issuance of the Subordinated
Certificates. In the event Mortgage Loans
are removed from the Mortgage Pool, such
removal will be noted in the Form 8-K. Such
Form 8-K will be available to purchasers and
potential purchasers of the Subordinated
Units.
INTEREST PAYMENTS ............. Interest on the Subordinated Certificates
will accrue at the applicable Pass-Through
Rate on the outstanding Certificate Balance
thereof. On each Distribution Date, each
Class of Subordinated Certificates will be
entitled to receive interest distributions
in an amount equal to the Interest
Distribution Amount (subject to the
priorities described under "Description of
the Subordinated Certificates --
Distributions") for such Class and
Distribution Date, together with any
Interest Shortfalls remaining from prior
Distribution Dates, in each case to the
extent of Available Funds, if any, remaining
after (i) payment of the Interest
Distribution Amounts, unreimbursed Interest
Shortfalls, and, depending on relative
priority, Reduction Interest Distribution
Amounts and Reduction Interest Shortfalls
for the Senior Certificates and (ii), if
applicable, payment of the Principal
Distribution Amount for such Distribution
Date and an amount equal to the aggregate
unreimbursed Realized Losses previously
allocated to any Senior Certificates.
The "Interest Distribution Amount" with
respect to any Distribution Date and any
Class of Subordinated Certificates is equal
to interest accrued during the
13
<PAGE>
related Interest Accrual Period at the
Pass-Through Rate on such Class on the
Certificate Balance of such Class.
PRINCIPAL PAYMENTS ............ The Principal Distribution Amount for each
Distribution Date will be distributed to the
Senior Certificates (other than the Class
A-CS1 and Class PS-1 Certificates) until the
Certificate Balances of all the Classes of
Senior Certificates (other than the Class
A-CS1 and Class PS-1 Certificates) have been
reduced to zero before being applied, first,
to the Class B-1 Certificates, in reduction
of the Certificate Balance thereof, until
the Certificate Balance of such Class has
been reduced to zero, second, to the Class
B-2 Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance of such Class has been
reduced to zero, third, to the Class B-3
Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance of such Class has been
reduced to zero, fourth, to the Class B-4
Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance of such Class has been
reduced to zero, fifth, to the Class B-5
Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance of such Class has been
reduced to zero, sixth, to the Class B-6
Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance of such Class has been
reduced to zero, and, seventh, to certain of
the Junior Subordinated Certificates in
accordance with the Pooling and Servicing
Agreement, in each case to the extent of
Available Funds remaining after required
distributions of interest to such Class and
after making interest and principal
distributions to any more senior Class of
Certificates.
The "Principal Distribution Amount" for any
Distribution Date is equal to the sum, for
all Mortgage Loans, of (i) the principal
component of all scheduled Monthly Payments
(other than Balloon Payments) due on the
Mortgage Loans on or before the related Due
Date (if received or advanced); (ii) the
principal component of all Assumed Scheduled
Payments or Minimum Defaulted Monthly
Payments, as applicable, due on or before
the related Due Date with respect to any
Mortgage Loan that is delinquent in respect
of its Balloon Payment; (iii) the Stated
Principal Balance of each Mortgage Loan that
was, during the related Collection Period,
repurchased from the Trust Fund in
connection with the breach of a
representation or warranty or purchased from
the Trust Fund as described herein under
"The Pooling and Servicing Agreement --
Optional Termination"; (iv) the portion of
Unscheduled Payments allocable to principal
of any Mortgage Loan that was liquidated
during the related Collection Period; (v)
all Balloon Payments and, to the extent not
included in the preceding clauses, any other
principal payment on any Mortgage Loan
received on or after the Maturity Date
thereof, to the extent received during the
related Collection Period; (vi) to the
extent not included in the preceding clauses
(iii) or (iv), all other Principal
Prepayments received in the related
Collection Period; and (vii) to the extent
not included in the preceding clauses, any
other full or partial recoveries in respect
of principal, including net insurance
proceeds, net liquidation proceeds and Net
REO Proceeds received in the related
Collection Period (in the case of clauses
(i) through (vii) net of any reimbursement
for related outstanding P&I Advances
allocable to principal and excluding any
amounts representing recoveries of
Subordinate Class Advance Amounts).
The Trust Fund will include two separate
real estate mortgage investment conduits
(each, a "REMIC"). Collections on the
Mortgage Loans will be used to make payments
of principal and interest on interests (the
"Lower-Tier Interests") in a REMIC (the
"Lower-Tier REMIC"). Those payments in turn
will be used to make distributions on the
Certificates (other than the Class LR,
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Class V-1 and Class V-2 Certificates), which
represent interests in a second REMIC (the
"Upper-Tier REMIC"). For purposes of
simplicity, distributions will generally be
described herein as if made directly from
collections on the Mortgage Loans to the
holders of the Certificates.
RECORD DATE ................... With respect to each Distribution Date other
than the Distribution Date occurring on
April 16, 1997, the close of business on the
10th day of the month in which such
Distribution Date occurs, or if such day is
not a business day, the preceding business
day; the Record Date for the Distribution
Date occurring on April 16, 1997 for all
purposes other than the receipt of
distributions is the Closing Date.
INTEREST ACCRUAL PERIOD ....... With respect to any Distribution Date other
than the Distribution Date occurring on
April 16, 1997, the period commencing on and
including the 11th day of the month
preceding the month in which such
Distribution Date occurs and ending on and
including the 10th day of the month in which
such Distribution Date occurs; the Interest
Accrual Period with respect to the
Distribution Date occurring on April 16,
1997 is assumed to consist of 14 days. Each
Interest Accrual Period other than the
Interest Accrual Period with respect to the
Distribution Date occurring on April 16,
1997 is assumed to consist of 30 days.
EXPECTED FINAL DISTRIBUTION
DATE .......................... April 14, 2017, the date on which the
Certificate Balance of the Subordinated
Certificates will be reduced to zero, based
on the assumption that all Mortgage Loans
are paid in full on the earlier of their
maturity date or Anticipated Repayment Date,
that there are no defaults or unadvanced
delinquencies with respect to such Mortgage
Loans, and that no prepayments are made
(other than payment in full on the
Anticipated Repayment Date).
SCHEDULED FINAL DISTRIBUTION
DATE .......................... As to each Class of Subordinated
Certificates, April 14, 2027, the next
Distribution Date occurring after the latest
maturity date of any Mortgage Loan.
RATED FINAL DISTRIBUTION DATE . As to each Class of Subordinated
Certificates, April 14, 2029, the next
Distribution Date occurring two years after
the latest Assumed Maturity Date of any of
the Mortgage Loans. The "Assumed Maturity
Date" of (a) any Mortgage Loan that is not a
Balloon Loan is the maturity date of such
Mortgage Loan and (b) any Balloon Loan is
the date on which such Mortgage Loan would
be deemed to mature in accordance with its
original amortization schedule absent its
Balloon Payment.
COLLECTION PERIOD ............. With respect to a Distribution Date, the
period beginning on the day after the Due
Date in the month preceding the month in
which such day after the Distribution Date
occurs (or, with respect to the first
Distribution Date, the Cut-off Date) and
ending at the close of business on the Due
Date in the month in which such Distribution
Date occurs.
DUE DATE ...................... With respect to any Distribution Date and/or
any Mortgage Loan, as the case may be, the
11th (or in the case of certain of the
Mortgage Loans, if the 11th day is not a
business day, either the next business day
or the first preceding business day) of the
month in which such Distribution Date
occurs.
VOTING RIGHTS ................. Holders of the Subordinated Certificates
will have Voting Rights under the Pooling
and Servicing Agreement, which Voting Rights
may be exercised, among
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other things, to direct certain actions of
the Special Servicer after a default on a
Mortgage Loan or to replace the Special
Servicer. Following a default on a Balloon
Loan at the maturity thereof and upon the
satisfaction of certain conditions contained
in the Pooling and Servicing Agreement the
holders (including, if applicable, the
Special Servicer or an affiliate thereof) of
greater than 50% of the Percentage Interests
of the most subordinate Class or Classes of
Certificates then outstanding representing a
minimum of 1.0% of the aggregate initial
Certificate Balance of all Classes of
Certificates (which Class initially will be
the Junior Subordinated Certificates) may at
their sole discretion, elect to provide the
Special Servicer with Instructions to extend
such Mortgage Loan. If the Certificate
Balance of such Class or Classes of
Certificates has been reduced to less than
40% of the initial Certificate Balances
thereof, the holders of such Class together
with the holders of the next most
subordinate class will be treated as a
single Class for purposes of such Voting
Rights. It is anticipated that the Special
Servicer or an affiliate of the Special
Servicer will own a majority of the Junior
Subordinated Certificates and, therefore,
will be able to control the vote with
respect to such matters for so long as the
outstanding Certificate Balance of the
Junior Subordinated Certificates meets the
criteria set forth above.
PASS-THROUGH RATES ............ The per annum rate at which interest accrues
(the "Pass-Through Rate") on the Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5
and Class B-6 Certificates will be equal to
7.525%. See "Description of Subordinated
Certificates -- Distributions" herein.
The Pass-Through Rates of the other Classes
of Certificates are set forth herein under
"Description of the Subordinated
Certificates -- Distributions."
ADVANCES ...................... The Servicer is required to make P&I
Advances with respect to delinquent Monthly
Payments on the Mortgage Loans, subject to
the limitations described herein, and
provided that the Servicer will make only
one P&I Advance with respect to each
Mortgage Loan for the benefit of the most
subordinate Class of Certificates then
outstanding (unless the related delinquent
Monthly Payment is received prior to the
following Due Date). If the Servicer fails
to make a required P&I Advance, the Trustee
will be required to make the P&I Advance,
and if the Trustee fails to make a required
P&I Advance, the Fiscal Agent will be
required to make such P&I Advance. If the
Servicer, the Trustee or the Fiscal Agent,
as applicable, determines in its good faith
business judgment that any P&I Advance
previously made will not be recoverable,
then the Servicer, the Trustee or the Fiscal
Agent, as applicable, will be entitled to
reimburse itself for such P&I Advance, plus
interest thereon, out of amounts payable on
or in respect of all of the Mortgage Loans
prior to distributions on the Certificates.
See "Description of the Pooling and
Servicing Agreement -- Advances" herein.
OPTIONAL TERMINATION .......... The Depositor, and if the Depositor does not
exercise the option, the Servicer and, if
neither the Servicer nor the Depositor
exercises the option, the holders of the
Class LR Certificates representing greater
than a 50% Percentage Interest of the Class
LR Certificates, will have the option to
purchase at the purchase price specified
herein, all of the Mortgage Loans and all
property acquired through exercise of
remedies in respect of any Mortgage Loan
remaining in the Trust Fund, and thereby
effect termination of the Trust Fund and
early retirement of the then outstanding
Certificates, on any Distribution Date on
which the aggregate Stated Principal Balance
of the Mortgage Loans remaining in the Trust
Fund is less than 1% of the Initial Pool
Balance. Additionally, the holders
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of the Class LR Certificates representing
100% of the Percentage Interest of the Class
LR Certificates, and if the holder of the
Class LR Certificates does not exercise its
option, the holders of the most subordinate
Class of Certificates (not including the
Class B-7H Certificates), will have the
option to purchase at the purchase price
specified herein any Mortgage Loan on its
Anticipated Repayment Date. See "The Pooling
and Servicing Agreement -- Optional
Termination" herein.
DENOMINATIONS ................. The Class B-1, Class B-2, Class B-3, Class
B-4, Class B-5 and Class B-6 Certificates
will be issuable in registered form, in
minimum denominations of Certificate Balance
of $50,000, $50,000, $20,000, $30,000,
$20,000 and $20,000, respectively and
multiples of $5, $5, $2, $3, $2, and $2,
respectively in excess thereof.
Notwithstanding the foregoing, one
Definitive Certificate for each of the Class
B-1 and B-2 and Class B-4 Certificates shall
be issued, each having an initial
Certificate Balance of $9.00.
CLEARANCE AND SETTLEMENT ...... Holders of Subordinated Certificates may
elect to hold their Certificates through any
of DTC (in the United States) or CEDEL or
Euroclear (in Europe). Transfers within DTC,
CEDEL or Euroclear, as the case may be, will
be in accordance with the usual rules and
operating procedures of the relevant system.
Crossmarket transfers between persons
holding directly or indirectly through DTC,
on the one hand, and counterparties holding
directly or indirectly through CEDEL or
Euroclear, on the other, will be effected in
DTC through the relevant Depositaries of
CEDEL or Euroclear. The Depositor may elect
to terminate the book-entry system through
DTC with respect to all or any portion of
any Class of the Subordinated Certificates.
See "Description of the Subordinated
Certificates -- Delivery, Form and
Denomination," "--Book-Entry Registration"
and "--Definitive Certificates" herein.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES ................. Elections will be made to treat the Trust
REMICs, and the Trust REMICs will qualify,
as two separate REMICs for federal income
tax purposes. The Senior Certificates, the
Subordinated Certificates and the Junior
Subordinated Certificates will constitute
"regular interests" in the Upper-Tier REMIC,
and the Class R and Class LR Certificates
(collectively the "Residual Certificates")
will be designated as the sole Classes of
"residual interests" in the Upper-Tier REMIC
and Lower-Tier REMIC, respectively. The
Class V-1 Certificates will represent the
right to receive Net Default Interest,
subject to the obligation to reimburse the
Servicer, the Trustee or the Fiscal Agent,
as applicable, for interest on Advances, and
the Class V-2 Certificates will represent
the right to receive Excess Interest, which
portions of the Trust Fund will be treated
as a grantor trust for federal income tax
purposes. See "Certain Federal Income Tax
Consequences" herein.
The Subordinated Certificates will be
treated as newly originated debt instruments
for federal income tax purposes. Beneficial
owners of the Subordinated Certificates will
be required to report income thereon in
accordance with the accrual method of
accounting. Although not free from doubt, it
is anticipated that for purposes of
computing and accruing original issue
discount the Subordinated Certificates will
be aggregated and that the Subordinated
Units will be treated as issued with
original issue discount in an amount equal
to the excess of their aggregate initial
Certificate Balances (plus days of
interest at
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the Pass-Through Rates thereon) over their
issue price. See "Certain Federal Income Tax
Consequences" herein.
ERISA CONSIDERATIONS .......... Because the Subordinated Certificates are
subordinate to one or more other Classes of
Certificates, the purchase and holding of
the Subordinated Certificates by or on
behalf of (i) an employee benefit plan or
other retirement arrangement subject to
Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),
or Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code"), or (ii) a
governmental plan (as defined in Section
3(32) of ERISA) subject to any federal,
state or local law ("Similar Law") which is,
to a material extent, similar to the
foregoing provisions of ERISA or the Code
(each, a "Plan"), may result in prohibited
transactions within the meaning of ERISA,
the Code or any Similar Law. No transfer of
a Subordinated Certificate that is a
Definitive Certificate shall be made unless
the prospective transferee has (a) delivered
to the Depositor, the Certificate Registrar
and the Trustee a representation letter
stating that that the transferee is not a
Plan or a person acting on behalf of or
investing the assets of a Plan, other than
an insurance company investing the assets of
its general account under circumstances
whereby the purchase and subsequent holding
of the Subordinated Certificate would be
exempt from the prohibited transaction
restrictions of ERISA and the Code under
Sections I and III of Prohibited Transaction
Class Exemption ("PTE") 95-60 or (b)
provided an opinion of counsel and such
other documentation as described under
"ERISA Considerations". The transferee of a
beneficial interest in a Subordinated
Certificate that is not a Definitive
Certificate will be deemed to have
represented, by its ownership thereof, that
it is not a person described in clause (a)
above. See "Description of the Subordinated
Certificates --Transfer Restrictions" and
"ERISA Considerations" herein.
RATINGS ....................... It is a condition to the issuance of the
Subordinated Certificates that (i) the
Senior Certificates be issued and offered,
(ii) the Class B-1 Certificates be rated
"BB+" by each of S&P and Fitch, the Class
B-2 Certificates be rated "BB" by each of
S&P and Fitch, the Class B-3 Certificates be
rated "BB-" by each of S&P and Fitch, the
Class B-4 Certificates be rated "B+" by S&P,
the Class B-5 Certificates be rated "B" by
S&P and the Class B-6 Certificates be rated
"B-" by S&P. 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. The Rating Agencies'
ratings on the Subordinated Certificates
address the likelihood of the timely payment
of interest and the ultimate repayment of
principal by the Rated Final Distribution
Date. A security rating does not address the
frequency of prepayments (both voluntary and
involuntary) or the possibility that
Certificateholders might suffer a lower than
anticipated yield, nor does a security
rating address the likelihood of receipt of
Prepayment Premiums, Net Default Interest or
Excess Interest. A security rating does not
represent any assessment of the yield to
maturity that investors may experience. See
"Risk Factors and Other Special
Considerations" and "Rating" herein.
LEGAL INVESTMENT .............. The appropriate characterization of the
Subordinated Certificates under various
legal investment restrictions, and thus the
ability of investors subject to these
restrictions to purchase the Subordinated
Certificates, may be subject to significant
interpretative uncertainties. The
Subordinated Certificates will not
constitute "mortgage related securities"
within the meaning of the Secondary Mortgage
Market Enhancement Act of 1984, as amended.
Accordingly, investors should consult their
own legal advisors to determine whether and
to what extent
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the Subordinated Certificates constitute
legal investments for them. See "Legal
Investment" herein.
USE OF PROCEEDS ............... The net proceeds from the sale of
Subordinated Units, together with the net
proceeds from the sale of the Senior
Certificates and Junior Subordinated
Certificates, will be used by the Depositor
to pay the purchase price of the Mortgage
Loans.
RISK FACTORS .................. See "Risk Factors" immediately following
this Summary for a discussion of certain
factors that should be considered in
connection with the purchase of the
Subordinated Units.
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RISK FACTORS
Prospective holders of Subordinated Units should consider, among other
things, the following factors in connection with the purchase of the
Subordinated Units.
THE MORTGAGE LOANS
Risks Associated with Commercial and Multifamily Lending Generally. The
Mortgage Loans are secured by anchored and unanchored retail properties,
office buildings, full and limited service hotels, multifamily residential
housing, nursing homes, industrial properties, factory outlet centers, mobile
home and recreational vehicle parks and an assisted living facility. Mortgage
Loans secured by commercial and multifamily properties are markedly different
from one-to-four family residential mortgage loans. Commercial and
multifamily lending is generally viewed as exposing a lender to a greater
risk of loss than one-to-four-family residential lending. The repayment of
loans secured by commercial or multifamily properties is typically dependent
upon the successful operation of the related real estate project, the
businesses operated by the tenants and the creditworthiness of such tenants,
i.e., the ability of the applicable property to produce cash flow. Even the
liquidation value of a commercial or multifamily residential property is
determined more by capitalization of the property's cash flow than any
absolute value of buildings and improvements thereon. Lenders typically look
to the debt service coverage ratio (that is the ratio of net cash flow to
debt service) of a loan secured by income-producing property as an important
measure of the risk of default on such a loan. Commercial and multifamily
lending also typically involves larger loans to a single obligor than
one-to-four-family residential lending.
Volatility. Commercial and multifamily property values and cash flows are
subject to volatility and may be sufficient or insufficient to cover debt
service on the related Mortgage Loan at any given time. The volatility of
property values and cash flows depends upon a number of factors, including
(i) the volatility of property revenue and (ii) the property's "operating
leverage," which generally refers to (a) the percentage of total property
operating expenses in relation to property revenue, (b) the breakdown of
property operating expenses between those that are fixed and those that vary
with revenue and (c) the level of capital expenditures required to maintain
the property and retain or replace tenants. The net operating income and
value of the Mortgaged Properties may be adversely affected by a number of
factors, including, but not limited to, national, regional and local economic
conditions (which may be adversely impacted by plant closings, industry
slowdowns and other factors); local real estate conditions (such as an
oversupply of housing, retail space, office space or hotel rooms); changes or
continued weakness in specific industry segments; changes in applicable
healthcare regulations, including reimbursement requirements; perceptions by
prospective tenants and, in the case of retail properties, retailers and
shoppers, of the safety, convenience, services and attractiveness of the
property; the willingness and ability of the property's owner to provide
capable management and adequate maintenance; demographic factors; retroactive
changes to building or similar codes; increases in operating expenses (such
as energy costs); the number of tenants or, if applicable, the diversity of
types of business operated by such tenants; and laws regulating the maximum
rental permitted to be charged to a residential tenant. Properties with
short-term, less creditworthy revenue sources and/or relatively high
operating leverage, such as health care related facilities, hotels and motels
can be expected to have more volatile cash flows than properties with medium
to long-term tenant commitments from creditworthy tenants and/or relatively
low operating leverage. A decline in the real estate market, in the financial
condition of a major tenant or a general decline in the local or national
economy will tend to have a more immediate effect on the net operating income
of such properties and may lead to higher rates of delinquency or defaults.
Historical operating results of the Mortgaged Properties may not be
comparable to future operating results. In addition, other factors may
adversely affect the Mortgaged Properties' value without affecting their
current net operating income, including changes in governmental regulations,
zoning or tax laws; potential environmental or other legal liabilities; the
availability of refinancing; and changes in interest rate levels.
The age, construction quality and design of a particular property may
affect the occupancy level as well as the rents that may be charged for
individual leases. The effects of poor construction quality or design will
increase over time in the form of increased maintenance and capital
improvements. Even good construction will deteriorate over time if the
property managers do not schedule and perform adequate maintenance in a
timely fashion. If, during the terms of the Mortgage Loans, competing
properties of a similar type are built in the areas where the Mortgaged
Properties are located or similar properties in the vicinity of the Mortgaged
Properties are substantially updated and refurbished, the value and net
operating income of such Mortgaged Properties could be reduced. There is no
assurance that the value of any Mortgaged Property during the term of the
related Mortgage Loan will equal or exceed the appraised value determined in
connection with the origination of such Mortgage Loan. However, the Mortgage
Loans generally provide for deferred
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maintenance reserves in an amount sufficient to remediate any deficiencies
raised by the engineering report issued in connection with the origination of
the related Mortgage Loan. In addition, most of the Mortgage Loans contain
ongoing capital expenditure reserve requirements.
Additionally, some of the Mortgaged Properties may not readily be
converted to alternative uses if such Mortgaged Properties were to become
unprofitable due to competition, age of the improvements, decreased demand or
other factors. The conversion of nursing homes or hotels to alternative uses
would generally require substantial capital expenditures. Thus, if the
operation of any such Mortgaged Properties becomes unprofitable such that the
borrower becomes unable to meet its obligations on the related loan, the
liquidation value of any such property may be substantially less, relative to
the amount owing on the related loan, than would be the case if such property
were readily adaptable to other uses.
Other multifamily residences, hotels, retail properties, office buildings,
mobile home parks, nursing homes and industrial properties located in the
areas of the Mortgaged Properties compete with the Mortgaged Properties of
such types to attract residents, retailers, customers, patients and tenants.
Increased competition frequently leads to lowering of rents in a market and
could adversely affect income from and market value of the Mortgaged
Properties.
Borrower Default; Nonrecourse Mortgage Loans. The Mortgage Loans are not
insured or guaranteed by any governmental entity, by any private mortgage
insurer, or by the Depositor, the Mortgage Loan Seller, the Servicer, the
Special Servicer, Bloomfield, the Trustee, the Fiscal Agent or any of their
respective affiliates.
Each Mortgage Loan is generally a nonrecourse loan as to which, in the
event of a default under such Mortgage Loan, recourse generally may be had
only against the specific properties and other assets that have been pledged
to secure the Mortgage Loan. See "Description of the Mortgage Pool" herein.
Consequently, payment on each Mortgage Loan prior to maturity is dependent
primarily on the sufficiency of the net operating income of the related
Mortgaged Property, and at maturity (whether at scheduled maturity or, in the
event of a default under the related Mortgage Loan, upon the acceleration of
such maturity), upon the then market value of the related Mortgaged Property
(taking into account any adverse effect of a foreclosure proceeding on the
market value of the Mortgaged Property) or the ability of the related
borrower to refinance the Mortgaged Property. All of the Mortgage Loans were
originated within 7 months prior to the Cut-off Date. Consequently, the
Mortgage Loans do not have as long standing a payment history as mortgage
loans originated on earlier dates.
Property Management. The successful operation of a real estate project is
also dependent on the performance and viability of the property manager of
such project. Different property types vary in the extent to which the
property manager is involved in property marketing, leasing and operations on
a daily basis. Properties deriving revenues primarily from short-term sources
(such as hotels) are generally more management intensive than properties
leased to creditworthy tenants under long-term leases. The property manager
is responsible for responding to changes in the local market, planning and
implementing the rental structure, including establishing levels of rent
payments, operating the properties and providing building services, managing
operating expenses and advising the borrowers so that maintenance and capital
improvements can be carried out in a timely fashion. There can be no
assurance that the property managers will at all times be in a financial
condition to continue to fulfill their management responsibilities under the
related management agreements throughout the terms thereof. The property
managers are operating companies and unlike limited purpose entities, may not
be restricted from incurring debt and other liabilities in the ordinary
course of business or otherwise. Moreover, a majority of the properties
secured by the Mortgage Loans are managed by affiliates of the applicable
borrower. Such relationship could raise additional difficulties in connection
with a Mortgage Loan in default or undergoing special servicing and a dispute
between the partners or members of a borrower could disrupt the management of
the underlying property which may cause an adverse effect on cash flow.
However, many of the Mortgage Loans permit the lender to remove the manager
upon the occurrence of an event of default, a decline in cash flow below
specified levels or other specified triggers.
Retail Properties. 33% of the Mortgage Loans, based on Initial Pool
Balance, are secured by retail properties (other than factory outlet
centers). See "Description of the Mortgage Pool --Additional Mortgage Loan
Information -- Types of Mortgaged Property" herein. Significant factors
determining the value of retail properties are the quality of the tenants as
well as fundamental aspects of real estate such as location and market
demographics. The correlation between the success of tenant businesses and
property value is more direct with respect to retail properties than other
types of commercial property because a significant component of the total
rent paid by retail tenants is often tied to a percentage of gross sales.
Whether a retail property is "anchored" or "unanchored" is also an important
distinction. Retail properties that are anchored have traditionally been
perceived to be less risky. While there is no strict definition of an anchor,
it is
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generally understood that a retail anchor tenant is proportionately large in
size and is vital in attracting customers to the property. 27%, based on
Initial Pool Balance, of the Mortgage Loans secured by retail properties (not
including factory outlet centers), are "anchored" and 6% are "unanchored."
Furthermore, the correlation between the success of tenant businesses and
property value is increased when the property is a single tenant property.
3%, based on Initial Pool Balance, of the Mortgage Loans secured by retail
properties (not including factory outlet centers), are secured by single
tenant properties.
Unlike office or hotel properties, retail properties also face competition
from sources outside a given real estate market. Catalogue retailers, home
shopping networks, telemarketing and outlet centers all compete with more
traditional retail properties for consumer dollars. Continued growth of these
alternative retail outlets (which are often characterized by lower operating
costs) could adversely affect the rents collectible at the retail properties
included in the Mortgage Pool.
Office Properties. 24% of the Mortgage Loans, based on Initial Pool
Balance, are secured by office properties. See "Description of the Mortgage
Pool -- Additional Mortgage Loan Information -- Types of Mortgaged Property"
herein. Significant factors determining the value of office properties are
the quality of the tenants in the building, the physical attributes of the
building in relation to competing buildings and the strength and stability of
the market area as a desirable business location. Office properties may be
adversely affected if there is an economic decline in the business operated
by the tenants. The risk of such an adverse effect is increased if revenue is
dependent on a single tenant or if there is a significant concentration of
tenants in a particular business or industry.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a property's age,
condition, design (e.g. floor sizes and layout), access to transportation and
ability or inability to offer certain amenities to its tenants, including
sophisticated building systems (such as fiberoptic cables, satellite
communications or other base building technological features).
The success of an office property also depends on the local economy. A
company's decision to locate office headquarters in a given area, for
example, may be affected by such factors as labor cost and quality, tax
environment and quality of life issues such as schools and cultural
amenities. A central business district may have an economy which is markedly
different from that of a suburb. The local economy will impact on an office
property's ability to attract stable tenants on a consistent basis. In
addition, the cost of refitting office space for a new tenant is often more
costly than for other property types.
Hotel Properties. 15% of the Mortgage Loans, based on Initial Pool
Balance, are secured by full service hotels or limited service hotels. These
hotels are comprised of hotels associated with national franchise chains,
hotels associated with regional franchise chains and hotels that are not
affiliated with any franchise chain but may have their own brand identity.
See "Description of the Mortgage Pool -- Additional Mortgage Loan Information
- -- Types of Mortgaged Property" herein for certain statistical information on
the Hotel Properties and Hotel Loans.
Various factors, including location, quality and franchise affiliation
affect the economic performance of a hotel. Adverse economic conditions,
either local, regional or national, may limit the amount that can be charged
for a room and may result in a reduction in occupancy levels. The
construction of competing hotels can have similar effects. To meet
competition in the industry and to maintain economic values, continuing
expenditures must be made for modernizing, refurbishing, and maintaining
existing facilities prior to the expiration of their anticipated useful
lives. In connection with such concerns, in all of the Hotel Loans, the
related borrower is required to fund FF&E reserves. Because hotel rooms
generally are rented for short periods of time, hotels tend to respond more
quickly to adverse economic conditions and competition than do other
commercial properties. Furthermore, the financial strength and capabilities
of the owner and operator of a hotel may have a substantial impact on such
hotel's quality of service and economic performance. Additionally, the hotel
and lodging industry is generally seasonal in nature and this seasonality can
be expected to cause periodic fluctuations in room and other revenues,
occupancy levels, room rates and operating expenses. In connection with such
concerns, in the case of certain Hotel Loans, the related borrower is
required to fund seasonal reserves. The demand for particular accommodations
may also be affected by changes in travel patterns caused by changes in
energy prices, strikes, relocation of highways, the construction of
additional highways and other factors.
Certain of the Hotel Properties are franchisees of national or regional
hotel chains. The viability of any such Hotel Property depends in part on the
continued existence and financial strength of the franchisor, the public
perception of the franchise service mark and the duration of the franchise
licensing agreements. The transferability of franchise license agreements may
be restricted and, in the event of a foreclosure on any such Hotel Property,
the mortgagee may not have
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<PAGE>
the right to use the franchise license without the franchisor's consent.
Conversely, a lender may be unable to remove a franchisor that it desires to
replace following a foreclosure. Further, in the event of a foreclosure on a
Hotel Property, it is unlikely that the Trustee (or Servicer or Special
Servicer) or purchaser of such Hotel Property would be entitled to the rights
under any liquor license for such Hotel Property and such party would be
required to apply in its own right for such license or licenses. There can be
no assurance that a new license could be obtained or that it could be
obtained promptly.
Multifamily Properties. 13% of the Mortgage Loans, based on Initial Pool
Balance, are secured by multifamily apartment buildings. See "Description of
the Mortgage Pool -- Additional Mortgage Loan Information -- Types of
Mortgaged Property" herein.
Significant factors determining the value and successful operation of a
multifamily property are the location of the property, the number of
competing residential developments in the local market (such as apartment
buildings, manufactured housing communities and site-built single family
homes), the physical attributes of the multifamily apartment building (such
as its age and appearance) and state and local regulations affecting such
property. In addition, the successful operation of an apartment building will
depend upon other factors such as its reputation, the ability of management
to provide adequate maintenance and insurance, and the types of services it
provides.
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. Apartment building owners have been the
subject of suits under state "Unfair and Deceptive Practices Acts" and other
general consumer protection statutes for coercive, abusive or unconscionable
leasing and sales practices. A few states offer more significant protection.
For example, there are provisions that limit the basis on which a landlord
may terminate a tenancy or increase its rent or prohibit a landlord from
terminating a tenancy solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment
buildings. These ordinances may limit rent increases to fixed percentages, to
percentages of increases in the consumer price index, to increases set or
approved by a governmental agency, or to increases determined through
mediation or binding arbitration. In many cases, the rent control laws do not
permit vacancy decontrol. Local authority to impose rent control is
pre-empted by state law in certain states, and rent control is not imposed at
the state level in those states. In some states, however, local rent control
ordinances are not pre-empted for tenants having short-term or month-to-month
leases, and properties there may be subject to various forms of rent control
with respect to those tenants. Any limitations on a borrower's ability to
raise property rents may impair such borrower's ability to repay its Mortgage
Loan from its net operating income or the proceeds of a sale or refinancing
of the related Mortgaged Property.
Adverse economic conditions, either local or national, may limit the
amount of rent that can be charged and may result in a reduction in timely
rent payments or a reduction in occupancy levels. Occupancy and rent levels
may also be affected by construction of additional housing units, local
military base closings and national and local politics, including current or
future rent stabilization and rent control laws and agreements. In addition,
the level of mortgage interest rates may encourage tenants to purchase
single-family housing. The location and construction quality of a particular
building may affect the occupancy level as well as the rents that may be
charged for individual units. The characteristics of a neighborhood may
change over time or in relation to newer developments.
Industrial Properties. 6% of the Mortgage Loans, based on Initial Pool
Balance, are secured by industrial properties. See "Description of the
Mortgage Pool -- Additional Mortgage Loan Information -- Types of Mortgaged
Property" herein. Significant factors determining the value of industrial
properties are the quality of tenants, building design and adaptability and
the location of the property. Concerns about the quality of tenants,
particularly major tenants, are similar in both office properties and
industrial properties, although industrial properties are more frequently
dependent on a single tenant.
Aspects of building site design and adaptability affect the value of an
industrial property. Site characteristics which are valuable to an industrial
property include clear heights, column spacing, number of bays and bay
depths, divisibility, truck turning radius and overall functionality and
accessibility.
Location is also important because an industrial property requires the
availability of labor sources, proximity to supply sources and customers and
accessibility to rail lines, major roadways and other distribution channels.
Mobile Home Park Properties. 4% of the Mortgaged Properties, based on
Initial Pool Balance, are operated as mobile home parks, recreational vehicle
parks or combinations thereof. See "Description of the Mortgage Pool --
Additional Mortgage Loan Information -- Types of Mortgaged Property" for
certain statistical information on such loans.
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<PAGE>
Significant factors determining the value of mobile home park properties
are generally similar to the factors affecting the value of multifamily
residential properties. In addition, the mobile home park properties are
"special purpose" properties that could not be readily converted to general
residential, retail or office use. In fact, certain states also regulate
changes in mobile home park use and require that the landlord give written
notice to its tenants a substantial period of time prior to the projected
change. Consequently, if the operation of any of the mobile home park
properties becomes unprofitable due to competition, age of the improvement or
other factors such that the borrower becomes unable to meet its obligation on
the related Mortgage Loan, the liquidation value of that mobile home park
property may be substantially less, relative to the amount owing on the
Mortgage Loan, than would be the case if the mobile home park property were
readily adaptable to other uses.
Senior Housing/Healthcare Properties. 3% of the Mortgaged Properties,
based on Initial Pool Balance, are operated as senior housing/healthcare
properties. See "Description of the Mortgage Pool -- Additional Mortgage Loan
Information -- Types of Mortgaged Property" herein for certain statistical
information on such loans. Significant factors determining the value of
senior housing and healthcare properties include federal and state laws,
competition with similar properties on a local and regional basis and the
continued availability of revenue from government reimbursement programs,
primarily Medicaid and Medicare.
Providers of long-term nursing care and other medical services are subject
to federal and state laws that relate to the adequacy of medical care,
distribution of pharmaceuticals, rate setting, equipment, personnel,
operating policies and additions to facilities and services and, to the
extent dependent on patients whose fees are reimbursed by private insurers,
to the reimbursement policies of such insurers. In addition, facilities where
such care or other medical services are provided are subject to periodic
inspection by governmental authorities to determine compliance with various
standards necessary for continued licensing under state law and continued
participation in the Medicaid and Medicare reimbursement programs. The
failure of any of such borrowers to maintain or renew any required license or
regulatory approval could prevent it from continuing operations at a
Mortgaged Property (in which case no revenues would be received from such
property or portion thereof requiring licensing) or, if applicable, bar it
from participation in government reimbursement programs. Furthermore, in the
event of foreclosure, there can be no assurance that the Trustee (or Servicer
or Special Servicer) or purchaser in a foreclosure sale would be entitled to
the rights under such licenses and such party may have to apply in its own
right for such a license. There can be no assurance that a new license could
be obtained.
Under applicable federal and state laws and regulations, Medicare and
Medicaid, only the provider who actually furnished the related medical goods
and services generally may sue for or enforce its rights to reimbursement.
Accordingly, in the event of foreclosure, none of the Trustee, the Servicer,
the Special Servicer or a subsequent lessee or operator of the property would
generally be entitled to obtain from federal or state governments any
outstanding reimbursement payments relating to services furnished at the
respective properties prior to such foreclosure.
The operators of such nursing homes are likely to compete on a local and
regional basis with others that operate similar facilities, some of which
competitors may be better capitalized, may offer services not offered by such
operators or may be owned by non-profit organizations or government agencies
supported by endowments, charitable contributions, tax revenues and other
sources not available to such operators. The successful operation of a
Mortgaged Property that is a nursing home will generally depend upon the
number of competing facilities in the local market, as well as upon other
factors such as its age, appearance, reputation and management, the types of
services it provides and the quality of care and the cost of that care.
Nursing home facilities may receive a substantial portion of their
revenues from government reimbursement programs, primarily Medicaid and
Medicare. Medicaid and Medicare are subject to statutory and regulatory
changes, retroactive rate adjustments, administrative rulings, policy
interpretations, delays by fiscal intermediaries and government funding
restrictions. Moreover, governmental payors have employed cost-containment
measures that limit payments to health care providers, and there are
currently under consideration various proposals for national health care
reform that could further limit those payments. Accordingly, there can be no
assurance that payments under government reimbursement programs will, in the
future, be sufficient to fully reimburse the cost of caring for program
beneficiaries. If not, net operating income of the Mortgaged Properties that
receive revenues from those sources, and consequently the ability of the
related borrowers to meet their Mortgage Loan obligations, could be adversely
affected.
Factory Outlet Properties. 2% of the Mortgage Loans, based on Initial Pool
Balance, are secured by factory outlet centers. See "Description of the
Mortgage Pool -- Additional Mortgage Loan Information -- Types of Mortgaged
Property" herein. The factory outlet center business depends, in part, on the
pricing differential between goods sold in the
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<PAGE>
factory outlet centers and similar or identical goods sold in a traditional
department store or retailer. While this pricing differential results, in
part, because of lower operating costs resulting from the elimination of
distribution layers and the reduced rent and overhead at factory outlet
centers, there can be no assurance that traditional retailers will not
compete aggressively to regain sales nor can there be any assurance that the
factory outlet center business will not be adversely affected by other
changes in the distribution and sale of retail goods.
Further, newer outlet centers are being constructed closer to metropolitan
and suburban areas, thereby decreasing the economic viability of older
centers that are located farther away. Numerous factory outlet centers have
been developed in recent years and are currently being developed. As a result
of this rapid growth, there is a risk of overdevelopment and increased
competition for tenants. The terms of leases of stores in factory outlet
centers typically are shorter than those in traditional malls or shopping
centers, thereby increasing the risks of tenants relocating to competing
centers.
Factory Outlet Properties are also subject to the risks described above
under "--Retail Properties."
Tenant Credit Risk. Income from and the market value of retail, factory
outlet, office and industrial Mortgaged Properties would be adversely
affected if space in the Mortgaged Properties could not be leased, if tenants
were unable to meet their lease obligations, if a significant tenant were to
become a debtor in a bankruptcy case under the United States Bankruptcy Code
or if for any other reason rental payments could not be collected. If tenant
sales in the Mortgaged Properties that contain retail space were to decline,
rents based upon such sales would decline and tenants may be unable to pay
their rent or other occupancy costs. Upon the occurrence of an event of
default by a tenant, delays and costs in enforcing the lessor's rights could
be experienced. Repayment of the Mortgage Loans will be affected by the
expiration of space leases and the ability of the respective borrowers to
renew the leases or relet the space on comparable terms. Even if vacated
space is successfully relet, the costs associated with reletting, including
tenant improvements, leasing commissions and free rent, could be substantial
and could reduce cash flow from the Mortgaged Properties.
In the case of retail properties, the failure of an anchor tenant to renew
its lease, the termination of an anchor tenant's lease, the bankruptcy or
economic decline of an anchor tenant, or the cessation of the business of an
anchor (notwithstanding its continued payment of rent) can have a
particularly negative effect on the economic performance of a shopping center
property given the importance of anchor tenants in attracting traffic to
other stores. In addition, the failure of any anchor tenant to operate from
its premises may give certain tenants the right to terminate or reduce rents
under their leases.
Concentration of Mortgage Loans; Borrowers. Several of the Mortgage Loans
have Cut-off Date Principal Balances that are substantially higher than the
average Cut-off Date Principal Balance. The largest Mortgage Loan, which is
secured by the Kendall Square Pool Properties, located in East Cambridge,
Massachusetts, has a Cut-off Date Principal Balance that represents
approximately 5.0% of the Initial Pool Balance. The second largest Mortgage
Loan, which is secured by the Saracen Pool Properties, located in suburban
Boston, Massachusetts, has a Cut-off Date Principal Balance that represents
approximately 4.9% of the Initial Pool Balance. The third largest Mortgage
Loan, which is secured by the property known as International Plaza, located
in New York City, has a Cut-off Date Principal Balance that represents
approximately 4.7% of the Initial Pool Balance. The ten largest Mortgage
Loans have Cut-off Date Principal Balances that represent, in the aggregate,
approximately 40% of the Initial Pool Balance. See "Description of the
Mortgage Pool -- Significant Mortgage Loans" for a description of these
Mortgage Loans.
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<PAGE>
The following table sets forth Mortgage Loans secured by more than one
Mortgaged Property.
MORTGAGE LOANS SECURED BY MORE THAN ONE MORTGAGED PROPERTY
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF % OF INITIAL
LOAN NAME PROPERTIES STATES POOL BALANCE
- ------------------------------------- -------------- ------------- ----------------
<S> <C> <C> <C>
M & H................................. 3 1 2.0%
Holladay.............................. 11 2 1.4%
Saracen............................... 6 1 4.9%
2 St. Marks/Greystone* ............... 2 2 1.1%
Hudson Hotels......................... 16 6 4.0%
Jacobs Malls.......................... 2 2 2.3%
Magnolia-Western Investments.......... 2 1 0.4%
Sunwest*.............................. 72 11 3.6%
Tramz................................. 2 1 0.8%
Kendall Square*....................... 3 1 5.0%
Ambassador Apartments II.............. 2 1 1.5%
Sutton Place and South Livingston .... 2 1 0.3%
Buena/Leisure Nursing................. 2 1 0.4%
Cleveland Industrial Portfolio ....... 8 1 0.6%
EconoLodge Portfolio* ................ 6 2 0.4%
Prime Retail II*...................... 3 3 1.9%
K-Mart Distribution Centers........... 2 2 4.5%
Uniprop*.............................. 4 3 2.4%
Burnham Pacific*...................... 2 1 4.2%
</TABLE>
- ------------
* Loans entered into with multiple borrowers. See "--Limitations on the
Enforceability of Cross-Collateralization" below and "Description of
the Mortgage Pool -- Cross-Collateralization and Cross-Default of
Certain Mortgage Loans" herein.
In addition there are three pairs and one group of four Mortgage Loans
that were made to affiliated borrowers which are not cross-collateralized or
cross-defaulted, no one of which represents more than 2% of the Initial Pool
Balance.
In general, concentrations in a mortgage pool in which one or more loans
that have outstanding principal balances that are substantially larger than
the other mortgage loans in such pool can result in losses that are more
severe, relative to the size of the pool, than would be the case if the
aggregate balance of such pool were more evenly distributed among the
mortgage loans in such pool. Concentrations of Mortgage Loans with the same
borrower or related borrowers can also pose increased risks. For example, if
a person that owns or controls several Mortgaged Properties experiences
financial difficulty at one Mortgaged Property, it could defer maintenance at
one Mortgaged Property in order to satisfy current expenses with respect to
another Mortgaged Property, or it could attempt to avert foreclosure by
filing a bankruptcy petition that might have the effect of interrupting
Monthly Payments (subject to the Servicer's obligation to make Advances) for
an indefinite period on all of the related Mortgage Loans.
Limitations on Enforceability of Cross-Collateralization. 19 of the
Mortgage Loans representing approximately 41.8% of the Initial Pool Balance
and having Cut-off Date Principal Balances ranging from $3,800,000 to
$69,598,691 are secured by more than one Mortgaged Property. These
arrangements seek to reduce the risk that the inability of a Mortgaged
Property securing each such Mortgage Loan to generate net operating income
sufficient to pay debt service will result in defaults and ultimate losses.
See "--Concentration of Mortgage Loans; Borrowers" above.
Cross-collateralization arrangements involving more than one borrower (as
indicated on the chart entitled "Mortgage Loans Secured by More Then One
Property" above) could be challenged as a fraudulent conveyance by creditors
of a borrower or by the representative of the bankruptcy estate of a
borrower, if a borrower were to become a debtor in a bankruptcy case.
Generally, under federal and most state fraudulent conveyance statutes, the
incurring of an obligation or the transfer of property by a person will be
subject to avoidance under certain circumstances if the person did not
receive fair consideration or reasonably equivalent value in exchange for
such obligation or transfer and (i) was insolvent or was
26
<PAGE>
rendered insolvent by such obligation or transfer, (ii) was engaged in
business or a transaction, or was about to engage in business or a
transaction, for which any property remaining with the person was an
unreasonably small capital or (iii) intended to, or believed that it would,
incur debts that would be beyond the person's ability to pay as such debts
matured. Accordingly, a lien granted by a borrower to secure repayment of
another borrower's Mortgage Loan could be avoided if a court were to
determine that (i) such borrower was insolvent at the time of granting the
lien, was rendered insolvent by the granting of the lien, or was left with
inadequate capital, or was not able to pay its debts as they matured and (ii)
the borrower did not, when it allowed its Mortgaged Property to be encumbered
by a lien securing the entire indebtedness represented by the other Mortgage
Loan, receive fair consideration or reasonably equivalent value for pledging
such Mortgaged Property for the equal benefit of the other borrower.
Other Financing. The Mortgage Loans generally prohibit incurring any debt
that is secured by the related Mortgaged Property. The Mortgage Loans do,
however, generally permit the related borrower to incur unsecured
indebtedness in limited circumstances for the purchase of certain items used
in the ordinary course of business, such as equipment and in the case of
certain of the Mortgage Loans, limited amounts of secured (but not by the
Mortgaged Property) or unsecured debt is permitted for other purposes. The
existence of such other indebtedness could adversely affect the financial
viability of the related borrowers or the security interest of the lender in
the equipment or other assets acquired through such financings or could
complicate bankruptcy proceedings and delay foreclosure on the Mortgaged
Property. See "Certain Legal Aspects of the Mortgage Loans -- Subordinate
Financing" herein. Additionally, the Mortgage Loan Seller has made loans to
affiliates of certain of the borrowers ("Mezzanine Debt") secured by their
equity interests in the borrowers, as set forth on the following table:
MEZZANINE DEBT
<TABLE>
<CAPTION>
MORTGAGE MEZZANINE
LOAN BALANCE DEBT BALANCE COMBINED LTV
MORTGAGE LOAN (1) (2) (3)
- ------------------------ -------------- -------------- --------------
<S> <C> <C> <C>
Residence Inn--Herndon . $13,481,513 $800,000 71%
One Ethel Rd. ........... $ 2,172,731 $225,000 58%
Burlington Square ....... $14,642,002 $335,000(4) 70%
</TABLE>
- ------------
(1) As of the Cut-off Date.
(2) Initial principal balance.
(3) "Combined LTV" means "LTV" as defined herein, but adding the original
principal balance of the Mezzanine Debt to the numerator.
(4) The loan is to the borrower, but is guaranteed by an affiliate.
In addition, the Mortgage Loan Seller has a $2,300,000 senior
participation interest in a financing arrangement with entities which control
the Kendall Borrowers. See "Description of the Mortgage Pool -- Significant
Mortgage Loans -- Kendall Square Pool Loan and Properties."
Equity Investments by the Mortgage Loan Seller and/or its Affiliates. The
Mortgage Loan Seller and/or its affiliates (the "Preferred Interest Holder")
has acquired a preferred equity interest in 16 borrowers or their affiliates,
which are the borrowers (or affiliates) with respect to Mortgage Loans
representing approximately 25.6% of the Initial Pool Balance, as set forth in
the following table:
PREFERRED EQUITY (APPROXIMATE) INVESTMENTS IN BORROWERS AND AFFILIATES
<TABLE>
<CAPTION>
APPROXIMATE AMOUNT INTEREST IN
MORTGAGE LOAN OF PREFERRED EQUITY BORROWER
MORTGAGE LOAN BALANCE(1) INVESTMENT(2) OR ITS AFFILIATE
- --------------------------------- --------------- ------------------- -------------------
<S> <C> <C> <C>
Saracen........................... $68,923,230 $7,500,000 Affiliate
International Plaza............... $65,750,000 $5,250,000 Borrower
Sunwest........................... $50,500,000 $6,700,000 Affiliate/Borrower
Westin--Indianapolis.............. $41,700,000 $5,900,000 Borrower
Security Square Mall.............. $36,000,000 $6,500,000 Borrower
Two Gateway Center................ $34,423,045 $4,000,000 Borrower
Lakeside Village.................. $24,971,982 $2,000,000 Borrower
Danvers Crossing Shopping Center . $13,627,151 $ 390,000 Borrower
The Plaza Burr Corners I & II .... $12,278,439 $1,035,000 Borrower
27
<PAGE>
APPROXIMATE AMOUNT INTEREST IN
MORTGAGE LOAN OF PREFERRED EQUITY BORROWER
MORTGAGE LOAN BALANCE(1) INVESTMENT(2) OR ITS AFFILIATE
- --------------------------------- --------------- ------------------- -------------------
Tramz............................. $11,599,902 $1,350,000 Borrower
Hood Commons...................... $ 9,025,000 $ 975,000 Borrower
Residence Inn--Livermore.......... $ 6,060,000 $ 740,000 Borrower
Englar Shopping Center............ $ 5,523,398 $ 430,000 Borrower
Totem Square Shopping Center ..... $ 5,425,000 $ 385,000 Borrower
Days Inn--Providence.............. $ 3,955,000 $ 460,000 Borrower
Washington Square Shopping
Center........................... $ 3,463,909 $ 305,000 Borrower
Slauson Apts. .................... $ 1,772,762 $ 170,000 Borrower
</TABLE>
- ------------
(1) As of the Cut-off Date, the total Initial Pool Balance of all Mortgage
Loans in which the Preferred Interest Holder has a preferred equity
interest is $394,998,818.
(2) Initial amount of investment.
In general, with respect to each such borrower, the Preferred Interest
Holder is entitled to receive certain preferred distributions prior to
distributions being made to the other partners or members. No monthly
distribution to the Preferred Interest Holder is permitted to be made until
all required monthly debt service payments, reserve payments, other payments
under the related Mortgage Loan ("Monthly Mortgage Loan Payments") and any
obligations to other creditors have been made when due and all monthly
operating expenses with respect to the related Mortgaged Property ("Monthly
Operating Expenses") have been paid. After payment of such amounts, the
Preferred Interest Holder is entitled to receive a distribution of a
preferred yield and a monthly return of capital equal to either (i) a
scheduled minimum payment or (ii) the greater of a scheduled minimum payment
and specified percentage of certain remaining cash flow from the Mortgaged
Property or Properties, after payment of Monthly Mortgage Loan Payments,
Monthly Operating Expenses and the monthly preferred yield to the Preferred
Interest Holder (or, in each case, if certain breaches have occurred, 100% of
such remaining cash flow).
Under the related partnership agreement, operating agreement or similar
agreement, the Preferred Interest Holder has certain specified rights,
including, in most cases, the right to terminate and replace the manager of
the related Mortgaged Property or Properties upon the occurrence of certain
specified breaches or, in some cases, if the DSCR as of certain dates falls
below certain levels generally equal to the DSCR at the time of the
origination of the related Mortgage Loan. However, the right of the Preferred
Interest Holder to terminate any manager is expressly subordinate to the
right of the Servicer to terminate and replace such manager. If the Preferred
Interest Holder is entitled to terminate a manager at a time when the
Servicer does not have such a right, then prior to termination, the Preferred
Interest Holder must receive confirmation from each of the Rating Agencies
that such termination would not cause any Rating Agency to withdraw, qualify
or downgrade any of its then-current ratings on the Certificates. Other than
the increase in the percentage of the cash flow used to calculate the monthly
return of capital and the right to terminate the manager as described above,
the Preferred Interest Holder has no further remedies under the relevant
partnership, operating or similar agreement in the event of nonpayment of its
monthly preferred yield and return of capital.
In general, the Preferred Interest Holder has the right to approve the
annual budget for the Mortgaged Properties, which right is subject to any
right that the Servicer may have to approve such budgets. The Preferred
Interest Holder also has the right to approve certain actions of the related
borrowers, including certain transactions with affiliates, prepayment or
refinancing of the related Mortgage Loan, transfer of the related Mortgaged
Property, entry into or modification of substantial leases or improvement of
the related Mortgaged Properties to a materially higher standard than
comparable properties in the vicinity of such Mortgaged Properties (unless
approved by the Servicer as described below), and the dissolution,
liquidation or the taking of certain bankruptcy actions with respect to the
borrower. With respect to the making of any capital improvements in addition
to those reserved for under the related Mortgage Loan, the Servicer alone may
approve such leases and improvements without the consent of the Preferred
Interest Holder. In such event, the expenditure of amounts to make such
additional capital improvements, rather than to make the monthly distribution
to the Preferred Interest Holder, will not cause a breach which gives rise to
a right to terminate the related manager.
An affiliate of the borrower with respect to the Mortgaged Property known
as Madison House has an option for approximately 18 months to require the
Mortgage Loan Seller or its affiliate to make a preferred equity investment
in such entity of up to $1,200,000.
An affiliate of the Mortgage Loan seller owns a 60% common equity
ownership interest in the Borrower with respect to the Mortgaged Property
known as South DeKalb Mall. An additional equity investment in the form of
preferred equity in an amount up to $2.5 million funded by another affiliate
of the Mortgage Loan Seller will be available to the borrower for up to
approximately three years. The proceeds of this investment may be used for
any capital improvement including additional tenant buildout.
28
<PAGE>
The Mortgage Loan Seller owns a 27% membership interest in Westin Hotel
LLC ("Westin"), the owner of Westin Hotels and Resorts Worldwide, Inc.
("Westin Resorts"). Westin Resorts owns the borrower with respect to the
Mortgaged Property known as Westin -- Indianapolis and the manager of such
hotel. The Mortgage Loan Seller's membership interests in Westin are
non-voting interests.
An affiliate of the Mortgage Loan Seller has a common equity investment of
$3,547,500 in the parent of the borrower with respect to the Mortgaged
Property known as the Montague Park Tech Center.
For an additional description of the preferred equity interests in the
borrowers and/or affiliates related to the Saracen Pool Loan (including the
commitment to fund an additional $1,000,000 of preferred equity) and Sunwest
Pool Loan, see "Description of the Mortgage Pool -- Significant Mortgage
Loans -- The Saracen Pool Loan and Properties" and "--Sunwest Pool Loan and
Properties."
Tax Considerations Related to Foreclosure. If the Trust Fund were to
acquire a Mortgaged Property subsequent to a default on the related Mortgage
Loan pursuant to a foreclosure or deed in lieu of foreclosure, the Special
Servicer would be required to retain an independent contractor to operate and
manage the Mortgaged Property. Any net income from such operation and
management, other than qualifying "rents from real property," or any rental
income based on the net profits of a tenant or sub-tenant or allocable to a
service that is non-customary in the area and for the type of building
involved, will subject the Trust REMIC to federal (and possibly state or
local) tax on such income at the highest marginal corporate tax rate
(currently 35%), thereby reducing net proceeds available for distribution to
Certificateholders. See "Certain Federal Income Tax Consequences -- Taxes
That May Be Imposed on a REMIC -- Net Income From Foreclosure Property"
herein.
Risk of Different Timing of Mortgage Loan Amortization. As set forth on
the table below, the different types of Mortgaged Properties securing the
Mortgage Loans have varying weighted average terms to maturity. If and as
principal payments or prepayments are made on a Mortgage Loan, the remaining
Mortgage Pool will be subject to more concentrated risk with respect to the
diversity of properties, types of properties, geographic concentration (see
"--Geographic Concentration" below) and with respect to the number of
borrowers. Because principal on the Certificates is payable in sequential
order, and no Class entitled to distributions of prinicpal receives principal
until the Certificate Balance of the preceding Class or Classes so entitled
has been reduced to zero, Classes that have a later sequential designation,
such as the Subordinated Certificates, are more likely to be exposed to the
risk of concentration discussed in the preceding sentence than Classes with
higher sequential priority.
WEIGHTED AVERAGE REMAINING TERM TO MATURITY FOR VARIOUS PROPERTY TYPES
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING TERM TO THE
EARLIER OF MATURITY OR
% OF INITIAL ANTICIPATED REPAYMENT
PROPERTY TYPE POOL BALANCE DATE (IF APPLICABLE)
- ------------------------ -------------- ----------------------
<S> <C> <C>
Retail (Anchored)........ 26.9% 129
Retail (Unanchored) .... 6.2% 154
Office .................. 24.2% 118
Hotel (Full Service) ... 8.9% 156
Hotel (Limited Service) 4.4% 154
Hotel (Extended Stay) ... 2.0% 180
Multifamily ............. 12.8% 140
Nursing Home ............ 3.3% 175
Industrial .............. 5.8% 218
Factory Outlet .......... 1.9% 123
Mobile Home/RV Park .... 3.5% 118
Assisted Living ......... 0.2% 179
TOTAL.................... 100%
</TABLE>
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<PAGE>
Geographic Concentration. The Mortgaged Properties are located in 39
states. The tables below set forth the states in which a significant
percentage of the Mortgaged Properties are located and the concentration of
property types within those states. See the table entitled "Geographic
Distribution of the Mortgaged Properties" for a description of geographic
location of the Mortgaged Properties. Except as set forth below, no state
contains more than 5% (by Cut-off Date Principal Balance or Allocated Loan
Amount) of the Mortgaged Properties.
SIGNIFICANT GEOGRAPHIC CONCENTRATION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
NUMBER OF
% OF INITIAL MORTGAGED
STATE POOL BALANCE PROPERTIES
- --------------- -------------- ------------
<S> <C> <C>
California ..... 21% 32
Massachusetts . 12% 11
New York ....... 8% 11
New Jersey ..... 6% 7
Florida ........ 6% 10
North Carolina 5% 10
</TABLE>
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<PAGE>
GEOGRAPHIC CONCENTRATION OF PROPERTY TYPES (1)
TYPE 1 CA MA NY
MA NY
In general, the Preferred Interest Holder has the right to approve the
annual budget for the Mortgaged Properties, which right is subject to any
right that the Servicer may have to approve such budgets. The Preferred
Interest Holder also has the right to approve certain actions of the related
borrowers, including certain transactions with affiliates, prepayment or
refinancing of the related Mortgage Loan, transfer of the related Mortgaged
Property, entry into or modification of substantial leases or improvement of
the related Mortgaged Properties to a materially higher standard than
0.2 1.0
------ ------ ------
TOTAL % % %
- ------------
(1) Based on Initial Pool Balance.
Repayments by borrowers and the market value of the Mortgaged Properties
could be adversely affected by economic conditions generally or in regions
where the borrowers and the Mortgaged Properties are located, conditions in
the real estate markets where the Mortgaged Properties are located, changes
in governmental rules and fiscal policies, acts of nature (which may result
in uninsured losses), and other factors which are beyond the control of the
borrowers.
The economy of any state or region in which a Mortgaged Property is
located may be adversely affected to a greater degree than that of other
areas of the country by certain developments affecting industries
concentrated in such state or region. Moreover, in recent periods, several
regions of the United States have experienced significant downturns in the
market value of real estate. To the extent that general economic or other
relevant conditions in states or regions in which concentrations of Mortgaged
Properties securing significant portions of the aggregate principal balance
of the Mortgage Loans are located decline and result in a decrease in
commercial property, housing or consumer demand in the region, the income
from and market value of the Mortgaged Properties may be adversely affected.
Exercise of Remedies. The Mortgage Loans generally contain a due-on-sale
clause, which permits the lender to accelerate the maturity of the Mortgage
Loan if the mortgagor sells, transfers or conveys the related Mortgaged
Property or its interest in the Mortgaged Property. All of the Mortgage Loans
also include a debt-acceleration clause, which permits the lender to
accelerate the debt upon specified monetary or non-monetary defaults of the
mortgagor. The courts of all states will enforce clauses providing for
acceleration in the event of a material payment default. The equity courts of
any state, however, may refuse the foreclosure of a mortgage or deed of trust
or permit the acceleration of the indebtedness as a result of a default
deemed to be immaterial or if the exercise of such remedies would be
inequitable or unjust or the circumstances would render the acceleration
unconscionable.
Each of the Mortgage Loans is secured by an assignment of leases and rents
pursuant to which the related mortgagor assigned its right, title and
interest as landlord under the leases on the related Mortgaged Property and
the income derived therefrom to the lender as further security for the
related Mortgage Loan, while retaining a license to collect rents for so long
as there is no default. In the event the mortgagor defaults, the license
terminates and the lender is entitled to collect rents. In some cases, such
assignments may not be perfected as security interests prior to actual
possession of the cash flow. In some cases, state law may require that the
lender take possession of the Mortgaged Property and obtain a judicial
appointment of a receiver before becoming entitled to collect the rents. In
addition, if bankruptcy or similar proceedings are commenced by or in respect
of the mortgagor, the lender's ability to collect the rents may be adversely
affected. See "Certain Legal Aspects of Mortgage Loans -- Leases and Rents."
Environmental Law Considerations. Under various federal, state and local
environmental laws, ordinances and regulations, a current or previous owner
or operator of real property may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under, adjacent to, or in
such property. Such laws often impose liability whether or
31
<PAGE>
not the owner or operator knew of, or was responsible for, the presence of
such hazardous or toxic substances. The cost of any required remediation and
the owner's liability therefor is generally not limited under such
circumstances and could exceed the value of the property and/or the aggregate
assets of the owner. Under the laws of certain states, contamination of a
property may give rise to a lien on the property to assure the costs of
cleanup. In some such states this lien has priority over the lien of an
existing mortgage against such property. In addition, the presence of
hazardous or toxic substances, or the failure to properly remediate such
property, may adversely affect the owner's or operator's ability to refinance
using such property as collateral. Persons who arrange for the disposal or
treatment of hazardous or toxic substances may also be liable for the costs
of removal or remediation of such substances at the disposal or treatment
facility. Certain laws impose liability for release of asbestos containing
materials ("ACMs") into the air or require the removal or containment of ACMs
and third parties may seek recovery from owners or operators of real
properties for personal injury associated with ACMs or other exposure to
chemicals or other hazardous substances. For all of these reasons, the
presence of, or contamination by, hazardous substances at, on, under,
adjacent to, or in a property can materially adversely affect the value of
the property.
Under some environmental laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), as well as certain state laws, a secured lender (such as the
Trust Fund) may be liable, as an "owner" or "operator," for the costs of
responding to a release or threat of a release of hazardous substances on or
from a borrower's property regardless of whether the borrower or a previous
owner caused the environmental damage, if (i) agents or employees of a lender
are deemed to have participated in the management of the borrower or (ii) the
Trust Fund actually takes possession of a borrower's property or control of
its day-to-day operations, as for example, through the appointment of a
receiver or foreclosure. Although recently enacted legislation clarifies the
activities in which a lender may engage without becoming subject to liability
under CERCLA and similar federal laws, such legislation has no applicability
to state environmental law. See "Certain Legal Aspects of the Mortgage Loans
- -- Environmental Legislation."
All of the Mortgaged Properties have been subject to environmental site
assessments or studies within the eighteen months preceding the Cut-off Date.
No assessment or study revealed any environmental condition or circumstance
that the Depositor believes will have a material adverse impact on the value
of the related Mortgaged Property or the borrower's ability to pay its debt.
In the cases where the environmental assessments revealed the existence of
friable and non-friable ACMs and lead based paint, the borrowers agreed to
establish and maintain operations and maintenance or abatement programs
and/or environmental reserves. The environmental studies and assessments
revealed that 45% of the Mortgaged Properties, based on Initial Pool Balance,
contained ACM's. In the case of the Mortgage Loan secured by the Sutton Place
and South Livingston retail properties, the environmental assessments
revealed the presence of hazardous waste at the Sutton Place property caused
by a dry cleaning operation. The environmental consultant estimated it will
take a maximum of $230,000 to commence cleanup plus $60,000 per year for
three years to complete the cleanup. The related borrower has established an
approximately $400,000 reserve to cover such estimated maximum costs. In the
case of the Sunwest Pool Properties, the related borrower has established a
$2,000,000 reserve to cover the remediation of groundwater contamination at
facility number 5859 (which has an Allocated Loan Amount of $162,930.48) and
facility number 7055 (which has an Allocated Loan Amount of $1,198,665).
Based on information from the environmental consultant, among other sources,
it is believed that the groundwater contamination at facility number 5859 was
caused by an upgradient LUST site owned by Chevron. The reserved amounts will
not be released to the borrower until the environmental considerations have
been resolved to the satisfaction of the Servicer. The environmental
consultant's report indicated that maintenance and/or remediation with
respect to these properties would cost a maximum of $1,200,000. In the case
of the Mortgage Loan secured by the How 'Bout Arden property, the
environmental assessment revealed groundwater contamination and determined
that the related Mortgaged Property was not responsible. Groundwater
monitoring has indicated there are declining levels of contaminants in the
groundwater (ranging from slightly above the regulatory limit to none) and an
additional test is currently being conducted. The state environmental agency
has indicated that the declining levels of contaminants and the expected
results from the current test will be sufficient for them to grant closure of
the file relating to this site. In the case of the Kendall Square Loan,
environmental tests in the 1980's disclosed elevated levels of volatile
organic compounds present in groundwater monitoring wells at One Kendall
Square. Although recent tests have disclosed contaminants below reportable
levels, and although the environmental consultant has estimated that
additional testing and remediation would cost $25,000, the Kendall Borrower
has reserved $100,000 for such testing and remediation and the remediation of
certain other environmental issues raised by the environmental assessment. In
the case of the Mortgage Loan secured by the Alzina Office Complex, the
environmental assessments revealed the presence of fuel oil and gasoline
contamination in the parking lot. The related borrower established a $400,000
reserve, which
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<PAGE>
amount, according to the environmental consultant, would be the maximum
amount needed for remediation. In the case of Two Gateway Plaza, nonfriable
ACM is present on one floor which is currently used as a cafeteria. Even
though the environmental consultant concluded that this ACM poses no risk to
health or the environment at this time, a $1,200,000 reserve has been
established to finance ACM removal, which is anticipated to be used for
future renovation of the floor. It recently has been estimated that the costs
of the anticipated ACM removal will be approximately $989,000. Certain of the
Mortgaged Properties have off-site leaking underground storage tank sites
located nearby which the environmental consultant has advised are not likely
to contaminate the related Mortgaged Properties but will require future
monitoring. The environmental assessments revealed other adverse
environmental conditions such as the existence of storage tanks needing
replacement or removal, PCBs in equipment on-site and elevated radon levels,
in connection with which environmental reserves have been established and/or
removal or monitoring programs have been implemented. There can be no
assurance that all environmental conditions and risks have been identified in
such environmental assessments or studies, as applicable, or that any such
environmental conditions will not have a material adverse effect on the value
or cash flow of the related Mortgaged Property.
Federal law requires owners of residential housing constructed prior to
1978 to disclose to potential residents or purchasers any condition on the
property that causes exposure to lead-based paint. In addition, every
contract for the purchase and sale of any interest in residential housing
constructed prior to 1978 must contain a "Lead Warning Statement" that
informs the purchaser of the potential hazards to pregnant women and young
children associated with exposure to lead-based paint. The ingestion of
lead-based paint chips and/or the inhalation of dust particles from
lead-based paint by children can cause permanent injury, even at low levels
of exposure. Property owners can be held liable for injuries to their tenants
resulting from exposure to lead-based paint under various state and local
laws and regulations that impose affirmative obligations on property owners
of residential housing containing lead-based paint. The environmental
assessments revealed the existence of lead-based paint at certain of the
multifamily residential properties. In these cases the borrowers have either
implemented operations and maintenance programs or are in the process of
removing the lead-based paint. The Depositor believes that the presence of
lead-based paint at these Mortgaged Properties will not have a material
adverse effect on the value of the related Mortgaged Property or ability of
the related borrowers to repay their loans.
The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to
acquiring title thereto on behalf of the Trust Fund or assuming its
operation. Such requirement may effectively preclude enforcement of the
security for the related Note until a satisfactory environmental site
assessment is obtained (or until any required remedial action is thereafter
taken), but will decrease the likelihood that the Trust Fund will become
liable under any environmental law. However, there can be no assurance that
the requirements of the Pooling and Servicing Agreement will effectively
insulate the Trust Fund from potential liability under environmental laws.
See "The Pooling and Servicing Agreement -- Realization Upon Mortgage Loans
- -- Standards for Conduct Generally in Effecting Foreclosure or the Sale of
Defaulted Loans" and "Certain Legal Aspects of Mortgage Loans --
Environmental Legislation" herein.
Balloon Payments. Nine of the Mortgage Loans are Balloon Loans which will
have substantial payments of principal ("Balloon Payments") due at their
stated maturities unless previously prepaid. 106 of the Mortgage Loans have
Anticipated Repayment Dates, and have substantial scheduled principal
balances as of such date. Loans that require Balloon Payments involve a
greater risk to the lender than fully amortizing loans because the ability of
a borrower to make a Balloon Payment typically will depend upon its ability
either to refinance the loan or to sell the related Mortgaged Property at a
price sufficient to permit the borrower to make the Balloon Payment.
Similarly, the ability of a borrower to repay a loan on the Anticipated
Repayment Date will depend on its ability to either refinance the Mortgage
Loan or to sell the related Mortgaged Property. The ability of a borrower to
accomplish either of these goals will be affected by all of the factors
described above affecting property value and cash flow, as well as a number
of other factors at the time of attempted sale or refinancing, including the
level of available mortgage rates, prevailing economic conditions and the
availability of credit for multifamily or commercial properties (as the case
may be) generally.
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<PAGE>
AMORTIZATION CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF INITIAL NUMBER OF
TYPE OF LOAN POOL BALANCE MORTGAGE LOANS
- -------------------------------------------------- -------------- --------------
<S> <C> <C>
ARD Loans ......................................... 96.2% 106
Fully Amortizing Loans (other than the ARD Loans) 2.5% 6
Balloon Mortgage Loans ............................ 1.2% 9
</TABLE>
One Action Considerations. Several states (including California) have laws
that prohibit more than one "judicial action" to enforce a mortgage
obligation, and some courts have construed the term "judicial action"
broadly. Accordingly, the Pooling and Servicing Agreement will require the
Servicer to obtain advice of counsel prior to enforcing any of the Trust
Fund's rights under any of the Mortgage Loans that include properties where
the rule could be applicable. In addition, in the case of a Pool Loan secured
by Mortgaged Properties located in multiple states, the Servicer may be
required to foreclose first on properties located in states where such "one
action" rules apply (and where non-judicial foreclosure is permitted) before
foreclosing on properties located in states where judicial foreclosure is the
only permitted method of foreclosure. See "Certain Legal Aspects of Mortgage
Loans --Foreclosure" herein.
Limitations of Appraisals and Market Studies. In general, appraisals
represent the analysis and opinion of the respective appraisers at or before
the time made and are not guarantees of, and may not be indicative of,
present or future value. There can be no assurance that another appraiser
would not have arrived at a different valuation, even if such appraiser used
the same general approach to and same method of appraising the property.
Moreover, appraisals seek to establish the amount a typically motivated buyer
would pay a typically motivated seller. Such amount could be significantly
higher than the amount obtained from the sale of a Mortgaged Property under a
distress or liquidation sale. Information regarding the values of the
Mortgaged Properties as of the Cut-off Date is presented under "Description
of the Mortgage Pool" herein for illustrative purposes only. Additionally, no
appraisals were performed for the Sunwest Pool Properties. A capitalization
rate of 9.5% was applied to the net cash flow as determined by the Mortgage
Loan Seller in determining the approximate value of these properties.
Conflicts of Interest. A substantial number of the Mortgaged Properties
are managed by property managers affiliated with the respective borrowers.
These property managers may also manage and/or franchise additional
properties, including properties that may compete with the Mortgaged
Properties. Moreover, affiliates of the managers, or the managers themselves,
may also own other properties, including competing properties. Accordingly,
the managers of the Mortgaged Properties may experience conflicts of interest
in the management of such properties.
Additionally, as described above under "--The Mortgage Loans --Other
Financing," and "--Equity Investments by the Mortgage Loan Seller and/or its
Affiliates," the Mortgage Loan Seller and/or an affiliate has acquired a
preferred equity interest in certain of the borrowers or their affiliates,
which are the borrowers (or affiliates) with respect to Mortgage Loans
representing approximately 25.6% of the Initial Pool Balance and has an
obligation to fund preferred equity on an additional 2% of the Initial Pool
Balance. In addition, the Mortgage Loan Seller or an affiliate has an equity
interest in the borrower with respect to the South DeKalb Mall and has an
equity interest in the parent of the borrower with respect to the Montague
Park Tech Center and in the indirect parent of the borrower with respect to
Westin -- Indianapolis and the manager of such hotel. See "--Equity
Investments by Affiliates of Mortgage Loan Seller." In addition, the Mortgage
Loan Seller or an affiliate may have other financing arrangements with
affiliates of the borrowers and may enter into additional financing
relationships in the future. Certain officers and directors of the Depositor
and its affiliates own equity interests in affiliates of the borrowers.
Ground Leases. Forty-three of the Mortgaged Properties, representing
security for approximately 13% of the Initial Pool Balance, are leasehold
interests.
Each of the Mortgage Loans secured by mortgages on leasehold estates were
underwritten taking into account payment of the ground lease rent, except in
cases where the Mortgage Loan has a lien on both the ground lessor's and
ground lessee's interest in the Mortgaged Property. On the bankruptcy of a
lessor or a lessee under a ground lease, the debtor entity has the right to
assume (continue) or reject (terminate) the ground lease. Pursuant to Section
365(h) of the Bankruptcy Code, as it is presently in effect, a ground lessee
whose ground lease is rejected by a debtor ground lessor has the right to
remain in possession of its leased premises under the rent reserved in the
lease for the term (including renewals) of the ground lease but is not
entitled to enforce the obligation of the ground lessor to provide any
services required under the ground lease. In the event a ground
lessee/borrower in bankruptcy rejects any or all of its ground leases,
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<PAGE>
the leasehold mortgagee would have the right to succeed to the ground
lessee/borrower's position under the lease only if the ground lessor had
specifically granted the mortgagee such right. In the event of concurrent
bankruptcy proceedings involving the ground lessor and the ground
lessee/borrower, the Trustee may be unable to enforce the bankrupt ground
lessee/borrower's obligation to refuse to treat a ground lease rejected by a
bankrupt ground lessor as terminated. In such circumstances, a ground lease
could be terminated notwithstanding lender protection provisions contained
therein or in the mortgage.
Zoning Compliance; Inspections. Due to changes in applicable building and
zoning ordinances and codes ("Zoning Laws") affecting certain of the
Mortgaged Properties which have come into effect after the construction of
improvements on such Mortgaged Properties and to other reasons, certain
improvements may not comply fully with current Zoning Laws, including
density, use, parking and set back requirements, but qualify as permitted
non-conforming uses. Such changes may limit the ability of the borrower to
rebuild the premises "as is" in the event of a substantial casualty loss with
respect thereto and may adversely affect the ability of the borrower to meet
its Mortgage Loan obligations from cash flow. While it is expected that
insurance proceeds would be available for application to the related Mortgage
Loan if a substantial casualty were to occur, no assurance can be given that
such proceeds would be sufficient to pay off such Mortgage Loan in full or
that, if the Mortgaged Property were to be repaired or restored in conformity
with current law, what its value would be relative to the remaining balance
on the related Mortgage Loan, whether the property would have a value equal
to that before the casualty, or what its revenue-producing potential would
be.
Inspections of the Mortgaged Properties were conducted in connection with
the origination of the Mortgage Loans by licensed engineers to assess the
structure, exterior walls, roofing interior construction, mechanical and
electrical systems and general condition of the site, buildings and other
improvements located on the Mortgaged Properties. There can be no assurance
that all conditions requiring repair or replacement have been identified in
such inspections.
Costs of Compliance with Americans with Disabilities Act. Under the
Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. To the extent the Mortgaged Properties do
not comply with the ADA, the borrowers may incur costs of complying with the
ADA. In addition, noncompliance could result in the imposition of fines by
the federal government or an award of damages to private litigants.
Litigation. There may be legal proceedings pending and, from time to time,
threatened against the borrowers and their affiliates relating to the
business of or arising out of the ordinary course of business of the
borrowers and their affiliates. There can be no assurance that such
litigation will not have a material adverse effect on the distributions to
Certificateholders.
Obligor Default. In order to maximize recoveries on defaulted Mortgage
Loans, the Special Servicer may, under certain limited circumstances, extend
and/or modify Mortgage Loans that are in default or as to which a payment
default is reasonably foreseeable, including in particular with respect to
Balloon Payments. While the Special Servicer will have a duty to determine
that any such extension or modification is likely to produce a greater
recovery on a present value basis than liquidation, there can be no assurance
that such flexibility with respect to extensions or modifications will
increase the present value of receipts from or proceeds of Mortgage Loans
that are in default or as to which a default is reasonably foreseeable.
THE CERTIFICATES
Limited Assets. If the Trust Fund is insufficient to make payments on the
Subordinated Certificates, no other assets will be available for payment of
the deficiency.
Subordination in Right of Payment. As and to the extent described below
under "Description of the Subordinated Certificates -- Subordination," the
Subordinated Certificates are subordinate in right of payment to the Senior
Certificates. The rights of the holders of the Class B-1 Certificates to
receive distributions of interest and principal will be subordinate to those
of the Senior Certificates; the rights of the holders of the Class B-2
Certificates to receive distributions of interest and principal will be
subordinate to those of the Senior Certificates and Class B-1 Certificates;
the rights of the holders of the Class B-3 Certificates to receive
distributions of interest and principal will be subordinate to those of the
Senior Certificates, Class B-1 and Class B-2 Certificates; the rights of the
holders of the Class B-4 Certificates to receive distributions of interest
and principal will be subordinate to those of the Senior Certificates, Class
B-1, Class B-2 and Class B-3 Certificates; the rights of the holders of the
Class B-5 Certificates to receive distributions of interest and principal
will be subordinate to those of the Senior Certificates, Class B-1, Class
B-2, Class B-3 and Class B-4 Certificates; and the rights
35
<PAGE>
of the holders of the Class B-6 Certificates to receive distributions of
interest and principal will be subordinate to those of the Senior
Certificates, Class B-1, Class B-2, Class B-3, Class B-4, and Class B-5
Certificates, in each case to the extent described herein under "Description
of the Subordinated Certificates --Subordination" and "--Distributions."
Allocation of Realized Losses on the Mortgage Loans. All Realized Losses
and other shortfalls in collections on the Mortgage Loans and all
extraordinary expenses that may be incurred by the Trust Fund will be
allocated in the following order of priority, first, pro rata to the Class
B-7 and Class B-7H Certificates until the Certificate Balances of such
Classes have been reduced to zero, second, to the Class B-6 Certificates
until the Certificate Balance of such Class has been reduced to zero, third,
to the Class B-5 Certificates until the Certificate Balance of such Class has
been reduced to zero, fourth, to the Class B-4 Certificates until the
Certificate Balance of such Class has been reduced to zero, fifth, to the
Class B-3 Certificates until the Certificate Balance of such Class has been
reduced to zero, sixth, to the Class B-2 Certificates until the Certificate
Balance of such Class has been reduced to zero, seventh, to the Class B-1
Certificates until the Certificate Balance of such Class has been reduced to
zero and eighth, to the Senior Certificates as described under "Description
of the Subordinated Certificates -- Distributions." INVESTORS IN THE
SUBORDINATED CERTIFICATES SHOULD CONSIDER THE RISK THAT LOSSES ON THE
MORTGAGE LOANS COULD RESULT IN THE FAILURE OF SUCH INVESTORS TO FULLY RECOVER
THEIR INITIAL INVESTMENTS. NO REPRESENTATION IS MADE AS TO THE FREQUENCY OF
DELINQUENCIES, DEFAULTS AND/OR LIQUIDATIONS THAT MAY OCCUR WITH RESPECT TO
THE MORTGAGE LOANS, OR THE MAGNITUDE OF ANY LOSSES THAT MAY OCCUR WITH
RESPECT TO THE MORTGAGE LOANS OR THE LIKELIHOOD OR MAGNITUDE OF ANY
EXTRAORDINARY EXPENSES THAT MAY BE INCURRED WITH RESPECT TO THE TRUST FUND.
Effect of Mortgagor Defaults. The aggregate amount of distributions on the
Subordinated Certificates, the yield to maturity of the Subordinated
Certificates, the rate of principal payments on the Subordinated Certificates
and the weighted average life of the Subordinated Certificates will be
affected by the rate and the timing of delinquencies and defaults on the
Mortgage Loans. Delinquencies on the Mortgage Loans, unless advanced, may
result in shortfalls in distributions of interest and/or principal to the
Subordinated Certificates for the current month. See "--Limitations on
Advancing" below. Any late payments received on or in respect of the Mortgage
Loans will be distributed to the Certificates in the priorities described
more fully herein, but no interest will accrue on such shortfall during the
period of time such payment is delinquent. Thus, because the Subordinated
Certificates will not accrue interest on shortfalls, delinquencies may result
in losses and shortfalls being allocated to the Subordinated Certificates,
which will reduce the amounts distributable to the Subordinated Certificates
and thereby adversely affect the yield to maturity of such Certificates.
If a purchaser of a Subordinated Certificate of any Class calculates its
anticipated yield based on an assumed rate of default and amount of losses on
the Mortgage Loans that is lower than the default rate and amount of losses
actually experienced and such additional losses are allocable to such Class
of Certificates, such purchaser's actual yield to maturity will be lower than
that so calculated and could, under certain scenarios, be negative. The
timing of any loss on a liquidated Mortgage Loan will also affect the actual
yield to maturity of the Subordinated Certificates to which all or a portion
of such loss is allocable, even if the rate of defaults and severity of
losses are consistent with an investor's expectations. In general, the
earlier a loss borne by an investor occurs, the greater is the effect on such
investor's yield to maturity. See "Yield and Prepayment Considerations --
Mortgagor Defaults."
As and to the extent described herein, the Servicer, the Special Servicer,
the Trustee or the Fiscal Agent, as applicable, will be entitled to receive
interest on unreimbursed Advances and unreimbursed servicing expenses that
(a) are recovered out of amounts received on the Mortgage Loan as to which
such Advances were made or such servicing expenses were incurred, which
amounts are in the form of reimbursement from the related borrower, late
payments, liquidation proceeds, insurance proceeds, condemnation proceeds or
amounts paid in connection with the purchase of such Mortgage Loan out of the
Trust Fund or (b) are determined to be nonrecoverable Advances. Such interest
will accrue from (and including) the date on which the related Advance is
made or the related expense incurred to (but excluding) the date on which (x)
in the case of clause (a) above, such amounts are recovered and (y) in the
case of clause (b) above, a determination of non-recoverability is made to
the extent that there are funds available in the Collection Account for
reimbursement of such Advance. The Servicer's, the Special Servicer's, the
Trustee's or the Fiscal Agent's right, as applicable, to receive such
payments of interest is prior to the rights of Certificateholders to receive
distributions on the Subordinated Certificates and, consequently, may result
in losses being allocated to the Subordinated Certificates that would not
otherwise have resulted absent the accrual of such interest. Such losses will
be allocated with the same priorities as Realized Losses. See "--Realized
Losses" herein. In addition, certain circumstances, including delinquencies
in the payment of principal and interest, may result in a Mortgage Loan being
specially serviced. The Special Servicer is entitled to additional
compensation for special servicing activities which may result in losses
being allocated to the Subordinated Certificates that would not otherwise
have resulted absent such compensation. See "The Pooling and Servicing
Agreement -- Special Servicing" herein.
36
<PAGE>
Even if losses on the Mortgage Loans are not borne by an investor in a
particular Class of Subordinated Certificates, such losses may affect the
weighted average life and yield to maturity of such investor's Certificates.
Losses on the Mortgage Loans, to the extent not allocated to such Class of
Subordinated Certificates, may result in a higher percentage ownership
interest evidenced by such Certificates than would otherwise have resulted
absent such loss. The consequent effect on the weighted average life and
yield to maturity of the Subordinated Certificates will depend upon the
characteristics of the remaining Mortgage Loans.
Regardless of whether losses ultimately result, delinquencies and defaults
on the Mortgage Loans may significantly delay the receipt of payments by the
holder of a Subordinated Certificate, to the extent that Advances or the
subordination of another Class of Certificates does not fully offset the
effects of any such delinquency or default. The Available Funds generally
consist of, as more fully described herein, principal and interest on the
Mortgage Loans actually collected or advanced.
As described under "Description of the Subordinated Certificates --
Distributions" herein, if the portion of Available Funds distributable in
respect of interest on the Subordinated Certificates on any Distribution Date
is less than the Interest Distribution Amount then payable for such class,
the shortfall will be distributable without interest on such shortfall to
holders of such Class of Certificates on subsequent Distribution Dates, to
the extent of Available Funds.
Limitations on Advancing. Upon the occurrence of each Appraisal Reduction
Event, the Special Servicer will calculate and report to the Servicer, the
paying agent appointed by the Trustee pursuant to the Pooling and Servicing
Agreement (the "Paying Agent") and the Trustee the Appraisal Reduction Amount
calculated in connection with such Appraisal Reduction Event as described
herein under "Description of the Subordinated Certificates -- Appraisal
Reductions." The amount required to be advanced in respect of delinquent
Monthly Payments, Assumed Scheduled Payments or Minimum Defaulted Monthly
Payments on a Mortgage Loan that has been subject to an Appraisal Reduction
Event will equal the product of (a) the amount that would be required to be
advanced by the Servicer without giving effect to such Appraisal Reduction
Event and (b) a fraction, the numerator of which is the Stated Principal
Balance of the Mortgage Loan less any Appraisal Reduction Amounts thereof and
the denominator of which is the Stated Principal Balance. The Servicer,
Trustee or Fiscal Agent will make only one P&I Advance in respect of each
Mortgage Loan for the benefit of the most subordinate Class of Certificates
then outstanding, unless the related delinquent Monthly Payment is cured
prior to the next Due Date on such Mortgage Loan. See "The Pooling and
Servicing Agreement -- Advances." The amount to be advanced by the Servicer,
Trustee or Fiscal Agent in respect of any Mortgage Loan on any Distribution
Date will be reduced by the greater of the reduction in respect of any
Appraisal Reduction Amount and the reduction described in the preceding
sentence.
The amount of any reduction in a P&I Advance pursuant to the preceding
paragraph will reduce the amount distributable to the Class B-6 Certificates
unless the subordination of the Class B-7 and Class B-7H Certificates, and in
the case of any other of the Subordinated Certificates, the subordination of
those Classes with a lower priority (i.e., higher numeric suffix), does not
fully offset the effects of any unadvanced delinquency or default. The amount
of any reduction in the P&I Advance pursuant to the preceding paragraph will
reduce the amount distributable to any Class of Subordinated Certificates to
the extent that the Certificate Balance of each Class of Certificates that is
subordinate to such Class has been previously reduced by Realized Losses.
The Servicer's, the Trustee's or the Fiscal Agent's obligation, as
applicable, to make Advances in respect of a Mortgage Loan that is delinquent
as to its Balloon Payment is limited to the extent described under "The
Pooling and Servicing Agreement -- Advances" herein.
Limited Liquidity and Market Value. There is currently no secondary market
for the Subordinated Units or Subordinated Certificates. While the
Underwriters have advised that they currently intend to make a secondary
market in the Subordinated Units and, if separately traded, the Subordinated
Certificates, they are under no obligation to do so. Accordingly, there can
be no assurance that a secondary market for the Subordinated Units or, if
separately traded, the Subordinated Certificates, will develop. Moreover, if
a secondary market does develop, there can be no assurance that it will
provide holders of Subordinated Units or Subordinated Certificates with
liquidity of investment or that it will continue for the life of the
Subordinated Units or Subordinated Certificates. Neither the Subordinated
Units nor the Subordinated Certificates will be listed on any securities
exchange.
In addition, the Subordinated Units may not be purchased by a Plan or a
person acting on behalf of a Plan or investing the assets of a Plan unless
certain criteria set forth under "Description of the Subordinated
Certificates -- Transfer Restrictions" have been met.
37
<PAGE>
Lack of liquidity could result in a precipitous drop in the market value
of the Subordinated Units or Subordinated Certificates. In addition, market
value of the Subordinated Units or Subordinated Certificates at any time may
be affected by many factors, including then prevailing interest rates, and no
representation is made by any person or entity as to the market value of the
Subordinated Units or Subordinated Certificates at any time.
No Class of Subordinated Certificates will be separately tradable until
the Separation Date for such Class. Following the Separation Date, such
investment grade Class shall be separately traded.
Limited Nature of Ratings. Any rating assigned by a Rating Agency to a
Class of Certificates will reflect such Rating Agency's assessment solely of
the likelihood that holders of Certificates of such Class will receive
payments to which such Certificateholders are entitled under the Pooling and
Servicing Agreement. Such rating will not constitute an assessment of the
likelihood that principal prepayments on the related Mortgage Loans 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
Certificates. Such rating will not address the possibility that prepayment at
lower rates than anticipated by an investor may cause such investor to
experience a lower than anticipated yield.
The amount, type and nature of subordination levels established with
respect to the Certificates will be determined on the basis of criteria
established by each Rating Agency rating such Certificates. Such criteria are
sometimes based upon an actuarial analysis of the behavior of mortgage loans
in a larger group. Such analysis is often the basis upon which each Rating
Agency determines the amount of subordination levels required with respect to
each such Class. There can be no assurance that the historical data
supporting any such actuarial analysis will accurately reflect future
experience nor any assurance that the data derived from a large pool of
mortgage loans accurately predicts the delinquency, foreclosure or loss
experience of the Mortgage Loans. No assurance can be given that values of
any Mortgaged Properties have remained or will remain at their levels on the
respective dates of origination of the related Mortgage Loans. Moreover,
there is no assurance that appreciation of real estate values generally will
limit loss experiences on the Mortgaged Properties. If the commercial or
multifamily residential real estate markets should experience an overall
decline in property values such that the outstanding principal balances of
the Mortgage Loans in the Trust Fund and any secondary financing on the
related Mortgaged Properties become equal to or greater than the value of the
Mortgaged Properties, the rates of delinquencies, foreclosures and losses
could be higher than those now generally experienced by institutional
lenders. In addition, adverse economic conditions (which may or may not
affect real property values) may affect the timely payment by mortgagors of
scheduled payments of principal and interest on the Mortgage Loans and,
accordingly, the rates of delinquencies, foreclosures and losses with respect
to the Trust Fund. See "Rating" herein.
Special Prepayment and Yield Considerations. The yield to maturity on the
Subordinated Certificates will depend on, among other things, the rate and
timing of principal payments (including both voluntary prepayments, in the
case of the Mortgage Loans that permit voluntary prepayment, and involuntary
prepayments, such as prepayments resulting from casualty or condemnation,
defaults and liquidations) on the Mortgage Loans and the allocation thereof
to reduce the Certificate Balances of the Subordinated Certificates entitled
to distributions of principal. See "Prepayment and Yield Considerations"
herein. In addition, in the event of any repurchase of a Mortgage Loan from
the Trust Fund by the Mortgage Loan Seller or the Depositor under the
circumstances described under "The Pooling and Servicing Agreement --
Representations and Warranties -- Repurchase" herein or the purchase of the
Mortgage Loans by the holders of the Class LR Certificates or the most
subordinate Class of Certificates outstanding under the circumstances
described under "The Pooling and Servicing Agreement -- Optional Termination"
herein, the repurchase or purchase price paid would be passed through to the
holders of the Certificates with the same effect as if such Mortgage Loan had
been prepaid in full (except that no Prepayment Premium would be payable with
respect to any such repurchase). No representation is made as to the
anticipated rate of prepayments (voluntary or involuntary) on the Mortgage
Loans or as to the anticipated yield to maturity of any Certificate. See
"Prepayment and Yield Considerations" herein.
BECAUSE SUBSTANTIALLY ALL PRINCIPAL RECEIVED ON THE MORTGAGE LOANS IS
FIRST ALLOCATED TO THE SENIOR CERTIFICATES UNTIL THEIR RESPECTIVE CERTIFICATE
BALANCES ARE REDUCED TO ZERO BEFORE PRINCIPAL IS ALLOCATED TO THE
SUBORDINATED CERTIFICATES, THE SUBORDINATED CERTIFICATES MAY NOT RECEIVE ANY
PRINCIPAL FOR A SUBSTANTIAL PERIOD OF TIME.
In general, if a Subordinated Certificate is purchased at a discount and
principal distributions thereon occur at a rate slower than that assumed at
the time of purchase, the investor's actual yield to maturity may be lower
than assumed at the time of purchase.
38
<PAGE>
The investment performance of the Subordinated Certificates may vary
materially and adversely from the investment expectations of investors due to
prepayments on the Mortgage Loans that are lower than anticipated by
investors. The actual yield to the holder of a Subordinated Certificate may
not be equal to the yield anticipated at the time of purchase of the
Subordinated Certificate or, notwithstanding that the actual yield is equal
to the yield anticipated at that time, the total return on investment
expected by the investor or the expected weighted average life of the
Subordinated Certificate may not be realized. IN DECIDING WHETHER TO PURCHASE
ANY SUBORDINATED CERTIFICATES, AN INVESTOR SHOULD MAKE AN INDEPENDENT
DECISION AS TO THE APPROPRIATE PREPAYMENT ASSUMPTIONS TO BE USED. See
"Prepayment and Yield Considerations" herein.
All of the Mortgage Loans provide for a Lock-out Period during which
voluntary prepayment is prohibited. The table below sets forth certain
information regarding the Lock-out Periods. For further statistical
information on a loan-by-loan basis, see Annex A hereto.
OVERVIEW OF LOCK-OUT PERIODS
<TABLE>
<CAPTION>
<S> <C>
Minimum Lock-out Period at Origination ........ 77 months
Minimum Remaining Lock-out Period .............. 75 months
Maximum Remaining Lock-out Period .............. 240 months
Weighted Remaining Average Lock-out Period .... 137 months
</TABLE>
The following table sets forth the number of, and percentages of the
Initial Pool Balance represented by, Mortgage Loans with respect to which the
related Lock-out Period expires (i) on or one to six months prior to their
respective Anticipated Repayment Dates or (ii) no earlier than the last six
months of their loan term. See "Description of the Mortgage Pool -- Certain
Terms and Conditions of the Mortgage Loans -- Prepayment Provisions" and
"--Defeasance Provisions" herein.
LOCK-OUT PERIOD CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF
INITIAL NUMBER OF
POOL MORTGAGE
TYPE OF LOAN BALANCE LOANS
- ---------------------------------------------------------------- --------- -----------
<S> <C> <C>
Lock-out Period Ending on/or close to Anticipated Repayment Date 96.2% 106
Lock-out Period Ending on/or close to Maturity Date.............. 3.8 15
TOTAL: 100% 121
</TABLE>
The rate at which voluntary prepayments occur on the Mortgage Pool will be
affected by a variety of factors, including, without limitation, the terms of
the Mortgage Loans, the level of prevailing interest rates as compared to the
applicable Mortgage Rate, the availability of mortgage credit and economic,
demographic, tax, legal and other factors. In general, however, if prevailing
interest rates remain at or above the rates borne by such Mortgage Loans,
such Mortgage Loans may be the subject of lower principal prepayments than if
prevailing rates fall significantly below the mortgage rates on the Mortgage
Loans. The rate of principal payments on the Subordinated Certificates may be
affected by the rate of principal payments on the Mortgage Loans and is
likely to be affected by the Lock-out Periods and Prepayment Premium
provisions applicable to the Mortgage Loans and by the extent to which a
Servicer is able to enforce such provisions. Mortgage Loans with a Lock-out
Period or 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.
All of the Mortgage Loans provide that after the applicable Defeasance
Lock-out Period, the borrower may obtain the release of the related Mortgaged
Property from the lien of the related Mortgage upon the delivery and pledge
to the Trustee of noncallable U.S. Treasury or other noncallable U.S.
government obligations which provide payments on or prior to all successive
payment dates through maturity (or, in the case of the ARD Loans, through the
Anticipated Repayment Date) in the amounts due on such dates (or, in the case
of ARD Loans, the amounts outstanding on the related Anticipated Repayment
Date), and upon the satisfaction of certain other conditions. See
"Description of the Mortgage Pool -- Property Releases."
See "Prepayment and Yield Considerations" and "Certain Federal Income Tax
Consequences" herein.
39
<PAGE>
Certain Federal Tax Considerations Regarding Original Issue Discount. The
Subordinated Units will be issued with "original issue discount" for federal
income tax purposes, which generally will result in recognition of some
taxable income in advance of the receipt of cash attributable to such income.
See "Federal Income Tax Consequences -- Taxation of Subordinated Certificates
and Subordinated Units."
ERISA Considerations. Generally, ERISA applies to investments made by
employee benefit plans and transactions involving the assets of such plans.
The Subordinated Certificates may not be purchased by a Plan or a person
acting on behalf of a Plan or using assets of a Plan unless certain criteria
described under "Description of the Subordinated Certificates -- Transfer
Restrictions" have been met. Due to the complexity of regulations which
govern such plans, prospective investors that are subject to ERISA are urged
to consult their own counsel regarding consequences under ERISA of
acquisition, ownership and disposition of the Subordinated Certificates. See
"ERISA Considerations."
Servicer or Special Servicer May Purchase Certificates; Conflict of
Interest. The Servicer, the Special Servicer or an affiliate thereof will be
permitted to purchase any Class of Certificates. It is anticipated that the
Special Servicer or an affiliate of the Special Servicer will purchase all or
a majority of the Class B-7 Certificates. However, there can be no assurance
that the Special Servicer or an affiliate of the Special Servicer will
purchase such Certificates. Following any such purchase of Certificates, the
Servicer or Special Servicer will have rights as a holder of Certificates,
including certain Voting Rights, which are in addition to such entity's
rights as Servicer or Special Servicer under the Pooling and Servicing
Agreement. Consequently, any purchase of Certificates by the Servicer or
Special Servicer, as the case may be, could cause a conflict between such
entity's duties pursuant to the Pooling and Servicing Agreement and its
interest as a holder of a Certificate, especially to the extent that certain
actions or events have a disproportionate effect on one or more Classes of
Certificates. Following a default on a Mortgage Loan at the maturity thereof
and upon the satisfaction of certain conditions contained in the Pooling and
Servicing Agreement, the Special Servicer may, if directed to do so by the
holders (including Special Servicer or an affiliate thereof) of greater than
50% of the Percentage Interests of the most subordinate Class or Classes of
Certificates then outstanding (which Class will initially be the Junior
Subordinated Certificates) having an aggregate initial Certificate Balance
representing a minimum of 1.0% of the aggregate initial Certificate Balances
of all Classes of Certificates (or if the Certificate Balance of such Class
or Classes has been reduced to less than 40% of the initial Certificate
Balances thereof, the holders of such Class or Classes together with the
holders of the next most subordinate Class), elect to extend such Mortgage
Loan. See "The Pooling and Servicing Agreement -- Realization Upon Mortgage
Loans -- Foreclosure Proceedings; Action of Directing Holders." In addition
to the foregoing, the holders of greater than 50% of the Percentage Interests
of the most subordinate Class of Certificates then outstanding (initially the
Junior Subordinated Certificates) will be entitled, at their option, to
remove the Special Servicer with or without cause, and appoint a successor
Special Servicer, provided that each Rating Agency confirms in writing that
such removal and appointment, in and of itself, would not cause a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class
of Certificates. The Pooling and Servicing Agreement provides that the
Mortgage Loans shall be administered in accordance with the servicing
standard set forth therein without regard to ownership of any Certificate by
the Servicer, Special Servicer, or any affiliate thereof. See also "The
Pooling and Servicing Agreement -- Amendment."
Consents. Under certain circumstances, the consent or approval of the
holders of a specified percentage of the aggregate Certificate Balance of the
outstanding Certificates will be required to direct and will be sufficient to
bind all Certificateholders to certain actions, including amending the
Pooling and Servicing Agreement in certain circumstances. See "The Pooling
and Servicing Agreement -- Amendment."
40
<PAGE>
INDUSTRY OVERVIEW
The commercial real estate market is estimated to be valued at
approximately $3 trillion. While much of this real estate is owned free of
any mortgage or other debt, a sizable portion is financed through commercial
mortgages. Commercial mortgages are predominantly secured by income producing
properties, including multifamily, office buildings, retail properties,
industrial properties, warehouse properties, mixed use properties, mobile
home parks, hotels, self-storage facilities, nursing homes, assisted living
facilities and senior housing centers. The commercial real estate mortgage
market is estimated to be valued at approximately $1 trillion. The
traditional holders of the majority of commercial mortgage loans have been
banks, life insurance companies and savings and loan institutions. In 1996,
commercial banks held approximately 41% of outstanding commercial mortgages,
followed by life insurance companies with 21% and both savings and loans and
private mortgage backed securities conduits with 7%. Other major holders
include pension funds and federal agencies. Recently, however, life insurance
companies and pension funds have in increasing percentages been investing in
beneficial interests in securitized pools of commercial mortgage loans.
CMBS issuances have grown significantly since 1990, with over $114 billion
in aggregate issuances from the beginning of 1990 through the end of 1996. In
1996 alone, approximately $30 billion of CMBS were issued. A portion of these
CMBS issuances consist of what is commonly referred to as "conduit"
securitizations. Under conduit programs, affiliates of investment banks
(among others) agree to purchase newly originated commercial mortgage loans
from their "conduit partners," or originators, on specified terms. Some
affiliates of investment banks, such as the Mortgage Loan Seller, also
originate loans directly in addition to acquiring loans from third parties.
According to the February 10, 1997 issue of Commercial Mortgage Alert (the
"CMA Report"), the term "conduit" now refers to any program that originates
and pools mortgage loans for securitization, whether operated by affiliates
of investment banks or through alliances between mortgage banks and their
funding sources. These conduit CMBS securitizations generally include a large
number of borrowers with mortgage loans of relatively small size. According
to the CMA Report, $18.147 billion of conduit CMBS were issued through 1996,
of which $10.212 billion was issued in 1996 alone, up 127% from 1995.
Fundamentally, the evaluation of a particular CMBS involves two separate
but interdependent types of analysis. First, the value of CMBS is ultimately
dependent on the value of the underlying pool of mortgage loans. Also
important are the terms of the CMBS, particularly with respect to
subordination, which ultimately determine a holder's rights to payments.
The key to valuing any commercial mortgage loan is to evaluate both the
collateral value of the mortgaged property (usually measured by loan-to-value
ratio) as well as the ability of the property to generate sufficient cash
flow to make timely mortgage payments to the lender (usually measured by a
debt service coverage ratio). Because of the unavoidable level of
subjectivity inherent in valuing real property (even a valuation method based
on capitalization of cash flows requires selection of a capitalization rate),
debt service coverage ratio may be a more reliable indicator of the credit
quality and default risk of a commercial mortgage. For commercial mortgages,
as the debt service coverage ratio starts to rise substantially over 1.0,
defaults should be less likely absent unanticipated risks or economic
downturns. However, the "net cash flow" or "net operating income" used in
calculating the debt service coverage ratio is also subjective in that it
reflects the adjustments made by the party calculating such ratio and will
not necessarily reflect the amounts calculated and adjusted by the applicable
rating agencies and is often not determined in accordance with generally
accepted accounting principles.
Because CMBS issuances are often effected in multiple tranches with
various levels of subordination, it is important to evaluate the terms
affecting the payment rights of any particular security. Once a pool of
mortgage loans has been evaluated and conclusions reached about the probable
defaults and losses to be experienced by the pool as a whole, a critical
factor in evaluating any particular class of CMBS secured by such pool is
where such class stands in terms of priority of payment and whether the
aggregate size of the classes subordinate to such class is sufficiently large
to absorb any losses in the pool without principal loss to such class. Losses
in the pool occur (and are allocated to the CMBS classes in inverse order of
priority) when, following a borrower default on a mortgage loan, less than
the full amount of unpaid principal and accrued interest is recovered through
the workout of the loan or liquidation of the mortgaged property. Losses can
also occur through the incurrence of greater than anticipated servicing costs
and expenses (e.g. bankruptcy and foreclosure costs and costs of operating
REO Property) that cannot be recovered from property proceeds.
Based on the comfort level derived from the support provided by the
subordinate classes, one can then assess the risk of principal loss to the
class being considered and compare that risk to the price/interest rate being
offered for that security. A similar determination forms a portion of the
analysis performed by rating agencies assigning ratings to various tranches
of CMBS, focusing on, among other things, given benchmarks of loan to value
ratio and debt service coverage ratio for each ratings classification.
41
<PAGE>
The American Council of Life Insurance Companies issues quarterly reports
on commercial mortgage loans owned by its members ("ACLI Reports"), which
show delinquencies and foreclosure by property type and region. For the
quarters ending June 30, 1988 to December 31, 1996, the ACLI Reports
indicated delinquencies ranging from a low of 1.79% (December 31, 1996) to a
high of 7.53% (June 30, 1992). Delinquencies by property type as of December
31, 1996 were as follows: hotels--1.23%; multifamily--0.48%;
industrial--1.08%; retail--1.62%; and office--2.78%. The loans comprising the
data in the ACLI Reports are loans originated or acquired by life insurance
companies. The results of the analysis are reflective of the portfolio of
mortgage loans included in the ACLI Reports and the demographic and regional
trends of the time period covered by the ACLI Reports and cannot be viewed as
being indicative of the performance of the Mortgage Pool.
Commercial and multifamily mortgage loans have experienced varying degrees
of delinquencies and defaults over time and by property type. While several
studies have estimated historical default rate experience for commercial
mortgage pools with various characteristics, to date no one study has been
chosen to represent a benchmark default rate. Recent studies have indicated,
however, that (i) the debt service coverage ratio of a commercial mortgage
loan is one of the factors most significantly correlated with default rates
and (ii) fully amortizing loans are generally less likely to default than
balloon loans.
THE DEPOSITOR
Asset Securitization Corporation, the Depositor, is a Delaware corporation
organized on June 23, 1992 for the purpose of acquiring Mortgage Loans and
selling interests therein or bonds secured thereby. It is a wholly owned
subsidiary of Nomura Asset Capital Corporation, which is in turn a wholly
owned subsidiary of Nomura Holding America Inc., a United States-based
holding company, incorporated in Delaware, which is wholly owned by The
Nomura Securities Co., Ltd., a Japanese corporation. The Nomura Securities
Co., Ltd. is engaged in the domestic and international securities business.
The Depositor maintains its principal office at Two World Financial Center --
Building B, 21st Floor, New York, New York 10281-1198. Its telephone number
is (212) 667-9300.
The Depositor does not have, nor is it expected in the future to have, any
significant assets.
THE MORTGAGE LOAN SELLER
The Mortgage Loan Seller is Nomura Asset Capital Corporation, a Delaware
corporation, the parent of the Depositor and an affiliate of NSI.
Nomura Asset Capital Corporation, the Mortgage Loan Seller, was
incorporated in 1992 and is engaged primarily in the business of originating
commercial mortgage loans. The Mortgage Loan Seller has been involved in the
origination of approximately $15.7 billion in commercial mortgage loans and
other commercial real estate investments in the past three years. According
to the CMA Report referred to above, (see "Industry Overview"), the Mortgage
Loan Seller ranked second for conduit CMBS issuance through 1996 (with $2.247
billion issued) and first for issuance in 1996 alone (with $1.662 billion
issued).
The Mortgage Loan Seller's principal offices are located at 2 World
Financial Center, Building B, 21st Floor, New York, New York 10281-1198, and
it maintains regional offices in Chicago and Los Angeles, employing a total
of professionals involved in the origination, underwriting, closing and
securitization of commercial mortgage loans.
Affiliates of the Mortgage Loan Seller have been involved in a total of
twenty offerings of CMBS from 1993 through December 1996 totaling
approximately $7.3 billion in initial principal amount. These offerings
included nine offerings totaling approximately $6.2 billion issued since
March 1994 and which are backed by mortgage loans predominantly originated
directly by the Mortgage Loan Seller.
42
<PAGE>
All mortgage loans originated by the Mortgage Loan Seller and unaffiliated
originators included in all previous CMBS offerings of Asset Securitization
Corporation and Nomura Asset Securities Corporation, a wholly owned
subsidiary of the Mortgage Loan Seller have an aggregate initial principal
balance of $6.2 billion as of March 31, 1997. At March 31, 1997, the
delinquency rates for these loans are as follows:
<TABLE>
<CAPTION>
<S> <C>
30-59 days delinquent: 0.00%;
60-89 days delinquent: 0.11%;
90+ days delinquent: 0.34%;
In foreclosure: 0.29%;
</TABLE>
The delinquency rates, calculated as described above, for all mortgage
loans included in all previous CMBS offerings of Asset Securitization
Corporation and Nomura Asset Securities Corporation (including mortgage loans
originated by the Mortgage Loan Seller and unaffiliated originators), and the
corresponding aggregate initial principal balances as of the dates indicated,
were as follows:
<TABLE>
<CAPTION>
3/31/96 3/31/95 3/31/94
---------------- ---------------- ----------------
<S> <C> <C> <C>
Aggregate Initial Principal Balance $3.9 billion $1.4 billion $0.2 billion
30-59 days delinquent: 0.55%; 0.00% 0.00%
60-89 days delinquent: 0.00%; 0.00% 0.00%
90+ days delinquent: 0.00%; 0.00%; 0.00%;
In foreclosure: 0.00%; 0.00% 0.00%
</TABLE>
These mortgage loans are not necessarily representative of the Mortgage
Loans included in the Mortgage Pool. There are many factors which could
affect delinquency and default rates for any particular pool of mortgage
loans. See "Risk Factors" and "Industry Overview." The delinquency/default
statistics presented herein do not purport to be a prediction of the future
performance of the Mortgage Loans.
The delinquency information set forth above has been taken from the
servicer remittance reports prepared in connection with previous CMBS
offerings of Asset Securitization Corporation and Nomura Asset Securities
Corporation and none of the Depositor, Mortgage Loan Seller, Servicer,
Special Servicer, Trustee, Fiscal Agent or the Underwriters makes any
representation or warranty as to the accuracy thereof.
The Mortgage Loan Seller is a wholly-owned subsidiary of Nomura Holding
America Inc., a Delaware corporation wholly-owned by The Nomura Securities
Co., Ltd., a Japanese corporation.
THE TRUSTEE
LaSalle National Bank, a nationally chartered bank with its principal
offices in Chicago, Illinois, will act as Trustee pursuant to the Pooling and
Servicing Agreement. The Trustee's corporate trust office is located at 135
South LaSalle Street, Suite 1740, Chicago, Illinois 60603, Attention: Asset
Backed Securities Trust Services, Nomura-D4.
THE FISCAL AGENT
ABN AMRO Bank N.V., a banking corporation organized under the laws of The
Netherlands, will act as Fiscal Agent pursuant to the Pooling and Servicing
Agreement. The Fiscal Agent's office is located at 135 South LaSalle Street,
Chicago, Illinois 60603. The Fiscal Agent will be deemed to have been removed
in the event of the resignation or removal of the Trustee.
THE SERVICER AND INITIAL SPECIAL SERVICER
AMRESCO Management, Inc. ("AMI") will be the Servicer and initial Special
Servicer and in such capacities will be responsible for servicing the
Mortgage Loans as described under "The Pooling and Servicing Agreement." The
Servicer will also be required to make certain Advances as described under
"The Pooling and Servicing Agreement -- Advances" herein. AMI is a wholly
owned subsidiary of AMRESCO, INC. ("AMRESCO") a publicly traded (NASDAQ)
company. The principal offices of AMI are located at 235 Peachtree Street,
NE, Suite 900, Atlanta, Georgia 30303. The servicing of all performing loans
will be performed by the AMRESCO Services Division of AMI.
As of January 31, 1997 AMRESCO's portfolio consisted of approximately
9,374 loans with an aggregate principal balance of approximately $16.9
billion. Within this servicing portfolio are loans which have been
securitized in a total of 43 loan portfolios with an aggregate principal
balance of $10.6 billion.
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The information concerning the Servicer set forth herein has been provided
by the Servicer, and none of the Mortgage Loan Seller, the Depositor, the
Trustee, the Fiscal Agent or the Underwriters makes any representation or
warranty as to the accuracy thereof.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 121 fixed rate Mortgage Loans secured by
252 multifamily and commercial properties with an aggregate Cut-off Date
Principal Balance of approximately $1,403,292,505 (the "Initial Pool
Balance"), subject to a variance of plus or minus 5%. All numerical
information provided herein with respect to the Mortgage Loans is provided on
an approximate basis. All percentages of the Mortgage Pool, or of any
specified sub-group thereof, referred to herein without further description
are approximate percentages by aggregate Cut-off Date Principal Balance.
Descriptions of the terms and provisions of the Mortgage Loans are
generalized descriptions of the terms and provisions of the Mortgage Loans in
the aggregate. Many of the individual Mortgage Loans have specific terms and
provisions that deviate from the general description.
Each Mortgage Loan is evidenced by one or more promissory notes (each, a
"Note") and secured by one or more mortgages, deeds of trust or other similar
security instruments (a "Mortgage"). Each of the Mortgages create a first
lien on the interests of the related borrower in the related Mortgaged
Property, as set forth on the following table:
SECURITY FOR THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF NUMBER OF
INITIAL POOL MORTGAGED
INTEREST OF BORROWER ENCUMBERED BALANCE (1) PROPERTIES
- ------------------------------- -------------- ------------
<S> <C> <C>
Fee Simple Estate............... 87% 209
Leasehold....................... 13 43
TOTAL........................... 100% 252
</TABLE>
- ------------
(1) Based on the principal balance of the Mortgage Loan or, for any Pool
Loan, Allocated Loan Amount of the related Mortgaged Property. For
any Mortgaged Property where the ground lessee and the ground lessor
are both parties to the Mortgage, the Mortgaged Property was
categorized as a Fee Simple Estate.
Each Mortgaged Property consists of land improved by (i) a retail property
(a "Retail Property," and any Mortgage Loan secured thereby, a "Retail
Loan"), (ii) an office building (an "Office Property," and any Mortgage Loan
secured thereby, an "Office Loan"), (iii) a full, limited service or extended
stay hotel property (a "Hotel Property," and any Mortgage Loan secured
thereby, a "Hotel Loan"), (iv) an apartment building or complex consisting of
five or more rental units (a "Multifamily Property," and any Mortgage Loan
secured thereby, a "Multifamily Loan"), (v) a nursing home (each, a "Senior
Housing/Healthcare Property," and any Mortgage Loan secured thereby, a
"Senior Housing/Healthcare Loan"), (vi) an industrial property (an
"Industrial Property," and any Mortgage Loan secured thereby, an "Industrial
Loan"), (vii) a factory outlet center (a "Factory Outlet Property," and any
Mortgage Loan secured thereby, a "Factory Outlet Loan"), (viii) a mobile home
community or recreational vehicle park or a combination thereof (a "Mobile
Home Property," and any Mortgage Loan secured thereby, a "Mobile Home Loan")
or (ix) an assisted living facility (an "Assisted Living Property," and any
Mortgage Loan secured thereby, an "Assisted Living Loan"). Certain
statistical information relating to the various types of Mortgaged Properties
is set forth under "--Additional Mortgage Information -- Types of Mortgaged
Property" herein.
19 of the Mortgage Loans are secured by two or more Mortgaged Properties,
either pursuant to cross-collateralization with other Mortgage Loans in the
Mortgage Pool or pursuant to a single Note by a single borrower secured by
multiple Mortgaged Properties, or both. See "Risk Factors -- Concentration of
Mortgage Loans; Borrowers" herein.
None of the Mortgage Loans are insured or guaranteed by the United States,
any governmental agency or instrumentality, any private mortgage insurer or
by the Depositor, the Mortgage Loan Seller, Bloomfield, the Servicer, the
Special Servicer, the Trustee or the Fiscal Agent or any of their respective
affiliates. All of the Mortgage Loans are non-recourse loans so that, in the
event of a borrower default on any Mortgage Loan, recourse may generally be
had only against the specific Mortgaged Property or Mortgaged Properties
securing such Mortgage Loan and such limited other
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<PAGE>
assets as have been pledged to secure such Mortgage Loan, and not against the
borrower's other assets. However, generally, the Mortgage Loans may become
recourse upon the occurrence of certain events of default under the Mortgage
Loans, including, in most cases, the transfer or voluntary encumbrance of the
Mortgaged Property without the consent of the mortgagee.
The Mortgage Loans were generally underwritten in accordance with the
underwriting criteria described under "The Mortgage Loan Program --
Underwriting Standards." The Depositor will purchase the Mortgage Loans to be
included in the Mortgage Pool on or before the Closing Date from the Mortgage
Loan Seller pursuant to a Mortgage Loan Purchase and Sale Agreement (the
"Mortgage Loan Purchase and Sale Agreement") to be dated as of the Cut-off
Date between the Mortgage Loan Seller and the Depositor. The Mortgage Loan
Seller will be obligated under the Mortgage Loan Purchase and Sale Agreement
to repurchase a Mortgage Loan in the event of a breach of a representation or
warranty of the Mortgage Loan Seller with respect to such Mortgage Loan as
described under "The Pooling and Servicing Agreement -- Representations and
Warranties -- Repurchase" herein. The Depositor will assign the Mortgage
Loans in the Mortgage Pool, together with the Depositor's rights and remedies
against the Mortgage Loan Seller in respect of breaches of representations or
warranties regarding the Mortgage Loans, to LaSalle National Bank, as
Trustee, for the benefit of the Certificateholders, pursuant to the Pooling
and Servicing Agreement. AMRESCO Management, Inc., in its capacity as
Servicer, will service the Mortgage Loans pursuant to the Pooling and
Servicing Agreement. The Depositor will make no representations or warranties
with respect to the Mortgage Loans and will have no obligation to repurchase
or substitute for Mortgage Loans with deficient documentation or which are
otherwise defective. The Mortgage Loan Seller, as seller of the Mortgage
Loans to the Depositor, is selling such Mortgage Loans without recourse, and,
accordingly, in such capacity, will have no obligations with respect to the
Certificates other than pursuant to the limited representations, warranties
and covenants made by it to the Depositor and assigned by the Depositor to
the Trustee for the benefit of the Certificateholders. See "The Pooling and
Servicing Agreement -- Assignment of the Mortgage Loans."
The Mortgage Loan Seller or an affiliate has acquired a preferred equity
interest in 16 borrowers or groups of borrowers, which are the borrowers with
respect to Mortgage Loans representing approximately 25.6% of the Initial
Pool Balance and has committed to fund preferred equity on 2 additional loans
representing approximately 2% of the Initial Pool Balance. See "Risk Factors
- -- Equity Investments by the Mortgage Loan Seller and/or its Affiliates" and
"--Conflicts of Interest" herein.
SECURITY FOR THE MORTGAGE LOANS
Each Mortgage Loan is generally non-recourse and is secured by one or more
Mortgages encumbering the related borrower's interest in the applicable
Mortgaged Property or Properties. Each Mortgage Loan is also secured by an
assignment of the related borrower's interest in the leases, rents, issues
and profits of the related Mortgaged Properties. In certain instances,
additional collateral exists in the nature of partial indemnities or
guaranties, or the establishment and pledge of one or more reserve or escrow
accounts for, among other things, necessary repairs, replacements and
environmental remediation, real estate taxes and insurance premiums, deferred
maintenance and/or scheduled capital improvements, re-leasing reserves and
seasonal working capital reserves (such accounts, "Reserve Accounts"). The
Mortgage Loans generally provide for the indemnification of the mortgagee by
the borrower for the presence of any hazardous substances affecting the
Mortgaged Property. Each Mortgage constitutes a first lien on a Mortgaged
Property, subject generally only to (i) liens for real estate and other taxes
and special assessments, not yet due and payable (ii) covenants, conditions,
restrictions, rights of way, easements and other encumbrances whether or not
of public record as of the date of recording of the related Mortgage, such
exceptions having been acceptable to the Mortgage Loan Seller in connection
with the purchase or origination of the related Mortgage Loan, and (iii) such
other exceptions and encumbrances on Mortgaged Properties as are reflected in
the related title insurance policies. See "Description of the Mortgage Pool
- -- Certain Terms and Conditions of the Mortgage Loans -- Escrows."
THE MORTGAGE LOAN PROGRAM -- UNDERWRITING STANDARDS
Each Mortgage Loan was originated by the Mortgage Loan Seller or
Bloomfield, as set forth below under "--Additional Mortgage Loan Information
- -- Mortgaged Properties by Originator", and is generally consistent with the
underwriting standards applied by the Mortgage Loan Seller in connection with
the purchase or origination of each of the Mortgage Loans.
The Mortgage Loan Seller purchased the Mortgage Loans that it did not
originate pursuant to the purchase and sale agreements with Bloomfield during
a period commencing on September 20, 1996 and ending on the Cut-off Date.
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<PAGE>
The Mortgage Loan Seller's underwriting process involves calculations of
Net Cash Flow reflecting certain adjustments. This Net Cash Flow calculation
is used to determine DSCR. "Net Cash Flow" with respect to a given Mortgage
Loan or Mortgaged Property means cash flow available for debt service, as
determined by the Mortgage Loan Seller based upon borrower supplied
information for a recent period that is generally the twelve months prior to
the origination of such Mortgage Loan, adjusted for stabilization and, in the
case of certain Mortgage Loans, may have been updated to reflect a more
recent operating period. Net Cash Flow does not reflect debt service,
subordinated ground rent, non-cash items such as depreciation or
amortization, and does not reflect actual capital expenditures and may have
been adjusted by, among other things, (i) in the case of the Multifamily
Properties and Mobile Home Properties, rental revenue shown on a recent rent
roll was annualized before applying a vacancy factor without further regard
to the terms (including expiration dates) of the leases shown thereon, (ii)
in the case of certain Office Properties, Industrial Properties and Retail
Properties, determining current revenues from leases in place, (iii) in the
case of certain of the Hotel Properties, assuming the occupancy rate was less
than the actual occupancy rate to account for a higher occupancy rate or to
reflect new construction in the market, (iv) assuming the occupancy rate for
the Mortgaged Property or pool of Mortgaged Properties was less than the
actual occupancy rate, including in the case of certain of the Hotel
Properties, to account for a high occupancy rate or to reflect new
construction in the market, (v) in the case of the Retail Properties,
excluding certain percentage rent, (vi) excluding certain non-recurring
income and/or expenses, (vii) assuming that a 3% to 5% of revenue was assumed
for a management fee and a 3.5% to 8% of room revenue adjustment was made for
franchise fees (for Hotel Properties only) was payable with respect to the
Mortgaged Property, (viii) to take into account new tax assessments and
utility savings from the installation of new energy efficient equipment, (ix)
in certain cases, assuming that operating and/or capital expenses with
respect to the Mortgaged Property were greater than actual expenses, (x)
subtracting from net operating income replacement or capital expenditure
reserves, and (xi) in the case of the Retail Properties and Office
Properties, subtracting from net operating income an assumed allowance for
tenant improvements, leasing commissions and free rent.
"Net Cash Flow" reflects the calculations and adjustments used by the
Mortgage Loan Seller for its underwriting process and may or may not reflect
the amounts calculated and adjusted by the Rating Agencies for their own
analysis. In addition, "Net Cash Flow" and the DSCRs derived therefrom are
not a substitute for cash flow as determined in accordance with generally
accepted accounting principles as a measure of the results of the property's
operations or a substitute for cash flows from operating activities
determined in accordance with generally accepted accounting principles as a
measure of liquidity.
Reletting costs and capital expenditures are crucial to the operation of
commercial and multifamily properties. Each investor should make its own
assessment of the level of reletting costs and capital expenditures of the
Mortgaged Properties, and the consequent effect of such costs and
expenditures on the actual net operating income, Net Cash Flow and debt
service coverage ratios of the Mortgage Loans.
No representation is made as to the future net cash flow of the
properties, nor is "Net Cash Flow" set forth in this Prospectus intended to
represent such future net cash flow.
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<PAGE>
The Mortgage Loan Seller's underwriting guidelines generally consist of
the following standards:
UNDERWRITING STANDARDS(1) BY PROPERTY TYPE:
<TABLE>
<CAPTION>
<S> <C>
MULTIFAMILY PROPERTIES
Minimum DSCR .............................. 1.20
Minimum Occupancy Rate .................... 85%
Maximum Loan to Value Ratio ............... 80%
HOTEL
Minimum DSCR .............................. 1.40
Maximum Annual Occupancy Rate.............. 80%
Minimum Annual Occupancy Rate ............. 55%
Maximum Loan to Value Ratio ............... 70%
NURSING HOME/ASSISTED LIVING
Minimum DSCR .............................. 1.30
Min. Amount of Time in Operation .......... 12 mo.
Minimum Occupancy Rate .................... 85%
Maximum Loan to Value Ratio ............... 75%
MOBILE HOME PARK
Minimum DSCR .............................. 1.20
Minimum Occupancy Rate .................... 85%
Maximum % of Homes for Sale ............... 15%
Maximum % of Homes Rented by Residents ... 5%
Maximum Loan to Value Ratio ............... 80%
OFFICE
Minimum DSCR .............................. 1.25
Minimum Occupancy Rate .................... 80%
Maximum Loan to Value Ratio ............... 75%
RETAIL
Minimum DSCR .............................. 1.20
Minimum Occupancy Rate .................... 85%
Maximum Loan to Value Ratio ............... 75%
INDUSTRIAL
Minimum DSCR .............................. 1.25
Minimum Occupancy Rate .................... 85%
Maximum Loan to Value Ratio ............... 75%
FACTORY OUTLET
Minimum DSCR............................... 1.30
Minimum Occupancy Rate..................... 70%
Maximum Loan to Value Ratio ............... 75%
</TABLE>
- ------------
(1) The underwriting guidelines described herein were generally followed
but were not satisfied in every case. See Annex A hereto for the
specific characteristics of the Mortgage Loans and Mortgaged
Properties.
In underwriting each Mortgage Loan in connection with the origination or
acquisition thereof, income information provided by the related borrower was
examined by the Mortgage Loan Seller. In addition, the operating history of
the property, industry data regarding the local real estate market and the
appraiser's analysis were reviewed and, if conditions warranted, net
operating income with respect to the related Mortgaged Property was adjusted
for purposes of determining whether the Mortgaged Property satisfied the debt
service coverage ratio required by the Mortgage Loan Seller's underwriting
guidelines. In accordance with the underwriting guidelines, net operating
income of any Mortgaged Property may have been adjusted by, among other
things, the adjustments listed in the definition of "Net Cash Flow" described
under "--Additional Loan Information." In connection with the underwriting,
net operating income was based upon
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<PAGE>
information provided by the borrower and neither the Depositor nor the
Mortgage Loan Seller makes any representation as to the accuracy of such
information; provided, however, that, with respect to certain of the Mortgage
Loans, the Mortgage Loan Seller or the borrower engaged independent
accountants to review or perform certain procedures to verify such
information.
Each Originator was required to cause each Mortgaged Property to be
inspected to determine whether it was in acceptable physical condition. The
inspection included a review of ongoing maintenance programs, common area
upkeep, mechanical systems and grounds maintenance. In addition, an
engineering study and an environmental review were prepared by appropriate
consultants. With respect to environmental matters, a Phase I environmental
assessment (and, where appropriate, a Phase II environmental assessment) was
conducted for each Mortgaged Property. A credit investigation was completed
for all prospective borrowers, in connection with which a credit report not
more than 30 days old as of the date of the loan application and current
financial statements were obtained. The borrowers with respect to 128 of the
Mortgaged Properties representing, in the aggregate, 60% of the Initial Pool
Balance, provided audited financial statements, agreed upon procedures or
statements certified by an independent accountant. The cash flow and NOI
information presented in Annex A may not correspond to the comparable
information included in the accountants' reports because of adjustments made
by the Mortgage Loan Seller as part of its underwriting procedures.
SIGNIFICANT MORTGAGE LOANS
In connection with the origination of each of the Mortgage Loans listed
below, other than the Kmart Distribution Centers Loan, the Mortgage Loan
Seller, in addition to its ordinary underwriting procedures, obtained audited
financials or agreed upon procedures for a recent 12 month period with
respect to the related Mortgaged Properties and obtained market rental
analysis for the Mortgaged Properties relating to the Sunwest Loan.
Kendall Square Pool Loan and Properties
The Loan. The largest Mortgage Loan in the Mortgage Pool is the Mortgage
Loan secured by the Mortgaged Properties known as the Kendall Square
Properties (the "Kendall Square Pool Loan"). The Kendall Square Pool Loan was
originated by the Mortgage Loan Seller on December 27, 1996. It had an
original principal balance of $69,700,000 and has a Cut-off Date Principal
Balance of $69,598,691, which represents approximately 5.0% of the Initial
Pool Balance, and is secured by a fee and leasehold Mortgage encumbering
office, biotech lab space, storage and retail space in East Cambridge,
Massachusetts (the "Kendall Square Pool Properties").
The Kendall Square Pool Loan was made to Athenaeum Property LLC, Old
Kendall Property LLC, Old Cambridge Property LLC and JONA Property LLC (each,
a "Kendall Borrower," collectively, the "Kendall Borrowers") on a joint and
several basis. Each Kendall Borrower is a Massachusetts special purpose
limited liability company. Each of the Kendall Borrowers is owned and
controlled by a limited partnership or limited liability company (the "Upper
Level Owners") that is in turn controlled by Robert A. Jones, Allan Jones and
K. George Najarian, the principals of The Athenaeum Group ("TAG"). An
affiliate of Boston Capital Institutional Advisors ("BCIA"), STB Corp., is a
special limited partner or special member, as applicable, in each Upper Level
Owner. OKS Realty Trust, an affiliate of BCIA, provided mezzanine financing
in the amount of $14,300,000 to the Upper Level Owners on December 27, 1996
(the "BCIA Mezzanine Financing"). STB Corp. will have control over the
affairs of such Upper Level Owner in the event of a default under the BCIA
Mezzanine Financing and will continue to occupy its special limited partner
or special member, as applicable, position until the BCIA Mezzanine Financing
is repaid in full. The obligations of the Upper Level Owners to such
affiliate of BCIA are secured, among other things, by a pledge of voting
rights of 100% of the shareholders of the general partner of the owners of
the Upper Level Owner; however, enforcement of these pledges is not permitted
before repayment in full of the Kendall Square Pool Loan. The Mortgage Loan
Seller has a $2,300,000 senior participation interest in the BCIA Mezzanine
Financing.
Payment and prepayment terms for the Kendall Pool Loan are as set forth on
Annex A and as described under "Certain Terms and Conditions of the Mortgage
Loans -- Property Releases."
Lock Box; Reserve Accounts. The Kendall Borrowers have entered into a lock
box agreement whereby all revenue is deposited directly into a Lock Box
Account controlled by the Servicer. The Kendall Borrowers have also
established an on-going tax and insurance reserve account, a tenant releasing
reserve account, an ongoing capital expenditure reserve account and an
up-front environmental reserve account. See "The Pooling and Servicing
Agreement -- Accounts -- Lock Box Accounts," "--Escrows" and "Risk Factors --
Environmental Law Considerations."
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<PAGE>
The Properties. The Kendall Square Pool Properties consist of Phases I
and II of One Kendall Square (including a surface parking lot at 66 Binney
Street), and 215 First Street (including a surface parking lot at 195 First
Street), all located in Cambridge, Massachusetts. The Kendall Square
Properties are managed by TAG, an affiliate of the Kendall Borrowers (as
described above). See "Certain Terms and Conditions of the Mortgage Loans --
Mortgage Provisions Relating to Servicer's Right to Termination of Management
Agreement".
One Kendall Square -- Phases I and II. One Kendall Square is a planned
900,000 square foot of GLA mixed use development, situated on a 10.25 acre
campus in East Cambridge, in walking distance to the MIT campus and public
transportation. To date, nearly 660,000 (460,008 of which is subject to the
lien of the related Mortgage) square feet of GLA of office, laboratory and
retail space, a 9 screen movie theater (not subject to the lien of the
related Mortgage) and a 1,530 car garage (not subject to the lien of the
related Mortgage) have been completed at the complex. Old Kendall Property
LLC and Old Cambridge Property LLC entered into a lease for over 650
additional parking spaces located in the 1,530 car garage. Such lease expires
on December 31, 2088. The property includes the buildings of the former
Boston Woven Hose Factory which, beginning in 1984, were rehabilitated. As of
December 6, 1996, Phase I was approximately 100% occupied and Phase II was
approximately 100% occupied. As of December 5, 1996, the combined appraised
value was $69,500,000. The borrowers with respect to One Kendall Square are
Old Kendall Property LLC and Old Cambridge Property LLC.
215 First Street. 215 First Street, also known as "Athenaeum House", was
built in stages beginning in 1895 as the original headquarters for The
Athenaeum Press. The property was rehabilitated in 1981 and occupies a full
city block, housing approximately 310,887 square feet of GLA of office,
laboratory and service retail space. The six level property, overlooking the
Charles River and the Kendall Square area of Cambridge also contains a full
service health club. An affiliate of the Kendall Borrowers leases
approximately 300 parking spaces in adjacent lots (such properties are not
subject to the lien of the related mortgage and such income was not included
in determining the Net Cash Flow). In addition, an adjacent parking lot at
195 First Street, a property which is owned in fee by one of the Kendall
Borrowers and is subject to the lien of the related Mortgage. As of December
6, 1996, the property was approximately 97% occupied, and as of December 5,
1996, the appraised value was $29,000,000. The borrower with respect to the
215 First Street property is Athenaeum Property LLC.
See "Risk Factors -- Commercial Lending Generally" "--Retail Properties"
and "--Office Properties" for a discussion of certain matters associated with
retail and office properties.
The Saracen Pool Loan and Properties
The Loan. The second largest Mortgage Loan in the Mortgage Pool is the
Mortgage Loan secured by the Mortgaged Properties known as the Saracen Pool
Properties (the "Saracen Pool Loan"). The Saracen Pool Loan was originated by
the Mortgage Loan Seller on December 31, 1996. It had an original principal
balance of $69,000,000 and has a Cut-off Date Principal Balance of
$68,923,230, which represents approximately 4.9% of the Initial Pool Balance,
and is secured by fee Mortgages encumbering six office building properties
located in suburban Boston (each, a "Saracen Pool Property", and,
collectively, the "Saracen Pool Properties"). The Saracen Pool Mortgages are
cross-collateralized and cross-defaulted.
The Saracen Pool Loan was made to Wells Avenue Senior Holdings LLC (the
"Saracen Borrower"), a special purpose Massachusetts limited liability
company owned by Wells Avenue Senior Holdings Inc. and Wells Avenue Holdings
LLC ("Wells Holdings"). Saraceno Holding Trust General Partnership ("Saraceno
G.P.") owns a 99% interest in Wells Holdings. Kurt W. Saraceno is the
principal with respect to such affiliates. Pacific Preferred LLC, an
affiliate of Lazard Freres Real Estate Fund II L.P. ("Lazard") holds a 1%
interest in Wells Holdings and will continue to occupy this position until a
mezzanine financing made on December 31, 1996 from Lazard to Wells Holdings
in the amount of $21,387,000 (the "Lazard Mezzanine Financing") is repaid in
full and a $113,000 capital contribution of Pacific Preferred LLC has been
returned in accordance with the Wells Holdings operating agreement. The
obligations of Wells Holdings under the Lazard Mezzanine Financing are
secured by a pledge by Saraceno G.P. of its 99% membership interest in Wells
Holdings, however, enforcement of this pledge is not permitted before
repayment in full of the Saracen Pool Loan. Additionally, an affiliate of the
Mortgage Loan Seller has made a preferred equity capital contribution to
Wells Holdings in the amount of $7,500,000 and is the special member of Wells
Holdings. Such affiliate also is committed to fund an additional $1 million
of preferred equity in Wells Holdings over the next three years subject to
certain conditions. See "Risk Factors and Other Special Considerations --
Other Financing" and "--Equity Investments by the Mortgage Loan Seller and/or
its Affiliates" for a discussion of capital contributions by affiliates of
the Mortgage Loan Seller and "Description of the Mortgage Pool."
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<PAGE>
Payment and prepayment terms for the Saracen Pool Loan are as set forth on
Annex A hereto and as described under "Certain Terms and Conditions of the
Mortgage Loans -- Property Releases."
Lock Box; Reserve Accounts. The Saracen Borrower has entered into a lock
box agreement whereby all revenue is required to be deposited directly into a
Lock Box account controlled by the Servicer. The Saracen Borrower has also
established reserve accounts, including an on-going tax and insurance reserve
account, an on-going capital expenditure reserve account, an up-front
deferred maintenance reserve account, an on-going tenant rollover account and
an up-front environmental reserve account. See "The Pooling and Servicing
Agreement -- Accounts -- Lock Box Accounts," "--Escrows" and "Risk Factors --
Environmental Law Considerations."
The Properties. The Saracen Pool Properties consist of six office building
complexes located in the Route 128 Corridor of suburban Boston. The
properties have a mix of high-tech, software, financial and other service
tenants. The Saracen Pool Properties are managed by Saracen Companies, Inc.,
an affiliate of the Saracen Borrower. See "Certain Terms and Conditions of
the Mortgage Loans -- Mortgage Provisions Relating to Servicer's Right to
Termination of Management Agreement."
128 Tech Center, Waltham. This office building complex, constructed in
1986, is a four-building 217,500 square feet of GLA office complex located on
10.64 acres in Waltham, Massachusetts. As of December 3, 1996, the property
was approximately 100% occupied, and as of December 1996, the appraised value
was $32,800,000.
7/57 Wells Avenue, Newton. This office building, constructed in 1982,
contains 88,400 square feet of GLA and is located on 10.64 acres in Newton,
Massachusetts. As of December 3, 1996, the property was approximately 98%
occupied, and as of December 1996, the appraised value was $11,300,000.
75/85/95 Wells Avenue, Newton. This office building, known as Wells
Research Center and constructed in 1970, was expanded in 1986 and contains
238,911 square feet of GLA and is located on 21.4 acres. As of December 3,
1996, the property was approximately 100% occupied, and as of December 1996,
the appraised value was $35,600,000.
201 University Avenue, Westwood. This office building complex, converted
from an industrial building to corporate office space in 1982 by the
Borrower's principals, contains 82,000 square feet of GLA including a health
club and an auditorium. Computer Associates leases the entire property. As of
December 3, 1996, the property was 100% occupied, and as of December 1996,
the appraised value of the property was $12,200,000.
Dedham Place, Dedham. This office building, constructed in 1987, contains
162,300 square feet of GLA, is located on 15.18 acres and is attached to a
Hilton Hotel which is not subject to the lien of the Mortgage. As of December
3, 1996, the property was approximately 100% occupied and as of December 1996
the appraised value was $25,400,000.
333 Elm Street, Dedham. This office building, constructed in 1983 and
known as Norfork Place, contains 48,068 square feet of GLA and is situated on
2.01 acres. As of December 3, 1996, the property was approximately 84%
occupied and of December 1996 the appraised value was $5,100,000.
See "Risk Factors -- Commercial Lending Generally" and "--Office
Properties" for a discussion of certain matters associated with office
properties.
The International Plaza Loan and Property
The Loan. The third largest Mortgage Loan in the Mortgage Pool is the
Mortgage Loan secured by the Mortgaged Property known as International Plaza
(the "International Plaza Loan"). The International Plaza Loan was made to
International Plaza Associates LP (the "International Plaza Borrower"), a New
York limited partnership. The International Plaza Loan was originated by the
Mortgage Loan Seller on March 5, 1997. It had an original principal balance
of $65,750,000 and has a Cut-off Date Principal Balance of $65,750,000, which
represents approximately 4.7% of the Initial Pool Balance and is secured by a
twenty-eight story office building at 750 Lexington Ave., in New York City,
New York (the "International Plaza Property"). The International Plaza
Borrower has a fee interest in a portion of the International Plaza Property
and a leasehold interest with respect to the remainder of such property.
The general partner of the International Plaza Borrower is 750 Lexington
Building Corporation, a special purpose New York corporation, and the limited
partner is 750 Lexington Avenue Associates, LLC, a special purpose New York
limited liability company. The International Plaza Borrower and the manager
of the International Plaza Property are
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directly or indirectly controlled by Sherman Cohen, Edward B. Cohen and
Charles Cohen. Additionally, the Mortgage Loan Seller owns a preferred
limited partnership interest in the International Plaza Borrower in the
amount of $5,250,000. See "Risk Factors and Other Special Considerations --
Other Financings" for a discussion of preferred equity interests of the
Mortgage Loan Seller and its affiliates.
The recourse obligations of the International Plaza Borrower in the event
of misconduct, removal or disposal of property after default,
misappropriation, and other similar conduct is guaranteed by a recourse
obligation of Sherman Cohen and Edward B. Cohen.
The payment and prepayment terms of the International Plaza Loan are as
set forth in Annex A, hereto and as described below under "--Certain Terms
and Conditions of the Mortgage Loans -- Property Releases."
Lock Box; Reserve Accounts. The International Plaza Borrower has
established a Lock Box Account with respect to the International Plaza
Property and is required to cause each tenant of the International Plaza
Property to pay all rents directly into the Lock Box Account. The
International Plaza Borrower has also established reserve accounts, including
an on-going tax and insurance reserve account, an on-going replacement
reserve account, an up-front required repair reserve account, an on-going
ground lease rent reserve account and an on-going tenant improvement reserve
account. See "The Pooling and Servicing Agreement -- Lock Box Accounts" and
"--Escrows."
The Property. The International Plaza Property is a twenty-eight story
office building, constructed in 1989, containing 362,079 square feet of GLA
of office space and 22,680 square feet of GLA of retail space, and is located
in midtown Manhattan. As of January 1, 1997, the International Plaza Property
was approximately 95% occupied, and as of January 1, 1997, the appraised
value was $104,000,000. The International Plaza Property is currently
occupied by approximately 37 tenants with the two largest tenants, Morrison,
Cohen, Singer & Weinstein and Edwards & Angell, occupying approximately 13%
and approximately 11% of the building, respectively. The International Plaza
Property is managed by Cohen Brothers Realty Corporation, an affiliate of the
International Plaza Borrower.
See "Risk Factors -- Commercial Lending Generally," "--Office Properties"
and "--Ground Leases" for discussion of certain matters associated with
office properties, and ground leases.
The Kmart Distribution Center Loan and Properties.
The Loan. The fourth largest loan in the Mortgage Pool is the Mortgage
Loan secured by the Mortgaged Properties known as the Kmart Distribution
Properties (the "Kmart Distribution Center Loan"). The Kmart Distribution
Center Loan was originated by the Mortgage Loan Seller, had an original
principal balance of $62,500,000, has a Cut-off Date Principal Balance of
$63,000,000, which represents 4.5%, of the Initial Pool Balance, and is
secured by a Mortgage encumbering the fee interest in two industrial
warehouse properties that are leased by Kmart Corporation and operated as
distribution centers (the "Kmart Distribution Properties"). The Kmart
Distribution Center Loan was made to Brighton Lease Management, LLC and
Greensboro Lease Management, LLC (together, the "Brentwood Borrowers"). Both
of the Kmart Distribution Properties are cross-collateralized and
cross-defaulted.
Payment and prepayment terms for the Kmart Distribution Centers Loan are
as set forth on Annex A and as described under "Certain Terms and Conditions
of the Mortgage Loans --Property Releases."
Lock Box Account. The Brentwood Borrower has established a Lock Box
Account and is required to cause Kmart Corporation, as tenant of the Kmart
Distribution Properties, to pay all rents into the Lock Box Account. See "The
Pooling and Servicing Agreement -- Accounts -- Lock Box Accounts."
The Properties. The Kmart Distribution Properties consist of an industrial
warehouse property located in Brighton, Colorado (the "Brighton Distribution
Center") and an industrial warehouse property located in Greensboro, North
Carolina (the "Greensboro Distribution Center"). Both Kmart Distribution
Properties are being acquired by the Brentwood Borrower in sale/leaseback
transactions with Kmart Corporation, as the seller/lessee, under two separate
leases. As of February 1, 1997, Kmart Corporation operated thirteen
distribution centers nationwide.
The Brighton Distribution Center was constructed in 1994 by Kmart
Corporation and has been occupied by Kmart Corporation since that time. The
Brighton Distribution Center contains 1,278,600 square feet of GLA and is
equipped with state of the art computer controlled facilities from entry to
shipping.
The Greensboro Distribution Center was constructed in 1992 by Kmart
Corporation and has been occupied by Kmart Corporation since that time. The
Greensboro Distribution Center contains 1,546,575 square feet of GLA and is
the second largest Kmart distribution center on the east coast.
51
<PAGE>
The Credit Lease. The Kmart Distribution Properties are leased to Kmart
Corporation under two separate twenty-five year leases (the "Kmart Leases").
The terms of the Kmart Leases are triple net and require the tenant to pay
all rent without deduction, setoff, abatement or other reduction,
notwithstanding casualty condemnation and prohibition of use. The Kmart
Leases may not be terminated for any reason other than a material taking or
casualty, provided, however, that Kmart Corporation agrees to purchase the
related Kmart Distribution Property for an amount at least equal to the
outstanding principal balance of the loan allocable to such property. In the
event of a sublease, Kmart Corporation remains fully liable for the
performance of its obligations under the Kmart Lease.
The Mortgage Loan Seller has, in its underwriting analysis, applied market
rental rates to the Kmart Distribution Properties as well as the rent
obligations under the Kmart Leases.
The senior secured and senior unsecured debt of Kmart Corporation is rated
BB-and B+, respectively, by S&P and BB+ and BB-, respectively, by DCR.
See "Risk Factors -- Industrial Properties" for a discussion of the
certain matters associated with industrial properties.
Burnham Pacific Pool Loan and Properties
The Loan. The fifth largest Mortgage Loan in the Mortgage Pool is the
Mortgage Loan secured by the Mortgaged Properties known as the Burnham
Pacific Pool Properties (the "Burnham Pacific Loan"). The Burnham Pacific
Loan is made up of two loans which were originated by the Mortgage Loan
Seller and made to BPP/Valley Central, L.P. (the "Valley Central Borrower")
on January 30, 1997, as amended on February 19, 1997 (the "Valley Central
Loan") and BPP/Puente Hills, Inc. (the "Puente Hills Borrower" and together
with the Valley Central Borrower, the "Burnham Pacific Borrowers") (the
"Puente Hills Loan"). The Burnham Pacific Loan had an original principal
balance and a Cut-off Date Principal Balance of $58,500,000, which represents
4.2% of the Initial Pool Balance, and is secured by two fee Mortgages
encumbering two shopping centers in California (the "Burnham Pacific
Properties"). Both of the loans which make up the Burnham Pacific Loan are
cross-defaulted and each Burnham Pacific Borrower has guaranteed the
indebtedness of the other Burnham Pacific Borrower.
The "Valley Central Borrower" is a special purpose entity owned 99% by
BPP/Valley Central Inc., its general partner (which is 100% owned by Burnham
Pacific Properties Inc. ("Burnham Inc.")), and 1% by a limited partner. The
"Puente Hills Borrower" is a special purpose corporation, 100% owned by
Burnham Inc. Burnham Inc. owns twenty-six retail properties in California and
four industrial and office properties in Southern California. Burnham Inc. is
publicly traded on the New York Stock Exchange.
Payment and prepayment terms for the Burnham Pacific Loan are as set forth
on Annex A hereto and as described below under "--Certain Terms and
Conditions of the Mortgage Loans --Excess Interest," and "--Property
Releases."
Lock Box; Reserve Accounts. The Burnham Pacific Borrowers have entered
into a lock box agreement whereby all rent is required to be deposited
directly into a Lock Box Account controlled by the Servicer. See "The Pooling
and Servicing Agreement -- Accounts -- Lock Box Accounts" and "--Escrows."
The Burnham Pacific Borrowers have also established reserve accounts,
including an ongoing tax and insurance reserve account, an ongoing capital
expenditure reserve account and an up-front deferred maintenance reserve
account.
The Properties. The Burnham Pacific Properties consist of two shopping
centers outside of Los Angeles, California. The Burnham Pacific Properties
are managed by Burnham Pacific Properties, Inc., an affiliate of the Burnham
Pacific Borrowers.
Valley Central Shopping Center. This shopping center, the largest in
Lancaster, was built in 1988 and consists of 480,092 square feet of GLA.
Major tenants include Wal-Mart, Homebase, Circuit City, Staples, Michaels,
Marshalls and Cinemark Theaters which occupy 24.5%, 23.7%, 6.7%, 3.5%, 3.7%,
5.6% and 7.3% of the Valley Central Shopping Center's GLA, respectively.
Another major tenant, Costco, occupies space that is not subject to the
related Mortgage. As of January 1997, the property was approximately 97%
occupied and the appraised value was $42,200,000.
Plaza at Puente Hills. This shopping center, located in the City of
Industry, was built in 1986 and renovated in 1992, and consists of 516,538
square feet of GLA on approximately 43.7 acres. Major tenants include IKEA
Furniture Warehouse, AMC Theaters 10 Plex, Office Depot and Circuit City
which occupy 29.0%, 8.0%, 5.8% and 6.0% of the Plaza at Puente Hill's GLA,
respectively. Other major tenants at the center who are not subject to the
related Mortgage include Home Depot, Sam's Club, Toys R Us, and Best Buy. As
of January 1997, the property was approximately 90% occupied and the
appraised value was $61,000,000.
52
<PAGE>
See "Risk Factors -- Commercial Lending Generally" and "--Retail
Properties" for a discussion of certain matters associated with retail
properties.
The Hudson Hotels Pool Loan and Properties
The Loan. The sixth largest Mortgage Loan in the Mortgage Pool is the
Mortgage Loan secured by the Mortgaged Properties known as Hudson Hotels (the
"Hudson Hotels Pool Loan"). The Hudson Hotels Pool Loan, originated by the
Mortgage Loan Seller on November 27, 1996, was made to HH Properties-I, Inc.,
a special purpose New York corporation (the "Hudson Hotels Borrower"). It had
an original principal balance of $56,000,000 and has a Cut-off Date Principal
Balance of $55,854,069, which represents approximately 4.0% of the Initial
Pool Balance. It is secured by fee Mortgages encumbering fifteen hotel
properties and by a Mortgage encumbering a ground leasehold interest in
another hotel property. The fee Mortgages and ground leasehold Mortgage are
collectively referred to as the "Hudson Hotels Mortgages" and the fee
interests and ground leasehold interest encumbered by the Hudson Hotels
Mortgages are referred to individually as a "Hudson Hotels Property" and
collectively as the "Hudson Hotels Properties." The Hudson Hotels Mortgages
are cross-collateralized and cross-defaulted.
Payment and prepayment terms for the Hudson Hotels Pool Loan are as set
forth on Annex A hereto and as described below under "--Certain Terms and
Conditions of the Mortgage Loans -- Excess Interest" and "--Property
Releases."
Lock Box; Reserve Accounts. The Hudson Hotels Borrower has established a
Lock Box Account with respect to each Hudson Hotels Property and is required
to cause each of the credit card companies with whom such Hudson Hotels
Property is affiliated to pay all amounts payable to the Hudson Hotels
Borrower directly into the related Lock Box Account. The Hudson Hotels
Borrower is also required to deposit, within one business day after receipt
thereof, any other receipts and income with respect to each Hudson Hotels
Property into its related Lock Box Account. The Hudson Hotels Borrower has
also established reserve accounts, including an on-going tax and insurance
reserve account, an on-going ground lease rent reserve account, an up-front
deferred maintenance reserve account, an on-going capital expenditures
reserve account, and an on-going seasonal reserve account. See "The Pooling
and Servicing Agreement -- Accounts -- Lock Box Accounts" and "--Escrows."
The Properties. The Hudson Hotels Properties consist of sixteen hotel
properties located in six states. Three of the hotel properties are full
service hotels offering food, beverages and other amenities consistent with
those offered by a full service hotel, while the remaining thirteen hotel
properties are limited service hotels. The Hudson Hotel Properties are
franchised or operated as eight Fairfield Inns, two Comfort Inns, one
Econolodge and five independent or non-flagged hotels. The Hudson Hotel
Properties are managed by Hudson Hotels Corporation, a New York corporation
(the "Hudson Hotels Manager") and an affiliate of the Hudson Hotels Borrower,
pursuant to separate management agreements between the Hudson Hotels Manager
and the Hudson Hotels Borrower. See "Certain Terms and Conditions of the
Mortgage Loans -- Mortgage Provisions Relating to Servicer's Right to
Termination of Management Agreement." The Hudson Hotels Manager is publicly
traded on the NASDAQ Small Cap Market. The appraised value of the Hudson
Hotels Properties was $90,700,000. The average occupancy rate for the Hudson
Hotels Properties in the aggregate for the twelve months ending September 30,
1996 was 73.7% and the average ADR for such period was $51.93. The Hudson
Hotels Properties are located in North Carolina (seven properties), New York
(four properties), South Carolina (two properties), Florida, Georgia, and
Virginia.
See "Risk Factors -- Commercial Lending Generally" and "--Hotels" for a
discussion of certain matters relating to hotel properties.
The Marina Harbor Loan and Property
The Loan. The seventh largest Mortgage Loan in the Mortgage Pool is the
Mortgage Loan secured by the Mortgaged Property known as Marina Harbor
Apartments and Anchorage (the "Marina Harbor Loan"). The Marina Harbor Loan
was originated by the Mortgage Loan Seller on September 25, 1996. It had an
original principal balance of $51,000,000 and has a Cut-off Date Principal
Balance of $50,586,851, which represents approximately 3.6% of the Initial
Pool Balance, and is secured by a Mortgage encumbering a ground leasehold
interest in an apartment complex comprised of sixteen two and three story
buildings in Marina del Rey, California (the "Marina Harbor Property"). The
Marina Harbor Loan has an amortization schedule of 240 months and a term of
198 months with the result that a Balloon Payment of $17,841,000 is due on
its maturity date of March 11, 2013 (the "Marina Harbor Maturity Date"). If
the Marina Harbor
53
<PAGE>
Borrower fails to pay the balance of the principal and accrued interest on
the Marina Harbor Maturity Date, the Servicer is authorized under the Pooling
and Servicing Agreement to enter into a modification of the Marina Harbor
Loan to provide for terms similar to those provided for in other ARD Loans
described herein, including the additional amortization of principal through
the application of excess cash flow. See "Description of the Mortgage Pool --
Certain Terms and Conditions of the Mortgage Loans -- Excess Interest"
herein. For purposes of the charts and tables included herein, the maturity
date of the Marina Harbor Loan shown assumes that the Mortgage Loan has been
modified as described above.
The Marina Harbor Loan was made to Marina Pacific Associates (the "Marina
Harbor Borrower"), which is a special purpose California limited partnership.
The general partners of the Marina Harbor Borrower are the Epstein Family
Trust and CMR, Inc., a California corporation, whose common stock is owned by
James H. Ring, Jacqueline Morgan and Suzanne Caplan.
The payment and prepayment terms of the Marina Harbor Loan are as set
forth in Annex A hereto and as described below under "--Certain Terms and
Conditions of the Mortgage Loans --Excess Interest" and "--Property
Releases."
Lock Box; Reserve Accounts. The Marina Harbor Borrower has established a
Lock Box Account with respect to the Marina Harbor Property and is required
to pay or cause to be paid all rents and income of any nature arising from
the ownership, possession or use of the Marina Harbor Property within one
business day after receipt thereof into the Lock Box Account. The Marina
Harbor Borrower has also established reserve accounts, including an on-going
tax and insurance reserve account, an on-going ground lease rent reserve
account and an on-going capital expenditures reserve account. See "The
Pooling and Servicing Agreement -- Accounts -- Lock Box Accounts" and
"--Escrows."
The Property. The Marina Harbor Property is an 846 unit apartment complex
constructed in 1962 and 1968. The complex consists of sixteen buildings,
containing studio, 1-, 2-, and 3-bedroom apartments. The apartments at the
complex had an occupancy rate as of October 31, 1996, of approximately 97%.
The complex also contains 671 boat slips, which had an occupancy rate as of
October 31, 1996, of 82%. The Marina Harbor Property is managed by EJ
Management, Inc., a California corporation (the "Marina Harbor Manager") and
an affiliate of the Marina Harbor Borrower, and is submanaged by E&S Ring
Management Corp., a California corporation (the "Marina Harbor Submanager")
and an affiliate of the Marina Harbor Borrower.
The borrower's interest in the Marina Harbor Property was created under a
ground lease with the County of Los Angeles, as ground lessor, which expires
on April 1, 2023. The ground lease provides for the payment of annual base
rent plus various percentages of rent with respect to rental of apartments,
boat slips, miscellaneous sales and other items.
The ground lease and related documents contain provisions for the
protection of lender's rights such as the right to notice and cure defaults.
However, under the ground lease, the ground lessor has retained certain
controls with respect to the Marina Harbor Property, including the approval
of subleases of apartments in excess of one year, the right to approve any
modification of the Marina Harbor Loan to the extent the modification could
be viewed as a "replacement" or "renewal" thereof and approval of any future
loans secured by the Marina Harbor. In addition, the ground lease provides
that the proceeds of all property insurance policies will be used to restore
and rebuild the property and will be held by the ground lessor for
distribution to the ground lessee in reimbursement of restoration and
rebuilding costs. The lender may only apply such proceeds to pay the Marina
Harbor Loan to the extent proceeds remain after application to restore and
repair the Marina Harbor Property.
See "Risk Factors -- Commercial Lending Generally" and "--Ground Leases"
for a discussion of certain matters associated with ground leases.
Sunwest Pool Loan and Properties
The Loan. The eighth largest Mortgage Loan in the Mortgage Pool is the
Mortgage Loan secured by 72 retail properties (the "Sunwest Pool
Properties"). The Sunwest Pool Loan was originated on January 30, 1997. It
had an original principal balance of $50,500,000 and has a Cut-off Date
Principal Balance of $50,500,000, which represents approximately 3.6% of the
Initial Pool Balance, and is secured by fee Mortgages encumbering 14 retail
properties, by the ground lessor's fee interest and ground lessee's leasehold
interest in 25 retail properties and by leasehold Mortgages encumbering 33
retail properties (the "Sunwest Pool Loan"). The Sunwest Pool Loan was made
to (i) Sunwest N.C. Trust (the "Sunwest Trust Borrower"), a special purpose
Delaware business trust, with Wilmington Trust Company, as trustee
("Wilmington"), and Sunwest Properties N.C., Inc., a special purpose Delaware
corporation, as the beneficiary thereof, and is secured by 62 of
54
<PAGE>
the Sunwest Pool Properties, including 33 properties encumbered by the
leasehold Mortgages, and (ii) to Sunwest Properties N.C. II, Inc., a special
purpose Delaware corporation (the "Sunwest Inc. Borrower" and together with
the Sunwest Trust Borrower, the "Sunwest Borrowers") and is secured by 10 of
the Sunwest Pool Properties. Robert Pierson, Jr., Judith Pierson and Robert
Pierson, Sr. are the principals with respect to the Sunwest Borrowers. All 72
of the Sunwest Pool Properties are cross-collateralized and cross-defaulted.
The Mortgage Loan Seller has acquired a preferred equity interest in the
initial amount of $6,700,000 in the Sunwest Borrowers. The aggregate cash
flow from all the Sunwest Pool Properties are available to make the required
distributions in respect of the preferred equity interest in either of the
Sunwest Borrowers.
Payment, prepayment and defeasance terms for the Sunwest Pool Loan are as
set forth on Annex A hereto and as described below under "--Certain Terms and
Conditions of the Mortgage Loans-Excess Interest" and "--Property Releases."
Lock Box; Reserve Accounts. The Sunwest Borrowers have each established a
Lock Box Account with respect to their respective Sunwest Pool Properties and
are required to cause the tenants of each Sunwest Pool Property to pay all
rents directly into the Lock Box Account. The Sunwest Borrowers have also
each established reserve accounts, including on-going tax and insurance
reserve accounts, on-going ground lease rent reserve accounts, on-going
capital expenditures reserve accounts, up-front engineering expense reserve
accounts and up-front environmental reserve accounts. See "The Pooling and
Servicing Agreement--Accounts-Lock Box Accounts," "--Escrows" and "Risk
Factors -- Environmental Law Considerations."
The Properties. The Sunwest Pool Properties consist of 72 retail
properties, the majority of which are single tenant properties. The Sunwest
Pool Properties are generally former Safeway stores, which were sold by
Safeway Stores, Inc., a Maryland corporation, after its leveraged buy out in
the 1980s. None of the Sunwest Pool Properties are currently being operated
as Safeway stores. The Sunwest Pool Properties are currently being leased by
70 different tenants with the top 5 tenants, based on underwritten rental
payment, being Gold's Gym (6.9%), Super Value Stores (6.7%), Office Depot
(6.1%), Drug Emporium (4.9%) and Michaels MJ Design (3.1%). The Sunwest Pool
Properties are located in 11 states with the largest concentration in Texas
(63%) and the remainder in 10 other states with the maximum concentration in
any such state below 10%. The Sunwest Pool Properties are managed by S.W.
Commercial Management and Leasing, Inc. See "Certain Terms and Conditions of
the Mortgage Loans--Mortgage Provisions Relating to Servicer's Right to
Terminate Management Agreement."
No MAI appraisals were obtained with respect to the Sunwest Pool
Properties. A capitalization rate of 9.5% was applied to the net cash flow as
determined by the Mortgage Loan Seller in its underwriting in determining the
approximate value of the properties. An independent appraiser advised the
Mortgage Loan Seller that such capitalization rate would be appropriate.
Ground Leases. The Sunwest Borrowers' interest in 33 of the Sunwest Pool
Properties are leasehold interests. There are 21 different ground lessors
with respect to these properties, some of which do not provide for direct
notice of default to a lender, but all of which do provide for notice to the
leasehold owner of record. To provide the mortgagee with certain protections,
the Sunwest Trust Borrower was formed to hold title to the Sunwest Pool
Properties (except for those fee interest properties located in states in
which the Delaware business trust is unable to hold title to real property).
Under the terms of the trust, Wilmington is required to act at the direction
of the Servicer if any event occurs which could reasonably be expected to
result in a termination of the ground lease, including without limitation,
any failure to exercise any option to extend or renew the term of any ground
lease within a specified period of time, any default, or any casualty or
condemnation, thereby providing the Servicer with notice of any defaults.
With respect to certain of the ground leases encumbered by the Sunwest
Loan that have a term to maturity shorter than thirty years, the principal
allocated to such properties amortizes based on their remaining terms.
55
<PAGE>
Other Significant Mortgage Loans.
The next 13 largest Mortgage Loans are as follows:
<TABLE>
<CAPTION>
CUT-OFF
DATE ANTICIPATED
PRINCIPAL REMAINING PREFERRED APPRAISED
LOAN /PROPERTY CITY/STATE BALANCE(A) TERM EQUITY DSCR VALUE
- ------------------------- ---------------- ----------- ----------- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
WESTIN-INDIANAPOLIS Indianapolis
Indiana $41,700,000 144 $5,900,000 1.42 $68,000,000
SECURITY SQUARE MALL Baltimore County
Maryland $36,000,000 181 $6,500,000 1.27 $47,000,000
TWO GATEWAY CENTER Newark
New Jersey $34,423,045 118 $4,000,000 1.73 $53,650,000
UNIPROP Margate
Aztec Estates Florida $33,500,000 121 1.46 $20,500,000
Ft. Lauderdale
Kings Manor Florida 121 1.46 $ 9,900,000
Novi
Old Dutch Farms Michigan 121 1.46 $ 9,050,000
Blaine
Park of the Four Seasons Minnesota 121 1.46 $13,750,000
MONTAGUE PARK TECH CENTER San Jose
California $32,964,627 119 1.27 $54,000,000
JACOBS MALL Grand Island
Conestoga Mall Nebraska $31,700,000 144 1.32 $27,600,000
Asheboro
Randolph Mall North Carolina 144 1.32 $19,200,000
M&H La Habra
LaHabra Marketplace California $28,701,826 118 1.91 $33,900,000
Madera
Bethard Square California 118 1.91 $ 4,500,000
Sacramento
How 'Bout Arden California 118 1.91 $21,000,000
NASSAU PARK II West Windsor
New Jersey $28,000,000 120 1.24 $36,500,000
PRIME RETAIL II
Coeur D'Alene Factory Coeur D'Alene
Outlets Idaho $27,000,000 123 1.51 $18,700,000
Oak Creek Factory Sedona
Outlets Arizona 123 1.51 $12,300,000
Bend
Bend Factory Outlets Oregon 123 1.51 $13,000,000
LAKESIDE VILLAGE San Leandro
California $24,971,982 119 $2,000,000 1.39 $33,690,000
ASIAN GARDENS MALL Westminster
California $24,326,512 178 1.31 $36,900,000
NORTHWOOD CENTRE Tallahassee
Florida $23,000,000 120 1.35 $35,600,000
SOUTH DEKALB MALL Decatur
Georgia $21,798,649 118 $2,500,000 1.41 $30,000,000
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
% OF
SPACE EXPIRATION
ANCHOR/ OCCUPIED YEAR OF
CUT-OFF SQ. FT./ MAJOR BY ANCHOR/ ANCHOR/ LOCK BOX
DATE NO. OF TENANT/ MAJOR MAJOR RESERVE GROUND
LOAN /PROPERTY LTV UNITS OCCUPANCY FRANCHISE TENANT TENANT ACCOUNTS LEASE
- ------------------- ------- --------- --------- ---------------------- ---------- ---------- --------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WESTIN-INDIANAPOLIS
61% 573 74% Hard Lockbox
SECURITY SQUARE
MALL
77% 361,804 94% Sears (Not Owned) 58% n/a Hard Lockbox
TWO GATEWAY CENTER
64% 738,201 90% Prudential Insurance 19% 2007(b)Hard Lockbox
UNIPROP
Aztec Estates 63% 645 95% Soft Lockbox
Kings Manor 63% 314 97% Soft Lockbox
Old Dutch Farms 63% 293 99% Soft Lockbox
Park of the Four
Seasons 63% 572 99% Soft Lockbox
MONTAGUE PARK TECH
CENTER
61% 417,532 100% Ultra Tech Stepper 23% 2005 Hard Lockbox
JACOBS MALL
Conestoga Mall 68% 504,550 96% Dillards 25% 2000 Hard Lockbox
Randolph Mall 68% 283,921 88% Belk-Yates (Not Owned) n/a n/a Hard Lockbox
M&H
LaHabra
Marketplace 48% 392,443 76% Oshmans 14% 2016 Hard Lockbox
Bethard Square 48% 92,988 84% Canned Foods Inc. 23% 2002 Hard Lockbox
How 'Bout Arden 48% 164,909 97% Home Express 34% 2003 Hard Lockbox
NASSAU PARK II
77% 202,104 100% Walmart (Not Owned) n/a n/a Hard Lockbox
PRIME RETAIL II
Coeur D'Alene
Factory Outlets 61% 179,125 81% Hard Lockbox
Oak Creek Factory
Outlets 61% 82,062 99% Hard Lockbox
Bend Factory
Outlets 61% 96,895 100% Hard Lockbox
LAKESIDE VILLAGE
74% 608 93% Soft Lockbox
ASIAN GARDENS MALL 2 Month Debt
66% 111,824 99% Service Reserve
NORTHWOOD CENTRE
65% 502,023 91% Publix 10% 2005 Hard Lockbox Yes
SOUTH DEKALB MALL
73% 328,078 95% Rich's (Not Owned) n/a n/a Hard Lockbox
</TABLE>
- ------------
(a) Loan Amounts for loans secured by more than one Property appear next to
the first mortgaged property securing that loan.
(b) Portions of the Prudential Space are subject to various tenant
cancellation options.
56
<PAGE>
The above 21 Mortgage Loans represent 60% of the Initial Pool Balance and
have ADR or Maturity Dates as follows:
<TABLE>
<CAPTION>
EARLIER OF ADR OR
MORTGAGE LOAN/PROPERTY PRINCIPAL AMOUNT MATURITY DATE
- -------------------------- ---------------- -----------------
<S> <C> <C>
Burnham Pacific............ $ 58,500,000.00 3/11/04
M & H...................... 28,701,825.62 1/11/07
Two Gateway Center......... 34,423,045.11 1/11/07
Kendall Square............. 69,598,691.32 1/11/07
South Dekalb Mall.......... 21,798,648.97 1/11/07
Saracen.................... 68,923,229.56 2/11/07
Lakeside Village........... 24,971,982.08 2/11/07
Montague Park Tech Center . 32,964,627.38 2/11/07
International Plaza........ 65,750,000.00 3/11/07
Northwood Centre........... 23,000,000.00 3/11/07
Nassau Park II............. 28,000,000.00 3/11/07
Uniprop.................... 33,500,000.00 4/11/07
Prime Retail II............ 27,000,000.00 6/11/07
Hudson Hotels.............. 55,854,068.56 12/11/08
Jacobs Mall................ 31,700,000.00 3/11/09
Westin-Indianapolis........ 41,700,000.00 3/11/09
Asian Gardens Mall......... 24,326,512.37 1/11/12
Security Square Mall....... 36,000,000.00 4/11/12
Sunwest.................... 50,500,000.00 3/11/12
Marina Harbour Apts........ 50,586,851.37 3/11/13
K-Mart Distribution
Center.................... 62,250,000.00 4/11/17
TOTAL ..................... $869,049,482.34
</TABLE>
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Annex A. For a detailed presentation of the characteristics of the
Mortgage Loans, on a loan-by-loan basis, see Annex A hereto.
Due Dates. All of the Mortgage Loans provide for Monthly Payments to be
due on the eleventh day of each month or, in the case of certain of the
Mortgage Loans, if the eleventh day is not a business day, the next business
day or the first preceding business day.
Mortgage Rates; Calculations of Interest. Each of the Mortgage Loans
accrues interest on the basis of a 360-day year consisting of twelve 30-day
months or on the basis of the actual number of days elapsed and a 360 day
year. Each of the Mortgage Loans accrues interest at the Mortgage Rate, which
is fixed for the entire remaining term of such Mortgage Loan; provided,
however, as described below under "--Excess Interest," certain of the
Mortgage Loans accrue interest at a higher rate after their respective
Anticipated Repayment Dates. As used herein, the term "Mortgage Rate" does
not include the Excess Rate.
Excess Interest. 106 of the Mortgage Loans, representing approximately 96%
of the Initial Pool Balance, bear interest at their respective Mortgage Rates
until an Anticipated Repayment Date. Commencing on the respective Anticipated
Repayment Date, except as described below, each such Mortgage Loan generally
will bear interest at a fixed rate per annum (the "Revised Rate") equal to
the greater of (a) the Mortgage Rate plus a specified percentage (of no more
than 2%, so long as the Mortgage Loan is included in the Mortgage Pool) and
(b) the Treasury Rate plus a specified percentage (of no more than 2%, so
long as the Mortgage Loan is included in the Mortgage Pool). "Treasury Rate"
means, as of the related Anticipated Repayment Date, the yield on noncallable
U.S. Treasury obligations with terms most nearly approximating the related
stated maturity date. Until the principal balance of each such Mortgage Loan
has been reduced to zero, such Mortgage Loan will only be required to pay
interest at the Mortgage Rate and the interest accrued at the excess of the
related Revised Rate over the related Mortgage Rate will be deferred (such
accrued and deferred interest and interest thereon, if any, is "Excess
Interest"). Except where limited by applicable law, Excess Interest so
accrued will earn interest at the Revised Rate. Prior to the Anticipated
Repayment Date, borrowers under ARD Loans will be required to enter into a
Lock Box agreement whereby all revenue will be deposited directly into a Lock
Box Account
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<PAGE>
controlled by the Servicer. From and after the Anticipated Repayment Date, in
addition to paying interest (at the Mortgage Rate) and principal (based on
the amortization schedule) (together, the "Monthly Debt Service Payment"),
the related borrower generally will be required to apply all monthly cash
flow from the related Mortgaged Property or Properties to pay the following
amounts in the following order of priority: (i) required payments to the tax
and insurance escrow fund and any ground lease escrow fund, (ii) payment of
Monthly Debt Service, (iii) payments to any other required escrow funds, (iv)
payment of operating expenses pursuant to the terms of an annual budget
approved by the Servicer, (v) payment of approved extraordinary operating
expenses or capital expenses not set forth in the approved annual budget or
allotted for in any escrow fund, (vi) principal on the Mortgage Loan until
such principal is paid in full and (vii) to Excess Interest. The cash flow
from the Mortgaged Property or Properties securing an ARD Loan after payments
of items (i) through (v) above is referred to herein as "Excess Cash Flow."
As described below, ARD Loans generally provide that the related borrower is
prohibited from prepaying the Mortgage Loan until the one to six months prior
to the Anticipated Repayment Date but, upon the commencement of such period,
may prepay the loan, in whole or in part, without payment of a Prepayment
Premium. The Anticipated Repayment Date for each ARD Loan is listed in Annex
A.
The holders of 100% of the Percentage Interests in the Class LR
Certificates, and if the holders of the Class LR Certificates do not exercise
their option, the holders of 100% of the Percentage Interests in the most
subordinate Class of Certificates then outstanding (not including the Class
B-7H Certificates), will have the option for up to two months after the
Anticipated Repayment Date for any ARD Loan to purchase such ARD Loan at a
price equal to its outstanding principal balance plus accrued and unpaid
interest and unreimbursed Advances with interest thereon. As a condition to
such purchase, such holders will be required to deliver an opinion of counsel
to the effect that such purchase would not (i) result in a gain which would
be subject to the tax on net income derived from prohibited transactions
imposed by Code Section 860F(a)(1) or otherwise result in the imposition of
any other tax on the Lower-Tier REMIC or Upper-Tier REMIC under the REMIC
provisions of the Code or (ii) cause either of the Lower-Tier REMIC or
Upper-Tier REMIC to fail to qualify as a REMIC.
Amortization of Principal. As set forth in the following table, certain
Mortgage Loans (the "Balloon Loans") provide for monthly payments of
principal based on amortization schedules at least 60 months longer than
their original terms thereby leaving substantial principal amounts due and
payable (each such payment, a "Balloon Payment") on their respective maturity
dates, unless previously prepaid. The remaining Mortgage Loans have remaining
amortization terms that are generally the same as their respective remaining
terms to maturity.
AMORTIZATION CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF
INITIAL NUMBER OF
POOL MORTGAGE
TYPE OF LOAN BALANCE LOANS
- ---------------------------------------------- --------- -----------
<S> <C> <C>
ARD Loans ..................................... 96.2% 106
Fully Amortizing Loans (other than ARD Loans) 2.5% 6
Balloon Mortgage Loans ........................ 1.2% 9
</TABLE>
Prepayment Provisions. All of the Mortgage Loans prohibit voluntary
prepayment during a period (each, a "Lock-out Period") from the date of
origination ranging from approximately 77 months to 239 months. The weighted
average Lock-out Period from the date of origination for the Mortgage Loans
is approximately 138 months and the weighted average remaining Lock-out
Period from the Cut-off Date is approximately 137 months. None of the
Mortgage Loans require the payment of a premium or fee (a "Prepayment
Premium") upon the voluntary prepayment of such Mortgage Loans on or after
the expiration of the related Lock-out Period. The Lock-out Periods for the
ARD Loans all expire on or one to six months prior to their respective
Anticipated Repayment Dates and the Lock-out Periods for the Balloon and
fully amortizing Mortgage Loans (other than ARD Loans) all expire no earlier
than the last one to six months prior to their respective maturities. Certain
of the prepayment terms of each of the Mortgage Loans are more particularly
described in Annex A.
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<PAGE>
OVERVIEW OF LOCK-OUT PERIODS
<TABLE>
<CAPTION>
<S> <C>
Minimum Lock-out Period at Origination ......... 77 months
Minimum Remaining Lock-out Period............... 75 months
Maximum Remaining Lock-out Period............... 240 months
Weighted Average Remaining Lock-out Period .... 137 months
</TABLE>
LOCK-OUT PERIOD CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF NUMBER OF
INITIAL POOL MORTGAGE
TYPE OF LOAN BALANCE LOANS
- ------------------------------------------------------------ -------------- -----------
<S> <C> <C>
Lock-out Period Ending on/close to Anticipated Repayment
Date........................................................ 96.2% 106
Lock-out Period Ending on/close to Maturity Date ............ 3.8 15
TOTAL........................................................ 100% 121
</TABLE>
The Mortgage Loans provide generally that in the event of a condemnation
or casualty, the mortgagee may apply the condemnation award or insurance
proceeds to the repayment of debt, which, in the case of some of the Mortgage
Loans, will require payment of any applicable Prepayment Premium. However, in
the case of most of the Mortgage Loans, if the award or loss is less than a
specified percentage of the original principal balance of the Mortgage Loan
and if in the reasonable judgment of the mortgagee (i) the Mortgaged Property
can be restored within six months prior to the maturity of the related Note
to a property no less valuable or useful than it was prior to the
condemnation or casualty, (ii) after a restoration the Mortgaged Property
would adequately secure the outstanding balance of the Note and (iii) no
event of default has occurred or is continuing, the proceeds or award may be
applied by the borrower to the costs of repairing or replacing the Mortgaged
Property. The Pooling and Servicing Agreement provides that if a Mortgage
Loan provides that the mortgagee may in its discretion apply certain amounts
to a prepayment of principal (e.g., by applying casualty or condemnation
proceeds or funds escrowed for improvements not completed by the required
date) prior to the expiration of the related Lock-out Period, the Special
Servicer cannot apply such funds to such a prepayment unless the Special
Servicer has first received the consent of the Servicer (if the Special
Servicer is not the Servicer) or the holders of 66 2/3% of the Voting Rights
of the Certificates responding within 20 business days to a solicitation of
their consent. If such consent is not obtained, such funds will be made
available to the related borrowers for their proscribed use.
A limited number of Mortgage Loans provide that if casualty or
condemnation proceeds are above a specified amount, the borrower will be
permitted to supplement such proceeds with an amount sufficient to prepay the
entire principal balance of the Mortgage Loan. In such event, no Prepayment
Premium would be required to be paid.
Neither the Depositor nor the Mortgage Loan Seller makes any
representation as to the enforceability of the provision of any Mortgage Loan
requiring the payment of a Prepayment Premium, or of the collectability of
any Prepayment Premium. See "Risk Factors -- The Certificates -- Special
Prepayment and Yield Considerations" herein and "Certain Legal Aspects of
Mortgage Loans -- Default Interest, Prepayment Charges and Prepayments"
herein.
Property Releases. All of the Mortgage Loans permit the applicable
borrower at any time after a specified period (the "Defeasance Lock-out
Period"), which is generally the greater of approximately three years from
the date of origination and two years from the Closing Date, provided no
event of default exists, to obtain a release of a Mortgaged Property from the
lien of the related Mortgage (a "Defeasance Option"), proceeded that, among
other conditions, the borrower (a) pays on any Due Date (the "Release Date")
(i) all interest accrued and unpaid on the principal balance of the Note to
and including the Release Date, (ii) all other sums, excluding scheduled
interest or principal payments, due under the Mortgage Loan and all other
loan documents executed in connection therewith, (iii) an amount (the
"Collateral Substitution Deposit") equal to the sum of (x) the remaining
principal amount of the Mortgage Loan or, if applicable, 125% (generally) of
the Allocated Loan Amount of the related Mortgaged Property or Properties
sought to be released, (y) the amount, if any, which, when added to such
amount, will be sufficient to purchase direct non-callable obligations of the
United States of America providing payments (1) on or prior to, but as close
as possible to, all successive scheduled payment dates from the Release Date
to the related maturity date, assuming, in the case of an ARD Loan, that such
loan prepays on the related Anticipated Repayment Date and (2) in amounts
equal to the scheduled payments due on such Due Dates under the Mortgage
Loan, and (z) any costs and expenses incurred in connection with the purchase
of such U.S.
59
<PAGE>
government obligations and (b) delivers a security agreement granting the
Trust Fund a first priority lien on the Collateral Substitution Deposit and
the U.S. government obligations purchased with the Collateral Substitution
Deposit and an opinion of counsel to such effect. The Pool Loans generally
require that (i) prior to the release of a related Mortgaged Property, a
specified percentage (generally 125%) of the Allocated Loan Amount for such
Mortgaged Property be defeased and (ii) that the DSCR with respect to the
remaining Mortgaged Properties after the defeasance be no less than the
greater of (x) the DSCR at origination and (y) the DSCR immediately prior to
such defeasance. The Servicer will be responsible for purchasing the U.S.
government obligations on behalf of the borrower at the borrower's expense.
Any amount in excess of the amount necessary to purchase such U.S. government
obligations will be returned to the borrower. Simultaneously with such
actions, the related Mortgaged Property will be released from the lien of the
Mortgage Loan and the pledged U.S. government obligations (together with any
Mortgaged Property not released, in the case of a partial defeasance) will be
substituted as the collateral securing the Mortgage Loan.
In general, a successor borrower established or designated by the Mortgage
Loan Seller will assume all of the defeased obligations of a borrower
exercising a Defeasance Option under a Mortgage Loan and the borrower will be
relieved of all of the defeased obligations thereunder. If a Mortgage Loan is
partially defeased, the related Note will be split and only the defeased
portion of the borrower's obligations will be transferred to the successor
borrower.
The Depositor makes no representation as to the enforceability of the
defeasance provisions of any Mortgage Loan. See "Risk Factors and Other
Special Considerations -- The Certificates -- Special Prepayment and Yield
Considerations."
Escrows. All of the Mortgage Loans, other than the Englar Plaza Shopping
Center Loan, the Kmart Distribution Center Loan and the Northridge Shopping
Center Loan, provide for monthly escrows to cover property taxes. All of the
Mortgage Loans provide for monthly escrows to cover insurance premiums on the
Mortgaged Properties (except in cases where six months to one year of
insurance premiums are escrowed). Certain of the Mortgage Loans secured by
leasehold interests also provide for escrows to make ground lease payments.
Thirteen of the Mortgage Loans, which represent approximately 8% of the
Initial Pool Balance (which includes all Mortgage Loans other than Mobile
Home Loans and the Kmart Distribution Center Loan) do not require monthly
escrows to cover ongoing replacements and capital repairs.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. The Mortgage Loans
generally contain "due-on-sale" and "due-on-encumbrance" clauses that in each
case permit the holder of the Mortgage Loan to accelerate the maturity of the
Mortgage Loan if the borrower sells or otherwise transfers or encumbers the
related Mortgaged Property without the consent of the mortgagee. The Special
Servicer will determine, in a manner consistent with the Servicing Standard,
whether to exercise any right the mortgagee may have under any such clause to
accelerate payment of the related Mortgage Loan upon, or to withhold its
consent to, any transfer or further encumbrance of the related Mortgaged
Property. Certain of the Mortgage Loans provide that the mortgagee may
condition an assumption of the loan on the receipt of an assumption fee,
which is in some cases equal to one percent of the then unpaid principal
balance of the applicable Note, in addition to the payment of all costs and
expenses incurred in connection with such assumption. Certain of the Mortgage
Loans provide that such consent may not be unreasonably withheld provided
that (i) no event of default has occurred, (ii) the proposed transferee is
creditworthy and has sufficient experience in the ownership and management of
properties similar to the Mortgaged Property, (iii) the Rating Agencies have
confirmed in writing that such transfer will not result in a qualification,
reduction or withdrawal of the then current rating of the Certificates, (iv)
the transferee has executed and delivered an assumption agreement evidencing
its agreement to abide by the terms of the Mortgage Loan together with legal
opinions and title insurance endorsements and (v) the assumption fee has been
received (which assumption fee will be paid to the Servicer and Special
Servicer as provided in the Pooling and Servicing Agreement and will not be
paid to the Certificateholders). See "Certain Legal Aspects of Mortgage Loans
- -- Due-on-Sale and Due-on-Encumbrance" herein. See "Risk Factors -- The
Mortgage Loans -- Exercise of Remedies." The Depositor makes no
representation as to the enforceability of any due-on-sale or
due-on-encumbrance provision in any Mortgage Loan.
Mortgage Provisions Relating to Servicer's Right to Terminate Management
Agreements. Certain of the Mortgage Loans permit the Special Servicer to
cause the related borrowers to terminate the related management agreements
upon the occurrence of certain events. Generally, each Mortgage Loan with
Cut-off Date Principal Balances in excess of $21,000,000 and certain other
Mortgage Loans, where an affiliate of the borrower manages the related
Mortgaged Property or Properties provides that if the DSCR for such Mortgage
Loan falls below a certain level, the Special Servicer will have the right to
cause the termination of the related management agreement and replace the
manager with a manager acceptable to the Special Servicer. The Mortgage Loans
generally allow the Special Servicer to terminate the related
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<PAGE>
management agreements upon the occurrence of certain events of default under
the related loan agreements or mortgage documents. In addition, the Special
Servicer is generally permitted to cause the termination of a management
agreement if the manager breaches certain provisions of the management
agreement which would permit the termination of such agreement thereunder.
Cross-Collateralization and Cross-Default of Certain Mortgage
Loans. Nineteen of the Mortgage Loans (the "Pool Loans") with Cut-off Date
Principal Balances ranging from $3,800,000 million to $69,598,691 million and
comprising 42% of the Mortgage Pool by Cut-off Date Principal Balance are
secured by more than one Mortgaged Property. However, because certain states
require the payment of a mortgage recording or documentary stamp tax based
upon the principal amount of debt secured by a mortgage, the Mortgages
recorded with respect to certain Mortgaged Properties secure only 150% of the
Allocated Loan Amount of such Mortgaged Properties (rather than the entire
initial principal balance of the related Notes). See "Risk Factors and Other
Special Considerations --Limitations on Enforceability of
Cross-Collateralization" and "Loan Characteristics" on Annex A.
Hazard, Liability and Other Insurance. The Mortgage Loans generally
require that each Mortgaged Property be insured by a hazard insurance policy
in an amount equal to the greatest of (i) the full replacement cost of the
improvements and equipment without deduction for physical depreciation, (ii)
the outstanding principal balance of the Mortgage Loan (or, with respect to
Pool Loans, the full insurable value of the Mortgaged Property) and (iii)
such amount that the insurer would not deem the borrower a co-insurer, or in
an amount satisfying other similar standards and by a flood insurance policy
if any part of the Mortgaged Property is located in an area identified by the
Federal Emergency Management Agency as an area having special flood hazards
and for which flood insurance has been made available under the National
Flood Insurance Program in an amount at least equal to the outstanding
principal amount of the Mortgage Loan (or with respect to Pool Loans, the
full insurable value of the Mortgaged Property) or the maximum limit of
coverage available, whichever is less, or in an amount satisfying other
similar standards. With respect to Mortgaged Properties located in earthquake
risk areas, certain of the related Mortgaged Properties are insured by
earthquake insurance, and certain of such insured Mortgaged Properties may be
insured in amounts less than the outstanding principal balance of such
Mortgage Loans. With respect to Mortgaged Properties located in areas having
special hurricane hazards, certain of the related Mortgaged Properties are
insured by hurricane insurance in amounts less than the outstanding principal
balance of such Mortgage Loans. The hazard insurance policy is required to
cover loss or damage by fire and lightning or other risks and hazards covered
by a standard extended coverage insurance policy including, but not limited
to, riot and civil commotion, vandalism, malicious mischief, burglary and
theft. Mobile Home Properties located in earthquake risk areas or areas
having special hurricane hazards are not insured against earthquake or
hurricane damage.
The Mortgage Loans also generally require that the borrower obtain and
maintain during the entire term of the Mortgage Loan (i) comprehensive public
liability insurance, including broad form property damage, blanket
contractual and personal injuries coverages and containing minimum limits per
occurrence as specified in the related Mortgage, (ii) rent loss and/or
business interruption insurance in an amount equal to the greater of (x)
estimated annual (or a specified longer period) gross revenues from the
operations of the Mortgaged Property and (y) projected annual (or a specified
longer period) operating expense (including debt service) for the maintenance
and operation of the Mortgaged Property, or in an amount satisfying other
similar standards, (iii) except with respect to certain of the Mobile Home
Loans, insurance against loss or damage from leakage of sprinkler systems and
explosion of steam boilers, air conditioning equipment, high pressure piping,
machinery and equipment, and pressure vessels, (iv) if the Mortgaged Property
is a commercial property, worker's compensation insurance, (v) during any
period of repair or restoration, builders "all risk" insurance, and (vi) such
other insurance as may from time to time be reasonably required by the
mortgagee in order to protect its interests.
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<PAGE>
ADDITIONAL MORTGAGE LOAN INFORMATION
<TABLE>
<CAPTION>
<S> <C>
GENERAL CHARACTERISTICS (AS OF CUT-OFF DATE, UNLESS OTHERWISE INDICATED)
Initial Pool Balance (1) ........................................................ $1,403,292,505
Number of Mortgage Loans ........................................................ 121
Number of Mortgaged Properties .................................................. 252
Average Mortgage Loan Balance ................................................... $11,597,459
Weighted Average Mortgage Rate .................................................. 8.666%
Range of Mortgage Rates ......................................................... 7.575%-10.1%
Weighted Average Remaining Term to the Earlier of Maturity or Anticipated
Repayment Date ................................................................. 140 Months
Range of Remaining Term to the Earlier of Maturity or Anticipated Repayment Date 80-241 Months
Weighted Average Original Amortization Term (2) ................................. 312
Range of Original Amortization .................................................. 156-360
Weighted Average DSCR (3) ....................................................... 1.42
Range of DSCR (3) ............................................................... 1.22-2.20
Weighted Average LTV (4) ........................................................ 67%
Range of LTV .................................................................... 34%-85%
Weighted Average LTV at Earlier of Anticipated Repayment Date or Maturity (5) .. 51%
Percentage of Initial Pool Balance made up of:
ARD Loans ...................................................................... 96.2%
Fully Amortizing Loans (other than ARD Loans) .................................. 2.5%
Balloon Loans .................................................................. 1.2%
Delinquent as of Cut-off Date ................................................... 0%
</TABLE>
- ------------
(1) Subject to a permitted variance of plus or minus 5%.
(2) "Weighted Average Original Amortization Term" reflects the fact that
certain Mortgage Loans provide for Monthly Payments based on
amortization schedules at least 60 months longer than the remaining
stated terms of such Mortgage Loans. See "Description of the Mortgage
Pool -- Certain Terms and Conditions of the Mortgage Loans --
Amortization of Principal" herein.
(3) DSCR for any Mortgage Loan is equal to the Net Cash Flow from the
related Mortgaged Property divided by the Annual Debt Service for such
Mortgaged Property (as defined below).
(4) "LTV" or "Loan-to-Value Ratio" means, with respect to any Mortgage
Loan, the principal balance of such Mortgage Loan as of the Cut-off
Date divided by the appraised value of the Mortgaged Property or
Properties securing such Mortgage Loan.
(5) "LTV at Earlier of Anticipated Repayment Date or Maturity" for any
Mortgage Loan is calculated in the same manner as LTV as of the Cut-off
Date, except that the Mortgage Loan Cut-off Date Principal Balance used
to calculate the LTV as of the Cut-off Date has been adjusted to give
effect to the amortization of the applicable Mortgage Loan as of its
maturity date or, in the case of a Mortgage Loan that has an
Anticipated Repayment Date, as of its Anticipated Repayment Date. Such
calculation thus assumes that the appraised value of the Mortgaged
Property or Properties securing a Mortgage Loan on the maturity date or
Anticipated Repayment Date, as applicable, is the same as the appraised
value as of the Cut-off Date. There can be no assurance that the value
of any particular Mortgaged Property will not have declined from the
appraised value.
The following tables and Annex A set forth certain information with
respect to the Mortgage Loans and Mortgaged Properties. The statistics in the
following tables and Annex A were primarily derived from information provided
to the Depositor by Bloomfield or the Mortgage Loan Seller, which information
may have been obtained from the borrowers without independent verification
except as noted. For purposes of the tables and Annex A:
(1) "Net Cash Flow" is as defined under "--The Mortgage Loan Program --
Underwriting Standards."
(2) "Underwritten NOI" means Net Cash Flow before deducting for capital
expenditures, tenant improvements and leasing commissions.
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<PAGE>
(3) "1994 NOI", "1995 NOI" and "1996 NOI" (which is for the period ending
as of the date specified in Annex A) is the net operating income for a
Mortgaged Property as established by information provided by the borrowers,
except that in certain cases such net operating income has been adjusted by
removing certain non-recurring expenses and revenue or by certain other
normalizations. 1994 NOI, 1995 NOI and 1996 NOI do not necessarily reflect
accrual of certain costs such as taxes and capital expenditures and do not
reflect non-cash items such as depreciation or amortization. In some cases,
capital expenditures may have been treated by a borrower as an expense or
expenses treated as capital expenditures. The Depositor has not made any
attempt to verify the accuracy of any information provided by each borrower
or to reflect changes in net operating income that may have occurred since
the date of the information provided by each borrower for the related
Mortgaged Property. 1994 NOI, 1995 NOI and 1996 NOI were not necessarily
determined in accordance with generally accepted accounting principles.
Moreover, 1994 NOI, 1995 NOI and 1996 NOI are not a substitute for net income
determined in accordance with generally accepted accounting principles as a
measure of the results of a property's operations or a substitute for cash
flows from operating activities determined in accordance with generally
accepted accounting principles as a measure of liquidity and in certain cases
may reflect partial-year annualizations.
For purposes of determining 1996 NOI as set forth on Annex A:
"YE" means for the twelve-month period ended December 31, 1996;
"YTD" means for the period commencing on January 1, 1996 and ending on
date indicated;
"Ann." means an annualized NOI calculated for the period indicated; and
"TTM" means NOI calculated for the trailing twelve months ending on the
date indicated.
(4) "Allocated Loan Amount" means, for each Mortgaged Property, the
portion of the principal amount of the related Mortgage Loan allocated to
such Mortgaged Property for certain purposes (including, without limitation,
determining the release prices of properties, if the Mortgage Loan permits
such releases) under such Mortgage Loan. The Allocated Loan Amount for each
Mortgaged Property securing a Mortgage Loan was determined generally based on
the ratio of the Net Cash Flow or net operating income (calculated as
provided in the related Mortgage Loan) or appraised value, or some
combination thereof, of such Mortgaged Property to the aggregate Net Cash
Flow or appraised value, or some combination thereof, of all the Mortgaged
Properties securing such Mortgage Loan. The Allocated Loan Amount for each
Mortgaged Property may be adjusted upon the payment of principal of the
related Mortgage Loan, whether upon amortization, prepayment, or otherwise.
"Cut-off Date Allocated Loan Amount" means for each Mortgaged Property the
Allocated Loan Amount of such property as of the Cut-off Date. There can be
no assurance, and it is unlikely, that the Allocated Loan Amounts represent
the current values of individual Mortgaged Properties, the price at which an
individual Mortgaged Property could be sold in the future to a willing buyer
or the replacement cost of the Mortgaged Properties.
(5) "Original Loan Balance" means the principal balance of the Mortgage
Loan as of the date of origination.
(6) "Cut-off Date Principal Balance" means the principal balance per unit
of measure as of the Cut-off Date.
(7) Cut-off Date Principal Balance/Unit
(8) "Annual Debt Service" means for any Mortgage Loan the current annual
debt service payable during the twelve month period commencing on May 11,
1997 on the related Mortgage Loan.
(9) "DSCR" means, with respect to any Mortgage Loan, (a) the Net Cash Flow
for the related Mortgaged Property or Properties, divided by (b) the Annual
Debt Service for such Mortgage Loan. The calculation of "DSCR" may differ
from the calculation of the debt service coverage ratios referred to under
"--The Mortgage Loan Program -- Underwriting Standards; Representations." For
the Econolodge Portfolio and the Cleveland Industrial Portfolio, DSCR was
calculated using a twenty-five year amortization, whereas all other
calculations for such loans were based on shorter amortization periods as
required so long as excess cash is available.
(10) "Stated Maturity Date" means the maturity date of the Mortgage Loan
as stated in the related Note or Loan Agreement.
(11) "Anticipated Repayment Date" means for ARD Loans, the date on which
interest begins accruing at the Revised Rate and/or Excess Cash Flow is
retained pursuant to the related Lock-box Agreements to application to
payment of principal and Excess Interest.
(12) "Anticipated Remaining Term" means the term of the Mortgage Loan from
the Cut-off Date to the earlier of the Anticipated Repayment Date, if
applicable, and the maturity date.
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(13) "Remaining Lock-out" means the period of the term of the related
Mortgage Loan from the Cut-off Date during which the Mortgage Loan may not be
prepaid.
(14) "Value" means for each of the Mortgaged Properties, the appraised
value of such property as determined by an appraisal thereof and in
accordance with MAI standards made not more than 18 months prior to the
origination date of the related Mortgage Loan. No MAI appraisals were
obtained with respect to the Sunwest Pool Properties. A capitalization rate
of 9.5% was applied to the net cash flow as determined by the Mortgage Loan
Seller in its underwriting in determining the approximate value of those
properties.
(15) "Maturity Date/Anticipated Repayment Date LTV" for any Mortgage Loan
is calculated in the same manner as Cut-off Date LTV, except that the
Mortgage Loan Cut-off Date Principal Balance used to calculate the Cut-off
Date LTV has been adjusted to give effect to the amortization of the
applicable Mortgage Loan as of its maturity date or, in the case of a
Mortgage Loan that has an Anticipated Repayment Date, as of its Anticipated
Repayment Date. Such calculation thus assumes that the appraised value of the
Mortgaged Property or Properties securing a Mortgage Loan on the maturity
date or Anticipated Repayment Date, as applicable, is the same as the
appraised value as of the Cut-off Date. There can be no assurance that the
value of any particular Mortgaged Property will not have declined from the
appraised value.
(16) "Amortization" means the number of months, based on the constant
Monthly Payment as stated in the related Note or Loan Agreement, that would
be necessary to reduce the principal balance of the related Note to zero if
interest on such Note was calculated based on twelve 30-day months and a
360-day year.
(17) "Year Built/Renovated" means the year in which the respective
Mortgaged Property was built and/or renovated.
(18) "Unit" and "Unit of Measure" mean the number of units in the
respective Mortgaged Property.
(19) "Occupancy" means the percentage of gross leaseable area, rooms,
units, beds or sites of the property that is leased. Occupancy rates are
calculated within a recent period and in certain cases reflect the average
occupancy rate over a period of time.
(20) "Underwritten Occupancy" means the occupancy rate used in determining
Net Cash Flow.
(21) "Anchor" means, with respect to the Retail Properties, the largest,
second and third largest tenants, if any.
(22) "Major Tenants" mean one of the largest tenants. An asterisk next to
a Major Tenant means that the property occupied by such tenant is not owned
by the related borrower.
(23) "Major Tenant Percentage of Square Feet" means the square feet leased
to a Major Tenant as a percentage of the total square feet of the Mortgaged
of Property.
(24) "Major Tenant Lease Expiration Date" means the year in which a Major
Tenant's lease is scheduled to expire.
(25) "Franchise" means the regional or national franchise affiliation of a
Hotel Property.
(26) "Audit/Agreed Upon Procedures/Review" indicates Mortgaged Properties
for which independent accountants performed audits, reviews or specified
procedures upon financial information provided by the borrower at the request
of the Mortgage Loan Seller or the borrower. The cash flow and NOI
information presented in Annex A may not correspond to the comparable
information included in the accountants' reports because of adjustments made
by the Mortgage Loan Seller as part of its underwriting procedures.
(27) "Identified Deferred Maintenance" is the estimated amount of deferred
maintenance in the respective Mortgaged Property's structural engineering
report.
(28) "Reserve for Deferred Maintenance" is the actual dollars escrowed at
the loan origination for deferred maintenance repairs.
(29) "Actual On-going Capital Reserves" means the annual reserves, as
indicated, per unit of measure or as a percentage of gross revenue and
escrowed on a monthly basis.
(30) "GLA" means the square footage of the gross leaseable area of each
Mortgaged Property.
Due to rounding, percentages in the following tables may not add to 100%
and amounts may not add to indicated total or subtotal.
64
<PAGE>
Mortgaged Properties secured, or partially secured, by a leasehold estate
are indicated on Annex A under the heading "Property Name" with an asterisk.
Mortgage Loans accruing interest on the basis of the actual number of days
elapsed and a 360-day year are indicated on Annex A under the heading
"Mortgage Rate" with an asterisk.
The tables below set forth certain summary information regarding the
Mortgage Loans. See Annex A hereto for certain characteristics of Mortgage
Loans on a loan-by-loan basis. All percentages of Initial Pool Balances used
herein and in Annex A are based upon the Cut-off Date Principal Balance of
the related Mortgage Loan or, with respect to Pool Loans, are based upon the
Allocated Loan Amount of the related Mortgaged Property. All weighted average
information regarding the Mortgage Loans reflects weighting of the Mortgage
Loans by their Cut-off Date Principal Balances or, with respect to Pool
Loans, Allocated Loan Amounts. The "Cut-off Date Principal Balance" of each
Mortgage Loan is equal to the unpaid principal balance thereof as of the
Cut-off Date, after application of all payments of principal due on or before
such date, whether or not received. All numerical information provided herein
and in Annex A with respect to the Mortgage Loans is provided on an
approximate basis. Certain statistical information set forth herein may
change prior to the date of issuance of the Certificates due to changes in
the composition of the Mortgage Pool prior to the Closing Date. No Mortgage
Loan represents more than 5% of the entire pool of Mortgage Loans. See
"--Changes in Mortgage Pool Characteristics" herein.
On the following tables, the "Remaining Anticipated Term" and the
"Remaining Lockout" are calculated from the Cut-off Date. Because certain of
the Mortgage Loans have first Due Dates on which principal and interest is
due subsequent to the Cut-off Date, the Remaining Anticipated Term and the
Remaining Lockout with respect to each such Mortgage Loan is longer than the
Anticipated Term and the Lockout. Remaining Anticipated Term indicates the
actual number of periods from the Cut-off Date until the earlier of the
maturity date or Anticipated Repayment Date and Remaining Lockout indicates
the actual number of periods from the Cut-off Date until the expiration of
the Lockout period.
65
<PAGE>
MORTGAGE NOTES
<TABLE>
<CAPTION>
CUT-OFF
DATE MONTHLY
LOAN # LOAN NAME BORROWER LEGAL NAME NOTE BALANCE PAYMENT
- ------ -------------------------------- ------------------------------------------ ---- -------------- -----------
<S> <C> <C> <C> <C> <C>
1 Kendall Square Old Kendall Property LLC $69,598,691 $535,191.92
2 Saracen Wells Ave. Senior Holdings LLC 68,923,230 507,982.11
3 International Plaza International Plaza L.P. A 64,650,000 506,294.87
3 International Plaza International Plaza L.P. B 1,100,000 13,756.37
4 K-Mart Distribution Centers Brentwood Holding Corp. 63,000,000 542,047.98
5 Burnham Pacific BPP/Puente Hills, LP A 33,100,000 255,054.69
5 Burnham Pacific BPP/Valley Central. LP B 25,400,000 195,721.73
6 Hudson Hotels HH Properties-I, Inc. 55,854,069 477,257.43
7 Marina Harbour Apts. Marina Pacific Assoc. 50,586,851 434,553.48
8 Sunwest Sunwest N.C. Trust A 46,707,370 374,331.67
8 Sunwest Sunwest N.C. Trust B 3,792,630 29,593.20
9 Westin--Indianapolis Westin Indianapolis, LLC 41,700,000 356,075.92
10 Two Gateway Center Townsend Gateway LP 34,423,045 273,746.58
11 Uniprop Uniprop M.H.C. Income Fund I,L.P. 33,500,000 251,438.84
12 Montague Park Tech Center Montague LLC 32,964,627 255,849.29
13 Jacobs Mall J.A. Rand LLC A 19,200,000 148,857.77
13 Jacobs Mall J.A. Conestoga LLC B 12,500,000 99,590.06
14 M & H M & H Realty Partners L.P. 28,701,826 202,502.73
15 Nassau Park II Hendon Princeton Assoc. No. 3 L.P. 28,000,000 210,590.91
16 Prime Retail II Prime Retail, L. P. 27,000,000 214,688.86
17 Lakeside Village Friedkin/Lakes Village Assoc. 24,971,982 182,309.59
18 Asian Gardens Mall Asian Garden Limited, LP 24,326,512 204,955.35
19 Northwood Centre Mark Northwood Assoc., L.P. 23,000,000 193,330.26
20 South Dekalb Mall CV NACC Dekalb, L.L.C. 21,798,649 178,117.95
21 Ambassador Apartments II Ambassador XI, L.P. 21,500,000 158,960.07
22 Century Square Mall Terra Century Assoc., L.P. 21,000,000 168,517.64
23 Holladay Holladay Midwest/Mishawaka 20,270,000 167,751.65
24 Knollwood Village Apartments Knollwood Village Assoc LP 19,940,533 156,056.26
25 Tuscon Place Artus Inc. I LLC 17,325,000 132,723.44
26 2 St. Marks/Greystone 2 St.Marks LP 15,371,078 115,928.91
27 Holiday Inn--Alexandria Gadsby Lodging Assoc. LP 14,875,834 148,503.33
28 Hamilton Park Health Care Center First Connecticut Holding Group, L.L.C. II 14,636,056 135,109.15
29 Burlington Square Burlington Executive Center Assoc. I 14,642,002 110,475.16
30 Alzina Office Building Alzina Building, LLC 14,019,336 124,931.71
31 Danvers Crossing Shopping Center DanCross Assoc. LP 13,627,151 109,381.72
32 Residence Inn-Herndon Herndon Lodge GP 13,481,513 115,611.56
33 Del Mar Del Mar Village L.P. 12,482,642 98,650.18
34 The Plaza Burr Corners I & II Burr Plaza I L.P. 12,278,439 99,664.32
35 Holiday Inn New Orleans Mikins Corporation 11,909,688 113,096.92
36 Tramz Tramz New York, Ltd. L.P. 11,599,902 107,757.82
37 Shadyside Gardens Apartment Shadyside Assoc. L.P. 10,500,000 82,787.26
38 Radisson Inn--Columbus Columbus Hawaii L.P. 9,665,000 87,935.46
39 Hood Commons Preferred Merchant Hood LLC 9,025,000 67,358.20
40 30 Broad Street 30 Broad Assoc., LP 9,000,000 74,605.37
41 Cleveland Industrial Portfolio Legacy Property Investments VI, Ltd. 8,665,157 92,224.11
42 Sehome Village Bellingham Marketplace Assoc., LP 8,300,000 63,525.94
43 Festival at Moreno Valley Hemlock Properties, LLC 8,065,000 70,245.38
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
STATED ANTICIPATED
MATURITY MORTGAGE REMAINING REMAINING
LOAN # DATE RATE LOCKOUT TERM AMORTIZATION
- ------ -------- -------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1 01/11/27 8.485 %* 117 118 360
2 02/11/27 8.035 %* 118 119 360
3 03/11/27 8.700 %* 115 120 360
3 03/11/27 8.700 %* 115 120 120
4 03/11/22 9.2975%* 240 241 299
5 03/11/22 7.981 %* 80 84 300
5 03/11/22 7.981 %* 80 84 300
6 12/11/21 9.190 %* 140 141 300
7 10/11/16 8.250 %* 191 192 240
8 03/11/27 8.660 %* 179 180 325
8 03/11/27 8.660 %* 179 180 360
9 03/11/22 9.214 %* 143 144 300
10 01/11/22 8.325 %* 117 118 299
11 04/11/27 8.240 %* 117 121 360
12 02/11/27 8.590 %* 115 119 360
13 03/11/27 8.590 %* 143 144 360
13 03/11/27 8.890 %* 143 144 360
14 01/11/27 7.575 %* 114 118 360
15 03/11/27 8.262 %* 119 120 360
16 03/11/22 8.350 %* 119 123 300
17 02/11/27 7.935 %* 118 119 360
18 04/11/22 9.050 %* 177 178 303
19 03/11/22 9.020 %* 119 120 300
20 01/11/22 8.650 %* 117 118 300
21 03/11/27 8.080 %* 119 120 360
22 04/11/27 8.970 %* 180 181 360
23 03/11/22 8.830 %* 113 120 300
24 10/11/26 8.660 % 111 115 360
25 03/11/27 8.460 %* 142 144 360
26 02/11/27 8.280 %* 115 119 360
27 12/11/11 8.590 %* 173 177 180
28 12/11/16 9.300 %* 173 177 240
29 01/11/27 8.280 %* 138 142 360
30 01/11/17 8.820 %* 75 82 240
31 11/11/23 8.670 %* 112 116 324
32 02/11/22 9.250 %* 175 179 300
33 01/11/27 8.785 %* 114 118 360
34 01/11/22 8.570 %* 114 118 300
35 10/11/16 9.670 %* 171 175 240
36 12/11/16 9.390 %* 173 177 240
37 03/11/22 8.250 %* 113 120 300
38 04/11/19 9.580 %* 114 121 264
39 04/11/27 8.180 %* 117 121 360
40 04/11/22 8.850 % 117 121 300
41 02/11/22 8.480 %* 151 155 156
42 04/11/27 8.450 %* 114 121 360
43 04/11/17 8.550 %* 174 181 240
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF
DATE MONTHLY
LOAN # LOAN NAME BORROWER LEGAL NAME NOTE BALANCE PAYMENT
- ------ -------------------------------- ------------------------------------------ ---- -------------- -----------
<S> <C> <C> <C> <C> <C>
44 Madison House HJM--Madison Health Care Center, LLC $ 6,725,941 $ 61,147.07
45 Decker Building Decker Assoc. LLC 6,500,000 50,988.91
46 EconoLodge Portfolio Lark Investment Co. Inc. LLC A 2,120,000 19,983.21
46 EconoLodge Portfolio Fredricksburg Inn LLC B 1,575,000 14,846.02
46 EconoLodge Portfolio Wytheville Assoc. LLC C 998,111 9,408.24
46 EconoLodge Portfolio Country Roads Assoc. LLC D 608,018 5,731.20
46 EconoLodge Portfolio Chesapeake Assoc. LLC E 525,483 4,953.22
46 EconoLodge Portfolio Sunrise West Assoc. LLC F 476,388 4,490.45
47 Residence Inn-Livermore RI Livermore, L.P. 6,060,000 50,192.99
48 140 Allen SJP Allen Road, L.L.C. 5,991,620 50,146.51
49 Brookside Commons Apartments Brookside Commons LP 5,900,000 48,426.33
50 Lincoln Park Center Lincoln Park Plaza Assoc. LP 5,892,333 48,452.36
51 Magnolia-Western Investments Magnolia-Western Investments, LP 5,781,465 57,844.78
52 Buena/Leisure Nursing MEK Assoc. LLC, a CA LLC 5,609,541 54,607.09
53 Englar Shopping Center Englar Center L.P. 5,523,398 45,656.17
54 Totem Square Shopping Center Totem Square Partners 5,425,000 44,343.58
55 Equitable of Iowa Building EIB Acquisition, LLC 5,169,401 50,538.09
56 Inn at Manchester Inn at Manchester, Inc. 5,090,239 48,039.36
57 Outlets Limited Mall Venture Outlet Mall LLC 4,959,958 43,644.66
58 Warwick Commons 399 Bald Hill Rd Prtnrs 5,000,000 40,632.67
59 Alden Terrace Investments Alden Terrace Investments, LP 4,731,830 47,342.96
60 6000 Metro Drive 6000 Metro LLC 4,707,742 39,234.34
61 Country Hearth Inn--Orlando Heritage Inn Assoc., LP 4,574,045 43,028.34
62 Longwood Manor Investments Longwood Manor Investments LP 4,563,370 45,657.48
63 Tech Center 29 Tech Center 29 LP 4,532,434 36,883.45
64 Davol Square Jewelry Bldg. Davol Square Jewelry Mart, LLC 4,484,492 38,966.64
65 Lincoln MHP Lincoln Park Assoc., LP 4,144,091 32,263.51
66 National Bank of California Fairfax Centre L.L.C. 4,119,395 32,983.13
67 Best Western-Jacksonville EDC Park Partnership 4,092,178 38,754.43
68 The Lab The Lab, LP 4,060,002 33,835.22
69 Northridge Shopping Center Minsyr-Oxbridge LLC 4,000,000 33,857.01
70 Days Inn-Providence Gano Holdings, LLC 3,955,000 37,124.44
71 Plymouth Mall Plymouth Mall L.P. 3,941,797 32,770.40
72 Residence Inn-Gainesville Triple T Inns of Arizona, Inc. 3,925,000 33,721.39
73 Ramada Inn Bossier Red River Lodging, Inc. 3,788,821 36,494.76
74 Sutton Place + South Livingston Livingston Assoc. A 3,116,000 26,128.02
74 Sutton Place + South Livingston Livingston Assoc. B 684,000 5,735.42
75 Old Town Square Progressive Old Town Sq. LLC 3,742,129 30,906.86
76 Anza Corporate Center Bayco Investment Co. 3,492,575 28,656.23
77 Washington Square Washington Square Shopping Center, LP 3,463,909 29,671.95
78 Winston Village Winston Perris, L.P. 3,370,372 28,856.32
79 Plaza Reyes Adobe Retail Center The Canwood Street, GP 3,350,000 28,067.21
80 Comfort Inn--Castaic Castaic Hotel Properties, Inc. 2,994,486 26,818.18
81 Pocono Green Pocono Green Plaza Assoc. LLC 2,993,860 25,114.29
82 Saunders Plaza JRSM Corporation 2,969,460 25,232.91
83 Heritage Bank Building Heritage Building, LLC 2,917,946 24.621.44
84 Arvada Plaza Arvada Plaza Retail LLC 2,897,637 25,417.89
85 Good Guys Plaza PRET Subsidiary, Inc. 2,850,000 23,527.99
86 Candlelite Apartments Candlelite Apts., Ltd. 2,789,524 23,077.12
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
STATED ANTICIPATED
MATURITY MORTGAGE REMAINING REMAINING
LOAN # DATE RATE LOCKOUT TERM AMORTIZATION
- ------ -------- -------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
44 10/11/21 9.960%* 171 175 300
45 03/11/22 8.190 116 120 300
46 03/11/22 9.660%* 176 180 240
46 03/11/22 9.660%* 176 180 240
46 03/11/22 9.660%* 176 180 240
46 03/11/22 9.660%* 176 180 240
46 03/11/22 9.660%* 176 180 240
46 03/11/22 9.660%* 176 180 240
47 04/11/22 8.840%* 174 181 300
48 02/11/22 8.950%* 175 179 300
49 03/11/22 8.730%* 113 120 300
50 01/11/27 9.230%* 174 178 360
51 02/11/12 8.714%* 178 179 180
52 02/11/17 10.100%* 175 179 240
53 01/11/22 8.790%* 114 118 300
54 03/11/22 8.680% 116 120 300
55 01/11/12 8.280%* 78 82 180
56 02/11/17 9.650%* 175 179 240
57 10/11/16 8.580%* 171 175 240
58 04/11/22 8.610%* 174 181 300
59 02/11/12 8.714%* 178 179 180
60 01/11/22 8.890%* 114 118 300
61 11/11/16 9.550%* 172 176 240
62 02/11/12 8.714%* 178 179 180
63 11/11/21 8.580%* 76 80 300
64 01/11/17 8.470%* 111 118 240
65 01/11/27 8.620%* 78 82 360
66 01/11/27 8.930%* 114 118 360
67 02/11/17 9.700%* 175 179 240
68 11/11/21 8.870%* 112 116 300
69 04/11/17 8.160%* 174 181 240
70 03/11/17 9.600%* 173 180 240
71 01/11/22 8.860%* 114 118 300
72 03/11/22 9.290%* 176 180 300
73 01/11/17 9.930%* 174 178 240
74 03/11/22 8.990%* 116 120 300
74 03/11/22 8.990%* 116 120 300
75 01/11/07 8.780%* 114 118 300
76 01/11/22 8.700%* 111 118 300
77 11/11/21 9.210%* 112 116 300
78 02/11/22 9.230%* 112 119 300
79 03/11/22 8.980%* 113 120 300
80 01/11/22 9.790%* 174 178 300
81 01/11/22 8.970%* 114 118 300
82 11/11/21 9.110%* 112 116 300
83 02/11/22 9.050%* 115 119 300
84 02/11/22 9.540% 115 119 300
85 03/11/22 8.800%* 113 120 300
86 11/11/21 8.780% 172 176 300
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF
DATE MONTHLY
LOAN # LOAN NAME BORROWER LEGAL NAME NOTE BALANCE PAYMENT
- ------ -------------------------------- ------------------------------------------ ---- -------------- -----------
<S> <C> <C> <C> <C> <C>
87 Topinkas Village Shopping Center Arbela Assoc., Inc. $ 2,800,000 $ 23,306.06
88 Village Park MHP Essex Village Park, L.P. 2,797,014 21,867.82
89 Woodland Park Investments Co. Woodland Park Investment Co., LLC 2,703,333 27,047.42
90 View Park Convalescent Center View Park Investments LP 2,666,452 26,678.41
91 Key RV Park Marathon Assoc., Ltd. 2,494,904 20,979.91
92 Ramada Inn--Nashville Umi Management Inc. 2,295,601 21,679.90
93 Barstow Plaza Theme Family Limited Partneship A 2,216,600 18,035.22
94 Aspen Care Center Aspen Properties, L.C. 2,195,603 19,779.82
95 Senate/Virginian Apartments Senate & Virginian Apts, L.C. 2,193,798 18,057.28
96 One Ethel Road One Ethel Road Associate, L.P. 2,172,731 17,578.85
97 American Plaza Shopping Center American Plaza LLC 2,145,565 17,910.40
98 Diamond Inn Diamond Inc. Motel, LC 2,096,068 20,265.45
99 Hocking Mall Shopping Center Chieftian Assoc., Inc. a NY Corp. 1,959,209 17,028.02
100 Kessler Garden Apartments K.G. L. P. 1,947,258 16,164.50
101 Chateau Apartments Chateau LLC 1,939,000 16,007.29
102 Knights Inn-Maumee Tulsi Corporation 1,921,318 18,145.13
103 Tiffany Bay Apartments Tiffany Bay Investors, L.P. 1,898,835 14,528.64
104 Airport Commerce Center Sherwood Partners, LP 1,870,000 16,014.34
105 Bakerview MHP Bakerview Mobile Estates Inc. 1,792,220 15,452.15
106 Slauson Apts. SKG Slauson 1,772,762 13,827.65
107 El Camino Apts. McAllen Camino Real Apts., Ltd. 1,771,548 13,260,19
108 Park Isle Club Apartments Park Isle Assoc. 1,693,967 14,382.93
109 Planet Pacific Building Puerta Real Partners 1,696,221 13,517.45
110 Butler Place Apartments Butler Place Assoc. 1,538,000 12,540.24
111 Cedar Springs MHP Cedar Springs Assoc. LLC 1,500,000 11,997.65
112 Emory Arms Apartments Emory Arms Venture, LLP 1,493,209 12,587.95
113 Fairdale Apartments Fairdale Apartments, Ltd. 1,493,949 11,897.00
114 Holiday Inn Express-East Haven Frontage Road Company, LLC 1,500,000 13,708.85
115 Holiday Inn--Bennettsville Marlboro Lodgings Corp. 1,430,000 13,357.50
116 Michigan Trailer Park Osborn Investors, L.P. 1,382,553 11,698.84
117 Hidden Meadow Hid-Med Ltd. 1,344,554 10,707.30
118 Econolodge Arizona Lake Powell Holdings, Inc. 1,200,000 11,492.94
119 Holiday Inn--S. Kingston South Kingstown Hotel Assoc. LLC 1,200,000 11,029.32
120 North Acres Mobile Home Park Burton DeYoung 1,010,529 8,067.22
121 Trainer Hill MHP Union Investment Group Ltd. 996,895 9,275.65
--------------
$1,403,292,505
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
STATED ANTICIPATED
MATURITY MORTGAGE REMAINING REMAINING
LOAN # DATE RATE LOCKOUT TERM AMORTIZATION
- ------ -------- -------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
87 04/11/22 8.900%* 81 85 300
88 02/11/27 8.670%* 115 119 360
89 02/11/12 8.714%* 178 179 180
90 02/11/12 8.714%* 178 179 180
91 01/11/22 9.000%* 114 118 300
92 02/11/17 9.660%* 172 179 240
93 12/11/21 8.590%* 113 117 300
94 02/11/17 8.990%* 115 119 240
95 12/11/21 8.730% 113 117 300
96 02/11/27 9.050%* 112 119 360
97 01/11/07 8.910%* 114 118 300
98 02/11/17 10.000%* 175 179 240
99 01/11/22 9.410%* 114 118 300
100 02/11/07 8.850%* 115 119 300
101 03/11/07 8.800%* 113 120 300
102 02/11/17 9.660%* 175 179 240
103 02/11/27 8.440% 115 119 360
104 03/11/22 9.250%* 173 180 300
105 10/11/06 9.280% 111 115 300
106 11/11/26 8.630% 112 116 360
107 12/11/26 8.190%* 113 117 360
108 11/11/21 9.100% 112 116 300
109 01/11/22 8.350%* 111 118 300
110 03/11/22 8.650%* 116 120 300
111 03/11/07 8.420%* 116 120 300
112 10/11/06 9.000% 111 115 300
113 11/11/06 8.320% 112 116 300
114 03/11/17 9.220%* 113 120 240
115 03/11/17 9.530%* 176 180 240
116 01/11/22 9.080% 114 118 300
117 11/11/06 8.320% 112 116 300
118 03/11/17 9.890%* 173 180 240
119 03/11/17 9.300%* 173 180 240
120 02/11/22 8.380%* 115 119 300
121 01/11/17 9.430%* 174 178 240
-------- -------- --------- ----------- ------------
8.666% 137 140 312
</TABLE>
68
<PAGE>
RANGE OF DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
PERCENT BY
CUT-OFF NUMBER AGGREGATE
DATE DEBT OF CUT-OFF WEIGHTED
SERVICE LOANS/ CUT-OFF DATE DATE AVERAGE
COVERAGE LOAN PRINCIPAL PRINCIPAL MORTGAGE
RATIO POOLS BALANCE BALANCE RATE
- -------------- -------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
1.2-1.299...... 28 $ 304,178,348 21.7% 8.782%
1.3-1.399...... 32 457,144,101 32.6 8.608
1.4-1.499...... 24 302,993,612 21.6 8.663
1.5-1.599...... 11 135,377,084 9.6 9.028
1.6-1.699...... 11 89,451,335 6.4 8.445
1.7-1.799...... 6 60,068,858 4.3 8.462
1.8-1.899...... 3 9,196,733 0.7 8.848
1.9-1.999...... 2 33,661,784 2.4 7.723
2.0-2.099...... 3 10,020,652 0.7 9.130
2.1-2.199...... 1 1,200,000 0.1 9.300
-------- -------------- ------------ ----------
Total/Weighted
Average...... 121 $1,403,292,505 100% 8.666%
======== ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CUT-OFF
DATE DEBT WEIGHTED WEIGHTED
SERVICE AVERAGE AVERAGE WEIGHTED WEIGHTED
COVERAGE REMAINING AMORTIZATION AVERAGE AVERAGE
RATIO TERM TERM DSCR LTV
- -------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
1.2-1.299...... 162 328 1.25 75%
1.3-1.399...... 133 325 1.35 69
1.4-1.499...... 136 313 1.44 64
1.5-1.599...... 140 284 1.52 62
1.6-1.699...... 111 288 1.68 57
1.7-1.799...... 140 253 1.75 60
1.8-1.899...... 169 212 1.82 58
1.9-1.999...... 126 342 1.92 48
2.0-2.099...... 170 221 2.05 56
2.1-2.199...... 180 240 2.20 34
----------- -------------- ---------- ----------
Total/Weighted
Average...... 140 312 1.42 67%
=========== ============== ========== ==========
</TABLE>
RANGE OF LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF WEIGHTED
LOANS/ CUT-OFF DATE DATE AVERAGE
LOAN TO LOAN PRINCIPAL PRINCIPAL MORTGAGE
VALUE RATIO POOLS BALANCE BALANCE RATE
- -------------- -------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
30%-34.99%..... 1 $ 1,200,000 0.1% 9.300%
35%-39.99%..... 1 2,703,333 0.2 8.714
45%-49.99%..... 6 53,031,567 3.8 8.045
50%-54.99%..... 9 42,794,620 3.0 9.017
55%-59.99%..... 14 163,529,764 11.7 8.263
60%-64.99%..... 26 368,959,038 26.3 8.807
65%-69.99%..... 19 190,762,355 13.6 8.874
70%-74.99%..... 33 378,537,998 27.0 8.559
75%-79.99%..... 10 88,273,830 6.3 8.575
80%-84.99%..... 1 50,500,000 3.6 8.660
85%-89.99%..... 1 63,000,000 4.5 9.298
-------- -------------- ------------ ----------
Total/Weighted
Average ..... 121 $1,403,292,505 100% 8.666%
======== ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
LOAN TO REMAINING AMORTIZATION MINIMUM MAXIMUM AVERAGE AVERAGE
VALUE RATIO TERM TERM DSCR DSCR DSCR LTV
- -------------- ----------- -------------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
30%-34.99%..... 180 240 2.20 2.20 2.20 34%
35%-39.99%..... 179 180 1.69 1.69 1.69 36
45%-49.99%..... 140 292 1.65 2.05 1.88 48
50%-54.99%..... 152 278 1.25 1.71 1.49 53
<PAGE>
55%-59.99%..... 117 310 1.26 2.05 1.58 57
60%-64.99%..... 129 320 1.27 1.82 1.44 62
65%-69.99%..... 146 292 1.23 1.68 1.38 67
70%-74.99%..... 138 318 1.22 1.71 1.37 72
75%-79.99%..... 121 342 1.24 1.41 1.31 77
80%-84.99%..... 180 328 1.24 1.24 1.24 80
85%-89.99%..... 241 299 1.23 1.23 1.23 86
----------- -------------- --------- --------- ---------- ----------
Total/Weighted
Average ..... 140 312 1.22 2.20 1.42 67%
=========== ============== ========= ========= ========== ==========
</TABLE>
RANGE OF LOAN-TO-VALUE RATIOS AT EARLIER OF ANTICIPATED REPAYMENT DATES OR
MATURITY
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF WEIGHTED
LOANS/ CUT-OFF DATE DATE AVERAGE
LOAN TO LOAN PRINCIPAL PRINCIPAL MORTGAGE
VALUE RATIO POOLS BALANCE BALANCE RATE
- --------------- -------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
less than 30% .. 19 $ 135,240,583 9.6% 8.694%
30% to 34.99% .. 7 40,914,332 2.9 9.359
35% to 39.99% .. 5 27,134,309 1.9 9.432
40% to 44.99% .. 8 119,223,907 8.5 8.846
45% to 49.99% .. 15 166,223,907 11.8 9.102
50% to 54.99% .. 19 274,509,694 19.6 8.353
55% to 59.99% .. 18 286,144,292 20.4 8.654
60% to 64.99% .. 19 223,382,492 15.9 8.605
65% to 69.99% .. 6 90,416,378 6.4 8.170
70% to 74.99% .. 5 40,238,864 2.9 8.683
-------- --------------- ------------ ----------
Total/Weighted
Average....... 121 $1,403,292,505 100% 8.666%
======== =============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED WEIGHTED AVERAGE
AVERAGE AVERAGE WEIGHTED LTV AT EARLIER
LOAN TO REMAINING AMORTIZATION MINIMUM MAXMIUM AVERAGE OF ARD OR
VALUE RATIO TERM TERM DSCR DSCR DSCR MATURITIES
- --------------- ----------- -------------- --------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
less than 30% .. 182 219 1.34 2.20 1.57 18%
30% to 34.99% .. 177 240 1.27 1.82 1.49 32
35% to 39.99% .. 174 257 1.37 2.05 1.45 37
40% to 44.99% .. 190 314 1.23 1.91 1.47 42
45% to 49.99% .. 148 295 1.25 1.73 1.45 48
50% to 54.99% .. 114 315 1.26 1.73 1.51 52
55% to 59.99% .. 132 338 1.23 1.68 1.33 58
60% to 64.99% .. 128 338 1.22 1.41 1.34 63
65% to 69.99% .. 119 358 1.24 1.43 1.34 67
70% to 74.99% .. 113 360 1.28 1.39 1.34 71
----------- -------------- --------- --------- ---------- --------------
Total/Weighted
Average....... 140 312 1.22 2.20 1.42 51%
=========== ============== ========= ========= ========== ==============
</TABLE>
69
<PAGE>
MORTGAGED PROPERTIES BY STATE
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
CUT-OFF WEIGHTED
CUT-OFF DATE DATE AVERAGE
NUMBER OF PRINCIPAL PRINCIPAL MORTGAGE
STATE PROPERTIES BALANCE BALANCE RATE
- --------- ------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
CA ....... 32 $ 298,458,574 21.3% 8.390%
MA ....... 11 166,791,073 11.9 8.296
NY ....... 11 108,910,959 7.8 8.792
NJ ....... 7 89,023,452 6.3 8.554
FL ....... 10 78,732,838 5.6 8.890
NC ....... 10 71,050,155 5.1 9.132
CO ....... 13 67,820,271 4.8 8.787
IN ....... 13 64,956,782 4.6 9.075
TX ....... 43 51,043,445 3.6 8.528
VA........ 10 44,327,735 3.2 9.043
MI........ 6 39,801,532 2.8 8.712
CT ....... 5 31,494,619 2.2 9.102
GA ....... 4 30,461,044 2.2 8.695
AZ........ 4 27,007,553 1.9 8.526
MD ....... 4 25,263,575 1.8 8.547
NE ....... 5 22,250,308 1.6 8.726
OH ....... 11 22,210,684 1.6 9.143
PA ....... 2 21,996,895 1.6 8.991
WA ....... 4 16,527,749 1.2 8.611
LA ....... 2 15,698,510 1.1 9.733
RI ....... 4 14,639,492 1.0 8.891
IL ....... 1 14,019,336 1.0 8.820
ID ....... 1 11,900,000 0.8 8.350
NH ....... 1 9,025,000 0.6 8.180
MN........ 1 8,678,759 0.6 8.240
OR ....... 1 8,000,000 0.6 8.350
SC ....... 3 7,962,931 0.6 9.251
TN ....... 4 6,388,380 0.5 9.108
UT ....... 5 5,351,124 0.4 9.320
IA ....... 1 5,169,401 0.4 8.280
MT ....... 5 4,705,354 0.3 8.660
WI ....... 1 4,144,091 0.3 8.620
OK ....... 3 2,211,118 0.2 8.660
NV ....... 1 2,193,798 0.2 8.730
MO ....... 4 1,954,512 0.1 8.660
KS ....... 4 1,321,212 0.1 8.660
AR ....... 2 675,321 0.0 8.660
WV ....... 1 608,018 0.0 9.660
WY ....... 2 516,906 0.0 8.660
------------ -------------- ------------ ----------
Total ... 252 $1,403,292,505 100% 8.666%
============ ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE AVERAGE
STATE TERM AMORTIZATION DSCR LTV
- --------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
CA ....... 138 298 1.50 63%
MA ....... 120 357 1.40 65
NY ....... 128 329 1.38 62
NJ ....... 133 310 1.49 68
FL ....... 131 317 1.41 66
NC ....... 185 312 1.35 74
CO ....... 183 317 1.33 77
IN ....... 138 300 1.39 63
TX ....... 158 336 1.30 76
VA........ 167 252 1.55 62
MI........ 124 348 1.40 73
CT ....... 141 287 1.44 68
GA ....... 129 290 1.51 67
AZ........ 139 336 1.34 69
MD ....... 112 300 1.34 70
NE ....... 143 353 1.31 68
OH ....... 139 223 1.53 68
PA ....... 181 355 1.23 72
WA ....... 120 330 1.29 70
LA ....... 176 240 1.59 69
RI ....... 161 260 1.52 64
IL ....... 82 240 1.35 68
ID ....... 123 300 1.51 61
NH ....... 121 360 1.35 74
MN........ 121 360 1.46 63
OR ....... 123 300 1.51 61
SC ....... 148 289 1.48 64
TN ....... 145 280 1.37 65
UT ....... 155 257 1.59 64
IA ....... 82 180 1.49 71
MT ....... 180 328 1.24 80
WI ....... 82 360 1.29 78
OK ....... 180 328 1.24 80
NV ....... 117 300 1.45 65
MO ....... 180 328 1.24 80
KS ....... 180 328 1.24 80
AR ....... 180 328 1.24 80
WV ....... 180 240 1.41 75
WY ....... 180 328 1.24 80
----------- -------------- ---------- ----------
Total ... 140 312 1.42 67%
=========== ============== ========== ==========
</TABLE>
RANGE OF YEAR BUILT
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE WEIGHTED
CUT-OFF DATE CUT-OFF AVERAGE
RANGE OF NUMBER OF PRINCIPAL PRINCIPAL MORTGAGE
YEAR BUILT PROPERTIES BALANCE BALANCE RATE
- --------------- ------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
1875-1900....... 3 $ 31,369,164 2.2% 8.422%
1900-1909....... 5 29,181,347 2.1 8.563
1910-1919....... 4 6,538,320 0.5 8.415
1920-1929....... 4 10,220,904 0.7 8.492
1930-1939....... 4 41,043,891 2.9 8.565
1940-1949....... 1 7,375,729 0.5 9.190
1950-1959....... 13 30,840,317 2.2 8.933
1960-1969....... 52 207,290,211 14.8 8.578
1970-1979....... 71 302,595,505 21.6 8.604
1980-1989....... 73 545,578,426 38.9 8.664
1990-1997....... 22 191,258,692 13.6 8.897
------------ -------------- ------------ ----------
Total/Wtd.
Avg........... 252 $1,403,292,505 100% 8.666%
============ ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
ANTICIPATED AVERAGED WEIGHTED WEIGHTED
RANGE OF REMAINING AMORTIZATION AVERAGE AVERAGE
YEAR BUILT TERM TERM DSCR LTV
- --------------- ------------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
1875-1900....... 118 330 1.44 69%
1900-1909....... 121 329 1.38 69
1910-1919....... 128 296 1.36 72
1920-1929....... 107 215 1.43 68
1930-1939....... 121 334 1.44 66
1940-1949....... 141 300 1.50 62
1950-1959....... 129 319 1.35 72
1960-1969....... 151 281 1.46 66
1970-1979....... 134 310 1.46 67
1980-1989....... 132 323 1.43 64
1990-1997....... 176 317 1.31 74
------------- -------------- ---------- ----------
Total/Wtd.
Avg........... 140 312 1.42 67%
============= ============== ========== ==========
</TABLE>
70
<PAGE>
CUT-OFF DATE LOAN AMOUNT BY PROPERTY TYPE
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE WEIGHTED WEIGHTED
CUT-OFF DATE CUT-OFF DATE CUT-OFF AVERAGE AVERAGE
NUMBER OF PRINCIPAL PRINCIPAL SUM OF BALANCE/ MORTGAGE REMAINING
PROPERTY TYPE PROPERTIES BALANCE BALANCE UNITS UNIT RATE TERM
- ----------------- ---------- -------------- ------------ --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSISTED LIVING . 1 $ 2,703,333 0.2% 250 $10,813 8.714% 179
HOTEL
Extended Stay..... 4 28,556,752 2.0 448 63,743 9.240 180
Full Service ..... 13 121,519,753 8.7 2,686 45,242 9.267 156
Ltd. Service ..... 27 61,435,256 4.4 2,896 21,214 9.395 154
---------- -------------- ------------ --------- -------- -------- ---------
TOTAL HOTEL ..... 44 211,511,761 15.1 6,030 35,077 9.301 159
INDUSTRIAL
Industrial ....... 11 17,603,838 1.3 1,625,413 11 8.668 136
Warehouse ........ 3 63,516,319 4.5 2,909,811 22 9.291 240
---------- -------------- ------------ --------- -------- -------- ---------
TOTAL
INDUSTRIAL....... 14 81,120,157 5.8 4,535,224 18 9.156 218
MOBILE HOME PARK 12 49,618,205 3.5 3,190 15,554 8.427 118
MULTIFAMILY ...... 23 179,021,849 12.8 5,237 34,184 8.304 140
NURSING........... 10 46,910,257 3.3 1,340 35,008 9.254 175
OFFICE
Office............ 29 307,324,369 21.9 4,262,199 72 8.483 118
R&D .............. 1 32,964,627 2.3 417,532 79 8.590 119
---------- -------------- ------------ --------- -------- -------- ---------
TOTAL OFFICE ... 30 340,288,996 24.2 4,679,731 73 8.493 118
RETAIL
Retail Anchored . 26 304,658,163 21.7 5,719,245 53 8.430 125
Retail Factory
Outlet .......... 3 27,000,000 1.9 358,082 75 8.350 123
Retail Mall....... 2 46,125,161 3.3 439,902 105 8.861 150
Retail Office..... 1 3,742,129 0.3 102,607 36 8.780 118
Retail Unanchored 82 83,584,825 6.0 2,500,081 33 8.762 156
Retail Secondary
Anchored ........ 4 27,007,666 1.9 400,059 68 8.539 141
---------- -------------- ------------ --------- -------- -------- ---------
TOTAL RETAIL ... 118 492,117,945 35.1 9,519,976 52 8.531 133
TOTAL/WTD. AVG.
252 $1,403,292,505 100% 8.666% 140
========== ============== ============ ========= ======== ======== =========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
LTV
AS OF THE WEIGHTED
WEIGHTED WEIGHTED WEIGHTED ANTICIPATED WEIGHTED AVERAGE
AVERAGE MIN MAX AVERAGE AVERAGE REPAYMENT AVERAGE YEAR
PROPERTY TYPE AMORTIZATION DSCR DSCR DSCR LTV DATE/MATURITY OCCUPANCY BUILT
- ----------------- ------------ ---- ---- -------- -------- ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSISTED LIVING . 180 1.69 1.69 1.69 36% 1% 88% 1977
HOTEL
Extended Stay..... 289 1.45 1.47 1.46 67 44 81 1993
Full Service ..... 264 1.41 2.20 1.51 61 38 74 1992
Ltd. Service ..... 280 1.39 2.05 1.54 62 43 70 1992
------------ ---- ---- -------- -------- ------------- --------- --------
TOTAL HOTEL ..... 272 1.39 2.20 1.51 62 41 74 1992
INDUSTRIAL
Industrial ....... 233 1.31 1.49 1.39 66 30 95 1958
Warehouse ........ 298 1.23 1.49 1.23 86 41 100 1993
------------ ---- ---- -------- -------- ------------- --------- --------
TOTAL
INDUSTRIAL....... 284 1.23 1.49 1.26 82 38 99 1985
MOBILE HOME PARK 348 1.29 2.05 1.46 64 57 95 1976
MULTIFAMILY ...... 312 1.25 1.82 1.38 73 53 95 1986
NURSING........... 226 1.50 2.05 1.68 65 24 94 1983
OFFICE
Office............ 335 1.25 1.73 1.42 63 55 96 1986
R&D .............. 360 1.27 1.27 1.27 61 55 100 1990
------------ ---- ---- -------- -------- ------------- --------- --------
TOTAL OFFICE ... 338 1.25 1.73 1.41 63 55 96 1987
RETAIL
Retail Anchored . 331 1.22 1.91 1.44 66 57 94 1990
Retail Factory
Outlet .......... 300 1.51 1.51 1.51 61 51 91 1992
Retail Mall....... 302 1.31 1.41 1.36 69 54 97 1979
Retail Office..... 300 1.28 1.28 1.28 61 52 93 1984
Retail Unanchored 313 1.24 1.65 1.30 75 58 95 1979
Retail Secondary
Anchored ........ 322 1.23 1.97 1.44 64 52 99 1991
------------ ---- ---- -------- -------- ------------- --------- --------
TOTAL RETAIL ... 323 1.22 1.97 1.41 67 56 95 1987
TOTAL/WTD. AVG.
312 1.22 2.20 1.42 67% 51 92% 1987
============ ==== ==== ======== ======== ============= ========= ========
</TABLE>
71
<PAGE>
RANGE OF LOAN AMOUNTS OR LOAN BALANCES
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
NUMBER CUT-OFF CUT-OFF
OF LOANS/ DATE DATE WEIGHTED
RANGE OF CUT-OFF LOAN PRINCIPAL PRINCIPAL AVERAGE
DATE LOAN AMOUNTS POOLS BALANCE BALANCE MORTGAGE RATE
- ----------------------- ----------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
less than $1,000,000 ... 1 $ 996,895 0.1% 9.430%
1,000,000-4,999,999 .... 63 174,344,858 12.4 8.974
5,000,000-9,999,999 .... 20 133,692,096 9.5 8.905
10,000,000-14,999,999 .. 11 144,052,564 10.3 8.866
15,000,000-19,999,999 .. 3 52,636,611 3.8 8.483
20,000,000-24,999,999 .. 7 156,867,143 11.2 8.640
25,000,000-29,999,999 .. 3 83,701,826 6.0 8.055
30,000,000-34,999,999 .. 4 132,587,672 9.4 8.461
40,000,000-44,999,999 .. 1 41,700,000 3.0 9.214
50,000,000-54,999,999 .. 2 101,086,851 7.2 8.455
55,000,000-59,999,999 .. 2 114,354,069 8.1 8.572
60,000,000-64,999,999 .. 1 63,000,000 4.5 9.298
65,000,000-69,999,999 .. 3 204,271,921 14.6 8.402
----------- -------------- ------------ ---------------
Total/Wtd. Avg. ...... 121 $1,403,292,505 100% 8.666%
=========== ============== ============ ===============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
ANTICIPATED AVERAGE WEIGHTED WEIGHTED
RANGE OF CUT-OFF REMAINING AMORTIZATION AVERAGE AVERAGE
DATE LOAN AMOUNTS TERM TERM DSCR LTV
- ----------------------- ------------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
less than $1,000,000 ... 178 240 1.34 59%
1,000,000-4,999,999 .... 137 281 1.49 63
5,000,000-9,999,999 .... 148 277 1.45 67
10,000,000-14,999,999 .. 144 279 1.43 68
15,000,000-19,999,999 .. 126 360 1.33 75
20,000,000-24,999,999 .. 137 326 1.35 70
25,000,000-29,999,999 .. 120 341 1.55 62
30,000,000-34,999,999 .. 125 344 1.45 64
40,000,000-44,999,999 .. 144 300 1.42 61
50,000,000-54,999,999 .. 186 284 1.29 76
55,000,000-59,999,999 .. 112 300 1.60 59
60,000,000-64,999,999 .. 241 299 1.23 86
65,000,000-69,999,999 .. 119 359 1.38 63
------------- -------------- ---------- ----------
Total/Wtd. Avg. ...... 140 312 1.42 67%
============= ============== ========== ==========
</TABLE>
RANGE OF ANTICIPATED REMAINING TERM IN MONTHS
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE WEIGHTED
OF CUT-OFF CUT-OFF AVERAGE
RANGE OF LOANS/ DATE DATE ANTICIPATED
ANTICIPATED LOAN PRINCIPAL PRINCIPAL REMAINING
REMAINING TERM POOLS BALANCE BALANCE TERM
- --------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
72-83.9 ........ 4 $ 27,865,263 2.0% 82
84-95.9......... 2 61,300,000 4.4 84
108-119.9....... 46 445,239,639 31.7 118
120-131.9....... 22 299,812,000 21.4 121
132-143.9....... 2 70,496,071 5.0 141
144-155.9....... 4 99,390,157 7.1 145
168-179.9....... 26 171,094,524 12.2 178
180-191.9....... 13 114,508,000 8.2 180
192-203.9....... 1 50,586,851 3.6 192
240-251.9....... 1 63,000,000 4.5 241
-------- -------------- ------------ -------------
Total/Wtd.
Avg........... 121 $1,403,292,505 100% 140
======== ============== ============ =============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE WEIGHTED WEIGHTED
ANTICIPATED AMORTIZATION MORTGAGE AVERAGE AVERAGE
REMAINING TERM TERM RATE DSCR LTV
- --------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
72-83.9 ........ 256 8.651% 1.36 70%
84-95.9......... 300 8.023 1.67 57
108-119.9....... 338 8.424 1.44 66
120-131.9....... 331 8.558 1.38 67
132-143.9....... 312 9.001 1.46 63
144-155.9....... 317 8.857 1.36 66
168-179.9....... 252 9.236 1.55 62
180-191.9....... 309 8.848 1.31 73
192-203.9....... 240 8.250 1.34 72
240-251.9....... 299 9.928 1.23 86
-------------- ---------- ---------- ----------
Total/Wtd.
Avg........... 312 8.666% 1.42 67%
============== ========== ========== ==========
</TABLE>
72
<PAGE>
RANGE OF REMAINING TERM IN MONTHS
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF CUT-OFF WTD. AVG.
LOANS/ DATE DATE ANTICIPATED
RANGE OF LOAN PRINCIPAL PRINCIPAL REMAINING
REMAINING TERM POOLS BALANCE BALANCE TERM
- --------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
108-119.9....... 7 $ 13,958,885 1.0% 117
120-131.9....... 2 3,439,000 0.2 120
168-179.9....... 7 40,491,685 2.9 166
228-239.9....... 17 144,856,594 10.3 170
240-251.9....... 7 21,350,000 1.5 176
264-275.9....... 1 9,665,000 0.7 121
288-299.9....... 30 224,521,359 16.0 133
300-311.9....... 22 332,617,512 23.7 148
312-323.9....... 1 13,627,151 1.0 116
348-359.9....... 17 312,165,320 22.2 120
360-371.9....... 10 286,600,000 20.4 139
-------- -------------- ------------ -------------
Total/Wtd.
Avg........... 121 $1,403,292,505 100% 140
======== ============== ============ =============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
WTD. AVG. AVERAGE WEIGHTED WEIGHTED
RANGE OF AMORTIZATION MORTGAGE AVERAGE AVERAGE
REMAINING TERM TERM RATE DSCR LTV
- --------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
108-119.9....... 300 8.804% 1.40 61%
120-131.9....... 300 8.634 1.60 62
168-179.9....... 180 8.613 1.77 57
228-239.9....... 240 8.970 1.47 67
240-251.9....... 240 8.902 1.51 59
264-275.9....... 264 9.580 1.56 72
288-299.9....... 294 8.897 1.48 65
300-311.9....... 299 8.796 1.41 67
312-323.9....... 324 8.670 1.40 71
348-359.9....... 360 8.299 1.42 66
360-371.9....... 353 8.532 1.31 71
-------------- ---------- ---------- ----------
Total/Wtd.
Avg........... 312 8.666% 1.42 67%
============== ========== ========== ==========
</TABLE>
ANTICIPATED REPAYMENT BY YEAR
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF CUT-OFF WTD. AVG.
LOANS/ DATE DATE ANTICIPATED
LOAN PRINCIPAL PRINCIPAL REMAINING
YEAR POOLS BALANCE BALANCE TERM
- --------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
2003............ 1 $ 4,532,434 0.3% 80
2004............ 5 84,632,829 6.0 83
2006............ 14 59,833,663 4.3 116
2007............ 54 685,217,976 48.8 119
2008............ 1 55,854,069 4.0 141
2009............ 4 105,367,002 7.5 144
2010............ 1 8,665,157 0.6 155
2011............ 8 72,070,948 5.1 176
2012............ 31 213,531,576 15.2 180
2013............ 1 50,586,851 3.6 192
2017............ 1 63,000,000 4.5 241
-------- -------------- ------------ -------------
Total/Wtd.
Avg........... 121 $1,403,292,505 100% 140
======== ============== ============ =============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
WTD. AVG. AVERAGE WEIGHTED WEIGHTED
AMORTIZATION MORTGAGE AVERAGE AVERAGE
YEAR TERM RATE DSCR LTV
- --------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
2003............ 300 8.580% 1.35 66%
2004............ 286 8.200 1.59 61
2006............ 329 8.739 1.41 72
2007............ 336 8.455 1.42 66
2008............ 300 9.190 1.50 62
2009............ 336 8.808 1.35 66
2010............ 156 8.480 1.49 67
2011............ 236 9.237 1.59 61
2012............ 288 9.028 1.41 68
2013............ 240 8.250 1.34 72
2017............ 299 9.298 1.23 86
-------------- ---------- ---------- ----------
Total/Wtd.
Avg........... 312 8.666% 1.42 67%
============== ========== ========== ==========
</TABLE>
73
<PAGE>
RANGE OF MORTGAGE RATES
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF CUT-OFF WEIGHTED WTD. AVG.
LOANS/ DATE DATE AVERAGE ANTICIPATED WEIGHTED WEIGHTED
RANGE OF LOAN PRINCIPAL PRINCIPAL MORTGAGE REMAINING WTD. AVG. AVERAGE AVERAGE
MORTGAGE RATES POOLS BALANCE BALANCE RATE TERM AMORT. TERM DSCR LTV
- ---------------- -------- -------------- ------------ ---------- ------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7.50%-7.7499% .. 1 $ 28,701,826 2.0% 7.575% 118 360 1.91 48%
7.75%-7.999%..... 2 83,471,982 5.9 7.967 94 318 1.60 62
8.00%-8.249% ... 7 145,219,777 10.3 8.110 121 354 1.44 62
8.25%-8.499% ... 19 303,009,807 21.6 8.357 134 314 1.41 70
8.50%-8.749% ... 27 335,918,917 23.9 8.658 139 318 1.38 68
8.75%-8.999% ... 23 141,728,874 10.1 8.871 130 309 1.34 67
9.00%-9.249% ... 15 174,231,965 12.4 9.145 142 303 1.41 63
9.25%-9.499% ... 10 114,460,795 8.2 9.303 211 285 1.34 76
9.50%-9.749% ... 11 54,133,706 3.9 9.626 165 247 1.49 67
9.75%-9.999% ... 4 14,709,248 1.0 9.912 177 280 1.70 60
10.00%-10.249% . 2 7,705,609 0.5 10.073 179 240 1.65 64
-------- -------------- ------------ ---------- ------------- ------------- ---------- ----------
Total/Wtd.
Avg............. 121 $1,403,292,505 100% 8.666% 140 312 1.42 67%
======== ============== ============ ========== ============= ============= ========== ==========
</TABLE>
DELINQUENCY STATUS AS OF MARCH 1, 1997
<TABLE>
<CAPTION>
STATUS
--------------------
<S> <C>
No Delinquencies
</TABLE>
RANGE OF REMAINING LOCK-OUT PERIOD IN MONTHS
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF CUT-OFF
LOCK-OUT LOANS/ DATE DATE
PERIOD LOAN PRINCIPAL PRINCIPAL
IN MONTHS POOLS BALANCE BALANCE
- ---------------- -------- -------------- ------------
<S> <C> <C> <C>
72-83.9.......... 6 $ 89,165,263 6.4%
108-119.9........ 68 745,051,639 53.1
132-143.9........ 5 161,221,071 11.5
144-155.9........ 1 8,665,157 0.6
168-179.9........ 38 264,602,524 18.9
180-191.9........ 2 71,586,851 5.1
240-241.9........ 1 63,000,000 4.5
-------- -------------- ------------
Total/Wtd.
Avg............. 121 $1,403,292,505 100%
======== ============== ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WTD. AVG. WEIGHTED
LOCK-OUT AVERAGE ANTICIPATED WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED
PERIOD REMAINING REMIANING AVERAGE AVERAGE MORTGAGE AVERAGE AVERAGE
IN MONTHS LOCKOUT TERM AMORTIZATION TERM RATE DSCR LTV
- ---------------- ----------- ------------- -------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
72-83.9.......... 79 83 286 286 8.219% 1.58 61%
108-119.9........ 116 119 335 332 8.478 1.42 66
132-143.9........ 141 143 324 324 8.940 1.40 65
144-155.9........ 151 155 156 300 8.480 1.49 67
168-179.9........ 175 179 268 276 9.089 1.48 66
180-191.9........ 188 189 275 275 8.461 1.31 72
240-241.9........ 240 241 299 299 9.298 1.23 86
----------- ------------- -------------- ---------- ---------- ---------- ----------
Total/Wtd.
Avg............. 137 140 312 313 8.666% 1.42 67%
=========== ============= ============== ========== ========== ========== ==========
</TABLE>
74
<PAGE>
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus of the Mortgage Pool and the Mortgaged
Properties is based upon the Mortgage Pool as expected to be constituted at
the close of business on the Cut-off Date, as adjusted for the scheduled
principal payments due on the Mortgage Loans on or before the Cut-off Date.
Prior to the issuance of the Subordinated Certificates, a Mortgage Loan may
be removed from the Mortgage Pool if the Depositor deems such removal
necessary or appropriate or if it is prepaid. This may cause the range of
Mortgage Rates and maturities as well as the other characteristics of the
Mortgage Loans to vary from those described herein.
A Current Report on Form 8-K will be available to purchasers of the
Subordinated Certificates and will be filed by the Depositor, together with
the Pooling and Servicing Agreement with the Securities and Exchange
Commission within fifteen days after the initial issuance of the Subordinated
Certificates. In the event Mortgage Loans are removed from the Mortgage Pool
as set forth in the preceding paragraph, such removal will be noted in the
Form 8-K. Such Form 8-K will be available to purchasers and potential
purchasers of the Subordinated Units.
DESCRIPTION OF THE SUBORDINATED UNITS
The Subordinated Units consist of $35,082,312 (approximate) Class B-1
Certificates, $35,082,312 (approximate) Class B-2 Certificates, $14,032,925
(approximate) Class B-3 Certificates, $21,049,387 (approximate) Class B-4
Certificates, $14,032,925 (approximate) Class B-5 Certificates, and
$14,032,925 (approximate) Class B-6 Certificates. No Class of Subordinated
Certificates will be separately tradable unless and until a Class of
Subordinated Certificates is rated investment grade by either S&P or Fitch,
and only such investment grade Class shall be separately tradable. See
"Description of the Subordinated Certificates" for further information
concerning the Subordinated Certificates. All references herein to the
Subordinated Units are deemed to include the Class B-1 Certificates, Class
B-2 Certificates, Class B-3 Certificates, Class B-4 Certificates, Class B-5
Certificates, and the Class B-6 Certificates which comprise the Subordinated
Units.
75
<PAGE>
DESCRIPTION OF THE SUBORDINATED CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of twenty-six Classes to be designated as the
Class A-1A Certificates, the Class A-1B Certificates, the Class A-1C
Certificates, the Class A-1D Certificates, the Class A-1E Certificates the
Class A-CS1 Certificates, the Class PS-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the
Class A-5 Certificates, the Class A-6 Certificates, the Class A-7
Certificates, the Class A-8 Certificates, the Class B-1 Certificates, the
Class B-2 Certificates, the Class B-3 Certificates, the Class B-4
Certificates, the Class B-5 Certificates, the Class B-6 Certificates, the
Class B-7 Certificates, the Class B-7H Certificates, the Class V-1
Certificates, the Class V-2 Certificates, the Class R Certificates and the
Class LR Certificates. Only the Subordinated Certificates are offered hereby
in the form of Subordinated Units. The Senior Certificates have been publicly
offered under a separate prospectus and are not offered hereby. The Junior
Subordinated Certificates, Class V-1, Class V-2, Class R and Class LR
Certificates are not offered hereby. The Class A-CS1 and Class PS-1
Certificates are sometimes referred to herein as the "Coupon Strip
Certificates."
The Certificates represent in the aggregate the entire beneficial
ownership interest in a Trust Fund consisting of: (i) the Mortgage Loans and
all payments under and proceeds of the Mortgage Loans due after the Cut-off
Date; (ii) any Mortgaged Property acquired by the Special Servicer on behalf
of the Trust Fund through foreclosure or deed in lieu of foreclosure (upon
acquisition, an "REO Property") such funds or assets as from time to time are
deposited in the Collection Account, the Distribution Account, the Upper-Tier
Distribution Account, the Interest Reserve Account, the Excess Interest
Distribution Account, the Default Interest Distribution Account and any
account established in connection with REO Properties (an "REO Account");
(iv) the rights of the mortgagee under all insurance policies with respect to
the Mortgage Loans; (v) the Depositor's rights and remedies under the
Mortgage Loan Purchase and Sale Agreement and Bloomfield Purchase Agreement;
and (vi) all of the mortgagee's right, title and interest in the Reserve
Accounts, the Cash Collateral Accounts and Lock Box Accounts.
The Class B-1 Certificates will have an initial Certificate Balance of
$35,082,312. The Class B-2 Certificates will have an initial Certificate
Balance of $35,082,312. The Class B-3 Certificates will have an initial
Certificate Balance of $14,032,925. The Class B-4 Certificates will have an
initial Certificate Balance of $21,049,387. The Class B-5 Certificates will
have an initial Certificate Balance of $14,032,925. The Class B-6
Certificates will have an initial Certificate Balance of $14,032,925.
The Class A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-1E, Class A-2,
Class A-3, Class A-4, Class A-5, Class A-6, Class A-7 and Class A-8
Certificates will have initial Certificate Balances of $127,000,000,
$90,010,000, $65,000,000, $671,228,903, $84,197,550, $28,065,850,
$49,115,237, $21,049,387, $42,098,775, $28,065,850, $21,049,387 and
$21,049,387, respectively. The Class B-7 and Class B-7H Certificates will
have initial Certificate Balances, in the aggregate, of approximately
$21,668,143. The Class A-CS1 Certificates will have an initial Notional
Balance equal to $127,000,000, which is equal to the Certificate Balance of
the Class A-1A Certificates. The Class PS-1 Certificates will have an initial
Notional Balance equal to $1,403,292,505, which is equal to the aggregate
Stated Principal Balance of the Mortgage Loans as of the Cut-off Date.
The initial Certificate Balance of each of the Class R, Class LR, Class
V-1 and Class V-2 Certificates will be zero. Additionally, the Class R, Class
LR, Class V-1 and Class V-2 Certificates will not have a Notional Balance.
The Certificate Balance of any Class of Certificates outstanding at any
time represents the maximum amount which the holders thereof are entitled to
receive as distributions allocable to principal from the cash flow on the
Mortgage Loans and the other assets in the Trust Fund; provided, however,
that in the event Realized Losses previously allocated to a Class of
Certificates in reduction of the Certificate Balance thereof are recovered
subsequent to the reduction of the Certificate Balance of such Class to zero,
such Class may receive distributions in respect of such recoveries in
accordance with the priorities set forth under "--Distributions --
Priorities" herein.
The respective Certificate Balance of each Class of Certificates (other
than the Coupon Strip Certificates, the Class V-1, Class V-2, Class R and
Class LR Certificates) will in each case be reduced by amounts actually
distributed thereon that are allocable to principal and by any Realized
Losses allocated to such Class of Certificates. The Notional Balance of the
Class A-CS1 Certificates will at all times equal the Certificate Balance of
the Class A-1A Certificates. The Notional
76
<PAGE>
Balance of the Class PS-1 Certificates will for purposes of distributions on
each Distribution Date equal the aggregate Stated Principal Balance of the
Mortgage Loans as of the first day of the related Interest Accrual Period.
The Notional Balance of the Class PS-1 Certificates will be reduced to the
extent of all reductions in the aggregate Stated Principal Balance of the
Mortgage Loans.
SUBORDINATION
As a means of providing a certain amount of protection to the holders of
the Senior Certificates against losses associated with delinquent and
defaulted Mortgage Loans, the rights of the holders of the Subordinated
Certificates and the Junior Subordinated Certificates to receive
distributions of interest and principal with respect to the Mortgage Loans,
as applicable, will be subordinated to the corresponding rights of the
holders of the Senior Certificates. The rights of the holders of the Class
B-1 Certificates to receive distributions of interest and principal will be
subordinate to those of the Senior Certificates; the rights of the holders of
the Class B-2 Certificates to receive distributions of interest and principal
will be subordinate to those of the Senior Certificates and Class B-1
Certificates; the rights of the holders of the Class B-3 Certificates to
receive distributions of interest and principal will be subordinate to those
of the Senior Certificates, Class B-1 and Class B-2 Certificates; the rights
of the holders of the Class B-4 Certificates to receive distributions of
interest and principal will be subordinate to those of the Senior
Certificates, Class B-1, Class B-2 and Class B-3 Certificates; the rights of
the holders of the Class B-5 Certificates to receive distributions of
interest and principal will be subordinate to those of the Senior
Certificates, Class B-1, Class B-2, Class B-3 and Class B-4 Certificates; and
the rights of the holders of the Class B-6 Certificates to receive
distributions of interest and principal will be subordinate to those of the
Senior Certificates, Class B-1, Class B-2, Class B-3, Class B-4, and Class
B-5 Certificates. The rights of the Junior Subordinated Certificates to
receive distributions of interest and principal will be subordinate to those
of the Senior Certificates and the Subordinated Certificates. This
subordination will be effected in two ways: (i) by the preferential right of
the holders of a Class of Certificates to receive on any Distribution Date
the amounts of interest and principal, distributable in respect of such
Certificates on such date prior to any distribution being made on such
Distribution Date in respect of any Classes of Certificates subordinate
thereto, as described below under "--Distributions," and (ii) by the
allocation of Realized Losses, first, to the Junior Subordinated
Certificates, second, to the Class B-6 Certificates, third, to the Class B-5
Certificates, fourth, to the Class B-4 Certificates, fifth, to the Class B-3
Certificates, sixth, to the Class B-2 Certificates, seventh, to the Class B-1
Certificates, and finally, to the Senior Certificates in accordance with the
terms of the Pooling and Servicing Agreement, as described below under
"--Realized Losses." No other form of credit enhancement will be available
for the benefit of the holders of the Subordinated Certificates. BECAUSE OF
THE SUBORDINATION OF THE SUBORDINATED CERTIFICATES, THE YIELD OF THE
SUBORDINATED CERTIFICATES WILL BE EXTREMELY SENSITIVE AND THE TIMING AND
MAGNITUDE OF UNADVANCED DELINQUENCIES AND LOSSES ON THE MORTGAGE LOANS DUE TO
LIQUIDATIONS.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Certificates will be made
on the Distribution Date. All distributions (other than the final
distribution on any Certificate) will be made by the Trustee to the persons
in whose names the Certificates are registered at the close of business on
the 10th day of the month in which the related Distribution Date occurs, or
if such day is not a business day, the preceding business day (the "Record
Date"); the Record Date for the Distribution Date occurring on April 16, 1997
for all purposes other than the receipt of distributions is the Closing Date.
Such distributions will be made (a) by wire transfer in immediately available
funds to the account specified by the Certificateholder at a bank or other
entity having appropriate facilities therefor, if such Certificateholder
provides the Trustee with wiring instructions no less than five business days
prior to the related Record Date and is the registered owner of Certificates
the aggregate Certificate Balance of which is at least $5,000,000, or
otherwise (b) by check mailed to such Certificateholder. The final
distribution on any Subordinated Certificates will be made in like manner,
but only upon presentment or surrender (for notation that the Certificate
Balance thereof has been reduced to zero) of such Certificate at the location
specified in the notice to the holder thereof of such final distribution. All
distributions made with respect to a Class of Certificates on each
Distribution Date will be allocated pro rata among the outstanding
Certificates of such Class based on their respective Percentage Interests.
The "Percentage Interest" evidenced by any Subordinated Certificate is equal
to the initial denomination thereof as of the Closing Date divided by the
initial Certificate Balance or Notional Balance, as applicable, of the
related Class.
The aggregate distribution to be made with respect to the Certificates on
any Distribution Date will equal the Available Funds. The "Available Funds"
for a Distribution Date will be the sum of all previously undistributed
Monthly
77
<PAGE>
Payments or other receipts on account of principal and interest on or in
respect of the Mortgage Loans (including Unscheduled Payments and Net REO
Proceeds, if any) received by the Servicer in the related Collection Period,
plus (i) all P&I Advances (except Subordinate Class Advance Amounts) made by
the Servicer, the Trustee or the Fiscal Agent, as applicable, in respect of
such Distribution Date, (ii) for the Distribution Date occurring in each
March, the "Withheld Amounts" as described under "--The Pooling and Servicing
Agreement -- Accounts -- Interest Reserve Account" and required to be
deposited in the Distribution Account pursuant to the Pooling and Servicing
Agreement, (iii) all other amounts required to be deposited in the Collection
Account by the Servicer pursuant to the Pooling and Servicing Agreement
allocable to the Mortgage Loans, (iv) any late payments of Monthly Payments
received after the end of the Collection Period relating to such Distribution
Date but prior to the related Servicer Remittance Date and (v) any Prepayment
Interest Shortfalls remitted by the Servicer to the Collection Account (as
described under "--Prepayment Interest Shortfalls"), but excluding the
following:
(a) amounts permitted to be used to reimburse the Servicer, the Special
Servicer, the Trustee or the Fiscal Agent, as applicable, for previously
unreimbursed Advances and interest thereon as described herein under "The
Pooling and Servicing Agreement -- Advances";
(b) the aggregate amount of the Servicing Fee (which includes the fees
for both the Trustee and the Servicer) and the other Servicing
Compensation (e.g., late fees, loan modification fees, extension fees,
loan service transaction fees, demand fees, beneficiary statement charges,
and similar fees) payable to the Servicer and the Special Servicing Fee
and other amounts payable to the Special Servicer described under "The
Pooling and Servicing Agreement -- Special Servicing" herein), and
reinvestment earnings on payments received with respect to the Mortgage
Loans which the Servicer or Special Servicer is entitled to receive as
additional servicing compensation, in each case in respect of such
Distribution Date;
(c) all amounts representing scheduled Monthly Payments due after the
related Due Date;
(d) to the extent permitted by the Pooling and Servicing Agreement, that
portion of liquidation proceeds, insurance proceeds and condemnation
proceeds with respect to a Mortgage Loan which represents any unpaid
Servicing Fee, Trustee Fee and special serving compensation together with
interest thereon as described herein, to which the Servicer, the Special
Servicer and the Trustee, are entitled;
(e) all amounts representing certain expenses reimbursable or payable to
the Servicer, the Special Servicer, the Trustee or the Fiscal Agent and
other amounts permitted to be retained by the Servicer or withdrawn
pursuant to the Pooling and Servicing Agreement in respect of various
items, including interest thereon as provided in the Pooling and Servicing
Agreement;
(f) Prepayment Premiums;
(g) Default Interest;
(h) Excess Interest;
(i) with respect to the Mortgage Loans known as the Saracen, Burnham
Pacific, M&H, Lakeside and Ambassador loans and any Distribution Date
relating to each Interest Accrual Period ending in each February or any
January occurring in a year which is not a leap year, an amount equal to
one day of interest on the Stated Principal Balance of each such Mortgage
Loan as of the Due Date occurring in the month preceding the month in
which such Distribution Date occurs at the related Mortgage Rate to the
extent such amounts are to be deposited in the Interest Reserve Account
and held for future distribution;
(j) all amounts received with respect to each Mortgage Loan previously
purchased or repurchased pursuant to the Pooling and Servicing Agreement
during the related Collection Period and subsequent to the date as of
which the amount required to effect such purchase or repurchase was
determined; and
(k) the amount reasonably determined by the Trustee to be necessary to
pay any applicable federal, state or local taxes imposed on the Upper-Tier
REMIC or the Lower-Tier REMIC under the circumstances and to the extent
described in the Pooling and Servicing Agreement.
The "Monthly Payment" with respect to any Mortgage Loan (other than any
REO Mortgage Loan) and any Due Date is the scheduled monthly payment of
principal (if any) and interest at the Mortgage Rate, excluding any Balloon
78
<PAGE>
Payment (but not excluding any constant Monthly Payment), which is payable by
the related borrower on the related Due Date. The Monthly Payment with
respect to an REO Mortgage Loan for any Distribution Date is the monthly
payment that would otherwise have been payable on the related Due Date had
the related Note not been discharged, determined as set forth in the Pooling
and Servicing Agreement.
"Unscheduled Payments" are all net liquidation proceeds, net insurance
proceeds and net condemnation proceeds payable under the Mortgage Loans, the
repurchase price of any Mortgage Loan repurchased by the Mortgage Loan Seller
or Bloomfield due to a breach of a representation or warranty made by them or
the purchase price paid by the parties described under "The Pooling and
Servicing Agreement -- Optional Termination", and any other payments under or
with respect to the Mortgage Loans not scheduled to be made, including
Principal Prepayments, but excluding Prepayment Premiums.
"Net REO Proceeds" with respect to any REO Property and any related REO
Mortgage Loan are all revenues received by the Special Servicer with respect
to such REO Property or REO Mortgage Loan net of any insurance premiums,
taxes, assessments and other costs and expenses permitted to be paid
therefrom pursuant to the Pooling and Servicing Agreement.
"Principal Prepayments" are payments of principal made by a borrower on a
Mortgage Loan which are received in advance of the scheduled Due Date for
such payments and which are not accompanied by an amount of interest
representing the full amount of scheduled interest due on any date or dates
in any month or months subsequent to the month of prepayment, other than any
amount paid in connection with the release of the related Mortgaged Property
through defeasance.
The "Collection Period" with respect to a Distribution Date is the period
beginning on the day after the Due Date in the month preceding the month in
which such Distribution Date occurs (or, with respect to the first
Distribution Date, the day after the Cut-off Date) and ending on the Due Date
in the month in which such Distribution Date occurs.
"Net Default Interest" with respect to any Mortgage Loan is any Default
Interest accrued on such Mortgage Loan less amounts required to pay the
Servicer, the Trustee or Fiscal Agent, as applicable, interest on Advances at
the Advance Rate.
"Default Interest" with respect to any Mortgage Loan is interest accrued
on such Mortgage Loan at the excess of (i) the related Default Rate over (ii)
the sum of the related Mortgage Rate and, if applicable, the related Excess
Rate.
The "Default Rate" with respect to any Mortgage Loan is the per annum rate
at which interest accrues on such Mortgage Loan following any event of
default on such Mortgage Loan including a default in the payment of a Monthly
Payment or a Balloon Payment.
"Excess Interest" with respect to each of the Mortgage Loans that has a
Revised Rate, interest accrued on such Mortgage Loan allocable to the Excess
Rate.
"Excess Rate" with respect to each of the Mortgage Loans that has a
Revised Rate, the difference between (a) the applicable Revised Rate and (b)
the applicable Mortgage Rate.
Payment Priorities. As used below in describing the priorities of
distribution of Available Funds for each Distribution Date, the terms set
forth below will have the following meanings.
The "Interest Accrual Amount" with respect to any Distribution Date and
any Class of Certificates (other than the Class A-CS1, Class PS-1, Class V-1,
Class V-2, Class R and Class LR Certificates), is equal to interest for the
related Interest Accrual Period at the Pass-Through Rate for such Class on
the related Certificate Balance or Notional Balance, as applicable (provided,
that for interest accrual purposes any distributions in reduction of
Certificate Balance or reductions in Certificate Balance as a result of
allocations of Realized Losses on the Distribution Date occurring in an
Interest Accrual Period will be deemed to have been made on the first day of
such Interest Accrual Period). The "Interest Accrual Amount" with respect to
any Distribution Date and the Class A-CS1 Certificates is equal to interest
for the related Interest Accrual Period at the Pass-Through Rate for such
class for such Interest Accrual Period on the Notional Balance of such class
(provided, that any reductions in the Notional Balance of such class as a
result of distributions in reduction of the Certificate Balance of the Class
A-1A Certificates or allocations of Realized Losses to the Certificate
Balance of the Class A-1A Certificates on the Distribution Date occurring in
an Interest Accrual Period, will be deemed to have occurred on the first day
of such Interest Accrual Period). The "Interest Accrual Amount" with respect
to any
79
<PAGE>
Distribution Date and the Class PS-1 Certificates is equal to interest for
the related Interest Accrual Period at the Pass-Through Rate for such class
for such Interest Accrual Period on the Notional Balance of such class.
Calculations of interest (except in respect of the Interest Accrual Period
beginning in March 1997) due in respect of the Certificates will be made on
the basis of a 360-day year consisting of twelve 30-day months.
The "Interest Distribution Amount" with respect to any Distribution Date
and any Class of Certificates (other than the Class PS-1, Class V-1, Class
V-2, Class R and Class LR Certificates) is equal to the Interest Accrual
Amount thereof for such Distribution Date.
The "Interest Distribution Amount" with respect to any Distribution Date
and the Class PS-1 Certificates is the Interest Accrual Amounts for such
Distribution Date minus the aggregate Reduction Interest Distribution Amounts
in respect of such Distribution Date.
The "Reduction Interest Distribution Amount" for the Class PS-1
Certificates with respect to any Distribution Date and each of clauses Third,
Seventh, Eleventh, Fifteenth, Nineteenth and Twenty-Third under "Distribution
of Available Funds" is the amount of interest accrued for the Interest
Accrual Period at the applicable Reduction Interest Pass-Through Rate for
such Interest Accrual Period on the aggregate amount of Appraisal Reduction
Amounts and Delinquency Reduction Amounts notionally allocated to the related
classes referred to in subclause (B) of each such clause as of such
Distribution Date, as described below under "--Delinquency Reduction Amounts
and Appraisal Reduction Amounts."
The "Reduction Interest Pass-Through Rate" (i) with respect to Appraisal
Reduction Amounts and Delinquency Reduction Amounts notionally allocated to
the Class B-6 Certificates, the Weighted Average Net Mortgage Pass-Through
Rate minus 7.525%, (ii) with respect to Appraisal Reduction Amounts and
Delinquency Reduction Amounts notionally allocated to the Class B-5
Certificates, the Weighted Average Net Mortgage Pass-Through Rate minus
7.525%, (iii) with respect to Appraisal Reduction Amounts and Delinquency
Reduction Amounts notionally allocated to the Class B-4 Certificates, the
Weighted Average Net Mortgage Pass-Through Rate minus 7.525%, (iv) with
respect to Appraisal Reduction Amounts and Delinquency Reduction Amounts
notionally allocated to the Class B-3 Certificates, the Weighted Average Net
Mortgage Pass-Through Rate minus 7.525%, (v) with respect to Appraisal
Reduction Amounts and Delinquency Reduction Amounts notionally allocated to
the Class B-2 Certificates, the Weighted Average Net Mortgage Pass-Through
Rate minus 7.525%, (vi) with respect to Appraisal Reduction Amounts and
Delinquency Reduction Amounts notionally allocated to the Class B-1
Certificates, the Weighted Average Net Mortgage Pass-Through Rate minus
7.525%, (vii) with respect to Appraisal Reduction Amounts and Delinquency
Reduction Amounts notionally allocated to the Class A-8 Certificates, 0.59%,
(viii) with respect to Appraisal Reduction Amounts and Delinquency Reduction
Amounts notionally allocated to the Class A-7 Certificates, 0.94%, (ix) with
respect to Appraisal Reduction Amounts and Delinquency Reduction Amounts
notionally allocated to the Class A-6 Certificates, 0.99%, (x) with respect
to Appraisal Reduction Amounts and Delinquency Reduction Amounts notionally
allocated to the Class A-5 Certificates, 1.08%, (xi) with respect to
Appraisal Reduction Amounts and Delinquency Reduction Amounts notionally
allocated to the Class A-4 Certificates, 1.13%, (xii) with respect to
Appraisal Reduction Amounts and Delinquency Reduction Amounts notionally
allocated to the Class A-3 Certificates, 1.16%, (xiii) with respect to
Appraisal Reduction Amounts and Delinquency Reduction Amounts notionally
allocated to the Class A-2 Certificates, 1.21%, and (xiv) with respect to
Appraisal Reduction Amounts and Delinquency Reduction Amounts notionally
allocated to the Class A-1E Certificates, the Weighted Average Net Mortgage
Pass-Through Rate minus 7.525%.
The "Reduction Interest Shortfalls" with respect to any Distribution Date
and each of the clauses Third, Seventh, Eleventh, Fifteenth, Nineteenth and
Twenty-Third under "Distribution of Available Funds" is any shortfall in the
Reduction Interest Distribution Amount required to be distributed to the
Class PS-1 Certificates pursuant to such clause on such Distribution Date.
The "Interest Accrual Period" with respect to any Distribution Date
commences on the eleventh day of the month preceding the month in which such
Distribution Date occurs and ends on the tenth day of the month in which such
Distribution Date occurs provided that the first Interest Accrual Period is
assumed to consist of 14 days. Except for the first Interest Accrual Period,
each Interest Accrual Period is assumed to consist of 30 days.
An "Interest Shortfall" with respect to any Distribution Date for any
Class of Subordinated Certificates is any shortfall in the amount of interest
required to be distributed on such Class on such Distribution Date.
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<PAGE>
The "Prepayment Interest Shortfall" with respect to any Distribution Date
is equal to the amount of any shortfall in collections of interest (adjusted
to the applicable Net Mortgage Pass-Through Rate plus the Trustee Fee)
resulting from a Principal Prepayment on such Mortgage Loan during the
related Collection Period and prior to the related Due Date. Such shortfall
may result because interest on a Principal Prepayment in full is paid by the
related borrower only to the date of prepayment.
"Delinquency Reduction Amount" is in connection with a Delinquency an
amount equal to the scheduled payment due on the related Due Date (adjusted
to the applicable Net Mortgage Pass-Through Rate with respect to the interest
portion) and not received from a borrower under any Mortgage Loan.
"Delinquency" means any failure of the borrower to make a scheduled
payment on a Due Date.
The "Pass-Through Rate" for any Class of Certificates is the per annum
rate at which interest accrues on such Class during any Interest Accrual
Period.
The Pass-Through Rate on the Class B-1, Class B-2, Class B-3, Class B-4,
Class B-5 and Class B-6 Certificates is a per annum rate equal to 7.525%.
The Pass-Through Rate on the Class A-1A, Class A-1B, Class A-1C, Class
A-1D and Class A-1E Certificates is a per annum rate equal to 7.350%, 7.400%,
7.420%, 7.490% and 7.525%, respectively. The Pass-Through Rate on the Class
A-CS1 Certificates is a per annum rate equal to the Weighted Average Net
Mortgage Pass-Through Rate minus 7.350%. The Pass-Through Rate on the Class
PS-1 Certificates is a per annum rate equal to the Weighted Average Net
Mortgage Pass-Through Rate minus the Weighted Average Pass-Through Rate. The
Pass-Through Rate on the Class A-2 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 1.21%. The
Pass-Through Rate on the Class A-3 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 1.16%. The
Pass-Through Rate on the Class A-4 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 1.13%. The
Pass-Through Rate on the Class A-5 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 1.08%. The
Pass-Through Rate on the Class A-6 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 0.99%. The
Pass-Through Rate on the Class A-7 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 0.94%. The
Pass-Through Rate on the Class A-8 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 0.59%.
The Pass-Through Rate on the Class B-7 and the Class B-7H Certificates is
a per annum rate equal to the Weighted Average Net Mortgage Pass-Through
Rate.
The "Weighted Average Pass-Through Rate" for purposes of calculating the
Pass-Through Rate on the Class PS-1 Certificates, with respect to any
Interest Accrual Period, is the amount (expressed as a percentage), the
numerator of which is the sum of (i) the sum of the products of (A) the
Pass-Through Rate with respect to each class of Certificates having a
Pass-Through Rate (other than the Coupon Strip Certificates) and (B) the
Certificate Balance of such class as of the first day of such Interest
Accrual Period and (ii) the product of (A) the Pass-Through Rate on the Class
A-CS1 Certificates and (B) the Notional Balance of such class as of such date
and the denominator of which is the sum of the Certificate Balances of each
class included in clause (i)(A) above as of such date (provided in each case,
any reductions in Certificate Balance or Notional Balance, as applicable, as
a result of distributions or allocations of Realized Losses to such Classes
or the related Class, respectively, occurring in an Interest Accrual Period
will be deemed to have been made on the first day of such Interest Accrual
Period).
The "Weighted Average Net Mortgage Pass-Through Rate" is the fraction
(expressed as a percentage) the numerator of which is the sum of the products
of (i) the Net Mortgage Pass-Through Rate and (ii) the Stated Principal
Balance of each Mortgage Loan and the denominator of which is the sum of the
Stated Principal Balances of each Mortgage Loan as of the Due Date occurring
in the month preceding the month in which such Distribution Date occurs.
The "Net Mortgage Pass-Through Rate" with respect to any Mortgage Loan and
any Distribution Date is the Mortgage Pass-Through Rate for such Mortgage
Loan for the related Interest Accrual Period minus the aggregate of the
applicable Servicing Fee Rate.
The "Mortgage Pass-Through Rate" with respect to the Mortgage Loans that
provide for calculations of interest based on twelve months of 30 days each,
is equal to the Mortgage Rate thereof.
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The "Mortgage Pass-Through Rate" with respect to the Mortgage Loans (other
than the Mortgage Loans known as the Nassau Park II, Saracen, Burnham
Pacific, M&H, Lakeside and Ambassador loans) that provide for interest based
on a 360-day year and the actual number of days elapsed for any Interest
Accrual Period, is equal to the Mortgage Rate thereof multiplied by a
fraction the numerator of which is the actual number of days in such Interest
Accrual Period and the denominator of which is 30.
The "Mortgage Pass-Through Rate" with respect to the Mortgage Loan secured
by the Nassau Park II property, for any Interest Accrual Period, is equal to
(a) the Mortgage Rate thereof multiplied by a fraction the numerator of which
is the actual number of days in such Interest Accrual Period and the
denominator of which is 30 plus (b) 0.05%.
The "Mortgage Pass-Through Rate" with respect to the Saracen, Burnham
Pacific, M&H, Lakeside and Ambassador loans for any Interest Accrual Period
commencing in any (a) January, February, April, June, September and November
and any December occurring in a year immediately preceding any year which is
not a leap year, is the Mortgage Rate thereof, or (b) March (other than March
1997), May, July, August and October and any December occurring in a year
immediately preceding a year which is a leap year, is equal to the Mortgage
Rate thereof multiplied by a fraction the numerator of which is the actual
number of days in such Interest Accrual Period and the denominator of which
is 30.
Notwithstanding the foregoing, the Mortgage Pass-Through Rate with respect
to each Mortgage Loan (other than the Mortgage Loan secured by the Nassau
Park II property) for the first Interest Accrual Period is the Mortgage Rate
thereof and the Mortgage Pass-Through Rate for the Mortgage Loan secured by
the Nassau Park II property for the first Interest Accrual Period is the
Mortgage Rate thereof plus (i) 0.05%.
The "Mortgage Rate" with respect to each Mortgage Loan and any Interest
Accrual Period is the annual rate, not including any Excess Rate, at which
interest accrues on such Mortgage Loan during such period (in the absence of
a default), as set forth in the related Note and on Annex A. The Mortgage
Rate for purposes of calculating the Weighted Average Net Mortgage
Pass-Through Rate will be the Mortgage Rate of such Mortgage Loan without
taking into account any reduction in the interest rate by a bankruptcy court
pursuant to a plan of reorganization or pursuant to any of its equitable
powers or a reduction on interest or principal due to a modification as
described under "The Pooling and Servicing Agreement -- Modifications".
The "Principal Distribution Amount" for any Distribution Date will be
equal to the sum of:
(i) the principal component of all scheduled Monthly Payments (other than
Balloon Payments) due on the Mortgage Loans on or before the related Due Date
(if received or advanced);
(ii) the principal component of all Assumed Scheduled Payments or Minimum
Defaulted Monthly Payments, as applicable, due on or before the related Due
Date (if received or advanced) with respect to any Mortgage Loan that is
delinquent in respect of its Balloon Payment;
(iii) the Stated Principal Balance of each Mortgage Loan that was, during
the related Collection Period, repurchased from the Trust Fund in connection
with the breach of a representation or warranty or purchased from the Trust
Fund as described herein under "The Pooling and Servicing Agreement --
Optional Termination";
(iv) the portion of Unscheduled Payments allocable to principal of any
Mortgage Loan which was liquidated during the related Collection Period;
(v) all Balloon Payments and, to the extent not included in the preceding
clauses, any other principal payment on any Mortgage Loan received on or
after the Maturity Date thereof, to the extent received during the related
Collection Period;
(vi) to the extent not included in the preceding clause (iii) or (iv), all
other Principal Prepayments received in the related Collection Period; and
(vii) to the extent not included in the preceding clauses, any other full
or partial recoveries in respect of principal, including net insurance
proceeds, net liquidation proceeds and Net REO Proceeds received in the
related Collection Period (in the case of clauses (i) through (vii) net of
any reimbursement for related outstanding P&I Advances allocable to principal
and excluding any amounts representing recoveries of Subordinate Class
Advance Amounts).
The "Assumed Scheduled Payment" with respect to any Mortgage Loan that is
delinquent in respect of its Balloon Payment (including any REO Mortgage Loan
as to which the Balloon Payment would have been past due) is an amount equal
to the sum of (a) the principal portion of the Monthly Payment that would
have been due on such Mortgage Loan on the related Due Date based on the
constant payment required by the related Note or the original amortization
schedule thereof (as calculated with interest at the related Mortgage Rate),
if applicable, assuming such Balloon Payment has not become due after giving
effect to any modification, and (b) interest at the applicable Net Mortgage
Pass-Through Rate.
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An "REO Mortgage Loan" is any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property.
Distribution of Available Funds. On each Distribution Date, the Available
Funds for such Distribution Date will be distributed in the following amounts
and order of priority:
(i) First, to all Classes of Senior Certificates in an aggregate amount
equal to the sum of (a) the aggregate of the Interest Distribution Amounts
of all such Classes; (b) the aggregate of all Unpaid Interest Shortfalls
previously allocated to any Class of Senior Certificates and the Reduction
Interest Distribution Amounts of the Senior Certificates (other than the
Class A-1A, Class A-1B, Class A-1C, Class A-1D and Class A-CS1
Certificates) and the unpaid Reduction Interest Shortfalls previously
allocated to the Senior Certificates (other than the Class A-1A, Class
A-1B, Class A-1C, Class A-1D and Class A-CS1 Certificates); (c) the
Principal Distribution Amount (which amount will be allocated to one or
more Classes of Senior Certificates until the Certificate Balances of all
Classes thereof have been reduced to zero); and (d) the amount of any
shortfall in the Principal Distribution Amount distributable to any Class
of Senior Certificates on a prior Distribution Date and the amount of any
unreimbursed Realized Losses previously allocated to any Class of Senior
Certificates;
(ii) Second, to the Class B-1 Certificates in respect of interest, up to
an amount equal to the aggregate Interest Distribution Amount of such
Class;
(iii) Third, pro rata, (A) to the Class B-1 Certificates in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class, (B) to the Class PS-1
Certificates in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate Balance of the
Class B-1 Certificates as described under "--Deliquency Reduction Amounts
and Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the aggregate unpaid
Reduction Interest Shortfalls previously allocated to the Class PS-1
Certificates in respect of Reduction Interest Distribution Amounts
distributable under clause (B);
(iv) Fourth, to the Class B-1 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant
to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(v) Fifth, to the Class B-1 Certificates, to the extent not distributed
pursuant to all prior clauses, for the unreimbursed amounts of Realized
Losses, if any, an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such Class;
(vi) Sixth, to the Class B-2 Certificates in respect of interest, up to
an amount equal to the aggregate Interest Distribution Amount of such
Class;
(vii) Seventh, pro rata, (A) to the Class B-2 Certificates in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class, (B) to the Class PS-1
Certificates in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate Balance of the
Class B-2 Certificates as described under "--Deliquency Reduction Amounts
and Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the aggregate unpaid
Reduction Interest Shortfalls previously allocated to the Class PS-1
Certificates in respect of Reduction Interest Distribution Amounts
distributable under clause (B);
(viii) Eighth, to the Class B-2 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant
to prior clauses, until the Certificate Balance of such Class is reduced
to zero;
(ix) Ninth, to the Class B-2 Certificates, to the extent not distributed
pursuant to all prior clauses, for the unreimbursed amounts of Realized
Losses, if any, an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such Class;
(x) Tenth, to the Class B-3 Certificates in respect of interest, up to an
amount equal to the aggregate Interest Distribution Amount of such Class;
(xi) Eleventh, pro rata, (A) to the Class B-3 Certificates in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class, (B) to the Class PS-1
Certificates in respect
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of the Reduction Interest Distribution Amount attributable to the notional
reduction in the Certificate Balance of the Class B-3 Certificates as
described under "--Deliquency Reduction Amounts and Appraisal Reduction
Amounts," up to an amount equal to the aggregate Reduction Interest
Distribution Amount so attributable and (C) to the Class PS-1
Certificates, up to an amount equal to the aggregate unpaid Reduction
Interest Shortfalls previously allocated to the Class PS-1 Certificates in
respect of Reduction Interest Distribution Amounts distributable under
clause (B);
(xii) Twelfth, to the Class B-3 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant
to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xiii) Thirteenth, to the Class B-3 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xiv) Fourteenth, to the Class B-4 Certificates in respect of interest,
up to an amount equal to the aggregate Interest Distribution Amount of
such Class;
(xv) Fifteenth, pro rata, (A) to the Class B-4 Certificates in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class, (B) to the Class PS-1
Certificates in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate Balance of the
Class B-4 Certificates as described under "--Deliquency Reduction Amounts
and Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the aggregate unpaid
Reduction Interest Shortfalls previously allocated to the Class PS-1
Certificates in respect of Reduction Interest Distribution Amounts
distributable under clause (B);
(xvi) Sixteenth, to the Class B-4 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant
to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xvii) Seventeenth, to the Class B-4 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xviii) Eighteenth, to the Class B-5 Certificates in respect of interest,
up to an amount equal to the aggregate Interest Distribution Amount of
such Class;
(xix) Nineteenth, pro rata, (A) to the Class B-5 Certificates in respect
of interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class, (B) to the Class PS-1
Certificates in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate Balance of the
Class B-5 Certificates as described under "--Deliquency Reduction Amounts
and Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the aggregate unpaid
Reduction Interest Shortfalls previously allocated to the Class PS-1
Certificates in respect of Reduction Interest Distribution Amounts
distributable under clause (B);
(xx) Twentieth, to the Class B-5 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant
to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xxi) Twenty-first, to the Class B-5 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xxii) Twenty-second, to the Class B-6 Certificates in respect of
interest, up to an amount equal to the aggregate Interest Distribution
Amount of such Class;
(xxiii) Twenty-third, pro rata, (A) to the Class B-6 Certificates in
respect of interest, up to an amount equal to the aggregate unpaid
Interest Shortfalls previously allocated to such Class, (B) to the Class
PS-1 Certificates in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate Balance of the
Class B-6 Certificates as described under "--Deliquency Reduction Amounts
and Appraisal Reduction Amounts," up
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to an amount equal to the aggregate Reduction Interest Distribution Amount
so attributable and (C) to the Class PS-1 Certificates, up to an amount
equal to the aggregate unpaid Reduction Interest Shortfalls previously
allocated to the Class PS-1 Certificates in respect of Reduction Interest
Distribution Amounts distributable under clause (B);
(xxiv) Twenty-fourth, to the Class B-6 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant
to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xxv) Twenty-fifth, to the Class B-6 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xxvi) Twenty-sixth, pro rata, to the Class B-7 and Class B-7H
Certificates in respect of interest, up to an amount equal to the
aggregate Interest Distribution Amounts of such classes;
(xxvii) Twenty-seventh, pro rata, to the Class B-7 and Class B-7H
Certificates in respect of interest, up to an amount equal to the
aggregate unpaid Interest Shortfalls previously allocated to such classes;
(xxviii) Twenty-eighth, pro rata, based on Certificate Balance to the
Class B-7 and Class B-7H Certificates in reduction of the Certificate
Balances thereof, an amount equal to the Principal Distribution Amount
less amounts of the Principal Distribution Amount distributed pursuant to
all prior clauses, until the Certificate Balance of each such class is
reduced to zero;
(xxix) Twenty-ninth, pro rata, to the Class B-7 and Class B-7H
Certificates, to the extent not distributed pursuant to all prior clauses,
for the unreimbursed amounts of Realized Losses, if any, an amount equal
to the aggregate of such unreimbursed Realized Losses previously allocated
to such classes; and
(xxx) Thirtieth, to the Class R and Class LR Certificates.
Prepayment Premiums. On each Distribution Date, Prepayment Premiums with
respect to any Unscheduled Payments (including voluntary and involuntary
prepayments) received in the related Collection Period shall be distributed
to the holders of the Senior Certificates outstanding on such Distribution
Date as specified in the Pooling and Servicing Agreement, but will not be
applied to reduce the outstanding Certificate Balance of any such Class.
Prepayment Premiums will not be distributed to holders of the Subordinated
Certificates.
Default Interest and Excess Interest. On each Distribution Date, Net
Default Interest and Excess Interest received in the related Collection
Period with respect to a default on a Mortgage Loan will be distributed
solely to the Class V-1 and Class V-2 Certificates, respectively, to the
extent set forth in the Pooling and Servicing Agreement, and will not be
available for distribution to holders of the Subordinated Certificates. The
Class V-1 and Class V-2 Certificates are not entitled to any other
distributions of interest, principal or Prepayment Premiums.
The holders of a majority Percentage Interest of the Class R Certificates
or the most subordinate Class of Certificates outstanding (other than the
Class B-7H Certificates) will have the limited right to purchase the ARD Loans
on their related Anticipated Repayment Dates under the circumstances described
under "The Pooling and Servicing Agreement -- Optional Termination" herein.
REALIZED LOSSES
The Certificate Balance of the Certificates will be reduced without
distribution on any Distribution Date as a write-off to the extent of any
Realized Loss allocated to the applicable Class of Certificates on the
related Distribution Date. As referred to herein, the "Realized Loss" with
respect to any Distribution Date shall mean the amount, if any, by which the
aggregate Certificate Balance of the Certificates after giving effect to
distributions made on such Distribution Date exceeds the aggregate Stated
Principal Balance of the Mortgage Loans as of the Due Date occurring in the
month in which such Distribution Date occurs. Except as described in the next
sentence, any such Realized Losses will be applied to the Classes of
Certificates in the following order, until the Certificate Balance of each is
reduced to zero: first, to the Junior Subordinated Certificates, second, to
the Class B-6 Certificates, third, to the Class B-5 Certificates, fourth, to
the Class B-4 Certificates, fifth, to the Class B-3 Certificates, sixth, to
the Class B-2 Certificates, seventh, to the Class B-1 Certificates and
finally, to certain Classes of the Senior Certificates in accordance with the
priorities set forth in the Pooling and Servicing Agreement. Any amounts
recovered in respect of any amounts previously written-off as Realized Losses
will be distributed to the Classes of Certificates in reverse order of
allocation of Realized Losses thereto. Shortfalls in Available Funds
resulting from Servicing Compensation (other than the Servicing Fee),
interest on Advances to the extent not covered by Default Interest,
extraordinary expenses of the Trust Fund (other than indemnification
expenses), a reduction on the interest rate of a Mortgage Loan by a
bankruptcy court pursuant to a plan of reorganization or pursuant to any of
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its equitable powers, a reduction in interest rate or a forgiveness of
principal of a Mortgage Loan as described under "The Pooling and Servicing
Agreement -- Modifications," herein or otherwise, will be allocated in the
same manner as Realized Losses. Shortfalls in Available Funds resulting from
(i) unanticipated indemnification expenses of the Trust Fund required to be
paid pursuant to the Pooling and Servicing Agreement and (ii) Prepayment
Interest Shortfalls in excess of the sum of (x) the related Servicing Fee
attributable to the Mortgage Loan being prepaid (not including the portion of
the Servicing fee attributable to the Trustee) and (y) investment income on
the related Principal Prepayment for the period such amount is held in the
Collection Account during the related Interest Accrual Period, will be
allocated to, and be deemed distributed to, each Class of Certificates, pro
rata, based upon amounts distributable to each such Class and, in the case of
indemnification expenses, will be allocated, first, in respect of interest
and, second, in respect of principal. The Notional Balance of the Class A-CS1
Certificates will be reduced to reflect reductions in the Certificate Balance
of the Class A-1A Certificates resulting from allocations of Realized Losses;
the Notional Balance of the Class PS-1 Certificates will be reduced to
reflect reductions in the Stated Principal Balances of the Mortgage Loans as
a result of write-offs in respect of final recovery determinations in respect
of liquidation of defaulted Mortgage Loans.
The "Stated Principal Balance" of any Mortgage Loan at any date of
determination will equal (a) the principal balance as of the Cut-off Date of
such Mortgage Loan, minus (b) the sum of (i) the principal portion of each
Monthly Payment, Minimum Defaulted Monthly Payment or Assumed Scheduled
Payment due on such Mortgage Loan after the Cut-off Date up to such date of
determination, (ii) all voluntary and involuntary principal prepayments and
other unscheduled collections of principal received with respect to such
Mortgage Loan, to the extent distributed to holders of the Certificates or
applied to other payments required under the Pooling and Servicing Agreement
before such date of determination and (iii) any principal forgiven by the
Special Servicer or Interest Shortfalls resulting from reductions or
deferrals of interest, each as described herein under "The Pooling and
Servicing Agreement -- Modifications." The Stated Principal Balance of a
Mortgage Loan with respect to which title to the related Mortgaged Property
has been acquired by the Trust Fund is equal to the principal balance thereof
outstanding on the date on which such title is acquired less any Net REO
Proceeds allocated to principal on such Mortgage Loan. The Stated Principal
Balance of a Specially Serviced Mortgage Loan with respect to which the
Servicer or Special Servicer has determined that it has received all payments
and recoveries which the Servicer or the Special Servicer, as applicable,
expects to be finally recoverable on such Mortgage Loan is zero.
PREPAYMENT INTEREST SHORTFALLS
The Servicer will deposit from its own funds any Prepayment Interest
Shortfalls into the Collection Account on the Servicer Remittance Date to the
extent such Prepayment Interest Shortfalls do not exceed the aggregate of the
related Servicing Fee attributable to the Mortgage Loan being prepaid due the
Servicer and the investment income accruing on the related Principal
Prepayment for the related Collection Period. Any Prepayment Interest
Shortfall in excess of the related Servicing Fee attributable to the Mortgage
Loan being prepaid and the investment income accruing on the related
Principal Prepayment due to the Servicer for such period will be allocated to
each Class of Certificates, pro rata, based on amounts distributable to each
such Class. Any interest that accrues on a prepayment of a Mortgage Loan
after the Due Date and before the following Servicer Remittance Date will be
paid to the Servicer.
DELINQUENCY REDUCTION AMOUNTS AND APPRAISAL REDUCTION AMOUNTS.
On or after any Distribution Date on which the Class B-6 Certificates are
the most subordinate class of Certificates outstanding, the Certificate
Balances of the certain Classes of the Senior Certificates and the Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates will be
notionally reduced (solely for purposes of determining the payment priority
of interest on the Class PS-1 Certificates in respect of Reduction Interest
Distribution Amounts) on any Distribution Date to the extent of any
Delinquency Reduction Amounts or Appraisal Reduction Amounts with respect to
such Distribution Date; provided that (i) if a Delinquency and an Appraisal
Reduction Event occur with respect to the same Distribution Date and the same
Mortgage Loan, the reduction will equal the Appraisal Reduction Amount, (ii)
following the occurrence of an Appraisal Reduction Event with respect to any
Mortgage Loan, no further Delinquency Reduction Amounts will be applied with
respect to such Mortgage Loan and any Delinquency Reduction Amounts
previously applied will be reversed and (iii) for any Distribution Date, the
aggregate of the Appraisal Reduction Amounts and Delinquency Reduction
Amounts may not exceed the Certificate Balance (as adjusted by any notional
reductions) of the most subordinate class of Certificates outstanding among
certain Classes of the Senior Certificates and the Class B-1, Class B-2,
Class B-3, Class B-4, Class B-5 and Class B-6 Certificates (and to the extent
the aggregate of the Appraisal
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Reduction Amounts and Delinquence Reduction Amounts exceeds such Certificate
Balance, such excess will be applied subject to any reversal described below,
to notionally reduce the next most subordinate Class of Certificates on the
next Distribution Date). Any such reductions will be applied notionally,
first, to the Class B-6 Certificates, second, to the Class B-5 Certificates,
third, to the Class B-4 Certificates, fourth, to the Class B-3 Certificates,
fifth, to the Class B-2 Certificates, sixth, to the Class B-1 Certificates,
and finally, to the Classes of Senior Certificates (provided in each case
that no Certificate Balance in respect of any such class may be notionally
reduced below zero). Any notional reduction of the Certificate Balance of
such Certificates as a result of any Delinquency or Appraisal Reduction Event
will be reversed to the extent there is a recovery of any or all of the
Delinquency Amounts or a Realized Loss. Additionally, a reversal or
additional reduction will occur to the extent that the Servicer's Appraisal
Estimate is less than or greater than the Appraisal Reduction as adjusted to
take into account a subsequent independent MAI appraisal. For purposes of
calculating Interest Accrual Amounts, any such reduction or reversal or
additional reductions made on the Distribution Date occurring in an Interest
Accrual Period will be deemed to have been made on the first day of such
Interest Accrual Period. See "Description of the Offered Certificates --
Distribution --Priorities" herein.
APPRAISAL REDUCTIONS
With respect to the Distribution Date following the earliest of (i) the
third anniversary of the date on which an extension of the maturity date of a
Mortgage Loan becomes effective as a result of a modification of such
Mortgage Loan by the Special Servicer, which extension does not change the
amount of Monthly Payments on the Mortgage Loan (unless during such extension
period the borrower has been delinquent for 60 days or more, in which case,
the first Distribution Date following such 60 day delinquency), (ii) 90 days
after an uncured delinquency occurs in respect of a Mortgage Loan, (iii)
immediately after the date on which a reduction in the amount of Monthly
Payments on a Mortgage Loan, or a change in any other material economic term
of the Mortgage Loan, becomes effective as a result of a modification of such
Mortgage Loan by the Special Servicer, (iv) immediately after a receiver has
been appointed, (v) immediately after a borrower declares bankruptcy, (vi)
immediately after a Mortgage Loan becomes an REO Mortgage Loan, (vii) upon a
default in the payment of a Balloon Payment, (viii) immediately after an
occurrence of an event for which a Property Advance would be required to be
made by the Servicer or (ix) any other event which, in the discretion of the
Servicer and of which the Servicer becomes aware in performing its
obligations in accordance with the Servicing Standard would materially and
adversely impair the value of the Mortgaged Property and security for the
related Mortgage Loan (any of (i), (ii), (iii), (iv), (v), (vi), (vii),
(viii) and (ix), an "Appraisal Reduction Event"), an Appraisal Reduction
Amount will be calculated. The "Appraisal Reduction Amount" for any
Distribution Date and for any Mortgage Loan as to which any Appraisal
Reduction Event has occurred will be an amount equal to the excess of (a) the
outstanding Stated Principal Balance of such Mortgage Loan over (b) the
excess of (i) 90% of the sum of the appraised values of the related Mortgaged
Properties as determined by independent MAI appraisals (the costs of which
shall be paid by the Servicer as an Advance) over (ii) the sum of (A) to the
extent not previously advanced by the Servicer, the Trustee or the Fiscal
Agent, all unpaid interest on such Mortgage Loan at a per annum rate equal to
the Mortgage Rate, (B) all unreimbursed Advances and interest thereon at the
Advance Rate in respect of such Mortgage Loan and (C) all currently due and
unpaid real estate taxes, ground rents and assessments and insurance premiums
and all other amounts due and unpaid under the Mortgage Loan (which tax,
premiums and other amounts have not been the subject of an Advance by the
Servicer). If no independent MAI appraisal has been obtained within twelve
months prior to the first Distribution Date on or after an Appraisal
Reduction Event has occurred, the Servicer will be required to estimate the
value of the related Mortgaged Properties (the "Servicer's Appraisal
Estimate") and such estimate will be used for purposes of the Appraisal
Reduction Amount. Within 30 days after the Appraisal Reduction Event, the
Servicer will be required to obtain an independent MAI appraisal. On the
first Distribution Date occurring on or after the delivery of such
independent MAI appraisal, the Servicer will be required to adjust the
Appraisal Reduction Amount to take into account such appraisal (regardless of
whether the independent MAI appraisal is higher or lower than the Servicer's
Appraisal Estimate). Appraisal Reduction Amounts will be recalculated
annually based on Updated Appraisals.
DELIVERY, FORM AND DENOMINATION
The Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6
Certificates will be issued, maintained and transferred in book-entry form
only, in denominations of $50,000, $50,000, $20,000, $30,000, $20,000 and
$20,000 initial Certificate Balances, respectively and in multiples of $5,
$5, $2, $3, $2 and $2, respectively, in excess thereof.
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Notwithstanding the foregoing, one Definitive Certificate for each of the
Class B-1 and B-2 and Class B-4 Certificates shall be issued, each having an
initial Certificate Balance of $9.00. All references herein to Subordinated
Certificates and Definitive Certificates are deemed to include Subordinated
Certificates and Definitive Certificates comprising global and definitive
Subordinated Units.
The Subordinated Certificates will initially be represented by one or more
global Certificates for each such Class registered in the name of the nominee
of DTC. The Depositor has been informed by DTC that DTC's nominee will be
Cede & Co. No holder of a Subordinated Certificate will be entitled to
receive a Definitive Certificate representing its interest in such Class,
except under the limited circumstances described under "--Definitive
Certificates." Unless and until Definitive Certificates are issued, all
references to actions by holders of the Subordinated Certificates will refer
to actions taken by DTC upon instructions received from holders of
Subordinated Certificates through its participating organizations (together
with CEDEL and Euroclear participating organizations, the "Participants", and
all references herein to payments, notices, reports, statements and other
information to holders of Subordinated Certificates will refer to payments,
notices, reports and statements to DTC or Cede & Co., as the registered
holder of the Subordinated Certificates, for distribution to holders of
Subordinated Certificates through its Participants in accordance with DTC
procedures; provided, however, that to the extent that the party responsible
for distributing any report, statement or other information has been provided
with the name of the beneficial owner of a Certificate (or the prospective
transferee of such beneficial owner), such report, statement or other
information will be provided to such beneficial owner (or prospective
transferee).
Until Definitive Certificates are issued in respect of the Subordinated
Certificates, interests in the Subordinated Certificates will be transferred
on the book-entry records of DTC and its Participants. The Trustee will
initially serve as certificate registrar (in such capacity, the "Certificate
Registrar") for purposes of recording and otherwise providing for the
registration of the Subordinated Certificates.
A "Certificateholder" under the Pooling and Servicing Agreement will be
the person in whose name a Certificate is registered in the certificate
register maintained pursuant to the Pooling and Servicing Agreement, except
that solely for the purpose of giving any consent or taking any action
pursuant to the Pooling and Servicing Agreement, any Certificate registered
in the name of the Depositor, the Servicer, the Special Servicer, the
Trustee, a manager of a Mortgaged Property, a Mortgagor or any person
affiliated with the Depositor, the Servicer, the Special Servicer, the
Trustee, such manager or a Mortgagor will be deemed not to be outstanding and
the Voting Rights to which it is entitled will not be taken into account in
determining whether the requisite percentage of Voting Rights necessary to
effect any such consent or take any such action has been obtained; provided,
however, that for purposes of obtaining the consent of Certificateholders to
an amendment to the Pooling and Servicing Agreement, any Certificates
beneficially owned by the Servicer or Special Servicer or an affiliate will
be deemed to be outstanding, provided that such amendment does not relate to
compensation of the Servicer or Special Servicer or otherwise benefit the
Servicer or the Special Servicer in any material respect; and, provided,
further, that for purposes of obtaining the consent of Certificateholders to
any action proposed to be taken by the Special Servicer with respect to a
Specially Serviced Mortgage Loan, any Certificates beneficially owned by the
Servicer or an affiliate will be deemed to be outstanding, provided that, the
Special Servicer is not the Servicer. Notwithstanding the foregoing, solely
for purposes of providing or distributing any reports, statements or other
information pursuant to the Pooling and Servicing Agreement, a
Certificateholder will include any beneficial owner (or prospective
transferee of a beneficial owner) to the extent that the party required or
permitted to provide or distribute such report, statement or other
information has been provided with the name of such beneficial owner (or
prospective transferee). The Percentage Interest of any Class of Subordinated
Certificate will be equal to the percentage obtained by dividing the
denomination of such Certificate by the aggregate initial Certificate Balance
of such Class of Certificates. See "--Book-Entry Registration" and
"--Definitive Certificates" herein.
BOOK-ENTRY REGISTRATION
Holders of Subordinated Certificates may hold their Certificates through
DTC (in the United States) or CEDEL or Euroclear (in Europe) if they are
Participants of such system, or indirectly through organizations that are
participants in such systems. CEDEL and Euroclear will hold omnibus positions
on behalf of the CEDEL Participants and the Euroclear Participants,
respectively, through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of
DTC. DTC is a limited purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the
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Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code and a "clearing agency" registered pursuant
to Section 17A of the Securities Exchange Act of 1934, as amended. DTC was
created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants
through electronic computerized book-entries, thereby eliminating the need
for physical movement of certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations.
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").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between CEDEL Participants and Euroclear Participants will
occur in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly 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 in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business
day following the DTC settlement date, and such credits or any transactions
in such securities settled during such processing will be reported to the
relevant CEDEL Participant or Euroclear Participant on such business day.
Cash received in CEDEL or Euroclear as a result of sales of securities by or
through a CEDEL Participant or a Euroclear Participant to a DTC 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 additional information regarding clearance
and settlement procedures for the Subordinated Certificates and for
information with respect to tax documentation procedures relating to the
Subordinated Certificates, see Annex B hereto.
The holders of Subordinated Certificates that are not Participants or
Indirect Participants but desire to purchase, sell or otherwise transfer
ownership of, or other interests in, Subordinated Certificates may do so only
through Participants and Indirect Participants. In addition, holders of
Subordinated Certificates will receive all distributions of principal and
interest from the Trustee through the Participants who in turn will receive
them from DTC. Similarly, reports distributed to Certificateholders pursuant
to the Pooling and Servicing Agreement and requests for the consent of
Certificateholders will be delivered to beneficial owners only through DTC,
Euroclear, CEDEL and their respective participants. Under a book-entry
format, holders of Subordinated Certificates may experience some delay in
their receipt of payments, reports and notices, since such payments, reports
and notices will be forwarded by the Trustee to Cede & Co., as nominee for
DTC. DTC will forward such payments, reports and notices to its Participants,
which thereafter will forward them to Indirect Participants, CEDEL, Euroclear
or holders of Subordinated Certificates, as applicable.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Subordinated Certificates among Participants on whose behalf it acts with
respect to the Subordinated Certificates and to receive and transmit
distributions of principal of, and interest on, the Subordinated
Certificates. Participants and Indirect Participants with which the holders
of Subordinated Certificates have accounts with respect to the Subordinated
Certificates similarly are required to make book-entry transfers and receive
and transmit such payments on behalf of their respective holders of
Subordinated Certificates. Accordingly, although the holders of Subordinated
Certificates will not possess the Subordinated Certificates, the Rules
provide a mechanism by which Participants will receive payments on
Subordinated Certificates and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a holder of
Subordinated Certificates to pledge such Certificates to persons or entities
that do not participate in the DTC system, or to otherwise act with respect
to such Certificates, may be limited due to the lack of a physical
certificate for such Certificates.
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DTC has advised the Depositor that it will take any action permitted to be
taken by a holder of a Subordinated Certificate under the Pooling and
Servicing Agreement only at the direction of one or more Participants to
whose accounts with DTC the Subordinated Certificates are credited. DTC may
take conflicting actions with respect to other undivided interests to the
extent that such actions are taken on behalf of Participants whose holdings
include such undivided interests.
Except as required by law, neither the Depositor, the Servicer, the Fiscal
Agent nor the Trustee will have any liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests
in the Subordinated Certificates held by Cede & Co., as nominee for DTC, or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
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, 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, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the Underwriters. 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 the
Euroclear system ("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
27 currencies, including United States dollars. The Euroclear system 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 Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator"), under contract with Euroclear
Clearance System, 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 the Euroclear system on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial
intermediaries and may include the Underwriters. Indirect access to the
Euroclear system 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 the Euroclear
system, withdrawal of securities and cash from the Euroclear system, and
receipts of payments with respect to securities in the Euroclear system. All
securities in the Euroclear system 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.
The information herein concerning DTC, CEDEL and Euroclear and their
book-entry systems has been obtained from sources believed to be reliable,
but the Depositor takes no responsibility for the accuracy or completeness
thereof.
DEFINITIVE CERTIFICATES
Subordinated Certificates issued in fully registered, certificated form
("Definitive Certificates" will be delivered to Certificate Owners (or their
nominees) only if (i) DTC is no longer willing or able to properly discharge
its responsibilities
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as depository with respect to the Book-Entry Certificates, and the Trustee is
unable to locate a qualified successor, (ii) the Depositor or the Trustee, at
its sole option, elects to terminate the book-entry system through DTC with
respect to some or all of any Class or Classes of Certificates, or (iii)
after the occurrence of an Event of Default under the Pooling and Servicing
Agreement, Certificate Owners representing a majority in principal amount of
the Book-Entry Certificates then outstanding advise DTC through DTC
Participants in writing that the continuation of a book-entry system through
DTC (or a successor thereto) is no longer in the best interest of Certificate
Owners.
Upon the occurrence of any of the events described in clauses (i) through
(iii) in the immediately preceding paragraph, the Trustee is required to
notify all affected Certificateholders (through DTC and related DTC
Participants) of the availability through DTC of Definitive Certificates.
Upon delivery of Definitive Certificates, the Trustee, Certificate Registrar,
and Servicer will recognize the holders of such Definitive Certificates as
holders under the Pooling and Servicing Agreement ("Holders"). Distributions
of principal and interest on the Definitive Certificates will be made by the
Trustee directly to Holders of Definitive Certificates in accordance with the
procedures set forth herein and in the Pooling and Servicing Agreement.
Upon the occurrence of any of the events described in clauses (i) through
(iii) of the second preceding paragraph, requests for transfer of Definitive
Certificates will be required to be submitted directly to the Certificate
Registrar in a form acceptable to the Certificate Registrar (such as the
forms which will appear on the back of the certificate representing a
Definitive Certificate), signed by the Holder or such Holder's legal
representative and accompanied by the Definitive Certificate or Certificates
for which transfer is being requested. The Trustee will be appointed as the
initial Certificate Registrar.
TRANSFER RESTRICTIONS
In the event that holders of the Subordinated Certificates become entitled
to receive Definitive Certificates under the circumstances described under
"--Definitive Certificates", each prospective transferee of a Subordinated
Certificate that is a Definitive Certificate will be required to (a) deliver
to the Depositor, the Certificate Registrar and the Trustee a representation
letter substantially in the form set forth as an exhibit to the Pooling and
Servicing Agreement stating that such transferee is not a Plan or a person
acting on behalf of or investing the assets of a Plan, other than an
insurance company investing the assets of its general account under
circumstances whereby the purchase and subsequent holding of the Subordinated
Certificate would be exempt from the prohibited transaction restrictions of
ERISA and the Code under Sections I and III of PTE 95-60, or (b) provide an
opinion of counsel and such other documentation as described under "ERISA
Considerations" herein. The purchaser or transferee of any interest in a
Subordinated Certificate that is not a Definitive Certificate shall be deemed
to represent that it is not a person described in clause (a) above.
The Subordinated Certificates will contain a legend describing such
restrictions on transfer and the Pooling and Servicing Agreement will provide
that any attempted or purported transfer in violation of these transfer
restrictions will be null and void.
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PREPAYMENT AND YIELD CONSIDERATIONS
MORTGAGOR DEFAULTS
Effect on Subordinated Certificates. The aggregate amount of
distributions on the Subordinated Certificates offered hereby, the yield to
maturity of such Subordinated Certificates, the rate of principal payments on
such Subordinated Certificates and the weighted average life of such
Subordinated Certificates will be affected by the rate and the timing of
delinquencies and defaults on the Mortgage Loans. If a purchaser of a
Subordinated Certificate of any Class calculates its anticipated yield based
on an assumed rate of default and amount of losses on the Mortgage Loans that
is lower than the default rate and amount of losses actually experienced and
such additional losses are allocable to such Class of Certificates, such
purchaser's actual yield to maturity will be lower than that so calculated
and could be negative. The timing of any loss on a liquidated Mortgage Loan
will also affect the actual yield to maturity of the Subordinated
Certificates to which a portion of such loss is allocable, even if the rate
of defaults and severity of losses are consistent with an investor's
expectations. In general, the earlier a loss borne by an investor occurs, the
greater is the effect on such investor's yield to maturity.
The yield to investors in the Subordinated Certificates will be very
sensitive to the timing and magnitude of losses on the Mortgage Loans due to
liquidations following a default, and will also be very sensitive to
delinquencies in payment. MOREOVER, BECAUSE THE SUBORDINATE CERTIFICATES AND
THE JUNIOR SUBORDINATE CERTIFICATES ARE SUBORDINATED TO THE SENIOR
CERTIFICATES, REALIZED LOSSES WILL BE ALLOCATED, FIRST, TO THE CLASS B-7 AND
CLASS B-7H CERTIFICATES, PRO RATA, UNTIL THEIR CERTIFICATE BALANCES ARE
REDUCED TO ZERO, SECOND, TO THE CLASS B-6 CERTIFICATES, UNTIL THEIR
CERTIFICATE BALANCE IS REDUCED TO ZERO, THIRD, TO THE CLASS B-5 CERTIFICATES,
UNTIL THEIR CERTIFICATE BALANCE IS REDUCED TO ZERO, FOURTH, TO THE CLASS B-4
CERTIFICATES, UNTIL THEIR CERTIFICATE BALANCE IS REDUCED TO ZERO, FIFTH, TO
THE CLASS B-3 CERTIFICATES, UNTIL THEIR CERTIFICATE BALANCE IS REDUCED TO
ZERO, SIXTH, TO THE CLASS B-2 CERTIFICATES, UNTIL THEIR CERTIFICATE BALANCE
IS REDUCED TO ZERO, SEVENTH, TO THE CLASS B-1 CERTIFICATES, UNTIL THEIR
CERTIFICATE BALANCE IS REDUCED TO ZERO, AND EIGHTH, TO THE SENIOR
CERTIFICATES IN THE ORDER SET FORTH IN THE POOLING AND SERVICING AGREEMENT.
AS A RESULT, LOSSES ON THE MORTGAGE LOANS COULD RESULT IN A SIGNIFICANT LOSS,
OR IN SOME CASES A COMPLETE LOSS, OF AN INVESTOR'S INVESTMENT IN THE
SUBORDINATE CERTIFICATES. CONSEQUENTLY, PROSPECTIVE INVESTORS SHOULD PERFORM
THEIR OWN ANALYSIS OF THE EXPECTED TIMING AND SEVERITY OF REALIZED LOSSES
PRIOR TO INVESTING IN THE SUBORDINATE CERTIFICATES.
As and to the extent described herein, the Servicer and Special Servicer,
as applicable, will be entitled to receive (a) interest on unreimbursed
Advances and unreimbursed servicing expenses that (i) are recovered out of
amounts received on the Mortgage Loan as to which such Advances were made or
such servicing expenses were incurred, which amounts are in the form of late
payments, liquidation proceeds, insurance proceeds, condemnation proceeds or
amounts paid in connection with the purchase of such Mortgage Loan out of the
Trust Fund or (ii) are determined to be nonrecoverable Advances and (b)
special servicing compensation for Specially Serviced Loans and REO Mortgage
Loans. The Servicer's or Special Servicer's right to receive such payments of
interest or additional compensation are prior to the rights of
Certificateholders to receive distributions on the Certificates and,
consequently, may result in losses being allocated to the Subordinated
Certificates that would not otherwise have resulted absent the accrual of
such interest or such additional compensation.
Regardless of whether losses ultimately result, delinquencies and defaults
on the Mortgage Loans may significantly delay the receipt of payments by the
holder of a Subordinated Certificate, to the extent that Advances or another
Class of Certificates does not fully offset the effects of any such
delinquency or default. INVESTORS IN THE SUBORDINATED CERTIFICATES SHOULD
CONSIDER THE RISK THAT LOSSES ON THE MORTGAGE LOANS COULD RESULT IN THE
FAILURE OF SUCH INVESTORS TO FULLY RECOVER THEIR INITIAL INVESTMENTS. NO
REPRESENTATION IS MADE AS TO THE FREQUENCY OF DELINQUENCIES, DEFAULTS AND/OR
LIQUIDATIONS THAT MAY OCCUR WITH RESPECT TO THE MORTGAGE LOANS, OR THE
MAGNITUDE OF ANY LOSSES THAT MAY OCCUR WITH RESPECT TO THE MORTGAGE LOANS OR
THE LIKELIHOOD OR MAGNITUDE OF ANY EXTRAORDINARY EXPENSES THAT MAY BE
INCURRED WITH RESPECT TO THE TRUST FUND.
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YIELD TABLES
The following Yield Tables assume that: (i) there is no prepayment prior
to the earlier of the Anticipated Repayment date or the Maturity Date (the
Mortgage Loans generally provide that prepayments are prohibited until the
Maturity Date or Anticipated Repayment Date (or in the case of certain
Mortgage loans, three or six months prior to the Anticipated Repayment Date
or Maturity Date), and prior to such dates a Mortgaged Property can be
released only upon defeasance through the substitution of U.S. Treasury
obligations), (ii) all ARD Loans are repaid on their Anticipated Repayment
Date, (iii) no defaults occur during the first 3 years with respect to any
Mortgage Loans, (iv) defaults are calculated in cumulative percentages
specified of the Initial Principal Balance, giving effect to (a) scheduled
principal payments, including balloon payments, previously received and (b)
elimination of the cumulative principal balance assumed to have previously
defaulted, (v) losses on defaulted Mortgage Loans are recognized and applied
to the Certificates immediately, (vi) the assumed loss percentages are the
net loss (including lost interest, (if any), loss of principal and
reimbursement of certain expenses) and (vii) yields are calculated as monthly
discount rates equating the loss-adjusted stream of cash flows in each
scenario to the assumed Certificate purchase prices and converting such
monthly discount rates to corporate bond equivalent yields.
The information provided below is subject to the following qualifications
and, therefore, actual yields on the Subordinated Certificates and the
performance of the Mortgage Pool as a whole may vary based on the performance
of the Mortgage Loans: (i) defaults and losses will occur based on individual
Mortgage Loans, not as fixed percentages of the Mortgage Pool balance; (ii)
certain individual loans and groups of loans with related borrowers exceed
the maximum percentage of the Mortgage Pool assumed to default in any year;
(iii) defaults and loss levels will depend upon the specific property type
and geographical and borrower concentrations in the Mortgage Pool and may not
relate to the historical experience of the Mortgage Loan Seller or other
industry participants with other mortgage loans; (iv) failure of ARD Loans to
prepay in full on the Anticipated Repayment Date may increase the average
life and duration of the Certificates, lowering yields to maturity on any
Certificates purchased at a discount and lengthening the period of time
during which such Certificates are exposed to potential losses; and (v)
delays between the timing of Mortgage Loan defaults and recognition of losses
on the related Mortgage Loans may result in the incurrence of additional
expenses (including reimbursement of Advances together with interest thereon,
Servicing Fees and Special Servicing Fees, Principal Recovery Fees and
servicing and loan workout expenses) which, like interest and principal
distributions on the Senior Certificates, must be paid prior to payments of
principal on the Subordinated Certificates. While the indicated loss
percentages employed in these tables are assumed to include such additional
expenses, protracted delays in the Mortgage Loan workout process could
increase such additional expenses considerably. Many of the additional
expenses represent fees or reimbursement of expenses to the Special Servicer,
who may be an affiliate of the holder of the Junior Subordinated
Certificates. See "Risk Factors -- Servicer or Special Servicer May Purchase
Certificates; Conflict of Interest". Investors should continue to monitor the
performance of the Mortgage Loans and update the assumptions they apply to
evaluate their investment in the Subordinated Units.
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WEIGHTED AVERAGE LIFE, FIRST AND LAST PRINCIPAL PAYMENT
DATE, YIELD AND DURATION OF
ALL SUBORDINATED UNITS
AT VARIOUS ASSUMED PRICES AND MORTGAGE LOAN
DEFAULT RATES ASSUMING 30% LOSSES ON DEFAULTED MORTGAGE LOANS
<TABLE>
<CAPTION>
SCENARIO
1 2 3 4 5
-------- -------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Default Percentage:(a) ....... 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a)($mm) ..... $0 $10.8 $21.7 $43.3 $65.0
As a percentage of Initial Pool Balance 0% .75% 1.5% 3.00% 4.5%
Applied to Subordinated Units ($mm) .... $0 $ 0 $ 0 $21.7 $43.3
As a percentage of Subordinated Units ... 0% 0% 0% 15.8% 31.6%
- --------------------------------------------------------------------------------------------------------------
Weighted average life (years) 15.70 16.03 16.36 16.45 16.59
First principal payment date 3/2012 3/2012 3/2012 3/2012 4/2012
Last principal payment date 4/2017 4/2017 4/2017 4/2017 4/2017
Price (%) 75.063......................... 11.09 11.06 11.03 10.16 8.96 Yield to Maturity
7.76 7.81 7.86 7.78 7.73 Duration
Price (%) 77.641......................... 10.66 10.63 10.61 9.73 8.53 Yield to Maturity
7.89 7.95 8.01 7.93 7.89 Duration
Price (%) 79.984......................... 10.28 10.26 10.24 9.36 8.16 Yield to Maturity
8.02 8.08 8.14 8.06 8.02 Duration
Price (%) 82.484......................... 9.90 9.88 9.86 8.98 7.78 Yield to Maturity
8.14 8.20 8.27 8.19 8.16 Duration
Price (%) 84.984......................... 9.54 9.52 9.51 8.62 7.41 Yield to Maturity
8.26 8.33 8.39 8.32 8.29 Duration
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
94
<PAGE>
WEIGHTED AVERAGE LIFE AND FIRST AND LAST PRINCIPAL PAYMENT
DATE OF CLASS B-1 CERTIFICATES
AT VARIOUS ASSUMED MORTGAGE LOAN
DEFAULT RATES ASSUMING 30% LOSSES ON DEFAULTED MORTGAGE LOANS
<TABLE>
<CAPTION>
SCENARIO
1 2 3 4 5
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cumulative Default Percentage:(a).......... 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a) ($mm) ...... $0 $10.8 $21.7 $43.3 $65.0
As a percentage of Initial Pool Balance .. 0% .75% 1.5% 3.0% 4.5%
Applied to Class B-1 Certificates ($mm) .. $0 $ 0 $ 0 $ 0 $ 0
As a percentage of Class B-1 Certificates 0% 0% 0% 0% 0%
- ---------------------------------------------------------------------------------------------
Weighted average life (years) 14.96 14.97 14.98 15.01 15.03
First principal payment date 3/2012 3/2012 3/2012 3/2012 4/2012
Last principal payment date 4/2012 4/2012 4/2012 4/2012 4/2012
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
95
<PAGE>
WEIGHTED AVERAGE LIFE AND FIRST AND LAST PRINCIPAL PAYMENT
DATE OF CLASS B-2 CERTIFICATES
AT VARIOUS ASSUMED MORTGAGE LOAN
DEFAULT RATES ASSUMING 30% LOSSES ON DEFAULTED MORTGAGE LOANS
<TABLE>
<CAPTION>
SCENARIO
1 2 3 4 5
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cumulative Default Percentage:(a).......... 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a) ($mm) ...... $0 $10.8 $21.7 $43.3 $65.0
As a percentage of Initial Pool Balance .. 0% .75% 1.5% 3.0% 4.5%
Applied to Class B-2 Certificates ($mm) .. $0 $ 0 $ 0 $ 0 $ 0
As a percentage of Class B-2 Certificates 0% 0% 0% 0% 0%
- ---------------------------------------------------------------------------------------------
Weighted average life (years) 15.03 15.03 15.03 15.24 16.10
First principal payment date 4/2012 4/2012 4/2012 4/2012 4/2012
Last principal payment date 4/2012 4/2012 4/2012 3/2013 9/2016
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
96
<PAGE>
WEIGHTED AVERAGE LIFE AND FIRST AND LAST PRINCIPAL PAYMENT
DATE OF CLASS B-3 CERTIFICATES
AT VARIOUS ASSUMED MORTGAGE LOAN
DEFAULT RATES ASSUMING 30% LOSSES ON DEFAULTED MORTGAGE LOANS
<TABLE>
<CAPTION>
SCENARIO
1 2 3 4 5
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cumulative Default Percentage:(a).......... 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a) ($mm) ...... $0 $10.8 $21.7 $43.3 $65.0
As a percentage of Initial Pool Balance .. 0% .75% 1.5% 3.0% 4.5%
Applied to Class B-3 Certificates ($mm) .. $0 $ 0 $ 0 $ 0 $ 0
As a percentage of Class B-3 Certificates 0% 0% 0% 0% 0%
- ---------------------------------------------------------------------------------------------
Weighted average life (years) 15.03 15.04 15.43 16.32 20.00
First principal payment date 4/2012 4/2012 4/2012 3/2013 9/2016
Last principal payment date 4/2012 6/2012 3/2013 3/2015 4/2017
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
97
<PAGE>
WEIGHTED AVERAGE LIFE AND FIRST AND LAST PRINCIPAL PAYMENT
DATE OF CLASS B-4 CERTIFICATES
AT VARIOUS ASSUMED MORTGAGE LOAN
DEFAULT RATES ASSUMING 30% LOSSES ON DEFAULTED MORTGAGE LOANS
<TABLE>
<CAPTION>
SCENARIO
1 2 3 4 5
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cumulative Default Percentage:(a).......... 0% 2.5% 5.00% 10.0% 15.0%
Cumulative Losses Realized(a) ($mm) ....... $0 $10.8 $21.7 $43.3 $65.0
As a percentage of Initial Pool Balance .. 0% .75% 1.5% 3.0% 4.5%
Applied to Class B-4 Certificates ($mm) .. $0 $ 0 $ 0 $ 0 $14.4
As a percentage of Class B-4 Certificates 0% 0% 0% 0% 66.6%
- ---------------------------------------------------------------------------------------------
Weighted average life (years) 15.53 15.87 16.62 19.76 20.03
First principal payment date 4/2012 6/2012 3/2013 3/2015 4/2017
Last principal payment date 3/2013 3/2013 5/2016 4/2017 4/2017
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
98
<PAGE>
WEIGHTED AVERAGE LIFE AND FIRST AND LAST PRINCIPAL PAYMENT
DATE OF CLASS B-5 CERTIFICATES
AT VARIOUS ASSUMED MORTGAGE LOAN
DEFAULT RATES ASSUMING 30% LOSSES ON DEFAULTED MORTGAGE LOANS
<TABLE>
<CAPTION>
SCENARIO
1 2 3 4 5
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Cumulative Default Percentage:(a).......... 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a) ($mm) ....... $0 $10.8 $21.7 $43.3 $65.0
As a percentage of Initial Pool Balance .. 0% .75% 1.5% 3.0% 4.5%
Applied to Class B-5 Certificates ($mm) .. $0 $ 0 $ 0 $ 7.2 $14.4
As a percentage of Class B-5 Certificates 0% 0% 0% 50% 100%
- --------------------------------------------------------------------------------------------
Weighted average life (years) 16.33 18.39 19.95 20.03 N/A
First principal payment date 3/2013 3/2013 5/2016 4/2017 N/A
Last principal payment date 3/2015 4/2017 4/2017 4/2017 N/A
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
99
<PAGE>
WEIGHTED AVERAGE LIFE AND FIRST AND LAST PRINCIPAL PAYMENT
DATE OF CLASS B-6 CERTIFICATES
AT VARIOUS ASSUMED MORTGAGE LOAN
DEFAULT RATES ASSUMING 30% LOSSES ON DEFAULTED MORTGAGE LOANS
<TABLE>
<CAPTION>
SCENARIO
1 2 3 4 5
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cumulative Default Percentage:(a).......... 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a) ($mm) ....... $0 $10.8 $21.7 $ 43.3 $ 65.0
As a percentage of Initial Pool Balance .. 0% .75% 1.50% 3.00% 4.5%
Applied to Class B-6 Certificates ($mm) .. $0 $ 0 $ 0 $ 14.4 $ 14.4
As a percentage of Class B-6 Certificates 0% 0% 0% 100.0% 100.0%
- ---------------------------------------------------------------------------------------------
Weighted average life (years) 19.55 20.03 20.03 N/A N/A
First principal payment date 3/2015 4/2017 4/2017 N/A N/A
Last principal payment date 4/2017 4/2017 4/2017 N/A N/A
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
100
<PAGE>
YIELD
The yield to maturity on the Subordinated Certificates will depend upon
the price paid by the Certificateholder, the rate and timing of the
distributions in reduction of Certificate Balance of such Certificates and
the rate, timing and severity of Realized Losses on the Mortgage Loans and
the extent to which such losses are allocable in reduction of the Certificate
Balance of such Certificates, as well as prevailing interest rates at the
time of payment or loss realization.
The rate of distributions in reduction of the Certificate Balance of any
Class of Subordinated Certificates, the aggregate amount of distributions on
any Class of Subordinated Certificates and the yield to maturity of any Class
of Subordinated Certificates will be directly related to the rate of payments
of principal (both scheduled and unscheduled) on the Mortgage Loans and the
amount and timing of borrower defaults. In addition, such distributions in
reduction of Certificate Balance may result from repurchases by the Mortgage
Loan Seller due to missing or defective documentation breaches of
representations and warranties with respect to the Mortgage Loans as
described herein under "The Pooling and Servicing Agreement --
Representations and Warranties; Repurchase," purchases of the Mortgage Loans
in the manner described under "The Pooling and Servicing Agreement --
Optional Termination" or purchases of ARD Loans by Class LR
Certificateholders as described under "Description of the Mortgage Pool --
Certain Terms and Conditions of the Mortgage Loans."
BECAUSE SUBSTANTIALLY ALL PRINCIPAL RECEIVED ON THE MORTGAGE LOANS IS
FIRST ALLOCATED TO THE SENIOR CERTIFICATES UNTIL THEIR RESPECTIVE CERTIFICATE
BALANCES ARE REDUCED TO ZERO, BEFORE PRINCIPAL IS ALLOCATED TO THE
SUBORDINATED CERTIFICATES, THE SUBORDINATED CERTIFICATES MAY NOT RECEIVE ANY
PRINCIPAL FOR A SUBSTANTIAL PERIOD OF TIME.
The Certificate Balance of any Class of Subordinated Certificates may be
reduced without distributions thereon as a result of the allocation of
Realized Losses to such Class, reducing the maximum amount distributable to
such Class in respect of Certificate Balance, as well as the amount of
interest that would have accrued thereon in the absence of such reduction. In
general, a Realized Loss occurs when the aggregate principal balance of a
Mortgage Loan is reduced without an equal distribution to Certificateholders
in reduction of the Certificate Balances of the Certificates. Realized Losses
are likely to occur only in connection with a default on a Mortgage Loan and
the liquidation of the related Mortgaged Properties or a reduction in the
principal balance of a Mortgage Loan by a bankruptcy court.
Because the ability of a borrower to make a Balloon Payment will depend
upon its ability either to refinance the Mortgage Loan or to sell the related
Mortgaged Properties, there is a risk that a borrower may default at the
maturity date. In connection with a default on the Balloon Payment, the
Special Servicer may agree to extend the maturity date thereof as described
under "The Pooling and Servicing Agreement -- Realization Upon Mortgage
Loans." In the case of any such default, recovery of proceeds may be delayed
by and until, among other things, work-outs are negotiated, foreclosures are
completed or bankruptcy proceedings are resolved. In addition, the Directing
Holders may instruct to delay the commencement of any foreclosure proceedings
under certain conditions described herein. Certificateholders are not
entitled to receive distributions of Monthly Payments or the Balloon Payment
when due except to the extent they are either covered by an Advance or
actually received. Consequently, any defaulted Monthly Payment for which no
such Advance is made and a defaulted Balloon Payment will tend to extend the
weighted average lives of the Certificates, whether or not a permitted
extension of the due date of the related Mortgage Loan has been effected.
The rate of payments (including voluntary and involuntary prepayments) on
pools of Mortgage Loans is influenced by a variety of economic, demographic,
geographic, social, tax, legal and other factors, including the level of
mortgage interest rates and the rate at which borrowers default on their
mortgage loans.
If the purchaser of a Certificate 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 Mortgage
Loans, the actual yield to maturity will be lower than that so calculated.
The effect of voluntary and involuntary prepayments of the Mortgage Loans on
the yield of each Class of Subordinated Certificates will be diminished by
the distribution of all principal first to the Senior Certificates, until the
Certificate Balances thereof have been reduced to zero, before any
distributions in respect of principal are made on any Class of Subordinated
Certificates.
The timing of changes in the rate of prepayment on the Mortgage Loans may
significantly affect the actual yield to maturity experienced by an investor
even if the average rate of principal payments experienced over time is
consistent with such investor's expectation. In general, the earlier a
prepayment of principal on the Mortgage Loans is applied in reduction of the
Certificate Balance of a Class of Subordinated Certificates, the greater the
effect on such investor's yield to maturity.
101
<PAGE>
The rate of principal payments on the Mortgage Loans is affected by the
existence of Lock-out Periods and Prepayment Premium provisions of the
Mortgage Loans, and by the extent to which the Servicer 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. All of the Mortgage Loans have Lock-out Periods
ranging from 77 months to 239 months following origination. The weighted
average Lock-out Period for the Mortgage Loans is approximately 138 months.
All Mortgage Loans are locked out until no earlier than three or six months
preceding their Anticipated Repayment Date or maturity date, as applicable.
See "Description of the Mortgage Pool -- Certain Terms and Conditions of the
Mortgage Loans -- Prepayment Provisions" herein.
No representation is made as to the rate of principal payments on the
Mortgage Loans or as to the yield to maturity of any Class of Subordinated
Certificates. In addition, although Excess Cash Flow is applied to reduce the
principal of the ARD Loans after their respective Anticipated Repayment
Dates, there can be no assurance that any of such Mortgage Loans will be
prepaid on that date or any date prior to maturity. An investor is urged to
make an investment decision with respect to any Class of Subordinated
Certificates based on the anticipated yield to maturity of such Class of
Subordinated Certificates resulting from its purchase price and such
investor's own determination as to anticipated Mortgage Loan prepayment rates
under a variety of scenarios. The extent to which any Class of Subordinated
Certificates is purchased at a discount or a premium and the degree to which
the timing of payments on such Class of Subordinated Certificates is
sensitive to prepayments will determine the extent to which the yield to
maturity of such Class of Subordinated Certificates may vary from the
anticipated yield. An investor should carefully consider the associated
risks, including, in the case of any Subordinated Certificates purchased at a
discount, the risk that a slower than anticipated rate of principal payments
on the Mortgage Loans could result in an actual yield to such investor that
is lower than the anticipated yield and, in the case of any Subordinated
Certificates purchased at a premium, the risk that a faster than anticipated
rate of principal payments could result in an actual yield to such investor
that is lower than the anticipated yield.
An investor should consider the risk that rapid rates of prepayments on
the Mortgage Loans, and therefore of amounts distributable in reduction of
the principal balance of the Subordinated Certificates may coincide with
periods of low prevailing interest rates. During such periods, the effective
interest rates on securities in which an investor may choose to reinvest
amounts distributed in reduction of the principal balance of such investor's
Subordinated Certificate may be lower than the Pass-Through Rate. Conversely,
slower rates of prepayments on the Mortgage Loans, and therefore of amounts
distributable in reduction of principal balance of the Subordinated
Certificates, may coincide with periods of high prevailing interest rates.
During such periods, the amount of principal distributions resulting from
prepayments available to an investor for reinvestment at such high prevailing
interest rates may be relatively small.
The effective yield to holders of Subordinated Certificates will be lower
than the yield otherwise produced by the Pass-Through Rate and applicable
purchase prices because while interest is required to be paid by the
borrowers on the eleventh day of each month, the distribution of such
interest will not be made until the Distribution Date occurring in such
month, and principal paid on any Distribution Date will not bear interest
during the period after the interest is paid and before the Distribution Date
occurs. Additionally, as described under "Description of the Subordinated
Certificates -- Distributions" herein, if the portion of the Available Funds
distributable in respect of interest on any Class of Subordinated
Certificates on any Distribution Date is less than the amount of interest
required to be paid to the holders of such Class, the shortfall will be
distributable to holders of such Class of Certificates on subsequent
Distribution Dates, to the extent of Available Funds on such Distribution
Dates. Any such shortfall will not bear interest, however, and will therefore
negatively affect the yield to maturity of such Class of Certificates for so
long as it is outstanding.
RATED FINAL DISTRIBUTION DATE
The "Rated Final Distribution Date," April 14, 2029, is the Distribution
Date occurring two years after the latest Assumed Maturity Date of any of the
Mortgage Loans. Because certain of the Mortgage Loans have maturity dates
that occur earlier than the latest maturity date, and because certain of the
Mortgage Loans may be prepaid prior to maturity, it is possible that the
Certificate Balance of each Class of Subordinated Certificates will be
reduced to zero significantly earlier than the Rated Final Distribution Date.
WEIGHTED AVERAGE LIFE OF SUBORDINATED CERTIFICATES
Weighted average life refers to the average amount of time that will
elapse from the date of determination to the date of distribution or
allocation to the investor of each dollar in reduction of Certificate Balance
that is distributed or allocated,
102
<PAGE>
respectively. The weighted average lives of the Subordinated Certificates
will be influenced by, among other things, the rate at which principal of the
Mortgage Loans is paid, which may occur as a result of scheduled
amortization, Balloon Payments, voluntary or involuntary prepayments or
liquidations.
Other Factors Affecting Weighted Average Life. The weighted average lives
of the Subordinated Certificates may also be affected to the extent that
additional distributions in reduction of the Certificate Balance of such
Certificates occur as a result of the repurchase or purchase of Mortgage
Loans from the Trust Fund as described under "The Pooling and Servicing
Agreement -- Representations and Warranties; Repurchase" or "--Optional
Termination" herein. Such a repurchase or purchase from the Trust Fund will
have the same effect on distributions to the holders of Certificates as if
the related Mortgage Loans had prepaid in full, except that no Prepayment
Premiums are made in respect thereof.
A number of Mortgage Loans 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, or that the servicer may extend the
maturity of such a Mortgage Loan in connection with a workout. 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. Any defaulted Balloon Payment or modification that
extends the maturity of a Mortgage Loan will tend to extend the weighted
average life of the Certificates, thereby lengthening the period of time
elapsed from the date of issuance of a Certificate until it is retired.
The number of foreclosures and the principal amount of the Mortgage Loans
that are foreclosed in relation to the number of Mortgage Loans that are
repaid in accordance with their terms will affect the weighted average life
of the Mortgage Loans and that of the Certificates. Servicing decisions made
with respect to the Mortgage Loans, including the use of payment plans prior
to a demand for acceleration and the restructuring of Mortgage Loans in
bankruptcy proceedings, may also have an effect upon the payment patterns of
particular Mortgage Loans and thus the weighted average life of the
Certificates.
Acceleration of mortgage payments as a result of certain transfers of or
the creation of encumbrances upon underlying Mortgaged Property is another
factor affecting prepayment rates. A number of the Mortgage Loans may include
"due-on-sale" clauses or "due-on-encumbrance" 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 or certain other transfers of or the
creation of encumbrances upon the related Mortgaged Property. See "Certain
Legal Aspects of Mortgage Loans -- Due-on-Sale and Due-on-Encumbrance" and
"Description of the Agreements -- Due-on-Sale and Due-on-Encumbrance
Provisions."
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus is the "Constant Prepayment Rate" or
"CPR" model. The CPR model represents an assumed constant annual rate of
prepayment each month, expressed as a per annum percentage of the
then-scheduled principal balance of the pool of mortgage loans. As used in
the following tables, the columns headed "0% CPR" assume that none of the
Mortgage Loans is prepaid before the related Anticipated Repayment Date or
maturity date, as applicable. The columns headed "10% CPR," "25% CPR," "50%
CPR" and "100% CPR" assume that prepayments on the Mortgage Loans are made at
those levels of CPR following the expiration of any Lock-out Period until the
related Anticipated Repayment Date or maturity date, as applicable. All
columns in the following table assume that all of the ARD Loans are fully
prepaid on their related Anticipated Repayment Date and all of the other
Mortgage Loans are paid in full on their maturity date. There is no
assurance, however, that prepayments of the Mortgage Loans will conform to
any level of CPR, and no representation is made that the Mortgage Loans will
prepay at the levels of CPR shown or at any other prepayment rate. The
foregoing assumptions are referred to herein as the "Prepayment Assumptions."
The tables of "Percentages of Initial Certificate Balance Outstanding" set
forth below indicate the weighted average life of each Class of Subordinated
Certificates and set forth the percentage of the initial Certificate Balance
of such Subordinated Certificates that would be outstanding after each of the
dates shown at the various CPRs and based on the Prepayment Assumptions. For
purposes of preparing the tables, it was assumed that each of the Mortgage
Loans has the following characteristics: (i) each Mortgage Loan will pay
principal and interest in accordance with its terms and scheduled payments
will be timely received on the 11th day of each month; (ii) the Mortgage Loan
Seller does not repurchase any Mortgage Loan as described under "The Pooling
and Servicing Agreement -- Representations and Warranties -- Repurchase";
(iii) none of the Depositor, Servicer, or the Class LR Certificateholders
exercise the right to cause early termination of the Trust Fund; and (iv) the
date of determination of weighted average life is April 2, 1997. These
assumptions are collectively referred to as the "Mortgage Loan Assumptions."
The Mortgage Loan Assumptions made in
103
<PAGE>
preparing the following tables are expected to vary from the actual
performance of the Mortgage Loans. It is highly unlikely that principal of
the Mortgage Loans will be repaid consistent with assumptions underlying any
one of the scenarios. Investors are urged to conduct their own analysis
concerning the likelihood that the Mortgage Loans may pay or prepay on any
particular date.
Based on the Mortgage Loan Assumptions, the Prepayment Assumptions and the
various CPRs, the tables indicate the weighted average life of the
Subordinated Certificates and set forth the percentages of the initial
Certificate Balance of the Subordinated Certificates that would be
outstanding after the Distribution Date in March of each of the years
indicated, at the indicated CPRs.
104
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
SUBORDINATED UNITS
-----------------------------------------------------
DISTRIBUTION DATE (1) 0% CPR 10% CPR 25% CPR 50% CPR 100% CPR
- ---------------------------------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ................ 100% 100% 100% 100% 100%
March 14, 1998 .................... 100 100 100 100 100
March 14, 1999 .................... 100 100 100 100 100
March 14, 2000 .................... 100 100 100 100 100
March 14, 2001 .................... 100 100 100 100 100
March 14, 2002 .................... 100 100 100 100 100
March 14, 2003 .................... 100 100 100 100 100
March 14, 2004 .................... 100 100 100 100 100
March 14, 2005 .................... 100 100 100 100 100
March 14, 2006 .................... 100 100 100 100 100
March 14, 2007 .................... 100 100 100 100 100
March 14, 2008 .................... 100 100 100 100 100
March 14, 2009 .................... 100 100 100 100 100
March 14, 2010 .................... 100 100 100 100 100
March 14, 2011 .................... 100 100 100 100 100
March 14, 2012 .................... 76 76 75 74 66
March 14, 2013 .................... 14 14 14 14 14
March 14, 2014 .................... 12 12 12 12 12
March 14, 2015 .................... 10 10 10 10 10
March 14, 2016 .................... 8 8 8 8 8
March 14, 2017 .................... 6 6 6 6 6
March 14, 2018 .................... 0 0 0 0 0
March 14, 2019 .................... 0 0 0 0 0
March 14, 2020 .................... 0 0 0 0 0
March 14, 2021 .................... 0 0 0 0 0
March 14, 2022 .................... 0 0 0 0 0
March 14, 2023 .................... 0 0 0 0 0
March 14, 2024 .................... 0 0 0 0 0
March 14, 2025 .................... 0 0 0 0 0
March 14, 2026 .................... 0 0 0 0 0
March 14, 2027 .................... 0 0 0 0 0
March 14, 2028 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 15.70 15.70 15.70 15.70 15.69
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Subordinated Units is determined by
(i) multiplying the amount of each distribution in reduction of the
aggregate Certificate Balances of the Classes comprising the
Subordinated Unit by the number of years from the date of determination
to the related Distribution Date, (ii) adding the results and (iii)
dividing the sum by the aggregate distributions in reduction of
Certificate Balance referred to in clause (i).
105
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS B-1
-----------------------------------------------------
DISTRIBUTION DATE (1) 0% CPR 10% CPR 25% CPR 50% CPR 100% CPR
- ---------------------------------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ................ 100% 100% 100% 100% 100%
March 14, 1998 .................... 100 100 100 100 100
March 14, 1999 .................... 100 100 100 100 100
March 14, 2000 .................... 100 100 100 100 100
March 14, 2001 .................... 100 100 100 100 100
March 14, 2002 .................... 100 100 100 100 100
March 14, 2003 .................... 100 100 100 100 100
March 14, 2004 .................... 100 100 100 100 100
March 14, 2005 .................... 100 100 100 100 100
March 14, 2006 .................... 100 100 100 100 100
March 14, 2007 .................... 100 100 100 100 100
March 14, 2008 .................... 100 100 100 100 100
March 14, 2009 .................... 100 100 100 100 100
March 14, 2010 .................... 100 100 100 100 100
March 14, 2011 .................... 100 100 100 100 100
March 14, 2012 .................... 9 8 6 3 0
March 14, 2013 .................... 0 0 0 0 0
March 14, 2014 .................... 0 0 0 0 0
March 14, 2015 .................... 0 0 0 0 0
March 14, 2016 .................... 0 0 0 0 0
March 14, 2017 .................... 0 0 0 0 0
March 14, 2018 .................... 0 0 0 0 0
March 14, 2019 .................... 0 0 0 0 0
March 14, 2020 .................... 0 0 0 0 0
March 14, 2021 .................... 0 0 0 0 0
March 14, 2022 .................... 0 0 0 0 0
March 14, 2023 .................... 0 0 0 0 0
March 14, 2024 .................... 0 0 0 0 0
March 14, 2025 .................... 0 0 0 0 0
March 14, 2026 .................... 0 0 0 0 0
March 14, 2027 .................... 0 0 0 0 0
March 14, 2028 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 14.96 14.96 14.96 14.95 14.92
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class B-1 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
106
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS B-2
-----------------------------------------------------
DISTRIBUTION DATE (1) 0% CPR 10% CPR 25% CPR 50% CPR 100% CPR
- ---------------------------------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ................ 100% 100% 100% 100% 100%
March 14, 1998 .................... 100 100 100 100 100
March 14, 1999 .................... 100 100 100 100 100
March 14, 2000 .................... 100 100 100 100 100
March 14, 2001 .................... 100 100 100 100 100
March 14, 2002 .................... 100 100 100 100 100
March 14, 2003 .................... 100 100 100 100 100
March 14, 2004 .................... 100 100 100 100 100
March 14, 2005 .................... 100 100 100 100 100
March 14, 2006 .................... 100 100 100 100 100
March 14, 2007 .................... 100 100 100 100 100
March 14, 2008 .................... 100 100 100 100 100
March 14, 2009 .................... 100 100 100 100 100
March 14, 2010 .................... 100 100 100 100 100
March 14, 2011 .................... 100 100 100 100 100
March 14, 2012 .................... 100 100 100 100 73
March 14, 2013 .................... 0 0 0 0 0
March 14, 2014 .................... 0 0 0 0 0
March 14, 2015 .................... 0 0 0 0 0
March 14, 2016 .................... 0 0 0 0 0
March 14, 2017 .................... 0 0 0 0 0
March 14, 2018 .................... 0 0 0 0 0
March 14, 2019 .................... 0 0 0 0 0
March 14, 2020 .................... 0 0 0 0 0
March 14, 2021 .................... 0 0 0 0 0
March 14, 2022 .................... 0 0 0 0 0
March 14, 2023 .................... 0 0 0 0 0
March 14, 2024 .................... 0 0 0 0 0
March 14, 2025 .................... 0 0 0 0 0
March 14, 2026 .................... 0 0 0 0 0
March 14, 2027 .................... 0 0 0 0 0
March 14, 2028 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 15.03 15.03 15.03 15.03 15.01
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class B-2 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
107
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS B-3
-----------------------------------------------------
DISTRIBUTION DATE (1) 0% CPR 10% CPR 25% CPR 50% CPR 100% CPR
- ---------------------------------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ................ 100% 100% 100% 100% 100%
March 14, 1998 .................... 100 100 100 100 100
March 14, 1999 .................... 100 100 100 100 100
March 14, 2000 .................... 100 100 100 100 100
March 14, 2001 .................... 100 100 100 100 100
March 14, 2002 .................... 100 100 100 100 100
March 14, 2003 .................... 100 100 100 100 100
March 14, 2004 .................... 100 100 100 100 100
March 14, 2005 .................... 100 100 100 100 100
March 14, 2006 .................... 100 100 100 100 100
March 14, 2007 .................... 100 100 100 100 100
March 14, 2008 .................... 100 100 100 100 100
March 14, 2009 .................... 100 100 100 100 100
March 14, 2010 .................... 100 100 100 100 100
March 14, 2011 .................... 100 100 100 100 100
March 14, 2012 .................... 100 100 100 100 100
March 14, 2013 .................... 0 0 0 0 0
March 14, 2014 .................... 0 0 0 0 0
March 14, 2015 .................... 0 0 0 0 0
March 14, 2016 .................... 0 0 0 0 0
March 14, 2017 .................... 0 0 0 0 0
March 14, 2018 .................... 0 0 0 0 0
March 14, 2019 .................... 0 0 0 0 0
March 14, 2020 .................... 0 0 0 0 0
March 14, 2021 .................... 0 0 0 0 0
March 14, 2022 .................... 0 0 0 0 0
March 14, 2023 .................... 0 0 0 0 0
March 14, 2024 .................... 0 0 0 0 0
March 14, 2025 .................... 0 0 0 0 0
March 14, 2026 .................... 0 0 0 0 0
March 14, 2027 .................... 0 0 0 0 0
March 14, 2028 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 15.03 15.03 15.03 15.03 15.03
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class B-3 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
108
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS B-4
-----------------------------------------------------
DISTRIBUTION DATE (1) 0% CPR 10% CPR 25% CPR 50% CPR 100% CPR
- ---------------------------------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ................ 100% 100% 100% 100% 100%
March 14, 1998 .................... 100 100 100 100 100
March 14, 1999 .................... 100 100 100 100 100
March 14, 2000 .................... 100 100 100 100 100
March 14, 2001 .................... 100 100 100 100 100
March 14, 2002 .................... 100 100 100 100 100
March 14, 2003 .................... 100 100 100 100 100
March 14, 2004 .................... 100 100 100 100 100
March 14, 2005 .................... 100 100 100 100 100
March 14, 2006 .................... 100 100 100 100 100
March 14, 2007 .................... 100 100 100 100 100
March 14, 2008 .................... 100 100 100 100 100
March 14, 2009..................... 100 100 100 100 100
March 14, 2010 .................... 100 100 100 100 100
March 14, 2011 .................... 100 100 100 100 100
March 14, 2012 .................... 100 100 100 100 100
March 14, 2013 .................... 0 0 0 0 0
March 14, 2014 .................... 0 0 0 0 0
March 14, 2015 .................... 0 0 0 0 0
March 14, 2016 .................... 0 0 0 0 0
March 14, 2017 .................... 0 0 0 0 0
March 14, 2018 .................... 0 0 0 0 0
March 14, 2019 .................... 0 0 0 0 0
March 14, 2020 .................... 0 0 0 0 0
March 14, 2021 .................... 0 0 0 0 0
March 14, 2022 .................... 0 0 0 0 0
March 14, 2023 .................... 0 0 0 0 0
March 14, 2024 .................... 0 0 0 0 0
March 14, 2025 .................... 0 0 0 0 0
March 14, 2026 .................... 0 0 0 0 0
March 14, 2027 .................... 0 0 0 0 0
March 14, 2028 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 15.53 15.53 15.53 15.53 15.53
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class B-4 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
109
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS B-5
-----------------------------------------------------
DISTRIBUTION DATE (1) 0% CPR 10% CPR 25% CPR 50% CPR 100% CPR
- --------------------------------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ............... 100% 100% 100% 100% 100%
March 14, 1998 ................... 100 100 100 100 100
March 14, 1999 ................... 100 100 100 100 100
March 14, 2000 ................... 100 100 100 100 100
March 14, 2001 ................... 100 100 100 100 100
March 14, 2002 ................... 100 100 100 100 100
March 14, 2003 ................... 100 100 100 100 100
March 14, 2004 ................... 100 100 100 100 100
March 14, 2005 ................... 100 100 100 100 100
March 14, 2006 ................... 100 100 100 100 100
March 14, 2007 ................... 100 100 100 100 100
March 14, 2008 ................... 100 100 100 100 100
March 14, 2009 ................... 100 100 100 100 100
March 14, 2010 ................... 100 100 100 100 100
March 14, 2011 ................... 100 100 100 100 100
March 14, 2012 ................... 100 100 100 100 100
March 14, 2013 ................... 36 36 36 36 36
March 14, 2014 ................... 18 18 18 18 18
March 14, 2015 ................... 0 0 0 0 0
March 14, 2016 ................... 0 0 0 0 0
March 14, 2017 ................... 0 0 0 0 0
March 14, 2018 ................... 0 0 0 0 0
March 14, 2019 ................... 0 0 0 0 0
March 14, 2020 ................... 0 0 0 0 0
March 14, 2021 ................... 0 0 0 0 0
March 14, 2022 ................... 0 0 0 0 0
March 14, 2023 ................... 0 0 0 0 0
March 14, 2024 ................... 0 0 0 0 0
March 14, 2025 ................... 0 0 0 0 0
March 14, 2026 ................... 0 0 0 0 0
March 14, 2027 ................... 0 0 0 0 0
March 14, 2028 ................... 0 0 0 0 0
Weighted Average Life (years)(2) . 16.33 16.33 16.33 16.33 16.33
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class B-5 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
110
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS B-6
-----------------------------------------------------
DISTRIBUTION DATE (1) 0% CPR 10% CPR 25% CPR 50% CPR 100% CPR
- ---------------------------------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ................ 100% 100% 100% 100% 100%
March 14, 1998 .................... 100 100 100 100 100
March 14, 1999 .................... 100 100 100 100 100
March 14, 2000 .................... 100 100 100 100 100
March 14, 2001 .................... 100 100 100 100 100
March 14, 2002 .................... 100 100 100 100 100
March 14, 2003 .................... 100 100 100 100 100
March 14, 2004 .................... 100 100 100 100 100
March 14, 2005 .................... 100 100 100 100 100
March 14, 2006 .................... 100 100 100 100 100
March 14, 2007 .................... 100 100 100 100 100
March 14, 2008 .................... 100 100 100 100 100
March 14, 2009 .................... 100 100 100 100 100
March 14, 2010 .................... 100 100 100 100 100
March 14, 2011 .................... 100 100 100 100 100
March 14, 2012 .................... 100 100 100 100 100
March 14, 2013 .................... 100 100 100 100 100
March 14, 2014 .................... 100 100 100 100 100
March 14, 2015 .................... 99 99 99 99 99
March 14, 2016 .................... 77 77 77 77 77
March 14, 2017 .................... 53 53 53 53 53
March 14, 2018 .................... 0 0 0 0 0
March 14, 2019 .................... 0 0 0 0 0
March 14, 2020 .................... 0 0 0 0 0
March 14, 2021 .................... 0 0 0 0 0
March 14, 2022 .................... 0 0 0 0 0
March 14, 2023 .................... 0 0 0 0 0
March 14, 2024 .................... 0 0 0 0 0
March 14, 2025 .................... 0 0 0 0 0
March 14, 2026 .................... 0 0 0 0 0
March 14, 2027 .................... 0 0 0 0 0
March 14, 2028 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 19.55 19.55 19.55 19.55 19.55
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class B-6 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
111
<PAGE>
THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of March 27, 1997 (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Servicer, the Special Servicer,
the Trustee and the Fiscal Agent.
The Depositor will provide to a prospective or actual holder of any
Subordinated Certificate without charge, upon written request, a copy
(without exhibits) of the Pooling and Servicing Agreement. Requests should be
addressed to Asset Securitization Corporation, 2 World Financial Center,
Building B, New York, New York 10281-1198.
ASSIGNMENT OF THE MORTGAGE LOANS
On the Closing Date, the Depositor will sell, transfer or otherwise
convey, assign or cause the assignment of the Mortgage Loans, without
recourse, to the Trustee for the benefit of the holders of Certificates. On
or prior to the Closing Date, the Depositor will deliver to the Trustee, with
respect to each Mortgage Loan certain documents and instruments including,
among other things, the following: (i) the original Mortgage Note endorsed
without recourse to the order of the Trustee, as trustee; (ii) the original
mortgage or counterpart thereof; (iii) the assignment of the mortgage in
recordable form in favor of the Trustee; (iv) if applicable, preceding
assignments of mortgages; (v), the related security agreement, if applicable,
(vi) to the extent not contained in the Mortgages, the original assignments
of leases and rents or counterpart thereof; (vii) if applicable, the original
assignments of assignments of leases and rents to the Trustee; (viii) if
applicable, preceding assignments of assignments of leases and rents; (ix)
where applicable, a certified copy of the UCC-1 Financing Statements, if any,
including UCC-3 continuation statements and UCC-3 assignments; (x) the
original loan agreements and (xi) the original lender's title insurance
policy (or marked commitments to insure). The Trustee will hold such
documents in trust for the benefit of the holders of Certificates. The
Depositor will promptly cause the assignment of each Mortgage Loan to be
recorded in the appropriate public office for real property records, except
in the State of California or in other states where, in the opinion of
counsel acceptable to the Trustee, such recording is not required to protect
the Trustee's interest in the Mortgage Loan against the claim of any
subsequent transferee or any successor to or creditor of the Depositor, the
Servicer, the relevant Mortgage Loan Seller or any other prior holder of the
Mortgage Loan.
The Trustee is obligated to review such documents for each Mortgage Loan
within 45 days after the later of the receipt of such documents or Closing
Date and report any missing documents or certain types of defects therein to
the Depositor. If any such document is found to be missing or defective in
any material respect, the Trustee (or such custodian) shall take such action
as required in the Pooling and Servicing Agreement, which may include
immediately notifying the Servicer and the Depositor. If the Mortgage Loan
Seller, upon notification, cannot cure the omission or defect within a
specified number of days after receipt of such notice, the Mortgage Loan
Seller will be obligated, within a specified number of days of receipt of
such notice, to repurchase the related Mortgage Loan from the Trustee at the
Purchase Price or substitute for such Mortgage Loan. There can be no
assurance that the Mortgage Loan Seller will fulfill this repurchase or
substitution obligation. Although the Servicer is obligated to use its best
efforts to enforce such obligation, neither the Servicer nor the Depositor
will be obligated to repurchase or substitute for such Mortgage Loan if the
Mortgage Loan Seller defaults on its obligation. This repurchase or
substitution obligation may constitute the sole remedy available to the
Certificateholders or the Trustee for omission of, or a material defect in, a
constituent document.
REPRESENTATIONS AND WARRANTIES; REPURCHASE
In the Pooling and Servicing Agreement, the Depositor will assign the
representations and warranties made by the Mortgage Loan Seller to the
Depositor in the Mortgage Loan Purchase and Sale Agreement to the Trustee for
the benefit of Certificateholders. In the Mortgage Loan Purchase and Sale
Agreement, the Mortgage Loan Seller will represent and warrant, among other
things, that (subject to certain exceptions specified in the Mortgage Loan
Purchase and Sale Agreement), as of the Closing Date (unless otherwise
specified):
(i) immediately prior to the sale, transfer and assignment to the
Depositor, each related Note and Mortgage were not subject to an
assignment or pledge, and the Mortgage Loan Seller has good title to, and
is the sole owner of, each Mortgage Loan;
(ii) the Mortgage Loan Seller has full right and the authority to sell,
assign and transfer such Mortgage Loan;
(iii) the Mortgage Loan Seller is transferring such Mortgage Loan free
and clear of any and all liens, pledges, charges or security interests of
any nature encumbering such Mortgage Loan;
(iv) each related Note, Mortgage, Assignment of Leases and Rents (if any)
and other agreement executed in connection with such Mortgage Loan are
legal, valid and binding obligations of the related borrower, enforceable
in
112
<PAGE>
accordance with their terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
the enforcement of creditors rights generally, or by general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and there is no valid defense,
counterclaim, or right of recission available to the related borrower with
respect to such Mortgage, Note and other agreements;
(v) each related Assignment of Leases and Rents, if any, creates a valid,
collateral or first priority assignment of, or a valid first priority
security interest in, certain rights under the related leases, subject
only to a license granted to the related borrower to exercise certain
rights and to perform certain obligations of the lessor under such leases,
including the right to operate the related Mortgaged Property; no person
other than the related borrower owns any interest in any payments due
under such leases that is superior to or of equal priority with the
mortgagee's interest therein;
(vi) each related assignment of Mortgage from the Mortgage Loan Seller to
the Depositor, and any related Reassignment of Assignment of Leases and
Rents, if any, or assignment of any other agreement executed in connection
with such Mortgage Loan, from the Mortgage Loan Seller to the Depositor
constitutes the legal, valid and binding assignment from the Mortgage Loan
Seller to the Depositor except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, liquidation, receivership,
moratorium or other laws relating to or affecting creditor's rights
generally, or by general principles or equity (regardless of whether such
enforcement is considered in a proceeding in equity or law);
(vii) since origination, and except as set forth in the related mortgage
file, such Mortgage Loan has not been waived, modified, altered,
satisfied, canceled, subordinated or rescinded and, each related Mortgaged
Property has not been released from the lien of the related Mortgage in
any manner which materially interferes with the security intended to be
provided by such Mortgage;
(viii) each related Mortgage is a valid and enforceable first lien on the
related Mortgaged Property, and such Mortgaged Property (subject to the
matters discussed in clause (xi) below) is free and clear of any
mechanics' and materialmen's liens which are prior to or equal with the
lien of the related Mortgage, except those which are insured against by a
lender's title insurance policy (as set forth in the Mortgage Loan
Purchase and Sale Agreement);
(ix) the Mortgage Loan Seller has not taken any action that would cause
the representations and warranties made by each related borrower in the
Mortgage Loan not to be true;
(x) the Mortgage Loan Seller has no knowledge that the representations
and warranties made by each related borrower in such Mortgage Loan are not
true in any material respect;
(xi) the lien of each related Mortgage is insured by an ALTA lender's
title insurance policy (or a binding commitment therefor), or its
equivalent as adopted in the applicable jurisdiction, insuring the
Mortgage Loan Seller, its successors and assigns, as to a valid and
perfected first priority security interest in the related Mortgaged
Property and the first priority lien of the Mortgage in the original
principal amount of such Mortgage Loan (as set forth on the Mortgage Loan
Schedule which is an exhibit to the Pooling and Servicing Agreement) after
all advances of principal, subject only to (a) the lien of current real
property taxes, ground rents, water charges, sewer rents and assessments
not yet due and payable, (b) covenants, conditions and restrictions,
rights of way, easements and other matters of public record, none of
which, individually or in the aggregate, materially interferes with the
current use of the Mortgaged Property or the security intended to be
provided by such Mortgage or with the borrower's ability to pay its
obligations when they become due or the value of the Mortgaged Property
and (c) the exceptions (general and specific) set forth in such lender's
title insurance policy, none of which, individually or in the aggregate,
materially interferes with the security intended to be provided by such
Mortgage or with the borrower's ability to pay its obligations when they
become due or the value of the Mortgaged Property; the Mortgage Loan
Seller or its successors or assigns is the sole named insured of such
policy; such policy is assignable to the Depositor without the consent of
or any notification to the insurer, and is in full force and effect upon
the consummation of the transactions contemplated by the Mortgage Loan
Purchase and Sale Agreement; no claims have been made under such policy
and the Mortgage Loan Seller has not done anything, by act or omission,
and the Mortgage Loan Seller has no knowledge of any matter, which would
impair or diminish the coverage of such policy; to the extent required by
applicable law the insurer issuing such policy is qualified to do business
in the jurisdiction in which the related Mortgaged Properties are located;
113
<PAGE>
(xii) the proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder and it covenants
that it will not make any future advances under the Mortgage Loan to the
related borrower;
(xiii) each related Mortgaged Property is free of any material damage
that would affect materially and adversely the value of such Mortgaged
Property as security for the Mortgage Loan and is in good repair and there
is no proceeding pending for the total or partial condemnation of such
Mortgaged Property, other than with respect to a portion of the property
in the Sunwest Pool known as facility number 5833, located in North
Richland Hills, Texas; the condemnation proceeding with respect to such
portion will not have a material adverse effect on the cash flow of such
facility;
(xiv) each of the related borrowers (and in the case of certain loans,
each of the operators of the senior housing/healthcare facility) is in
possession of all material licenses, permits and other authorizations
necessary and required by all applicable laws for the conduct of its
business; all such licenses, permits and authorizations are valid and in
full force and effect; and if a related Mortgaged Property is improved by
a senior housing or healthcare facility, the most recent inspection or
survey by governmental authorities having jurisdiction in connection with
such licenses, permits and authorizations did not cite such Mortgaged
Property for material violations (which shall include only "Level A"
violations, in the case of skilled nursing facilities, that have not been
cured);
(xv) the Mortgage Loan Seller or Bloomfield has inspected or caused to be
inspected each related Mortgaged Property within the past twelve months
preceding the Cut-off Date or within one month of origination of the
Mortgage Loan;
(xvi) such Mortgage Loan does not have a shared appreciation feature,
other contingent interest feature or negative amortization;
(xvii) such Mortgage Loan is a whole loan and no other party holds a
participation interest in the Mortgage Loan;
(xviii) (A) the Mortgage Rate (exclusive of any default interest or yield
maintenance charges) of such Mortgage Loan complied as of the date of
origination with, or is exempt from, applicable state or federal laws,
regulations and other requirements pertaining to usury; any and all other
requirements of any federal, state or local laws, including, without
limitation, truth-in-lending, real estate settlement procedures, equal
credit opportunity or disclosure laws, applicable to such Mortgage Loan
have been complied with as of the date of origination of such Mortgage
Loan or (B) the Mortgage Loan Seller has received an opinion to such
effect;
(xix) (A) with respect to each Mortgage Loan originated by the Mortgage
Loan Seller, no fraudulent acts were committed by the Mortgage Loan Seller
during the origination process of such Mortgage Loan and the origination,
servicing and collection of each Mortgage Loan is in all respects legal,
proper and prudent in accordance with customary industry standards and (B)
with respect to each Mortgage Loan originated by Bloomfield, to the best
of the Mortgage Loan Seller's knowledge, no fraudulent acts were committed
by Bloomfield during the origination process of such Mortgage Loan and to
the best of the Mortgage Loan Seller's knowledge, the origination,
servicing and collection of each Mortgage Loan is in all respects legal,
proper and prudent in accordance with customary industry standards;
(xx) all taxes and governmental assessments that prior to the Closing
Date became due and owing in respect of each related Mortgaged Property
have been paid, or an escrow of funds in an amount sufficient to cover
such payments has been established;
(xxi) all escrow deposits and payments required pursuant to the Mortgage
Loan are in the possession, or under the control, of the Mortgage Loan
Seller or its agent and there are no deficiencies in connection therewith;
(xxii) to the extent required under applicable law, as of the Cut-off
Date, the Mortgage Loan Seller was authorized to transact and do business
in the jurisdiction in which each related Mortgaged Property is located at
all times when it held the Mortgage Loan;
(xxiii) each related Mortgaged Property is insured by a fire and extended
perils insurance policy, issued by an insurer meeting the requirements of
the Mortgage Loans, in an amount not less than the replacement cost and
the amount necessary to avoid the operation of any co-insurance provisions
with respect to the Mortgaged Property; each related Mortgaged Property is
also covered by business interruption insurance and comprehensive general
liability
114
<PAGE>
insurance in amounts generally required by institutional lenders for
similar properties; all premiums on such insurance policies required to be
paid as of the date hereof have been paid; such insurance policies require
prior notice to the insured of termination or cancellation, and no such
notice has been received; each related Mortgage obligates the related
borrower to maintain all such insurance and, at such borrower's failure to
do so, authorizes the mortgagee to maintain such insurance at the
borrower's cost and expense and to seek reimbursement therefor from such
borrower;
(xxiv) there is no default, breach, violation or event of acceleration
existing under the related Mortgage or the related Note and no event
which, with the passage of time or with notice and the expiration of any
grace or cure period, would and does constitute a default, breach,
violation or event of acceleration;
(xxv) such Mortgage Loan has not been 30 or more days delinquent since
origination and as of the Cut-off Date was not delinquent;
(xxvi) each related Mortgage contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the
benefits of the security, including realization by judicial or, if
applicable, non-judicial foreclosure, and there is no exemption available
to the borrower which would interfere with such right to foreclose;
(xxvii) in each related Mortgage or Loan Agreement, the related borrower
represents and warrants that it has not used, caused or permitted to exist
and will not use, cause or permit to exist on the related Mortgaged
Property any Hazardous Materials in any manner which violates federal,
state or local laws, ordinances, regulations, orders, directives or
policies governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials; the related borrower agrees to indemnify, defend and hold the
mortgagee and its successors and assigns harmless from and against any and
all losses, liabilities, damages, injuries, penalties, fines, expenses,
and claims of any kind whatsoever (including attorneys' fees and costs)
paid, incurred or suffered by, or asserted against, any such party
resulting from a breach of any representation, warranty or covenant given
by the borrower in such Mortgage or Loan Agreement. A Phase I
environmental report was conducted by a reputable environmental engineer
in connection with such Mortgage Loan, which report, except as otherwise
disclosed herein did not indicate any material non-compliance or material
existence of Hazardous Materials. To the best of the Mortgage Loan
Seller's knowledge, each related Mortgaged Property is in material
compliance with all applicable federal, state and local laws pertaining to
environmental hazards, and no notice of violation of such laws has been
issued by any governmental agency or authority; the Mortgage Loan Seller
has not taken any action which would cause the related Mortgaged Property
not to be in compliance with all federal, state and local laws pertaining
to environmental hazards;
(xxviii) each related Mortgage or Loan Agreement contains provisions for
the acceleration of the payment of the unpaid principal balance of such
Mortgage Loan if, without the prior written consent of the mortgagee or
the satisfaction of certain conditions, the related Mortgaged Property, or
any interest therein, is directly or indirectly transferred or sold, or
encumbered in connection with subordinate financing;
(xxix) (1) the Mortgage Loan is directly secured by a Mortgage on a
commercial property or multifamily residential property, and (2) the fair
market value of such real property, as evidenced by an MAI appraisal
conducted within 12 months of the origination of the Mortgage Loan (except
with respect to the Mortgaged Properties included in the Sunwest Pool, in
which case, market value was determined by using a capitalization rate),
was at least equal to 80% of the principal amount of the Mortgage Loan (a)
at origination (or if the Mortgage Loan has been modified in a manner that
constituted a deemed exchange under Section 1001 of the Code at a time
when the Mortgage Loan was not in default or default with respect thereto
was not reasonably foreseeable, the date of the last such modification) or
(b) at the Closing Date; provided that the fair market value of the real
property interest must first be reduced by (A) the amount of any lien on
the real property interest that is senior to the Mortgage Loan (unless
such senior lien also secures a Mortgage Loan, in which event the
computation described in (a) and (b) shall be made on an aggregated basis)
and (B) a proportionate amount of any lien that is in parity with the
Mortgage Loan (unless such other lien secures a Mortgage Loan that is
cross-collateralized with such Mortgage Loan, in which event the
computation described in (a) and (b) shall be made on an aggregate basis);
(xxx) except with respect to the Mortgage Loan secured by the Mortgaged
Property known as South DeKalb Mall, neither the Mortgage Loan Seller nor
any affiliate thereof has any obligation or right to make any capital
contribution to any borrower under a Mortgage Loan, other than
contributions made on or prior to the Closing Date;
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(xxxi) with respect to each Mortgaged Property except with respect to the
Mortgaged Properties in the Sunwest Pool, where a material portion of the
estate of the related borrower therein is a leasehold estate and the fee
interest of the ground lessor is not subject and subordinate to the
related Mortgage, that
(A) The ground lease or a memorandum regarding it has been duly
recorded. The ground lease permits the interest of the lessee to be
encumbered by the related Mortgage and does not restrict the use of
the related Mortgaged Property by such lessee, its successors or
assigns in a manner that would adversely affect the security provided
by the related Mortgage. There has been no material change in the
terms of such ground lease since its recordation, except by written
instruments, all of which are included in the related Mortgage File;
(B) Except with respect to the Mortgage Loan known as Marina Harbor,
the lessor under such ground lease has agreed in writing and included
in the related Mortgage File that the ground lease may not be amended,
modified, canceled or terminated without the prior written consent of
the mortgagee and that any such action without such consent is not
binding on the mortgagee, its successors or assigns;
(C) The ground lease has an original term (or an original term plus
one or more optional renewal terms, which, under all circumstances,
may be exercised, and will be enforceable, by the mortgagee) that
extends not less than 10 years beyond the stated maturity of the
related Mortgage Loan;
(D) The ground lease is not subject to any liens or encumbrances
superior to, or of equal priority with, the Mortgage (subject to those
exceptions comparable to those in clause (xi) above). The ground lease
is, and provides that it shall remain prior to any Mortgage or other
lien upon the related fee interest;
(E) Except with respect to the Mortgage Loan known as Marina Harbor,
the ground lease is assignable to the mortgagee under the leasehold
estate and its assigns without the consent of the lessor thereunder;
(F) As of the date of execution and delivery, the ground lease is in
full force and effect and no default has occurred, nor is there any
existing condition which, but for the passage of time or giving of
notice, would result in a default under the terms of the ground lease;
(G) The ground lease or ancillary agreement between the lessor and
the lessee requires the lessor to give notice of any default by the
lessee to the mortgagee. The ground lease or ancillary agreement
further provides that no notice given is effective against the
mortgagee unless a copy has been given to the mortgagee in a manner
described in the ground lease or ancillary agreement;
(H) A mortgagee is permitted a reasonable opportunity (including,
where necessary, sufficient time to gain possession of the interest of
the lessee under the ground lease through legal proceedings, or to
take other action so long as the mortgagee is proceeding diligently)
to cure any default under the ground lease which is curable after the
receipt of notice of any default before the lessor may terminate the
ground lease. All rights of the mortgagee under the ground lease and
the related Mortgage (insofar as it relates to the ground lease) may
be exercised by or on behalf of the mortgagee;
(I) Except with respect to the Mortgage Loan known as Marina Harbor,
the ground lease does not impose any restrictions on subletting that
would be viewed as commercially unreasonable by an institutional
investor. The lessor is not permitted to disturb the possession,
interest or quiet enjoyment of any subtenant of the lessee in the
relevant portion of the Mortgaged Property subject to the ground lease
for any reason, or in any manner, which would adversely affect the
security provided by the related Mortgage;
(J) Any related insurance proceeds or condemnation award (other than
in respect of a total or substantially total loss or taking) will be
applied either to the repair or restoration of all or part of the
related Mortgaged Property, with the mortgagee or a trustee appointed
by it (or in the case of the Marina Harbor Property, the ground lessor
acting in trust for the named insureds) having the right to hold and
disburse such proceeds as repair or restoration progresses, or, if
permitted by the related ground lease, to the payment of the
outstanding principal balance of the Mortgage Loan, together with any
accrued interest, except that in the case of condemnation awards, the
ground lessor is entitled to an amount of such award generally based
on the value of the unimproved land taken; and
(K) Except with respect to the Mortgage Loans known as Marina Harbor,
International Plaza and 30 Broad Street, under the terms of the ground
lease and the related Mortgage, any related insurance proceeds, or
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condemnation award in respect of a total or substantially total loss
or taking of the related Mortgaged Property will be applied first to
the payment of the outstanding principal balance of the Mortgage Loan,
together with any accrued interest (except where contrary to
applicable law or in cases where a different allocation would not be
viewed as commercially unreasonable by any institutional investor,
taking into account the relative duration of the ground lease and the
related Mortgage and the ratio of the market value of the related
Mortgage property to the outstanding principal balance of such
Mortgage Loan). Until the principal balance and accrued interest rate
are paid in full, neither the lessee nor the lessor under the ground
lease will have the option to terminate or modify the ground lease
without prior written consent of the mortgagee as a result of any
casualty or partial condemnation, except to provide for an abatement
of the rent;
(xxxii) with respect to each Mortgage Loan originated by Bloomfield, that
(A) such Mortgage Loan was underwritten in accordance with standards
established by the Mortgage Loan Seller, using application forms and
related credit documents approved by the Mortgage Loan Seller;
(B) the Mortgage Loan Seller approved each application and related
credit documents before a commitment by Bloomfield was issued, and no
such commitment was issued until the Mortgage Loan Seller agreed to
fund such loan;
(C) the closing documents for such Mortgage Loan were prepared on
forms approved by the Mortgage Loan Seller, and reflect the Mortgage
Loan Seller as the successor and assign to Bloomfield; and
(D) such loan was actually funded by the Mortgage Loan Seller, and
was assigned to the Mortgage Loan Seller at the closing,
(xxxiii) The leases to the Kmart Corporation with respect to the
Mortgaged Properties securing the Kmart Distribution Properties (A) are
triple net leases, (B) require the tenant to pay all rent without
reduction, setoff, abatement or other reduction, notwithstanding casualty,
condemnation and prohibition of use and (C) may not be terminated for any
reason other than a material taking or casualty, provided, however, that
Kmart Corporation agrees to purchase the related Kmart Distribution
Property for an amount at least equal to the outstanding principal balance
of the loan allocable to such property;
(xxxiv) With respect to each Mortgaged Property improved by a hotel, the
Mortgage Loan Seller has filed and/or recorded (or sent for filing and/or
recording on the closing date of the related Mortgage Loan) Uniform
Commercial Code financing statements on all furniture, fixtures, equipment
and all other personal property used in the operation of the hotel; and
(xxxv) The Mortgage Loan documents for each Mortgage Loan having a
Cut-off Date Principal Balance in excess of $20,000,000 requires that the
Board of Directors of the borrower, its corporate general partner, or
managing member, as applicable, include an independent director.
The Pooling and Servicing Agreement requires that the Servicer, the
Special Servicer or the Trustee notify the Mortgage Loan Seller and the
Depositor upon its becoming aware of (a) any breach of any representation or
warranty contained in clauses (i), (ii), (iii), (iv), (v), (vi), (vii),
(viii), (ix), (xi), (xii), (xv), (xvi), (xvii), (xviii), (xix), (xx), (xxiv)
or (xxix) and (b) any breach of any representation or warranty contained in
clauses (x), (xiii), (xiv), (xxi), (xxii), (xxiii), (xxv), (xxvi), (xxvii),
(xxviii), (xxx), (xxxi), (xxxii), (xxxiii), (xxxiv) or (xxxv) that materially
and adversely affects the value of such Mortgage Loan or the interests of the
holders of the Certificates therein. The Mortgage Loan Purchase and Sale
Agreement provides that, with respect to any such Mortgage Loan, within 90
days after notice from the Servicer, the Special Servicer or the Trustee, the
Mortgage Loan Seller shall either (a) repurchase such Mortgage Loan at an
amount equal to (i) the outstanding principal balance of the Mortgage Loan as
of the Due Date as to which a payment was last made by the borrower (less any
P&I Advances previously made on account of principal), (ii) accrued interest
up to the Due Date in the month following the month in which such repurchase
occurs (less P&I Advances previously made on account of interest), (iii) the
amount of any unreimbursed Advances (with interest thereon) and any
unreimbursed servicing compensation relating to such Mortgage Loan and (iv)
any expenses reasonably incurred or to be incurred by the Servicer, the
Special Servicer or the Trustee in respect of the breach or defect giving
rise to the repurchase obligation, including any expenses arising out of the
enforcement of the repurchase obligation (such price the "Repurchase Price")
or (b) promptly cure such breach in all material respects, provided, however,
that in the event that such breach is capable of being cured, as determined
by the Servicer, but not within such 90-day period and the Mortgage Loan
Seller, has
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commenced and is diligently proceeding with the cure of such breach, the
Mortgage Loan Seller will have an additional 90 days to complete such cure;
provided, further, that with respect to such additional 90-day period the
Mortgage Loan Seller shall have delivered an officer's certificate to the
Trustee and the Servicer setting forth the reason such breach is not capable
of being cured within the initial 90-day period and what actions the Mortgage
Loan Seller is pursuing in connection with the cure thereof and stating that
the Mortgage Loan Seller anticipates that such breach will be cured within
the additional 90-day period; and, provided, further, that in the event the
Mortgage Loan Seller fails to cure such breach within such additional 90-day
period, the Repurchase Price shall include interest on any Advances made in
respect of the related Mortgage Loan during such period.
Notwithstanding the foregoing, upon discovery by the Trustee, any
custodian for the Trustee, the Servicer or Special Servicer of a breach of a
representation or warranty that causes any Mortgage Loan not to be a
"qualified mortgage" within the meaning of the REMIC provisions of the Code,
such person shall give prompt notice thereof to the Depositor and within 90
days after such discovery, if such breach cannot be cured within such period,
the Depositor shall purchase, or cause the Mortgage Loan Seller to purchase,
such Mortgage Loan from the Trust Fund at the Repurchase Price.
The obligations of the Mortgage Loan Seller to repurchase or cure
constitute the sole remedies available to holders of Certificates or the
Trustee for a breach of a representation or warranty by the Mortgage Loan
Seller with respect to a Mortgage Loan. None of the Depositor (except as
described in the previous paragraph), the Servicer, the Special Servicer, the
Trustee or the Fiscal Agent will be obligated to purchase a Mortgage Loan if
the Mortgage Loan Seller defaults on its obligation to repurchase or cure,
and no assurance can be given that the Mortgage Loan Seller will fulfill such
obligations. No assurance can be given that the Depositor will perform any
obligation to cure or repurchase a Mortgage Loan for a breach of any
representation referred to in the second preceding paragraph. If such
obligation is not met, as to a Mortgage Loan that is not a "qualified
mortgage," the Upper-Tier REMIC and Lower-Tier REMIC may be disqualified.
However, with respect to the Mortgage Loans acquired by the Mortgage Loan
Seller from Bloomfield, the Mortgage Loan Seller will also assign to the
Depositor, and the Depositor will further assign to the Trustee, the Mortgage
Loan Seller's rights and remedies against Bloomfield in respect of the
representations and warranties made by Bloomfield in its purchase and sale
agreement with the Mortgage Loan Seller (the "Bloomfield Purchase
Agreement"), except that the Trustee will be required to reassign such rights
and remedies to the Mortgage Loan Seller as to individual Mortgage Loans
repurchased by the Mortgage Loan Seller.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The Pooling and Servicing Agreement requires the Servicer and Special
Servicer to service and administer the Mortgage Loans on behalf of the Trust
Fund solely in the best interests of and for the benefit of all of the
holders of Certificates (as determined by the Servicer or Special Servicer in
the exercise of its reasonable judgment) in accordance with applicable law,
the terms of the Pooling and Servicing Agreement and the Mortgage Loans and
to the extent not inconsistent with the foregoing, in the same manner in
which, and with the same care, skill, prudence and diligence with which, it
(a) services and administers similar mortgage loans comparable to the
Mortgage Loans and held for other third party portfolios or (b) administers
mortgage loans for its own account, whichever standard is higher, but without
regard to (i) any known relationship that the Servicer or Special Servicer,
or an affiliate of the Servicer or Special Servicer, may have with the
borrowers or any other party to the Pooling and Servicing Agreement; (ii) the
ownership of any Certificate by the Servicer or Special Servicer or any
affiliate of the Servicer or Special Servicer, as applicable; (iii) the
Servicer's or Special Servicer's obligation to make Advances or to incur
servicing expenses with respect to the Mortgage Loans; (iv) the Servicer's or
Special Servicer's right to receive compensation for its services under the
Pooling and Servicing Agreement or with respect to any particular
transaction; or (v) the ownership, or servicing or management for others, by
the Servicer or Special Servicer of any other mortgage loans or property (the
"Servicing Standard"). The Servicer and the Special Servicer are permitted,
at their own expense, to employ subservicers, agents or attorneys in
performing any of their respective obligations under the Pooling and
Servicing Agreement, but will not thereby be relieved of any such obligation,
and will be responsible for the acts and omissions of any such subservicers,
agents or attorneys. The Pooling and Servicing Agreement provides, however,
that neither the Servicer, the Special Servicer nor any of their respective
directors, officers, employees or agents shall have any liability to the
Trust Fund or the Certificateholders for taking any action or refraining from
taking an action in good faith, or for errors in judgment. The foregoing
provision would not protect the Servicer or the Special Servicer for the
breach of its representations or warranties in the Pooling and Servicing
Agreement, or any liability by reason of willful misconduct, bad faith, fraud
or negligence in the performance of its duties or by reason of its reckless
disregard of obligations or duties under the Pooling and Servicing Agreement.
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The Pooling and Servicing Agreement requires the Servicer or the Special
Servicer, as applicable, to make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans. Consistent
with the above, the Servicer or Special Servicer may, in its discretion,
waive any late payment charge in connection with any delinquent Monthly
Payment or Balloon Payment with respect to any Mortgage Loan. With respect to
the ARD Loans, the Servicer and Special Servicer will be directed in the
Pooling and Servicing Agreement not to take any enforcement action with
respect to payment of Excess Interest or principal in excess of the principal
component of the constant Monthly Payment prior to the final maturity date.
The Pooling and Servicing Agreement provides that if a Mortgage Loan provides
that the lender may in its direction apply certain amounts to a prepayment of
principal (e.g., by applying casualty or condemnation proceeds or funds
escrowed improvements not completed by the required date) prior to the
expiration of the related Lock-out Period, the Special Servicer cannot
consent to such a prepayment unless the Special Servicer has first received
the consent of the Servicer or the holders of 66 2/3% of the Voting Rights of
the Certificates responding to a solicitation of their consent. With respect
to any Specially Serviced Mortgage Loan, subject to the restrictions set
forth below under "--Realization Upon Mortgage Loans," the Special Servicer
will be entitled to pursue any of the remedies set forth in the related
Mortgage, including the right to acquire, through foreclosure, all or any of
the Mortgaged Properties securing such Mortgage Loan. The Servicer or Special
Servicer may elect to extend a Mortgage Loan (subject to conditions described
herein) notwithstanding its decision to foreclose on certain of the Mortgaged
Properties.
ADVANCES
The Servicer will be obligated to advance, on the business day immediately
preceding a Distribution Date (the "Servicer Remittance Date") an amount
(each such amount, a "P&I Advance") equal to the total or any portion of the
Monthly Payment or Minimum Defaulted Monthly Payment on a Mortgage Loan (with
interest at the Mortgage Pass-Through Rate) not received that was delinquent
as of the close of business on the immediately preceding Due Date (and which
delinquent payment has not been cured as of the Servicer Remittance Date),
or, in the event of a default in the payment of amounts due on the maturity
date of a Mortgage Loan, the amount equal to the Monthly Payment or portion
thereof not received that was due prior to the maturity date provided,
however, the Servicer will not be required to make an Advance to the extent
it determines that such advance would not be ultimately recoverable from late
payments, net insurance proceeds, net liquidation proceeds and other
collections with respect to the related Mortgage Loan. P&I Advances are
intended to maintain a regular flow of scheduled interest and principal
payments to holders of the Certificates entitled thereto, rather than to
guarantee or insure against losses. The Servicer will not be required or
permitted to make a P&I Advance for Excess Interest or Default Interest. The
amount required to be advanced in respect of delinquent Monthly Payments,
Assumed Scheduled Payments or Minimum Defaulted Monthly Payments on a
Mortgage Loan that has been subject to an Appraisal Reduction Event will
equal the product of (a) the amount that would be required to be advanced by
the Servicer without giving effect to such Appraisal Reduction Event and (b)
a fraction, the numerator of which is the Stated Principal Balance of the
Mortgage Loan (as of the last day of the related Collection Period) less any
Appraisal Reduction Amounts thereof and the denominator of which is the
Stated Principal Balance (as of the last day of the related Collection
Period). In addition, and without duplication the Servicer will (i) make only
one P&I Advance in respect of each Mortgage Loan for the benefit of the most
subordinate Class of Certificates then outstanding unless the related
defaulted Monthly Payment is cured prior to the following Due Date on any
Mortgage Loan and (ii) not make any P&I Advance in respect of Reduction
Interest Distribution Amounts or Reduction Interest Shortfalls. The amount to
be advanced by the Servicer, Trustee or Fiscal Agent in respect of any
Mortgage Loan on any Distribution Date will be reduced by the greater of the
reduction in respect of any Appraisal Reduction Amount and the reduction
described in the preceding sentence. On any Servicer Remittance Date on which
the Servicer is not required to make a P&I Advance to the most subordinate
Class of Certificates (as described above), the Servicer will initially make
such P&I Advance (for accounting purposes only) but will be required,
immediately subsequent to the making of such P&I Advance, to reimburse itself
(without interest) for such P&I Advance from and up to all amounts with
respect to such Mortgage Loan that would be distributed to the most
subordinate Class on the related Distribution Date then outstanding if such
Mortgage Loan was not in default (such amount of reimbursement, the
"Subordinate Class Advance Amount"). No interest will accrue on, or be
payable with respect to, any outstanding Subordinate Class Advance Amount.
The obligation of the Servicer, the Special Servicer, the Trustee or the
Fiscal Agent, as applicable, to make Advances with respect to any Mortgage
Loan pursuant to the Pooling and Servicing Agreement continues through the
foreclosure of such Mortgage Loan and until the liquidation of the Mortgage
Loan or related Mortgaged Properties. P&I Advances are intended to provide a
limited amount of liquidity, not to guarantee or insure against losses. None
of the Servicer, the Special Servicer, the Trustee or the Fiscal Agent will
be required to make any Advance that it determines in its good faith
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business judgment will not be recoverable by the Servicer, the Special
Servicer, the Trustee or the Fiscal Agent, as applicable, out of related late
payments, net insurance proceeds, net liquidation proceeds and other
collections with respect to the Mortgage Loan as to which such Advances were
made. In addition, if the Servicer, the Special Servicer, the Trustee or the
Fiscal Agent, as applicable, determines in its good faith business judgment
that any Advance previously made will not be recoverable from the foregoing
sources, then the Servicer, the Special Servicer, the Trustee or the Fiscal
Agent, as applicable, will be entitled to reimburse itself for such Advance,
plus interest thereon, out of amounts payable on or in respect of all of the
Mortgage Loans prior to distributions on the Certificates. Any such judgment
or determination with respect to the recoverability of Advances must be
evidenced by an officers' certificate delivered to the Trustee, Fiscal Agent
and Depositor, in the case of the Servicer, the Servicer, in the case of the
Special Servicer, the Depositor, in the case of the Trustee or the Fiscal
Agent and the Trustee in the case of the Fiscal Agent, setting forth such
judgment or determination of nonrecoverability and the considerations of the
Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as
applicable, forming the basis of such determination (including but not
limited to information selected by the person making such determination in
its good faith discretion such as related income and expense statements, rent
rolls, occupancy status, property inspections, inquiries by the Servicer, the
Special Servicer, the Trustee or the Fiscal Agent, as applicable, and an
independent appraisal performed in accordance with MAI standards conducted
within the past twelve months on the applicable Mortgaged Property).
The Trustee will provide to the Servicer written statements prior to the
Servicer Remittance Date listing (i) the aggregate Reduction Interest
Distribution Amounts and Reduction Interest Shortfalls for such Distribution
Date and (ii) the distribution due to the Holders of the most subordinate
Class of Certificates. For purposes of determining the most subordinate
Class, (i) the Class A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-CS1
and Class PS-1 Certificates collectively and (ii) the Class B-7 and Class
B-7H Certificates together will, in each case, be treated as one Class.
In addition to P&I Advances, the Servicer (and in limited circumstances,
the Special Servicer) will also be obligated (subject to the limitations
described herein) to make cash advances ("Property Advances," and together
with P&I Advances, "Advances") to pay delinquent real estate taxes,
assessments and hazard insurance premiums and to cover other similar costs
and expenses necessary to preserve the priority of the related Mortgage,
enforce the terms of any Mortgage Loan or to maintain such Mortgaged
Property.
To the extent the Servicer fails to make an Advance it is required to make
under the Pooling and Servicing Agreement, the Trustee, subject to a
determination of recoverability, will make such required Advance or, in the
event the Trustee fails to make such Advance, the Fiscal Agent, subject to a
determination of recoverability, will make such Advance, in each case
pursuant to the terms of the Pooling and Servicing Agreement. To the extent
the Special Servicer fails to make an Advance it is required to make under
the Pooling and Servicing Agreement, the Servicer, subject to a determination
of recoverability, will make such an Advance. Both the Trustee and the Fiscal
Agent will be entitled to rely conclusively on any non-recoverability
determination of the Servicer or the Special Servicer, as the case may be.
See "--Trustee" and "--Fiscal Agent" below.
The Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as
applicable, will be entitled to reimbursement for any Advance made by it in
an amount equal to the amount of such Advance and interest accrued thereon at
the Advance Rate (i) from late payments on the Mortgage Loan by the
Mortgagor, (ii) from insurance proceeds, condemnation proceeds, liquidation
proceeds from the sale of the Specially Serviced Mortgage Loan or the related
Mortgaged Property or other collections relating to the Mortgage Loan or
(iii) upon determining in good faith that such Advance or interest is not
recoverable in the manner described in the preceding two clauses, from any
other amounts from time to time on deposit in the Collection Account.
The Servicer, the Special Servicer, the Trustee and the Fiscal Agent will
each be entitled to receive interest on Advances at a per annum rate equal to
the sum of (i) the Prime Rate plus (ii) 1% (the "Advance Rate"), compounded
monthly, as of each Servicer Remittance Date and the Servicer will be
authorized to pay itself, the Special Servicer, the Trustee or the Fiscal
Agent, as applicable, such interest monthly from general collections with
respect to all of the Mortgage Loans prior to any payment to holders of
Certificates. To the extent that the payment of such interest at the Advance
Rate results in a shortfall in amounts otherwise payable on one or more
Classes of Certificates on the next Distribution Date, the Servicer, the
Trustee or the Fiscal Agent, as applicable, will be obligated to make a cash
advance to cover such shortfall, but only to the extent the Servicer, the
Trustee or the Fiscal Agent, as applicable, concludes that, with respect to
each such Advance, such Advance can be recovered from amounts payable on or
in respect of the
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Mortgage Loan to which the Advance is related. If the interest on such
Advance is not recovered from Default Interest on such Mortgage Loan, a
shortfall will result which will have the same effect as a Realized Loss. The
"Prime Rate" is the rate, for any day, set forth as such in the "Money Rates"
section of The Wall Street Journal, Eastern Edition.
ACCOUNTS
Lock Box Accounts. With respect to 47 Mortgage Loans, which represent in
the aggregate 79% of the Initial Pool Balance, one or more accounts in the
name of the related borrower (the "Lock Box Accounts") have been established
into which rents or other revenues from the related Mortgaged Properties are
deposited by the related tenants or manager. Any Lock Box which does not
require the related borrower to instruct tenants to deposit rents directly
into such account will instead require the borrower or the related property
manager to deposit rents and other revenues in the related Lock Box Account.
Agreements governing the Lock Box Accounts provide that the borrower has no
withdrawal or transfer rights with respect thereto and that all funds on
deposit in the Lock Box Accounts are periodically swept into the Cash
Collateral Accounts. Additionally, the Mortgage Loans that have Anticipated
Repayment Dates require that a Lock Box Account be established prior to their
respective Anticipated Repayment Dates. The Lock Box Accounts will not be an
asset of the Trust REMICs.
Cash Collateral Accounts. With respect to each Mortgage Loan that has a
Lock Box Account, one or more accounts in the name of the Servicer (the "Cash
Collateral Accounts") have been established into which funds in the related
Lock Box Accounts will be swept on a regular basis. The Reserve Accounts
generally will be sub-accounts of the Cash Collateral Accounts. Any excess
over the amount necessary to fund the Monthly Payment, the Reserve Accounts
and any other amounts due under the Mortgage Loans will be returned to or
retained by the related borrower provided no event of default of which the
Servicer is aware has occurred and is continuing with respect to such
Mortgage Loan. However, as described under "Description of the Mortgage Pool
- -- Certain Terms and Conditions of the Mortgage Loans -- Excess Interest,"
after the respective Anticipated Repayment Date, if applicable, all amounts
in the related Cash Collateral Account in excess of the amount necessary to
fund the Monthly Payment and Reserve Accounts will be applied to (i)
operating and capital expenses, (ii) the reduction of the principal balance
of the related Mortgage Loan until such principal is paid in full and (iii)
Excess Interest, in that order. The Cash Collateral Accounts will not be an
asset of the Trust REMICs.
Collection Account. The Servicer will establish and maintain a segregated
account (the "Collection Account") pursuant to the Pooling and Servicing
Agreement, and on each Due Date withdraw from each Cash Collateral Account an
amount equal to the Monthly Payment on the related Mortgage Loan and deposit
such amount into the Collection Account for application towards the Monthly
Payment (including Servicing Fees) due on the related Mortgage Loan. The
Servicer shall also deposit into the Collection Account within one business
day of receipt all other payments in respect of the Mortgage Loans, other
than amounts to be deposited into any Reserve Account.
Distribution Accounts. The Trustee will establish and maintain one or more
segregated accounts ("Distribution Accounts") in the name of the Trustee for
the benefit of the holders of Certificates. With respect to each Distribution
Date, the Servicer will deposit in the Distribution Account, to the extent of
funds on deposit in the Collection Account, on the Servicer Remittance Date
an aggregate amount of immediately available funds equal to the sum of (i)
the Available Funds and (ii) the portion of the Servicing Fee representing
the Trustee's Fee. The Servicer will deposit all P&I Advances into the
Distribution Account on the related Servicer Remittance Date. To the extent
the Servicer fails to do so, the Trustee or the Fiscal Agent will deposit all
P&I Advances into the Distribution Account as described herein. See
"Description of the Subordinated Certificates -- Distributions" herein.
Interest Reserve Account. The Servicer will establish and maintain an
Interest Reserve Account ("Interest Reserve Account") in the name of the
Trustee for the benefit of the holders of the Certificates. On each Servicer
Remittance Date relating to an Interest Accrual Period ending in any February
and on any Servicer Remittance Date relating to an Interest Accrual Period
ending in any January which occurs in a year which is not a leap year, the
Servicer will be required to deposit, in respect of the Mortgage Loans known
as the Saracen, Burnham Pacific, M&H, Lakeside and Ambassador loans, into the
Interest Reserve Account, an amount equal to one day's interest collected on
the Stated Principal Balance of such Mortgage Loan as of the Due Date
occurring in the month preceding the month in which such Servicer Remittance
Date occurs at the related Mortgage Rate, to the extent a full Monthly
Payment or P&I Advance is made in respect thereof (all amounts so deposited
in any consecutive January and February, "Withheld Amounts"). On each
Servicer Remittance Date occurring in March, the Servicer will be required to
withdraw from the Interest Reserve Account an amount equal to the Withheld
Amounts from the preceding January and February, if any, and deposit such
amount into the Distribution Accounts.
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The Trustee will also establish and maintain one or more segregated
accounts for each of the "Upper-Tier Distribution Account," the "Default
Interest Distribution Account" and the "Excess Interest Distribution
Account," each in the name of the Trustee for the benefit of the holders of
the Certificates.
The Cash Collateral Accounts, Collection Account, the Distribution
Account, the Upper-Tier Distribution Account, the Interest Reserve Account,
the Excess Interest Distribution Account and the Default Interest
Distribution Account will be held in the name of the Trustee (or the Servicer
on behalf of the Trustee) on behalf of the holders of Certificates and the
Servicer will be authorized to make withdrawals from the Cash Collateral
Accounts, the Collection Account and the Interest Reserve Account. Each of
the Cash Collateral Account, Collection Account, any REO Account, the
Distribution Account, the Upper-Tier Distribution Account, the Interest
Reserve Account, the Excess Interest Distribution Account and the Default
Interest Distribution Account will be either (i) (A) an account or accounts
maintained with a depository institution or trust company the short term
unsecured debt obligations or commercial paper of which are rated at least
A-1 by S&P, P-1 by Moody's, D-1 by DCR and F-1+ by Fitch in the case of
accounts in which funds are held for 30 days or less (or, in the case of
accounts in which funds are held for more than 30 days, the long term
unsecured debt obligations of which are rated at least "AA" by Fitch, DCR and
S&P and "Aaa" by Moody's) or (B) as to which the Trustee has received written
confirmation from each of the Rating Agencies that holding funds in such
account would not cause any Rating Agency to qualify, withdraw or downgrade
any of its ratings on the Certificates or (ii) a segregated trust account or
accounts maintained with a federal or state chartered depository institution
or trust company acting in its fiduciary capacity which, in the case of a
state chartered depository institution, is subject to regulations
substantially similar to 12 C.F.R. Section 9.10(b), having in either case a
combined capital surplus of at least $50,000,000 and subject to supervision
or examination by federal and state authority, or any other account that, as
evidenced by a written confirmation from each Rating Agency that such account
would not, in and of itself, cause a downgrade, qualification or withdrawal
of the then current ratings assigned to the Certificates, which may be an
account maintained with the Trustee or the Servicer (an "Eligible Bank").
Amounts on deposit in the Collection Account, Cash Collateral Account, any
REO Account and the Interest Reserve Account may be invested in certain
United States government securities and other high-quality investments
specified in the Pooling and Servicing Agreement ("Permitted Investments").
Interest or other income earned on funds in the Collection Account and Cash
Collateral Accounts will be paid to the Servicer (except to the extent
required to be paid to the related borrower) as additional servicing
compensation and interest or other income earned on funds in any REO Account
will be payable to the Special Servicer. Interest or other income earned on
funds in the Interest Reserve Account will be paid to NSI as compensation for
arranging for on-going monitoring and surveillance of the Subordinated
Certificates by the Rating Agencies.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The Servicer may make withdrawals from the Collection Account for the
following purposes, to the extent permitted and in the priorities provided in
the Pooling and Servicing Agreement: (i) to remit on or before each Servicer
Remittance Date (A) to the Distribution Account an amount equal to the sum of
(I) Available Funds and any Prepayment Premiums and (II) the Trustee Fee for
such Distribution Date, (B) to the Default Interest Distribution Account an
amount equal to the Net Default Interest received in the related Collection
Period, (C) to the Excess Interest Distribution Account an amount equal to
the Excess Interest received in the related Collection Period, if any, and
(D) to the Interest Reserve Account an amount required to be withheld as
described under "--Accounts -- Interest Reserve Account"; (ii) to pay or
reimburse the Servicer, the Special Servicer, the Trustee and the Fiscal
Agent, as applicable, for Advances made by any of them and, if applicable,
interest on Advances (provided, that the Trustee and Fiscal Agent will have
priority with respect to such payment or reimbursement), the Servicer's right
to reimbursement for items described in this clause (ii) being limited as
described herein under "--Advances"; (iii) to pay on or before each Servicer
Remittance Date to the Servicer and the Special Servicer as compensation, the
aggregate unpaid Servicing Compensation (not including the portion of the
Servicing Fee representing the Trustee's Fee), Special Servicing Fee,
Principal Recovery Fee, if any, and any other servicing or special servicing
compensation in respect of the immediately preceding calendar month; (iv) to
pay on or before each Distribution Date to the Depositor, Mortgage Loan
Seller or Bloomfield with respect to each Mortgage Loan or REO Property that
has previously been purchased or repurchased by it pursuant to the Pooling
and Servicing Agreement, all amounts received thereon during the related
Collection Period and subsequent to the date as of which the amount required
to effect such purchase or repurchase was determined; (v) to the extent not
reimbursed or paid pursuant to any of the above clauses, to reimburse or pay
the Servicer, the Special Servicer, the Trustee, the Fiscal Agent and/or the
Depositor for unpaid servicing compensation (in the case of the Servicer, the
Special Servicer or the Trustee) and certain other unreimbursed expenses
incurred by such persons pursuant to and to the extent reimbursable under the
Pooling and
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Servicing Agreement and to satisfy any indemnification obligations of the
Trust Fund under the Pooling and Servicing Agreement; (vi) to pay to the
Trustee amounts requested by it to pay taxes on certain net income with
respect to REO Properties; (vii) to withdraw any amount deposited into the
Collection Account that was not required to be deposited therein; and (viii)
to clear and terminate the Collection Account pursuant to a plan for
termination and liquidation of the Trust Fund.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
The Mortgage Loans contain provisions in the nature of "due-on-sale"
clauses, which by their terms (a) provide that the Mortgage Loans shall (or
may at the mortgagee's option) become due and payable upon the sale or other
transfer of an interest in the related Mortgaged Property or (b) provide that
the Mortgage Loans may not be assumed without the consent of the related
mortgagee in connection with any such sale or other transfer. The Servicer or
the Special Servicer, as applicable, will not be required to enforce such
due-on-sale clauses and in connection therewith will not be required to (i)
accelerate payments thereon or (ii) withhold its consent to such an
assumption if (x) such provision is not exercisable under applicable law or
such provision is reasonably likely to result in meritorious legal action by
the borrower or (y) the Servicer or the Special Servicer, as applicable,
determines, in accordance with the Servicing Standard, that granting such
consent would be likely to result in a greater recovery, on a present value
basis (discounting at the related Mortgage Rate), than would enforcement of
such clause. If the Servicer or the Special Servicer, as applicable,
determines that granting such consent would be likely to result in a greater
recovery or such provision is not legally enforceable, the Servicer or the
Special Servicer, as applicable, is authorized to take or enter into an
assumption agreement from or with the proposed transferee as obligor thereon
provided that (a) the credit status of the prospective transferee is in
compliance with the Servicer's or Special Servicer's, as applicable, regular
commercial mortgage origination or servicing standards and criteria and the
terms of the related Mortgage and (b) the Servicer or the Special Servicer,
as applicable, has received written confirmation from each of Fitch, Moody's
and S&P, and, if the Mortgage Loan represents greater than 2% of the
aggregate Stated Principal Balances of the Mortgage Loans, DCR that such
assumption or substitution would not, in and of itself, cause a downgrade,
qualification or withdrawal of the then current ratings assigned to the
Certificates. No assumption agreement may contain any terms that are
different from any term of any Mortgage or related Note, except pursuant to
the provisions described under "--Realization Upon Mortgage Loans" and
"Modifications" herein.
The Mortgage Loans contain provisions in the nature of a
"due-on-encumbrance" clause which by their terms (a) provide that the
Mortgage Loans shall (or may at the mortgagee's option) become due and
payable upon the creation of any lien or other encumbrance on the related
Mortgaged Property, or (b) require the consent of the related mortgagee to
the creation of any such lien or other encumbrance on the related Mortgaged
Property. The Servicer or the Special Servicer, as applicable, will not be
required to enforce such due-on-encumbrance clauses and in connection
therewith will not be required to (i) accelerate payments thereon or (ii)
withhold its consent to such lien or encumbrance if the Servicer or the
Special Servicer, as applicable, (x) determines, in accordance with the
Servicing Standard, that such enforcement would not be in the best interests
of the Trust Fund and (y) receives prior written confirmation from each of
Fitch, Moody's and S&P, and, if the Mortgage Loan represents greater than 2%
of the aggregate Stated Principal Balances of the Mortgage Loans, DCR that
granting such consent would not, in and of itself, cause a downgrade,
qualification or withdrawal of any of the then current ratings assigned to
the Certificates. See "Certain Legal Aspects of the Mortgage Loans --
Due-on-Sale and Due-on-Encumbrance."
INSPECTIONS
The Servicer (or with respect to any Specially Serviced Mortgage Loan, the
Special Servicer) is required to inspect each Mortgaged Property at such
times and in such manner as are consistent with the Servicing Standards
described herein, but in any event (i) is required to inspect each Mortgaged
Property securing a Note, with a Stated Principal Balance (or in the case of
a Note secured by more than one Mortgaged Property, having an Allocated Loan
Amount) of (a) $2,000,000 or more at least once every twelve months and (b)
less than $2,000,000 at least once every 24 months, in each case commencing
in May 1997 (or at such lesser frequency, provided each Rating Agency has
confirmed in writing to the Servicer that such schedule will not result in
the withdrawal, downgrading or qualification of the then-current ratings
assigned to the Certificates) and (ii) if the Mortgage Loan (a) becomes a
"Specially Serviced Mortgage Loan," (b) is delinquent for 60 days or (c) has
a debt service coverage ratio of less than 1.0, the Special Servicer is
required to inspect the related Mortgaged Properties as soon as practicable
and thereafter at least every twelve months.
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INSURANCE POLICIES
The Pooling and Servicing Agreement requires the Servicer (or the Special
Servicer in the case of an REO Property) to obtain or cause the mortgagor on
each Mortgage Loan to maintain fire and hazard insurance with extended
coverage on the related Mortgaged Property in an amount which is at least
equal to the lesser of (A) one hundred percent (100%) of the then "full
replacement cost" of the improvements and equipment without deduction for
physical depreciation, and (B) the outstanding principal balance of the
related Mortgage Loan, or such greater amount as is necessary to prevent any
reduction, by reason of the application of co-insurance and to prevent the
Trustee thereunder from being deemed a co-insurer and provided such policy
shall include a "replacement cost" rider. The Pooling and Servicing Agreement
also requires the Servicer (or the Special Servicer in the case of an REO
Property) to obtain or cause the mortgagor on each Mortgaged Property to
maintain insurance providing coverage against at least 18 months of rent
interruptions (24 months with respect to an REO Property) and any other
insurance as is required in the related Mortgage Loan. In the case of an REO
Property, if the Special Servicer fails to maintain fire and hazard insurance
as described above or flood insurance as described below, the Servicer shall
maintain such insurance, and if the Servicer does not maintain such
insurance, the Trustee shall maintain such insurance and if the Trustee does
not maintain such insurance, the Fiscal Agent shall do so, subject to the
provisions concerning nonrecoverable Advances. Any cost incurred by the
Servicer, Special Servicer, Trustee or Fiscal Agent in maintaining any such
insurance shall not, for the purpose of calculating distributions to
Certificateholders, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so
permit.
In general, the standard form of fire and hazard extended coverage policy
covers physical damage to or destruction of the improvements of the property
by fire, lightning, explosion, smoke, windstorm, hail, riot, strike and civil
commotion, subject to certain conditions and exclusions in each policy.
Although the policies relating to the Mortgage Loans will be underwritten by
different insurers in different states and therefore will not contain
identical terms and conditions, most such policies will 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, domestic animals and
certain other kinds of uninsured risks. Nonetheless, certain of the Mortgage
Loans require insurance coverage for floods and other water-related causes
and earth movement. When a Mortgaged Property is located in a federally
designated flood area, the Pooling and Servicing Agreement requires the
Servicer to use its best efforts to cause the related borrower to maintain,
or if not maintained, to itself obtain (subject to the provisions concerning
nonrecoverable Advances) flood insurance. Such flood insurance shall be in an
amount equal to the lesser of (i) the unpaid principal balance of the related
Mortgage Loan and (ii) the maximum amount of such insurance required by the
terms of the related Mortgage and as is available for the related property
under the national flood insurance program, if available. If an REO Property
(i) is located in a federally designated special flood hazard area or (ii) is
related to a Mortgage Loan pursuant to which earthquake insurance was in
place at the time of origination and continues to be available at
commercially reasonable rates, the Pooling and Servicing Agreement requires
that the Special Servicer obtain (subject to the provisions concerning
nonrecoverable Advances) flood insurance and/or earthquake insurance. If a
recovery due to a flood or earthquake is not available for an REO Property
but would have been available if such insurance were maintained, the Special
Servicer will be required (subject to the provisions concerning
nonrecoverable Advances) to (i) immediately deposit into the Collection
Account from its own funds the amount that would have been recovered or (ii)
apply to the restoration and repair of the property from its own funds the
amount that would have been recovered, if such application is consistent with
the Servicing Standard; provided, however, that the Special Servicer shall
not be responsible for any shortfall in insurance proceeds resulting from an
insurer's refusal or inability to pay a claim.
The Servicer or the Special Servicer may obtain and maintain a blanket
insurance policy insuring against fire and hazard losses on all of the
Mortgaged Properties (other than REO Properties) as to which the related
borrower has not maintained insurance to satisfy its obligations concerning
the maintenance of insurance coverage. Any such blanket insurance policy
shall be maintained with an insurer qualified under the terms of the Pooling
and Servicing Agreement. Additionally, the Servicer or the Special Servicer
may obtain a master force placed insurance policy, as long as such policy is
issued by an insurer qualified under the terms of the Pooling and Servicing
Agreement and provides no less coverage in scope and amount than otherwise
required to be maintained as described in the preceding paragraphs.
The ability of the Servicer to assure that fire and hazard, flood or
earthquake insurance proceeds are appropriately applied may be dependent upon
its being named as an additional insured under such policy, or upon the
extent to which information in this regard is furnished by mortgagors.
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Under the terms of the Mortgage Loans, the borrowers will be required to
present claims to insurers under hazard insurance policies maintained on the
related Mortgaged Properties. The Servicer or Special Servicer, as
applicable, on behalf of itself, 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 Mortgage Loans. However, the ability of the Servicer or Special
Servicer, as applicable, to present or cause to be presented such claims is
dependent upon the extent to which information in this regard is furnished to
the Servicer or Special Servicer, as applicable, by the borrowers.
All insurance policies required shall name the Trustee or the Servicer or
the Special Servicer, on behalf of the Trustee as the mortgagee, as loss
payee.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement requires the Servicer to cause a
nationally recognized firm of independent public accountants, which is a
member of the American Institute of Certified Public Accountants, to furnish
to the Trustee, the Depositor and the Rating Agencies on or before March 15
of each year, beginning March 15, 1998, a statement to the effect that such
firm has examined certain documents and records relating to the servicing of
similar mortgage loans for the preceding twelve months and that on the basis
of their examination, conducted substantially in compliance with generally
accepted auditing standards and the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC, such
servicing has been conducted in compliance with similar agreements except for
such significant exceptions or errors in records that, in the opinion of such
firm, generally accepted auditing standards and the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FHLMC require it to report, in which case such exceptions and
errors shall be so reported.
The Pooling and Servicing Agreement also requires the Servicer to deliver
to the Trustee, the Depositor and the Rating Agencies on or before March 15
of each year, beginning March 15, 1998, an officer's certificate of the
Servicer stating that, to the best of such officer's knowledge, the Servicer
has fulfilled its obligations under the Pooling and Servicing Agreement
throughout the preceding year or, if there has been a default, specifying
each default known to such officer and the action proposed to be taken with
respect thereto.
CERTAIN MATTERS REGARDING THE DEPOSITOR, THE SERVICER AND THE SPECIAL
SERVICER
Each of the Servicer and Special Servicer may assign its rights and
delegate its duties and obligations under the Pooling and Servicing Agreement
in connection with the sale or transfer of a substantial portion of its
mortgage servicing or asset management portfolio, provided that certain
conditions are satisfied including obtaining the consent of the Trustee and
written confirmation of each Rating Agency that such assignment or delegation
will not cause a qualification, withdrawal or downgrading of the then-current
ratings assigned to the Certificates. The Pooling and Servicing Agreement
provides that the Servicer or Special Servicer may not otherwise resign from
its obligations and duties as Servicer or Special Servicer thereunder, except
upon the determination that performance of its duties is no longer
permissible under applicable law and provided that such determination is
evidenced by an opinion of counsel delivered to the Trustee. No such
resignation may become effective until the Trustee or a successor Servicer or
Special Servicer has assumed the obligations of the Servicer or Special
Servicer under the Pooling and Servicing Agreement. The Trustee or any other
successor Servicer or Special Servicer assuming the obligations of the
Servicer or Special Servicer under the Pooling and Servicing Agreement will
be entitled to the compensation to which the Servicer or Special Servicer
would have been entitled. If no successor Servicer or Special Servicer can be
obtained to perform such obligations for such compensation, additional
amounts payable to such successor Servicer or Special Servicer will be
treated as Realized Losses. In addition, the Pooling and Servicing Agreement
provides that the Depositor is permitted to remove the Servicer at any time
without cause provided that (i) each Rating Agency has confirmed in writing
that such removal will not result in a downgrade, qualification or withdrawal
of the then current rating of any Class of Certificates and (ii) the
successor Servicer shall be a servicing company that (x) is an affiliate of
the Depositor and (y) was acquired by an affiliate of the Depositor.
The Pooling and Servicing Agreement also provides that neither the
Depositor, the Servicer, the Special Servicer, nor any director, officer,
employee or agent of the Depositor, the Servicer or the Special Servicer will
be under any liability to the Trust Fund or the holders of Certificates for
any action taken or for refraining from the taking of any action in good
faith pursuant to the Pooling and Servicing Agreement, or for errors in
judgment; provided, however, that neither the Depositor, the Servicer, the
Special Servicer nor any such person will be protected against any breach of
its representations
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and warranties made in the Pooling and Servicing Agreement or any liability
which would otherwise be imposed by reason of willful misconduct, bad faith,
fraud or negligence in the performance of duties thereunder or by reason of
reckless disregard of obligations and duties thereunder. The Pooling and
Servicing Agreement further provides that the Depositor, the Servicer, the
Special Servicer and any director, officer, employee or agent of the
Depositor, the Servicer and the Special Servicer will be entitled to
indemnification by the Trust Fund for any loss, liability or expense incurred
in connection with any legal action relating to the Pooling and Servicing
Agreement or the Certificates, other than any loss, liability or expense (i)
incurred by reason of willful misconduct, bad faith, fraud or negligence (or
in the case of the Servicer, by reason of any specific liability imposed for
a breach of the Servicing Standard) in the performance of duties thereunder
or by reason of reckless disregard of obligations and duties thereunder or
(ii) imposed by any taxing authority if such loss, liability or expense is
not specifically reimbursable pursuant to the terms of the Pooling and
Servicing Agreement.
In addition, the Pooling and Servicing Agreement provides that neither the
Depositor, the Servicer, nor the Special Servicer will be under any
obligation to appear in, prosecute or defend any legal action unless such
action is related to its duties under the Pooling and Servicing Agreement and
which in its opinion does not expose it to any expense or liability. The
Depositor, the Servicer or the Special Servicer may, however, in its
discretion undertake any such action which it may deem necessary or desirable
with respect to the Pooling and Servicing Agreement and the rights and duties
of the parties thereto and the interests of the holders of Certificates
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 Depositor, the Servicer and the Special Servicer will
be entitled to be reimbursed therefor and to charge the Collection Account.
The Depositor is not obligated to monitor or supervise the performance of
the Servicer, the Special Servicer or the Trustee under the Pooling and
Servicing Agreement. The Depositor may, but is not obligated to, enforce the
obligations of the Servicer or the Special Servicer under the Pooling and
Servicing Agreement and may, but is not obligated to, perform or cause a
designee to perform any defaulted obligation of the Servicer or the Special
Servicer or exercise any right of the Servicer or the Special Servicer under
the Pooling and Servicing Agreement. In the event the Depositor undertakes
any such action, it will be reimbursed by the Trust Fund from the Collection
Account to the extent not recoverable from the Servicer or Special Servicer,
as applicable. Any such action by the Depositor will not relieve the Servicer
or the Special Servicer of its obligations under the Pooling and Servicing
Agreement.
Any person into which the Servicer may be merged or consolidated, or any
person resulting from any merger or consolidation to which the Servicer is a
party, or any person succeeding to the business of the Servicer, will be the
successor of the Servicer under the Pooling and Servicing Agreement, and
shall be deemed to have assumed all of the liabilities and obligations of the
Servicer under the Pooling and Servicing Agreement, if each of the Rating
Agencies has confirmed in writing that such merger or consolidation or
transfer of assets and succession, in and of itself, will not cause a
downgrade, qualification or withdrawal of the then current ratings assigned
by such Rating Agency to any Class of Certificates.
EVENTS OF DEFAULT
Events of default of the Servicer (each, an "Event of Default") under the
Pooling and Servicing Agreement consist, among other things, of (i) any
failure by the Servicer to remit to the Collection Account or any failure by
the Servicer to remit to the Trustee for deposit into the Upper-Tier
Distribution Account, Distribution Account, Excess Interest Distribution
Account, Interest Reserve Account or Default Interest Distribution Account
any amount required to be so remitted pursuant to the Pooling and Servicing
Agreement or (ii) any failure by the Servicer duly to observe or perform in
any material respect any of its other covenants or agreements or the breach
of its representations or warranties under the Pooling and Servicing
Agreement which continues unremedied for thirty (30) days after the giving of
written notice of such failure to the Servicer by the Depositor or the
Trustee, or to the Servicer and to the Depositor and the Trustee by the
holders of Certificates evidencing Percentage Interests of at least 25% of
any affected Class; or (iii) any failure by the Servicer to make any Advances
as required pursuant to the Pooling and Servicing Agreement; or (iv)
confirmation in writing by any Rating Agency that not terminating the
Servicer would, in and of itself, cause the then-current rating assigned to
any Class of Certificates to be qualified, withdrawn or downgraded; (v)
certain events of insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings and certain actions by, on behalf of or
against the Servicer indicating its insolvency or inability to pay its
obligations or (vi) the Servicer shall no longer be an "approved" servicer by
each of the Rating Agencies for mortgage pools similar to the Trust Fund.
Events of Default of the Special Servicer under the Pooling and Servicing
Agreement include the items specified in clauses (i) through (vi) above with
respect to, and to the extent applicable to, the Special Servicer.
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RIGHTS UPON EVENT OF DEFAULT
If an Event of Default with respect to the Servicer or Special Servicer
occurs, then the Trustee may, and at the direction of the holders of
Certificates evidencing at least 25% of the aggregate Voting Rights of all
Certificateholders, the Trustee will, terminate all of the rights and
obligations of the Servicer or Special Servicer as servicer or special
servicer under the Pooling and Servicing Agreement and in and to the Trust
Fund. Notwithstanding the foregoing, upon any termination of the Servicer
under the Pooling and Servicing Agreement the Servicer will continue to be
entitled to receive all accrued and unpaid servicing compensation through the
date of termination plus all Advances and interest thereon as provided in the
Pooling and Servicing Agreement. In the event that the Servicer is also the
Special Servicer and the Servicer is terminated, the Servicer will also be
terminated as Special Servicer.
On and after the date of termination following an Event of Default by the
Servicer, the Trustee will succeed to all authority and power of the Servicer
(and the Special Servicer if the Special Servicer is also the Servicer) under
the Pooling and Servicing Agreement and will be entitled to the compensation
arrangements to which the Servicer (and the Special Servicer if the Servicer
is also the Special Servicer) would have been entitled. If the Trustee is
unwilling or unable so to act, or if the holders of Certificates evidencing
at least 25% of the aggregate Voting Rights of all Certificateholders so
request, or if the long-term unsecured debt rating of the Trustee or the
Fiscal Agent is not at least "AA" by S&P, DCR and Fitch and "Aa2" by Moody's
or if the Rating Agencies do not provide written confirmation that the
succession of the Trustee as Servicer, will not cause a qualification,
withdrawal or downgrading of the then-current ratings assigned to the
Certificates, the Trustee must appoint, or petition a court of competent
jurisdiction for the appointment of, a mortgage loan servicing institution
the appointment of which will not result in the downgrading, qualification or
withdrawal of the rating or ratings then assigned to any Class of
Certificates as evidenced in writing by each Rating Agency to act as
successor to the Servicer under the Pooling and Servicing 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.
If the Special Servicer is not the Servicer and an Event of Default with
respect to the Special Servicer occurs, the Trustee will terminate the
Special Servicer and the Servicer will succeed to all the power and authority
of the Special Servicer under the Pooling and Servicing Agreement (provided
that such termination would not result in the downgrading, qualification or
withdrawal of the rating or ratings assigned to any Class of Certificates as
evidenced in writing by each Rating Agency) and will be entitled to the
compensation to which the Special Servicer would have been entitled.
No Certificateholder will have any right under the Pooling and Servicing
Agreement to institute any proceeding with respect to the Pooling and
Servicing Agreement or the Mortgage Loans, unless, with respect to the
Pooling and Servicing Agreement, such holder previously shall have given to
the Trustee a written notice of a default under the Pooling and Servicing
Agreement, and of the continuance thereof, and unless also the holders of
Certificates of any Class affected thereby evidencing Percentage Interests of
at least 25% of such Class shall have made written request of the Trustee to
institute such proceeding in its own name as Trustee under the Pooling and
Servicing Agreement 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 60 days after its receipt
of such notice, request and offer of indemnity, shall have neglected or
refused to institute such proceeding.
The Trustee will have no obligation to make any investigation of matters
arising under the Pooling and Servicing Agreement or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order
or direction of any of the holders of Certificates, unless such holders of
Certificates shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
AMENDMENT
The Pooling and Servicing Agreement may be amended at any time by the
Depositor, the Servicer, the Special Servicer, the Trustee and the Fiscal
Agent without the consent of any of the holders of Certificates (i) to cure
any ambiguity; (ii) to correct or supplement any provisions therein which may
be defective or inconsistent with any other provisions therein; (iii) to
amend any provision thereof to the extent necessary or desirable to maintain
the rating or ratings assigned to each Class of Certificates; (iv) to amend
or supplement a provision which will not adversely affect in any material
respect the interests of any Certificateholder not consenting thereto, as
evidenced in writing by an opinion of counsel or confirmation in writing from
each Rating Agency that such amendment will not result in a qualification,
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withdrawal or downgrading of the then-current ratings assigned to the
Certificates; and (v) to amend or supplement any provisions therein to the
extent not inconsistent with the provisions of the Pooling and Servicing
Agreement and will not result in a downgrade, qualification or withdrawal of
the then current ratings assigned to any Class of Certificates as confirmed
in writing by each Rating Agency.
The Pooling and Servicing Agreement may also be amended from time to time
by the Depositor, the Servicer, the Special Servicer, the Trustee and the
Fiscal Agent with the consent of the holders of Certificates evidencing at
least 66 2/3% of the Percentage Interests of each Class of Certificates
affected thereby for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Pooling and Servicing
Agreement or modifying in any manner the rights of the holders of
Certificates; provided, however, that no such amendment may (i) reduce in any
manner the amount of, or delay the timing of, payments received on the
Mortgage Loans which are required to be distributed on any Certificate; (ii)
alter the obligations of the Servicer, the Special Servicer, the Trustee or
the Fiscal Agent to make a P&I Advance or Property Advance or alter the
servicing standards set forth in the Pooling and Servicing Agreement; (iii)
change the percentages of Voting Rights of holders of Certificates which are
required to consent to any action or inaction under the Pooling and Servicing
Agreement; or (iv) amend the section in the Pooling and Servicing Agreement
relating to the amendment of the Pooling and Servicing Agreement, in each
case without the consent of the holders of all Certificates representing all
the Percentage Interests of the Class or Classes affected thereby.
VOTING RIGHTS
The "Voting Rights" assigned to each Class shall be (a) 0% in the case of
the Class V-1, Class V-2, Class R and Class LR Certificates, (b) 0.09% in the
case of the Class A-CS1 Certificates and 3.58% in the case of the Class PS-1
Certificates (the sum of such percentages for each such Class outstanding is
the "Fixed Voting Rights Percentage"), provided that the Voting Rights of the
(i) Class A-CS1 Certificates will be reduced to zero upon the reduction of
the Notional Balance of such Class to zero and (ii) Class PS-1 Certificates
will be reduced to zero on the Distribution Date on which none of the A-1B,
Class A-1C, Class A-1D, Class A-1E, Class B-1, Class B-2, Class B-3, Class
B-4, Class B-5 and Class B-6 Certificates are outstanding, (c) in the case of
the Class A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-1E, Class A-2,
Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7 and Class
B-7H Certificates, a percentage equal to the product of (x) 100% minus the
Fixed Voting Rights Percentage multiplied by (y) a fraction, the numerator of
which is equal to the aggregate outstanding Certificate Balance of any such
Class and the denominator of which is equal to the aggregate outstanding
Certificate Balances of all Classes of Certificates. The Coupon Strip
Certificates will not be entitled to vote with respect to proposed extensions
of a Specially Serviced Mortgage Loan. The Voting Rights of any Class of
Certificates shall be allocated among holders of Certificates of such Class
in proportion to their respective Percentage Interests, except that any
Certificate beneficially owned by the Depositor, the Servicer, the Special
Servicer, any mortgagor, the Trustee, a manager, or any of their respective
affiliates will be deemed not to be outstanding; provided, however, that for
purposes of obtaining the consent of Certificateholders to an amendment to
the Pooling and Servicing Agreement, any Certificates beneficially owned by
the Servicer or Special Servicer or an affiliate thereof will be deemed to be
outstanding, provided that such amendment does not relate to compensation of
the Servicer, Special Servicer or otherwise benefit such entity or an
affiliate (other than solely in its capacity as Certificateholder); and,
provided, further, that for purposes of obtaining the consent of
Certificateholders to any action proposed to be taken by the Special Servicer
with respect to a Specially Serviced Mortgage Loan, any Certificates
beneficially owned by the Servicer or an affiliate will be deemed to be
outstanding if the Special Servicer is not the Servicer or any affiliate. The
Certificates beneficially owned by the Special Servicer or an affiliate
thereof shall be deemed outstanding for purposes of determining who the
Directing Holders (as defined below) are and for purposes of issuing
Instructions (as defined below). The Voting Rights of each Class of
Certificates will be deemed to be reduced on any day on which an Appraisal
Reduction Amount is allocated to such Class. The Fixed Voting Right
Percentage of the Class A-CS1 and Class PS-1 Certificates will be
proportionally reduced upon the allocation of Appraisal Reduction Amounts
with respect to any component of such Classes based on the amount of such
reduction.
REALIZATION UPON MORTGAGE LOANS
Specially Serviced Mortgage Loans; Appraisals;
Extensions. Contemporaneously with the earliest of (i) the effective date of
any modification of the Mortgage Rate, principal balance or amortization
terms of any Mortgage Loan, any extension of the Maturity Date of a Mortgage
Loan or consent to the release of any Mortgaged Property or REO Property from
the lien of the related Mortgage, (ii) the occurrence of an Appraisal
Reduction Event, (iii) a default in the payment
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of a Balloon Payment, or (iv) the date on which the Special Servicer,
consistent with the Servicing Standard, requests an Updated Appraisal (as
defined below), the Servicer (after consultation with the Special Servicer)
will obtain an appraisal (or a letter update from an existing appraisal which
is less than three years old) of the Mortgaged Property from an independent
appraiser who is a member of the American Institute of Real Estate Appraisers
(an "Updated Appraisal") provided, that, the Servicer will not be required to
obtain an Updated Appraisal of any Mortgaged Property with respect to which
there exists an appraisal which is less than twelve months old.
Following a default on a Mortgage Loan at maturity, the Special Servicer
may either foreclose or elect to grant a one-year extension of the Specially
Serviced Mortgage Loan; provided that the Special Servicer may only extend
such Mortgage Loan if (i) immediately prior to the default on the Balloon
Payment the related borrower had made twelve consecutive Monthly Payments on
or prior to their Due Dates, (ii) the Special Servicer determines in its
reasonable judgment that such borrower has attempted in good faith to
refinance such Mortgage Loan or Mortgaged Property, (iii) the Special
Servicer determines that (A) extension of such Mortgage Loan is consistent
with the Servicing Standard and (B) extension of such Mortgage Loan is likely
to result in a recovery which on a net present value basis would be greater
than the recovery that would result from a foreclosure, (iv) such extension
requires that all cash flow on all related Mortgage Properties in excess of
amounts required to operate and maintain such Mortgaged Properties be applied
to payments of principal and interest on such Mortgage Loan and (v) the
Special Servicer terminates the related Manager unless the Special Servicer
determines that retaining such Manager is conducive to maintaining the value
of such Mortgaged Properties; provided, further, that, if, after notice to
all Certificateholders, holders of Certificates evidencing at least 66 2/3%
of the Voting Rights of each Class of Certificates entitled to vote direct
the Special Servicer not to extend, the Special Servicer will not extend;
provided, further, that, if the Special Servicer is not the Servicer and the
Servicer would not elect to extend, holders of Certificates evidencing
greater than (a) 50% of the aggregate Voting Rights of all Certificateholders
entitled to vote and (b) 66 2/3% of the aggregate Voting Rights of all
Certificateholders entitled to vote who respond to such notice, may direct
the Special Servicer not to extend. Notwithstanding the foregoing, the
Special Servicer may extend pursuant to the Instructions of the Directing
Holders (as described and defined below). The holders of the Class A-CS1 and
Class PS-1 Certificates will not be entitled to vote with respect to proposed
extensions of a Specially Serviced Mortgage Loan.
The Special Servicer may, after presenting a proposal to and consulting
with the Servicer (if the Special Servicer is not the Servicer), and taking
into account the LTV of a Specially Serviced Mortgage Loan as indicated in
the Updated Appraisal, grant subsequent one-year extensions of such Specially
Serviced Mortgage Loan if (i) the related borrower has made twelve
consecutive monthly payments in an amount equal to or greater than the
Minimum Defaulted Monthly Payments and (ii) the requirements set forth in
clauses (ii) -- (iv) of the preceding paragraph are satisfied; provided,
however, that, if, after notice to all Certificateholders, holders of
Certificates evidencing at least 66 2/3% of the aggregate Percentage
Interests of each Class of Certificates direct the Special Servicer not to
extend, the Special Servicer will not extend; provided, further, that, if the
Special Servicer is not the Servicer and the Servicer would not elect to
extend, holders of Certificates evidencing greater than (a) 50% of the
aggregate Voting Rights of all Certificateholders and (b) 66 2/3% of the
aggregate Voting Rights of all Certificateholders who respond to such notice,
may direct the Special Servicer not to extend. Notwithstanding the foregoing,
the Special Servicer may extend pursuant to the Instructions of the Directing
Holders. The Special Servicer will not agree to any extension of a Mortgage
Loan beyond two years prior to the Rated Final Distribution Date. If such
borrower fails to make a Minimum Defaulted Monthly Payment more than once
during an extension period, no further extensions will be granted (provided,
however, that the Special Servicer may grant such extension if the borrower
has been delinquent on no more than one such Minimum Defaulted Monthly
Payment within a 24-month period and the requirements set forth in clauses
(ii) through (iv) of the preceding paragraph are satisfied).
Any extension pursuant to the two preceding paragraphs will require
monthly payments in an amount equal to or greater than the Minimum Defaulted
Monthly Payment.
The "Minimum Defaulted Monthly Payment" with respect to any extension of a
Mortgage Loan that is delinquent in respect of its Balloon Payment, is equal
to (a) the principal portion of the Monthly Payment that would have been due
on such Mortgage Loan on the related Due Date based on the original
amortization schedule thereof (or, if there is no amortization schedule, the
principal portion of the constant Monthly Payment that would have been due),
assuming such Balloon Payment had not become due, after giving effect to any
modification, and (b) interest at the applicable Default Rate; provided,
however, that the Special Servicer may agree that the Minimum Defaulted
Monthly Payments may include interest at a rate lower than the related
Default Rate (but in no event lower than the related Mortgage Rate) (the
"Lower Rate") provided that if, after notice to all Certificateholders,
holders of Certificates evidencing at least 66 2/3% of the Voting
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Rights of each Class direct (or, in the event that the Special Servicer is
not the Servicer and the Servicer would not agree to the Lower Rate,
Certificateholders representing greater than (a) 50% of the aggregate Voting
Rights of all Certificateholders and (b) 66 2/3% of the aggregate Voting
Rights of all Certificateholders who respond to such notice) the Special
Servicer not to agree to permit payments to include interest at the Lower
Rate, the Special Servicer shall not agree to payments with interest at the
Lower Rate; provided, further, that if the Minimum Defaulted Monthly Payment
is to include interest at the Lower Rate, the Special Servicer may agree that
interest on such Mortgage Loan accrues at the Lower Rate; and provided that
if, after notice to all Certificateholders, holders of Certificates
evidencing at least 66 2/3% of the Voting Rights of each Class direct the
Special Servicer that such Mortgage Loan shall accrue interest at the related
Default Rate, then such Mortgage Loan will continue to accrue interest at the
Default Rate thereof and the excess of interest accrued on such Mortgage Loan
over the amount included in the Minimum Defaulted Monthly Payments (i.e.,
interest at the Lower Rate) will be added to the outstanding principal
balance of such Mortgage Loan. Notwithstanding the foregoing, if the
Directing Holders have given Instructions to the Special Servicer to extend,
the Special Servicer will be required to follow the Directing Holders'
Instructions with respect to interest so long as the Minimum Defaulted
Monthly Payment is at least equal to the Lower Rate.
The Special Servicer will only be permitted to extend pursuant to the
preceding paragraphs or pursuant to instructions from Directing Holders.
Under certain circumstances the Special Servicer may modify the terms of
Specially Serviced Mortgage Loans as described below under "--Modifications."
Defaulted Balloon Payments; Foreclosure Proceedings; Action of Directing
Holders. The Special Servicer may be given revocable instructions
("Instructions") to extend a Specially Serviced Mortgage Loan serviced by it
that has defaulted on the Balloon Payment (which extension will be restricted
to the actions that the Special Servicer could have otherwise taken with
respect to such Mortgage Loan except that (a) the actions of the Directing
Holders will not be subject to the rejection of the holders of the
Certificates and (b) the related borrower will not have had to make twelve
consecutive Monthly Payments on or prior to their Due Dates) by the holders
of a majority in Percentage Interest of the most subordinate Class of
Certificates then outstanding (determined as provided below) having an
aggregate initial Certificate Balance representing a minimum of 1.0% of the
aggregate initial Certificate Balances of all Classes of Certificates (or if
the Certificate Balance of such Class or Classes has been reduced to less
than 40% of the initial Certificate Balances thereof, the holders of such
Class or Classes together with the holders of the next most subordinate
Class) (the "Directing Holders") under the following circumstance: if the
Special Servicer has determined to commence foreclosure or acquisition
proceedings, the Special Servicer will notify the Trustee (who will, in turn,
notify the Directing Holders), the Servicer and the Depositor of its proposed
action. If the Special Servicer receives contrary Instructions within seven
days from the Directing Holders, the Special Servicer will delay such
proceedings, and the procedures described below shall apply to the servicing
of such Mortgage Loan. In the event that the Special Servicer does not
receive such Instructions within such seven-day period, the Special Servicer
may proceed with the foreclosure or acquisition. If the Directing Holders
revoke their Instructions to extend the Mortgage Loan, the Special Servicer
will service the Mortgage Loan without regard to such original Instructions;
provided, however, that the Directing Holders will be required to maintain
the Collateral Account (as described below) unless and until the Mortgage
Loan is no longer a Specially Serviced Mortgage Loan for nine consecutive
months or has been liquidated. For purposes of determining the Directing
Holders with respect to any Mortgage Loan, the Class A-1A, Class A-1B, Class
A-1C, Class A-1D, Class A-CS1 and Class PS-1 Certificates collectively, and
the Class B-7 and Class B-7H Certificates together, will, in each case, be
treated as one class.
Deposits by Directing Holders. If the Special Servicer receives
Instructions and the Servicer has not otherwise been required to obtain an
Updated Appraisal as described above, the Servicer (after consultation with
the Special Servicer) will obtain an Updated Appraisal as soon as reasonably
practicable to determine the fair market value of each related Mortgaged
Property, after accounting for the estimated liquidation and carrying costs
(the "Fair Market Value" of such Mortgaged Property). Within two Business
Days after the Special Servicer's receipt of Instructions, the Directing
Holders are required to deposit (in proportion to their respective Percentage
Interests) into a segregated account (the "Collateral Account") established
by the Servicer an amount equal to the lesser of (a) 125% of the Fair Market
Value of the related Mortgaged Property and (b) the outstanding principal
balance of the Mortgage Loan plus unreimbursed Advances (with interest
thereon) and unpaid accrued interest (the "Deposit"). If no Updated Appraisal
has yet been obtained, the amount of the Deposit will be determined based on
the Special Servicer's (or if the Special Servicer is a Directing Holder, the
Servicer's) estimate of the Fair Market Value of the Mortgaged Property, in
which case, upon the Special Servicer's receipt of such Updated Appraisal,
the Special Servicer (or if the Special Servicer is a Directing Holder, the
Servicer) will remit
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any excess deposit to the Directing Holders, or the Directing Holders will
deposit in the Collateral Account any shortfall, as the case may be. In the
event that the Directing Holders do not make the required deposit within two
business days of the Special Servicer's receipt of Instructions, the Special
Servicer will disregard such Instructions. The Directing Holders will be
deemed to have granted to the Special Servicer (or the Servicer, if
applicable) for the benefit of Certificateholders a first priority security
interest in the Collateral Account, as security for the obligations of the
Directing Holders.
If the Special Servicer is acting pursuant to Instructions, the Special
Servicer or the Servicer, as applicable, shall withdraw from the Collateral
Account and remit to the Servicer for deposit into the Collection Account on
or prior to the Business Day preceding each Servicer Remittance Date a sum
equal to the P&I Advances and Property Advances for the related Mortgage Loan
which in the absence of Instructions would be made by the Servicer (and the
obligation to make such advances shall not be subject to a non-recoverability
standard) and the Directing Holders shall, upon request therefor by the
Special Servicer (or if the Special Servicer is a Directing Holder, the
Servicer), deposit from their own funds into the Collateral Account the
amount of such P&I Advances or Property Advances. If the Directing Holders
fail to make such Deposit within one Business Day after receipt of the
Special Servicer's or Servicer's, as applicable, request, the Special
Servicer will no longer be required to follow such Instructions and will
specially service such Mortgage Loan as though no Instructions had been
given; provided, however, that the Directing Holders will be required to
maintain the Collateral Account unless and until the related Mortgage Loan is
no longer a Specially Serviced Mortgage Loan for nine consecutive months or
has been liquidated. The Special Servicer or Servicer, as applicable, will
invest amounts on deposit in the Collateral Account in Permitted Investments
upon direction by the Directing Holders. Directing Holders will be entitled
to reinvestment income as received, and will reimburse the Collateral Account
for any losses incurred.
Settlement. If a Balloon Loan or the related Mortgaged Property which is
subject to Instructions is liquidated or disposed of, the Servicer will
withdraw from the Collateral Account, and deposit into the Collection Account
as additional liquidation proceeds for distribution to Certificateholders in
accordance with the priorities described herein, the lesser of (a) the amount
by which 125% of the Fair Market Value (determined at the time of the
Deposit) exceeds the net sales proceeds, and (b) the amount by which the
outstanding principal balance of the related Mortgage Loan plus unreimbursed
Advances (with interest thereon) and unpaid accrued interest exceeds the net
sales proceeds, provided that in no event may such additional liquidation
proceeds exceed the unpaid principal balance, accrued and unpaid interest
(including Default Interest), unpaid advances made by the Servicer, Special
Servicer, Trustee or Fiscal Agent and interest thereon, and any expenses paid
by the Trust Fund with respect to such Mortgage Loan.
If the amount realized upon disposition of the Mortgage Loan or Mortgaged
Property exceeds 125% of the Fair Market Value, the Servicer shall deposit
the excess in the Collection Account to the extent not required by applicable
law to be paid to the related borrower. If the Mortgage Loan has not been
realized upon on or before the third anniversary of the Instructions (or such
earlier date so that the Trust Fund owns the Mortgaged Property for no more
than two years), the Directing Holders will be required to purchase the
Mortgage Loan for a purchase price equal to the Fair Market Value (determined
at the time of the Deposit). Amounts on deposit in the Collateral Account
will be applied toward the purchase price.
If at any time following the establishment of a Collateral Account and
prior to the disposition of a Specially Serviced Mortgage Loan or Mortgaged
Property, the Mortgaged Property suffers a hazard loss that results in the
Mortgaged Property not being rebuilt and payments to the Trustee are made
under the related hazard insurance policy, the Special Servicer or Servicer,
as applicable, will pay all amounts on deposit in the Collateral Account to
the Directing Holders. In addition, after amounts required to be deposited in
the Collection Account have been withdrawn from the Collateral Account, as
described above, following foreclosure, liquidation, disposition, purchase by
Directing Holders or, if the related Mortgage Loan is no longer a Specially
Serviced Mortgage Loan for nine consecutive months, any related remaining
amounts in the Collateral Account will be released to the Directing Holders.
No Advances. Until the disposition of the Specially Serviced Mortgage Loan
or Mortgaged Property, as to which Directing Holders have provided
Instructions, or the cure of such default, no P&I Advances will be made in
respect of amounts distributable to the Class of the Directing Holders in
respect of such Mortgage Loan.
Material Defaults; Foreclosure. Upon the occurrence of a material default
under a Specially Serviced Mortgage Loan, the Special Servicer may,
consistent with servicing standards, accelerate such Specially Serviced
Mortgage Loan and commence a foreclosure or other acquisition with respect to
the related Mortgaged Property or Properties, provided, that the Special
Servicer determines that such acceleration and foreclosure are more likely to
produce a greater recovery to Certificateholders on a present value basis
(discounting at the related Mortgage Rate) than would a waiver of such
default
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or an extension or modification in accordance with the provisions described
above or under "--Modifications." In connection with any foreclosure or other
acquisition as to which the Special Servicer is not required to act under
Instructions from the Directing Holders, the Servicer is required to pay the
costs and expenses in any such proceedings as an Advance unless the Servicer
determines, in its good faith judgment, that such Advance would constitute a
Nonrecoverable Advance. The Servicer will be entitled to reimbursement of
Advances (with interest at the Advance Rate) made as described in the
preceding sentence. If the Special Servicer is acting pursuant to
Instructions, the cost and expenses in any such proceeding will be required
to be paid by the Directing Certificateholders or the Special Servicer,
without reimbursement therefor by the Trust Fund.
Standards for Conduct Generally in Effecting Foreclosure or the Sale of
Defaulted Loans. In connection with any foreclosure or other acquisition, the
cost and expenses of any such proceeding shall be paid by the Special
Servicer as a Property Advance.
If the Special Servicer elects to proceed with a non-judicial foreclosure
in accordance with the laws of the state where the Mortgaged Property is
located, the Special Servicer shall not be required to pursue a deficiency
judgment against the related Mortgagor, if available, or any other liable
party if the laws of the state do not permit such a deficiency judgment after
a non-judicial foreclosure or if the Special Servicer determines, in its best
judgment, that the likely recovery if a deficiency judgment is obtained will
not be sufficient to warrant the cost, time, expense and/or exposure of
pursuing the deficiency judgment and such determination is evidenced by an
officers' certificate delivered to the Trustee.
Notwithstanding any provision to the contrary, the Special Servicer shall
not, on behalf of the Trust Fund, obtain title to a Mortgaged Property as a
result of or in lieu of foreclosure or otherwise, and shall not otherwise
acquire possession of, or take any other action with respect to, any
Mortgaged Property if, as a result of any such action, the Trustee, for the
Trust Fund or the holders of Certificates, would be considered to hold title
to, to be a "mortgagee-in-possession" of, or to be an "owner" or "operator"
of, such Mortgaged Property within the meaning of CERCLA or any comparable
law, unless the Special Servicer has previously determined, based on an
environmental assessment report prepared by an independent person who
regularly conducts environmental audits, that: (i) such Mortgaged Property is
in compliance with applicable environmental laws or, if not, after
consultation with an environmental consultant that it would be in the best
economic interest of the Trust Fund to take such actions as are necessary to
bring such Mortgaged Property in compliance therewith and (ii) there are no
circumstances present at such Mortgaged Property relating to the use,
management or disposal of any hazardous materials for which investigation,
testing, monitoring, containment, clean-up or remediation could be required
under any currently effective federal, state or local law or regulation, or
that, if any such hazardous materials are present for which such action could
be required, after consultation with an environmental consultant it would be
in the best economic interest of the Trust Fund to take such actions with
respect to the affected Mortgaged Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of
sale shall be issued to the Trustee, or to its nominee, on behalf of holders
of Certificates. Notwithstanding any such acquisition of title and
cancellation of the related Mortgage Loan, such Mortgage Loan shall be
considered to be an REO Mortgage Loan held in the Trust Fund until such time
as the related REO Property shall be sold by the Trust Fund and shall be
reduced only by collections net of expenses.
If the Trust Fund acquires a Mortgaged Property by foreclosure or
deed-in-lieu of foreclosure upon a default of a Mortgage Loan, the Pooling
and Servicing Agreement provides that the Trustee (or the Special Servicer,
on behalf of the Trustee), must administer such Mortgaged Property so that it
qualifies at all times as "foreclosure property" within the meaning of Code
Section 860G(a)(8). The Pooling and Servicing Agreement also requires that
any such Mortgaged Property be managed and operated by an "independent
contractor," within the meaning of applicable Treasury regulations, who
furnishes or renders services to the tenants of such Mortgaged Property.
Generally, the Trust REMICs will not be taxable on income received with
respect to the Mortgaged Property to the extent that it constitutes "rents
from real property," within the meaning of Code Section 856(c)(3)(A) and
Treasury regulations thereunder. "Rents from real property" do not include
the portion of any rental based on the net income or gain of any tenant or
sub-tenant. No determination has been made whether rent on any of the
Mortgaged Properties meets this requirement. "Rents from real property"
include charges for services customarily furnished or rendered in connection
with the rental of real property, whether or not the charges are separately
stated. Services furnished to the tenants of a particular building will be
considered as customary if, in the geographic market in which the building is
located, tenants in buildings which are of similar Class are customarily
provided with the service. No determination has been made whether the
services furnished to the tenants of the Mortgaged Properties are "customary"
within the meaning of applicable regulations. It is therefore
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possible that a portion of the rental income with respect to a Mortgaged
Property owned by the Trust Fund, presumably allocated based on the value of
any non-qualifying services, would not constitute "rents from real property."
In addition to the foregoing, any net income from a trade or business
operated or managed by an independent contractor on a Mortgaged Property
owned by the Lower-Tier REMIC, including but not limited to a hotel or
skilled nursing care business, will not constitute "rents from real
property." Any of the foregoing types of income may instead constitute "net
income from foreclosure property," which would be taxable to the Lower-Tier
REMIC at the highest marginal federal corporate rate (currently 35%) and may
also be subject to state or local taxes. Any such taxes would be chargeable
against the related income for purposes of determining the Net REO Proceeds
available for distribution to holders of Certificates. Under the Pooling and
Servicing Agreement, the Special Servicer is required to determine whether
the earning of such income taxable to the Lower-Tier REMIC would result in a
greater recovery to Certificateholders on a net after-tax basis than a
different method of operation of such property. See "Certain Federal Income
Tax Consequences -- Taxes That May Be Imposed on a REMIC -- Net Income from
Foreclosure Property."
If title to any Mortgaged Property is acquired by the Trust Fund, the
Special Servicer, pursuant to the Pooling and Servicing Agreement and on
behalf of the Trust Fund, will be required to sell the Mortgaged Property
within two years of acquisition, unless the Trustee receives (i) 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 REMICs or cause the Trust Fund to fail
to qualify as REMICs under the Code at any time that any Certificate is
outstanding or (ii) an extension from the Internal Revenue Service.
The limitations imposed by the Pooling and Servicing Agreement and the
REMIC provisions of the Code on the operations and ownership 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."
The Special Servicer may offer to sell to any person any Specially
Serviced Mortgage Loan or any REO Property, or may offer to purchase any
Specially Serviced Mortgage Loan or any REO Property (in each case at the
repurchase price set forth in the Pooling and Servicing Agreement, which
includes unpaid principal and interest thereon), if and when the Special
Servicer determines, consistent with the Servicing Standard set forth in the
Pooling and Servicing Agreement, that no satisfactory arrangements can be
made for collection of delinquent payments thereon and such a sale would be
in the best economic interests of the Trust Fund, but shall, in any event, so
offer to sell any REO Property no later than the time determined by the
Special Servicer to be sufficient to result in the sale of such REO Property
within the period specified in the Pooling and Servicing Agreement, including
extensions thereof. The Special Servicer shall give the Trustee not less than
ten days' prior written notice of its intention to sell any Specially
Serviced Mortgage Loan or REO Property, in which case the Special Servicer
shall accept the highest offer received from any person for any Specially
Serviced Mortgage Loan or any REO Property in an amount at least equal to the
Repurchase Price or, at its option, if it has received no offer at least
equal to the Repurchase Price therefor, purchase the Specially Serviced
Mortgage Loan or REO Property at such Repurchase Price.
In the absence of any such offer (or purchase by the Special Servicer),
the Special Servicer shall accept the highest offer received from any person
that is determined by the Special Servicer to be a fair price for such
Specially Serviced Mortgage Loan or REO Property, if the highest offeror is a
person not affiliated with the Special Servicer, the Servicer or the
Depositor or is determined to be a fair price by the Trustee (after
consultation with an independent appraiser if the highest offeror is an
interested party). Notwithstanding anything to the contrary herein, neither
the Trustee, in its individual capacity, nor any of its affiliates may make
an offer for or purchase any Specially Serviced Mortgage Loan or any REO
Property.
The Special Servicer shall not be obligated by either of the foregoing
paragraphs or otherwise to accept the highest offer if the Special Servicer
determines, in accordance with the Servicing Standard, that rejection of such
offer would be in the best interests of the holders of Certificates. In
addition, the Special Servicer may accept a lower offer if it determines, in
accordance with the Servicing Standard, that acceptance of such offer would
be in the best interests of the holders of Certificates (for example, if the
prospective buyer making the lower offer is more likely to perform its
obligations, or the terms offered by the prospective buyer making the lower
offer are more favorable), provided that the offeror is not a person
affiliated with the Special Servicer. The Special Servicer is required to use
its best efforts to sell all Specially Serviced Mortgage Loans and REO
Property prior to the Rated Final Distribution Date.
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MODIFICATIONS
The Special Servicer may, consistent with the Servicing Standard, agree to
any modification, waiver or amendment of any term of, forgive or defer
interest on and principal of, and/or add collateral for, any Mortgage Loan
with the consent of Certificateholders representing 100% of the Percentage
Interests of the most subordinate Class of Certificates then outstanding
determined as provided below, subject, however, to each of the following
limitations, conditions and restrictions: (i) a material default on such
Mortgage Loan has occurred or, in the Special Servicer's reasonable and good
faith judgment, a default in respect of payment on such Mortgage Loan is
reasonably foreseeable, and such modification, waiver, amendment or other
action is reasonably likely to produce a greater recovery to
Certificateholders on a present value basis (the relevant discounting of
anticipated collections that will be distributable to Certificateholders will
be done at the related Mortgage Rate), than would liquidation; (ii) the
Special Servicer may not extend the date on which any Balloon Payment is
scheduled to be due on any Specially Serviced Mortgage Loan except as
described under "Realization Upon Mortgage Loans"; (iii) no reduction of any
scheduled monthly payment of principal and/or interest on any Specially
Serviced Mortgage Loan may result in a debt service coverage ratio for such
Mortgage Loan of greater than 1.10 to 1, and the Special Servicer may only
agree to reductions lasting a period of no more than twelve months and, in
the aggregate, no more than three consecutive reductions of twelve months or
less each; (iv) the Special Servicer may not release or substitute collateral
or release mortgagors or guarantors except in accordance with the provisions
of the related Loan Documents; (v) the Special Servicer may not forgive an
aggregate amount of principal of the Mortgage Loans in excess of the
Certificate Balance of most the subordinate Class of Certificates then
outstanding minus the aggregate of the greater of (A) any Appraisal Reduction
Amounts and (B) Delinquency Reduction Amounts of each Mortgage Loan that, in
each case have not resulted in Realized Losses; (vi) the Special Servicer
will not permit any borrower to add any collateral unless the Special
Servicer has first determined in accordance with the Servicing Standard,
based upon an environmental assessment prepared by an independent person who
regularly conducts environmental assessments, at the expense of the borrower,
that such additional collateral is in compliance with applicable
environmental laws and regulations and that there are no circumstances or
conditions present with respect to such new collateral relating to the use,
management or disposal of any hazardous materials for which investigation,
testing, monitoring, containment, clean-up or remediation would be required
under any then applicable environmental laws and/or regulations; and (vii)
the Special Servicer may waive or reduce a Lock-out Period or any Prepayment
Premiums only if the commencement of a foreclosure proceeding with respect to
the related Mortgage Loan is imminent and the Special Servicer first receives
written notification from the Servicer that such action in the opinion of the
Servicer, consistent with the Servicing Standard and based solely upon
information furnished by the Special Servicer without independent
investigation of the Servicer thereof, is likely to produce a greater
recovery, on a present value basis, than would a foreclosure. For purposes of
obtaining the consent of the most subordinate Class of Certificates
outstanding to any modification described above, (i) the Class A-1A, Class
A-1B, Class A-1C, Class A-1D, Class A-CS1, and Class PS-1 Certificates
collectively and (ii) the Class B-7 and Class B-7H Certificates together,
will, in each case, be treated as one class. For purposes of determining the
amount of principal which the Special Servicer may forgive pursuant to clause
(vi) above, the most subordinate Class will include the next subordinate
Class (determined as provided in the preceding sentence) provided that
Certificateholders evidencing 100% of the Percentage Interests of such Class
consent to such forgiveness. Notwithstanding the foregoing, the Special
Servicer will not be required to oppose the confirmation of a plan in any
bankruptcy or similar proceeding involving a borrower if in its reasonable
and good faith judgment such opposition would not ultimately prevent the
confirmation of such plan or one substantially similar.
Any payment of interest, which is deferred as described herein will not,
for purposes, including, without limitation, calculating monthly
distributions to Certificateholders, be added to the unpaid principal balance
of the related Mortgage Loan, notwithstanding that the terms of such Mortgage
Loan so permit or that such interest may actually be capitalized.
Following the execution of any modification, waiver or amendment agreed to
by the Special Servicer pursuant to clause (i) above, the Special Servicer
must deliver to the Trustee an officer's certificate setting forth in
reasonable detail the basis of the determination made by it pursuant to
clause (i) above.
Except as otherwise provided above under "Realization Upon Mortgage Loans"
and "Modifications," the Special Servicer or the Servicer may not modify any
term of a Mortgage Loan unless such modification (i) would not be
"significant" as such term is defined in Code Section 1001 or Treasury
Regulation Section 1.860G-2(b)(3) and (ii) would be in accordance with the
servicing standard set forth in the Pooling and Servicing Agreement. The
Pooling and Servicing Agreement will require the Servicer or Special
Servicer, as applicable, to provide copies of any modifications or extensions
to each Rating Agency.
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In the event that the Special Servicer is unable to obtain consent from
100% of the Percentage Interests of the most subordinate Class of
Certificates, the Special Servicer will continue to retain the options
described under "Realization Upon Mortgage Loans" including foreclosure or
extension.
TERMINATION
The obligations created by the Pooling and Servicing Agreement for the
Certificates will terminate upon the payment to Certificateholders of all
amounts held in the Collection Account or Distribution Account to be paid to
them pursuant to the Pooling and Servicing Agreement following the later to
occur of (i) the receipt or collection of the last payment due on any
Mortgage Loan included in the Trust Fund or (ii) the liquidation or
disposition of the last asset held by the Trust Fund. In no event, however,
will the trust created by the Pooling and Servicing Agreement continue beyond
the expiration of twenty-one years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the United Kingdom, living on the date hereof. Written notice of termination
of the Pooling and Servicing Agreement will be given to each
Certificateholder by the Trustee, 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.
OPTIONAL TERMINATION
The Depositor or the Servicer and, if neither the Depositor nor the
Servicer exercises its option, the holders of the Class LR Certificates
representing greater than 50% of the Percentage Interest of the Class LR
Certificates will have the option to purchase all of the Mortgage Loans and
all property acquired in respect of any Mortgage Loan remaining in the Trust
Fund, and thereby effect termination of the Trust Fund and early retirement
of the then outstanding Certificates, on any Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans remaining in the
Trust Fund is less than 1% of the aggregate principal balance of such
Mortgage Loans as of the Cut-off Date. The purchase price payable upon the
exercise of such option on such a Distribution Date will be an amount equal
to the greater of (i) the sum of (A) 100% of the outstanding principal
balance of each Mortgage Loan included in the Trust Fund as of the last day
of the month preceding such Distribution Date (less any P&I Advances
previously made on account of principal); (B) the fair market value of all
other property included in the Trust Fund as of the last day of the month
preceding such Distribution Date, as determined by an independent appraiser
as of a date not more than 30 days prior to the last day of the month
preceding such Distribution Date; (C) all unpaid interest accrued on such
principal balance of each such Mortgage Loan (including any Mortgage Loans as
to which title to the related Mortgaged Property has been acquired) at the
Mortgage Rate (plus the Excess Rate, to the extent applicable) to the last
day of the month preceding such Distribution Date (less any P&I Advances
previously made on account of principal); and (D) unreimbursed Advances (with
interest thereon) and unpaid Trust Fund fees and expenses and (ii) the
aggregate fair market value of the Mortgage Loans and all other property
acquired in respect of any Mortgage Loan in the Trust Fund, on the last day
of the month preceding such Distribution Date, as determined by an
independent appraiser acceptable to the Servicer, together with one month's
interest thereon at the Mortgage Rate. The holders of 100% of the Percentage
Interest in the Class LR Certificates may purchase any Mortgage Loan on its
Anticipated Repayment Date at a price equal to the sum of the following: (i)
100% of the outstanding principal balance of such Mortgage Loan on such
Anticipated Repayment Date (less any P&I Advances previously made on account
of principal); (ii) all unpaid interest accrued on such principal balance of
such Mortgage Loan at the Mortgage Rate thereof, to the last day of the
Interest Accrual Period preceding such Anticipated Repayment Date (less any
P&I Advances previously made on account of interest); (iii) the aggregate
amount of all unreimbursed Advances with respect to such Mortgage Loan, with
interest thereon at the Advance Rate, and all unpaid Special Servicing Fees,
Servicing Fees and any other compensation due to the Servicer or Special
Servicer, Trustee Fees and Trust Fund expenses; and (iv) the amount of any
liquidation expenses incurred by the Trust Fund in connection with such
purchase.
Notwithstanding the foregoing, such Mortgage Loan may not be purchased if
the fair market value of the Mortgage Loan is greater than 100% of the
outstanding principal balance of such Mortgage Loan.
The Holder of 100% of the most subordinate Class of Certificates (provided
that the Class 7H Certificates shall not be considered a Class for such
purposes) may purchase any Mortgage Loan on or after its Anticipated
Repayment Date under the same terms and conditions hereunder as in the case
of a purchase by the Holder of the Class LR Certificates if the Holder of the
Class LR Certificates either (i) notifies the Holder of the most subordinate
Class of Certificates that it will not purchase such Mortgage Loan or (ii)
does not, in fact, purchase such Mortgage Loan on its Anticipated Repayment
Date. See "Description of the Certificates -- Termination."
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THE TRUSTEE
The Trustee may resign at any time by giving written notice to the
Depositor, the Servicer and the Rating Agencies, provided that no such
resignation shall be effective until a successor has been appointed. Upon
such notice, the Servicer will appoint a successor trustee. If no successor
trustee is appointed within one month after the giving of such notice of
resignation, the resigning Trustee may petition the court for appointment of
a successor trustee.
The Servicer or the Depositor may remove the Trustee and the Fiscal Agent
if, among other things, the Trustee ceases to be eligible to continue as such
under the Pooling and Servicing Agreement or if at any time the Trustee
becomes incapable of acting, or is adjudged bankrupt or insolvent, or a
receiver of the Trustee or its property is appointed or any public officer
takes charge or control of the Trustee or of its property. The holders of
Certificates evidencing aggregate Voting Rights of at least 50% of all
Certificateholders may remove the Trustee and the Fiscal Agent upon written
notice to the Depositor, the Servicer, the Trustee and the Fiscal Agent. Any
resignation or removal of the Trustee and the Fiscal Agent and appointment of
a successor trustee and, if such trustee is not rated at least "AA" by each
Rating Agency, fiscal agent, will not become effective until acceptance of
the appointment by the successor trustee and, if necessary, fiscal agent.
Notwithstanding the foregoing, upon any termination of the Trustee and Fiscal
Agent under the Pooling and Servicing Agreement, the Trustee and Fiscal Agent
will continue to be entitled to receive all accrued and unpaid compensation
through the date of termination plus all Advances and interest thereon as
provided in the Pooling and Servicing Agreement. Any successor trustee must
have a combined capital and surplus of at least $50,000,000 and such
appointment must not result in the downgrade, qualification or withdrawal of
the then-current ratings assigned to the Certificates, as evidenced in
writing by the Rating Agencies.
Pursuant to the Pooling and Servicing Agreement, the Trustee will be
entitled to withdraw from the Distribution Account a monthly fee (the
"Trustee Fee"), which constitutes a portion of the Servicing Fee.
The Trust Fund will indemnify the Trustee and the Fiscal Agent against any
and all losses, liabilities, damages, claims or unanticipated expenses
(including reasonable attorneys' fees) arising in respect of the Pooling and
Servicing Agreement or the Certificates other than those resulting from the
negligence, bad faith or willful misconduct of the Trustee or the Fiscal
Agent, as applicable. Neither the Trustee nor the Fiscal Agent will be
required to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties under the Pooling and
Servicing Agreement, or in the exercise of any of its rights or powers, if in
the Trustee's or the Fiscal Agent's opinion, as applicable, the repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it. Each of the Servicer, the Special Servicer, the
Depositor, the Paying Agent, the Certificate Registrar and the Custodian will
indemnify the Trustee, the Fiscal Agent, and certain related parties for
similar losses incurred related to the willful misconduct, bad faith, fraud
and/or negligence in the performance of each such party's respective duties
under the Pooling and Servicing Agreement or by reason of reckless disregard
of its obligations and duties under the Pooling and Servicing Agreement.
At any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust Fund or property securing the
same is located, the Depositor and the Trustee acting jointly will have the
power to appoint one or more persons or entities approved by the Trustee to
act (at the expense of the Trustee) 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 co-trustee or separate trustee
such powers, duties, obligations, rights and trusts as the Depositor and the
Trustee may consider necessary or desirable. Except as required by applicable
law, the appointment of a co-trustee or separate trustee will not relieve the
Trustee of its responsibilities, obligations and liabilities under the
Pooling and Servicing Agreement.
DUTIES OF THE TRUSTEE
The Trustee (except for the information under the first paragraph of
"--The Trustee") and Servicer (except for the information under "--The
Servicer") will make no representation as to the validity or sufficiency of
the Pooling and Servicing Agreement, the Certificates or the Mortgage Loans,
this Prospectus or related documents. The Trustee will not be accountable for
the use or application by the Depositor, the Servicer or the Special Servicer
of any Certificates issued to it or of the proceeds of such Certificates, or
for the use of or application of any funds paid to the Depositor, the
Servicer or the Special Servicer in respect of the assignment of the Mortgage
Loans to the Trust Fund, or any funds deposited in or withdrawn from the Lock
Box Accounts, Cash Collateral Accounts, Reserve Accounts, Collection Account,
Excess Interest Distribution Account, Interest Reserve Account and Default
Interest Distribution Account or any other account maintained by or on behalf
of the Servicer or Special Servicer, nor will the Trustee be required to
perform, or be responsible for the manner of performance of, any of the
obligations of the Servicer or Special Servicer under the Pooling and
Servicing Agreement.
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In the event that the Servicer fails to make a required Advance, the
Trustee will make such Advance, provided that the Trustee shall not be
obligated to make any Advance it deems to be nonrecoverable. The Trustee
shall be entitled to rely conclusively on any determination by the Servicer
or the Special Servicer that an Advance, if made, would not be recoverable.
The Trustee will be entitled to reimbursement for each Advance, with
interest, made by it in the same manner and to same extent as the Servicer or
the Special Servicer.
If no Event of Default has occurred, and after the curing of all Events of
Default which may have occurred, the Trustee is required to perform only
those duties specifically required under the Pooling and Servicing Agreement.
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 on their face to the
requirements of the Pooling and Servicing Agreement.
DUTIES OF THE FISCAL AGENT
The Fiscal Agent will make no representation as to the validity or
sufficiency of the Pooling and Servicing Agreement, the Certificates, the
Mortgage Loan, this Prospectus (except for the information above, see "--The
Fiscal Agent") or related documents. The duties and obligations of the Fiscal
Agent consist only of making Advances as described below and in "--Advances"
above; the Fiscal Agent shall not be liable except for the performance of
such duties and obligations.
In the event that the Servicer and the Trustee fail to make a required
Advance, the Fiscal Agent will make such Advance, provided that the Fiscal
Agent will not be obligated to make any Advance that it deems to be
nonrecoverable. The Fiscal Agent shall be entitled to rely conclusively on
any determination by the Servicer or the Trustee, as applicable, that an
Advance, if made, would not be recoverable. The Fiscal Agent will be entitled
to reimbursement for each Advance made by it in the same manner and to the
same extent as the Trustee and the Servicer.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Pursuant to the Pooling and Servicing Agreement, the Servicer will be
entitled to withdraw monthly from the Collection Account its portion of the
Servicing Fee. The monthly servicing fee (the "Servicing Fee") for any
Distribution Date is an amount per Interest Accrual Period equal to the
product of (i) a per annum rate of 0.05% (the "Servicing Fee Rate") and (ii)
the Stated Principal Balance of such Mortgage Loan as of the Due Date and
includes the compensation payable to the Servicer and the Trustee Fee. The
Servicer's portion of the Servicing Fee relating to each Mortgage Loan will
be retained by the Servicer from payments and collections (including
insurance proceeds, condemnation proceeds and liquidation proceeds) in
respect of such Mortgage Loan. The Servicer will also be entitled to retain
as additional servicing compensation (together with the Servicer's portion of
the Servicing Fee, "Servicing Compensation") (i) all investment income earned
on amounts on deposit in the Collection Account and certain Reserve Accounts
(to the extent consistent with the related Mortgage Loan) and (ii) to the
extent permitted by applicable law and the related Mortgage Loans, any late
payment charges, one-half of any loan modification or extension fees (payable
in connection with a modification for which review by the Servicer is
required), loan service transaction fees, beneficiary statement changes, or
similar items (but not including Prepayment Premiums). If a review by the
Servicer is not required, the Special Servicer will be entitled to the full
amount of any modification or extension fees.
If the Servicer accepts a voluntary prepayment on a Mortgage Loan after
the related Lock-out Period with respect to such loan which results in a
Prepayment Interest Shortfall, the Servicer will be obligated to reduce its
Servicing Compensation as provided above under "Description of the
Subordinated Certificates -- Distributions -- Prepayment Interest
Shortfalls."
The Servicer will pay all expenses incurred in connection with its
responsibilities under the Pooling and Servicing Agreement (subject to
reimbursement as described herein), including all fees of any subservicers
retained by it. The Trustee will withdraw monthly from the Distribution
Account the portion of the Servicing Fee representing the Trustee Fee.
SPECIAL SERVICING
AMI will initially be appointed as Special Servicer to, among other
things, oversee the resolution of non-performing Mortgage Loans and act as
disposition manager of REO Properties. The Pooling and Servicing Agreement
will provide that more than one Special Servicer may be appointed, but only
one Special Servicer may specially service any Mortgage Loan.
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The Pooling and Servicing Agreement provides that holders of Certificates
evidencing greater than 50% of the Percentage Interests of the most
subordinate Class of Certificates then outstanding (provided, however, that
for purposes of determining the most subordinate Class, the Class A-1A, Class
A-1B, Class A-1C, Class A-1D, Class A-CS1 and Class PS-1 Certificates
collectively, and the Class B-7 and Class B-7H Certificates together, will,
in each case, be treated as one Class) may replace the Special Servicer,
provided that each Rating Agency confirms to the Trustee in writing that such
replacement, in and of itself, will not cause a qualification, withdrawal or
downgrading of the then-current ratings assigned to any Class of
Certificates.
The duties of the Special Servicer relate to Specially Serviced Mortgage
Loans and to any REO Property. The Pooling and Servicing Agreement will
define a "Specially Serviced Mortgage Loan" to include any Mortgage Loan with
respect to which: (i) the related borrower has not made two consecutive
Monthly Payments (and has not cured at least one such delinquency by the next
due date under the related Mortgage Loan) or (ii) the Servicer, the Trustee
and/or the Fiscal Agent has made four consecutive P&I Advances (regardless of
whether such P&I Advances have been reimbursed); (iii) the borrower has
expressed to the Servicer an inability to pay or a hardship in paying the
Mortgage Loan in accordance with its terms; (iv) the Servicer has received
notice that the borrower has become the subject of any bankruptcy, insolvency
or similar proceeding, admitted in writing the inability to pay its debts as
they come due or made an assignment for the benefit of creditors; (v) the
Servicer has received notice of a foreclosure or threatened foreclosure of
any lien on the Mortgaged Property securing the Mortgage Loan; (vi) a default
of which the Servicer has notice (other than a failure by the borrower to pay
principal or interest) and which materially and adversely affects the
interests of the Certificateholders has occurred and remained unremedied for
the applicable grace period specified in the Mortgage Loan (or, if no grace
period is specified, 60 days); provided, that a default requiring a Property
Advance will be deemed to materially and adversely affect the interests of
Certificateholders; (vii) the Special Servicer proposes to commence
foreclosure or other workout arrangements; or (viii) such borrower has failed
to make a Balloon Payment as and when due; provided, however, that a Mortgage
Loan will cease to be a Specially Serviced Mortgage Loan (i) with respect to
the circumstances described in clauses (i), (ii), and (viii) above, when the
borrower thereunder has brought the Mortgage Loan current (or, with respect
to the circumstances described in clause (viii), pursuant to a work-out
implemented by the Special Servicer) and thereafter made three consecutive
full and timely monthly payments, including pursuant to any workout of the
Mortgage Loan, (ii) with respect to the circumstances described in clause
(iii), (iv), (v) and (vii) above, when such circumstances cease to exist in
the good faith judgment of the Servicer, or (iii) with respect to the
circumstances described in clause (vi) above, when such default is cured;
provided, in either case, that at that time no circumstance exists (as
described above) that would cause the Mortgage Loan to continue to be
characterized as a Specially Serviced Mortgage Loan.
Pursuant to the Pooling and Servicing Agreement, the Special Servicer will
be entitled to certain fees including a special servicing fee, payable with
respect to each Interest Accrual Period, equal to 1/12 of 0.50% of the Stated
Principal Balance of each related Specially Serviced Mortgage Loan (the
"Special Servicing Fee"). The Special Servicer will be entitled, in addition
to the Special Servicing Fee, to a "Principal Recovery Fee" with respect to
each Specially Serviced Mortgage Loan or REO Property which Principal
Recovery Fee will be in an amount equal to 1% of all amounts received in
respect thereof and allocable as a recovery of principal which will be
payable when the Mortgage Loan or REO Property is sold or liquidated or when
the Specially Serviced Mortgage Loan ceases to be a Specially Serviced
Mortgage Loan. However, no Principal Recovery Fee will be payable in
connection with, or out of Liquidation Proceeds resulting from, the purchase
of any Specially Serviced Mortgage Loan or REO Property (i) by the Mortgage
Loan Seller or Bloomfield as described herein under "The Pooling and
Servicing Agreement -- Representations and Warranties; Repurchase"; (ii) by
the Servicer, the Depositor or the Certificateholders as described herein
under "The Pooling and Servicing Agreement -- Optional Termination" or (iii)
in certain other limited circumstances. In addition, the Special Servicer
will be entitled to receive (i) any (or, if the Servicer's consent is
required, 50% of) assumption fees and certain loan modification fees related
to the Specially Serviced Mortgage Loans and (ii) any income earned on
deposits in the REO Accounts. Notwithstanding the foregoing, in the event
that the Special Servicer is, or is an affiliate of, the holder of
Certificates representing greater than 50% of the Percentage Interests of the
most subordinate Class of Certificates then outstanding (determined as
provided below), the Special Servicer will be entitled to receive a Special
Servicing Fee for each Interest Accrual Period equal to 1/12 of 0.25% of the
Stated Principal Balance of each Specially Serviced Mortgage Loan and
one-half of the Principal Recovery Fee it would otherwise be entitled to.
For purposes of determining whether the Special Servicer is entitled to
full compensation, with respect to any Mortgage Loan, the Class A-1A, Class
A-1B, Class A-1C, Class A-1D, Class A-CS1 and Class PS-1 Certificates
collectively, and the Class B-7 and Class B-7H Certificates together, will in
each case, be treated as one class.
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SERVICER AND SPECIAL SERVICER PERMITTED TO BUY CERTIFICATES
The Servicer and Special Servicer will be permitted to purchase any Class
of Certificates. Such a purchase by the Servicer or Special Servicer could
cause a conflict relating to the Servicer's or Special Servicer's duties
pursuant to the Pooling and Servicing Agreement and the Servicer's or Special
Servicer's interest as a holder of Certificates, especially to the extent
that certain actions or events have a disproportionate effect on one or more
Classes of Certificates. The Pooling and Servicing Agreement provides that
the Servicer or Special Servicer shall administer the Mortgage Loans in
accordance with the servicing standard set forth therein without regard to
ownership of any Certificate by the Servicer or Special Servicer or any
affiliate thereof.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
TRUSTEE REPORTS
Based on information provided in monthly reports prepared by the Servicer
and the Special Servicer and delivered to the Trustee, the Trustee will
prepare and forward on each Distribution Date to each Certificateholder, the
Depositor, the Servicer, the Special Servicer, each Underwriter, each Rating
Agency and, if requested, any potential investors in the Certificates:
1. A statement (a "Distribution Date Statement") setting forth, among
other things: (i) the amount of distributions, if any, made on such
Distribution Date to the Holders of each Class of Certificates applied to
reduce the respective Certificate Balances thereof; (ii) the amount of
distributions, if any, made on such Distribution Date to Holders of each
Class of Certificates allocable to (A) the Interest Accrual Amount less
any Prepayment Interest Shortfalls (not absorbed by the Servicer) and/or
(B) Prepayment Premiums and/or Reduction Interest Distribution Amounts;
(iii) the number of outstanding Mortgage Loans, the aggregate unpaid
principal balance of the Mortgage Loans at the close of business on the
related Due Date; (iv) the number and aggregate unpaid principal balance
of Mortgage Loans (A) delinquent one Collection Period, (B) delinquent two
Collection Periods, (C) delinquent three or more Collection Periods, (D)
that are Specially Serviced Mortgage Loans that are not delinquent, or (E)
as to which foreclosure proceedings have been commenced; (v) with respect
to any Mortgage Loan as to which the related Mortgaged Property became a
REO Property during the preceding calendar month, the city, state,
property type, latest DSCR, the Stated Principal Balance and unpaid
principal balance of such Mortgage Loan as of the date such Mortgaged
Property became an REO Property; (vi) as to any Mortgage Loan repurchased
by the Mortgage Loan Seller or otherwise liquidated or disposed of during
the related Collection Period, the loan number thereof and the amount of
proceeds of any repurchase of a Mortgage Loan, Liquidation Proceeds and/or
other amounts, if any, received thereon during the related Collection
Period and the portion thereof included in the Available Funds for such
Distribution Date; (vii) with respect to any REO Property included in the
Trust Fund as of the close of business on the related Due Date, the loan
number of the related Mortgage Loan, the value of such REO Property based
on the most recent appraisal or valuation and the amount of any other
income collected with respect to any REO Property net of related expenses
and other amounts, if any, received on such REO Property during the
related Collection Period and the portion thereof included in the
Available Funds for such Distribution Date; (viii) with respect to any REO
Property sold or otherwise disposed of during the related Collection
Period, (A) the loan number of the related Mortgage Loan, (B) the Realized
Losses attributable to such Mortgage Loan, (C) the amount of sale proceeds
and other amounts, if any, received in respect of such REO Property during
the related Collection Period and the portion thereof included in the
Available Funds for such Distribution Date and (D) the date of the related
determination by the Special Servicer that it has recovered all payments
which it expects to be finally recoverable (the "Final Recovery
Determination"); (ix) the aggregate Certificate Balance of each Class of
Certificates before and after giving effect to the distributions made on
such Distribution Date, separately identifying any reduction in the
aggregate Certificate Balance of each such Class due to Realized Losses
and/or Trust Fund expenses; (x) the aggregate amount of Principal
Prepayments (other than Liquidation Proceeds and Insurance Proceeds) made
during the related Collection Period and the aggregate amount of any
Prepayment Interest Shortfalls (not absorbed by the Servicer) for such
Distribution Date; (xi) the Pass-Through Rate and the Reduction Interest
Pass-Through Rate, if any, applicable to each Class of Certificates for
such Distribution Date; (xii) the aggregate amount of the Servicing Fee,
Special Servicing Fee, Principal Recovery Fee and any other servicing or
special servicing compensation retained by or paid to the Servicer and the
Special Servicer during the related Collection Period; (xiii) the amount
of Realized Losses, Trust Fund expenses, Interest Shortfalls and Reduction
Interest Shortfalls, if any, incurred with respect to the
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Mortgage Loans during the related Collection Period and in the aggregate
for all prior Collection Periods (except to the extent reimbursed or
paid); (xiv) the aggregate amount of Property Advances and P&I Advances
(net of reimbursed Advances) outstanding which have been made by the
Servicer, the Special Servicer, the Trustee and the Fiscal Agent; (xv) the
amount of any Appraisal Reduction Amounts allocated during the related
Collection Period on a loan-by-loan basis and the total Appraisal
Reduction Amounts as of such Distribution Date on a loan-by-loan basis. In
the case of information furnished pursuant to subclauses (i), (ii) and
(ix) above, the amounts shall be expressed as a dollar amount in the
aggregate for all Certificates of each applicable Class and per single
Certificate of a specified minimum denomination.
2. A report containing information regarding the Mortgage Loans as of the
end of the related Collection Period, which report shall contain
substantially the categories of information regarding the Mortgage Loans
set forth in this Prospectus in the tables under the caption "Description
of the Mortgage Pool -- Certain Terms and Conditions of the Mortgage
Loans" (calculated, where applicable, on the basis of the most recent
relevant information provided by the borrowers to the Servicer or the
Special Servicer and by the Servicer or the Special Servicer, as the case
may be, to the Trustee) which shall also include a loan-by-loan listing
(in descending balance order) showing loan name, property type, location,
unpaid principal balance, Mortgage Rate, paid through date, maturity date,
net interest portion of the Monthly Payment, principal portion of the
Monthly Payment and any Prepayment Premiums received. Such report will be
made available electronically; provided, however, the Trustee will provide
Certificateholder with a written copy of such report upon request.
Certain information made available in the Distribution Date Statements
referred to in item (1) above may be obtained by calling LaSalle National
Bank's ASAP System at (312) 904-2200 and requesting statement number 244 or
such other mechanism as the Trustee may have in place from time-to-time.
SERVICER REPORTS
The Servicer is required to deliver to the Trustee prior to each
Distribution Date, and the Trustee is to deliver to each Certificateholder,
the Depositor, each Underwriter, each Rating Agency and, if requested, any
potential investor in the Certificates, on each Distribution Date, the
following six reports:
(a) A "Comparative Financial Status Report" substantially containing the
content in Annex C-1 attached hereto, setting forth, to the extent such
information is provided by the related borrowers, among other things, the
occupancy, revenue, net operating income and DSCR for the Mortgage Loans
with the greatest outstanding principal balance as of the current date of
the latest information available immediately preceding the preparation of
such report for each of the following periods: (i) the most current
available year-to-date, (ii) the previous two full fiscal years, and (iii)
the "base year" (representing the original underwriting information used
as of the Cut-off Date).
(b) A "Delinquent Loan Status Report" substantially containing the
content in Annex C-2 attached hereto, setting forth, among other things,
those Mortgage Loans which, as of the close of business on the Due Date
immediately preceding the preparation of such report, were delinquent one
Collection Period, delinquent two Collection Periods, delinquent three or
more Collection Periods, current but specially serviced, or in foreclosure
but not REO Property.
(c) An "Historical Loan Modification Report" substantially containing the
content in Annex C-3 attached hereto, setting forth, among other things,
those Mortgage Loans which, as of the close of business on the Due Date
immediately preceding the preparation of such report, have been modified
pursuant to the Pooling and Servicing Agreement (i) during the related
Collection Period and (ii) since the Cut-off Date, showing the original
and the revised terms thereof.
(d) An "Historical Loss Estimate Report" substantially containing the
content in Annex C-4 attached hereto, setting forth, among other things,
as of the close of business on the Due Date immediately preceding the
preparation of such report, (i) the aggregate amount of liquidation
proceeds and liquidation expenses, both for the current period and
historically, and (ii) the amount of Realized Losses occurring during the
related Collection Period, set forth on a Mortgage Loan-by-Mortgage Loan
basis.
(e) An "REO Status Report" substantially containing the content in Annex
C-5 attached hereto, setting forth, among other things, with respect to
each REO Property that was included in the Trust Fund as of the close of
business on the Due Date immediately preceding the preparation of such
report, (i) the acquisition date of such REO Property,
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(ii) the amount of income collected with respect to any REO Property net
of related expenses and other amounts, if any, received on such REO
Property during the related Collection Period and (iii) the value of the
REO Property based on the most recent appraisal or other valuation thereof
available to the Servicer as of such date of determination (including any
prepared internally by the Special Servicer).
(f) A "Watch List" substantially containing the content in Annex C-6
attached hereto, setting forth, among other things, any Mortgage Loan that
is in jeopardy of becoming a Specially Serviced Mortgage Loan.
The information that pertains to Specially Serviced Mortgage Loans and REO
Properties reflected in such reports shall be based solely upon the reports
delivered by the Special Servicer to the Servicer at least one business day
prior to the Servicer Remittance Date. Absent manifest error, (i) none of the
Servicer, the Special Servicer or the Trustee shall be responsible for the
accuracy or completeness of any information supplied to it by a borrower or
third party that is included in any reports, statements, materials or
information prepared or provided by the Servicer, the Special Servicer or the
Trustee, as applicable, (ii) the Trustee shall not be responsible for the
accuracy or completeness of any information supplied to it by the Servicer or
Special Servicer that is included in any reports, statements, materials or
information prepared or provided by the Servicer or Special Servicer, as
applicable, and (iii) the Trustee shall be entitled to conclusively rely upon
the Servicer's reports and the Special Servicer's reports without any duty or
obligation to recompute, verify or re-evaluate any of the amounts or other
information stated therein.
The Servicer is also required to deliver to the Trustee the following
materials:
(a) Annually, on or before June 30 of each year, commencing with June 30,
1997, with respect to each Mortgaged Property and REO Property, an
"Operating Statement Analysis" substantially containing the content in
Annex C-7 attached hereto as of the end of the preceding fiscal year,
together with copies of the operating statements and rent rolls (but only
to the extent the related borrower is required by the Mortgage to deliver,
or otherwise agrees to provide such information) for such Mortgaged
Property or REO Property as of the end of the preceding calendar year. The
Servicer (or the Special Servicer in the case of Specially Serviced
Mortgage Loans and REO Properties) is required to use its best reasonable
efforts to obtain said annual operating statements and rent rolls.
(b) Within thirty days of receipt by the Servicer (or within ten days of
receipt by the Special Servicer with respect to any Specially Serviced
Mortgage Loan or REO Property) of annual operating statements, if any,
with respect to any Mortgaged Property or REO Property, an "NOI Adjustment
Worksheet" for such Mortgaged Property (with the annual operating
statements attached thereto as an exhibit), presenting the computations
made in accordance with the methodology described in the Pooling and
Servicing Agreement to "normalize" the full year net operating income and
debt service coverage numbers used by the Servicer in the other reports
referenced above.
The Trustee is to deliver a copy of each Operating Statement Analysis
report and NOI Adjustment Worksheet that it receives from the Servicer to the
Depositor, each Underwriter and each Rating Agency promptly after its receipt
thereof. Upon request, the Trustee will make such reports available to the
Certificateholders and the Special Servicer. Any Certificateholder and any
potential investor in the Certificates may obtain a copy of any NOI
Adjustment Worksheet for a Mortgaged Property or REO Property in the
possession of the Trustee upon request.
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee is required to send to each person who at any time
during the calendar year was a Certificateholder of record, a report
summarizing on an annual basis (if appropriate) the items provided to
Certificateholders in the monthly Distribution Date Statements and such other
information as may be required to enable such Certificateholders to prepare
their federal income tax returns. Such information is to include the amount
of original issue discount accrued on each Class of Certificate held by
persons other than holders exempted from the reporting requirements and
information regarding the expenses of the Trust Fund.
OTHER INFORMATION
The Pooling and Servicing Agreement requires that the Trustee make
available at its offices, during normal business hours, for review by any
Holder of a Certificate, the Depositor, the Special Servicer, the Servicer,
any Rating Agency, any potential investor in the Certificates or any other
Person to whom the Depositor believes such disclosure is appropriate,
originals or copies of, among other things, the following items (except to
the extent not permitted by applicable law or under any of the Mortgage Loan
documents): (i) the Pooling and Servicing Agreement and any amendments
thereto, (ii) all Distribution Date Statements delivered to holders of the
relevant Class of Offered Certificates since the Closing Date, (iii) all
annual officers' certificates and accountants' reports delivered by the
Servicer and Special Servicer to the Trustee
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since the Closing Date regarding compliance with the relevant agreements,
(iv) the most recent property inspection report prepared by or on behalf of
the Servicer or the Special Servicer with respect to each Mortgaged Property,
(v) the most recent annual operating statements, rent rolls (to the extent
such rent rolls have been made available by the related borrower) and retail
"sales information," if any, collected by or on behalf of the Servicer or the
Special Servicer with respect to each Mortgaged Property, (vi) any and all
modifications, waivers and amendments of the terms of a Mortgage Loan entered
into by the Servicer and/or the Special Servicer, and (vii) any and all
officers' certificates and other evidence delivered to or by the Trustee to
support the Servicer's, the Trustee's or the Fiscal Agent's, as the case may
be, determination that any Advance, if made, would not be recoverable and
(viii) any other materials provided to a requesting Certificateholder as
provided in the Pooling and Servicing Agreement in situations where such
requesting Certificateholder declined to enter into a confidentiality
agreement with the Servicer. Copies of any and all of the foregoing items
will be available from the Trustee upon request; however, the Trustee will be
permitted to require payment of a sum sufficient to cover the reasonable
costs and expenses of providing such copies.
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ERISA CONSIDERATIONS
Because the Subordinated Certificates are subordinate to one or more
Classes of Certificates, the purchase and holding of the Subordinated
Certificates by or on behalf of a Plan may result in "prohibited
transactions" within the meaning of ERISA, Section 4975 of the Code or any
Similar Law. Accordingly, each prospective transferee of a Subordinated
Certificate that is a Definitive Certificate will be required to (a) deliver
to the Depositor, the Certificate Registrar and the Trustee a representation
letter substantially in the form set forth as an exhibit to the Pooling and
Servicing Agreement stating that such transferee is not a Plan or a person
acting on behalf of or investing the assets of a Plan, other than an
insurance company investing the assets of its general account under
circumstances whereby the purchase and subsequent holding of the Subordinated
Certificate would be exempt from the prohibited transaction restrictions of
ERISA and the Code under Sections I and III of PTE 95-60, or (b) provide (i)
an opinion of counsel in form and substance satisfactory to the Certificate
Registrar that the purchase of the Subordinated Certificate will not result
in the assets of the Trust Fund being deemed to be "plan assets" and subject
to the prohibited transaction restrictions of ERISA, the Code or any Similar
Law and will not subject the Depositor, the Servicer, the Special Servicer,
the Trustee, or the Fiscal Agent to any obligation in addition to those
undertaken in the Pooling and Servicing Agreement and (ii) such other
opinions of counsel, officers' certificates and agreements as the Certificate
Registrar may require in connection with such transfer. The purchaser or
transferee of any interest in a Subordinated Certificate that is not a
Definitive Certificate will be deemed to have represented, by its ownership
thereof, that it is not a person described in clause (a) above. The
Subordinated Certificates will contain a legend describing such restrictions
on transfer and the Pooling and Servicing Agreement will provide that any
attempted or purported transfer in violation of these transfer restrictions
will be null and void.
The sale of Certificates to a Plan is in no respect a representation by
the Depositor or Underwriters that this investment meets all relevant legal
requirements with respect to investments by Plans generally or any particular
Plan, or that this investment is appropriate for Plans generally or any
particular Plan.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties
that are general in nature. Because such legal aspects are governed 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.
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, 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 deed to secure debt.
Under 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
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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. As used in this Prospectus, unless the context
otherwise requires, the term "mortgagee" means the lender and, in the case of
the deed of trust, the trustee thereunder in certain cases. 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 Sailor's Civil Relief Act of 1940) and, in some cases, in deed
of trust transactions, the directions of the beneficiary.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the mortgagor assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to the lender, while the mortgagor retains a revocable license to
collect the rents for so long as there is no unremedied default. If the
mortgagor defaults and such default is not remedied by the mortgagor within
the cure period, if any, 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. In most States, hotel and motel room rates are
considered accounts receivable under the Uniform Commercial Code ("UCC");
generally these rates are either assigned by the mortgagor, which remains
entitled to collect such rates absent a default, or pledged by the mortgagor,
as security for the loans. In general, the lender must file financing
statements in order to perfect its security interest in the rates and must
file continuation statements, generally every five years, to maintain
perfection of such security interest. Even if the lender's security interest
in room rates is perfected under the UCC, the lender will generally be
required to commence a foreclosure or otherwise take possession of the
property in order to collect the room rates after a default.
Even after a foreclosure, the potential rent payments from the property
may be less than the periodic payments that had been due under the mortgage.
For instance, the net income that would otherwise be generated from the
property may be less than the amount that would have been needed to service
the mortgage debt if the leases on the property are at below-market rents, or
as the result of excessive maintenance, repair or other obligations which a
lender succeeds to as landlord.
PERSONALTY
Certain types of Mortgaged Properties, such as hotels, motels and
industrial plants, are likely to derive a significant part of their value
from personal property which does not constitute "fixtures" under applicable
state real property law, and hence, would not be subject to the lien of a
mortgage. Such property is generally pledged or assigned as security to the
lender under the UCC. In order to perfect its security interest therein, the
lender generally must file UCC financing statements and, to maintain
perfection of such security interest, file continuation statements generally
every five years.
INSTALLMENT CONTRACTS
The Mortgage Loans included in a Trust Fund may also consist of
Installment Contracts. Under an Installment Contract the seller (hereinafter
referred to in this Section as the "lender" retains legal title to the
property and enters into an agreement with the purchaser (hereinafter
referred to in this Section as the "borrower") for the payment of the
purchase price, plus interest, over the term of such contract. Only after
full performance by the borrower of the contract is the lender obligated to
convey title to the real estate to the borrower. As with mortgage or deed of
trust financing, during the effective period of the Installment Contract, the
borrower is generally responsible for maintaining the property in good
condition and for paying real estate taxes, assessments and hazard insurance
premiums associated with the property.
The method of enforcing the rights of the lender under an Installment
Contract varies on a state-by-state basis depending upon the extent to which
state courts are willing, or able pursuant to state statute, to enforce the
contract strictly according to its terms. The terms of Installment Contracts
generally provide that upon a default by the borrower, the borrower loses his
or her right to occupy the property, the entire indebtedness is accelerated,
and the buyer's equitable
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interest in the property is forfeited. The lender in such a situation does
not have to foreclose in order to obtain title to the property, although in
some cases a quiet title action is in order if the borrower has filed the
Installment Contract in local land records and an ejectment action may be
necessary to recover possession. In a few states, particularly in cases of
borrower default during the early years of an Installment Contract, the
courts will permit ejectment of the buyer and a forfeiture of his or her
interest in the property. However, most state legislatures have enacted
provisions by analogy to mortgage law protecting borrowers under Installment
Contracts from the harsh consequences of forfeiture. Under such statutes, a
judicial or nonjudicial foreclosure may be required, the lender may be
required to give notice of default and the borrower may be granted some grace
period during which the contract may be reinstated upon full payment of the
default amount and the borrower may have a post-foreclosure statutory
redemption right. In other states, courts in equity may permit a borrower
with significant investment in the property under an Installment Contract for
the sale of real estate to share in the proceeds of sale of the property
after the indebtedness is repaid or may otherwise refuse to enforce the
forfeiture clause. Nevertheless, generally speaking, the lender's procedures
for obtaining possession and clear title under an Installment Contract for
the sale of real estate in a given state are simpler and less time-consuming
and costly than are the procedures for foreclosing and obtaining clear title
to a mortgaged property.
SUBORDINATE FINANCING
Where the mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the
mortgagor may have difficulty servicing and repaying multiple loans. In
addition, if the junior loan permits recourse to the mortgagor (as junior
loans often do) and the senior loan does not, a mortgagor may be more likely
to repay sums due on the junior loan than those on the senior loan. Second,
acts of the senior lender that prejudice the junior lender or impair the
junior lender's security may create a superior equity in favor of the junior
lender. For example, if the mortgagor and the senior lender agree to an
increase in the principal amount of or the interest rate payable on the
senior loan, the senior lender may lose its priority to the extent 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.
FORECLOSURE
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 and, by reason thereof, the
indebtedness has been accelerated, 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 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 a subordinate
interest of record in the real property and all parties in possession of the
property, under leases or otherwise, whose interests are subordinate to the
mortgage. Delays in completion of the foreclosure may occasionally result
from difficulties in locating defendants. When the lender's right to
foreclosure is contested, the legal proceedings can be costly and
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
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.
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
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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.
LIMITATIONS ON LENDER'S RIGHTS
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 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.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses are raised or counterclaims are interposed, and
sometimes require several years to complete.
Also, 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. Potential buyers may be reluctant to
purchase property at a foreclosure sale as a result of the 1980 decision of
the United States Court of Appeals for the Fifth Circuit in Durrett v.
Washington National Insurance Company and other decisions that have followed
its reasoning. The court in Durrett held that even a non-collusive, regularly
conducted foreclosure sale was a fraudulent transfer under the federal
Bankruptcy Code, as amended from time to time (11 U.S.C.) and, therefore,
could be rescinded in favor of the bankrupt's estate, if (i) the foreclosure
sale was held while the debtor was insolvent and not more than one year prior
to the filing of the bankruptcy petition and (ii) the price paid for the
foreclosed property did not represent "fair consideration" ("reasonably
equivalent value" under the Bankruptcy Code). Although the reasoning and
result of Durrett in respect of the Bankruptcy Code was rejected by the
United States Supreme Court in May 1994, the case could nonetheless be
persuasive to a court applying a state fraudulent conveyance law which has
provisions similar to those construed in Durrett. For these reasons, it is
common for the lender to purchase the mortgaged property for an amount equal
to the lesser of fair market value and the underlying debt and accrued and
unpaid interest plus the expenses of foreclosure. 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
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mortgaged property. For example, the lender will have the obligation to pay
debt service on any senior mortgages, 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. Frequently, the lender employs a third party
management company to manage and operate the property. The costs of operating
and maintaining a commercial or multifamily residential property may be
significant and may be greater than the income derived from that property.
The costs of management and operation of those mortgaged properties which are
hotels, motels or restaurants or nursing or convalescent homes or hospitals
may be particularly significant because of the expertise, knowledge and, with
respect to nursing or convalescent homes or hospitals, regulatory compliance,
required to run such operations and the effect which foreclosure and a change
in ownership may have on the public's and the industry's (including
franchisors') perception of the quality of such operations. 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. Furthermore, a
few states require that any environmental contamination at certain types of
properties be cleaned up before a property may be resold. In addition, a
lender may be responsible under federal or state law for the cost of cleaning
up a mortgaged property that is environmentally contaminated. See
"--Environmental Legislation." 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 which 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
generally applied first to the costs, fees and expenses of sale, to unpaid
real estate taxes and assessments 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 generally 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.
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Under the REMIC Regulations currently in effect, property acquired by
foreclosure generally must not be held for more than two years. The Pooling
and Servicing Agreement will permit foreclosed property to be held for more
than two years if the Trustee receives (i) an extension from the Internal
Revenue Service or (ii) an opinion of counsel to the effect that holding such
property for such period is permissible under the REMIC provisions of the
Code.
ANTI-DEFICIENCY LEGISLATION
Some or all of the Mortgage Loans may be nonrecourse loans, as to which
recourse may be had only against the specific property securing the related
Mortgage Loan and a personal money judgment may not be obtained against the
mortgagor. Even if a mortgage loan by its terms provides for recourse to the
mortgagor, some states impose prohibitions or limitations on such recourse.
For example, statutes in some states limit the right of the lender 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.
LEASEHOLD RISKS
Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold
mortgages are subject to certain risks not associated with mortgage loans
secured by the fee estate of the mortgagor. The most significant of these
risks is that the ground lease creating the leasehold estate could terminate,
leaving the leasehold mortgagee without its security. The ground lease may
terminate if, among other reasons, the ground lessee breaches or defaults in
its obligations under the ground lease or there is a bankruptcy of the ground
lessee or the ground lessor. This risk may be minimized if the ground lease
contains certain provisions protective of the mortgagee, but the ground
leases that secure Mortgage Loans may not contain some of these protective
provisions, and mortgages may not contain the other protections discussed in
the next paragraph. Protective ground lease provisions include the right of
the leasehold mortgagee to receive notices from the ground lessor of any
defaults by the mortgagor; the right to cure such defaults, with adequate
cure periods; if a default is not susceptible of cure by the leasehold
mortgagee, the right to acquire the leasehold estate through foreclosure or
otherwise; the ability of the ground lease to be assigned to and by the
leasehold mortgagee or purchaser at a foreclosure sale and for the
concomitant release of the ground lessee's liabilities thereunder; and the
right of the leasehold mortgagee to enter into a new ground lease with the
ground lessor on the same terms and conditions as the old ground lease in the
event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may
require that the ground lease or leasehold mortgage prohibit the ground
lessee from treating the ground lease as terminated in the event of the
ground lessor's bankruptcy and rejection of the ground lease by the trustee
for the debtor-ground lessor. As further protection, a leasehold mortgage may
provide for the assignment of the debtor-ground lessee's right to reject a
lease pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as
amended (11 U.S.C.) (the "Bankruptcy Code"), although the enforceability of
such clause has not been established. Without the protections described in
the foregoing paragraph, a leasehold mortgagee may lose the collateral
securing its leasehold mortgage. In addition, terms and conditions of a
leasehold mortgage are subject to the terms and conditions of the ground
lease. Although certain rights given to a ground lessee can be limited by the
terms of a leasehold mortgage, the rights of a ground lessee or a leasehold
mortgagee with respect to, among other things, insurance, casualty and
condemnation will be governed by the provisions of the ground lease.
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BANKRUPTCY LAWS
The Bankruptcy Code and related state laws may interfere with or affect
the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings)
are automatically stayed upon the filing of the bankruptcy petition, and,
usually, no interest or principal payments are made during the course of the
bankruptcy case. The delay and the consequences thereof caused by such
automatic stay can be significant. Also, under the Bankruptcy Code, the
filing of a petition in bankruptcy by or on behalf of a junior lienor may
stay the senior lender from taking action to foreclose out such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage secured
by property of the debtor may be modified under certain circumstances. The
outstanding amount of the loan secured by the real property may be reduced to
the then-current value of the property (with a corresponding partial
reduction of the amount of lender's security interest) pursuant to a
confirmed plan or lien avoidance proceeding, thus leaving the lender a
general unsecured creditor for the difference between such value and the
outstanding balance of the loan. Other modifications may include the
reduction in the amount of each scheduled payment, which reduction may result
from a reduction in the rate of interest and/or the alteration of the
repayment schedule (with or without affecting the unpaid principal balance of
the loan), and/or an extension (or reduction) of the final maturity date.
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. Also,
under federal bankruptcy law, a bankruptcy court may permit a debtor through
its rehabilitative plan to de-accelerate a secured loan and to reinstate the
loan even though the lender accelerated the mortgage loan and final judgment
of foreclosure had been entered in state court (provided no sale of the
property had yet occurred) prior to the filing of the debtor's petition. This
may be done even if the full amount due under the original loan is never
repaid.
The Bankruptcy Code has been amended to provide that a lender's perfected
pre-petition security interest in leases, rents and hotel revenues continues
in the post-petition leases, rents and hotel revenues, unless a bankruptcy
court orders to the contrary "based on the equities of the case." Thus,
unless a court orders otherwise, revenues from a Mortgaged Property generated
after the date the bankruptcy petition is filed will constitute "cash
collateral" under the Bankruptcy Code. Debtors may only use cash collateral
upon obtaining the lender's consent or a prior court order finding that the
lender's interest in the Mortgaged Properties and the cash collateral is
"adequately protected" as such term is defined and interpreted under the
Bankruptcy Code. It should be noted, however, that the court may find that
the lender has no security interest in either pre-petition or post-petition
revenues if the court finds that the loan documents do not contain language
covering accounts, room rents, or other forms of personalty necessary for a
security interest to attach to hotel revenues.
To the extent that a mortgagor's ability to make payment on a mortgage
loan is dependent on its receipt of payments of rent under a lease of the
related property, such ability may be impaired by the commencement of a
bankruptcy proceeding relating to a lessee under such lease. Under the
Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a
lessee results in a stay in bankruptcy against the commencement or
continuation of any state court proceeding for past due rent, for accelerated
rent, for damages or for a summary eviction order with respect to a default
under the lease that occurred prior to the filing of the lessee's petition.
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume the
lease and retain it or assign it to a third party or (b) reject the lease. If
the lease is assumed, the trustee or debtor in possession (or assignee, if
applicable) must cure any defaults under the lease, compensate the lessor for
its losses and provide the lessor with "adequate assurance" of future
performance. Such remedies may be insufficient, however, as the lessor may be
forced to continue under the lease with a lessee that is a poor credit risk
or an unfamiliar tenant if the lease was assigned, and any assurances
provided to the lessor may, in fact, be inadequate. If the lease is rejected,
the lessor will be treated as an unsecured credit or with respect to its
claim for damages for termination of the lease. In addition, pursuant to
Section 502(b)(6) of the Bankruptcy Code, a lessor's damages for lease
rejection in respect of future rent installments are limited to the rent
reserved by the lease, without acceleration, for the greater of one year, or
15%, not to exceed three years, of the remaining term of the lease.
In a bankruptcy or similar proceeding, action may be taken seeking the
recovery as a preferential transfer of any payments made by the mortgagor
under the related Mortgage Loan to the Trust Fund. Payments on long-term debt
may be protected from recovery as preferences if they are payments in the
ordinary course of business made on debts incurred in the ordinary course of
business. Whether any particular payment would be protected depends upon the
facts specific to a particular transaction.
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A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may
have the power to grant liens senior to the lien of a mortgage, and analogous
state statutes and general principles of equity may also provide a mortgagor
with means to halt a foreclosure proceeding or sale and to force a
restructuring of a mortgage loan on terms a lender would not otherwise
accept. Moreover, the laws of certain states also give priority to certain
tax liens over the lien of a mortgage or deed of trust. Under the Bankruptcy
Code, if the court finds that actions of the mortgagee have been
unreasonable, the lien of the related mortgage may be subordinated to the
claims of unsecured creditors.
Pursuant to the federal doctrine of "substantive consolidation" or to the
(predominantly state law) doctrine of "piercing the corporate veil," a
bankruptcy court, in the exercise of its equitable powers, also has the
authority to order that the assets and liabilities of a related entity be
consolidated with those of an entity before it. Thus, property ostensibly the
property of one entity may be determined to be the property of a different
entity in bankruptcy, the automatic stay applicable to the second entity
extended to the first and the rights of creditors of the first entity
impaired in the fashion set forth above in the discussion of ordinary
bankruptcy principles. Depending on facts and circumstances not wholly in
existence at the time a loan is originated or transferred to the Trust Fund,
the application of any of these doctrines to one or more of the mortgagors in
the context of the bankruptcy of one or more of their affiliates could result
in material impairment of the rights of the Certificateholders.
For each mortgagor that is described as a "special purpose entity,"
"single purpose entity" or "bankruptcy-remote entity" in this Prospectus, the
activities that may be conducted by such mortgagor and its ability to incur
debt are restricted by the applicable Mortgage or the organizational
documents of such mortgagor in such manner as is intended to make the
likelihood of a bankruptcy proceeding being commenced by or against such
mortgagor remote, and such mortgagor has been organized and is designed to
operate in a manner such that its separate existence should be respected
notwithstanding a bankruptcy proceeding in respect of one or more affiliated
entities of such mortgagor. However, the Depositor makes no representation as
to the likelihood of the institution of a bankruptcy proceeding by or in
respect of any mortgagor or the likelihood that the separate existence of any
mortgagor would be respected if there were to be a bankruptcy proceeding in
respect of any affiliated entity of a mortgagor.
ENVIRONMENTAL LEGISLATION
A lender may be subject to unforeseen environmental risks when taking a
security interest in real or personal property.
Under the laws of many states, contamination on a property may give rise
to a lien on the property for cleanup costs. In several states, such a lien
has priority over all existing liens (a "superlien") including those of
existing mortgages; in those states, the lien of a mortgage contemplated by
this transaction may lose its priority to such a superlien.
CERCLA imposes strict, as well as joint and several, liability on several
classes of potentially responsible parties, including current owners and
operators of the property, regardless of whether they caused or contributed
to the contamination. Many states have laws similar to CERCLA. CERCLA
excludes from the definition of "owner or operator" any person "who, without
participating in the management of . . . [the] facility, holds indicia of
ownership primarily to protect his security interest" ("secured-creditor
exemption").
A lender may lose its secured-creditor exemption and be held liable under
CERCLA as an owner or operator, if such lender or its employees or agents
participate in management of the property. Also, if the lender takes title to
or possession of the property, the secured-creditor exemption may be deemed
to be unavailable, and the lender may be liable to the government or private
parties for clean-up or other remedial costs pursuant to CERCLA.
A decision in May 1990 of the United States Court of Appeals for the
Eleventh Circuit in United States v. Fleet Factors Corp. very narrowly
construed the CERCLA secured-creditor exemption. The Court held that a
mortgagee need not have involved itself in the day-to-day operations of the
mortgaged property or in decisions relating to hazardous waste in order to be
liable under CERCLA; rather, liability could attach to a mortgagee if its
involvement in the management of the property is sufficiently broad to
support the inference that it had the capacity to influence the mortgagor's
treatment of hazardous waste. Such capacity to influence could be inferred
from the extent of the mortgagee's involvement in the mortgagor's financial
management. A subsequent decision by the United States Court of Appeals for
the Ninth Circuit in In re Bergsoe Metal Corp. disagreed with the Fleet
Factors opinion, ruling that a secured lender had no liability absent "some
actual management of the facility" on the part of the lender.
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The scope of the secured-creditor exemption under CERCLA has now been
clarified by Congress with the enactment of the Asset Conservation, Lender
Liability, and Deposit Insurance Protection Act of 1996 (the "DIPA Act"). In
connection with pre-foreclosure activities, the DIPA Act clarifies that the
lender is considered to be "participating in the management" of secured
property only if it (1) exercises decision-making control over the
environmental compliance of the property such that it has undertaken
responsibility for hazardous substances handling or disposal practices; or
(2) exercises control comparable to that of a manager of the property, either
in terms of day-to-day decision-making on environmental compliance matters,
or in terms of management of all or substantially all non-environmental
operational functions.
With respect to post-foreclosure activities, the DIPA Act makes clear that
the lender may take title to the secured property and conduct
post-foreclosure activities with respect to the property without losing the
liability exemption, as long as the lender tries to divest itself of the
property at the earliest practicable, "commercially reasonable" time, on
"commercially reasonable" terms (taking into account market conditions and
legal and regulatory requirements).
If a lender is or becomes liable, it may bring an action for contribution
against the owner or operator who created the environmental contamination,
but that person or entity may be bankrupt or otherwise judgment proof. It is
possible that cleanup costs could become a liability of the Trust Fund and
occasion a loss to Certificateholders in certain circumstances described
above if such remedial costs were incurred.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
Certain of the Mortgage Loans may contain due-on-sale and
due-on-encumbrance clauses. These clauses generally provide that the lender
may accelerate the maturity of the loan if the mortgagor sells or otherwise
transfers or encumbers the mortgaged property. Certain of these clauses may
provide that, upon an attempted breach thereof by the mortgagor of an
otherwise non-recourse loan, the mortgagor becomes personally liable for the
mortgage debt. 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.
The Servicer, on behalf of the Trust Fund, will determine whether to exercise
any right the Trustee may have as mortgagee to accelerate payment of any such
Mortgage Loan or to withhold its consent to any transfer or further
encumbrance in accordance with the general Servicing Standard described
herein.
ACCELERATION ON DEFAULT
Some of the Mortgage Loans included in a Trust Fund will include a
"debt-acceleration" clause, which permits the lender to accelerate the full
debt upon a monetary or nonmonetary default of the borrower. The courts of
all states will enforce clauses providing for acceleration in the event of a
material payment default after giving effect to any appropriate notices. The
equity courts of any state, however, may refuse to foreclose a mortgage or
deed of trust when an acceleration of the indebtedness would be inequitable
or unjust or the circumstances would render the acceleration unconscionable.
Furthermore, in some states, the borrower may avoid foreclosure and reinstate
an accelerated loan by paying only the defaulted amounts and the costs and
attorneys' fees incurred by the lender in collecting such defaulted payments.
State courts also are known to apply various legal and equitable
principles to avoid enforcement of the forfeiture provisions of Installment
Contracts. For example, a lender's practice of accepting late payments from
the borrower may be deemed a waiver of the forfeiture clause. State courts
also may impose equitable grace periods for payment of arrearages or
otherwise permit reinstatement of the contract following a default. Not
infrequently, if a borrower under an Installment Contract has significant
equity in the property, equitable principles will be applied to reform or
reinstate the contract or to permit the borrower to share the proceeds upon a
foreclosure sale of the property if the sale price exceeds the debt.
DEFAULT INTEREST, PREPAYMENT CHARGES AND PREPAYMENTS
Forms of notes and mortgages used by lenders may contain provisions
obligating the mortgagor to pay a late charge or additional interest if
payments are not timely made, and in some circumstances may provide for
prepayment fees or yield maintenance penalties if the obligation is paid
prior to maturity or prohibit such prepayment for a specified period. In
certain states, there are or may be specific limitations upon the late
charges which a lender may collect from a mortgagor
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for delinquent payments. Certain states also limit the amounts that a lender
may collect from a mortgagor as an additional charge if the loan is prepaid.
The enforceability, under the laws of a number of states of provisions
providing for prepayment fees or penalties upon, or prohibition of, an
involuntary prepayment is unclear, and no assurance can be given that, at the
time a Prepayment Premium is required to be made on a Mortgage Loan in
connection with an involuntary prepayment, the obligation to make such
payment, or the provisions of any such prohibition, will be enforceable under
applicable state law. The absence of a restraint on prepayment, particularly
with respect to Mortgage Loans having higher Mortgage Rates, may increase the
likelihood of refinancing or other early retirements of the Mortgage Loans.
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 (including
multifamily but not other commercial) 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 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 has been advised by counsel that a court interpreting Title
V would hold that first mortgage loans secured by primarily residential
properties that are originated on or after January 1, 1980 are subject to
federal preemption. Therefore, in a state 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.
ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including adjustable rate mortgage
loans, originated by non-federally chartered lenders have historically been
subjected to a variety of restrictions. Such restrictions differed from state
to state, resulting in difficulties in determining whether a particular
alternative mortgage instrument originated by a state-chartered lender was in
compliance with applicable law. These difficulties were alleviated
substantially as a result of the enactment of Title VIII of the Garn-St
Germain Act ("Title VIII"). Title VIII provides that, notwithstanding any
state law to the contrary, state-chartered banks may originate alternative
mortgage instruments in accordance with regulations promulgated by the
Comptroller of the Currency with respect to origination of alternative
mortgage instruments by national banks, state-chartered credit unions may
originate alternative mortgage instruments in accordance with regulations
promulgated by the National Credit Union Administration (the "NCUA") 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 mortgage banking companies, may originate alternative mortgage
instruments in accordance with the regulations promulgated by the Federal
Home Loan Bank Board (now 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 provision 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
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shortfalls in interest collections resulting from the application of the
Relief Act would result in a reduction of the amounts distributable to the
holders of the Certificates and would not be covered by advances or any form
of Credit Support (if any) 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 LAWS AND REGULATIONS
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply
(together with an inability to remedy any such failure) could result in
material diminution in the value of a Mortgaged Property which could,
together with the possibility of limited alternative uses for a particular
Mortgaged Property (i.e., a nursing or convalescent home or hospital), result
in a failure to realize the full principal amount of the related Mortgage
Loan.
TYPE OF MORTGAGED PROPERTY
The lender may be subject to additional risk depending upon the type and
use of the Mortgaged Property in question. For instance, Mortgaged Properties
which are hospitals, nursing homes or convalescent homes may present special
risks to lenders in large part due to significant governmental regulation of
the operation, maintenance, control and financing of health care
institutions. Mortgages on Mortgaged Properties which are owned by the
borrower under a condominium form of ownership are subject to the
declaration, by-laws and other rules and regulations of the condominium
association. Mortgaged Properties which are hotels or motels may present
additional risk to the lender in that: (i) hotels and motels are typically
operated pursuant to franchise, management and operating agreements which may
be terminable by the operator and (ii) the transferability of the hotel's
operating, liquor and other licenses to the entity acquiring the hotel either
through purchase or foreclosure is subject to the vagaries of local law
requirements. In addition, Mortgaged Properties which are multifamily
residential properties or cooperatively owned multifamily properties may be
subject to rent control laws, which could impact the future cash flows of
such properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which
are structural in nature from existing places of public accommodation to the
extent "readily achievable." In addition, under the ADA, alterations to a
place of public accommodation or a commercial facility are to be made so
that, to the maximum extent feasible, such altered portions are readily
accessible to and usable by disabled individuals. The "readily achievable"
standard takes into account, among other factors, the financial resources of
the affected site, owner, landlord or other applicable person. In addition to
imposing a possible financial burden on the borrower in its capacity as owner
or landlord, the ADA may also impose such requirements on a foreclosing
lender who succeeds to the interest of the borrower as owner or landlord.
Furthermore, since the "readily achievable" standard may vary depending on
the financial condition of the owner or landlord, a foreclosing lender who is
financially more capable than the borrower of complying with the requirements
of the ADA may be subject to more stringent requirements than those to which
the borrower is subject.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of the
Subordinated Certificates and is based on the advice of Cadwalader,
Wickersham & Taft. The discussion below does not purport to address all
federal income tax consequences that may be applicable to particular
categories of investors, some of which may be subject to special rules. In
addition, this discussion does not address state, local or foreign tax issues
with respect to the acquisition, ownership or disposition of the Subordinated
Certificates. The authorities on which this discussion is based are subject
to change or differing interpretations, and any such change or interpretation
could apply retroactively. This discussion reflects the applicable provisions
of the Code, as well as regulations (the "REMIC Regulations") promulgated by
the U.S. Department of the Treasury. Investors should consult their own tax
advisors in determining the federal, state, local, foreign or any other tax
consequences to them of the purchase, ownership and disposition of
Certificates.
Elections will be made to treat the Trust Fund, exclusive of the Reserve
Accounts, the Lock Box Accounts, the Cash Collateral Accounts, the Excess
Interest and the Default Interest in respect of the Mortgage Loans (such
portion of the Trust Fund, the "Trust REMICs"), as two separate REMICs (the
"Upper-Tier REMIC" and the "Lower-Tier REMIC," respectively) within the
meaning of Code Section 860D. The Lower-Tier REMIC will hold the Mortgage
Loans, proceeds therefrom, the Collection Account, the Distribution Account
and any REO Property, and will issue (i) certain uncertificated classes of
regular interests (the "Lower-Tier Regular Interests") to the Upper-Tier
REMIC and (ii) the Class LR Certificates, which will represent the sole class
of residual interests in the Lower-Tier REMIC. The Upper-Tier REMIC will hold
the Lower-Tier Regular Interests and the Upper-Tier Distribution Account in
which distributions thereon will be deposited, and will issue the Class A-1A,
Class A-1B, Class A-1C, Class A-1D, Class A-1E, Class A-CS1, Class PS-1,
Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8,
Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7
and Class B-7H Certificates (the "Regular Certificates"), as classes of
regular interests and the Class R Certificates as the sole class of residual
interests in the Upper-Tier REMIC. Qualification as a REMIC requires ongoing
compliance with certain conditions. Assuming (i) the making of appropriate
elections, (ii) compliance with the Pooling and Servicing Agreement and (iii)
compliance with any changes in the law, including any amendments to the Code
or applicable temporary or final regulations of the United States Department
of the Treasury ("Treasury Regulations") thereunder, in the opinion of
Cadwalader, Wickersham & Taft, the Trust Fund will qualify as two separate
REMICs. References in this discussion to the "REMIC" will, unless the context
dictates otherwise, refer to each of the Upper-Tier REMIC and the Lower-Tier
REMIC. The Class V-1 and Class V-2 Certificates will represent pro rata
undivided beneficial interests in the portion of the Trust Fund consisting of
Excess Interest and Default Interest in respect of the Mortgage Loans,
respectively, and such portions will be treated as a grantor trust for
federal income tax purposes.
STATUS OF SUBORDINATED CERTIFICATES
Subordinated Certificates held by a real estate investment trust will
constitute "real estate assets" within the meaning of Code Sections
856(c)(5)(A) and 856(c)(6) and interest on the Subordinated Certificates will
be considered "interest on obligations secured by mortgages on real property
or on interests in real property" within the meaning of Code Section
856(c)(3)(B) in the same proportion that, for both purposes, the assets of
the related REMIC and the income thereon would be so treated. Subordinated
Certificates held by a domestic building and loan association will be treated
as "regular or residual interests in a REMIC" under Code Section
7701(a)(19)(C)(xi), but only in the proportion that the REMIC holds "loans .
. . secured by an interest in real property which is . . . residential real
property" within the meaning of Code Section 7701(a)(19)(C)(v). Mortgage
Loans constitute loans described in Code Section 7701(a)(19)(C)(v) if a
sufficiently limited portion of the real property securing the Mortgage Loans
is devoted to commercial use. For this purpose, Mortgage Loans secured by
multifamily residential housing should qualify. It is also likely that
Mortgage Loans secured by nursing homes and an assisted living facility would
qualify as "loans secured by an interest in . . . health institutions or
facilities, including structures designed or used primarily for residential
purposes for . . . persons under care." If at all times 95% or more of the
assets of the related REMIC or the income thereon qualify for the foregoing
treatments, the Subordinated Certificates will qualify for the corresponding
status in their entirety. For purposes of Code Section 856(c)(5)(A), payments
of principal and interest on a Mortgage Loan that are reinvested pending
distribution to holders of Subordinated Certificates qualify for such
treatment. Subordinated Certificates held by a regulated investment company
will not constitute "government securities" within the meaning of Code
Section 851(b)(4)(A)(i). Subordinated Certificates held by certain financial
institutions will constitute an "evidence of indebtedness" within the meaning
of Code Section 582(c)(1).
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QUALIFICATION AS A REMIC
In order for each of the Upper-Tier REMIC and the Lower-Tier REMIC to
qualify as a REMIC, there must be ongoing compliance on the part of the
applicable portions of the Trust Fund with the requirements set forth in the
Code. Each of the Upper-Tier REMIC and the Lower-Tier REMIC must fulfill an
asset test, which requires that no more than a de minimis portion of the
assets of each REMIC, as of the close of the third calendar month beginning
after the "Startup Day" (which for purposes of this discussion is the date of
the issuance of the Certificates) and at all times thereafter, may consist of
assets other than "qualified mortgages" and "permitted investments." The
REMIC Regulations provide a safe harbor pursuant to which the de minimis
requirement will be met if at all times the aggregate adjusted basis of the
nonqualified assets is less than one percent of the aggregate adjusted basis
of all the REMIC's assets. Each REMIC also must provide "reasonable
arrangements" to prevent its residual interests from being held by
"disqualified organizations" or agents thereof and must furnish applicable
tax information to transferors or agents that violate this requirement. The
Pooling and Servicing Agreement will provide that no legal or beneficial
interest in the Class R or Class LR Certificate may be transferred or
registered unless certain conditions, designed to prevent violation of this
requirement, are met.
A qualified mortgage is any obligation that is principally secured by an
interest in real property and that is either transferred to the REMIC on the
Startup Day or is purchased by the REMIC within a three-month period
thereafter pursuant to a fixed price contract in effect on the Startup Day.
Qualified mortgages include whole mortgage loans, such as the Mortgage Loans,
and regular interests in another REMIC, such as the Lower-Tier Regular
Interests that will be held by the Upper-Tier REMIC, provided, in general,
(i) the fair market value of the real property security (including buildings
and structural components thereof) is at least 80% of the principal balance
of the related Mortgage Loan either at origination or as of the Startup Day
(an original loan-to-value ratio of not more than 125% with respect to the
real property security) or (ii) substantially all the proceeds of the
Mortgage Loan or the underlying mortgage were used to acquire, improve or
protect an interest in real property that, at the origination date, was the
only security for the Mortgage Loan. If the Mortgage Loan has been
substantially modified other than in connection with a default or reasonably
foreseeable default, it must meet the loan-to-value test in (i) of the
preceding sentence as of the date of the last such modification. A mortgage
loan that was not in fact principally secured by real property or is
otherwise not a qualified mortgage must be disposed of within 90 days of
discovery of such defect, or otherwise ceases to be a qualified mortgage
after such 90-day period.
Permitted investments include cash flow investments, qualified reserve
assets and foreclosure property. A cash flow investment is an investment,
earning a return in the nature of interest, of amounts received on or with
respect to qualified mortgages for a temporary period, not exceeding 13
months, until the next scheduled distribution to holders of interests in the
REMIC. The Upper-Tier REMIC and Lower-Tier REMIC will not hold any reserve
funds. Foreclosure property is real property acquired by the Lower-Tier REMIC
in connection with the default or imminent default of a qualified mortgage,
provided the Depositor had no knowledge or reason to know as of the Startup
Day that such a default had occurred or would occur. Foreclosure property may
generally be held for not more than two years, with extensions granted by the
Internal Revenue Service.
In addition to the foregoing requirements, the various interests in a
REMIC also must meet certain requirements. All of the interests in a REMIC
must be either of the following: (i) one or more classes of regular interests
or (ii) a single class of residual interests on which distributions, if any,
are made pro rata. A regular interest is an interest in a REMIC that is
issued on the Startup Day with fixed terms, is designated as a regular
interest, and unconditionally entitles the holder to receive a specified
principal amount (or other similar amount), and provides that interest
payments (or other similar amounts), if any, at or before maturity either are
payable based on a fixed rate or a qualified variable rate, or consist of a
specified, nonvarying portion of the interest payments on the qualified
mortgages. Such a specified portion may consist, among other things, of a
fixed or qualified variable rate on some or all of the qualified mortgages in
excess of a different fixed or qualified variable rate on some or all of the
qualified mortgages. The specified principal amount of a regular interest
that provides for interest payments consisting of a specified, nonvarying
portion of interest payments on qualified mortgages may be zero. A residual
interest is an interest in a REMIC other than a regular interest that is
issued on the Startup Day that is designated as a residual interest. An
interest in a REMIC may be treated as a regular interest even if payments of
principal with respect to such interest are subordinated to payments on other
regular interests or the residual interest in the REMIC, and are dependent on
the absence of defaults or delinquencies on qualified mortgages or permitted
investments, lower than reasonably expected returns on permitted investments,
expenses incurred by the REMIC or prepayment interest shortfalls.
Accordingly, in the opinion of Cadwalader, Wickersham & Taft, the Regular
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Certificates will constitute classes of regular interests in the Upper-Tier
REMIC, the Lower-Tier Regular Interests will constitute classes of regular
interests in the Lower-Tier REMIC and the Class R Certificates and Class LR
Certificates will represent the sole classes of residual interests in the
Upper-Tier REMIC and Lower-Tier REMIC, respectively.
If an entity fails to comply with one or more of the ongoing requirements
of the Code for status as one or more REMICs during any taxable year, the
Code provides that the entity or applicable portion thereof will not be
treated as a REMIC for such year and thereafter. In this event, any entity
that is the obligor with respect to debt obligations with two or more
maturities, such as the Trust Fund, may be treated as a separate association
taxable as a corporation under Treasury Regulations, and the Subordinated
Certificates may be treated as equity interests therein. The Code, however,
authorizes the Treasury Department to issue regulations that address
situations where failure to meet one or more of the requirements for REMIC
status occurs inadvertently and in good faith. Investors should be aware,
however, that the Conference Committee Report to the Tax Reform Act of 1986
(the "1986 Act") indicates that the relief may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the Trust
Fund's income for the period of time in which the requirements for REMIC
status are not satisfied.
TAXATION OF SUBORDINATED CERTIFICATES AND SUBORDINATED UNITS
General. The Subordinated Certificates generally will be treated for
federal income tax purposes as newly-originated debt instruments. In general,
interest, original issue discount ("OID") and market discount on a
Subordinated Certificate will be treated as ordinary income to the holder of
a Subordinated Certificate, and principal payments (other than principal
payments that do not exceed accrued market discount) on a Subordinated
Certificate will be treated as a return of capital to the extent of the
Certificateholder's basis allocable thereto. Certificateholders must use the
accrual method of accounting with respect to Subordinated Certificates,
regardless of the method of accounting otherwise used by such
Certificateholders.
Original Issue Discount. Holders of debt instruments issued with OID
generally must include original issue discount in 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 following discussion is
based in part on Treasury Regulations issued on February 2, 1994, and amended
on June 14, 1996, under Code Sections 1271 through 1273 and 1275 (the "OID
Regulations") and in part on the provisions of the 1986 Act. Holders of the
Subordinated Certificates should be aware, however, that the OID Regulations
do not adequately address certain issues relevant to prepayable securities,
such as the Subordinated Certificates. To the extent such issues are not
addressed in such Regulations, it is anticipated that the Trustee will apply
the principles of such regulations and the methodology described in the
Conference Committee Report to the 1986 Act. No assurance can be provided
that the Internal Revenue Service will not take a different position as to
those matters not currently addressed by the OID Regulations. Moreover, the
OID Regulations include an anti-abuse rule allowing the Internal Revenue
Service to apply or depart from the OID Regulations where necessary or
appropriate to ensure a reasonable tax result in light of the applicable
statutory provisions. A tax result will not be considered unreasonable under
the anti-abuse rule in the absence of a substantial effect on the present
value of a taxpayer's tax liability. Investors are advised to consult their
own tax advisors as to the discussion herein and the appropriate method for
reporting interest and original issue discount with respect to the
Subordinated Certificates.
Under an aggregation rule in the OID Regulations, because the Subordinated
Certificates will be sold as Subordinated Units, they may be treated as a
single debt instrument for purposes of determining issue price, stated
redemption price at maturity and original yield to maturity (each as defined
below), for accruing original issue discount, and for certain other purposes.
This rule would not apply, however, if, among other things, the Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5 or Class B-6 Certificates were
"part of an issue a substantial portion of which is traded on an established
market." Under applicable Treasury regulations, a debt instrument is traded
on an established market if, among other things, price quotations are
available from dealers, brokers or traders. It is not certain whether this
requirement will be met. Accordingly, the Depositor believes that the
Subordinated Certificates should be treated as a single debt instrument for
OID purposes. If the aggregation rule applies, it should have no major effect
on the holder of a Subordinated Unit. Upon a sale of one or more classes of
Subordinated Certificates, the holder should allocate its adjusted basis in
the Subordinated Unit between the sold and retained portions for purposes of
computing gain or loss. See "Sale or Exchange of Subordinated Units." It is
not clear how a subsequent purchaser of a single class of Subordinated
Certificates would compute original discount with respect to such Class. The
balance of this discussion assumes that the aggregation rule will apply.
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The total amount of OID on a Subordinated Unit is the excess of the
"stated redemption price at maturity" of the Subordinated Unit over its
"issue price." The issue price of a Subordinated Unit is the price at which a
substantial amount of such Subordinated Units is first sold to investors
(other than bond houses, brokers or underwriters). The issue price will also
include any accrued interest attributable to the period prior to the issue
date of the Subordinated Units, unless the holder elects on its federal
income tax return to exclude such amounts from the issue price and to recover
it on the first Distribution Date. The stated redemption price at maturity of
a Subordinated Unit is the sum of all payments provided by the Subordinated
Unit other than qualified stated interest payments. Under the OID
Regulations, qualified stated interest generally includes interest payable at
a single fixed rate if such interest payments are unconditionally payable at
intervals of one year or less during the entire term of the obligation.
Qualified stated interest does not include the portion of interest payable on
the first Distribution Date that exceeds interest for the number of days
between the Startup Day and the first Distribution Date. Accordingly, because
the Subordinate Certificates will all bear the same fixed rate of interest,
it is anticipated that the Trustee will treat all payments of interest on the
Subordinated Units [(other than days of interest payable at the
Pass-Through Rates thereon payable on the first Distribution Date)] as
qualified stated interest and consequently as not includible in the stated
redemption price at maturity of such Classes. Based on the foregoing, it is
anticipated that the Subordinated Units will be issued with OID in an amount
equal to the excess of their aggregate initial Certificate Balance [(plus
days of interest at the Pass-Through Rate thereon)] over their issue price
(including accrued interest).
Under a de minimis rule, OID on a Subordinated Unit will be considered to
be zero if such OID is less than 0.25% of the stated redemption price at
maturity of the Subordinated Unit multiplied by the weighted average maturity
of the Subordinated Unit. For this purpose, the weighted average maturity of
the Subordinated Unit 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 Subordinated Unit and the denominator of which is
the stated redemption price at maturity of the Subordinated Unit. The
Conference Committee Report to the 1986 Act provides that the schedule of
such distributions should be determined in accordance with the Prepayment
Assumptions (defined above under "Prepayment and Yield Considerations --
Weighted Average Life of Subordinated Certificates") and the anticipated
reinvestment rate, if any, relating to the Subordinated Units. The Prepayment
Assumptions with respect to the Subordinated Units is [a % constant
prepayment rate] [based on Scenario set forth above under "Prepayment and
Yield Considerations."] No representation is made that the Mortgage Loans
will prepay at such rate or any other rate. Holders generally must report de
minimis OID pro rata as principal payments are received, and such income will
be capital gain if the Subordinated Unit is held as a capital asset. Under
the OID Regulations, however, holders of Subordinated Units may elect to
accrue all de minimis OID, as well as market discount and market premium,
under the constant yield method. See "Election to Treat All Interest Under
the Constant Yield Method." Based on the foregoing, it is anticipated that
the Subordinated Units will not be issued with de minimis OID.
A Certificateholder of a Subordinated Unit issued with OID generally must
include in gross income for any taxable year the sum of the "daily portions,"
as defined below, of the OID, if any, on the Subordinated Unit accrued during
an accrual period for each day on which it holds the Subordinated Unit,
including the date of purchase but excluding the date of disposition. With
respect to a Subordinated Unit determined to be issued with OID, a
calculation will be made of the OID that accrues during each successive full
accrual period (or shorter period from the date of original issue). Each
accrual period with respect to the Subordinated Units will begin on each
Distribution Date (or the Startup Day in the case of the first accrual
period) and end on the day preceding the next Distribution Date. Under Code
Section 1272(a)(6), OID is to be calculated initially based on a principal
payment schedule that takes into account expected prepayment behavior and an
anticipated reinvestment rate in the manner to be specified in Treasury
Regulations. The Conference Committee Report to the 1986 Act indicates that
such schedule is intended to be based on the Prepayment Assumptions with no
assumed reinvestment rate. The OID accruing in a full accrual period will be
the excess, if any, of (i) the sum of (a) the present value of all of the
remaining distributions to be made on the Subordinated Unit as of the end of
that accrual period and (b) the distributions made on the Subordinated Unit
during the accrual period that are included in the Subordinated Unit's stated
redemption price at maturity over (ii) the adjusted issue price of the
Subordinated Unit at the beginning of the accrual period. The present value
of the remaining distributions referred to in the preceding sentence is
calculated based on (i) the yield to maturity of the Subordinated Unit as of
the Startup Day, (ii) events (including actual prepayments, if any) that have
occurred prior to the end of the accrual period, (iii) the Prepayment
Assumptions and (iv) a schedule of interest payments based on the Mortgage
Rates and the maturities of the Mortgage Loans based on the Prepayment
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Assumptions. For these purposes, the adjusted issue price of a Subordinated
Unit at the beginning of any accrual period equals the issue price of the
Subordinated Unit, increased by the aggregate amount of original issue
discount with respect to the Subordinated Unit that accrued in all prior
accrual periods and reduced by the amount of distributions included in the
Subordinated Unit's stated redemption price at maturity that were made on the
Subordinated Unit that were attributable to such prior periods. In addition,
the original yield to maturity of a Subordinated Unit should be calculated
based on its issue price, assuming that the Subordinated Unit will be paid in
all periods in accordance with the Prepayment Assumptions, and with
compounding at the end of each accrual period used in the formula. The OID
accruing during any accrual period (as determined in this paragraph) will be
divided by the number of days in the period to determine the daily portion of
OID for each day in the period. [OID for the first short accrual period
between the Startup Day and the first Distribution Date will be determined
using the exact method.]
Acquisition Premium. A purchaser of a Subordinated Unit issued with OID at
a price greater than its adjusted issue price and less than its remaining
stated redemption price at maturity will be required to include in gross
income the daily portions of the OID on the Subordinated Unit reduced pro
rata by a fraction, the numerator of which is the excess of its purchase
price over such adjusted issue price and the denominator of which is the
excess of the remaining stated redemption price at maturity over the adjusted
issue price. Alternatively, such a subsequent purchaser may elect to treat
all such acquisition premium under the constant yield method, as described
below under the heading "Election to Treat All Interest Under the Constant
Yield Method."
Market Discount. A purchaser of a Subordinated Unit may be subject to the
market discount rules of Code Sections 1276 through 1278. Under these Code
sections and the principles applied by the OID Regulations in the context of
OID, "market discount" is the amount by which the purchaser's original basis
in the Subordinated Unit is exceeded by the adjusted issue price of such
Subordinated Unit at the time of purchase. Such purchaser generally will be
required to recognize ordinary income to the extent of accrued market
discount on such Subordinated Unit as distributions includible in the stated
redemption price at maturity thereof are received, in an amount not exceeding
any such distribution. Such market discount would accrue in a manner to be
provided in Treasury Regulations and should take into account the Prepayment
Assumptions. The Conference Committee Report to the 1986 Act provides that
until such regulations are issued, such market discount would accrue either
(i) on the basis of a constant interest rate or (ii) either in the ratio of
interest accrued for the relevant period to the sum of interest accrued for
such period plus the remaining interest as of the end of such period or in
the ratio of OID accrued for the relevant period to the sum of the OID
accrued for such period plus the remaining OID as of the end of such period.
Such purchaser also generally will be required to treat a portion of any gain
on a sale or exchange of the Subordinated Unit as ordinary income to the
extent of the market discount accrued to the date of disposition under one of
the foregoing methods, less any accrued market discount previously reported
as ordinary income as partial distributions in reduction of the stated
redemption price at maturity were received. Such purchaser will be required
to defer deduction of a portion of the excess of the interest paid or accrued
on indebtedness incurred to purchase or carry the Subordinated Unit over the
interest (including OID) distributable thereon. The deferred portion of such
interest expense in any taxable year generally will not exceed the accrued
market discount on the Subordinated Unit for such year. Any such deferred
interest expense is, in general, allowed as a deduction not later than the
year in which the related market discount income is recognized or the
Subordinated Unit is disposed of. As an alternative to the inclusion of
market discount in income on the foregoing basis, the Certificateholder may
elect to include market discount in income currently as it accrues on all
market discount instruments acquired by such Certificateholder in that
taxable year or thereafter, in which case the interest deferral rule will not
apply. See "Election to Treat All Interest Under the Constant Yield Method"
below regarding an alternative manner in which such election may be deemed to
be made.
Market discount with respect to a Subordinated Unit will be considered to
be zero if such market discount is less than 0.25% of the remaining stated
redemption price at maturity of such Subordinated Unit multiplied by the
weighted average maturity of the Subordinated Unit remaining after the date
of purchase, rounding down the date each payment included in the stated
redemption price at maturity is expected to be made to the next lowest number
of whole years. Such de minimis market discount should be reportable in the
same manner as de minimis OID as determined above under "Original Issue
Discount." Treasury Regulations implementing the market discount rules have
not yet been issued, and investors should therefore consult their own tax
advisors regarding the application of these rules as well as the advisability
of making any of the elections with respect thereto. Investors should also
consult Revenue Procedure 92-67 concerning the elections to include market
discount in income currently and to accrue market discount on the basis of a
constant interest rate.
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Premium. Subordinated Units may be purchased at a premium, i.e., at a
cost greater than their remaining stated redemption price at maturity. If the
Certificateholder holds such a Subordinated Unit as a "capital asset" within
the meaning of Code Section 1221, the Certificateholder may elect under Code
Section 171 to amortize such premium under the constant interest method. Such
election applies to all debt instruments held by the Certificateholders at
the beginning of the taxable year as to which the election is made or
acquired thereafter and is irrevocable except with the consent of the
Internal Revenue Service. The Conference Committee Report to the 1986 Act
indicates a Congressional intent that the same rules that will apply to the
accrual of market discount on installment obligations will also apply to
amortizing bond premium under Code Section 171 on installment obligations
such as the Subordinated Units, although it is unclear whether the
alternatives to the constant interest method described above under "Market
Discount" are available. Amortizable bond premium will be treated as an
offset to interest income on a Subordinated Unit rather than as a separate
deduction item. See "Election to Treat All Interest Under the Constant Yield
Method" below regarding an alternative manner in which the Code Section 171
election may be deemed to be made.
Election to Treat All Interest Under the Constant Yield Method. A holder
of a debt instrument such as a Subordinated Unit may elect to treat all
interest that accrues on the instrument using the constant yield method, with
none of the interest being treated as qualified stated interest. For purposes
of applying the constant yield method to a debt instrument subject to such an
election, (i) "interest" includes stated interest, original issue discount,
de minimis OID, market discount and de minimis market discount, as adjusted
by any amortizable bond premium or acquisition premium and (ii) the debt
instrument is treated as if the instrument were issued on the holder's
acquisition date in the amount of the holder's adjusted basis immediately
after acquisition. A holder generally may make such an election on an
instrument by instrument basis or for a class or group of debt instruments.
However, if the holder makes such an election with respect to a debt
instrument with amortizable bond premium or with market discount, the holder
is deemed to have made elections to amortize bond premium or to report market
discount income currently as it accrues under the constant yield method,
respectively, for all debt instruments acquired by the holder in the same
taxable year or thereafter. The election is made on the holder's federal
income tax return for the year in which the debt instrument is acquired and
is irrevocable except with the approval of the Internal Revenue Service.
Investors should consult their own tax advisors regarding the advisability of
making such an election.
Treatment of Losses. Certificateholders will be required to report income
with respect to the Subordinated Units on the accrual method of accounting,
without giving effect to delays or reductions in distributions attributable
to defaults or delinquencies on the Mortgage Loans, except to the extent it
can be established that such losses are uncollectible. Accordingly, the
holder of a Subordinated Unit may have income, or may incur a diminution in
cash flow as a result of a default or delinquency, but may not be able to
take a deduction (subject to the discussion below) for the corresponding loss
until a subsequent taxable year. In this regard, investors are cautioned that
while they may generally cease to accrue interest income if it reasonably
appears that the interest will be uncollectible, the Internal Revenue Service
may take the position that original issue discount must continue to be
accrued in spite of its uncollectability until the debt instrument is
disposed of in a taxable transaction or becomes worthless in accordance with
the rules of Code Section 166.
To the extent the rules of Code Section 166 regarding bad debts are
applicable, it appears that Certificateholders that are corporations or that
otherwise hold the Subordinated Units in connection with a trade or business
should in general be allowed to deduct as an ordinary loss such loss with
respect to principal sustained during the taxable year on account of any such
Subordinated Units becoming wholly or partially worthless, and that, in
general, Certificateholders that are not corporations and that do not hold
the Subordinated Units in connection with a trade or business will be allowed
to deduct as a loss, which may be a short-term capital loss, any loss
sustained during the taxable year on account of any such Subordinated Units
becoming wholly worthless. The Internal Revenue Service could assert,
however, that losses on the Subordinated Units are deductible based on some
other method that may defer such deductions for all holders, such as reducing
future cash flow for purposes of computing original issue discount. This may
have the effect of creating "negative" OID which would be deductible only
against future positive OID or otherwise upon termination of the Class.
Certificateholders are urged to consult their own tax advisors regarding the
appropriate timing, amount and character of any loss sustained with respect
to such Subordinated Units. While losses attributable to interest previously
reported as income should be deductible as ordinary losses by both corporate
and non-corporate holders, the Internal Revenue Service may take the position
that losses attributable to accrued OID may only be deducted as short-term
capital losses by non-corporate holders not engaged in a trade or business.
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 Subordinated Units.
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Sale or Exchange of Subordinated Units. If a Certificateholder sells or
exchanges a Subordinated Unit, the Certificateholder will recognize gain or
loss equal to the difference, if any, between the amount received and its
adjusted basis in the Subordinated Unit. The adjusted basis of a Subordinated
Unit generally will equal the cost of the Subordinated Unit to the seller,
increased by any OID or market discount previously included in the seller's
gross income with respect to the Subordinated Unit and reduced by amounts
included in the stated redemption price at maturity of the Subordinated Unit
that were previously received by the seller, by any amortized premium, and by
any recognized losses.
Except as described above with respect to market discount, and except as
provided in this paragraph, any gain or loss on the sale or exchange of a
Subordinated Unit realized by an investor who holds the Subordinated Unit as
a capital asset will be capital gain or loss and will be long-term or
short-term depending on whether the Subordinated Unit has been held for the
long-term capital gain holding period (more than one year). Such gain will be
treated as ordinary income (i) if a Subordinated Unit is held as part of a
"conversion transaction" as defined in Code Section 1258(c), up to the amount
of interest that would have accrued on the holder's net investment in the
conversion transaction at 120% of the appropriate applicable Federal rate
under Code Section 1274(d) in effect at the time the holder entered into the
transaction minus any amount previously treated as ordinary income with
respect to any prior disposition of property that was held as a part of such
transaction, (ii) in the case of an non-corporate taxpayer, to the extent
such taxpayer has made an election under Code Section 163(d)(4) to have net
capital gains taxed as investment income at ordinary income rates, or (iii)
to the extent that such gain does not exceed the excess, if any, of (a) the
amount that would have been includible in the gross income of the holder if
its yield on such Subordinated Unit were 110% of the applicable Federal rate
as of the date of purchase, over (b) the amount of income actually includible
in the gross income of such holder with respect to such Subordinated Unit. In
addition, gain or loss recognized from the sale of a Subordinated Unit by
certain banks or thrift institutions will be treated as ordinary income or
loss pursuant to Code Section 582(c). Capital gains of certain non-corporate
taxpayers are subject to a lower tax rate than ordinary income of such
taxpayers. The maximum tax rate for corporations is the same with respect to
both ordinary income and capital gains.
TAXES THAT MAY BE IMPOSED ON A REMIC
Prohibited Transactions. Income from certain transactions by a REMIC,
called prohibited transactions, will be taxed directly to the related REMIC
at a 100% rate. Prohibited transactions generally include (i) the disposition
of a qualified mortgage other than for (a) substitution within two years of
the Startup Day for a defective (including a defaulted) obligation (or
repurchase in lieu of substitution of a defective (including a defaulted)
obligation at any time) or for any qualified mortgage within three months of
the Startup Day, (b) foreclosure, default, or imminent default of a qualified
mortgage, (c) bankruptcy or insolvency of the REMIC, or (d) a qualified
(complete) liquidation, (ii) the receipt of income from assets that are not
the type of mortgages or investments that the REMIC is permitted to hold,
(iii) the receipt of compensation for services, or (iv) the receipt of gain
from disposition of cash flow investments other than pursuant to a qualified
liquidation. Notwithstanding (i) and (iv), it is not a prohibited transaction
to sell REMIC property to prevent a default on regular interests as a result
of a default on qualified mortgages or to facilitate a qualified liquidation
or a clean-up call. The REMIC Regulations indicate that the modification of a
Mortgage Loan generally will not be treated as a disposition if it is
occasioned by a default or reasonably foreseeable default, an assumption of
the Mortgage Loan, or the waiver of a due-on-sale or due-on encumbrance
clause. It is not anticipated that either REMIC will engage in any prohibited
transaction.
Contributions to a REMIC After the Startup Day. In general, a REMIC will
be subject to a tax at a 100% rate on the value of any property contributed
to the REMIC after the Startup Day. Exceptions are provided for cash
contributions to the REMIC (i) during the three months following the Startup
Day, (ii) made to a qualified reserve fund by a holder of a Residual
Certificate, (iii) in the nature of a guarantee, (iv) made to facilitate a
qualified liquidation or clean-up call, and (v) as otherwise permitted in
Treasury Regulations yet to be issued. It is not anticipated that there will
be any taxable contributions to either REMIC.
Net Income from Foreclosure Property. The Lower-Tier REMIC will 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. Generally, property acquired by foreclosure or
deed in lieu of foreclosure would be treated as "foreclosure property" for a
period of two years, with possible extensions. Net income from foreclosure
property generally means gain from the sale of a foreclosure property that is
inventory property and gross income from foreclosure property other than
qualifying rents and other qualifying income for a real estate investment
trust. Examples of taxable net income from foreclosure property include net
income received as a result of the operation and management of a trade or
business
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on the foreclosure property (within the meaning of the rules applicable to
real estate investment trusts), income from the furnishing or rendering of
services to the tenants of such foreclosure property by an independent
contractor, to the extent that such services are not customarily furnished to
tenants in properties of a similar class in the geographic market in which
the property is located, and rental income based on the net profits of a
tenant.
LIQUIDATION OF THE REMIC
If a 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 taxable on any gain on the sale
of its assets, provided that the REMIC credits or distributes in liquidation
all of the sale proceeds plus its cash (other than amounts retained to meet
claims) to holders of regular and residual interests within the 90-day
period.
TAXATION OF CERTAIN FOREIGN INVESTORS
Interest, including OID, distributable to holders of Subordinated Units or
Subordinated Certificates who are non-resident aliens, foreign corporations,
or other Non-U.S. Persons (i.e., any person who is not a "U.S. Person"), will
be considered "portfolio interest" and, therefore, generally will not be
subject to a 30% United States withholding tax, provided that such Non-U.S.
Person (i) is not a "10-percent shareholder" within the meaning of Code
Section 871(h)(3)(B) or a controlled foreign corporation described in Code
Section 881(c)(3)(C) and (ii) provides the Trustee, or the person who would
otherwise be required to withhold tax from such distributions under Code
Section 1441 or 1442, with an appropriate statement, signed under penalties
of perjury, identifying the beneficial owner and stating, among other things,
that the beneficial owner of the Subordinated Unit or Subordinated
Certificate is a Non-U.S. Person. If such statement, or any other required
statement, is not provided, 30% withholding will apply unless reduced or
eliminated pursuant to an applicable tax treaty or unless the interest on the
Subordinated Unit or Subordinated Certificate is effectively connected with
the conduct of a trade or business within the United States by such Non-U.S.
Person. In the latter case, such Non-U.S. Person will be subject to United
States federal income tax at regular rates. Investors who are Non-U.S.
Persons should consult their own tax advisors regarding the specific tax
consequences to them of owning a Certificate. The term "U.S. Person" means 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, an estate that is subject to U.S. federal
income tax regardless of the source of its income or a trust if (A) for
taxable years beginning after December 31, 1996 (or for taxable years ending
after August 20, 1996, if the trustee has made an applicable election) a
court within the United States is able to exercise primary supervision over
the administration of such trust, and one or more United States fiduciaries
have the authority to control all substantial decisions of such trust, or (B)
for all other taxable years, such trust is subject to United States federal
income tax regardless of the source of its income.
BACKUP WITHHOLDING
Distributions made on the Subordinated Units or Subordinated Certificates,
and proceeds from the sale of the Subordinated Units or Subordinated
Certificates to or through certain brokers, may be subject to a "backup"
withholding tax under Code Section 3406 at the rate of 31% on "reportable
payments" (including interest distributions, original issue discount, and,
under certain circumstances, principal distributions) unless the
Certificateholder complies with certain reporting and/or certification
procedures, including the provision of its taxpayer identification number to
the Trustee, its agent or the broker who effected the sale of the
Subordinated Unit or Subordinated Certificate, or such Certificateholder is
otherwise an exempt recipient under applicable provisions of the Code. Any
amounts to be withheld from distributions on the Subordinated Units or
Subordinated Certificates would be refunded by the Internal Revenue Service
or allowed as a credit against the Certificateholder's federal income tax
liability.
REPORTING REQUIREMENTS
Each of the Upper-Tier REMIC and the Lower-Tier REMIC will be required to
maintain its books on a calendar year basis and to file federal income tax
returns in a manner similar to a partnership. The form for such returns is
Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return.
The Trustee will be required to sign each REMIC's returns. It is anticipated
that the REMIC's books and the Trustee's reports to investors will reflect
the aggregate treatment of the Subordinated Units as a single debt
instrument, without regard to whether the Subordinated Certificates become
separately tradable.
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<PAGE>
Reports of accrued interest, OID, if any, and information necessary to
compute the accrual of any market discount on the Subordinated Units will be
made annually to the Internal Revenue Service and to individuals, estates,
non-exempt and non-charitable trusts, and partnerships who are either holders
of record of Subordinated Units or beneficial owners who own Subordinated
Units through a broker or middleman as nominee. All brokers, nominees and all
other non-exempt holders of record of Subordinated Units (including
corporations, non-calendar year taxpayers, securities or commodities dealers,
real estate investment trusts, investment companies, common trust funds,
thrift institutions and charitable trusts) may request such information for
any calendar quarter by telephone or in writing by contacting the person
designated in Internal Revenue Service Publication 938 with respect to the
Upper-Tier REMIC and Lower-Tier REMIC. Holders through nominees must request
such information from the nominee.
Treasury Regulations require that, in addition to the foregoing
requirements, information must be furnished annually to holders of
Subordinated Units and filed annually with the Internal Revenue Service
concerning the percentage of each REMIC's assets meeting the qualified asset
tests described above under "Status of Subordinated Certificates."
DUE TO THE COMPLEXITY OF THESE RULES AND THE CURRENT UNCERTAINTY AS TO THE
MANNER TO THEIR APPLICATION TO THE TRUST FUND AND CERTIFICATEHOLDERS, IT IS
PARTICULARLY IMPORTANT THAT POTENTIAL INVESTORS CONSULT THEIR OWN TAX
ADVISORS REGARDING THE TAX TREATMENT OF THEIR ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE SUBORDINATE CERTIFICATES.
LEGAL INVESTMENT
The Subordinated Certificates will not constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984, as amended ("SMMEA"). The appropriate characterization of the
Subordinated Certificates under various legal investment restrictions, and
thus the ability of investors subject to these restrictions to purchase the
Subordinated Certificates, may be subject to significant interpretive
uncertainties.
All depository institutions considering an investment in the Subordinated
Certificates should review the "Supervisory Policy Statement on Securities
Activities" dated January 28, 1992, as revised April 15, 1994 (the "Policy
Statement") of the Federal Financial Institutions Examination Council. The
Policy Statement, which has been adopted by the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, the Office
of the Comptroller of the Currency and the Office of Thrift Supervision, and
by the National Credit Union Administration (with certain modifications),
prohibits depository institutions from investing in certain "high-risk
mortgage securities," except under limited circumstances, and sets forth
certain investment practices deemed to be unsuitable for regulated
institutions.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any
Subordinated Certificates, as they may be deemed unsuitable investments, or
may otherwise be restricted, under such rules, policies or guidelines.
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,
provisions which may restrict or prohibit investment in securities which are
not "interest bearing" or "income paying," and provisions which may restrict
or prohibit investments in securities which are issued in book-entry form.
No representation is made as to the proper characterization of the
Subordinated Certificates for legal investment purposes, financial
institution regulatory purposes, or other purposes, or as to the ability of
particular investors to purchase the Subordinated 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 Subordinated
Certificates) may adversely affect the liquidity of the Subordinated
Certificates. Accordingly, all institutions 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 Subordinated
Certificates constitute a legal investment or are subject to investment,
capital or other restrictions.
Investors should consult their own legal advisors in determining whether
and to what extent the Subordinated Certificates constitute legal investments
for such investors.
162
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USE OF PROCEEDS
The net proceeds from the sale of Subordinated Units will be used by the
Depositor to pay part of the purchase price of the Mortgage Loans.
163
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PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") between the Depositor and Bear,
Stearns & Co. Inc. and Nomura Securities International, Inc. (the
"Underwriters"), each of the Underwriters has severally agreed to purchase
from the Depositor, and the Depositor has agreed to sell to each of the
Underwriters, the respective principal balance of Subordinated Units set
forth opposite its name at the price to the public set forth on the cover
page of this Prospectus, less underwriting discount:
<TABLE>
<CAPTION>
PRINCIPAL BALANCE OF
UNDERWRITERS SUBORDINATED UNITS(1)
- ------------------------------------------ ------------------------
<S> <C>
Bear, Stearns & Co. Inc.................... $
Nomura Securities International, Inc. ....
------------------------
$
========================
</TABLE>
- ------------
(1) Subject to a permitted variance of plus or minus 5%.
The Underwriting Agreement provides that the obligations of the several
Underwriters are subject to the approval of certain legal matters by counsel,
and to certain other conditions. The nature of the Underwriters' obligations
is such that the Underwriters are committed to purchase all of the
Subordinated Units, if any are purchased, at a purchase price of [ ]% of
the initial principal balance thereof as of the Cut-off Date, plus accrued
interest from the Cut-off Date, before deducting expenses payable by the
Depositor. In the event of default by any Underwriter, the Underwriting
Agreement provides that, in certain circumstances, the purchase commitment of
the non-defaulting Underwriter may be increased or the Underwriting Agreement
may be terminated. After the initial public offering of the Subordinated
Units, the offering price and other selling terms may be changed by the
Underwriters.
The Depositor and the Mortgage Loan Seller will indemnify the Underwriters
against certain liabilities, including civil liabilities under the Act or
will contribute to payments that the Underwriters may be required to make in
respect thereof in accordance with the terms and provisions of the
Underwriting Agreement.
Pursuant to the provisions of NASD Conduct Rule 2810(b)(2)(C), NASD
members may not execute transaction in the Subordinated Units for any
accounts over which they exercise discretionary authority without prior
written approval of the customer.
There is currently no secondary market for the Subordinated Units or the
Subordinated Certificates. Each of the Underwriters currently expects to make
a secondary market in the Subordinated Units and, if separately traded, the
Subordinated Certificates, but has no obligation to do so. There can be no
assurance that an active secondary market for the Subordinated Units or, if
separately traded, Subordinated Certificates will develop or that any such
market, if established, will continue.
To facilitate the Offering, the Underwriters may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Subordinated
Units. This may include over-allotments or short sales of the Subordinated
Units, which involves the sale by the Underwriters of more Subordinated Units
than have been sold to them by the Company. In such circumstances, the
Underwriters would cover such over-allotments or short positions by
purchasing Subordinated Units in the open market. In addition, the
Underwriters may stabilize or maintain the price of the Subordinated Units by
bidding for or purchasing Subordinated Units in the open market or by
imposing penalty bids, whereby selling concessions allowed to broker-dealers
participating in the Offering may be reclaimed if Subordinated Units sold by
them are repurchased in connection with stabilization transactions. The
effect of these transactions may be to stabilize or maintain the market price
of the Subordinated Units at a level above that which might otherwise prevail
in the open market. Such transactions, if commenced, may be discontinued at
any time.
This Prospectus may only be issued or passed on in the United Kingdom to a
person who is of a kind described in Article 9(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1988 or is a person
to whom this Prospectus may otherwise lawfully be issued or passed on.
The Trust Fund described in this Prospectus may only be promoted (whether
by the issuing or passing on of documents as referred to in the foregoing
restriction or otherwise) by an authorized person under Chapter III of the
Financial Services Act 1986 of the United Kingdom ("FSA") to a person in the
United Kingdom if that person is of a kind described in section 76(2) of the
FSA or as permitted by the Financial Services (Promotion of Unregulated
Schemes) Regulations 1991.
164
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The Mortgage Loan Seller and NSI are wholly owned subsidiaries of Nomura
Holding America Inc. The Depositor is a wholly owned subsidiary of the
Mortgage Loan Seller. The Mortgage Loan Seller or an affiliate has acquired a
preferred equity interest in 16 of the borrowers or their affiliates, which
are the borrowers (or affiliates) with respect to Mortgage Loans representing
approximately 25.6% of the Initial Pool Balance. In addition, the Mortgage
Loan Seller or an affiliate has an equity interest in the borrower with
respect to the South Dekalb Mall and has an equity interest in the parent of
the borrower with respect to the Montague Park Tech Center and in Westin. See
"Risk Factors -- Other Financing," "--Equity Investments by the Mortgage Loan
Seller and/or its Affiliates" and "--Conflicts of Interest." In addition, the
Mortgage Loan Seller or an affiliate may have other financing arrangements
with affiliates of the borrowers and may enter into additional financing
relationships in the future. Certain officers and directors of the Depositor
and its affiliates own equity interests in affiliates of the borrowers.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Cadwalader,
Wickersham & Taft, New York, New York. Certain legal matters will be passed
upon for the Underwriters by Shearman & Sterling, New York, New York.
FINANCIAL INFORMATION
A new Trust Fund is being formed with respect to the Certificates and the
Trust Fund will not engage in any business activities or have any assets or
obligations prior to the issuance of the Certificates. Accordingly, no
financial statements with respect to the Trust Fund will be included in this
Prospectus.
RATING
It is a condition to the issuance of the Subordinated Certificates that
(i) the Senior Certificates be issued and offered, (ii) the Class B-1
Certificates be rated "BB+" by each of S&P and Fitch, the Class B-2
Certificates be rated "BB" by each of S&P and Fitch, the Class B-3
Certificates be rated "BB-" by each of S&P and Fitch, the Class B-4
Certificates be rated "B+" by S&P, the Class B-5 Certificates be rated "B" by
S&P and the Class B-6 Certificates be rated "B-" by S&P.
The Rating Agencies' ratings on mortgage pass-through certificates address
the likelihood of the timely payment of interest and the ultimate repayment
of principal by the Rated Final Distribution Date. The Rating Agencies'
ratings take into consideration the credit quality of the Mortgage Pool,
structural and legal aspects associated with the Certificates, and the extent
to which the payment stream in the Mortgage Pool is adequate to make payments
required under the Certificates. Ratings on mortgage pass-through
certificates do not, however, represent an assessment of the likelihood,
timing or frequency of principal prepayments (both voluntary and involuntary)
by mortgagors, or the degree to which such prepayments might differ from
those originally anticipated. The security ratings do not address the
possibility that Certificateholders might suffer a lower than anticipated
yield. In addition, ratings on mortgage pass-through certificates do not
address the likelihood of receipt of Prepayment Premiums, Net Default
Interest or Excess Interest or the timing or frequency of the receipt
thereof. In general, the ratings thus address credit risk and not prepayment
risk. Also, a security rating does not represent any assessment of the yield
to maturity that investors may experience.
There can be no assurance as to whether any rating agency not requested to
rate the Subordinated Certificates will nonetheless issue a rating and, if
so, what such rating would be. A rating assigned to the Subordinated
Certificates by a rating agency that has not been requested by the Depositor
to do so may be lower than the rating assigned by the Rating Agencies
pursuant to the Depositor's request.
The rating of the Subordinated Certificates should be evaluated
independently from similar ratings on other types of securities. 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 agency.
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 Act with respect to the Subordinated Certificates. This
Prospectus contains summaries of the material terms of the documents referred
to herein, but does 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
165
<PAGE>
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: Midwest Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and Northeast
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048.
The Commission also maintains a site on the World Wide Web (the "Web") at
"http://www.sec.gov" at which users can view and download copies of reports,
proxy and information statements and other information filed electronically
through the Electronic Data Gathering, Analysis and Retrieval ("EDGAR")
system.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given
or made, such information or representations must not be relied upon. This
Prospectus does not constitute an offer to sell or a solicitation of an offer
to buy any securities other than the Subordinated Certificates or an offer of
the Subordinated Certificates to any person in any state or other
jurisdiction in which such offer would be unlawful. The delivery of this
Prospectus at any time does not imply that information herein is correct as
of any time subsequent to its date; however, if any material change occurs
while this Prospectus is required by law to be delivered, this Prospectus
will be amended or supplemented accordingly.
166
<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
<TABLE>
<CAPTION>
<S> <C>
1
1986 Act ......................................... 156
A
AA ............................................... 122
Aaa .............................................. 122
ACLI Reports ..................................... 42
ACMs ............................................. 32
Act .............................................. 1
Actual On-going Capital Reserves ................. 64
ADA .............................................. 35, 153
Advance Rate ..................................... 120
Advances ......................................... 120
Allocated Loan Amount ............................ 63
AMI .............................................. 7
Amortization ..................................... 64
AMRESCO .......................................... 7
Anchor ........................................... 64
Ann .............................................. 63
Annual Debt Service .............................. 63
Anticipated Remaining Term ....................... 63
Anticipated Repayment Date ....................... 63
Appraisal Reduction Amount ....................... 87
Appraisal Reduction Event ........................ 87
ARD Loans ........................................ 8
Assisted Living Loan ............................. 44
Assisted Living Property ......................... 44
Assumed Maturity Date ............................ 15
Assumed Scheduled Payment ........................ 82
Audit/Agreed Upon Procedures/Review .............. 64
Available Funds .................................. 77
B
Balloon Loans .................................... 58
Balloon Payment .................................. 58
Balloon Payments ................................. 33
Bankruptcy Code .................................. 148
Bloomfield ....................................... 8
Bloomfield Purchase Agreement .................... 118
Burnham Inc ...................................... 52
Burnham Pacific Borrowers ........................ 52
Burnham Pacific Loan ............................. 52
C
Cash Collateral Accounts ......................... 121
CEDEL ............................................ 1
CEDEL Participants ............................... 90
CERCLA ........................................... 32
Certificate Balance .............................. 1
Certificate Registrar ............................ 88
Certificateholder ................................ 88
Certificates ..................................... 1
Class ............................................ 1
CMA Report ....................................... 41
167
<PAGE>
Code ............................................. 18
Collateral Account ............................... 130
Collateral Substitution Deposit .................. 59
Collection Account ............................... 121
Collection Period ................................ 79
Commission ....................................... 165
Constant Prepayment Rate ......................... 103
Cooperative ...................................... 90
Coupon Strip Certificates ........................ 76
CPR .............................................. 103
Crime Control Act ................................ 153
Cut-off Date Principal Balance ................... 63
D
Default Interest ................................. 79
Default Interest Distribution Account ............ 122
Default Rate ..................................... 79
Defeasance Lock-out Period ....................... 59
Defeasance Option ................................ 59
Definitive Certificates .......................... 90
Delinquency ...................................... 81
Delinquency Reduction Amount ..................... 81
Deposit .......................................... 130
Depositaries ..................................... 88
Depositor ........................................ 1
Directing Holders ................................ 130
Distribution Accounts ............................ 121
Distribution Date ................................ 1
Distribution Date Statement ...................... 139
DSCR ............................................. 63
DTC .............................................. 1, B-1
E
EDGAR ............................................ 166
Eligible Bank .................................... 122
Euroclear ........................................ 1
Euroclear Operator ............................... 90
Euroclear Participants ........................... 90
Event of Default ................................. 126
Excess Cash Flow ................................. 58
57,
Excess Interest .................................. 79
Excess Interest Distribution Account ............. 122
Excess Rate ...................................... 79
F
Factory Outlet Loan .............................. 44
Factory Outlet Property .......................... 44
Fair Market Value ................................ 130
Final Recovery Determination ..................... 139
Fiscal Agent ..................................... 13
Fixed Voting Rights Percentage ................... 128
Franchise ........................................ 64
FSA .............................................. 164
168
<PAGE>
G
GLA .............................................. 64
Global Securities ................................ B-1
GlobalSecurities ................................. B-1
H
Holders .......................................... 91
Hotel Loan ....................................... 44
Hotel Property ................................... 44
Hudson Hotels Borrower ........................... 53
Hudson Hotels Manager ............................ 53
Hudson Hotels Pool Loan .......................... 53
I
Identified Deferred Maintenance .................. 64
Indirect Participants ............................ 89
Industrial Loan .................................. 44
Industrial Property .............................. 44
Industry Overview ................................ 42
Initial Pool Balance ............................. 44
Instructions ..................................... 130
Interest Accrual Amount .......................... 79
Interest Accrual Period .......................... 80
Interest Reserve Account ......................... 121
Interest Shortfall ............................... 80
International Plaza Borrower ..................... 50
International Plaza Loan ......................... 50
International Plaza Property ..................... 50
J
Junior Subordinated Certificates ................. 1
K
Kendall Square Pool Loan ......................... 48
Kendall Square Pool Properties ................... 48
L
Lazard ........................................... 49
Lazard Mezzanine Financing ....................... 49
Level A .......................................... 114
Lock Box Accounts ................................ 121
Lower Rate ....................................... 129
Lower-Tier Regular Interests ..................... 154
Lower-Tier REMIC ................................. 2
LTV .............................................. 62
M
Major Tenants .................................... 64
Marina Harbor Borrower ........................... 54
Marina Harbor Loan ............................... 53
Marina Harbor Manager ............................ 54
Marina Harbor Maturity Date ...................... 53
Marina Harbor Property ........................... 53
Marina Harbor Submanager ......................... 54
Maturity Date/Anticipated Repayment Date LTV .... 64
Mezzanine Debt ................................... 27
Minimum Defaulted Monthly Payment ................ 129
Mobile Home Loan ................................. 44
Mobile Home Property ............................. 44
169
<PAGE>
Monthly Debt Service Payment ..................... 58
Monthly Mortgage Loan Payments ................... 28
Monthly Operating Expenses ....................... 28
Monthly Payment .................................. 78
Mortgage ......................................... 44
Mortgage Loan Assumptions ........................ 103
Mortgage Loan Purchase and Sale Agreement ....... 45
Mortgage Loan Seller ............................. 6, 7
Mortgage Loans ................................... 1
Mortgage Pool .................................... 1
Mortgaged Properties ............................. 1
Multifamily Loan ................................. 44
Multifamily Property ............................. 44
N
NCUA ............................................. 152
Net Cash Flow .................................... 46
Net Default Interest ............................. 79
Net REO Proceeds ................................. 79
Note ............................................. 44
NSI .............................................. 7
O
Occupancy ........................................ 64
Office Loan ...................................... 44
Office Property .................................. 44
OID .............................................. 156
OID Regulations .................................. 156
Original Loan Balance ............................ 63
Originators ...................................... 8
P
Participants ..................................... 88
Pass-Through Rate ................................ 16
Percentage Interest .............................. 77
Permitted Investments ............................ 122
P&I Advance ...................................... 119
Plan of Distribution ............................. 2
Policy Statement ................................. 162
Pool Loans ....................................... 61
Pooling and Servicing Agreement .................. 112
Prepayment Assumptions ........................... 103
Prepayment Interest Shortfall .................... 81
Prepayment Premium ............................... 58
Prime Rate ....................................... 121
Principal Prepayments ............................ 79
Principal Recovery Fee ........................... 138
Property Advances ................................ 120
Puente Hills Borrower ............................ 52
Puente Hills Loan ................................ 52
R
Rated Final Distribution Date .................... 102
Realized Loss .................................... 85
Record Date ...................................... 77
Regular Certificates ............................. 154
Release Date ..................................... 59
170
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Relief Act ....................................... 152
Remaining Lock-out ............................... 64
REMIC ............................................ 2
REMIC Regulations ................................ 154
REO Account ...................................... 76
REO Mortgage Loan ................................ 83
REO Property ..................................... 76
Repurchase Price ................................. 117
Reserve Accounts ................................. 45
Reserve for Deferred Maintenance ................. 64
Residual Certificates ............................ 17
Retail Loan ...................................... 44
Retail Property .................................. 44
Revised Rate ..................................... 57
RICO ............................................. 153
Rules ............................................ 89
S
Saracen Borrower ................................. 49
Saracen Pool Loan ................................ 49
Saracen Pool Properties .......................... 49
Saracen Pool Property ............................ 49
SEL .............................................. 2
Senior Certificates .............................. 1
Senior Housing/Healthcare Loan ................... 44
Senior Housing/Healthcare Property ............... 44
Servicer ......................................... 7
Servicer Remittance Date ......................... 119
Servicer's Appraisal Estimate .................... 87
Servicing Compensation ........................... 137
Servicing Fee .................................... 137
Servicing Fee Rate ............................... 137
Servicing Standard ............................... 118
SMMEA ............................................ 162
Special Servicing Fee ............................ 138
Specially Serviced Mortgage Loan ................. 138
Startup Day ...................................... 155
Stated Maturity Date ............................. 63
Stated Principal Balance ......................... 86
Subordinate Class Advance Amount ................. 119
Subordinated Certificates ........................ 1
Subordinated Units ............................... 1
T
Terms and Conditions ............................. 90
Title V .......................................... 152
Title VIII ....................................... 152
Treasury Rate .................................... 57
Treasury Regulations ............................. 154
Trust Fund ....................................... 1
Trust REMICs ..................................... 154
Trustee .......................................... 13
Trustee Fee ...................................... 136
TTM .............................................. 63
171
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U
UCC .............................................. 144
Underwriters ..................................... 164
Underwriting Agreement ........................... 164
Unit ............................................. 64
Unscheduled Payments ............................. 79
Updated Appraisal ................................ 129
Upper-Tier REMIC ................................. 2
U.S. Person ...................................... 161
V
Valley Central Borrower .......................... 52
Valley Central Loan .............................. 52
Value ............................................ 64
W
Web .............................................. 166
Wells Holdings ................................... 49
Withheld Amounts ................................. 121
Y
YE ............................................... 63
Year Built/Renovated ............................. 64
YTD .............................................. 63
Z
Zoning Laws ...................................... 35
</TABLE>
172
<PAGE>
GLOSSARY OF KEY REAL ESTATE, MORTGAGE
AND MORTGAGE LOAN UNDERWRITING TERMS
- -A-
"ACMS" means asbestos containing materials.
"ACTUAL ON-GOING CAPITAL RESERVES" means the annual reserves per unit of
measure or as a percentage of gross revenue, as indicated, and escrowed on a
monthly basis.
"ALLOCATED LOAN AMOUNT" means, for each Mortgaged Property, the portion of
the principal amount of the related Mortgage Loan allocated to such Mortgaged
Property for certain purposes (including, without limitation, determining the
release prices of properties, if the Mortgage Loan permits such releases)
under such Mortgage Loan. The Allocated Loan Amount for each Mortgaged
Property securing a Mortgage Loan was determined generally based on the ratio
of the Net Cash Flow or net operating income (calculated as provided in the
related Mortgage Loan) or appraised value, or some combination thereof, of
such Mortgaged Property to the aggregate Net Cash Flow or appraised value, or
some combination thereof, of all the Mortgaged Properties securing such
Mortgage Loan. The Allocated Loan Amount for each Mortgaged Property may be
adjusted upon the payment of principal of the related Mortgage Loan, whether
upon amortization, prepayment, or otherwise.
"AMORTIZATION" means the number of months, based on the constant Monthly
Payment as stated in the related Note or Loan Agreement, that would be
necessary to reduce the principal balance of the related Note to zero if
interest on such Note were calculated based on twelve 30-day months and a
360-day year.
"ANCHOR" means, with respect to Retail Properties, the largest, second
largest and third largest tenants, if any.
"ANNUAL DEBT SERVICE" means the current annual debt service payable on the
related Mortgage Loan.
"ANTICIPATED REMAINING TERM" means the term of the Mortgage Loan from the
Cut-off Date to the earlier of the Anticipated Repayment Date, if applicable,
or the maturity date.
"ANTICIPATED REPAYMENT DATE" or "ARD" means, for ARD Loans, the date on which
interest begins accruing at the Revised Rate and Excess Cash Flow is retained
pursuant to the related Lock-box Agreements to be applied to payment of
principal and Excess Interest.
"APPRAISAL REDUCTION AMOUNT" means, for any Distribution Date and for any
Mortgage Loan as to which any Appraisal Reduction Event has occurred, an
amount equal to the excess of (a) the outstanding Stated Principal Balance of
such Mortgage Loan over (b) the excess of (i) 90% of the sum of the appraised
values of the related Mortgaged Properties as determined by independent MAI
appraisals (the costs of which shall be paid by the Servicer as an Advance)
over (ii) the sum of (A) to the extent not previously advanced by the
Servicer, the Trustee or the Fiscal Agent, all unpaid interest on such
Mortgage Loan at a per annum rate equal to the Mortgage Rate, (B) all
unreimbursed Advances and interest thereon at the Advance Rate in respect of
such Mortgage Loan and (C) all currently due and unpaid real estate taxes,
ground rents and assessments and insurance premiums and all other amounts due
and unpaid under the Mortgage Loan (which tax, premiums and other amounts
have not been the subject of an Advance by the Servicer).
"APPRAISAL REDUCTION EVENT" means any of the following: (i) the third
anniversary of the date on which an extension of the maturity date of a
Mortgage Loan becomes effective as a result of a modification of such
Mortgage Loan by the Special Servicer, which extension does not change the
amount of Monthly Payments on the Mortgage Loan (unless during such extension
period the borrower has been delinquent for 60 days or more, in which case,
the first Distribution Date following such 60 day delinquency), (ii) 90 days
after an uncured delinquency occurs in respect of a Mortgage Loan, (iii)
immediately after the date on which a reduction in the amount of Monthly
Payments on a Mortgage Loan, or a change in any other material economic term
of the Mortgage Loan, becomes effective as a result of a modification of such
Mortgage Loan by the Special Servicer, (iv) immediately after a receiver has
been appointed, (v) immediately after a borrower declares bankruptcy, (vi)
immediately after a Mortgage Loan becomes an REO Mortgage Loan, (vii) upon a
default in the payment of a Balloon Payment, (viii) immediately after an
occurrence of an event for which a Property Advance would be required to be
made by the Servicer or (ix) any other event which, in the discretion of the
Servicer and of which the Servicer becomes aware in performing its
obligations in accordance with the Servicing Standard, would materially and
adversely impair the value of the Mortgaged Property and security for the
related Mortgage Loan.
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"ARD LOAN" generally means a Mortgage Loan that substantially fully amortizes
by its respective repayment date (and not its Anticipated Repayment Dates)
but provides for an Anticipated Repayment Date on which a substantial amount
of principal will be due if the borrower elects to prepay the Mortgage Loan
in full on such date.
"ASSUMED MATURITY DATE" means with respect to (a) any Mortgage Loan that is
not a Balloon Loan, the maturity date of such Mortgage Loan and (b) any
Balloon Loan, the date on which a Mortgage Loan would be deemed to mature in
accordance with its original amortization schedule absent its Balloon
Payment.
- -B-
"BALLOON LOANS" means a Mortgage Loan that provide for monthly payments of
principal based on an amortization schedule at least 60 months longer than
its original term.
"BALLOON PAYMENT" means the substantial payment of principal due at the
maturity date of a Balloon Loan unless previously prepaid.
- -C-
"CASH COLLATERAL ACCOUNTS" means, with respect to each Mortgage Loan that has
a Lock Box Account, one or more accounts established in the name of the
Servicer and into which funds in the related Lock Box Accounts will be swept
on a regular basis.
"COLLATERAL ACCOUNT" means a segregated account established by the Servicer
to receive certain deposits by the Directing Holders upon the occurrence of
certain defaults on Balloon Payments.
"COLLATERAL SUBSTITUTION DEPOSIT" means an amount equal to the sum of (x) the
remaining principal amount of the Mortgage Loan or, if applicable, 125%
(generally) of the Allocated Loan Amount of the related Mortgaged Property or
Properties sought to be released, (y) the amount, if any, which, when added
to such amount, will be sufficient to purchase direct non-callable
obligations of the United States of America providing payments (1) on or
prior to, but as close as possible to, all successive scheduled payment dates
from the Release Date to the related maturity date, assuming, in the case of
an ARD Loan, that such loan prepays on the related Anticipated Repayment Date
and (2) in amounts equal to the scheduled payments due on such Due Dates
under the Mortgage Loan, and (z) any costs and expenses incurred in
connection with the purchase of such U.S. government obligation.
"CONSTANT PREPAYMENT RATE" or "CPR" means the prepayment model used in the
Prospectus and representing an assumed constant annual rate of prepayment
each month, expressed as a per annum percentage of the then-scheduled
principal balance of the pool of mortgage loans.
"CUT-OFF DATE ALLOCATED LOAN AMOUNT" means, for each Mortgaged Property, the
Allocated Loan Amount of such property as of the Cut-off Date.
"CUT-OFF DATE PRINCIPAL BALANCE" means, for each Mortgage Loan, the unpaid
principal balance thereof as of the Cut-off Date.
- -D-
"DEFEASANCE LOCK-OUT PERIOD" means a specified period, which is generally the
greater of approximately three years from the date of origination and two
years from the Closing Date, after which, provided no event of default
exists, a release of a Mortgaged Property from the lien of the related
Mortgage may be obtained.
"DEFEASANCE OPTION" means a release of a Mortgaged Property from the lien of
the related Mortgage in exchange for a Collateral Substitution Deposit
following the Defeasance Lock-out Period.
"DELINQUENCY" means any failure of the borrower to make a scheduled payment
on a Due Date.
"DSCR" means, with respect to any Mortgage Loan, the Net Cash Flow for the
related Mortgaged Property divided by the Annual Debt Service for such
Mortgaged Property.
- -E-
"EXCESS CASH FLOW" means the cash flow from the Mortgaged Property or
Properties securing an ARD Loan after payments of the following: (i) required
payments to the tax and insurance escrow fund and any ground lease escrow
fund,
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<PAGE>
(ii) payment of Monthly Debt Service, (iii) payments to any other required
escrow funds, (iv) payment of operating expenses pursuant to the terms of an
annual budget approved by the Servicer, and (v) payment of approved
extraordinary operating expenses or capital expenses not set forth in the
approved annual budget or allotted for in any escrow fund.
"EXCESS INTEREST" means, with respect to each of the Mortgage Loans that has
a Revised Rate, interest accrued on such Mortgage Loan allocable to the
Excess Rate.
"EXCESS RATE" means, with respect to each of the Mortgage Loans that has a
Revised Rate, the difference between (a) the applicable Revised Rate and (b)
the applicable Mortgage Rate.
- -F-
"FAIR MARKET VALUE" means the fair market value of a Mortgaged Property,
after accounting for the estimated liquidation and carrying costs.
"FINAL RECOVERY DETERMINATION" means the date of the determination by the
Special Servicer that it has recovered all payments which it expects to be
finally recoverable.
- -G-
"GLA" means the square footage of the gross leasable area of each Mortgaged
Property.
- -I-
"IDENTIFIED DEFERRED MAINTENANCE" means the estimated amount of deferred
maintenance in a Mortgaged Property's structural engineering report.
"INITIAL POOL BALANCE" means the Cut-off Date Principal Balance of the
Mortgage Pool.
- -L-
"LOAN-TO-VALUE RATIO" or "LTV" means, with respect to any Mortgage Loan, the
principal balance of such Mortgage Loan as of the Cut-off Date divided by the
appraised value of the Mortgaged Property or Properties securing such
Mortgage Loan.
"LOCK BOX ACCOUNTS" means one or more accounts that have been established in
the name of the related borrower into which rents or other revenues from
related Mortgaged Properties are deposited by the tenants or manager. All
funds on deposit in the Lock Box Accounts are periodically swept into the
Cash Collateral Accounts.
"LOCK-OUT PERIOD" means a period during which a Mortgage Loan prohibits
voluntary prepayment.
- -M-
"MEZZANINE DEBT" means loans made by the Mortgage Loan Seller to affiliates
of certain of the borrowers that are secured by equity interests in the
borrowers or affiliates of the borrowers.
"MONTHLY DEBT SERVICE PAYMENT" means the payment of interest at the Mortgage
Rate and principal based on the amortization schedule.
"MONTHLY MORTGAGE LOAN PAYMENTS" means all required monthly debt service
payments, reserve payments and other payments under the related Mortgage
Loan.
"MONTHLY OPERATING EXPENSES" means all monthly operating expenses with
respect to a related Mortgaged Property.
"MONTHLY PAYMENT" means the scheduled monthly payment of principal (if any)
and interest at the Mortgage Rate, excluding any Balloon Payment but not
excluding any constant Monthly Payment, which is payable by the related
borrower on the related Due Date.
"MORTGAGE" means a mortgage, deed of trust or other similar security
instrument.
"MORTGAGE LOAN ASSUMPTIONS" means the following assumptions regarding the
Mortgage Loans: (i) each Mortgage Loan will pay principal and interest in
accordance with its terms and scheduled payments will be timely received on
the 11th day
175
<PAGE>
of each month; (ii) the Mortgage Loan Seller does not repurchase any Mortgage
Loan as described under "The Pooling and Servicing Agreement-Representations
and Warranties-Repurchase"; (iii) none of the Depositor, Servicer, or the
Class LR Certificateholders exercise the right to cause early termination of
the Trust Fund; and (iv) the date of determination of weighted average life
is April 2, 1997.
"MORTGAGE LOAN PURCHASE AND SALE AGREEMENT" means the Mortgage Loan Purchase
and Sale Agreement to be dated as of the Cut-off Date between the Mortgage
Loan Seller and the Depositor pursuant to which the Depositor will purchase
the Mortgage Loans to be included in the Mortgage Pool.
"MORTGAGE LOAN SELLER" means Nomura Asset Capital Corporation.
"MORTGAGE LOANS" means the 121 fixed-rate mortgage loans included in the
Mortgage Pool.
"MORTGAGE POOL" means a pool of 121 fixed-rate mortgage loans, with original
terms to maturity of generally not more than thirty years, deposited in the
Trust Fund by the Depositor.
"MORTGAGE RATE" means, with respect to each Mortgage Loan, the annual rate,
not including any Excess Rate, at which interest accrues on such Mortgage
Loan.
"MORTGAGED PROPERTIES" means the anchored and unanchored retail properties,
office buildings, full and limited service hotels, multifamily residential
housing, nursing homes, industrial properties, factory outlet centers, mobile
home and recreational vehicle parks and an assisted living facility which
secure the Mortgage Loans.
- -N-
"NET CASH FLOW" means cash flow available for debt service, as determined by
the Mortgage Loan Seller based upon borrower supplied information for a
recent period that is generally the twelve months prior to the origination of
such Mortgage Loan, adjusted for stabilization and, in the case of certain
Mortgage Loans, may have been updated to reflect a more recent operating
period. Net Cash Flow does not reflect debt service, non-cash items such as
depreciation or amortization, and does not reflect actual capital
expenditures and may have been adjusted by, among other things, (i) assuming
the occupancy rate for the Mortgaged Property was less than the actual
occupancy rate, (ii) subtracting from net operating income replacement or
capital expenditure reserves, (iii) assuming that a 4% to 5% management fee
and a 4% to 8% franchise fee (for Hotel Properties only) was payable with
respect to the Mortgaged Property, (iv) in certain cases, assuming that
operating and/or capital expenses with respect to the Mortgaged Property were
greater than actual expenses, (v) in the case of the Retail Properties,
excluding certain percentage rent, (vi) in the case of the Retail Properties
and Office Properties, subtracting from net operating income an assumed
allowance for tenant improvements and leasing commissions, (vii) in the case
of the Multifamily Properties and Mobile Home Properties, rental revenue
shown on a recent rent roll was annualized before applying a vacancy factor
without further regard to the terms (including expiration dates) of the
leases shown thereon, (viii) excluding certain non-recurring income and/or
expenses, (ix) in the case of certain Office Properties, Industrial
Properties and Retail Properties, determining current revenues from leases in
place, (x) in the case of certain of the Hotel Properties, assuming the
occupancy rate was less than the actual occupancy rate to account for a high
occupancy rate or to reflect new construction in the market and (xi) to take
into account new tax assessments and utility savings from the installation of
new energy efficient equipment.
"NET MORTGAGE PASS-THROUGH RATE" means, with respect to any Mortgage Loan and
any Distribution Date, the Mortgage Pass-Through Rate for such Mortgage Loan
for the related Interest Accrual Period minus the aggregate of the applicable
Servicing Fee Rate.
"NET REO PROCEEDS" means, with respect to any REO Property and any related
REO Mortgage Loan, all revenues received by the Special Servicer with respect
to such REO Property or REO Mortgage Loan net of any insurance premiums,
taxes, assessments and other costs and expenses permitted to be paid
therefrom pursuant to the Pooling and Servicing Agreement
"NOTE" means a promissory note.
- -O-
"OCCUPANCY" means the percentage of gross leasable area, rooms, units, beds
or sites of the property that is leased.
"ORIGINAL PRINCIPAL LOAN BALANCE" means the principal balance of the Mortgage
Loan as of the date of origination.
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<PAGE>
"ORIGINATORS" means Bloomfield and the Mortgage Loan Seller.
- -P-
"P&I ADVANCE" means an amount advanced by the Servicer, the Trustee or the
Fiscal Agent, as applicable and in each case subject to a recoverability
determination, equal to the total or any portion of the Monthly Payment or
Minimum Defaulted Monthly Payment on a Mortgage Loan (with interest at the
Mortgage Pass-Through Rate) not received that was delinquent as of the close
of business on the immediately preceding Due Date (and which delinquent
payment has not been cured as of the Servicer Remittance Date), or, in the
event of a default in the payment of amounts due on the maturity date of a
Mortgage Loan, the amount equal to the Monthly Payment or portion thereof not
received that was due prior to the maturity date.
"PASS-THROUGH RATE" means, for any Class of Certificates or Component, the
per annum rate at which interest accrues on the Certificates of such Class or
component during any Interest Accrual Period.
"POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing Agreement
to be dated as of March 27, 1997, by and among the Depositor, the Servicer,
the Special Servicer, the Trustee and the Fiscal Agent.
"PREFERRED INTEREST HOLDER" means the Mortgage Loan Seller or its affiliates
in the capacity as holder of a preferred equity interest in a borrower or an
affiliate of a borrower.
"PROPERTY ADVANCES" means an amount advanced by the Servicer, the Trustee or
the Fiscal Agent, as applicable and in each case subject to a recoverability
determination, to pay delinquent real estate taxes, assessments and hazard
insurance premiums and to cover other similar costs and expenses necessary to
preserve the priority of the related Mortgage, enforce the terms of any
Mortgage Loan or to maintain such Mortgaged Property.
- -R-
"RATED FINAL DISTRIBUTION DATE" means April 14, 2029, the Distribution Date
occurring after the latest Assumed Maturity Date of any of the Mortgage
Loans.
"REALIZED LOSS" means, with respect to any Distribution Date, the amount, if
any, by which the aggregate Certificate Balance of the Certificates after
giving effect to distributions made on such Distribution Date exceeds the
aggregate Stated Principal Balance of the Mortgage Loans as of the Due Date
occurring in the month in which such Distribution Date occurs.
"RELEASE DATE" means any Due Date on which a borrower exercises its
Defeasance Option.
"REMAINING LOCK-OUT" means the period of the term of the related Mortgage
Loan from the Cut-off Date during which the Mortgage Loan may not be prepaid.
"REO ACCOUNT" means any account established in connection with REO
Properties.
"REO MORTGAGE LOAN" means any Mortgage Loan as to which the related Mortgaged
Property has become an REO Property.
"REO PROPERTY" means, upon acquisition, any Mortgaged Property acquired by
the Special Servicer on behalf of the Trust Fund through foreclosure or deed
in lieu of foreclosure.
"REPRESENTATIONS AND WARRANTIES OF THE MORTGAGE LOAN SELLER" means those
representations and warranties made by the Mortgage Loan Seller to the
Depositor in the Mortgage Loan Purchase and Sale Agreement and assigned by
the Depositor to the Trustee for the benefit of Certificateholders pursuant
to the Pooling and Servicing Agreement, as more fully described under "The
Pooling and Servicing Agreement -- Representations and Warranties;
Repurchase."
"RESERVE ACCOUNTS" means one or more reserve or escrow accounts for, among
other things, necessary repairs, replacements and environmental remediation,
real estate taxes and insurance premiums, deferred maintenance and/or
scheduled capital improvements, re-leasing reserves and seasonal working
capital reserves.
"RESERVE FOR DEFERRED MAINTENANCE" means the actual dollars escrowed at the
loan origination for deferred maintenance repairs.
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<PAGE>
- -S-
"SERVICER" means AMRESCO Management, Inc.
"SERVICING STANDARD" means the standards established under the Pooling and
Servicing Agreement which require the Servicer and Special Servicer to
service and administer the Mortgage Loans on behalf of the Trust Fund solely
in the best interests of and for the benefit of all of the holders of
Certificates (as determined by the Servicer or Special Servicer in the
exercise of its reasonable judgment) in accordance with applicable law, the
terms of the Pooling and Servicing Agreement and the Mortgage Loans and to
the extent not inconsistent with the foregoing, in the same manner in which,
and with the same care, skill, prudence and diligence with which, it (a)
services and administers similar mortgage loans comparable to the Mortgage
Loans and held for other third party portfolios or (b) administers mortgage
loans for its own account, whichever standard is higher, but without regard
to (i) any known relationship that the Servicer or Special Servicer, or an
affiliate of the Servicer or Special Servicer, may have with the borrowers or
any other party to the Pooling and Servicing Agreement; (ii) the ownership of
any Certificate by the Servicer or Special Servicer or any affiliate of the
Servicer or Special Servicer, as applicable; (iii) the Servicer's or Special
Servicer's obligation to make Advances or to incur servicing expenses with
respect to the Mortgage Loans; (iv) the Servicer's or Special Servicer's
right to receive compensation for its services under the Pooling and
Servicing Agreement or with respect to any particular transaction; or (v) the
ownership, or servicing or management for others, by the Servicer or Special
Servicer of any other mortgage loans or property.
"SPECIAL SERVICER" means AMRESCO Management, Inc.
"SPECIALLY SERVICED MORTGAGE LOAN" means any Mortgage Loan with respect to
which: (i) the related borrower has not made two consecutive Monthly Payments
(and has not cured at least one such delinquency by the next due date under
the related Mortgage Loan) or (ii) the Servicer, the Trustee and/or the
Fiscal Agent has made four consecutive P&I Advances (regardless of whether
such P&I Advances have been reimbursed); (iii) the borrower has expressed to
the Servicer an inability to pay or a hardship in paying the Mortgage Loan in
accordance with its terms; (iv) the Servicer has received notice that the
borrower has become the subject of any bankruptcy, insolvency or similar
proceeding, admitted in writing the inability to pay its debts as they come
due or made an assignment for the benefit of creditors; (v) the Servicer has
received notice of a foreclosure or threatened foreclosure of any lien on the
Mortgaged Property securing the Mortgage Loan; (vi) a default of which the
Servicer has notice (other than a failure by the borrower to pay principal or
interest) and which materially and adversely affects the interests of the
Certificateholders has occurred and remained unremedied for the applicable
grace period specified in the Mortgage Loan (or, if no grace period is
specified, 60 days); provided, that a default requiring a Property Advance
will be deemed to materially and adversely affect the interests of
Certificateholders; (vii) the Special Servicer proposes to commence
foreclosure or other workout arrangements; or (viii) such borrower has failed
to make a Balloon Payment as and when due; provided, however, that a Mortgage
Loan will cease to be a Specially Serviced Mortgage Loan (a) with respect to
the circumstances described in clauses (i), (ii), and (viii) above, when the
borrower thereunder has brought the Mortgage Loan current (or, with respect
to the circumstances described in clause (viii), pursuant to a work-out
implemented by the Special Servicer) and thereafter made three consecutive
full and timely monthly payments, including pursuant to any workout of the
Mortgage Loan, (b) with respect to the circumstances described in clause
(iii), (iv), (v) and (vii) above, when such circumstances cease to exist in
the good faith judgment of the Servicer, or (c) with respect to the
circumstances described in clause (vi) above, when such default is cured;
provided, in either case, that at that time no circumstance exists (as
described above) that would cause the Mortgage Loan to continue to be
characterized as a Specially Serviced Mortgage Loan.
"STATED MATURITY DATE" means the maturity date of the Mortgage Loan as stated
in the related Note or Loan Agreement.
"STATED PRINCIPAL BALANCE" means, with respect to any Mortgage Loan at any
date of determination, an amount equal to (a) the principal balance as of the
Cut-off Date of such Mortgage Loan, minus (b) the sum of (i) the principal
portion of each Monthly Payment, Minimum Defaulted Monthly Payment or Assumed
Scheduled Payment due on such Mortgage Loan after the Cut-off Date up to such
date of determination, (ii) all voluntary and involuntary principal
prepayments and other unscheduled collections of principal received with
respect to such Mortgage Loan, to the extent distributed to holders of the
Certificates or applied to other payments required under the Pooling and
Servicing Agreement before such date of determination and (iii) any principal
forgiven by the Special Servicer or Interest Shortfalls resulting from
reductions or deferrals of interest.
- -T-
"TTM" means NOI calculated for the trailing twelve months ending on the date
indicated.
178
<PAGE>
- -U-
"UPDATED APPRAISAL" means an appraisal (or a letter update from an existing
appraisal which is less than three years old) of the Mortgaged Property from
an independent appraiser who is a member of the American Institute of Real
Estate Appraisers.
- -V-
"VALUE" means for each of the Mortgaged Properties, the appraised value of
such property as determined by an appraisal thereof and in accordance with
MAI standards made not more than 18 months prior to the origination date of
the related Mortgage Loan.
- -W-
"WEIGHTED AVERAGE NET MORTGAGE PASS-THROUGH RATE" means, with respect to any
Distribution Date, the fraction (expressed as a percentage) the numerator of
which is the sum of the products of (i) the Net Mortgage Pass-Through Rate
and (ii) the Stated Principal Balance of each Mortgage Loan and the
denominator of which is the sum of the Stated Principal Balances of each
Mortgage Loan as of the Due Date occurring in the month preceding the month
in which such Distribution Date occur.
- -Z-
"ZONING LAWS" means applicable building and zoning ordinances and codes.
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<PAGE>
<TABLE>
<CAPTION>
LOAN ASSET
# # PROPERTY NAME ADDRESS CITY STATE ZIP PROPERTY TYPE
- ---- ----- ------------------------------------- ----------------------------- -------------- ----- ----- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
KENDALL SQUARE
--------------
1 1 Phase II 1 Kendall Sq. Phase 2 Cambridge MA 02142 Office
1 2 Athenaeum House 215 1st Street Cambridge MA 02142 Office
1 3 Phase I One Kendall Square Cambridge MA 02142 Office
SARACEN
-------
2 1 Wells Research 75-85-95 Wells Ave. Newton MA 02159 Office
2 2 128 Technology Center 125 Roberts Road Waltham MA 02154 Office
2 3 Dedham Place East St. & Allied Dr. Dedham MA 02026 Office
2 4 201 University 201 University Ave. Westwood MA 02090 Office
2 5 7-57 Wells Avenue 7-57 Wells Avenue Newton MA 02159 Office
2 6 Norfolk 333 Elm Street Dedham MA 02026 Office
3 *International Plaza 750 Lexington Ave. New York NY 10022 Office
K-MART DISTRIBUTION CENTER
--------------------------
4 1 K-Mart Brighton Distribution Center 18875 Bromley Lane Brighton CO 80601 Industrial
-Warehouse
4 2 K-Mart Greensboro Distribution Center 300 Penry Road Greensboro NC 27405 Industrial-
Warehouse
BURNHAM PACIFIC
---------------
5 1 Puente Hills 17525-18271 Gale City of Industry CA 91748 Retail-Anchored
5 2 Valley Central 44655 Vly Central Way Lancaster CA 93536 Retail-Anchored
HUDSON HOTELS
-------------
6 1 Seagate Hotel 400 So. Ocean Blvd Delray Beach FL 33483 Hotel-Full Service
6 2 Durham-Duke 2306 Elba St. Durham NC 27705 Hotel-Full Service
6 3 Brookwood Inn--Pittsford 800 Pittsford-Victor Rd. Pittsford NY 14534 Hotel-Full Service
6 4 Fairfield Inn--Richmond 7300 W. Broad St. Richmond VA 23294 Hotel-Ltd. Service
6 5 Fairfield Inn--Cary 1716 Walnut St. Cary NC 27511 Hotel-Ltd. Service
6 6 Fairfield Inn--Wilmington 4926 Market St. Wilmington NC 28403 Hotel-Ltd. Service
6 7 Fairfield Inn--Columbia 8104 Two Notch Rd. Columbia SC 29223 Hotel-Ltd. Service
6 8 Fairfield Inn--Charleston 7415 Northside Dr. Charleston SC 29420 Hotel-Ltd. Service
6 9 Fairfield Inn--Durham RTP 4507 NC Highway 55 Durham NC 27713 Hotel-Ltd. Service
6 10 Comfort Inn--Jamestown 2800 N. Main St. Ext. Jamestown NY 14701 Hotel-Ltd. Service
6 11 Raleigh 3201 Wake Forest Rd. Raleigh NC 27609 Hotel-Ltd. Service
6 12 *Fairfield Inn--Statesville 1503 E. Broad St. Statesville NC 28677 Hotel-Ltd. Service
6 13 Charlotte 1200 W. Sugar Creek Rd. Charlotte NC 28213 Hotel-Ltd. Service
6 14 Comfort Inn--Rochester 1501 Ridge Rd. West Rochester NY 14615 Hotel-Ltd. Service
6 15 Fairfield Inn--Albany 2586 N. Slappey Blvd. Albany GA 31701 Hotel-Ltd. Service
6 16 EconoLodge--Canandaigua 170 Eastern Blvd. Canandaigua NY 14424 Hotel-Ltd. Service
7 *Marina Harbor Apts and Anchorage 4500 Via Marina Marina del Rey CA 90292 Multifamily
SUNWEST
-------
8 1 SunWest 5032 14540 Memorial Drive Houston TX 77079 Retail-Unanchored
8 2 SunWest 7924 1937 Parker Road Plano TX 75023 Retail-Unanchored
8 3 SunWest 8001 2524 N. Galloway Ave Mesquite TX 75150 Retail-Unanchored
8 4 SunWest 5833 7800 Grapevine Highway N. Richland Hills TX 76118 Retail-Unanchored
8 5 SunWest 7801 15 West 1st Street Havre MT 59501 Retail-Unanchored
8 6 SunWest 5858 2770 Trinity Mills Road Carrollton TX 75006 Retail-Unanchored
8 7 SunWest 7802 2nd Street & 2nd Ave NW Sidney MT 59270 Retail-Unanchored
8 8 *SunWest 7442 2218 Greenville Avenue Dallas TX 75206 Retail-Unanchored
8 9 SunWest 7862 1201 South Stockton Monahans TX 79756 Retail-Unanchored
8 10 *SunWest 7055 1873 South Wadsworth Lakewood CO 80232 Retail-Unanchored
8 11 *SunWest 7507 3065 Josey Lane Carrollton TX 75007 Retail-Unanchored
8 12 SunWest 5126 401 16th Street Orange TX 77630 Retail-Unanchored
8 13 SunWest 5038 2747 East Fifth Street Tyler TX 75701 Retail-Unanchored
8 14 *SunWest 7311 3101 South Elm Place Broken Arrow OK 74012 Retail-Unanchored
8 15 SunWest 5131 100 Cleveland SC Cleveland TX 77327 Retail-Unanchored
8 16 SunWest 7641 28522 FM 149 Road Tomball TX 77375 Retail-Unanchored
8 17 SunWest 7075 103 West Prospect Fort Collins CO 80525 Retail-Unanchored
8 18 *SunWest 5808 13548 Preston Road Dallas TX 75240 Retail-Unanchored
8 19 SunWest 7704 590 32nd Street Clifton CO 81520 Retail-Unanchored
8 20 *SunWest 7098 5820 South 1st Street Austin TX 78745 Retail-Unanchored
8 21 SunWest 5011 2010 South Sheridan Tulsa OK 74112 Retail-Unanchored
8 22 SunWest 7613 NW Bypass & W 3rd St Great Falls MT 59404 Retail-Unanchored
8 23 *SunWest 5801 335 South Cedar Ridge Duncanville TX 75116 Retail-Unanchored
<PAGE>
LOAN ASSET
# # PROPERTY NAME ADDRESS CITY STATE ZIP PROPERTY TYPE
- ---- ----- ------------------------------------- ----------------------------- -------------- ----- ----- -----------------
8 24 SunWest 5057 1305 Tenaha Center TX 75935 Retail-Unanchored
8 25 *SunWest 5861 3614 Camp Bowie Blvd. Fort Worth TX 76107 Retail-Unanchored
8 26 *SunWest 7032 3333 Finley Irving TX 75062 Retail-Unanchored
8 27 SunWest 7125 6400 Nieman Road Shawnee KS 66203 Retail-Unanchored
8 28 *SunWest 5822 6500 Skillman Dallas TX 75231 Retail-Unanchored
8 29 SunWest 7792 3707 Lemmon Avenue Dallas TX 75219 Retail-Unanchored
8 30 *SunWest 7033 9825 Miller Road Dallas TX 75238 Retail-Unanchored
8 31 SunWest 7118 1201 South Noland Independence MO 64055 Retail-Unanchored
8 32 SunWest 7816 1380 North Main Street Vidor TX 76704 Retail-Unanchored
8 33 *SunWest 7615 715 South Haynes Miles City MT 59301 Retail-Unanchored
8 34 *SunWest 7736 429 West Broadway West Memphis AR 72301 Retail-Unanchored
8 35 *SunWest 7446 14th Street & Grand Ave Billings MT 59101 Retail-Unanchored
8 36 SunWest 7742 1818 Ninth Street Wichita Falls TX 76301 Retail-Unanchored
8 37 SunWest 7342 280 West Main Street Vernal UT 84078 Retail-Unanchored
8 38 SunWest 7020 2215 East Marsalis Dallas TX 75216 Retail-Unanchored
8 39 *SunWest 7595 10525 Edgebrook Houston TX 77034 Retail-Unanchored
8 40 SunWest 7019 4500 Live Oak Dallas TX 75204 Retail-Unanchored
8 41 *SunWest 7925 1949 John West Road Dallas TX 75228 Retail-Unanchored
8 42 *SunWest 7344 3990 Washington Ogden UT 84403 Retail-Unanchored
8 43 *SunWest 7031 911 North Hampton Desoto TX 75115 Retail-Unanchored
8 44 SunWest 7738 3314 Bell Street Amarillo TX 79106 Retail-Unanchored
8 45 SunWest 7126 1300 North Highway 7 Blue Springs MO 64015 Retail-Unanchored
8 46 *SunWest 7154 1665 Winchester Memphis TN 38116 Retail-Unanchored
8 47 *SunWest 7849 1605 West Pioneer Pkwy Arlington TX 76013 Retail-Unanchored
8 48 *SunWest 7599 2127 East Southmore Pasadena TX 77502 Retail-Unanchored
8 49 SunWest 7121 712 West Commerical Springfield MO 65803 Retail-Unanchored
8 50 SunWest 7063 709 North Federal Riverton WY 83501 Retail-Unanchored
8 51 *SunWest 7585 105 West Edgewood Friendswood TX 77546 Retail-Unanchored
8 52 SunWest 7751 1343 Miner Street Idaho Springs CO 80452 Retail-Unanchored
8 53 *SunWest 5016 7301 South Shields Oklahoma City OK 73149 Retail-Unanchored
8 54 *SunWest 7097 9316 North Lamar Austin TX 78753 Retail-Unanchored
8 55 *SunWest 7576 1600 Midwestern Parkway Wichita Falls TX 76302 Retail-Unanchored
8 56 SunWest 7116 3510 Prospect Kansas City MO 64128 Retail-Unanchored
8 57 *SunWest 7601 16550 El Camino Real Houston TX 77062 Retail-Unanchored
8 58 SunWest 7070 111 Church Street Florence CO 81226 Retail-Unanchored
8 59 SunWest 7110 4601 Parallel Street Kansas City KS 66101 Retail-Unanchored
8 60 *SunWest 7728 1102 South Dewey North Platte NE 69101 Retail-Unanchored
8 61 SunWest 7067 535 Green Street Craig CO 81625 Retail-Unanchored
8 62 SunWest 7589 611 North Burlington Hastings NE 68901 Retail-Unanchored
8 63 *SunWest 7989 1717-1722 W.2nd Grand Island NE 68801 Retail-Unanchored
8 64 *SunWest 7516 306 East Paisano Avenue El Paso TX 79901 Retail-Unanchored
8 65 SunWest 5141 601 Brown Street Osawatomie KS 22482 Retail-Unanchored
8 66 *SunWest 7343 300 Main Street Richfield UT 84701 Retail-Unanchored
8 67 SunWest 7040 111 Park Street Powell WY 82435 Retail-Unanchored
8 68 SunWest 7701 705 Kansas Avenue Garden City KS 67846 Retail-Unanchored
8 69 SunWest 7451 259 14th Street Burlington CO 80807 Retail-Unanchored
8 70 *SunWest 5859 1927 East Beltline Road Carrollton TX 75006 Retail-Unanchored
8 71 *SunWest 7145 5316 Rogers Avenue Fort Smith AR 72902 Retail-Unanchored
8 72 *SunWest 7551 202 Clubview Levelland TX 79336 Retail-Unanchored
9 Westin--Indianapolis 50 South Capitol Ave Indianapolis IN 46204 Hotel-Full Service
10 Two Gateway Center 283-299 Market St. Newark NJ 07102 Office
UNIPROP
-------
11 1 Aztec Estates 1-A Sundial Circle Drive Margate FL 33068 Mobile Home Park
11 2 Park of the Four Seasons 50 113th Avenue, NE Blaine MN 55434 Mobile Home Park
11 3 Kings Manor 12500 State Road 84 Ft. Lauderdale FL 33325 Mobile Home Park
11 4 Old Dutch Farms 27000 Napier Road Novia MI 48009 Mobile Home Park
12 Montague Park Tech Center Junction Avenue San Jose CA 95134 Office-R&D
JACOBS MALL
-----------
13 1 Conestoga Mall NEC U.S. 281 & 13th Grand Island NE 68803 Retail-Anchored
13 2 Randolph Mall NEC 49 & 64 Asheboro NC 27203 Retail-Anchored
<PAGE>
LOAN ASSET
# # PROPERTY NAME ADDRESS CITY STATE ZIP PROPERTY TYPE
- ---- ----- ------------------------------------- ----------------------------- -------------- ----- ----- -----------------0
M & H
-----
14 1 LaHabra Marketplace 1500-1900 Imperial Hwy La Habra CA 90631 Retail-Anchored
14 2 How 'Bout Arden 2100 Arden Way Sacramento CA 95825 Retail-Anchored
14 3 Bethard Square 301-342 West Olive Ave. Madera CA 93638 Retail-Anchored
15 Nassau Park II Rt.1&Quaker Bridge West Windsor NJ 08540 Retail-Anchored
PRIME RETAIL II
---------------
16 1 Coeur D'Alene Factory Outlets 3900 Riverbend Ave. Coeur D'Alene ID 83854 Retail-Factory
Outlet
16 2 Bend Factory Outlets 61330 S. Highway 97 Bend OR 97702 Retail-Factory
Outlet
16 3 Oak Creek Factory Outlets 6601-6657 Hwy. 179 Sedona AZ 86351 Retail-Factory
Outlet
17 Lakeside Village 4170 Spring Lake Drive San Leandro CA 94578 Multifamily
18 Asian Gardens Mall 9200 Bolsa Ave. Westminster CA 92683 Retail-Mall
19 Northwood Centre 1940 N. Monroe St. Tallahassee FL 32303 Retail-Anchored
20 South Dekalb Mall 2801 Candler Road Decatur GA 30034 Retail-Mall
AMBASSADOR APARTMENTS II
------------------------
21 1 Country Club West 1001 50th. Ave. Greeley CO 80634 Multifamily
21 2 Courtney Park Apts. 4470 S. Lemay Ave. Fort Collins CO 80525 Multifamily
22 *Century Square Mall Mountain View Drive West Mifflin PA 15122 Retail-Anchored
HOLLADAY
--------
23 1 Byrkit 400 S. Byrkit Ave. Mishawaka IN 46544 Industrial
23 2 LTV 105 Niles Ave. South Bend IN 46617 Office
23 3 3300 Sample 3300 West Sample St. South Bend IN 46619 Industrial
23 4 Blackthorn--Wells Olive Rd/Nimtz Pkwy South Bend IN 46628 Industrial
23 5 West Jefferson 1501 Liberty Dr. Mishawaka IN 46545 Multifamily
23 6 Willow Trace--II 820 Fessler Prkwy. Nashville TN 37210 Industrial
23 7 Dugdale 17390 Dugdale Rd. South Bend IN 46635 Office
23 8 Niles/Colfax 431 E. Colfax Ave. South Bend IN 46601 Office
23 9 Michiana 53830 Generations Dr. South Bend IN 46635 Office
23 10 Colfax 220 W. Colfax Ave. South Bend IN 46601 Office
23 11 Pru 53822 Generation Dr South Bend IN 46635 Office
24 Knollwood Village Apartments 2130 E. Hill Grand Blanc MI 48439 Multifamily
25 Tucson Place NWC Wetmore & 1st Tucson AZ 85705 Retail-Anchored
2 ST. MARKS/GREYSTONE
---------------------
26 1 Greystone Apartments 7585 Ingram Road San Antonio TX 78232 Multifamily
26 2 St. Marks 37 St. Marks Place New York NY 10003 Multifamily
27 Holiday Inn--Alexandria 480 King Street Alexandria VA 22314 Hotel-Full
Service
28 Hamilton Park Health Care Center 525 Monmouth Street Jersey City NJ 07302 Nursing
29 Burlington Square Middlesex Turnpike Burlington MA 01803 Retail-Secondary
Anchored
30 Alzina Office Building 100 North First St. Springfield IL 62705 Office
31 Danvers Crossing Shopping Center 8-10 Newbury St Danvers MA 01923 Retail-Anchored
32 Residence Inn--Herndon 315 Elden Street Herndon VA 22070 Hotel-Extended
Stay
33 Del Mar Village Shopping Center 7154 Beracasa Way Boca Raton FL 33434 Retail-Anchored
34 Plaza at Burr Corners I&II 1129 Tolland Tpk. Manchester CT 06040 Retail-Anchored
35 *Holiday Inn New Orleans 100 West Bank Expwy. Gretna LA 70053 Hotel-Full
Service
TRAMZ
-----
36 1 Holiday Inn--Carrier Circle 6501 College Drive East Syracuse NY 13057 Hotel-Full
Service
36 2 Holiday Inn--Airport 6701 Buckley Road North Syracuse NY 13212 Hotel-Full
Service
37 Shadyside Gardens Apartment 2641 Shadyside Ave. Suitland MD 20746 Multifamily
38 Radisson Inn--Columbus 4900 Sinclair Road Columbus OH 43229 Hotel-Full
Service
39 Hood Commons Crystal Avenue Derry NH 03038 Retail-Anchored
40 *30 Broad Street 30 Broad Street New York NY 10004 Office
CLEVELAND INDUSTRIAL PORTFOLIO
------------------------------
41 1 6200 Harvard 6200 Harvard Avenue Cleveland OH 44105 Industrial
41 2 Berea Road 10408-10750 Berea Road Lakewood OH 44102 Industrial
41 3 East 34th Street 2912-2972 East 34th Street Cleveland OH 44115 Industrial
<PAGE>
LOAN ASSET
# # PROPERTY NAME ADDRESS CITY STATE ZIP PROPERTY TYPE
- ---- ----- ------------------------------------- ----------------------------- -------------- ----- ----- -----------------
41 4 Eddy Road 341-353 Eddy Road Cleveland OH 44108 Industrial
41 5 Grant 5207-5215 Grant Avenue Cleveland OH 44125 Industrial
41 6 Stones Levee 401-607 Stones Levee Cleveland OH 44113 Industrial
41 7 Industrial Parkway 1261 Industrial Parkway Brunswick OH 44212 Industrial-
Warehouse
41 8 Babbitt Road 1261-1267 Babbitt Road Euclid OH 44132 Industrial
42 Sehome Village 300 36th St. Bellingham WA 98226 Retail-Anchored
43 Festival at Moreno Valley 24318 Hemolck Moreno Valley CA 92387 Retail-Anchored
44 Madison House 34 Wildwood Avenue Madison CT 06443 Nursing
45 Decker Building 33 Union Square West New York NY 10003 Multifamily
ECONOLODGE PORTFOLIO
--------------------
46 1 Woodbridge Econolodge 13317 Gordon Blvd Woodbridge VA 22191 Hotel-Ltd. Service
46 2 Fredericksburg Econolodge 5321 Jeff Davis Hwy Fredericksburg VA 22401 Hotel-Ltd. Service
46 3 *Wytheville Econolodge 1190 E. Main Street Wytheville VA 24382 Hotel-Ltd. Service
46 4 *Bluefield Econolodge 3400 Cumberland Rd. Bluefield WV 24701 Hotel-Ltd. Service
46 5 Chesapeake Econolodge 4725 N. Military Highway Chesapeake VA 23321 Hotel-Ltd. Service
46 6 Midlothian Econolodge 6523 Midlothian Turnpike Richmond VA 23225 Hotel-Ltd. Service
47 Residence Inn-Livermore 1000 Airway Boulevard Livermore CA 94550 Hotel-Extended
Stay
48 140 Allen 140 Allen Road Bernards Twsp. NJ 07936 Office
49 Brookside Commons Apartments 235 E. Main Street East Hartford CT 06108 Multifamily
50 Lincoln Park Center 3600 Fort Street Lincoln Park MI 48146 Retail-Anchored
MAGNOLIA-WESTERN INVESTMENTS, LP
--------------------------------
51 1 Magnolia Gardens 17922 San Fernando Miss. Granada Hills CA 91604 Nursing
51 2 Western Convalescent 2190 W. Adams Blvd. Los Angeles CA 90018 Nursing
BUENA/LEISURE NURSING
---------------------
52 1 Buena Ventura Care Center 1016 S. Record Ave Los Angeles CA 90023 Nursing
52 2 Leisure Glen 1505 Colby Drive Glendale CA 91205 Nursing
53 Englar Shopping Center MD Rte 140/Englar Road Westminster MD 21157 Retail-Anchored
54 Totem Square Shopping Center 11815 124th Ave. NE Kirkland WA 98034 Retail-Unanchored
55 Equitable of Iowa Building 604 Locust Street Des Moines IA 50309 Office
56 Clarion Suites Inn 191 Spencer Street Manchester CT 06040 Hotel-Extended
Stay
57 Outlets Limited Mall 3750 Venture Drive Duluth GA 30136 Retail-Secondary
Anchored
58 Warwick Commons 399 Bald Hill Road Warwick RI 02886 Retail-Anchored
59 Alden Terrace 1240 Hoover Street Los Angeles CA 90006 Nursing
60 6000 Metro Drive 6000 Metro Drive Baltimore MD 21215 Office
61 Country Hearth Inn--Orlando 9861 International Dr. Orlando FL 32819 Hotel-Full Service
62 Longwood Manor 4853 W. Washington Blvd. Los Angeles CA 90016 Nursing
63 Tech Center 29 12200 Tech Road Silver Spring MD 20904 Office
64 Davol Square Jewelry Bldg. 3 Davol Square Providence RI 02903 Retail-Unanchored
65 Lincoln MHP 10301 And 10315 W. Greenfield West Allis WI 53214 Mobile Home Park
66 National Bank of California 145 S. Fairfax Ave. Los Angeles CA 90036 Office
67 Best Western--Jacksonville 300 N. Park Avenue Orange Park FL 32073 Hotel-Full Service
68 The Lab 2930 Bristol Street Costa Mesa CA 92626 Retail-Unanchored
69 Northridge Shopping Center W 80th Ave/Wadsworth Arvada CO 80003 Retail-Anchored
70 Days Inn--Providence 220 India Street Providence RI 02903 Hotel-Full Service
71 Plymouth Mall 2700 Plymouth Rd. Ann Arbor MI 48104 Retail-Secondary
Anchored
72 Residence Inn--Gainesville 4001 SW 13th Street Gainesville FL 32608 Hotel-Extended
Stay
73 Ramada Inn Bossier 750 Isle of Capri Blvd. Bossier LA 71111 Hotel-Ltd. Service
SUTTON PLACE + SOUTH LIVINGSTON
-------------------------------
74 1 Sutton Place 998-1100 St George Ave Rahway NJ 07065 Retail-Anchored
74 2 79 South Livingston 79 South Livingston Ave Livingston NJ 07039 Retail-Unanchored
75 Old Town Square Mountain & College Fort Collins CO 80524 Retail
76 Anza Corporate Center 433 Airport Blvd. Burlingame CA 94010 Office
77 Washington Square Shopping Center 1111 E. Washington Ave. Escondido CA 92025 Retail-Secondary
Anchored
78 Winston Village 2055 N. Perris Blvd Perris CA 92571 Retail-Unanchored
79 Plaza Reyes Adobe Retail Center 30313 Canwood St Agoura Hills CA 91301 Retail-Unanchored
<PAGE>
LOAN ASSET
# # PROPERTY NAME ADDRESS CITY STATE ZIP PROPERTY TYPE
- ---- ----- ------------------------------------- ----------------------------- -------------- ----- ----- -----------------
80 Comfort Inn--Castaic 31558 Castaic Rd. Castaic CA 91384 Hotel-Ltd. Service
81 Pocono Green Shopping Center Midlothian Turnpike Richmond VA 23235 Retail-Unanchored
82 Saunders Plaza 4533 MacArthur Blvd Newport Beach CA 92660 Retail-Unanchored
83 Heritage Bank Building 1313 Dolley Madison McLean VA 22101 Office
84 Arvada Plaza 9212-9588 West 58th Ave. Arvada CO 85704 Retail-Unanchored
85 Good Guys Plaza 1331 Guerneville Rd Santa Rosa CA 95402 Retail-Unanchored
86 Candlelite Apartments 700 Candelite Ct. Fort Wayne IN 46807 Multifamily
87 Topinkas Village Shopping Center 19111--19191 Telegraph Rd. Detroit MI 48219 Retail-Anchored
88 Village Park MHP 724 Creek Ridge Road Greensboro NC 27406 Mobile Home Park
89 Woodland Park Retirement 21200 Ventura Blvd. Woodland Hills CA 91634 Assisted Living
90 View Park Convalescent Center 3737 Don Felipe Drive Los Angeles CA 90008 Nursing
91 Key RV Park 6099 Overseas Highway Marathon FL 33050 Mobile Home Park
92 Ramada Inn--Nashville 837 Briley Parkway Nashville TN 37217 Hotel-Ltd. Service
93 Barstow Plaza 901 Armory Road Barstow CA 92311 Retail-Anchored
94 Aspen Care Center 2325 Madison Avenue Ogden UT 84401 Nursing
95 Senate House and Virginian 935 & 965 Cottage Grove Las Vegas NV 89119 Multifamily
96 One Ethel Road One Ethel Road Edison NJ 08817 Office
97 American Plaza Shopping Center 701 Galvin Road Bellevue NE 68005 Retail-Anchored
98 Diamond Inn 1009 South Main St. Salt Lake City UT 84111 Hotel-Ltd. Service
99 Hocking Mall Shopping Center C.R. 33A & S.R. 664 Logan OH 43138 Retail-Anchored
100 Kessler Garden Apts. 5480 N. Michigan Rd. Indianapolis IN 46228 Multifamily
101 Chateau Apartments 2000 24th Street Nashville TN 37212 Multifamily
102 Knights Inn-Maumee 1520 S Holland Maumee OH 43537 Hotel-Ltd. Service
103 Tiffany Bay Clear Lake 1605 Tiffany Court Houston TX 77058 Multifamily
104 *Airport Commerce Center 16126 Sherman Way Van Nuys CA 91406 Office
105 Bakerview MHP 505 West Bakerview Bellingham WA 98226 Mobile Home Park
106 Slauson Apartments 4707-41 Slauson Ave Los Angeles CA 90001 Multifamily
107 El Camino Real Apartments 1600 Tamarack McAllen TX 78501 Multifamily
108 Park Isle Club Apartments 790 73rd Street Miami Beach FL 33141 Multifamily
109 Planet Pacific Building 27405 Puerta Real Mission Viejo CA 92691 Office
110 Butler Place Apartments 14 & 20 Butler Pl Brooklyn NY 11238 Multifamily
111 Cedar Springs 400 Susan Cedar Springs MI 49319 Mobile Home Park
112 Emory Arms Apartments 1295 E. Rock Spr. Rd. Atlanta GA 30306 Multifamily
113 Fairdale Apartments 6600 Fairdale San Antonio TX 78218 Multifamily
114 *Holiday Inn Express -East Haven 30 Frontage Road East Haven CT 06518 Hotel-Ltd. Service
115 Holiday Inn Express-Bennetsville 213 US Hwy 15 Bennettsville SC 29512 Hotel-Ltd. Service
116 Michigan Trailer Park 3140 W. Osborne Phoenix AZ 85017 Mobile Home Park
117 Hidden Meadows Apartments 5959 Wurzbach San Antonio TX 78238 Multifamily
118 Econolodge Arizona 121 S. Lake Powell Page AZ 86040 Hotel-Ltd. Service
119 Holiday Inn--S. Kingston 3009 Tower Hill Rd South Kingston RI 02874 Hotel-Full Service
120 North Acres Mobile Home Park 302 E. "N" Street Yakima WA 98901 Mobile Home Park
121 Trainer Hill MHP 4300 West Ninth Street Trainer PA 19013 Mobile Home Park
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
$29,544,340 $29,501,397 $124 $4,223,357 $4,169,895 $ 4,600,418 TTM 11/30/96 $ 4,294,941
20,414,344 20,384,672 66 2,157,309 2,601,977 2,862,522 TTM 11/30/96 3,002,213
19,741,316 19,712,622 89 2,908,497 2,732,416 2,579,271 TTM 11/30/96 2,805,624
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
69,700,000 69,598,691 90 9,289,163 9,504,288 10,042,211 10,102,778
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
19,497,301 19,475,608 82 2,667,258 2,995,470 2,994,149 TTM 11/30/96 2,863,071
17,666,917 17,647,261 81 2,500,550 2,621,380 2,469,041 TTM 11/30/96 2,423,022
14,148,837 14,133,095 87 1,820,126 2,080,887 2,111,059 TTM 11/30/96 1,415,876
7,656,783 7,648,264 93 1,364,262 1,583,114 1,615,543 TTM 11/30/96 1,299,184
6,937,010 6,929,292 78 590,010 881,831 681,936 TTM 11/30/96 876,328
3,093,152 3,089,711 64 290,599 445,740 236,491 TTM 11/30/96 357,867
----------- ----------- ------------ ---------- ---------- ---------- ----------
69,000,000 68,923,230 82 9,232,805 10,608,422 10,108,219 9,235,348
65,750,000 65,750,000 171 11,168,393 11,718,933 12,093,512 TTM 10/31/96 9,442,321
31,513,457 31,513,457 25 3,990,166
31,486,543 31,486,543 20 3,986,759
----------- ------------ ------------ ----------
63,000,000 63,000,000 22 7,976,925
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
33,100,000 33,100,000 64 6,080,004 6,174,558 6,013,949 TTM 12/31/96 5,571,650
25,400,000 25,400,000 53 4,046,563 4,235,896 4,124,189 TTM 12/31/96 4,122,150
----------- ------------ ------------ ---------- ---------- ---------- ----------
58,500,000 58,500,000 59 10,126,567 10,410,454 10,138,138 9,693,800
7,395,000 7,375,729 105,368 1,256,361 1,342,788 1,285,670 TTM 9/30/96 1,226,029
6,090,000 6,074,130 40,494 950,677 1,023,261 1,291,575 TTM 9/30/96 1,197,701
4,510,000 4,498,247 41,650 885,220 908,673 870,389 TTM 9/30/96 732,733
4,375,000 4,363,599 35,190 169,077 712,682 884,477 TTM 9/30/96 872,067
3,935,000 3,924,746 31,398 272,900 686,954 766,592 TTM 9/30/96 737,848
3,545,000 3,535,762 29,465 166,446 697,741 678,815 TTM 9/30/96 619,227
3,365,000 3,356,231 26,017 (84,699) 461,528 640,195 TTM 9/30/96 656,315
3,185,000 3,176,700 26,695 (30,985) 477,050 578,128 TTM 9/30/96 564,503
3,130,000 3,121,843 32,519 126,727 581,520 591,663 TTM 9/30/96 549,407
3,000,000 2,992,182 29,626 493,896 549,864 539,113 TTM 9/30/96 514,568
2,775,000 2,767,769 18,576 490,353 574,387 631,975 TTM 9/30/96 589,238
2,515,000 2,508,446 21,258 20,767 393,860 433,420 TTM 9/30/96 419,139
2,340,000 2,333,902 17,681 380,511 370,608 426,293 TTM 9/30/96 379,091
2,275,000 2,269,072 27,338 488,333 469,262 441,986 TTM 9/30/96 412,955
2,215,000 2,209,228 18,108 72,627 451,045 353,982 TTM 9/30/96 318,818
1,350,000 1,346,482 20,715 221,796 229,824 263,596 TTM 9/30/96 253,321
----------- ------------ ------------ ---------- ---------- ---------- ----------
56,000,000 55,854,069 30,842 5,880,007 9,931,047 10,677,870 10,042,960
51,000,000 50,586,851 59,795 7,275,475 7,640,886 7,366,892 TTM 10/31/96 7,324,895
2,529,561 2,529,561 69 367,313 400,174 420,938 TTM 2/97 334,378
1,912,588 1,912,588 38 26,173 69,580 47,949 TTM 2/97 241,968
1,828,252 1,828,252 52 TTM 2/97 231,321
1,826,954 1,826,954 50 228,028 256,195 239,530 TTM 2/97 234,008
1,629,613 1,629,613 49 244,083 244,177 244,181 TTM 2/97 219,865
1,707,171 1,707,171 40 146,245 267,505 267,501 TTM 2/97 239,792
1,436,135 1,436,135 37 233,218 206,774 192,610 TTM 2/97 181,760
1,709,217 1,709,217 79 266,984 245,915 245,915 TTM 2/97 222,253
1,298,090 1,298,090 43 192,696 201,652 211,650 TTM 2/97 172,258
1,198,665 1,198,665 24 155,302 152,023 TTM 2/97 159,915
1,205,911 1,205,911 45 148,721 163,294 166,024 TTM 2/97 153,021
1,218,846 1,218,846 23 158,159 193,925 209,195 TTM 2/97 169,220
1,164,070 1,164,070 51 157,954 159,533 159,535 TTM 2/97 151,415
1,107,881 1,107,881 36 107,746 118,116 135,170 TTM 2/97 148,985
1,059,419 1,059,419 28 143,399 144,260 144,264 TTM 2/97 135,831
1,049,421 1,049,421 27 151,275 157,317 160,519 TTM 2/97 144,427
1,043,414 1,043,414 47 97,575 101,257 189,100 TTM 2/97 132,538
1,167,641 1,167,641 50 158,984 158,258 158,258 TTM 2/97 148,105
952,988 952,988 11 115,930 151,661 172,385 TTM 2/97 134,180
1,106,065 1,106,065 52 145,284 160,409 160,403 TTM 2/97 147,736
717,300 717,300 16 135,157 151,977 143,538 TTM 2/97 109,449
603,631 603,631 17 99,342 33,201 52,825 TTM 2/97 80,339
874,438 874,438 28 74,287 122,619 122,616 TTM 2/97 112,981
<PAGE>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
$ 777,402 $ 777,402 $ 26 $ 124,541 $ 114,986 $ 123,805 TTM 2/97 $ 99,724
720,365 720,365 39 98,765 124,650 155,426 TTM 2/97 104,569
795,036 795,036 36 TTM 2/97 101,803
669,878 669,878 35 93,591 93,279 93,792 TTM 2/97 86,727
763,071 763,071 26 111,471 101,573 71,703 TTM 2/97 100,284
602,279 602,279 48 28,556 100,006 TTM 2/97 77,408
501,112 501,112 22 143,291 168,502 159,537 TTM 2/97 88,482
890,733 890,733 24 135,343 128,340 119,830 TTM 2/97 114,138
498,568 498,568 13 53,112 75,547 84,860 TTM 2/97 66,957
511,948 511,948 18 295 TTM 2/97 69,528
564,588 564,588 23 87,386 89,377 80,896 TTM 2/97 73,620
524,028 524,028 24 87,451 73,076 73,076 TTM 2/97 68,363
504,251 504,251 26 68,684 70,431 73,486 TTM 2/97 68,259
368,933 368,933 27 61,486 61,381 63,781 TTM 2/97 51,127
481,368 481,368 24 66,312 68,723 66,650 TTM 2/97 65,510
506,781 506,781 18 66,219 76,697 76,698 TTM 2/97 68,759
438,427 438,427 22 53,142 59,500 59,497 TTM 2/97 56,722
505,862 505,862 24 86,875 92,120 92,907 TTM 2/97 73,860
497,166 497,166 22 70,060 69,724 69,724 TTM 2/97 65,492
507,428 507,428 26 57,677 70,894 68,153 TTM 2/97 65,882
422,106 422,106 14 51,056 4,446 -12,666 TTM 2/97 73,369
404,261 404,261 17 32,728 48,856 38,206 TTM 2/97 53,065
403,780 403,780 13 1,794 40,066 72,125 TTM 2/97 55,771
392,586 392,586 16 60,783 56,278 56,274 TTM 2/97 53,102
447,615 447,615 18 45,906 72,235 73,107 TTM 2/97 59,471
356,983 356,983 17 48,621 50,041 50,044 TTM 2/97 46,906
354,572 354,572 15 48,028 53,862 60,958 TTM 2/97 47,046
394,863 394,863 17 77,671 56,272 42,972 TTM 2/97 52,573
331,854 331,854 30 50,946 42,800 42,800 TTM 2/97 42,287
385,937 385,937 18 57,523 56,947 73,397 TTM 2/97 51,921
374,516 374,516 17 47,806 54,391 54,390 TTM 2/97 50,297
365,241 365,241 17 49,377 55,628 55,626 TTM 2/97 50,280
302,534 302,534 16 41,818 47,697 44,132 TTM 2/97 40,020
358,002 358,002 11 87,022 112,433 112,932 TTM 2/97 90,330
261,121 261,121 36 18,264 33,682 43,348 TTM 2/97 33,998
288,498 288,498 20 39,713 43,365 40,027 TTM 2/97 37,581
363,859 363,859 20 33,450 69,149 63,390 TTM 2/97 48,696
244,729 244,729 13 33,039 37,187 37,190 TTM 2/97 33,030
259,853 259,853 9 38,889 31,597 28,332 TTM 2/97 36,270
281,031 281,031 13 42,398 41,929 41,926 TTM 2/97 38,576
239,524 239,524 28 16,777 25,260 27,543 TTM 2/97 31,106
207,401 207,401 19 26,725 28,192 28,196 TTM 2/97 27,075
193,354 193,354 11 32,844 26,573 31,758 TTM 2/97 27,486
162,335 162,335 21 19,915 23,827 23,827 TTM 2/97 21,828
155,435 155,435 9 39,693 39,072 39,072 TTM 2/97 35,303
134,276 134,276 18 20,458 18,579 19,748 TTM 2/97 19,033
162,930 162,930 7 32,239 45,056 45,056 TTM 2/97 30,054
110,734 110,734 5 23,261 31,691 22,606 TTM 2/97 26,146
163,577 163,577 5 80,504 74,123 74,123 TTM 2/97 38,427
----------- ------------ ------------ ---------- ---------- ---------- ----------
50,500,000 50,500,000 27 6,091,763 6,723,135 6,960,690 6,824,006
41,700,000 41,700,000 72,775 6,291,514 7,150,356 7,897,762 TTM 12/31/96 7,323,945
34,473,575 34,423,045 47 5,915,125 5,979,532 6,149,264 TTM 10/31/96 7,074,917
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
12,666,889 12,666,889 19,639 1,544,045 1,588,265 1,583,078 TTM 9/30/96 1,609,324
8,678,759 8,678,759 15,173 1,055,557 1,085,930 1,196,067 TTM 9/25/96 1,259,903
6,427,484 6,427,484 20,470 781,391 821,053 828,701 TTM 9/30/96 846,912
5,726,868 5,726,868 19,546 744,447 731,943 760,608 TTM 9/25/96 783,587
----------- ------------ ------------ ---------- ---------- ---------- ----------
33,500,000 33,500,000 18,366 4,125,440 4,227,191 4,368,454 4,499,726
33,000,000 32,964,627 79 2,069,437 3,941,288 4,160,168 TTM 12/31/96 4,669,489
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
19,200,000 19,200,000 38 2,486,555 2,514,922 2,384,915 TTM 12/31/96 2,512,568
12,500,000 12,500,000 44 1,628,687 1,711,994 1,955,772 TTM 12/31/96 1,792,033
----------- ------------ ------------ ---------- ---------- ---------- ----------
31,700,000 31,700,000 40 4,115,242 4,226,916 4,340,687 4,304,601
<PAGE>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
$15,884,176 $15,857,560 $ 40 $1,620,635 $1,806,581 TTM 12/31/96 $2,863,896
11,465,239 11,446,027 69 1,788,378 1,793,543 TTM 12/31/96 1,887,308
1,400,585 1,398,238 15 378,450 279,828 TTM 12/31/96 251,798
----------- ------------ ------------ ---------- ---------- ----------
28,750,000 28,701,826 44 3,787,463 3,879,952 5,003,002
28,000,000 28,000,000 139 1,728,961 TTM 12/31/96 3,249,803
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
11,900,000 11,900,000 66 $2,912,707 2,575,897 2,325,507 TTM 12/31/96 1,790,400
8,000,000 8,000,000 83 1,362,814 1,344,567 1,379,263 TTM 12/31/96 1,194,616
7,100,000 7,100,000 87 1,351,700 1,393,444 1,361,420 TTM 12/31/96 1,271,268
----------- ------------ ------------ ---------- ---------- ---------- ----------
27,000,000 27,000,000 75 5,627,221 5,313,908 5,066,190 4,256,284
25,000,000 24,971,982 41,072 2,650,453 2,798,362 3,128,516 TTM 12/31/96 3,219,783
24,375,000 24,326,512 218 2,334,399 2,885,176 3,278,009 TTM 12/31/96 3,352,220
23,000,000 23,000,000 46 3,940,852 4,056,339 4,131,299 TTM 12/31/96 3,775,966
21,845,301 21,798,649 66 3,550,084 3,745,511 3,534,086 TTM 12/31/96 3,550,330
----------- ----------
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
11,400,000 11,400,000 39,583 1,226,695 1,530,811 1,568,299 TTM 12/31/96 1,500,513
10,100,000 10,100,000 40,726 1,159,288 1,417,466 1,423,551 TTM 12/31/96 1,367,176
----------- ------------ ------------ ---------- ---------- ---------- ----------
21,500,000 21,500,000 40,112 2,385,983 2,948,277 2,991,850 2,867,689
21,000,000 21,000,000 51 2,826,109 2,765,134 2,601,411 TTM 12/31/96 2,692,929
3,450,000 3,450,000 10 504,954 516,098 612,499 TTM 12/31/96 584,140
2,880,000 2,880,000 82 433,067 439,463 436,100 TTM 12/31/96 434,793
2,255,000 2,255,000 10 383,402 390,120 428,430 TTM 12/31/96 357,039
2,000,000 2,000,000 41 275,481 YTD Ann. 12/31/96 262,123
1,875,000 1,875,000 19,531 240,836 243,747 267,802 TTM 12/31/96 263,865
1,750,000 1,750,000 33 215,128 217,479 269,706 TTM 12/31/96 257,058
1,660,000 1,660,000 58 207,882 210,480 229,673 TTM 12/31/96 241,303
1,545,000 1,545,000 70 272,835 271,942 269,532 TTM 12/31/96 238,489
1,330,000 1,330,000 108 102,097 176,066 206,104 TTM 12/31/96 194,473
1,050,000 1,050,000 37 137,098 199,093 180,835 TTM 12/31/96 180,811
475,000 475,000 73 76,438 76,914 76,299 TTM 12/31/96 71,332
----------- ------------ ------------ ---------- ---------- ---------- ----------
20,270,000 20,270,000 N/A 2,573,737 2,741,402 3,252,461 3,085,426
20,000,000 19,940,533 30,772 2,640,142 2,851,292 2,857,373 TTM 8/31/96 2,771,116
17,325,000 17,325,000 63 1,761,481 2,102,056 2,087,911 TTM 11/30/96
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
11,967,093 11,954,004 20,899 1,731,587 1,714,042 1,526,187 TTM 11/30/96 1,490,823
3,420,815 3,417,074 178 516,292 585,507 619,485 TTM 12/31/96 524,060
----------- ------------ ------------ ---------- ---------- ---------- ----------
15,387,909 15,371,078 N/A 2,247,879 2,299,549 2,145,672 2,014,883
15,000,000 14,875,834 65,532 3,893,523 4,111,381 4,144,668 TTM 10/31/96 3,982,652
14,700,000 14,636,056 58,544 2,219,100 3,413,592 2,471,363 TTM 9/30/96 2,500,846
14,664,000 14,642,002 170 1,812,150 1,939,929 1,883,081 TTM 10/31/96 1,839,022
14,066,000 14,019,336 55 2,242,329 2,284,343 2,668,504 TTM 11/30/96 2,311,839
13,670,000 13,627,151 78 1,736,497 1,957,340 2,029,886 TTM 11/30/96 1,937,684
13,500,000 13,481,513 80,247 2,078,708 2,373,430 2,559,600 TTM 11/30/96 2,261,537
12,500,000 12,482,642 81 1,133,123 1,095,179 1,509,337 TTM 12/31/96 1,672,705
12,305,000 12,278,439 45 1,630,958 1,463,092 1,560,044 TTM 11/30/96 1,710,402
11,990,000 11,909,688 38,668 1,829,139 2,237,718 2,457,301 TTM 11/30/96 2,262,123
6,640,500 6,611,944 32,571 1,262,676 1,310,137 1,409,908 TTM 10/31/96 1,364,743
5,009,500 4,987,958 26,674 1,111,419 1,076,207 1,108,535 TTM 10/31/96 992,046
----------- ------------ ------------ ---------- ---------- ---------- ----------
11,650,000 11,599,902 29,743 2,374,096 2,386,343 2,518,442 2,356789
10,500,000 10,500,000 30,086 1,098,761 1,381,171 1,339,523 TTM 12/31/96 1,372,206
9,665,000 9,665,000 36,063 1,392,312 1,788,613 2,128,136 TTM 12/31/96 2,050,842
9,025,000 9,025,000 43 1,388,348 1,391,003 1,280,019 TTM 12/31/96 1,201,359
9,000,000 9,000,000 22 2,286,971 1,236,884 TTM 12/31/96 1,788,398
1,753,525 1,746,503 14 303,407 294,339 305,449 TTM 11/30/96 283,852
1,681,513 1,674,779 7 313,989 326,162 331,776 TTM 11/30/96 311,168
1,599,085 1,592,681 8 278,141 333,000 326,690 TTM 11/30/96 310,532
<PAGE>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
$1,106,787 $1,102,355 $ 8 $ 235,966 $ 212,474 $ 200,894 TTM 11/30/96 $ 201,025
953,632 949,812 12 167,208 164,411 165,956 TTM 11/30/96 159,197
604,236 601,816 7 132,378 132,582 132,858 TTM 11/30/96 115,407
518,395 516,319 6 197,913 188,589 180,814 TTM 11/30/96 138,810
482,826 480,892 5 127,148 140,584 159,528 TTM 11/30/96 183,602
----------- ------------ ------------ ---------- ---------- ---------- ----------
8,700,000 8,665,157 8 1,756,150 1,792,141 1,803,965 1,703,593
8,300,000 8,300,000 65 1,104,509 1,032,868 1,029,562 TTM 12/31/96 1,022,662
8,065,000 8,065,000 41 1,303,892 1,265,991 1,298,745 TTM 12/31/96 1,197,445
6,750,000 6,725,941 74,733 988,189 1,369,023 TTM 9/30/96 1,220,672
6,500,000 6,500,000 361,111 763,197 TTM 12/31/96 919,609
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
2,120,000 2,120,000 32,615 457,225 480,991 471,531 TTM 10/30/96 375,708
1,575,000 1,575,000 9,000 203,551 234,100 268,008 TTM 10/30/96 257,732
998,111 998,111 13,863 241,293 241,982 222,042 TTM 10/31/96 182,527
608,018 608,018 12,667 137,043 194,123 188,065 TTM 10/30/96 176,382
525,483 525,483 9,915 101,652 85,287 97,605 TTM 10/30/96 81,712
476,388 476,388 6,617 47,636 65,925 102,509 TTM 10/30/96 62,445
----------- ------------ ------------ ---------- ---------- ---------- ----------
6,303,000 6,303,000 12,996 1,188,399 1,302,408 1,349,759 1,136,506
6,060,000 6,060,000 63,125 820,525 1,039,661 1,351,568 TTM 12/31/96 1,003,438
6,000,000 5,991,620 96 1,083,618 1,153,834 1,249,680 4 Mo. Ann. 12/31/96 1,053,569
5,900,000 5,900,000 23,228 519,497 630,527 797,817 TTM 2/28/97 866,507
5,900,000 5,892,333 34 875,019 876,291 954,597 TTM 10/31/96 897,307
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
3,300,000 3,289,454 33,227 1,119,282 716,377 756,949 TTM 9/30/96 755,349
2,500,000 2,492,011 19,318 770,365 523,316 586,284 TTM 9/30/96 579,341
----------- ------------ ------------ ---------- ---------- ---------- ----------
5,800,000 5,781,465 25,357 1,889,647 1,239,693 1,343,233 1,334,690
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
2,886,253 2,880,881 29,100 658,307 822,393 652,213 TTM 9/30/96 628,229
2,733,747 2,728,660 29,028 472,373 627,125 585,557 TTM 9/30/96 508,172
----------- ------------ ------------ ---------- ---------- ---------- ----------
5,620,000 5,609,541 29,065 1,130,680 1,449,518 1,237,770 1,136,401
5,535,000 5,523,398 45 800,481 809,105 822,507 TTM 11/30/96 792,110
5,425,000 5,425,000 43 802,690 876,507 TTM 12/31/96 850,080
5,200,000 5,169,401 24 1,543,939 1,976,660 1,790,509 TTM 10/30/96 1,257,123
5,100,000 5,090,239 48,945 707,667 847,866 1,019,991 TTM 11/30/96 972,029
5,000,000 4,959,958 29 1,157,521 1,363,656 1,393,804 TTM 12/31/96 1,220,207
5,000,000 5,000,000 91 677,015 691,591 678,697 TTM 12/31/96 675,101
4,747,000 4,731,830 22,533 1,274,412 1,642,380 1,602,028 TTM 9/30/96 1,225,780
4,717,500 4,707,742 60 801,927 853,173 870,615 TTM 11/30/96 766,837
4,600,000 4,574,045 30,494 1,057,043 974,283 1,085,800 TTM 11/30/96 957,215
4,578,000 4,563,370 23,047 1,005,633 1,311,260 995,214 TTM 9/30/96 995,845
4,550,000 4,532,434 81 772,093 670,226 675,241 TTM 10/31/96 680,620
4,500,000 4,484,492 55 834,131 901,769 850,921 TTM 9/30/96 843,520
4,150,000 4,144,091 20,720 541,865 557,919 546,003 TTM 12/31/96 510,560
4,125,000 4,119,395 75 755,852 646,671 YTD Ann 11/30/96 609,158
4,100,000 4,092,178 20,359 588,583 945,365 987,544 TTM 11/30/96 844,393
4,075,000 4,060,002 130 346,426 553,104 654,020 TTM 9/30/96 602,751
4,000,000 4,000,000 30 949,806 938,208 898,865 TTM 12/31/96 816,675
3,955,000 3,955,000 29,081 826,610 805,077 815,477 TTM 1/31/97 831,713
3,950,000 3,941,797 46 484,891 561,773 575,977 TTM 11/30/96 600,005
3,925,000 3,925,000 49,063 612,258 693,003 705,148 TTM 11/30/96 683,181
3,800,000 3,788,821 15,528 826,231 1,518,322 1,283,898 TTM 10/31/96 1,019,897
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
3,116,000 3,116,000 69 473,788 520,121 521,692 TTM 12/31/96 439,321
684,000 684,000 122 114,064 119,407 127,831 TTM 12/31/96 109,301
----------- ------------ ------------ ---------- ---------- ---------- ----------
3,800,000 3,800,000 75 587,852 639,528 649,523 548,622
3,750,000 3,742,129 36 545,658 563,181 674,815 TTM 10/31/96 634,033
3,500,000 3,492,575 53 481,718 501,889 532,208 TTM 11/30/96 538,220
3,476,000 3,463,909 61 494,060 507,366 579,964 TTM 10/31/96 507,664
3,375,000 3,370,372 70 425,654 459,239 511,099 TTM 12/31/96 492,965
3,350,000 3,350,000 88 465,500 406,669 491,662 TTM 12/31/96 465,456
<PAGE>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
$3,000,000 $2,994,486 $24,954 $554,983 $533,801 $555,934 TTM 11/30/96 $546,058
3,000,000 2,993,860 68 348,879 456,239 482,023 TTM 11/30/96 452,472
2,980,000 2,969,460 87 368,473 493,244 517,345 TTM 11/30/96 442,985
2,922,000 2,917,946 55 322,127 454,149 528,279 TTM 12/6/96 482,215
2,900,000 2,897,637 19 302,054 484,650 539,061 TTM 10/31/96 569,448
2,850,000 2,850,000 84 535,931 543,242 600,284 TTM 12/31/96 510,610
2,800,000 2,789,524 21,458 420,958 405,871 428,779 TTM 11/30/96 443,179
2,800,000 2,800,000 82 378,360 417,032 403,201 TTM 11/30/96 393,530
2,800,000 2,797,014 11,606 335,614 370,444 385,594 TTM 12/31/96 397,783
2,712,000 2,703,333 10,813 705,086 723,854 670,605 TTM 9/30/96 622,004
2,675,000 2,666,452 26,934 590,136 648,780 576,827 TTM 9/30/96 576,977
2,500,000 2,494,904 11,497 367,792 382,349 429,972 TTM 12/31/96 432,613
2,300,000 2,295,601 15,942 454,327 499,653 575,525 TTM 11/30/96 489,327
2,223,000 2,216,600 56 339,818 340,460 402,800 TTM 9/30/96 370,815
2,200,000 2,195,603 30,494 515,420 508,738 538,052 TTM 12/31/96 428,916
2,200,000 2,193,798 16,875 352,124 339,687 371,578 TTM 9/30/96 345,638
2,175,000 2,172,731 38 218,389 224,771 391,713 TTM 12/31/96 403,012
2,150,000 2,145,565 47 276,460 296,764 291,425 TTM 11/30/96 314,123
2,100,000 2,096,068 33,808 73,336 522,865 TTM 12/31/96 351,161
1,963,000 1,959,209 19 356,433 352,560 340,552 TTM 11/30/96 320,761
1,950,000 1,947,258 14,641 54,213 207,014 275,550 TTM 11/30/96 280,358
1,939,000 1,939,000 29,379 257,019 258,144 258,996 TTM 12/31/96 262,175
1,925,000 1,921,318 11,934 437,309 480,920 500,649 TTM 11/30/96 348,034
1,900,000 1,898,835 41,279 233,381 230,750 249,170 TTM 11/30/96 234,953
1,870,000 1,870,000 45 19,307 276,850 349,484 TTM 12/31/96 313,149
1,800,000 1,792,220 14,338 225,994 250,493 258,845 TTM 11/30/96 241,763
1,777,000 1,772,762 24,622 216,973 234,336 272,586 TTM 5/31/96 241,334
1,775,000 1,771,548 13,123 306,684 289,174 305,994 TTM 11/30/96 289,526
1,700,000 1,693,967 16,940 300,279 311,528 314,200 TTM 9/30/96 248,904
1,700,000 1,696,221 44 310,073 392,184 YTD Ann. 11/30/96 331,321
1,538,000 1,538,000 32,042 114,829 139,762 187,139 TTM 2/28/97 211,858
1,500,000 1,500,000 6,944 217,396 317,053 356,620 TTM 10/30/96 306,161
1,500,000 1,493,209 24,887 194,422 211,393 278,255 TTM 11/30/96 242,308
1,500,000 1,493,949 6,791 386,446 419,964 225,414 TTM 11/30/96 314,458
1,500,000 1,500,000 18,293 96,481 207,579 425,985 TTM 11/30/96 332,761
1,430,000 1,430,000 27,500 56,528 268,207 289,826 TTM 12/31/96 254,926
1,385,000 1,382,553 9,156 180,145 183,191 181,587 TTM 11/30/96 185,014
1,350,000 1,344,554 8,456 262,514 252,136 200,329 TTM 11/30/96 259,694
1,200,000 1,200,000 19,048 390,062 481,647 519,694 TTM 12/30/96 263,907
1,200,000 1,200,000 11,429 322,310 463,306 472,235 TTM 12/31/96 364,366
1,012,000 1,010,529 8,864 111,332 139,684 183,435 TTM 11/30/96 133,449
1,000,000 996,895 9,773 200,698 146,596 183,243 TTM 11/30/96 151,985
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE
- ---------- ---------- ---------- ---------- ------------- ---- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 6,414,752 $ 6,404,859 $ 7,012,817 $ 6,608,228 $3,942,900 1.40
4,260,341 4,729,718 5,122,557 5,245,734 2,533,428 1.40
5,337,787 5,322,464 5,113,002 5,260,930 2,486,120 1.40
- ---------- ---------- ---------- ---------- ------------- ----
16,012,880 16,457,041 17,248,376 17,114,892 8,962,448 1.40 6,422,303 8.485%* 01/11/2027 01/11/2007
4,737,152 5,149,508 5,249,003 5,097,663 2,476,062 1.42
4,329,968 4,394,768 4,415,133 4,331,629 2,065,531 1.42
3,197,899 3,322,468 3,573,753 3,634,556 1,960,171 1.42
1,940,021 2,054,547 2,115,423 1,791,700 1,180,106 1.42
1,484,669 1,763,835 1,497,638 1,694,891 704,687 1.42
702,281 837,554 655,347 766,089 282,981 1.42
- ---------- ---------- ---------- ---------- ------------- ----
16,391,990 17,522,680 17,506,297 17,316,528 8,669,538 1.42 6,095,785 8.035%* 02/11/2027 02/11/2007
15,790,754 16,432,370 16,720,960 14,920,353 8,203,972 1.31 6,240,615 8.700%* 03/11/2027 03/11/2007
4,030,471 3,990,166 1.23
4,027,029 3,986,759 1.23
---------- ------------- ----
8,057,500 7,976,925 1.23 6,504,564 9.2975%* 03/11/2022 04/11/2017
8,325,381 8,395,800 8,233,241 7,900,763 5,278,174 1.69
5,296,738 5,345,605 5,278,613 5,330,578 3,869,254 1.69
- ---------- ---------- ---------- ---------- ------------- ----
13,622,119 13,741,405 13,511,854 13,231,341 9,147,428 1.69 5,409,317 7.981%* 03/11/2022 03/11/2004
4,451,309 4,593,095 4,609,388 4,534,388 999,310 1.50
2,102,018 2,348,475 2,819,894 2,655,245 1,064,939 1.50
2,548,600 2,627,963 2,570,016 2,437,316 610,867 1.50
954,828 1,772,505 2,007,933 1,958,938 774,120 1.50
1,120,262 1,736,628 1,824,306 1,804,122 647,642 1.50
1,006,968 1,651,774 1,713,391 1,618,452 538,304 1.50
668,443 1,484,525 1,827,771 1,735,530 569,539 1.50
746,657 1,427,250 1,651,464 1,593,041 484,851 1.50
858,485 1,463,686 1,570,493 1,510,499 473,882 1.50
1,390,072 1,550,208 1,536,541 1,479,074 440,614 1.50
1,241,284 1,364,392 1,449,397 1,449,397 516,768 1.50
734,447 1,291,925 1,437,880 1,437,880 347,245 1.50
1,161,704 1,163,959 1,302,010 1,302,010 313,990 1.50
1,332,803 1,361,122 1,321,665 1,314,506 347,230 1.50
842,697 1,292,185 1,161,927 1,161,927 260,722 1.50
751,519 777,272 806,576 780,079 214,317 1.50
- ---------- ---------- ---------- ---------- ------------- ----
21,912,096 27,906,964 29,610,652 28,772,404 8,604,339 1.50 5,727,089 9.190%* 12/11/2021 12/11/2008
13,329,069 13,565,335 13,714,304 13,809,463 6,988,912 1.34 5,214,642 8.250%* 10/11/2016 03/11/2013
468,853 410,442 410,519 340,992 300,311 1.24
250,166 290,271 268,514 252,478 227,064 1.24
250,676 234,284 217,051 1.24
276,973 257,950 259,698 236,998 216,897 1.24
245,000 245,000 245,068 220,827 193,469 1.24
183,941 269,346 269,346 243,067 202,676 1.24
255,928 229,894 215,654 206,029 170,499 1.24
282,520 260,948 260,948 238,086 202,919 1.24
225,101 202,406 229,939 173,138 154,110 1.24
277,526 259,641 246,958 142,306 1.24
232,738 211,741 207,754 196,575 143,166 1.24
239,763 198,510 185,551 175,430 144,702 1.24
159,838 161,170 161,170 153,178 138,199 1.24
212,712 226,945 226,708 208,433 131,528 1.24
145,750 145,867 145,867 138,659 125,775 1.24
199,290 160,704 160,694 147,875 124,588 1.24
125,221 115,018 172,047 164,352 123,875 1.24
277,207 235,429 211,165 200,665 138,623 1.24
181,462 211,545 217,761 203,754 113,139 1.24
200,174 214,466 217,748 201,772 131,313 1.24
169,626 196,851 190,476 146,398 85,158 1.24
127,398 77,197 132,441 126,362 71,663 1.24
202,183 161,218 161,218 152,582 103,814 1.24
<PAGE>
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE
- ---------- ---------- ---------- ---------- ------------- ---- --------- -------- ---------- -----------
126,310 116,202 107,146 101,853 92,294 1.24
145,392 138,809 141,800 118,571 85,522 1.24
146,346 139,198 94,387 1.24
95,110 94,599 95,110 88,151 79,528 1.24
231,291 183,073 198,033 182,564 90,592 1.24
75,002 75,002 100,054 77,769 71,503 1.24
212,842 203,856 136,305 124,604 59,492 1.24
167,603 163,029 158,062 149,907 105,748 1.24
103,390 77,435 77,579 69,687 59,190 1.24
155,000 154,888 147,144 60,779 1.24
118,566 111,977 102,941 96,656 67,028 1.24
142,624 112,347 126,958 121,979 62,213 1.24
82,602 71,237 82,151 69,676 59,865 1.24
65,417 64,655 67,738 55,091 43,800 1.24
87,045 69,558 70,434 66,956 57,148 1.24
157,887 160,272 160,254 152,449 60,165 1.24
67,285 60,307 61,142 58,127 52,050 1.24
123,089 117,704 117,873 100,125 60,056 1.24
122,546 118,424 124,989 119,890 59,024 1.24
83,005 95,838 96,181 91,455 60,242 1.24
120,093 51,268 102,536 74,217 50,113 1.24
51,561 66,010 73,600 70,903 47,994 1.24
129,063 146,521 126,444 120,853 47,937 1.24
121,599 100,637 100,637 93,189 46,608 1.24
95,902 100,857 93,484 88,864 53,141 1.24
58,680 58,813 59,404 56,904 42,381 1.24
60,743 60,748 56,976 54,464 42,095 1.24
128,787 81,123 82,135 78,145 46,878 1.24
68,558 43,609 45,623 43,444 39,398 1.24
100,013 99,164 99,164 94,229 45,819 1.24
104,364 90,161 110,685 106,180 44,463 1.24
90,087 96,041 97,249 91,626 43,362 1.24
50,867 54,958 51,417 49,281 35,917 1.24
182,967 162,282 194,562 187,306 42,502 1.24
22,661 38,208 40,550 38,750 31,000 1.24
40,593 43,970 40,640 38,640 34,251 1.24
73,359 90,571 75,652 70,698 43,198 1.24
43,803 44,000 47,282 43,090 29,054 1.24
39,682 42,947 39,054 37,101 30,850 1.24
86,162 70,816 71,670 68,134 33,364 1.24
41,382 48,439 48,269 45,875 28,436 1.24
32,772 34,341 35,506 34,064 24,623 1.24
57,330 53,323 57,853 54,675 22,955 1.24
21,831 25,639 26,072 24,137 19,272 1.24
49,621 50,052 50,920 46,816 18,453 1.24
26,937 18,888 20,606 19,575 15,941 1.24
108,097 87,211 83,461 72,934 19,343 1.24
110,269 109,997 109,997 104,546 13,146 1.24
209,972 194,913 194,574 159,413 19,420 1.24
- ---------- ---------- ---------- ---------- ------------- ----
9,196,605 9,115,272 9,622,609 8,808,797 5,995,385 1.24 4,847,098 8.660%* 03/11/2027 03/11/2012
23,325,514 25,497,225 25,575,859 25,091,637 6,069,363 1.42 4,272,911 9.214%* 03/11/2022 03/11/2009
12,448,100 12,648,534 13,032,870 14,176,658 5,696,922 1.73 3,284,959 8.325%* 01/11/2022 01/11/2007
2,984,702 2,982,193 3,028,893 3,040,269 1,577,074 1.46
1,873,051 1,936,182 2,086,910 2,144,362 1,231,303 1.46
1,311,612 1,354,589 1,360,062 1,391,438 831,212 1.46
1,156,136 1,189,270 1,226,722 1,272,317 768,937 1.46
- ---------- ---------- ---------- ---------- ------------- ----
7,325,501 7,462,234 7,702,587 7,848,386 4,408,526 1.46 3,017,266 8.240%* 04/11/2027 04/11/2007
3,003,168 4,917,191 5,027,218 5,536,538 3,896,063 1.27 3,070,191 8.590%* 02/11/2027 02/11/2007
3,847,163 3,925,918 3,766,166 3,899,100 2,292,714 1.32
2,531,525 2,735,633 3,006,320 2,839,829 1,627,922 1.32
- ---------- ---------- ---------- ---------- ------------- ----
6,378,688 6,661,551 6,772,486 6,738,929 3,920,636 1.32 2,981,374 8.708%* 03/11/2027 03/11/2009
<PAGE>
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE
- ---------- ---------- ---------- ---------- ------------- ---- --------- -------- ---------- -----------
2,443,620 2,698,884 4,128,373 2,667,562 1.91
2,410,648 2,502,709 2,527,438 1,764,570 1.91
473,917 393,116 360,630 200,465 1.91
---------- ---------- ---------- ------------- ----
5,328,185 5,594,709 7,016,441 4,632,597 1.91 2,430,033 7.575%* 01/11/2027 01/11/2007
2,321,441 4,231,055 4,117,238 3,126,553 1.24 2,527,091 8.262%* 03/11/2027 03/11/2007
3,805,886 3,526,875 2,779,423 1,632,730 1.51
1,886,032 1,954,908 1,818,681 1,075,297 1.51
1,877,395 1,991,745 1,918,277 1,177,316 1.51
---------- ---------- ---------- ------------- ----
7,569,313 7,473,528 6,516,381 3,885,343 1.51 2,576,266 8.350%* 03/11/2022 06/11/2007
4,379,913 4,607,536 4,864,168 5,020,231 3,042,855 1.39 2,187,715 7.935%* 02/11/2027 02/11/2007
3,887,751 4,626,721 5,118,851 5,149,579 3,231,686 1.31 2,459,464 9.050%* 04/11/2022 01/11/2012
5,619,648 5,763,122 5,722,721 5,645,883 3,136,126 1.35 2,319,963 9.020%* 03/11/2022 03/11/2007
6,168,449 6,197,373 6,206,977 6,237,617 3,013,893 1.41 2,137,415 8.650%* 01/11/2022 01/11/2007
1,848,263 1,996,917 2,087,318 2,130,160 1,428,513 1.43
1,723,325 1,830,012 1,897,761 1,950,391 1,305,176 1.43
- ---------- ---------- ---------- ---------- ------------- ----
3,571,588 3,826,929 3,985,079 4,080,551 2,733,689 1.43 1,907,521 8.080%* 03/11/2027 03/11/2007
4,895,143 4,825,459 4,643,395 4,742,083 2,469,772 1.22 2,022,212 8.970%* 04/11/2027 04/11/2012
842,471 887,056 902,757 429,099 1.31
653,208 664,154 692,456 691,083 393,913 1.31
573,251 571,081 591,965 521,319 284,754 1.31
284,000 270,230 240,469 1.31
424,505 446,375 466,718 476,292 239,865 1.31
342,332 324,155 389,348 376,035 221,196 1.31
243,960 257,631 266,660 278,649 217,965 1.31
411,197 414,631 431,284 410,804 212,056 1.31
142,600 254,150 290,564 276,623 180,192 1.31
288,911 367,184 361,638 361,613 151,199 1.31
115,798 116,314 117,475 112,248 63,965 1.31
- ---------- ---------- ---------- ---------- ------------- ----
3,195,762 4,258,146 4,779,164 4,677,653 2,634,673 1.31 2,013,020 8.830%* 03/11/2022 03/11/2007
4,185,419 4,328,701 4,372,249 4,446,669 2,609,116 1.39 1,872,675 8.660% 10/11/2026 10/11/2006
2,423,907 2,787,276 2,840,931 2,822,772 2,007,184 1.26 1,592,681 8.460%* 03/11/2027 03/11/2009
3,053,680 3,129,248 2,955,240 2,912,537 1,347,823 1.33
766,159 843,806 862,177 784,301 498,563 1.33
- ---------- ---------- ---------- ---------- ------------- ----
3,819,839 3,973,054 3,817,417 3,696,838 1,846,386 1.33 1,391,147 8.280%* 02/11/2027 02/11/2007
10,695,119 11,142,213 11,011,092 10,437,111 3,202,733 1.80 1,782,040 8.590%* 12/11/2011
11,532,536 13,604,018 14,338,462 14,445,392 2,438,346 1.50 1,621,310 9.300%* 12/11/2016 12/11/2011
2,297,040 2,443,025 2,437,464 2,400,029 1,749,446 1.32 1,325,702 8.280%* 01/11/2027 01/11/2009
3,597,386 3,689,874 3,774,091 3,611,363 2,016,656 1.35 1,499,181 8.820%* 01/11/2017 01/11/2004
2,169,685 2,409,270 2,593,855 2,462,376 1,838,495 1.40 1,312,581 8.670%* 11/11/2023 11/11/2006
4,285,498 4,744,744 5,111,975 4,751,847 2,023,945 1.46 1,387,339 9.250%* 02/11/2022 02/11/2012
1,660,237 1,695,375 2,090,635 2,332,595 1,531,551 1.29 1,183,802 8.785%* 01/11/2027 01/11/2007
2,111,101 2,072,774 2,244,152 2,364,932 1,575,724 1.32 1,195,972 8.570%* 01/11/2022 01/11/2007
5,086,777 5,778,198 6,077,040 5,865,212 1,968,862 1.45 1,357,163 9.670%* 10/11/2016 10/11/2011
4,783,716 4,697,833 4,646,338 4,646,338 1,132,426 1.48
4,080,891 4,011,806 4,089,219 4,089,219 787,585 1.48
- ---------- ---------- ---------- ---------- ------------- ----
8,864,607 8,709,639 8,735,557 8,735,557 1,920,011 1.48 1,293,094 9.390%* 12/11/2016 12/11/2011
2,545,465 2,570,625 2,591,736 2,620,472 1,271,350 1.28 993,447 8.250%* 03/11/2022 03/11/2007
7,413,368 7,721,936 8,060,498 8,060,498 1,647,817 1.56 1,055,226 9.580%* 04/11/2019 04/11/2007
2,096,577 2,124,536 2,032,871 1,995,716 1,089,076 1.35 808,298 8.180%* 04/11/2027 04/11/2007
6,659,027 6,488,481 5,355,932 5,949,357 1,409,196 1.57 895,264 8.850%* 04/11/2022 04/11/2007
370,785 358,301 368,119 353,535 207,771 1.49
434,138 436,529 438,460 429,318 224,080 1.49
369,684 409,546 405,509 397,169 221,590 1.49
<PAGE>
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE
- ---------- ---------- ---------- ---------- ------------- ---- --------- -------- ---------- -----------
326,386 302,589 294,915 301,183 142,805 1.49
205,424 209,612 211,423 205,021 135,859 1.49
171,483 169,542 170,068 158,475 82,659 1.49
277,622 248,694 234,354 213,377 97,686 1.49
332,915 315,238 333,835 363,516 135,670 1.49
- ---------- ---------- ---------- ---------- ------------- ----
2,488,437 2,450,051 2,456,683 2,421,594 1,248,120 1.49 1,106,689 8.480%* 02/11/2022 02/11/2010
1,288,118 1,212,645 1,210,537 1,231,047 940,229 1.23 762,311 8.450%* 04/11/2027 04/11/2007
1,949,123 1,739,065 1,778,919 1,728,110 1,070,887 1.27 842,945 8.550%* 04/11/2017 04/11/2012
5,922,477 6,430,931 6,509,722 1,198,172 1.63 733,765 9.960%* 10/11/2021 10/11/2011
959,704 1,295,352 910,609 1.49 611,867 8.190% 03/11/2022 03/11/2007
880,270 907,239 919,238 839,297 333,743 1.41
956,555 1,209,292 1,213,295 1,210,130 197,225 1.41
593,383 609,767 638,828 602,681 152,393 1.41
436,997 504,756 505,516 503,494 151,207 1.41
357,729 366,408 381,815 366,364 63,394 1.41
369,762 385,674 442,803 383,676 43,261 1.41
- ---------- ---------- ---------- ---------- ------------- ----
3,594,696 3,983,136 4,101,495 3,905,642 941,223 1.41 712,948 9.660%* 03/11/2022 03/11/2012
2,394,036 2,648,048 3,129,396 2,648,048 871,036 1.45 602,316 8.840%* 04/11/2022 04/11/2012
1,462,493 1,447,313 1,447,308 1,447,312 822,583 1.37 601,758 8.950%* 02/11/2022 02/11/2012
1,075,143 1,213,793 1,519,755 1,602,791 803,007 1.38 581,116 8.730%* 03/11/2022 03/11/2007
1,186,483 1,164,546 1,256,018 1,228,671 756,843 1.30 581,428 9.230%* 01/11/2027 01/11/2012
4,244,568 3,988,954 4,010,962 4,010,962 725,649 1.82
4,208,715 4,747,298 5,336,412 5,336,412 540,641 1.82
- ---------- ---------- ---------- ---------- ------------- ----
8,453,283 8,736,252 9,347,374 9,347,374 1,266,290 1.82 694,137 8.714%* 02/11/2012
3,016,339 3,038,686 3,144,790 3,144,790 603,479 1.66
2,562,355 2,891,895 3,070,188 3,070,188 484,672 1.66
- ---------- ---------- ---------- ---------- ------------- ----
5,578,694 5,930,581 6,214,978 6,214,978 1,088,151 1.66 655,285 10.100%* 02/11/2017 02/11/2012
984,936 982,282 1,008,335 988,108 762,755 1.39 547,874 8.790%* 01/11/2022 01/11/2007
1,206,694 1,287,308 1,260,194 724,085 1.36 532,123 8.680%* 03/11/2022 03/11/2007
3,462,277 3,897,664 3,789,231 3,194,371 902,477 1.49 606,457 8.280%* 01/11/2012 01/11/2004
2,340,558 2,503,529 2,534,306 2,514,541 846,302 1.47 576,472 9.650%* 02/11/2017 02/11/2012
1,405,600 1,677,193 1,727,170 1,654,300 1,031,245 1.97 523,736 8.580% 10/11/2016 10/11/2011
913,006 918,920 906,303 905,226 617,768 1.27 487,592 8.610%* 04/11/2022 04/11/2012
6,141,833 6,617,279 6,632,911 1,162,780 2.05 568,116 8.714%* 02/11/2012
996,660 1,056,625 1,108,327 1,021,227 671,165 1.43 470,812 8.890%* 01/11/2022 01/11/2007
3,484,152 3,505,124 3,821,031 3,626,246 775,903 1.50 516,340 9.550%* 11/11/2016 11/11/2011
6,170,614 6,926,860 7,050,936 936,445 1.71 547,890 8.714%* 02/11/2012
1,148,456 1,036,450 1,067,872 1,084,151 597,708 1.35 442,601 8.580%* 11/11/2021 11/11/2003
1,378,724 1,493,333 1,406,024 1,408,821 747,494 1.60 467,600 8.470%* 01/11/2017 01/11/2007
656,753 693,257 719,927 500,560 1.29 387,162 8.620%* 01/11/2027 01/11/2004
1,340,709 1,141,873 1,125,490 501,160 1.27 395,798 8.930%* 01/11/2027 01/11/2007
3,066,305 3,730,405 3,816,678 3,816,678 653,559 1.41 465,053 9.700%* 02/11/2017 02/11/2012
647,522 765,015 873,821 815,898 554,722 1.37 406,023 8.870%* 11/11/2021 11/11/2006
1,248,883 1,234,753 1,219,336 1,155,403 682,914 1.68 406,284 8.160%* 04/11/2017 04/11/2012
2,836,093 2,853,968 2,843,320 2,861,320 688,647 1.55 445,493 9.600%* 03/11/2017 03/11/2012
791,456 887,591 924,904 936,799 539,408 1.37 393,245 8.860%* 01/11/2022 01/11/2007
1,738,827 1,791,918 1,873,882 1,808,956 592,733 1.46 404,657 9.290%* 03/11/2022 03/11/2012
1,997,429 2,974,866 2,739,189 2,484,871 895,653 2.05 437,937 9.930%* 01/11/2017 01/11/2012
762,860 798,241 783,803 717,109 393,993 1.29
161,942 171,275 179,166 161,869 99,391 1.29
- ---------- ---------- ---------- ---------- ------------- ----
924,802 969,516 962,969 878,978 493,384 1.29 382,361 8.990%* 03/11/2022 03/11/2007
1,233,252 1,288,381 1,354,693 1,340,624 472,947 1.28 370,882 8.780%* 01/11/2007
883,911 904,279 914,816 953,105 430,187 1.25 343,875 8.700%* 01/11/2022 01/11/2007
631,907 649,091 727,504 690,435 438,786 1.23 356,063 9.210%* 11/11/2021 11/11/2006
592,000 630,553 688,291 671,580 440,806 1.27 346,276 9.230%* 02/11/2022 02/11/2007
591,913 542,320 619,744 607,611 420,948 1.25 336,807 8.980%* 03/11/2022 03/11/2007
<PAGE>
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE
- ---------- ---------- ---------- ---------- ------------- ---- --------- -------- ---------- -----------
1,559,416 1,589,632 1,638,104 1,599,718 466,037 1.45 321,818 9.790%* 01/11/2022 01/11/2012
436,689 615,424 638,217 613,990 396,719 1.32 301,371 8.970%* 01/11/2022 01/11/2007
481,108 589,376 632,767 575,963 405,156 1.34 302,795 9.110%* 11/11/2021 11/11/2006
690,573 807,211 882,112 867,226 396,672 1.34 295,457 9.050%* 02/11/2022 02/11/2007
603,968 754,232 824,818 828,792 420,633 1.38 305,015 9.540% 02/11/2022 02/11/2007
710,668 726,565 715,635 682,005 466,964 1.65 282,336 8.800%* 03/11/2022 03/11/2007
756,785 754,123 780,774 799,520 404,049 1.46 276,925 8.780% 11/11/2021 11/11/2011
605,395 619,933 581,936 573,071 359,797 1.29 279,673 8.900%* 04/11/2022 04/11/2004
484,177 524,606 569,148 391,758 1.49 262,414 8.670%* 02/11/2027 02/11/2007
2,144,298 2,175,920 2,086,611 547,004 1.69 324,569 8.714%* 02/11/2012
2,939,373 3,352,091 3,438,203 547,277 1.71 320,141 8.714%* 02/11/2012
672,035 692,518 764,325 421,763 1.68 251,759 9.000%* 01/11/2022 01/11/2007
1,645,067 1,868,904 1,827,190 1,782,844 400,185 1.54 260,159 9.660%* 02/11/2017 02/11/2012
475,662 465,762 526,039 507,365 329,292 1.52 216,423 8.590%* 12/11/2021 12/11/2006
1,800,557 1,977,944 2,054,224 410,916 1.73 237,358 8.990%* 02/11/2017 02/11/2007
522,394 548,312 569,572 577,440 313,138 1.45 216,687 8.730% 12/11/2021 12/11/2006
507,514 481,279 648,421 674,150 306,281 1.45 210,946 9.050%* 02/11/2027 02/11/2007
375,097 396,373 400,800 428,437 272,222 1.27 214,925 8.910%* 01/11/2007
145,977 874,520 856,581 393,990 1.62 243,185 10.000%* 02/11/2017 02/11/2012
454,793 450,395 436,584 417,516 257,128 1.26 204,336 9.410%* 01/11/2022 01/11/2007
341,100 635,493 706,197 718,811 247,108 1.27 193,974 8.850%* 02/11/2007
417,799 445,715 452,208 465,211 240,197 1.25 192,087 8.800%* 03/11/2007
872,194 930,287 971,757 971,757 396,622 1.82 217,742 9.660%* 02/11/2017 02/11/2012
399,943 406,488 419,034 414,857 222,741 1.28 174,344 8.440% 02/11/2027 02/11/2007
341,061 436,496 498,640 475,752 258,165 1.34 192,172 9.250%* 03/11/2022 03/11/2012
315,915 328,898 346,183 238,638 1.29 185,426 9.280% 10/11/2006
417,763 411,361 423,127 423,986 223,334 1.35 165,932 8.630% 11/11/2026 11/11/2006
564,103 551,838 600,713 608,284 254,801 1.60 159,122 8.190%* 12/11/2026 12/11/2006
497,845 501,595 512,000 481,407 221,943 1.29 172,595 9.100% 11/11/2021 11/11/2006
514,376 556,784 598,076 574,846 258,217 1.59 162,209 8.350%* 01/11/2022 01/11/2007
284,376 292,058 376,689 394,638 196,444 1.31 150,483 8.650%* 03/11/2022 03/11/2007
489,050 576,330 605,471 295,361 2.05 143,972 8.420%* 03/11/2007
315,317 351,913 391,497 399,761 225,380 1.49 151,055 9.000% 10/11/2006
747,029 798,496 797,718 817,068 259,458 1.82 142,764 8.320% 11/11/2006
742,278 964,919 1,309,936 1,235,753 270,973 1.65 164,506 9.220%* 03/11/2017 03/11/2007
104,906 616,509 651,354 651,354 222,358 1.39 160,290 9.530%* 03/11/2017 03/11/2012
277,627 279,695 282,022 181,239 1.29 140,386 9.080% 01/11/2022 01/11/2007
521,658 568,338 596,720 591,280 219,944 1.71 128,488 8.320% 11/11/2006
762,811 878,411 884,460 695,921 229,111 1.66 137,915 9.890%* 03/11/2017 03/11/2012
1,504,352 1,596,368 1,528,092 1,466,035 291,064 2.20 132,352 9.300%* 03/11/2017 03/11/2012
209,823 254,522 279,467 127,749 1.32 96,807 8.380%* 02/11/2022 02/11/2007
292,239 269,390 308,746 148,925 1.34 111,308 9.430%* 01/11/2017 01/11/2012
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BALLOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REMAINING REPAYMENT BUILT/ UNIT OF
LOCKOUT LOCKBOX TERM VALUE LTV DATE LTV AMORTIZATION RENOVATED UNIT MEASURE
--------- ------- ----------- ----------- --- ----------- ------------ -------------- --------- -------
<S> <C>
$41,800,000 71% 64% 1930/1980/1985 238,648 sf
29,000,000 71% 64% 1895/1979 310,887 sf
27,700,000 71% 64% 1900/1980 221,360 sf
--------- ----------- --- ----------- ---------
117 YES 118 98,500,000 71% 64% 360 770,895
35,600,000 56% 50% 1970/1986 238,911 sf
32,800,000 56% 50% 1986 217,500 sf
25,400,000 56% 50% 1987 162,300 sf
12,200,000 56% 50% 1970/1982 82,000 sf
11,300,000 56% 50% 1982 88,400 sf
5,100,000 56% 50% 1984 48,068 sf
--------- ----------- --- ----------- ---------
118 YES 119 122,400,000 56% 50% 360 837,179
115 Yes 120 104,000,000 63% 57% 356 1989 384,759 sf
36,650,000 86% 41% 1994 1,278,600 sf
36,600,000 86% 41% 1992 1,546,575 sf
--------- ----------- --- ----------- ---------
240 YES 241 73,250,000 86% 41% 299 2,825,175
61,000,000 57% 51% 1986/1992 516,538 sf
42,200,000 57% 51% 1988/1993 480,092 sf
--------- ----------- --- ----------- ---------
80 YES 84 103,200,000 57% 51% 300 996,630
10,700,000 62% 49% 1948/1960/1995 70 rooms
8,700,000 62% 49% 1985/1988/1996 150 rooms
7,900,000 62% 49% 1987 108 rooms
6,400,000 62% 49% 1987/1994 124 rooms
6,200,000 62% 49% 1986/1994 125 rooms
6,100,000 62% 49% 1985/1994 120 rooms
5,100,000 62% 49% 1988/1994 129 rooms
5,500,000 62% 49% 1985/1994 119 rooms
5,100,000 62% 49% 1986/1994 96 rooms
5,000,000 62% 49% 1985 101 rooms
4,700,000 62% 49% 1984/1995 149 rooms
4,500,000 62% 49% 1985/1994 118 rooms
4,700,000 62% 49% 1989/1995 132 rooms
3,800,000 62% 49% 1987 83 rooms
4,100,000 62% 49% 1982/1994 122 rooms
2,200,000 62% 49% 1984 65 rooms
--------- ----------- --- ----------- ---------
140 YES 141 90,700,000 62% 49% 300 1,811
191 Yes 192 70,000,000 72% 25% 240 1962/1968/1996 846 units
3,161,168 80% 60% 1971 36,644 sf
2,390,143 80% 60% 1974 50,678 sf
2,284,749 80% 60% 1981 35,000 sf
2,283,127 80% 60% 1977 36,850 sf
2,036,511 80% 60% 1981 33,207 sf
2,133,435 80% 60% 1982 43,046 sf
1,794,724 80% 60% 1963 38,500 sf
2,135,992 80% 60% 1966 21,650 sf
1,622,210 80% 60% 1985 30,375 sf
1,497,961 80% 60% 1965 50,437 sf
1,507,015 80% 60% 1976 26,640 sf
1,523,179 80% 60% 1982 52,066 sf
1,454,727 80% 60% 1990 22,936 sf
1,384,508 80% 60% 1976 30,666 sf
1,323,945 80% 60% 1981 38,439 sf
1,311,451 80% 60% 1978 38,526 sf
1,303,945 80% 60% 1969 22,125 sf
1,459,190 80% 60% 1976 23,313 sf
1,190,940 80% 60% 1983 86,091 sf
1,382,239 80% 60% 1973 21,393 sf
896,403 80% 60% 1979 44,785 sf
754,351 80% 60% 1982 34,739 sf
1,092,776 80% 60% 1976 30,885 sf
<PAGE>
BALLOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REMAINING REPAYMENT BUILT/ UNIT OF
LOCKOUT LOCKBOX TERM VALUE LTV DATE LTV AMORTIZATION RENOVATED UNIT MEASURE
--------- ------- ----------- ----------- --- ----------- ------------ -------------- --------- -------
$ 971,511 80% 60% 1984 29,418 sf
900,233 80% 60% 1960 18,392 sf
993,548 80% 60% 1970 22,279 sf
837,140 80% 60% 1960 19,022 sf
953,603 80% 60% 1971 29,038 sf
752,662 80% 60% 1951 12,460 sf
626,235 80% 60% 1970 22,536 sf
1,113,141 80% 60% 1964 36,516 sf
623,055 80% 60% 1983 38,168 sf
639,776 80% 60% 1980 28,897 sf
705,560 80% 60% 1973 24,835 sf
654,873 80% 60% 1969 22,080 sf
630,158 80% 60% 1965 19,340 sf
461,052 80% 60% 1961 13,558 sf
601,561 80% 60% 1967 20,223 sf
633,319 80% 60% 1974 27,630 sf
547,898 80% 60% 1965 19,684 sf
632,171 80% 60% 1971 20,880 sf
621,303 80% 60% 1973 22,366 sf
634,128 80% 60% 1975 19,643 sf
527,502 80% 60% 1974 29,296 sf
505,201 80% 60% 1974 23,556 sf
504,599 80% 60% 1977 30,978 sf
490,611 80% 60% 1974 24,880 sf
559,380 80% 60% 1971 24,641 sf
446,118 80% 60% 1966 20,663 sf
443,105 80% 60% 1969 23,463 sf
493,457 80% 60% 1973 22,800 sf
414,714 80% 60% 1964 10,978 sf
482,301 80% 60% 1972 21,929 sf
468,028 80% 60% 1978 21,780 sf
456,438 80% 60% 1973 21,527 sf
378,074 80% 60% 1963 19,240 sf
447,392 80% 60% 1970 33,514 sf
326,321 80% 60% 1960 7,304 sf
360,534 80% 60% 1974 14,600 sf
454,711 80% 60% 1969 18,382 sf
305,836 80% 60% 1960 18,539 sf
324,735 80% 60% 1965 28,716 sf
351,202 80% 60% 1973 21,304 sf
299,331 80% 60% 1951 8,704 sf
259,187 80% 60% 1975 10,873 sf
241,633 80% 60% 1971 16,971 sf
202,868 80% 60% 1959 7,918 sf
194,245 80% 60% 1957 18,068 sf
167,803 80% 60% 1961 7,493 sf
203,613 80% 60% 1971 22,878 sf
138,383 80% 60% 1972 22,150 sf
204,421 80% 60% 1983 36,062 sf
- ---------- --------- ----------- --- ----------- ---------
179 YES 180 63,109,359 80% 60% 328 1,905,163
143 Yes 144 68,000,000 61% 49% 300 1989/1997 573 rooms
117 Yes 118 53,650,000 64% 53% 299 1972/1993 738,201 sf
20,500,000 63% 57% 1970 645 pads
13,750,000 63% 57% 1972/1983 572 pads
9,900,000 63% 57% 1972 314 pads
9,050,000 63% 57% 1972 293 pads
--------- ----------- --- ----------- ---------
117 YES 121 53,200,000 63% 57% 360 1,824
115 Yes 119 54,000,000 61% 55% 360 1985/1990 417,532 sf
27,600,000 68% 60% 1974 504,550 sf
19,200,000 68% 60% 1982/1989 283,921 sf
--------- ----------- --- ----------- ---------
143 YES 144 46,800,000 68% 60% 360 788,471
<PAGE>
BALLOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REMAINING REPAYMENT BUILT/ UNIT OF
LOCKOUT LOCKBOX TERM VALUE LTV DATE LTV AMORTIZATION RENOVATED UNIT MEASURE
--------- ------- ----------- ----------- --- ----------- ------------ -------------- --------- -------
$33,900,000 48% 43% 1960/1996 392,443 sf
21,000,000 48% 43% 1988 164,909 sf
4,500,000 48% 43% 1968/1986 92,988 sf
--------- ----------- --- ----------- ---------
114 Yes 118 59,400,000 48% 43% 360 650,340
119 Yes 120 36,500,000 77% 69% 360 1996 202,104 sf
18,700,000 61% 51% 1991/1992 179,125 sf
13,000,000 61% 51% 1993 96,895 sf
12,300,000 61% 51% 1992 82,062 sf
--------- ----------- --- ----------- ---------
119 Yes 123 44,000,000 61% 51% 300 358,082
118 Yes 119 33,690,000 74% 66% 360 1972 608 units
177 Yes 178 36,900,000 66% 47% 303 1987 111,824 sf
119 Yes 120 35,600,000 65% 55% 300 1967/1989 502,023 sf
117 Yes 118 30,000,000 73% 61% 300 1970 328,078 sf
14,900,000 75% 67% 1986 288 units
13,800,000 75% 67% 1986 248 units
--------- ----------- --- ----------- ---------
119 YES 120 28,700,000 75% 67% 360 536
180 Yes 181 28,800,000 73% 61% 360 1991 415,713 sf
4,600,000 65% 55% 1907/1988 347,022 sf
5,000,000 65% 55% 1989 35,000 sf
3,200,000 65% 55% 1928/1985 221,241 sf
2,930,000 65% 55% 1996 48,858 sf
2,500,000 65% 55% 1969/1986 96 units
3,080,000 65% 55% 1989 52,616 sf
2,500,000 65% 55% 1991/1994 28,600 sf
2,500,000 65% 55% 1990 22,206 sf
2,150,000 65% 55% 1993 12,365 sf
2,000,000 65% 55% 1928/1988 28,363 sf
720,000 65% 55% 1992 6,512 sf
--------- ----------- --- ----------- ---------
113 YES 120 31,180,000 65% 55% 300 802,879
111 115 25,250,000 79% 70% 360 1970/1994 648 units
142 Yes 144 23,750,000 73% 64% 360 1989 273,555 sf
16,000,000 72% 65% 1984/1985 572 units
5,350,000 72% 65% 1912/1987 19,243 sf
--------- ----------- --- ----------- ---------
115 YES 119 21,350,000 72% 65% 360
173 177 30,000,000 50% 1% 180 1974/1985 227 rooms
173 Yes 177 21,000,000 70% 33% 240 1989 250 beds
138 142 21,300,000 69% 60% 360 1992 86,290 sf
75 Yes 82 20,700,000 68% 57% 240 1974 256,513 sf
112 Yes 116 19,300,000 71% 62% 324 1989/1994 175,733 sf
175 Yes 179 20,000,000 67% 48% 300 1988/1995 168 rooms
114 Yes 118 16,000,000 78% 71% 360 1982 153,523 sf
114 Yes 118 17,000,000 72% 61% 300 1966/1996 271,134 sf
171 Yes 175 16,300,000 73% 36% 240 1972/1985/1994 308 rooms
12,000,000 54% 26% 1967/1987 203 rooms
9,300,000 54% 26% 1967/1971/1990 187 rooms
--------- ----------- --- ----------- ---------
173 YES 177 21,300,000 54% 26% 240 390
113 120 14,000,000 75% 62% 300 1963/1987 349 units
114 121 13,400,000 72% 58% 264 1971/1986 268 rooms
117 Yes 121 12,200,000 74% 66% 360 1968/1990 208,980 sf
117 121 17,500,000 51% 42% 300 1932/1995 416,880 sf
2,080,000 67% 1% 1925 123,095 sf
2,335,000 67% 1% 1905 236,066 sf
2,380,000 67% 1% 1939 191,287 sf
<PAGE>
BALLOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REMAINING REPAYMENT BUILT/ UNIT OF
LOCKOUT LOCKBOX TERM VALUE LTV DATE LTV AMORTIZATION RENOVATED UNIT MEASURE
--------- ------- ----------- ----------- --- ----------- ------------ -------------- --------- -------
$ 1,595,000 67% 1% 1918 142,026 sf
1,035,000 67% 1% 1930 78,000 sf
1,055,000 67% 1% 1905 81,790 sf
1,640,000 67% 1% 1974 84,636 sf
825,000 67% 1% 1917 103,412 sf
--------- ----------- --- ----------- ---------
151 YES 155 12,945,000 67% 1% 156 1,040,312
114 121 11,610,000 71% 65% 360 1969/1991 128,451 sf
174 181 12,250,000 66% 30% 240 1989 198,127 sf
171 Yes 175 11,000,000 61% 45% 300 1994 90 beds
116 120 10,000,000 65% 53% 300 1893/1995 18 units
2,400,000 75% 37% 1972/1994 65 rooms
2,100,000 75% 37% 1972 175 rooms
1,160,000 75% 37% 1975 72 rooms
1,120,000 75% 37% 1973 48 rooms
700,000 75% 37% 1981 53 rooms
880,000 75% 37% 1975 72 rooms
--------- ----------- --- ----------- ---------
176 YES 180 8,360,000 75% 37% 240 485
174 Yes 181 10,000,000 61% 42% 300 1990/1997 96 rooms
175 179 11,250,000 53% 37% 300 1983/1996 62,250 sf
113 120 8,100,000 73% 61% 300 1952/1954/1996 254 units
174 178 8,200,000 72% 60% 360 1955/1995 175,679 sf
4,800,000 59% 2% 1963/1966 99 beds
5,000,000 59% 2% 1969 129 beds
--------- ----------- --- ----------- ---------
178 179 9,800,000 59% 2% 180 228
4,300,000 67% 33% 1967/1988 99 rooms
4,100,000 67% 33% 1972/1982 94 rooms
--------- ----------- --- ----------- ---------
175 179 8,400,000 67% 33% 240 193
114 Yes 118 7,700,000 72% 61% 300 1987 123,909 sf
116 Yes 120 7,500,000 72% 59% 300 1980 125,611 sf
78 Yes 82 7,300,000 71% 49% 180 1924/1990 217,638 sf
175 179 7,500,000 68% 33% 240 1991 104 rooms
171 175 11,000,000 45% 19% 240 1986/1993 170,886 sf
174 181 6,800,000 74% 51% 300 1985 55,200 sf
178 179 8,000,000 59% 2% 180 1961/1987 210 beds
114 118 7,500,000 63% 53% 300 1987 78,971 sf
172 176 7,700,000 59% 29% 240 1985 150 rooms
178 179 6,500,000 70% 2% 180 1965 198 beds
76 80 6,900,000 66% 59% 300 1988 55,872 sf
111 118 6,800,000 66% 47% 240 1875/1992 81,284 sf
78 82 5,300,000 78% 74% 360 1952/1978 200 pads
114 118 5,500,000 75% 68% 360 1984 54,759 sf
175 179 6,500,000 63% 31% 240 1974/1994 201 rooms
112 116 5,750,000 71% 60% 300 1955/1993 31,165 sf
174 181 8,000,000 50% 22% 240 1979/1991 135,471 sf
173 Yes 180 6,800,000 58% 28% 240 1989 136 rooms
114 118 6,000,000 66% 56% 300 1966/1996 86,038 sf
176 180 5,500,000 71% 51% 300 1986 80 rooms
174 178 6,810,000 56% 28% 240 1968/1972/1996 244 rooms
4,800,000 64% 55% 1950/1987 44,885 sf
1,100,000 64% 55% 1982 5,605 sf
--------- ----------- --- ----------- ---------
116 120 5,900,000 64% 55% 300 50,490
114 118 6,100,000 61% 52% 300 1900/1984 102,607 sf
111 118 6,500,000 54% 45% 300 1972 65,553 sf
112 Yes 116 5,000,000 69% 59% 300 1978 56,845 sf
112 119 4,700,000 72% 61% 300 1990 48,275 sf
113 Yes 120 4,550,000 74% 62% 300 1980/1987 38,262 sf
<PAGE>
BALLOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REMAINING REPAYMENT BUILT/ UNIT OF
LOCKOUT LOCKBOX TERM VALUE LTV DATE LTV AMORTIZATION RENOVATED UNIT MEASURE
--------- ------- ----------- ----------- --- ----------- ------------ -------------- --------- -------
174 178 $4,725,000 63% 46% 300 1988 120 rooms
114 118 4,100,000 73% 62% 300 1986/1995 44,005 sf
112 116 4,250,000 70% 60% 300 1966/1993 34,122 sf
115 119 4,700,000 62% 53% 300 1976/1994 52,992 sf
115 119 5,500,000 53% 44% 300 1964 152,621 sf
113 120 5,180,000 55% 46% 300 1986 33,968 sf
172 176 3,750,000 74% 49% 300 1972/1986 130 units
81 85 3,825,000 73% 66% 300 1991 33,960 sf
115 119 4,400,000 64% 58% 360 1972/1984 241 pads
178 179 7,500,000 36% 1% 180 1974/1977 250 beds
178 179 4,800,000 56% 1% 180 1964/1995 99 beds
114 118 3,670,000 68% 58% 300 1955/1985 217 pads
172 179 4,300,000 53% 26% 240 1978/1993 144 rooms
113 117 3,600,000 62% 52% 300 1982/1991 39,412 sf
115 119 3,500,000 63% 46% 240 1963 72 beds
113 117 3,390,000 65% 53% 300 1972 130 units
112 Yes 119 4,100,000 53% 49% 360 1987 57,093 sf
114 118 3,400,000 63% 53% 300 1986/1988 45,265 sf
175 179 3,600,000 58% 29% 240 1995 62 rooms
114 118 3,300,000 59% 51% 300 1977 100,680 sf
115 119 2,750,000 71% 60% 300 1966/1994 133 units
113 120 2,600,000 75% 63% 300 1961 66 units
175 179 3,100,000 62% 30% 240 1986/1990 161 rooms
115 119 2,400,000 79% 70% 360 1981 46 units
173 180 2,800,000 67% 47% 300 1990 41,330 sf
111 115 2,800,000 64% 54% 300 1975 125 pads
112 Yes 116 2,250,000 79% 70% 360 1964 72 units
113 117 2,800,000 63% 57% 360 1972 135 units
112 116 2,250,000 75% 63% 300 1958 100 units
111 118 3,050,000 56% 46% 300 1983 38,268 sf
116 120 2,000,000 77% 65% 300 1915 48 units
116 120 3,250,000 46% 39% 300 1969/1995 216 pads
111 115 2,300,000 65% 54% 300 1968 60 units
112 116 3,000,000 50% 41% 300 1968/1973 220 units
113 120 3,200,000 47% 34% 240 1963/1987/1995 82 rooms
176 180 1,950,000 73% 36% 240 1994 52 rooms
114 118 1,860,000 74% 62% 300 1950 151 pads
112 116 2,600,000 52% 42% 300 1975 159 units
173 180 2,000,000 60% 30% 240 1970/1992 63 rooms
173 180 3,500,000 34% 16% 240 1968/1995 105 rooms
115 119 1,750,000 58% 48% 300 1961/1994 114 pads
174 178 1,700,000 59% 28% 240 1951/1996 102 pads
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AUDIT/AGREED ACTUAL U/W
UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY U/W_O PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD CC REVIEW MAINTENANCE MAINTENANCE ITEMS ITEMS ANCHOR/TENANTS/FRANCHISE
- --------- ------------ ----- ------------ ----------- ----------- ------- ------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
100% 12/6/96 95% $ 57,600 $ 62,550 0.12 0.20 Genzyme Corp
97% 12/6/96 93% 312,400 375,500 0.20 0.20 Commonwealth of Mass Revenue
100% 12/6/96 95% 57,850 69,313 0.15 0.20 The Office @ 1 Kendall Square
----------- -----------
YES 427,850 507,363
100% 12/3/96 95% 21,300 26,625 0.16 0.19 Marcam
100% 12/3/96 95% 44,625 55,781 0.18 0.15 Parametric Technology
100% 12/3/96 95% 59,485 74,356 0.18 0.15 Computer Associates(Harvard PHC)
100% 12/3/96 95% 34,730 43,413 0.29 0.29 Computer Associates
98% 12/3/96 94% 17,625 22,032 0.37 0.37 Geo Centers
84% 12/3/96 84% 22,065 27,582 0.18 0.24 Lojack
----------- -----------
YES 199,830 249,789
95% 1/1/97 93% Yes 15,500 19,375 0.25 0.25 Morrison, Cohen, Singer and Weinstien
100% 2/20/97 100% -- -- -- -- Kmart
100% 2/20/97 100% -- -- -- -- Kmart
YES
90% 1/10/97 90% 10,275 12,844 0.15 0.15 IKEA
97% 1/1/97 95% 62,635 78,294 0.16 0.16 WalMart
----------- -----------
YES 72,910 91,138
70% TTM 9/30/96 70% 10,750 13,438 5% 5%
80% TTM 9/30/96 75% 15,000 18,750 5% 5%
81% TTM 9/30/96 77% -- -- 5% 5%
77% TTM 9/30/96 75% 3,250 4,063 5% 5%
78% TTM 9/30/96 78% 9,900 12,375 5% 5% Fairfield Inn
79% TTM 9/30/96 75% 41,150 51,438 5% 5% Fairfield Inn
79% TTM 9/30/96 75% -- -- 5% 5% Fairfield Inn
81% TTM 9/30/96 78% -- -- 5% 5% Fairfield Inn
82% TTM 9/30/96 79% 7,500 9,375 5% 5% Fairfield Inn
78% TTM 9/30/96 75% -- -- 5% 5% Fairfield Inn
57% TTM 9/30/96 57% 5,400 6,750 5% 5% Comfort Inn
70% TTM 9/30/96 70% 9,000 11,250 5% 5% Comfort Inn
68% TTM 9/30/96 68% -- -- 5% 5% Fairfield Inn
80% TTM 9/30/96 80% 17,950 22,438 5% 5% Comfort Inn
53% TTM 9/30/96 53% 8,000 10,000 5% 5% Fairfield Inn
70% TTM 9/30/96 68% 3,500 4,375 5% 5% Econo Lodge
----------- -----------
YES 131,400 164,252
97% 10/31/96 94% Yes 690,990 690,990 397 397
100% 12/31/96 93% 15,405 19,256 0.15 0.15 Drug Emporium
100% 12/31/96 93% -- -- 0.15 0.15 Montgomery Ward
100% 12/31/96 93% -- -- 0.15 0.15 Gold's Gym
100% 12/31/96 93% -- -- 0.15 0.15 Office Depot
100% 12/31/96 93% 9,000 11,250 0.15 0.15 Super Valu Stores
100% 12/31/96 93% -- -- 0.15 0.15 Gold's Gym
100% 12/31/96 93% -- -- 0.15 0.15 Super Valu Stores
100% 12/31/96 93% -- -- 0.15 0.15 Whole Foods Market
100% 12/31/96 93% 900 1,125 0.15 0.15 Furr's Supermarket
100% 12/31/96 93% 2,680 3,350 0.15 0.15 World of Sleep
100% 12/31/96 93% 28,950 36,188 0.15 0.15 Drug Emporium
100% 12/31/96 93% 1,000 1,250 0.15 0.15 Brookshire Brothers
100% 12/31/96 93% 1,000 1,250 0.15 0.15 Trans Texas Amusement
100% 12/31/96 93% 45,000 56,250 0.15 0.15 May Drugs
100% 12/31/96 93% 20,750 25,938 0.15 0.15 H.E. Butt Grocery Co.
100% 12/31/96 93% 1,200 1,500 0.15 0.15 Academy Sporting Goods
100% 12/31/96 93% -- -- 0.15 0.15 Chuck E. Cheese's Pizza
100% 12/31/96 93% 2,000 2,500 0.15 0.15 Western Auto/Designer Shoe
25% 12/31/96 93% 2,500 3,125 0.15 0.15 Baby U
100% 12/31/96 93% 26,250 32,813 0.15 0.15 Future Firm
57% 12/31/96 93% 11,100 13,875 0.15 0.15 Office Depot
100% 12/31/96 93% 65,000 81,250 0.15 0.15 Big Bear Sports
100% 12/31/96 93% 1,500 1,875 0.15 0.15 Michael's MJ Design
<PAGE>
AUDIT/AGREED ACTUAL U/W
UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY U/W_O PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD CC REVIEW MAINTENANCE MAINTENANCE ITEMS ITEMS ANCHOR/TENANTS/FRANCHISE
- --------- ------------ ----- ------------ ----------- ----------- ------- ------- -------------------------------------
100% 12/31/96 93% $ 5,000 $ 6,250 0.15 0.15 U Save Foods
100% 12/31/96 93% -- -- 0.15 0.15 Thrift Mart IGA
100% 12/31/96 93% 6,000 7,500 0.15 0.15 A.C., Inc
100% 12/31/96 93% 150 188 0.15 0.15 Tile Shop
100% 12/31/96 93% 2,000 2,500 0.15 0.15 Texas Drug Warehouse
100% 12/31/96 93% -- -- 0.15 0.15 Rudy's Country Bar-B-Q
100% 12/31/96 93% 45,760 57,200 0.15 0.15 Gold's Gym
100% 12/31/96 93% 5,500 6,875 0.15 0.15 Big Lots
100% 12/31/96 93% 675 844 0.15 0.15 Brookshire Brothers
100% 12/31/96 93% -- -- 0.15 0.15 Super Valu Stores
100% 12/31/96 93% 7,500 9,375 0.15 0.15 Fleming Companies, Inc
100% 12/31/96 93% 100 125 0.15 0.15 Thurman Kitchen & Bath
100% 12/31/96 93% 3,000 3,750 0.15 0.15 Wichita Food Mart
100% 12/31/96 93% -- -- 0.15 0.15 True Value Hardware
100% 12/31/96 93% 1,500 1,875 0.15 0.15 Minyard Food Stores
100% 12/31/96 93% -- -- 0.15 0.15 Office Depot
100% 12/31/96 93% -- -- 0.15 0.15 Minyard Food Stores
100% 12/31/96 93% -- -- 0.15 0.15 Buckner Bingo
100% 12/31/96 93% -- -- 0.15 0.15 Bank of Utah
100% 12/31/96 93% -- -- 0.15 0.15 Comerica Bank
100% 12/31/96 93% -- -- 0.15 0.15 Hobby Lobby
100% 12/31/96 93% 5,800 7,250 0.15 0.15 Blue Springs Fitness
100% 12/31/96 93% 9,750 12,188 0.15 0.15 Chism Trail Supermarkets
100% 12/31/96 93% -- -- 0.15 0.15 Western Auto
100% 12/31/96 93% 29,700 37,125 0.15 0.15 Mercantile Thrift Stores
100% 12/31/96 93% 2,850 3,563 0.15 0.15 Ramey Supermarkets
100% 12/31/96 93% 7,000 8,750 0.15 0.15 Stecks IGA
100% 12/31/96 93% 5,000 6,250 0.15 0.15 Crafts Plus
100% 12/31/96 93% 50,000 62,500 0.15 0.15 Coast to Coast Hardware
100% 12/31/96 93% 5,300 6,625 0.15 0.15 Langston Company
100% 12/31/96 93% 500 625 0.15 0.15 Calcasieu Lumber
100% 12/31/96 93% 1,500 1,875 0.15 0.15 McDuff's Super Center
100% 12/31/96 93% 2,500 3,125 0.15 0.15 Fleming Companies
100% 12/31/96 93% 36,430 45,538 0.15 0.15 Cortran--J Larkins Club
100% 12/31/96 93% -- -- 0.15 0.15 Skyline Super Foods
100% 12/31/96 93% 6,850 8,563 0.15 0.15 Chas Ball Market
100% 12/31/96 93% -- -- 0.15 0.15 Performance Today
47% 12/31/96 93% 6,100 7,625 0.15 0.15 US Postal Service
100% 12/31/96 93% -- -- 0.15 0.15 Fleming Companies
100% 12/31/96 93% 5,000 6,250 0.15 0.15 Bag 'N Save
100% 12/31/96 93% 8,300 10,375 0.15 0.15 Melek Service Center
100% 12/31/96 93% 5,000 6,250 0.15 0.15 Bob's Market
100% 12/31/96 93% -- -- 0.15 0.15 Crawford Auto Parts
100% 12/31/96 93% -- -- 0.15 0.15 Aldrich and Company
100% 12/31/96 93% -- -- 0.15 0.15 Appliance Mart
100% 12/31/96 93% -- -- 0.15 0.15 US Postal Service
100% 12/31/96 93% 1,000 1,250 0.15 0.15 Auto Zone
100% 12/31/96 93% 2,000 2,500 0.15 0.15 Michael's MJ Design
100% 12/31/96 93% 3,853 4,816 0.15 0.15 Fenn Food Market
----------- -----------
YES 505,853 632,320
74% TTM 12/31/96 74% Yes 395,600 494,500 5% 5% Westin
90% 1/1/97 90% Yes 1,108,500 1,300,000 0.25 0.27 Prudential Insurance
95% 1/97 91% 34,925 43,656 50 50
99% 12/25/96 91% 50,660 63,325 50 50
97% 1/25/97 91% 7,950 9,938 50 50
99% 1/26/97 93% 5,030 6,290 50 50
----------- -----------
YES 98,565 123,209
100% 1/1/97 95% Yes 75,800 83,380 0.20 0.22 Ultra Tech Stepper
96% 1/22/97 95% 23,050 29,000 0.15 0.15 Dillards
88% 1/22/97 86% 24,500 31,000 0.15 0.16 Belk--Yates*
----------- -----------
YES 47,550 60,000
76% 1/14/97 76% $ 15,300 $ 19,125 0.15 0.15 Oshmans
97% 1/21/97 96% 32,700 40,875 0.15 0.15 Home Express
84% 1/1/97 84% 66,540 83,175 0.15 0.15 Canned Foods Inc.
----------- -----------
YES 114,540 143,175
100% 1/1/97 97% Yes -- -- 0.15 0.15 Walmart, Home Depot, Sam*
81% 1/8/97 81% 8,750 8,750 0.15 0.15
100% 1/8/97 95% 4,850 4,850 0.15 0.15
99% 1/8/97 95% 23,000 23,000 0.15 0.15
----------- -----------
YES 36,600 36,600
93% 1/8/97 90% Yes 291 291
99% 2/97 95% 5,000 6,250 0.20 0.20
91% 1/1/97 90% Yes 224,217 280,271 0.29 0.29 Publix
95% 10/29/96 90% 137,250 172,188 0.35 0.35 Rich's*
95% 1/24/97 94% 48,516 60,645 250 250
94% 1/24/97 90% 43,494 54,368 250 250
----------- -----------
YES 92,010 115,013
100% 2/5/97 98% 53,770 67,213 0.15 0.15 Builders Square
93% 2/97 93% 30,000 37,500 0.15 0.16
100% 2/97 95% 0.15 0.15
AUDIT/AGREED ACTUAL U/W
UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY U/W_O PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD CC REVIEW MAINTENANCE MAINTENANCE ITEMS ITEMS ANCHOR/TENANTS/FRANCHISE
- --------- ------------ ----- ------------ ----------- ----------- ------- ------- -------------------------------------
87% 12/26/96 87% 22,000 27,500 0.15 0.16
100% 12/96 95% -- -- 0.15 0.15
99% 1/3/97 93% 5,000 6,250 250 250
100% 1/3/97 95% 0.15 0.15
100% 1/3/97 95% -- -- 0.15 0.15
100% 12/26/96 95% 0.15 0.15
100% 1/3/97 95% 0.15 0.15
88% 2/97 88% 8,000 10,000 0.15 0.15
100% 12/26/96 96% 0.15 0.15
----------- -----------
65,000 81,250
94% 10/31/96 92% Yes 149,590 186,988 250 250
94% 1/6/97 94% 1,100 -- 0.15 0.15 WalMart
87% TTM 11/30/96 87% 92,615 115,769 250 250
100% 2/1/96 95% 3,000 3,750 0.29 0.20 The Gap
----------- -----------
95,615 119,519
79% TTM 10/31/96 75% 20,000 4% 5%
97% 9/30/96 95% 33,500 41,875 250 250 Holiday Inn
100% 11/20/96 96% Yes 60,400 75,500 0.18 0.18 Staples
100% 12/4/96 95% -- -- 0.20 0.20 DORS
100% 10/16/96 98% -- 6,000 0.15 0.15 Home Quarters
79% TTM 11/30/96 78% 8,500 10,625 4% 5% Residence Inn
97% 8/1/96 90% 92,920 342,559 0.15 0.15 Winn Dixie
97% 12/16/96 96% 12,875 16,094 0.15 0.16 Caldor
75% TTM 11/30/96 73% 12,000 15,000 5% 5% Holiday Inn
67% TTM 10/31/96 67% 7,780 9,725 4% 5% Holiday Inn
68% TTM 10/31/96 68% 10,780 13,475 4% 5% Holiday Inn
----------- -----------
YES 18,560 23,200
96% 12/5/96 92% 76,750 95,938 250 289
69% TTM 12/31/96 69% -- 88,838 5% 5% Radisson Inn
94% 2/3/97 90% 119,780 148,225 0.20 0.20 Shaws Superstore
65% 1/2/96 55% 116,010 145,013 0.03 0.20 New York Stock Exchange
100% 11/17/96 95% 68,510 84,338 0.37 0.37 Anderson International
99% 11/17/96 95% 17,000 20,000 0.15 0.15 Metal Fabricating Inc.
92% 11/17/96 92% 116,200 143,950 0.23 0.23 Peck Distributing
<PAGE>
AUDIT/AGREED ACTUAL U/W
UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY U/W_O PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD CC REVIEW MAINTENANCE MAINTENANCE ITEMS ITEMS ANCHOR/TENANTS/FRANCHISE
- --------- ------------ ----- ------------ ----------- ----------- ------- ------- -------------------------------------
87% 11/17/96 87% $ 5,000 $ 5,000 0.19 0.19 Ritrama Duramark
100% 11/17/96 95% 208 0.15 Sensikal
77% 11/17/96 77% 45,860 46,485 0.04 0.15 Potter Ind.
93% 11/17/96 56% 7,000 7,000 0.22 0.22 Skate Inc
98% 11/17/96 95% 49,210 53,298 0.24 0.24 ADC Inc.
----------- -----------
308,988 360,070
91% 2/10/97 91% 38,510 48,138 0.15 0.15 Payless Drugs
88% 1/1/97 88% -- -- 0.17 0.17 Homebase
98% 7/96 95% Yes 250 250
95% 2/14/97 95% -- -- 500 500
82% TTM 10/30/96 75% 1,000 1,250 4% 5% EconoLodge
52% TTM 10/30/96 54% 1,000 1,250 4% 5% EconoLodge
66% TTM 10/30/96 62% 7,560 9,450 4% 5% EconoLodge
74% TTM 10/30/96 76% -- -- 4% 5% EconoLodge
68% TTM 10/30/96 64% 4,350 5,438 4% 5% EconoLodge
57% TTM 10/30/96 49% 8,500 10,625 4% 5% EconoLodge
----------- -----------
22,410 28,013
91% TTM 12/31/96 80% 4% 5% Residence Inn
100% 1/8/97 96% 12,150 15,188 0.22 0.32 Bea Systems
92% 1/20/97 92% 87,900 109,875 248 250 Farmer Jack
100% 11/15/96 95% 11,000 13,750 0.34 0.34
94% TTM 9/30/96 94% 10,000 12,000 300 300
85% TTM 9/30/96 85% 3,500 4,200 300 300
----------- -----------
13,500 16,200
94% TTM 9/30/96 94% 27,150 33,938 250 250
82% TTM 9/30/96 82% 15,650 19,563 250 250
----------- -----------
42,800 53,500
100% 12/5/96 98% -- -- 0.15 0.15 Kmart
85% 1/13/97 85% Yes 93,600 117,000 0.19 0.19
95% 10/16/96 90% 258,250 270,781 0.26 0.26 Equitable
74% TTM 11/30/96 74% 46,550 58,188 0.05 0.05 Clarion Suites
96% 1/9/97 93% 2,000 2,000 0.24 0.24 Burlington Coat Factory
100% 12/31/96 95% 70,775 88,469 0.03 0.15 Filene's Basement
97% TTM 9/30/96 95% -- -- 300 300
100% 12/11/96 95% 18,800 23,500 0.20 0.20 Baltimore VNA Foundation
84% TTM 11/30/96 80% 124,100 170,750 4% 5% Country Hearth Inn
93% TTM 9/30/96 93% 500 600 300 300
100% 11/4/96 95% 2,500 0.03 0.20
80% 1/1/97 80% 38,300 47,875 0.23 0.23 Trainor and Associates
95% 1/2/97 92% 22,000 27,500 25 50
98% 12/13/96 93% 865 0.20 0.20 Bet Zedek
71% TTM 11/30/96 71% 53,250 66,563 4% 5% Best Western
100% 1/08/97 90% 500 625 0.15 0.15 Urban Outfitters
100% 2/26/97 93% 500 625 0.20 0.20 Hobby Lobby
68% TTM 1/31/97 68% 3,000 3,750 5% 5% Days Inn
97% 11/20/96 93% 1,000 1,250 0.20 0.20 Merchants Warehouse
78% TTM 11/30/96 75% 36,500 45,625 4% 5% Residence Inn
58% TTM 10/31/96 53% 698,150 872,688 5% 5% Ramada Inn
100% 1/24/97 95% 2,500 3,125 0.20 0.20 Drug Fair
100% 2/5/97 92% 2,000 2,500 0.56 0.56
----------- -----------
4,500 5,625
93% 12/4/96 93% 11,310 14,138 0.03 0.48
99% 12/12/96 90% 46,975 58,719 0.20 0.20 Empress Court Restaurant
100% 1/1/97 93% 500 -- 0.29 0.29
94% 12/31/96 88% -- -- -- 0.15
94% 1/31/97 93% 10,135 12,669 0.24 0.24
<PAGE>
AUDIT/AGREED ACTUAL U/W
UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY U/W_O PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD CC REVIEW MAINTENANCE MAINTENANCE ITEMS ITEMS ANCHOR/TENANTS/FRANCHISE
- --------- ------------ ----- ------------ ----------- ----------- ------- ------- -------------------------------------
72% TTM 11/30/96 70% -- -- 4% 5% Comfort Inn
92% 12/15/96 92% $ 2,075 -- 0.15 0.15 The Cosmetics Center
100% 11/30/96 93% -- $ 20,967 0.15 0.15 Coco's Restaurant
95% 11/30/96 95% 17,300 21,625 0.21 0.21 Heritage Bank
100% 12/12/96 93% 36,500 45,625 0.20 0.20 World of Color
96% 1/20/97 91% 6,500 4,375 0.20 0.20 The Good Guys Stereo
96% 12/20/96 95% 17,725 22,156 301 301
100% 1/14/97 95% 1,689 0.20 0.45 Arbor Drugs
96% 1/16/97 95% 6,780 8,475 25
88% TTM 9/30/96 88% 5,000 6,000 300 300
95% TTM 9/30/96 95% 5,500 6,600 300 300
75% 12/31/96 75% 12,000 15,000 25 50
66% TTM 11/30/96 64% 63,501 79,376 4% 5% Ramada Inn
96% 12/31/96 92% 3,000 -- 0.18 0.18
92% TTM 12/31/96 92% 34,285 42,856 250
98% 10/31/96 95% 15,000 18,750 200 250
78% 12/1/96 78% 800 1,000 0.33 0.37 Execu-Flow
88% 12/23/96 88% -- -- 0.15 0.15 Old Country Buffet
61% TTM 12/31/96 60% 1,600 -- 4% 5%
100% 11/1/96 96% 46,750 36,625 0.03 0.23 Ames
92% 11/25/96 92% 24,700 30,875 250 250
95% 1/31/97 93% 109,300 136,625 333 333
43% TTM 11/30/96 43% 4,774 5,968 5% 5% Knights Inn
98% 11/30/96 95% 34,995 43,744 265 265
88% 1/30/97 88% 200 -- 0.03 0.15 Xymox Corporation
100% 11/30/96 95% 8,250 -- 25
92% 12/18/96 92% 12,650 15,813 200 250
96% 12/1/96 95% 12,200 15,250 257 257
100% 10/24/96 95% 30,515 38,144 269 269
100% 11/1/96 90% 0.23
97% 11/6/96 95% 264,500 330,625 321 321
95% 1/2/97 85% 60,870 76,088 25 50
100% 8/26/96 95% 32,350 5,000 282.13 282.13
98% 12/5/96 90% 17,000 21,250 250 250
67% TTM 11/30/96 63% 1,993 -- 4% 5% Holiday Inn Express
64% TTM 12/31/96 64% 1,000 -- 4% 5% Holiday Inn Express
76% 11/30/96 76% 10,700 13,375 25 25
99% 12/2/96 95% 10,000 12,500 250 250
66% TTM 12/31/96 52% 115,624 133,362 4% 5% EconoLodge
49% TTM12/31/96 50% 75,000 93,750 5% 5% Holiday Inn
98% 11/30/96 95% 900 -- 50
92% 11/30/96 92% 13,050 62,500 27 30
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
DATE SF ANCHOR2/TENANTS2 DATE 2 SF ANCHOR3/TENANTS3 DATE 3 SF
---------- ----- -------------------------------- ---------- ----- ---------------------- ---------- -----
<C> <C> <C> <C> <C> <C> <C> <C>
2005 41% Nueroscience 1998 16% Mitotix 2003 13%
1998 24% Fitness 2003 10% LeukoSite Lab 1999 8%
1998 13% Whitehead Institute 1998 10%
1999 39% Thomson Financial 1998 16%
2001 100%
2002 43% Healthcare 2001 35%
1999 100%
1997 26% The Tower Group 2001 11%
2001 24% Welty Leger Corp 1997 16% Boston Systems Office 2001 14%
2005 13% Edwards and Angell 2005 11% Shoppers Parking Corp. 2008 6%
2022 100%
2022 100%
2007 29% AMC Theaters 2007 8% Circuit City 2008 6%
2010 25% Homebase 2008 24% Circuit City 2011 7%
2004 78%
2000 100%
2001 100%
2000 100%
2005 100%
2004 100%
2001 100 %
2002 100%
1997 100%
1998 62%
2000 100%
1998 100%
2012 100%
1999 59%
1998 100%
2004 100%
1999 59%
1997 100%
2000 5%
2003 100%
1999 56%
2001 100%
2006 100%
<PAGE>
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
DATE SF ANCHOR2/TENANTS2 DATE 2 SF ANCHOR3/TENANTS3 DATE 3 SF
---------- ----- -------------------------------- ---------- ----- ---------------------- ---------- -----
1998 100%
2000 100%
2002 100%
2003 100%
1998 88%
1999 100%
2001 100%
1999 63%
2001 100%
2000 100%
1998 100%
1999 100%
2001 100%
2001 100%
1997 100%
1999 100%
2000 100%
1997 100%
1997 100%
2001 100%
1997 100%
2001 100%
1997 100%
2000 100%
2000 100%
2001 100%
1998 100%
1997 100%
2001 100%
1997 100%
2002 100%
1997 100%
1997 100%
2002 100%
2006 100%
2001 100%
2000 58%
2000 47%
2001 100%
2000 100%
2001 100%
1997 100%
2000 50%
1999 100%
1997 100%
1999 100%
1997 57%
2002 100%
1998 100%
2007 18% Prudential 2001 13% State of NJ 2005 11%
2005 23% Equitable (Phoenix Technologies) 2003 21% Lifeguard 2002 19%
2000 25% Sears 2029 13% Yonkers 2000 12%
23% Roses 2003 21% Sears 2009 15%
<PAGE>
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
DATE SF ANCHOR2/TENANTS2 DATE 2 SF ANCHOR3/TENANTS3 DATE 3 SF
---------- ----- -------------------------------- ---------- ----- ---------------------- ---------- -----
2016 14% Service Merchandise 2001 13% Office Max 2011 9%
2003 34% Good Guys 1999 8%
2002 23% Thrifty Drug 2004 22%
Best Buy 2011 29% Linens & Things 2010 17%
2005 10%
JC Penney* Furniture Land 1998 8%
2016 21% Phar-Mor 2005 16%
2009 32% Best Buy 2013 24%
2000 26% Workshop 1998 14%
2007 22% Barnes & Noble 2008 18% Tower Records 2007 14%
1999 43% Illinois State Brd of Ed. 2001 55%
2015 49% Office Max--Outparcel 2008 14%
2007 29% Eckerd Drug 2002 7%
1999 36% Waldbaums Grocery 2010 20%
2013 28% Ames 2000 24% Decelle 1999 13%
2003 8% HB Turck Hlding LLC 2006 4%
2001 66% DMT Eng. 2000 34%
2002 42% Clecorr Inc. 1998 19%
2000 32% Vitex Corp 1997 31%
<PAGE>
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
DATE SF ANCHOR2/TENANTS2 DATE 2 SF ANCHOR3/TENANTS3 DATE 3 SF
---------- ----- -------------------------------- ---------- ----- ---------------------- ---------- -----
2000 63% First Forms Inc. 2004 20%
*1990 58% Multi--Flow Dispensers 2001 32%
1999 45% Lake Erie Graphics 1997 22%
1997 27% Formatech 1997 13%
1999 42% MPC Powder Coating 1998 20% Cuyahoga Plastics 1997 17%
2012 28% The Childrens Co 1997 16%
2009 52% Edwards Theater 2005 12%
2006 100%
1999 23% JC Penney 2001 11% Arbour Drugs 1997 9%
2011 55% A&P 2012 31%
1999 42% Student Loan Liquidity 15%
2001 22% Trad-A-House O'Neill's Theater 2004 20%
2005 46%
2001 48% US Telecom Sprint 2002 29%
2001 9% Talbots 1998 6%
2005 19% The Price REIT Inc 2000 18% National Bank of Cal. 2003 12%
2003 39% Tower Records 1998 13%
2003 42%
2012 22% Rite-Aid 1998 15%
2000 42% United Jersey Bank 1999 14%
1998 23%
<PAGE>
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
DATE SF ANCHOR2/TENANTS2 DATE 2 SF ANCHOR3/TENANTS3 DATE 3 SF
---------- ----- -------------------------------- ---------- ----- ---------------------- ---------- -----
2001 15% Party Land 2000 11%
2001 46%
1998 16% Comstock 1998 11% Burk and Associates 2000 9%
2002 9% Salvation Army 1999 8% Ace Hardware 2003 7%
2001 32% 0%
2007 30% Blockbuster Video 2001 21%
1998 31% Tutor Time 2005 19%
2001 22%
2003 45%
1998 11%
</TABLE>
<PAGE>
ANNEX B
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Asset
Securitization Corporation, Commercial Mortgage Pass-Through Certificates,
Series 1997-D4 (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 tradable 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 days 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.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Subordinated 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 of 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.
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.
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 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 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, calculated on the basis of a year
of 360 days consisting of twelve 30-day months. Payment will then be made by
the respective Depositary to 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
B-1
<PAGE>
or Euroclear Participant's account. The securities credit will appear the
next day (European time) and the cash debit 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 debit 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 pre-position 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 can elect not to pre-position funds and allow that
credit line to be drawn upon to 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.
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 bonds to the DTC Participant's account 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,
calculated on the basis of a year of 360 days consisting of 12 30-day months.
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 debit in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft charges incurred
over the 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
B-2
<PAGE>
of interest (including original issue discount) on registered debt issued by
U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business in the chain or 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.
Exceptions for non-U.S. Persons (Form W-8): Beneficial owners of
Certificates 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.
Exception 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 of a
Certificate and reside 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 holder of a Certificate or his 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 holder 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, (iii) an estate the
income of which is includible in gross income for United States tax purposes,
regardless of its source or (iv) a trust if (A) for taxable years beginning
after December 31, 1996 (or for taxable years ending after August 20, 1996,
if the trustee has made an applicable election) a court within the United
States is able to exercise primary supervision over the administration of
such trust, and one or more United states fiduciaries have the authority to
control all substantial decisions of such trust, or (B) for all other taxable
years, such trust is subject to United States federal income tax regardless
of the source of its income. 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.
B-3
<PAGE>
ANNEX C-1
FORM OF COMPARATIVE FINANCIAL STATUS REPORT
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
COMPARATIVE FINANCIAL STATUS REPORT
AS OF
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ORIGINAL UNDERWRITING INFORMATION PRIOR FULL YEAR OPERATING INFORMATION
BASE YEAR AS OF NORMALIZED
- -----------------------------------------------------------------------------------------------------------------------------------
CURRENT LAST LAST
STATED PAID ANNUAL PROP. FINANCIAL (1) PROP. FINANCIAL (1)
LOAN PRINCIPAL THRU DEBT INSPECT. INFO AS % TOTAL $ DSCR INSPECT. INFO AS % TOTAL $ DSCR
NUM. CITY STATE BALANCE DATE SERVICE DATE OF DATE OCC. REV. NOI X DATE OF DATE OCC. REV. NOI X
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
LIST ALL MORTGAGE LOANS CURRENTLY IN THE TRUST (WITH OR WITHOUT INFORMATION) IN DESCENDING PRINCIPAL BALANCE ORDER.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
TOTAL: $ $ WA $ $ WA WA $ $ WA
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
RECEIVED REQUIRED
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
FINANCIAL INFORMATION: LOANS BALANCE LOANS BALANCE
- ----------------------------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
# % $ % # % $ %
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
CURRENT FULL YEAR:
- ------------------------------------------------------ --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
CURRENT FULL YEAR RECEIVED WITH DSCR LESS THAN 1:
- ------------------------------------------------------ --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
PRIOR FULL YEAR:
- ------------------------------------------------------ --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
PRIOR FULL YEAR RECEIVED WITH DSCR LESS THAN 1:
- ------------------------------------------------------ --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
(1) DSCR CALCULATED USING NET CASH FLOW/ANNUAL DEBT SERVICE.
- ----------------------------------------------------------------------- ----- --- ---- -------- --------- ---- ----- --- ----
(2) NET CHANGE SHOULD COMPARE THE LATEST YEAR TO THE UNDERWRITING YEAR.
- ----------------------------------------------------------------------- ----- --- ---- -------- --------- ---- ----- --- ----
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
COMPARATIVE FINANCIAL STATUS REPORT
AS OF
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
"ACTUAL" (2)
CURRENT ANNUAL OPERATING INFORMATION YTD FINANCIAL INFORMATION NET CHANGE
AS OF NORMALIZED MONTH REPORTED CURRENT & BASE
- --------------------------------------------------------------------------------------------------------------
LAST
PROP. FINANCIAL (1) FINANCIAL %
INSPECT. INFO AS % TOTAL $ DSCR INFO AS % TOTAL $ % % TOTAL DSCR
DATE OF DATE OCC. REV. NOI X OF DATE OCC. REV. NOI DSCR OCC. REV. X
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
WA $ $ WA WA $ $ WA WA $ WA
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
</TABLE>
C-1-1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
<PAGE>
FORM OF DELINQUENT LOAN STATUS REPORT
ANNEX C-2
COMMERCIAL MORTGAGE ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
DELINQUENT LOAN STATUS REPORT
AS OF
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)=a+b+c+d
- ------- ----- ------- ---- --------- --------- --------- -------- -----------------
SQ. FT. TOTAL
LOAN OR OUTSTAND. TOTAL OTHER
NUMBER, UNITS, PAID SCHED. P&I OUTSTAND. ADVANCES CURRENT
CITY & PROP. OCC %, THRU PRINCIPAL ADVANCES EXPENSES (TAXES & TOTAL MONTHLY
STATE TYPE DATE DATE BALANCE TO DATE TO DATE ESCROW) EXPOSURE P&I
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
FCL--Foreclosure
- ----------------------- ---- --------- --------- --------- -------- -------- -------
LTM--Latest 12 Months
- ----------------------- ---- --------- --------- --------- -------- -------- -------
* Status should contain a code indicating the current direction of each loan such as
(FCL--In Foreclosure, MOD-- Modification, DPO--Discount Payoff, NS--Note Sale,
BK--Bankruptcy, PP--Payment
- -------------------------------------------------------------------------------------------
Plan, Curr--Current, TBD--To Be Determined, etc.) It is possible to combine the status
codes if the loan is going in more than one direction (i.e. FCL/Mod, BK/Mod, BK/FCL/DPO).
- -------------------------------------------------------------------------------------------
** App--Appraisal, BPO--Broker Opinion, Inc.-- Internal Value
- ------------------------------------------------------------------------ -------- -------
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
(f) (g)=(.92*f)-e
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
DATE
LOSS NOI
MOST APPRAISAL TRANSFER USING FILED/
CURRENT LTM LTM ACCURATE BPO OR DATE/ 92% FCL
INTEREST MATURITY NOI NOI, VALUATION PROPERTY INTERNAL CLOSING APPR. OR SALE
RATE DATE DATE DSCR DATE VALUE VALUE** DATE BPO (f) DATE STATUS*
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4 COLLECTION PERIODS DELINQUENT
- --------------------------------------------------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
3 COLLECTION PERIODS DELINQUENT
- --------------------------------------------------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
1 TO 2 COLLECTION PERIODS DELINQUENT
- --------------------------------------------------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
SPECIALLY SERVICES MORTGAGE LOANS THAT ARE CURRENT
- --------------------------------------------------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
</TABLE>
C-2-1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
<PAGE>
ANNEX C-3
FORM OF HISTORICAL LOAN MODIFICATION REPORT
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
HISTORICAL LOAN MODIFICATION REPORT
AS OF
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
BALANCE BALANCE AT THE
WHEN SENT EFFECTIVE DATE NUM.
LOAN CITY/ MOD./ EFFECTIVE TO SPECIAL OF MONTHS/
NUMBER STATE EXTENSION DATE SERVICER REHABILITATION OLD RATE NEW RATE
- ------- ----- --------- ---------- ---------- -------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------- ----- --------- ---------- ---------- -------------- -------- --------
THIS REPORT IS HISTORICAL
- ------------------------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
TOTAL FOR ALL LOANS:
- -------------- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
TOTAL FOR LOANS IN CURRENT MONTHS:
- ------------------------------------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
# OF LOANS $ BALANCE
- ------- ----- --------- ---------- ---------- -------------- -------- --------
MODIFICATIONS:
- -------------- --------- ---------- ---------- -------------- -------- --------
MATURITY DATE EXTENSIONS:
- ------------------------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
TOTAL:
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
FORM OF HISTORICAL LOAN MODIFICATION REPORT
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
HISTORICAL LOAN MODIFICATION REPORT
AS OF
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
TOTAL (2) EST.
NUM. FUTURE
MONTHS INTEREST LOSS
FOR (1) REALIZED TO TRUST $
NEW OLD NEW CHANGE OF LOSS TO (RATE
OLD P&I P&I MATURITY MATURITY MOD. TRUST $ REDUCTION) COMMENTS
- ------- ----- -------- -------- --------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
</TABLE>
C-3-1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
<PAGE>
ANNEX C-4
FORM OF HISTORICAL LOSS ESTIMATE REPORT
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
HISTORICAL LOSS ESTIMATE REPORT (REO-SOLD OR DISCOUNTED PAYOFF)
AS OF
<TABLE>
<CAPTION>
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
(c) = b/a (a) (b) (d) (e) (f) (g)
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
LATEST
% REC. APPRAISAL EFFECT NET AMT.
SERVICER FROM OR BROKERS DATE OF SALES RECEIVED STATED TOTAL P&I TOTAL
LOAN ID CITY/STATE SALE OPINION SALE PRICE FROM SALE BALANCE ADVANCED EXPENSES
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------- ------------ ------------- ------------- ----------- --------- ---------- ---------
THIS REPORT IS HISTORICAL
- ---------------------------------------- ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
TOTAL ALL LOANS
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
CURRENT MONTH ONLY:
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
ANNEX C-4
FORM OF HISTORICAL LOSS ESTIMATE REPORT
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
HISTORICAL LOSS ESTIMATE REPORT (REO-SOLD OR DISCOUNTED PAYOFF)
<TABLE>
<CAPTION>
AS OF
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
(h) (i)=d(f+g+h) (k)+i-e (m) (n)+k+m (o)=n/e
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
ACTUAL DATE MINOR
LOSSES LOSS MINOR ADJ. TOTAL LOSS LOSS % OF
SERVICING PASSED PASSED ADJ. TO PASSED WITH SCHEDULED
FEES NET PROCEEDS THRU THRU TRUST THRU ADJUSTMENT BALANCE
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------- ------------ ------------- ------------- ----------- ---------
- ----------------------------------------- ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
</TABLE>
C-4-1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
<PAGE>
ANNEX C-5
FORM OF REO STATUS REPORT
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
REO STATUS REPORT
AS OF
<TABLE>
<CAPTION>
- ------- --------- -------- -------- --------- -------- -------- -------- ---------------- -------- -------- -------- ------
(a) (b) (c) (d) (e)=a+b+c+d
- ------- --------- -------- -------- --------- -------- -------- -------- ---------------- -------- -------- -------- ------
LOAN SQ. FT. (YTD)
NUM./ OR TOTAL OTHER MOST
CITY UNITS/ PAID SCHED. P&I ADVANCES TOTAL CURRENT CURRENT NOI RECENT
& PROP. OCC. %/ THRU PRINCIPAL ADVANCES (TAXES & EXPENSES TOTAL MONTHLY INTEREST MATURITY AS OF NOI/
STATE TYPE DATE DATE BALANCE TO DATE ESCROW) TO DATE EXPOSURE P&I RATE DATE DATE DSCR
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- ----------------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REAL ESTATE OWNED
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- ----------------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
(1) Using the following codes: App. -- Appraisal; BPO -- Brokers Opinion; Int. -- Internal Value.
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
REO STATUS REPORT
AS OF
<TABLE>
<CAPTION>
- ------ --------- -------- ------------------------------ -------- --------
(f) (g)=(.92*f)-e
- ------ --------- -------- ------------------------------ -------- --------
($1) LOAN
MOST APPRAISAL, TRANSFER USING
ACCURATE BPO OR DATE/ 92% REO
APPR. PROPERTY INTERNAL CLOSING APPR. OR ACQUISITION PENDING
DATE VALUE VALUE DATE BPO (f) DATE OFFERS COMMENTS
- ------- --------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
</TABLE>
C-5-1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
<PAGE>
<TABLE>
ANNEX C-6
FORM OF WATCH LIST
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
WATCH LIST
AS OF
<CAPTION>
- --------- --------------- --------- --------- -------- ---------- ---------- --------- --------------------------------------
STATED PAID CURRENT
LOAN PRINCIPAL THRU MATURITY DSC
NUMBER PROPERTY TYPE CITY STATE BALANCE DATE DATE (%) COMMENT/REASON ON WATCH LIST
- --------- --------------- --------- --------- -------- ---------- ---------- --------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
List all loans on Watch List and the reason for each being on the Watch List. List should be sorted in descending loan balance
order.
- -------------------------------------------------------------------------------------------------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
Total: $
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
</TABLE>
C-6-1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
<PAGE>
ANNEX C-7
FORM OF OPERATING STATEMENT ANALYSIS
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
OPERATING STATEMENT ANALYSIS REPORT
AS OF
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW:
--------------
Servicer Loan Number
-------------- ------------ ------------ -------------- -------------- ----------- ------
Property Type
-----------------------------------------------------------------------------------------------
Property Address, City, State
-----------------------------------------------------------------------------------------------
Net Rentable Square Feet
-------------- ------------
Year Built/Year Renovated
-------------- ------------ ------------ -------------- --------------
Year of Operations UNDERWRITING 1994 1995 1996 YTD
-------------- ------------ ------------ -------------- --------------
Occupancy Rate*
-------------- ------------ ------------ -------------- --------------
Average Rental Rate
-------------- ------------ ------------ -------------- --------------
* Occupancy rates are year end or the ending date of the financial statement for the period.
INCOME: NO. OF MOS.
-------------- ----------- -------
Number of Mos. Annualized PRIOR YEAR CURRENT YEAR
-------------- ------------ ------------ -------------- -------------- ----------- -------
Period Ended UNDERWRITING 1994 1995 1996 1997 YTD** 1995-BASE 1995-1994
Statement Classification BASE YEAR NORMALIZED NORMALIZED NORMALIZED AS OF / /96 VARIANCE VARIANCE
-------------- ------------ ------------ -------------- -------------- ----------- -------
Rental Income
-------------- ------------ ------------ -------------- -------------- ----------- -------
Pass Through/Escalations
-------------- ------------ ------------ -------------- -------------- ----------- -------
Other Income
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
EFFECTIVE GROSS INCOME $0.00 $0.00 $0.00 $0.00 $0.00 % %
-------------- ------------ ------------ -------------- -------------- ----------- -------
Normalized -- Full year financial statements that have been reviewed by the underwriter or the
Servicer.
** YTD numbers will not be normalized.
OPERATING EXPENSES:
-------------- ------------ ------------ -------------- -------------- ----------- -------
Real Estate Taxes
-------------- ------------ ------------ -------------- -------------- ----------- -------
Property Insurance
-------------- ------------ ------------ -------------- -------------- ----------- -------
Utilities
-------------- ------------ ------------ -------------- -------------- ----------- -------
Repairs and Maintenance
-------------- ------------ ------------ -------------- -------------- ----------- -------
Management Fees
-------------- ------------ ------------ -------------- -------------- ----------- -------
Payroll & Benefits Expense
-------------- ------------ ------------ -------------- -------------- ----------- -------
Advertising & Marketing
-------------- ------------ ------------ -------------- -------------- ----------- -------
Professional Fees
-------------- ------------ ------------ -------------- -------------- ----------- -------
Other Expenses
-------------- ------------ ------------ -------------- -------------- ----------- -------
Ground Rent
-------------- ------------ ------------ -------------- -------------- ----------- -------
TOTAL OPERATING EXPENSES $0.00 $0.00 $0.00 $0.00 $0.00 % %
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
OPERATING EXPENSES RATIO
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
NET OPERATING INCOME $0.00 $0.00 $0.00 $0.00 $0.00
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
Leasing Commissions
-------------- ------------ ------------ -------------- -------------- ----------- -------
Tenant Improvements
-------------- ------------ ------------ -------------- -------------- ----------- -------
Replacement Reserve
-------------- ------------ ------------ -------------- -------------- ----------- -------
TOTAL CAPITAL ITEMS $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
N.O.I. AFTER CAPITAL ITEMS $0.00 $0.00 $0.00 $0.00 $0.00
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
DEBT SERVICE (PER SERVICER) $0.00 $0.00 $0.00 $0.00 $0.00
-------------- ------------ ------------ -------------- -------------- ----------- -------
CASH FLOW AFTER DEBT SERVICE $0.00 $0.00 $0.00 $0.00 $0.00
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
(1) DSCR: (NOI/DEBT SERVICE)
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
DSCR: (AFTER RESERVES/CAP ITEMS)
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
SOURCE OF FINANCIAL DATE:
------------------------------------------------------------------------------------------------
(i.e., operating statements, financial statements, tax return, other)
NOTES AND ASSUMPTIONS:
- ---------------------------------------------------------------------------------------------------------------------------------
The years shows above will always show a three year history. 1996 is the current year financials; 1997 is the prior
year financials.
This report may vary depending on the property type and due to reporting differences among the financial statements
of the borrowers.
INCOME: COMMENT
EXPENSE: COMMENT
CAPITAL ITEMS: COMMENT
(1) Used in the Comparative Financial Status Report.
</TABLE>
C-7-1
<PAGE>
ANNEX D
The following graphic material is included in the paper and electronic
versions of this Prospectus Supplement.
A. The inside front cover contains a map of the contiguous United
States showing the concentration of the Mortgaged Properties in the pool by
state as follows:
Number of Percentage
State Properties Value of Total
- ----- ---------- ----- --------
Arizona 4 $ 27,007,563 1.9%
Arkansas 2 $ 675,321 0.0%
California 32 $ 298,458,574 21.3%
Colorado 13 $ 67,820,271 4.8%
Connecticut 5 $ 31,494,619 2.2%
Florida 10 $ 78,732,838 5.6%
Georgia 4 $ 30,461,044 2.2%
Idaho 1 $ 11,900,000 0.8%
Illinois 1 $ 14,019,336 1.0%
Indiana 13 $ 64,956,782 4.6%
Iowa 1 $ 5,169,401 0.4%
Kansas 4 $ 1,321,212 0.1%
Louisiana 2 $ 15,698,510 1.1%
Maryland 5 $ 25,263,575 1.8%
Massachusetts 11 $ 166,791,073 11.9%
Michigan 6 $ 39,801,532 2.8%
Minnesota 1 $ 8,678,759 0.6%
Missouri 4 $ 1,954,512 0.1%
Montana 5 $ 4,705,354 0.3%
Nebraska 5 $ 22,250,308 1.6%
Nevada 1 $ 2,193,798 0.2%
New Hampshire 1 $ 9,025,000 0.6%
New Jersey 7 $ 89,023,452 6.3%
New York 11 $ 108,910,959 7.8%
North Carolina 10 $ 71,050,155 5.1%
Ohio 11 $ 22,210,684 1.6%
<PAGE>
Number of Percentage
State Properties Value of Total
- ----- ---------- ----- --------
Oklahoma 3 $ 2,211,118 0.2%
Oregon 1 $ 8,000,000 0.6%
Pennsylvania 2 $ 21,996,895 1.6%
Rhode Island 4 $ 14,639,492 1.0%
South Carolina 3 $ 7,692,931 0.6%
Tennessee 4 $ 6,388,380 0.5%
Texas 43 $ 51,043,445 3.6%
Utah 5 $ 5,351,124 0.4%
Virginia 10 $ 44,327,735 3.2%
Washington 4 $ 16,527,749 1.2%
West Virginia 1 $ 608,018 0.0%
Wisconsin 1 $ 4,144,091 0.3%
Wyoming 2 $ 516,906 0.0%
B. There are photographs of certain of the Mortgaged Properties(1)
contained on the inside front cover as follows:
International Plaza: New York, NY. The photograph shows an aerial view
of the modern high-rise glass office building located in midtown Manhattan.
Marina Harbor Apartments: Marina del Rey, CA. The photograph shows two
red brick buildings in the low-rise apartment complex, located in a landscaped
suburban setting with a stream running in front of the buildings.
One Kendall Square: Cambridge, MA. The photograph shows three
connected, modern office buildings, approximately six stories high, two of
which appear to be steel and glass and one of which is a glass tower-like
structure.
Puente Hills: City of Industry, CA. The photograph shows the portion
of a suburban low-rise outdoor retail mall and the portion of the parking lot
in front of Office Depot.
- --------
1 The photographs of the Mortgaged Properties included in this Prospectus
are not representative of all of the Mortgaged Properties included in any pool
loan or of any particular type of Mortgaged Property.
-2-
<PAGE>
Wells Research Center: Newton, MA. The photograph shows the red brick,
low-rise research facility in a landscaped office-park setting and a portion of
the parking lot.
K-Mart Distribution Center: Brighton, CO. The photograph shows the
warehouse facility with numerous K-Mart trucks parked in front.
Westin Hotel: Indianapolis, IN. The photograph shows the modern
high-rise, full-service hotel overlooking the surrounding buildings and city
streets.
Montague Park Tech Center: San Jose, CA. The photograph shows the
modern low-rise research facility in a landscaped office-park setting and a
portion of the parking lot.
There are photographs of certain of the Mortgaged Properties(2)
contained on the inside back cover as follows:
Kessler Garden Apartments. The photograph shows a portion of the red
brick, low-rise apartment complex, including the balconies located off some of
the rooms, a portion of the parking available and a large grass area in front
of the parking area.
Bend Factory Outlets. The photograph shows a portion of the newly
constructed, traditional-style factory outlet mall with the storefronts for
tenants Cape Isle Knitters and Bass Shoe Outlet, including a portion of the
parking area.
Courtney Park Apartments. The photograph shows a portion of the red
brick and gray shingle low-rise apartment complex including a small landscaped
and grass area and a portion of the parking lot.
Outlets Limited Mall. The photograph shows a portion of the outlet
mall, located in a modern, warehouse-like facility with very high ceilings,
with the storefront for tenant Accessory Corner.
Alzina Office Building. The photograph shows a portion of the glass
and white stone office building located on a city street.
- ------
2 The photographs of the Mortgaged Properties included in this
Prospectus are not representative of all of the Mortgaged Properties included
in any pool loan or of any particular type of Mortgaged Property.
-3-
<PAGE>
North Acres Mobile Home Park. The photograph shows a stationary
ranch-style mobile home surrounded by a brick and metal fence and some
landscaping in the mobile home park.
Asian Gardens Mall. The photograph shows the low-rise Asian-style
white building and green thatch-style roof and a portion of the parking lot
containing well-manicured small green trees.
Burlington Square. The photograph shows the two-story white with red
trim building of the shopping center with the storefront for tenant Staples as
well as a portion of the parking lot.
Holiday Inn Express-East Haven. The photograph shows the front of the
two-story white limited service hotel with parking in front of the rooms.
Davol Square Jewelry Building. The photograph shows the red brick
loft-style building with large windows and a red awning at a portion of the
first floor.
Heritage Bank Building. The photograph shows the entrance to the
modern white stone building with a green awning at the entrance to Weichert
Realtors.
Tuscon Place. The photograph shows a portion of the suburban low-rise
outdoor retail mall and the portion of the parking lot in front of tenants
WalMart, Payless Shoe Store and Office Max, located in a mountain area with
mountains in the background behind the mall.
View Park Convalescent Center: 3737 Don Felipe Drive. The photograph
shows a portion of the single story convalescent center, located in a suburban
setting on a tree-lined street.
Oak Creek Factory Outlets. The photograph shows a portion of the white
stone with terra cotta accents, single-story outlet center and a portion of the
parking lot, located in a mountain area with red rock formations in the
background behind the outlet center.
Michiana: 23 Medical Park Plaza. The photograph shows the entrance to
the modern, low-rise office building.
Del Mar. The photograph shows the single-story retail outdoor mall and
a portion of the parking lot.
Fairfield Inn - Richmond. This photograph shows the entrance to the
low-rise, limited service hotel.
Madison House. The photograph shows the entrance to the
traditional style building nursing home.
Greystone Apartments. The photograph shows the pool area at the
three-story, brick and shingle roof apartment complex.
-4-
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED HEREBY NOR AN OFFER
OF SUCH SECURITIES TO ANY PERSON IN ANY STATE OR OTHER JURISDICTION IN WHICH
SUCH AN OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME
DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE; HOWEVER, IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS
REQUIRED BY LAW TO BE DELIVERED, THIS PROSPECTUS WILL BE AMENDED OR
SUPPLEMENTED ACCORDINGLY.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Summary of Prospectus...................... 6
Risk Factors .............................. 20
Industry Overview.......................... 41
The Depositor.............................. 41
The Mortgage Loan Seller................... 41
The Trustee ............................... 43
The Fiscal Agent .......................... 43
The Servicer and Initial Special Servicer 43
Description of the Mortgage Pool .......... 44
Description of the Subordinated Units .... 75
Description of the Subordinated
Certificates.............................. 76
Prepayment and Yield Considerations ...... 92
The Pooling and Servicing Agreement ...... 112
ERISA Considerations ...................... 143
Certain Legal Aspects of Mortgage Loans .. 143
Certain Federal Income Tax Consequences ... 154
Legal Investment........................... 162
Use of Proceeds............................ 163
Plan of Distribution ...................... 164
Legal Matters ............................. 165
Financial Information ..................... 165
Rating .................................... 165
Available Information ..................... 165
Index of Significant Definitions .......... 167
Glossary of Key Real Estate, Mortgage and
Mortgage Loan Underwriting Terms.......... 172
Annex A--Loan Characteristics.............. A-1
Annex B--Global Clearance, Settlement and
Tax Documentation Procedures ............. B-1
Annex C--Form of Reports to
Certificateholders ....................... C-1
</TABLE>
$133,312,786
(APPROXIMATE)
ASSET SECURITIZATION
CORPORATION,
DEPOSITOR
SUBORDINATED UNITS CONSISTING OF
$35,082,312 (APPROXIMATE) CLASS B-1,
$35,082,312 (APPROXIMATE) CLASS B-2,
$14,032,925 (APPROXIMATE) CLASS B-3,
$21,049,387 (APPROXIMATE) CLASS B-4,
$14,032,925 (APPROXIMATE) CLASS B-5, AND
$14,032,925 (APPROXIMATE) CLASS B-6
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES,
SERIES 1997-D4
- ------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NOMURA LOGO
- ------------------------------------------------------------------------------
PROSPECTUS
BEAR, STEARNS & CO. INC.
NOMURA SECURITIES
INTERNATIONAL, INC.
[ ], 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered, other than underwriting
compensation, are set forth below. All such expenses, except for the filing
fee, are estimated.
<TABLE>
<CAPTION>
ITEM AMOUNT
- ------------------------------------------ ------------
<S> <C>
SEC Registration Fee ...................... $41,585.31
Blue Sky and NASD Fees and Expenses ....... $24,500
Legal Fees and Expenses.................... $350,000
Accounting Fees and Expenses............... $11,875
Servicer's and Trustee's Fees and
Expenses.................................. $4,750
Printing and Engraving Fees................ $200,000
Rating Agency Fees......................... $190,000
Miscellaneous.............................. $25,000
------------
$847,710.31
============
</TABLE>
- ------------
ITEM 31. SALES TO SPECIAL PARTIES.
Not applicable.
ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES.
To be provided by amendment.
ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the form of Underwriting Agreement included in the Registration
Statement, the Underwriters are obligated under certain circumstances to
indemnify certain controlling persons of the Depositor against certain
liabilities, including liabilities under the Act.
The Depositor's By-laws and Certificate of Incorporation provide for
indemnification of directors and officers of the Depositor to the full extent
permitted by Delaware law and the power to purchase and maintain insurance on
behalf of directors and officers against any liability asserted against them
and incurred by them in such capacities. The Certificate of Incorporation
further provides that no director of the Depositor shall be personally liable
to the Depositor or to its stockholders for monetary damages for any breach
of such director's fiduciary duty as a director of the Depositor, provided
that such limitation on a director's liability shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of
loyalty to the Depositor or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of Delaware,
or (iv) for any transaction from which the director derived an improper
personal benefit.
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 are or were such directors, officers, employees or agents, against
expenses incurred in any such action, suit or proceeding.
The Pooling and Servicing Agreement provides that no director, officer,
employee or agent of the Depositor is liable to the Trust Fund or the
Certificateholders, except for such person's own willful misfeasance, bad
faith or gross negligence in the performance of duties or reckless disregard
of obligations and duties. The Pooling and Servicing Agreement
II-1
<PAGE>
provides further than, with the exceptions stated above, a director,
officer, employee or agent of the Depositor is entitled to be indemnified
against any loss, liability or expenses incurred in connection with legal
actions relating to the Pooling and Servicing Agreement and the Certificates,
other than such expenses relating to particular Mortgage Loans.
ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
Not applicable.
ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS.
<TABLE>
<CAPTION>
<S> <C>
1.1* Form of Underwriting Agreement
Certificate of Incorporation of Asset Securitization Corporation as currently
3.1* in effect
3.2** Bylaws of Asset Securitization Corporation as currently in effect
4.1 Form of Pooling and Servicing Agreement
5.1* Opinion of Cadwalader, Wickersham & Taft as to legality (including the
consent of such firm)
8.1 Opinion of Cadwalader, Wickersham & Taft as to certain tax matters (included
in Exhibit 5.1)
24.1 Consent of Cadwalader, Wickersham & Taft (included as part of Exhibits 5.1
and 8.1)
25.1 Power of Attorney (located on the signature page of the initial filing of
this Registration Statement)
</TABLE>
- ------------
* Previously filed.
** Previously filed in connection with Registration Statement No.
33-89494 and incorporated by reference herein.
ITEM 36. UNDERTAKINGS.
A. Undertaking in Respect of Indemnification
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant, pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant, as
the case may be, will, unless in the opinion of its counsel that 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.
B. Undertaking pursuant to Rule 430A.
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-11 and has duly caused this Pre-effective
Amendment No. 3 to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of New York, State of
New York, on March 25, 1997.
ASSET SECURITIZATION
CORPORATION
By: /s/ Ethan Penner
-----------------------
Name: Ethan Penner
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Pre-effective Amendment No. 3 to the Registration Statement has been signed
by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
- ------------------------- -----------------------------------------
<S> <C>
/s/ Ethan Penner
-------------------------
Ethan Penner President and Director
*
-------------------------
Michael Berman Chief Executive Officer and Director
*
------------------------- Chief Financial Officer and Treasurer
Robert Rottmann (Principal Accounting Officer)
*
-------------------------
William Wraith Director
*
-------------------------
Richard Ader Director
*
-------------------------
Hiroshi Tsujimura Director
*
-------------------------
Max C. Chapman, Jr. Chairman and Director
*
-------------------------
Mark W. McGauley Director
*By: /s/ Ethan Penner
Name: Ethan Penner
-------------------
Attorney-in-fact
</TABLE>
II-3
<PAGE>
EXHIBITS INDEX
<TABLE>
<CAPTION>
SEQUENTIAL PAGE
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT NUMBER
- ------------------ ----------------------------------------------------------------------- -------------------
<S> <C> <C>
1.1* Form of Underwriting Agreement
3.1* Certificate of Incorporation of Asset Securitization Corporation as
currently in effect
3.2** Bylaws of Asset Securitization Corporation as currently in effect
4.1 Form of Pooling and Servicing Agreement
5.1* Opinion of Cadwalader, Wickersham & Taft as to legality (including the
consent of such firm)
8.1 Opinion of Cadwalader, Wickersham & Taft as to certain tax matters
(included in Exhibit 5.1)
24.1 Consent of Cadwalader, Wickersham & Taft (included as part of Exhibits
5.1 and 8.1)
25.1 Power of Attorney (located on the signature page of the initial filing
of this Registration Statement)
</TABLE>
- ------------
* Previously filed.
** Previously filed in connection with Registration Statement No.
33-89494 and incorporated by reference herein.
II-4
<PAGE>
ASSET SECURITIZATION CORPORATION,
DEPOSITOR
AMRESCO MANAGEMENT, INC.,
SERVICER AND INITIAL SPECIAL SERVICER
LASALLE NATIONAL BANK,
TRUSTEE
and
ABN AMRO BANK N.V.,
FISCAL AGENT
--------------------------------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of March 27, 1997
------------------------------------------------------
Commercial Mortgage Pass-Through Certificates
Series 1997-D4
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
ARTICLE I
DEFINITIONS
<S> <C>
SECTION 1.01. Defined Terms...................................................................................... 4
SECTION 1.02. Certain Calculations...............................................................................56
SECTION 1.03. Certain Constructions..............................................................................57
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Conveyance of Mortgage Loans; Assignment of Mortgage Loan Purchase and Sale
Agreement.............................................................................58
SECTION 2.02. Acceptance by Custodian and the Trustee............................................................61
SECTION 2.03. Representations and Warranties of the Depositor....................................................63
SECTION 2.04. Representations, Warranties and Covenants of the Servicer, Special Servicer and
Trustee...............................................................................69
SECTION 2.05. Execution and Delivery of Certificates; Issuance of Lower-Tier Regular Interests...................72
SECTION 2.06. Miscellaneous REMIC and Grantor Trust Provisions...................................................72
ARTICLE III
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
SECTION 3.01. Servicer to Act as Servicer; Administration of the Mortgage Loans..................................74
SECTION 3.02. Liability of the Servicer..........................................................................76
SECTION 3.03. Collection of Certain Mortgage Loan Payments.......................................................77
SECTION 3.04. Collection of Taxes, Assessments and Similar Items; Escrow Accounts................................77
SECTION 3.05. Collection Account; Distribution Account; Upper-Tier Distribution Account;
Default Interest Distribution Account; and Excess Interest
Distribution Account..................................................................79
SECTION 3.06. Permitted Withdrawals from the Collection Account..................................................81
SECTION 3.07. Investment of Funds in the Collection Account, the REO Account, the Lock-Box
Accounts, the Cash Collateral Accounts, the Interest Reserve Account
and the Reserve Accounts..............................................................84
SECTION 3.08. Maintenance of Insurance Policies and Errors and Omissions and Fidelity Coverage...................86
SECTION 3.09. Enforcement of Due-On-Sale Clauses; Assumption Agreements; Defeasance Provisions...................89
SECTION 3.10. Appraisals; Realization Upon Defaulted Mortgage Loans..............................................92
SECTION 3.11. Trustee to Cooperate; Release of Mortgage Files....................................................97
SECTION 3.12. Servicing Fees, Trustee Fees and Special Servicing Compensation....................................98
SECTION 3.13. Reports to the Trustee; Collection Account Statements.............................................100
SECTION 3.14. Annual Statement as to Compliance.................................................................104
SECTION 3.15. Annual Independent Public Accountants' Servicing Report...........................................104
SECTION 3.16. Access to Certain Documentation...................................................................105
SECTION 3.17. Title and Management of REO Properties and REO Account Properties.................................105
SECTION 3.18. Sale of Specially Serviced Mortgage Loans and REO Properties......................................110
SECTION 3.19. Additional Obligations of the Servicer and the Special Servicer; Inspections......................112
SECTION 3.20. Authenticating Agent..............................................................................113
SECTION 3.21. Appointment of Custodians.........................................................................114
SECTION 3.22. Reports to the Securities and Exchange Commission; Available Information..........................115
SECTION 3.23. Lock-Box Accounts, Cash Collateral Accounts, Escrow Accounts and Reserve Accounts.................118
SECTION 3.24. Property Advances.................................................................................118
SECTION 3.25. Appointment of Special Servicer...................................................................119
SECTION 3.26. Transfer of Servicing Between Servicer and Special Servicer; Record Keeping.......................120
SECTION 3.27. Interest Reserve Account..........................................................................121
SECTION 3.28. Limitations on and Authorizations of the Servicer and Special Servicer with
Respect to Certain Mortgage Loans....................................................122
SECTION 3.29. Intentionally left Blank..........................................................................125
SECTION 3.30. Modification, Waiver, Amendment and Consents......................................................125
SECTION 3.31. Notices to Unitholders............................................................................133
<PAGE>
ARTICLE IV
DISTRIBUTIONS TO CERTIFICATEHOLDERS
SECTION 4.01. Distributions....................................................................................134
SECTION 4.02. Statements to Certificateholders; Reports by Trustee; Other Information Available
to the Holders and Others............................................................153
SECTION 4.03. Compliance with Withholding Requirements..........................................................158
SECTION 4.04. REMIC Compliance.................................................................................158
SECTION 4.05. Imposition of Tax on the Trust Fund...............................................................160
SECTION 4.06. Remittances; P&I Advances.........................................................................161
SECTION 4.07. Grantor Trust Reporting...........................................................................164
ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates..................................................................................166
SECTION 5.02. Registration, Transfer and Exchange of Certificates...............................................171
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.................................................177
SECTION 5.04. Appointment of Paying Agent.......................................................................178
SECTION 5.05. Access to Certificateholders' Names and Addresses.................................................178
SECTION 5.06. Actions of Certificateholders.....................................................................179
ARTICLE VI
THE DEPOSITOR, THE SERVICER AND THE SPECIAL SERVICER
SECTION 6.01. Liability of the Depositor, the Servicer and the Special Servicer.................................180
SECTION 6.02. Merger or Consolidation of the Servicer...........................................................180
SECTION 6.03. Limitation on Liability of the Depositor, the Servicer and Others.................................180
SECTION 6.04. Limitation on Resignation of the Servicer and the Special Servicer; Termination
of the Servicer and the Special Servicer.............................................181
SECTION 6.05. Rights of the Depositor and the Trustee in Respect of the Servicer and the
Special Servicer.....................................................................183
SECTION 6.06. Servicer or Special Servicer as Owner of a Certificate............................................184
<PAGE>
ARTICLE VII
DEFAULT
SECTION 7.01. Events of Default.................................................................................185
SECTION 7.02. Trustee to Act; Appointment of Successor..........................................................189
SECTION 7.03. Notification to Certificateholders................................................................190
SECTION 7.04. Other Remedies of Trustee.........................................................................190
SECTION 7.05. Waiver of Past Events of Default; Termination.....................................................191
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.................................................................................192
SECTION 8.02. Certain Matters Affecting the Trustee.............................................................194
SECTION 8.03. Trustee and Fiscal Agent Not Liable for Certificates or Mortgage Loans............................196
SECTION 8.04. Trustee and Fiscal Agent May Own Certificates.....................................................198
SECTION 8.05. Payment of Trustee's Fees and Expenses; Indemnification...........................................198
SECTION 8.06. Eligibility Requirements for Trustee..............................................................200
SECTION 8.07. Resignation and Removal of the Trustee............................................................201
SECTION 8.08. Successor Trustee and Fiscal Agent................................................................202
SECTION 8.09. Merger or Consolidation of Trustee................................................................203
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.....................................................203
SECTION 8.11. Fiscal Agent Appointed; Concerning the Fiscal Agent...............................................204
ARTICLE IX
TERMINATION
SECTION 9.01. Termination......................................................................................206
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. Counterparts.....................................................................................211
SECTION 10.02. Limitation on Rights of Certificateholders......................................................211
SECTION 10.03. Governing Law....................................................................................212
SECTION 10.04. Notices. 212
SECTION 10.05. Severability of Provisions.......................................................................214
SECTION 10.06. Notice to the Depositor and Each Rating Agency...................................................214
SECTION 10.07. Amendment. 216
SECTION 10.08. Confirmation of Intent...........................................................................218
SECTION 10.09. Streit Act. 219
SECTION 10.10. No Intended Third-Party Beneficiaries............................................................220
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF EXHIBITS
<S> <C>
Exhibit A-1 Form of Class A-1A Certificate
Exhibit A-2 Form of Class A-1B Certificate
Exhibit A-3 Form of Class A-1C Certificate
Exhibit A-4 Form of Class A-1D Certificate
Exhibit A-5 Form of Class A-1E Certificate
Exhibit A-6 Form of Class A-2 Certificate
Exhibit A-7 Form of Class A-3 Certificate
Exhibit A-8 Form of Class A-4 Certificate
Exhibit A-9 Form of Class A-5 Certificate
Exhibit A-10 Form of Class A-6 Certificate
Exhibit A-11 Form of Class A-7 Certificate
Exhibit A-12 Form of Class A-8 Certificate
Exhibit A-13 Form of Class A-CS1 Certificate
Exhibit A-14 Form of Class PS-1 Certificate
Exhibit A-15 Form of Class B-1 Certificate
Exhibit A-16 Form of Class B-2 Certificate
Exhibit A-17 Form of Class B-3 Certificate
Exhibit A-18 Form of Class B-4 Certificate
Exhibit A-19 Form of Class B-5 Certificate
Exhibit A-20 Form of Class B-6 Certificate
Exhibit A-21 Form of Class B-7 Certificate
Exhibit A-22 Form of Class B-7H Certificate
Exhibit A-23 Form of Class V-1 Certificate
Exhibit A-24 Form of Class V-2 Certificate
Exhibit A-25 Form of Class R Certificate
Exhibit A-26 Form of Class LR Certificate
Exhibit B Mortgage Loan Schedule
Exhibit C-1 Form of Transferee Affidavit
Exhibit C-2 Form of Transferor Letter
Exhibit D-1 Form of Investment Representation Letter
Exhibit D-2 Form of ERISA Representation Letter
Exhibit E Form of Request for Release
Exhibit F Form of Custodial Agreement
Exhibit G Securities Legend
Exhibit H Form of Mortgage Loan Purchase and Sale Agreement
Exhibit I-1 Form of Comparative Financial Status Report
Exhibit I-2 Form of Delinquent Loan Status Report
Exhibit I-3 Form of Historical Loan Modification Report
Exhibit I-4 Form of Historical Loss Estimate Report
Exhibit I-5 Form of REO Status Report
Exhibit I-6 Form of Watch List
Exhibit I-7 Form of Operating Statement Analysis Report
Exhibit I-8 Form of NOI Adjustment Worksheet
</TABLE>
<PAGE>
Pooling and Servicing Agreement, dated as of March 27, 1997,
among Asset Securitization Corporation, as Depositor, AMRESCO Management, Inc.,
as Servicer and initial Special Servicer, LaSalle National Bank, as Trustee,
and ABN AMRO Bank N.V., as Fiscal Agent.
PRELIMINARY STATEMENT:
(Terms used but not defined in this Preliminary Statement shall have the
meanings specified in Article I hereof)
The Depositor intends to sell pass-through certificates to be
issued hereunder in multiple Classes which in the aggregate will evidence the
entire beneficial ownership interest in the Trust Fund consisting primarily of
the Mortgage Loans. As provided herein, the Trustee will elect that the Trust
Fund, exclusive of the Lock-Box Accounts, Cash Collateral Accounts, Reserve
Accounts, the Default Interest, the Default Interest Distribution Account, the
Excess Interest and the Excess Interest Distribution Account (such portion of
the Trust Fund, the "Trust REMICs"), be treated for federal income tax purposes
as two separate real estate mortgage investment conduits (each, a "REMIC" or,
in the alternative, the "Lower-Tier REMIC" and the "Upper-Tier REMIC,"
respectively). The Class A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-CS1,
Class PS-1, Class A-1E, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6,
Class A-7, Class A-8, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5,
Class B-6, Class B-7 and Class B-7H Certificates constitute "regular interests"
in the Upper-Tier REMIC and the Class R Certificates constitute the sole Class
of "residual interests" in the Upper-Tier REMIC for purposes of the REMIC
Provisions. The Class LR Certificates constitute the sole Class of "residual
interests" in the Lower-Tier REMIC for purposes of the REMIC Provisions. There
are also seventeen Classes of uncertificated Lower-Tier Regular Interests
issued under this Agreement (the Class A-1A-L, Class A-1B-L, Class A-1C-L,
Class A-1D-L, Class A-1E-L, Class A-2-L, Class A-3-L, Class A-4-L, Class A-5-L,
Class A-6-L, Class A-7-L, Class A-8-L, Class B-1-L, Class B-2-L, Class B-3-L,
Class B-4-L, Class B-5-L, Class B-6-L, Class B-7-L and Class B-7H-L Interests),
each of which will constitute a regular interest in the Lower-Tier REMIC. All
such Lower-Tier Regular Interests will be held by the Trustee as assets of the
Upper-Tier REMIC. The parties intend that the portions of the Trust Fund
representing the Default Interest, the Default Interest Distribution Account,
the Excess Interest and the Excess Interest Distribution Account will be
treated as a grantor trust under Subpart E of Part 1 of Subchapter J of the
Code, that the Class V-1 Certificates represent pro rata undivided beneficial
interests in the portion of the Trust Fund consisting of the Net Default
Interest and the Default Interest Distribution Account and that the Class V-2
Certificates represent pro rata undivided beneficial interests in the portion
of the Trust Fund consisting of the Excess Interest and the Excess Interest
Distribution Account.
The following table sets forth the designation and aggregate
initial Certificate Balance (or, with respect to the Class A-CS1 and Class PS-1
Certificates, Notional Balance) for each Class of Certificates comprising
interests in the Upper-Tier REMIC.
Class Certificate Balance or Notional Balance
Class A-1A $127,000,000.00
Class A-1B $91,010,000.00
Class A-1C $65,000,000.00
Class A-1D $671,228,903.00
Class A-1E $84,197,550.00
Class A-CS1(1) $127,000,000.00
Class PS-1(2) $1,403,292,505.00
Class A-2 $28,065,850.00
Class A-3 $49,115,237.00
Class A-4 $21,049,387.00
Class A-5 $42,098,775.00
Class A-6 $28,065,850.00
Class A-7 $21,049,387.00
Class A-8 $21,049,387.00
Class B-1 $35,082,312.00
Class B-2 $35,082,312.00
Class B-3 $14,032,925.00
Class B-4 $21,049,387.00
Class B-5 $14,032,925.00
Class B-6 $14,032,925.00
Class B-7 $21,048,393.00
Class B-7H $1,000.35
(1) The initial Notional Balance of Class PS-1 Certificates is equal to the
aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off
Date.
(2) The initial Notional Balance of the Class CS-1 Certificates is equal to the
initial Certificate Balance of the Class A-1A Certificates.
The initial Certificate Balance of each of the Class V-1,
Class V-2, Class R and Class LR Certificates is zero. Additionally, the Class
V-1, Class V-2, Class R and Class LR Certificates do not have a Notional
Balance. The Certificate Balance of any Class of Certificates outstanding at
any time represents the maximum amount which holders thereof are entitled to
receive as distributions allocable to principal from the cash flow on the
Mortgage Loans and the other assets in the Trust Fund; provided, however, that
in the event that amounts previously allocated as Realized Losses to a Class of
Certificates in reduction of the Certificate Balance thereof are recovered
subsequent to the reduction of the Certificate Balance of such Class to zero,
such Class may receive distributions in respect of such recoveries in
accordance with the priorities set forth in Section 4.01.
As of the Cut-off Date, the Mortgage Loans have an aggregate
Stated Principal Balance equal to approximately $1,403,292,505.
In consideration of the mutual agreements herein contained,
the Depositor, the Servicer, the initial Special Servicer, the Trustee and the
Fiscal Agent agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms.
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article.
"Act": The Securities Act of 1933, as it may be amended from
time to time.
"Actual/360 Mortgage Loans": The Mortgage Loans indicated as
such in the Mortgage Loan Schedule.
"Advance": Any P&I Advance or Property Advance.
"Advance Interest Amount": Interest at the Advance Rate on
the aggregate amount of P&I Advances and Property Advances for which the
Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as applicable,
have not been reimbursed and Servicing Fees, Trustee Fees or Special Servicing
Compensation for which the Servicer, the Trustee or the Special Servicer, as
applicable, has not been timely paid or reimbursed for the number of days from
the date on which such Advance was made or such Servicing Fees, Trustee Fees or
Special Servicing Compensation were due through the date of payment or
reimbursement of the related Advance or other such amount, less any amount of
interest previously paid on such Advance or Servicing Fees, Trustee Fees or
Special Servicing Compensation; provided, that, with respect to a P&I Advance,
in the event that the related Borrower makes payment of the amount in respect
of which such P&I Advance was made with interest at the Default Rate, the
Advance Interest Amount payable to the Servicer, the Trustee or the Fiscal
Agent shall be paid (i) first from the amount of Default Interest paid by the
Borrower and (ii) to the extent such amounts are insufficient therefor, from
amounts on deposit in the Collection Account.
"Advance Rate": A per annum rate equal to the sum of (i) the
Prime Rate (as most recently published in the "Money Rates" section of The Wall
Street Journal, New York edition, on or before the related Record Date) plus
(ii) 1%, compounded monthly as of each Servicer Remittance Date. Interest at
the Advance Rate will accrue from (and including) the date on which the related
Advance is made or the related expense incurred to (but excluding) the first
Servicer Remittance Date after the date on which such amounts are recovered out
of amounts received on the Mortgage Loan as to which such Advances were made or
servicing expenses incurred or the first Servicer Remittance Date after a
determination of non-recoverability, as the case may be, is made, provided that
such interest at the Advance Rate will continue to accrue to the extent funds
are not available in the Collection Account for such reimbursement of such
Advance.
"Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. The Trustee may obtain
and rely on an Officers' Certificate of the Servicer, the Special Servicer, or
the Depositor to determine whether any Person is an Affiliate of such party.
"Affiliated Person": Any Person (other than a Rating Agency)
involved in the organization or operation of the Depositor or an affiliate, as
defined in Rule 405 of the Act, of such Person.
"Agent Member": Members of, or Depository Participants in,
the Depository.
"Agreement": This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
"Allocated Loan Amount": With respect to each Mortgaged
Property, the portion of the principal amount of the related Mortgage Loan
allocated to such Mortgaged Property in the applicable Mortgage or Loan
Agreement.
"Annual Compliance Report": A report consisting of an annual
statement of compliance required by Section 3.14 hereof and an annual report of
an Independent accountant required pursuant to Section 3.15 hereof.
"Anticipated Repayment Date": With respect to any Mortgage
Loan that is indicated on the Mortgage Loan Schedule as having a Revised
Mortgage Rate, the date upon which such Mortgage Loan commences accruing
interest at such Revised Rate.
"Anticipated Termination Date": Any Distribution Date on
which it is anticipated that the Trust Fund will be terminated pursuant to
Section 9.01(c).
"Applicable Monthly Payment": As defined in Section 4.06(a).
"Appraisal Reduction Amount": For any Distribution Date and
for any Mortgage Loan as to which an Appraisal Reduction Event has occurred, an
amount equal to the excess, if any, of (a) the Stated Principal Balance of such
Mortgage Loan over (b) the excess of (i) 90% of the sum of the appraised values
of the related Mortgaged Properties as determined by Updated Appraisals
obtained by the Servicer of the Mortgaged Properties securing such Mortgage
Loan over (ii) the sum of (A) to the extent not previously advanced by the
Servicer, the Trustee or the Fiscal Agent, all unpaid interest on such Mortgage
Loan at a per annum rate equal to its Mortgage Rate, (B) all unreimbursed
Advances, with interest thereon at the Advance Rate, in respect of such
Mortgage Loan and (C) all currently due and unpaid real estate taxes, ground
rents and assessments and insurance premiums and all other amounts due and
unpaid with respect to such Mortgage Loan (which taxes, premiums and other
amounts have not been the subject of an Advance by the Servicer, the Trustee or
the Fiscal Agent, as applicable). If no Updated Appraisal has been obtained
within the last 12 months prior to the first Distribution Date on or after an
Appraisal Reduction Event has occurred, the Servicer shall estimate the value
of the related Mortgaged Properties (the "Servicer's Appraisal Estimate") and
such estimate shall be used for purposes of determining the Appraisal Reduction
Amount for such Distribution Date. Within 30 days after the Servicer receives
notice or is otherwise aware of the Appraisal Reduction Event, the Servicer
shall obtain an Updated Appraisal. On the first Distribution Date occurring on
or after the delivery of such appraisal, the Servicer shall adjust the
Appraisal Reduction Amount to take into account such appraisal (regardless of
whether the Updated Appraisal is higher or lower than the Servicer's Appraisal
Estimate). Each Appraisal Reduction Amount shall also be adjusted to take into
account any subsequent Updated Appraisal and annual letter updates, as of the
date of each such subsequent Updated Appraisal or letter update.
"Appraisal Reduction Event": With respect to any Mortgage
Loan, the first Distribution Date following the earliest of (i) the third
anniversary of the date on which an extension of the Maturity Date of such
Mortgage Loan becomes effective as a result of a modification of such Mortgage
Loan by the Special Servicer pursuant to the terms hereof, which extension does
not change the amount of Monthly Payments on the Mortgage Loan (unless during
such extension period the borrower has been delinquent for 60 days or more, in
which case, the first Distribution Date following such 60 day delinquency),
(ii) 90 days after an uncured Delinquency (without regard to the application of
any grace period) occurs in respect of such Mortgage Loan, (iii) immediately
after the date on which a reduction in the amount of Monthly Payments on such
Mortgage Loan, or a change in any other material economic term of such Mortgage
Loan (other than an extension of the Maturity Date), becomes effective as a
result of a modification of such Mortgage Loan by the Special Servicer, (iv)
immediately after a receiver has been appointed, (v) immediately after a
borrower declares bankruptcy, (vi) immediately after a Mortgage Loan becomes an
REO Mortgage Loan, (vii) upon a default in the payment of a Balloon Payment,
(viii) immediately upon the occurrence of an event for which a Property Advance
would be required to be made by the Servicer or (ix) any other event which, in
the discretion of the Servicer and of which the Servicer becomes aware in
performing its obligations hereunder, in accordance with the Servicing
Standard, would materially and adversely impair the value of a Mortgaged
Property and security for the related Mortgage Loan. The Special Servicer shall
notify the Servicer promptly upon the occurrence of any of the foregoing
events.
"Assignment of Leases, Rents and Profits": With respect to
any Mortgaged Property, any assignment of leases, rents and profits or similar
agreement executed by the Borrower, assigning to the mortgagee all of the
income, rents and profits derived from the ownership, operation, leasing or
disposition of all or a portion of such Mortgaged Property, in the form which
was duly executed, acknowledged and delivered, as amended, modified, renewed or
extended through the date hereof and from time to time hereafter.
"Assignment of Mortgage": An assignment of Mortgage without
recourse, notice of transfer or equivalent instrument, in recordable form,
which is sufficient under the laws of the jurisdiction in which the related
Mortgaged Property is located to reflect of record the sale of the Mortgage,
which assignment, notice of transfer or equivalent instrument may be in the
form of one or more blanket assignments covering Mortgages encumbering
Mortgaged Properties located in the same jurisdiction, if permitted by law and
acceptable for recording; provided, however, that none of the Trustee, the
Custodian and the Servicer shall be responsible for determining whether any
assignment is legally sufficient or in recordable form.
"Assumed Maturity Date": With respect to any Mortgage Loan
that is not a Balloon Loan, the maturity date of such Mortgage Loan. With
respect to any Balloon Loan, the date on which such Mortgage Loan would be
deemed to mature in accordance with its original amortization schedule absent
its Balloon Payment.
"Assumed Scheduled Payment": With respect to any Mortgage
Loan that is delinquent in respect of its Balloon Payment (including any REO
Mortgage Loan as to which the Balloon Payment would have been past due), an
amount equal to the sum of (a) the principal portion of the Monthly Payment
that would have been due on such Mortgage Loan on the related Due Date (or
portion thereof not received), based on the constant Monthly Payment that would
have been due on such Mortgage Loan on the related Due Date based on the
constant payment required by the related Note or the amortization or payment
schedule thereof (as calculated with interest at the related Mortgage Rate) (if
any), assuming such Balloon Payment had not become due, after giving effect to
any prior modification, and (b) interest at the applicable Mortgage
Pass-Through Rate.
"Assumption Fees": Any fees collected by the Servicer or
Special Servicer in connection with an assumption or modification of a Mortgage
Loan or substitution of a Borrower thereunder permitted to be executed under
the provisions of this Agreement.
"Authenticating Agent": Any authenticating agent appointed by
the Trustee pursuant to Section 3.20.
"Available Funds": For a Distribution Date, the sum of (i)
all previously undistributed Monthly Payments, Minimum Defaulted Monthly
Payments or other receipts on account of principal and interest (including
Unscheduled Payments and any Net REO Proceeds transferred from an REO Account
pursuant to Section 3.17(b)) on or in respect of the Mortgage Loans, received
by the Servicer in the Collection Period relating to such Distribution Date,
(ii) all other amounts received by the Servicer in such Collection Period and
required to be placed in the Collection Account by the Servicer pursuant to
Section 3.05 allocable to such Mortgage Loans, and including all P&I Advances
(excluding Subordinate Class Advance Amounts) made by the Servicer, the Trustee
or the Fiscal Agent in respect of such Distribution Date, (iii) for the
Distribution Date occurring in each March, the Withheld Amounts remitted to the
Distribution Account pursuant to Section 3.27(b), (iv) any late payments of
Monthly Payments received after the end of the Collection Period relating to
such Distribution Date but prior to the related Servicer Remittance Date and
(v) any Servicer Prepayment Interest Shortfalls remitted by the Servicer to the
Collection Account, but excluding the following:
(a) amounts permitted to be used to reimburse the
Servicer, the Special Servicer, the Trustee or the
Fiscal Agent, as applicable, for previously
unreimbursed Advances and interest thereon as
described in Section 3.06(ii) and (iii);
(b) those portions of each payment of interest which
represent the applicable Servicing Fee, and Trustee
Fee and an amount representing any applicable
Special Servicing Compensation, including interest
thereon at the Advance Rate as provided in this
Agreement;
(c) all amounts in the nature of late fees (subject to
Section 3.12 hereof), loan modification fees,
extension fees, loan service transaction fees,
demand fees, beneficiary statement charges,
Assumption Fees and similar fees, which the Servicer
or the Special Servicer is entitled to retain as
Servicing Compensation or Special Servicing
Compensation, respectively;
(d) all amounts representing scheduled Monthly
Payments due after the related Due Date;
(e) that portion of Net Liquidation Proceeds or Net
Insurance Proceeds with respect to a Mortgage Loan
which represents any unpaid Servicing Fee, Trustee
Fee and Special Servicing Compensation, including
interest thereon at the Advance Rate as provided in
this Agreement, to which the Servicer, Trustee and
the Special Servicer, respectively, are entitled;
(f) all amounts representing certain expenses
reimbursable or payable to the Servicer, the Special
Servicer, the Trustee or the Fiscal Agent and other
amounts permitted to be retained by the Servicer or
withdrawn by the Servicer from the Collection
Account to the extent expressly set forth in this
Agreement (including, without limitation, as
provided in Section 3.06 and including any
indemnities provided for herein), including interest
thereon as provided in this Agreement;
(g) any interest or investment income on funds on
deposit in the Collection Account, the Upper-Tier
Distribution Account, the Distribution Account, the
Default Interest Distribution Account, the Excess
Interest Distribution Account, the Interest Reserve
Account, any Cash Collateral Account, any Lock-Box
Account, any Reserve Account or any REO Account or
in Permitted Investments in which such funds may be
invested;
(h) with respect to the Interest Reserve Loans and any
Distribution Date relating to each Interest Accrual
Period ending in each February or any January in a
year immediately preceding a year which is not a
leap year, an amount equal to one day of interest on
the Stated Principal Balance of such Mortgage Loan
as of the Due Date in the month preceding the month
in which such Distribution Date occurs at the
related Mortgage Rate to the extent such amounts are
to be deposited in the Interest Reserve Account and
held for future distribution pursuant to Section
3.27;
(i) all amounts received with respect to each Mortgage
Loan previously purchased or repurchased pursuant to
Sections 2.03(d), 2.03(e), 3.18 or 9.01 during the
related Collection Period and subsequent to the date
as of which the amount required to effect such
purchase or repurchase was determined;
(j) the amount reasonably determined by the Trustee to
be necessary to pay any applicable federal, state or
local taxes imposed on the Upper-Tier REMIC or the
Lower-Tier REMIC under the circumstances and to the
extent described in Section 4.05;
(k) Prepayment Premiums;
(l) Default Interest; and
(m) Excess Interest.
"Balloon Loan": Any Mortgage Loan that requires a payment of
principal on the maturity date in excess of its constant Monthly Payment.
"Balloon Payment": With respect to each Mortgage Loan, the
scheduled payment of principal due on the Maturity Date (less principal
included in the applicable amortization schedule or scheduled Monthly Payment).
"Beneficial Owner": With respect to a Global Certificate, the
Person who is the beneficial owner of such Certificate 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) and
with respect to the Classes of Global Certificates comprising the Units, the
beneficial owner of such Unit 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) with respect to such Classes.
Each of the Trustee and the Servicer shall have the right to require, as a
condition to acknowledging the status of any Person as a Beneficial Owner under
this Agreement, that such Person provide evidence at its expense of its status
as a Beneficial Owner hereunder.
"Bloomfield Purchase Agreement": With respect to any Mortgage
Loan not originated by the Mortgage Loan Seller, the agreement between the
Mortgage Loan Seller and Bloomfield Acceptance Company, LLC pursuant to which
the Mortgage Loan Seller acquired such Mortgage Loan.
"Borrower": With respect to any Mortgage Loan, any obligor or
obligors on any related Note or Notes.
"Borrower Account": As defined in Section 3.07(a).
"Business Day": Any day other than a Saturday, a Sunday or
any day on which banking institutions in the City of New York, New York, the
City of Chicago, Illinois, the State of Georgia or the State of Texas are
authorized or obligated by law, executive order or governmental decree to be
closed.
"Cash Collateral Account": With respect to any Mortgage Loan
that has a Lock-Box Account, any account or accounts created pursuant to the
related Mortgage, Loan Agreement, Cash Collateral Account Agreement or other
loan document into which the Lock-Box Account monies are swept on a regular
basis for the benefit of the Trustee as successor to the Mortgage Loan Seller.
Any Cash Collateral Account shall be beneficially owned for federal income tax
purposes by the Person who is entitled to receive all reinvestment income or
gain thereon in accordance with the terms and provisions of the related
Mortgage Loan and Section 3.07, which Person shall be taxed on all reinvestment
income or gain thereon. The Servicer shall be permitted to make withdrawals
therefrom for deposit into the Collection Account. To the extent not
inconsistent with the terms of the related Mortgage Loan, each such Cash
Collateral Account shall be an Eligible Account.
"Cash Collateral Account Agreement": With respect to any
Mortgage Loan, the cash collateral account agreement, if any, between the
Originator and the related Borrower, pursuant to which the related Cash
Collateral Account, if any, may have been established.
"Cash Deposit": An amount equal to all cash payments of
principal and interest received by the Mortgage Loan Seller in respect of the
Mortgage Loans prior to or on the Closing Date that are due after the Cut-off
Date.
"CEDEL": Citibank, N.A., as depositary for Centrale de
Livraison de Valeurs Mobilieres, S.A., or its successor in such capacity.
"Certificate": Any Class A-1A, Class A-1B, Class A-1C, Class
A-1D, Class A-1E, Class A-CS1, Class PS-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6, Class A-7, Class A-8, Class B-1, Class B-2, Class B-3,
Class B-4, Class B-5, Class B-6, Class B-7, Class B-7H, Class V-1, Class V-2,
Class R or Class LR Certificate issued, authenticated and delivered hereunder.
"Certificate Balance": With respect to any Class of
Certificates or Lower-Tier Regular Interests (other than the Class A-CS1, Class
PS-1, Class V-1, Class V-2, Class R and Class LR Certificates) (a) on or prior
to the first Distribution Date, an amount equal to the aggregate initial
Certificate Balance of such Class, as specified in the Preliminary Statement
hereto, (b) as of any date of determination after the first Distribution Date,
the Certificate Balance of such Class of Certificates or Lower-Tier Regular
Interests on the Distribution Date immediately prior to such date of
determination after distributions and Realized Losses allocable to principal
have been made thereon on such prior Distribution Date; provided that for
purposes of determining Voting Rights, the Certificate Balance of the Class
(other than the Class A-1A, Class A-1B, Class A-1C and Class A-1D Certificates)
shall be deemed to have been reduced by an amount equal to the amount of
Appraisal Reductions allocated for purposes of Section 4.06 and in reverse
order of alphabetical designation; provided further that no such reduction
shall apply to the Voting Rights of the Class PS-1 and Class A-CS1
Certificates. With respect to any Class of Lower-Tier Regular Interests, the
Certificate Balance thereof shall, in any event, be equal to the Certificate
Balance of the Related Certificates.
"Certificate Custodian": Initially, LaSalle National Bank;
thereafter any other Certificate Custodian acceptable to the Depository and
selected by the Trustee.
"Certificate Register" and "Certificate Registrar": The
register maintained and the registrar appointed pursuant to Section 5.02.
"Certificateholder": The Person whose name is registered in
the Certificate Register subject to the following:
(i) except as provided in clause (ii), for the purpose of
giving any consent or taking any action pursuant to this Agreement, any
Certificate beneficially owned by the Depositor, the Servicer, the Special
Servicer, the Trustee, a Manager or a Borrower or any Person known to a
Responsible Officer of the Certificate Registrar to be an Affiliate of any
thereof shall be deemed not to be outstanding and the Voting Rights to which it
is entitled shall not be taken into account in determining whether the
requisite percentage of Voting Rights necessary to effect any such consent or
take any such action has been obtained;
(ii) for purposes of obtaining the consent of
Certificateholders to an amendment of the Pooling and Servicing Agreement, any
Certificates beneficially owned by the Servicer or the Special Servicer or an
Affiliate thereof shall be deemed to be outstanding, unless such amendment
relates to compensation of the Servicer or the Special Servicer or benefits the
Servicer or the Special Servicer (in its capacity as such) or any Affiliate
thereof (other than solely in its capacity as Certificateholder) in any
material respect, in which case such Certificates shall be deemed not to be
outstanding;
(iii) except as provided in clause (iv) below, for purposes
of obtaining the consent of Certificateholders to any action proposed to be
taken by the Special Servicer with respect to a Specially Serviced Mortgage
Loan, any Certificates beneficially owned by the Special Servicer or an
Affiliate thereof shall be deemed not to be outstanding;
(iv) for purposes of Section 3.30 (for purposes of
determining who the Directing Holders are), Certificates owned by the Special
Servicer or an Affiliate shall be deemed to be outstanding; and
(v) for purposes of providing or distributing any reports,
statements or other information required or permitted to be provided to a
Certificateholder hereunder, a Certificateholder shall include any Beneficial
Owner, or any Person identified by a Beneficial Owner as a prospective
transferee of a Certificate beneficially owned by such Beneficial Owner, but
only if the Trustee or another party hereto furnishing such report, statement
or information has been provided with the name of the Beneficial Owner of the
related Certificate or the Person identified as a prospective transferee
thereof. For purposes of the foregoing, the Depositor, the Servicer, the
Special Servicer, the Trustee, the Paying Agent, the Fiscal Agent or other such
Person may rely, without limitation, on a Depository Participant listing from
the Depository or statements furnished by a Person that on their face appear to
be statements from a Depository Participant to such Person indicating that such
Person beneficially owns Certificates.
"Class": With respect to the Certificates or Lower-Tier
Regular Interests, all of the Certificates or Lower-Tier Regular Interests
bearing the same alphabetical and numerical Class designation.
"Class A-1A Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on behalf
of the Depositor in substantially the form set forth in Exhibit A-3 hereto.
"Class A-1A Pass-Through Rate": A per annum rate equal to
7.35%.
"Class A-1A-L Interest": A regular interest in the Lower-Tier
REMIC entitled to monthly distributions payable thereto pursuant to Section
4.01.
"Class A-1B Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on behalf
of the Depositor in substantially the form set forth in Exhibit A-4 hereto.
"Class A-1B Pass-Through Rate": A per annum rate equal to
7.40%.
"Class A-1B-L Interest": A regular interest in the Lower-Tier
REMIC entitled to monthly distributions payable thereto pursuant to Section
4.01.
"Class A-1C Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on behalf
of the Depositor in substantially the form set forth in Exhibit A-5 hereto.
"Class A-1C Pass-Through Rate": A per annum rate equal to
7.42%.
"Class A-1C-L Interest": A regular interest in the Lower-Tier
REMIC entitled to monthly distributions payable thereto pursuant to Section
4.01.
"Class A-1D Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on behalf
of the Depositor in substantially the form set forth in Exhibit A-6 hereto.
"Class A-1D Pass-Through Rate": A per annum rate equal to
7.49%.
"Class A-1D-L Interest": A regular interest in the Lower-Tier
REMIC entitled to monthly distributions payable thereto pursuant to Section
4.01.
"Class A-1E Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on behalf
of the Depositor in substantially the form set forth in Exhibit A-7 hereto.
"Class A-1E Pass-Through Rate": A per annum rate equal to
7.525%.
"Class A-1E-L Interest": A regular interest in the Lower-Tier
REMIC entitled to monthly distributions payable thereto pursuant to Section
4.01.
"Class A-2 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-8 hereto.
"Class A-2 Pass-Through Rate": A per annum rate equal to the
Weighted Average Net Mortgage Pass-Through Rate minus 1.21%.
"Class A-2-L Interest": A regular interest in the Lower-Tier
REMIC entitled to monthly distributions payable thereto pursuant to Section
4.01.
"Class A-3 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-9 hereto.
"Class A-3 Pass-Through Rate": A per annum rate equal to the
Weighted Average Net Mortgage Pass-Through Rate minus 1.16%.
"Class A-3-L Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to Section
4.01.
"Class A-4 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-10 hereto.
"Class A-4 Pass-Through Rate": A per annum rate equal to the
Weighted Average Net Mortgage Pass-Through Rate minus 1.13%.
"Class A-4-L Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to Section
4.01.
"Class A-5 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-11 hereto.
"Class A-5 Pass-Through Rate": A per annum rate equal to the
Weighted Average Net Mortgage Pass-Through Rate minus 1.08%.
"Class A-5-L Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to Section
4.01.
"Class A-6 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-12 hereto.
"Class A-6 Pass-Through Rate": A per annum rate equal to the
Weighted Average Net Mortgage Pass-Through Rate minus 0.99%.
"Class A-6-L Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to Section
4.01.
"Class A-7 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-13 hereto.
"Class A-7 Pass-Through Rate": A per annum rate equal to the
Weighted Average Net Mortgage Pass-Through Rate minus 0.94%.
"Class A-7-L Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to Section
4.01.
"Class A-8 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-14 hereto.
"Class A-8 Pass-Through Rate": A per annum rate equal to the
Weighted Average Net Mortgage Pass-Through Rate minus 0.59%.
"Class A-8-L Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to Section
4.01.
"Class A-CS1 Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on behalf
of the Depositor in substantially the form set forth in Exhibit A-1 hereto. The
Class A-CS1 Certificates are comprised entirely of the Class A-1A Strip
Component.
"Class A-CS1 Pass-Through Rate": A per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 7.35%.
"Class B-1 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-15 hereto.
"Class B-1 Pass-Through Rate": A per annum rate equal to
7.525%.
"Class B-1-L Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to Section
4.01.
"Class B-2 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-__ hereto.
"Class B-2 Pass-Through Rate": A per annum rate equal to
7.525%.
"Class B-2-L Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to Section
4.01.
"Class B-3 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-17 hereto.
"Class B-3 Pass-Through Rate": A per annum rate equal to
7.525%.
"Class B-3-L Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to Section
4.01.
"Class B-4 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-18 hereto.
"Class B-4 Pass-Through Rate": A per annum rate equal to
7.525%.
"Class B-4-L Interest": A regular interest in the Lower-Tier
REMIC entitled to monthly distributions payable thereto pursuant to Section
4.01.
"Class B-5 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-19 hereto.
"Class B-5 Pass-Through Rate": A per annum rate equal to
7.525%.
"Class B-5-L Interest": A regular interest in the Lower-Tier
REMIC entitled to monthly distributions payable thereto pursuant to Section
4.01.
"Class B-6 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-20 hereto.
"Class B-6 Pass-Through Rate": A per annum rate equal to
7.525%.
"Class B-6-L Interest": A regular interest in the Lower-Tier
REMIC entitled to monthly distributions payable thereto pursuant to Section
4.01.
"Class B-7 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-21 hereto.
"Class B-7 Pass-Through Rate": A per annum rate equal to the
Weighted Average Net Mortgage Pass-Through Rate.
"Class B-7-L Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to Section
4.01.
"Class B-7H Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on behalf
of the Depositor in substantially the form set forth in Exhibit A-22 hereto.
"Class B-7H Pass-Through Rate": A per annum rate equal to the
Weighted Average Net Mortgage Pass-Through Rate.
"Class B-7H-L Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to Section
4.01.
"Class Interest Distribution Amount": With respect to any
Distribution Date and the Class A-1A, Class A-1B, Class A-1C, Class A-1D, Class
A-1E, Class A-CS1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class
A-7, Class A-8, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class
B-6, Class B-7 and Class B-7H Certificates, an amount equal to the Interest
Accrual Amount thereof for such Distribution Date; with respect to any
Distribution Date and the Class PS-1 Certificates, the Interest Accrual Amounts
thereof for such Distribution Date minus the aggregate Reduction Interest
Distribution Amounts in respect of such Distribution Date.
"Class Interest Shortfall": On any Distribution Date for any
Class and/or Strip Component of such Class, as applicable, of Certificates, the
amount of interest (other than Net Default Interest, Excess Interest, Reduction
Interest Distribution Amounts or Reduction Interest Shortfalls) required to be
distributed to the Holders of such Class and/or in respect of such Strip
Component pursuant to Section 4.01(b) on such Distribution Date minus the
amount of interest (other than Net Default Interest, Excess Interest, Reduction
Interest Distribution Amounts or Reduction Interest Shortfalls) actually
distributed to such Holders pursuant to such Section, if any.
"Class PS-1 Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on behalf
of the Depositor in substantially the form set forth in Exhibit A-2 hereto.
"Class PS-1 Pass Through Rate": A per annum rate equal to the
Weighted Average Net Mortgage Pass-Through Rate minus the Weighted Average
Pass-Through Rate.
"Class LR Certificate": Any Certificate executed and
authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-26 hereto. The Class
LR Certificates have no Pass-Through Rate, Certificate Balance or Notional
Balance.
"Class R Certificate": Any Certificate executed and
authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-25 hereto. The Class
R Certificates have no Pass-Through Rate, Certificate Balance or Notional
Balance.
"Class V-1 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-23 hereto. The Class
V-1 Certificates have no Pass-Through Rate, Certificate Balance or Notional
Balance.
"Class V-2 Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibits A-24 hereto. The
Class V-2 Certificates have no Pass-Through Rate, Certificate Balance or
Notional Balance.
"Closing Date": On or about March 27, 1997.
"Code": The Internal Revenue Code of 1986, as amended from
time to time, any successor statute thereto, and any temporary or final
regulations of the United States Department of the Treasury promulgated
pursuant thereto.
"Collateral Account": As defined in Section 3.30(e). The
Collateral Account shall be maintained as an Eligible Account.
"Collection Account": The trust account or accounts created
and maintained by the Servicer pursuant to Section 3.05(a), which shall be
entitled "AMRESCO Management, Inc. in trust for LaSalle National Bank, as
Trustee, in trust for Holders of Asset Securitization Corporation, Commercial
Mortgage Pass-Through Certificates, Series 1997-D4, Collection Account" and
which must be an Eligible Account.
"Collection Period": With respect to a Distribution Date and
each Mortgage Loan, the period beginning on the day after the Due Date, in the
month preceding the month in which such Distribution Date occurs (or, in the
case of the Distribution Date occurring in April 1997, on the day after the
Cut-off Date) and ending at the close of business on the Due Date, in the month
in which such Distribution Date occurs.
"Commission": The Securities and Exchange Commission.
"Comparative Financial Status Report": A report substantially
containing the content described in Exhibit I-1 attached hereto, setting forth,
among other things, the occupancy, revenue, net operating income and Debt
Service Coverage Ratio for each Mortgage Loan as of the date of the latest
financial information available immediately preceding the preparation of such
report for each of the following three periods (to the extent such information
is available): (i) the most current available year-to-date, (ii) the previous
two full fiscal years, and (iii) the "base year" (representing the original
analysis of information used as of the Cut-off Date). For the purposes of the
Servicer's production of any such report that is required to state information
for any period prior to the Cut-off Date, the Servicer may conclusively rely
(without independent verification), absent manifest error, on information
provided to it by the Mortgage Loan Seller.
"Corporate Trust Office": The principal office of the Trustee
located at 135 South LaSalle Street, Suite 1740, Chicago, Illinois 60603 or the
principal trust office of any successor trustee qualified and appointed
pursuant to Section 8.08.
"Cross-over Date": means the Distribution Date on which the
Certificate Balance of each Class of Certificates other than the Class A-1A,
Class A-1B, Class A-1C and Class A-1D Certificates have been reduced to zero.
"Custodial Agreement": The Custodial Agreement, if any, from
time to time in effect between the Custodian named therein and the Trustee,
substantially in the form of Exhibit F hereto, as the same may be amended or
modified from time to time in accordance with the terms thereof.
"Custodian": Any Custodian appointed pursuant to Section 3.21
and, unless the Trustee is Custodian, named pursuant to any Custodial
Agreement. The Custodian may (but need not) be the Trustee or the Servicer or
any Affiliate of the Trustee or the Servicer, but may not be the Depositor or
any Affiliate thereof.
"Cut-off Date": March 27, 1997.
"DCR": Duff & Phelps Credit Rating Co., or its successor in
interest.
"Debt Service Coverage Ratio": With respect to any Mortgage
Loan as of any date of determination and for any period, the ratio calculated
by dividing the net operating income of the related Mortgaged Property or
Mortgaged Properties, as the case may be, for the most recently ended one-year
period for which data is available from the related Borrower, before payment of
any scheduled payments of principal and interest on such Mortgage Loan but
after funding of required reserves and "normalized" by the Servicer pursuant to
Section 3.13, by the annual debt service required by such Mortgage Loan. Annual
debt service shall be calculated by multiplying the Monthly Payment in effect
on such date of determination for such Mortgage Loan by 12.
"Default Interest": With respect to any Mortgage Loan,
interest accrued on such Mortgage Loan at the excess of (i) the related Default
Rate over (ii) the sum of the related Mortgage Rate and, if applicable, the
related Excess Rate. The Default Interest shall not be an asset of the
Lower-Tier REMIC or the Upper-Tier REMIC formed hereunder.
"Default Interest Distribution Account": The trust account or
accounts created and maintained as a separate trust account or accounts by the
Trustee pursuant to Section 3.05(d), which shall be entitled "LaSalle National
Bank, as Trustee, in trust for Holders of Asset Securitization Corporation,
Commercial Mortgage Pass-Through Certificates, Series 1997-D4, Default Interest
Distribution Account" and which must be an Eligible Account. The Default
Interest Distribution Account shall not be an asset of the Lower-Tier REMIC or
the Upper-Tier REMIC formed hereunder.
"Default Rate": With respect to each Mortgage Loan, the per
annum rate at which interest accrues on such Mortgage Loan following any event
of default on such Mortgage Loan, including a default in the payment of a
Monthly Payment or a Balloon Payment, as such rate is set forth on the Mortgage
Loan Schedule.
"Delinquency": Any failure of a Borrower to make a scheduled
payment on a Due Date.
"Delinquency Reduction Amount": In connection with a
Delinquency, an amount equal to the scheduled payment (or portion thereof) due
on the related Due Date (adjusted to the applicable Net Mortgage Pass-Through
Rate with respect to the interest portion) and not received from a Borrower
under any Mortgage Loan.
"Delinquent Loan Status Report": A report substantially
containing the content described in Exhibit I-2 attached hereto, setting forth,
among other things, those Mortgage Loans which, as of the close of business on
the Due Date immediately preceding the preparation of such report, were
delinquent 1 Collection Period, delinquent 2 Collection Periods, delinquent 3
Collection Periods or more, current but specially serviced, or were in
foreclosure but were not REO Property.
"Denomination": As defined in Section 5.01(a).
"Depositor": Asset Securitization Corporation, a Delaware
corporation, and its successors and assigns.
"Depository": The Depository Trust Company or a successor
appointed by the Certificate Registrar (which appointment shall be at the
direction of the Depositor if the Depositor is legally able to do so).
"Depository Participant": A Person for whom, from time to
time, the Depository effects book-entry transfers and pledges of securities
deposited with the Depository.
"Directing Holders": As defined in Section 3.30(d).
"Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof that are not
customarily provided to tenants in connection with the rental of space for
occupancy only within the meaning of Treasury Regulations Section
1.512(h)-1(c)(5), the management or operation of such REO Property, the holding
of such REO Property primarily for sale to customers in the ordinary course of
a trade or business, or any use of such REO Property in a trade or business
conducted by the Trust Fund, or the performance of any construction work on the
REO Property other than through an Independent Contractor; provided, however,
that the Special Servicer, on behalf of the Trust Fund, shall not be considered
to Directly Operate an REO Property solely because the Special Servicer, on
behalf of the Trust Fund, establishes rental terms, chooses tenants, enters
into or renews leases, deals with taxes and insurance, or makes decisions as to
repairs or capital expenditures with respect to such REO Property or takes
other actions consistent with Section 1.856-4(b)(5)(ii) of the regulations of
the United States Department of the Treasury.
"Discount Rate": With respect to any Class of Certificates,
the rate determined by the Trustee, in its good faith, to be the rate
(interpolated and rounded to the nearest one-thousandth of a percent, if
necessary) in the secondary market for United States Treasury securities with a
maturity equal to the then computed weighted average life (or in the case of
the Class A-CS1 and Class PS-1 Certificates, the weighted average life of the
interest payments) of such class (rounded to the nearest month), without taking
into account the related prepayment of principal.
"Disqualified Non-U.S. Person": With respect to a Class R or
Class LR Certificate, any Non-U.S. Person or agent thereof other than (i) a
Non-U.S. Person that holds the Class R or Class LR Certificate in connection
with the conduct of a trade or business within the United States and has
furnished the transferor and the Certificate Registrar with an effective IRS
Form 4224 or (ii) a Non-U.S. Person that has delivered to both the transferor
and the Certificate Registrar an opinion of a nationally recognized tax counsel
to the effect that the transfer of the Class R or Class LR Certificate to it is
in accordance with the requirements of the Code and the regulations promulgated
thereunder and that such transfer of the Class R or Class LR Certificate will
not be disregarded for federal income tax purposes.
"Disqualified Organization": Either (a) the United States, a
State or any political subdivision thereof, any possession of the United
States, or any agency or instrumentality of any of the foregoing (other than an
instrumentality that is a corporation if all of its activities are subject to
tax and a majority of its board of directors is not selected by any such
governmental unit), (b) a foreign government, International Organization or
agency or instrumentality of either of the foregoing, (c) an organization that
is exempt from tax imposed by Chapter 1 of the Code (including the tax imposed
by Code Section 511 on unrelated business taxable income) on any excess
inclusions (as defined in Code Section 860E(c)(1)) with respect to the Class R
or Class LR Certificates (except certain farmers' cooperatives described in
Code Section 521), (d) rural electric and telephone cooperatives described in
Code Section 1381(a)(2), or (e) any other Person so designated by the
Certificate Registrar based upon an Opinion of Counsel to the effect that any
Transfer to such Person may cause the Upper-Tier REMIC or Lower-Tier REMIC to
be subject to tax or to fail to qualify as a REMIC at any time that the
Certificates are outstanding. The terms "United States," "State" and
"International Organization" shall have the meanings set forth in Code Section
7701 or successor provisions.
"Distribution Account": The trust account or accounts created
and maintained as a separate trust account or accounts by the Trustee pursuant
to Section 3.05(b), which shall be entitled "LaSalle National Bank, as Trustee,
in trust for Holders of Asset Securitization Corporation, Commercial Mortgage
Pass-Through Certificates, Series 1997-D4, Distribution Account" and which must
be an Eligible Account.
"Distribution Date": The 14th day of each month, or if such
14th day is not a Business Day, the Business Day immediately following such
14th day, commencing in April, 1997; provided, however, that in any month, the
Distribution Date will be no earlier than the third Business Day following the
11th day of such month; provided, further, that if the 11th day of any month is
not a Business Day, the Distribution Date will be the fourth Business Day
following the 11th day of such month.
"Distribution Date Statement": As defined in Section 4.02(a).
"Due Date": With respect to any Distribution Date and/or any
Mortgage Loan, as the case may be, the 11th day of the month (or in the case of
certain of the Mortgage Loans, if the 11th day is not a business day, as
defined in the related Loan Documents, either the next business day or the
first preceding business day) in which such Distribution Date occurs.
"Early Termination Notice Date": Any date as of which the
aggregate Stated Principal Balance of the Mortgage Loans is less than 1.0% of
the aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off
Date.
"Eligible Account": Either (i) (A) an account or accounts
maintained with a depository institution or trust company the short term
unsecured debt obligations or commercial paper of which are rated at least A-1
by S&P, P-1 by Moody's, D-1 by DCR and F-1+ by Fitch in the case of accounts in
which funds are held for 30 days or less (or, in the case of accounts in which
funds are held for more than 30 days, the long term unsecured debt obligations
of which are rated at least "AA" by Fitch, DCR and S&P and "Aaa" by Moody's) or
(B) as to which the Trustee has received written confirmation from each of the
Rating Agencies that holding funds in such account would not cause any Rating
Agency to qualify, withdraw or downgrade any of its ratings on the Certificates
or (ii) a segregated trust account or accounts maintained with a federal or
state chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or
trust company is subject to regulations substantially similar to 12 C.F.R.
ss.9.10(b), having in either case a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal and state
authority, or (any other account that, as evidenced by a written confirmation
from each Rating Agency would not, in and of itself, cause a downgrade,
qualification or withdrawal of the then current ratings assigned to the
Certificates), which may be an account maintained with the Trustee or the
Servicer. Eligible Accounts may bear interest.
"Eligible Investor": Any of (i) a Qualified Institutional
Buyer that is purchasing for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the offer, sale or transfer is
being made in reliance on Rule 144A or (ii) an Institutional Accredited
Investor.
"Environmental Report": The environmental audit report or
reports with respect to each Mortgaged Property delivered to the Mortgage Loan
Seller in connection with the related Mortgage.
"ERISA": The Employee Retirement Income Security Act of 1974,
as it may be amended from time to time.
"Escrow Account": As defined in Section 3.04(b). Any Escrow
Account may be a sub-account of the related Cash Collateral Account.
"Escrow Payment": Any payment made by any Borrower to the
Servicer pursuant to the related Mortgage, Cash Collateral Agreement, Lock-Box
Agreement or Loan Agreement for the account of such Borrower for application
toward the payment of taxes, insurance premiums, assessments and similar items
in respect of the related Mortgaged Property.
"Euroclear": Morgan Guaranty Trust Company of New York,
Brussels Office, as operator of the Euroclear System, or its successor in such
capacity.
"Event of Default": A Servicer Event of Default or Special
Servicer Event of Default, as applicable.
"Excess Interest": With respect to each of the Mortgage Loans
indicated on the Mortgage Loan Schedule as having a Revised Rate, interest
accrued on such Mortgage Loan allocable to the Excess Rate. The Excess Interest
shall not be an asset of the Lower-Tier REMIC or the Upper-Tier REMIC formed
hereunder.
"Excess Interest Distribution Account": The trust account or
accounts created and maintained as a separate trust account or accounts by the
Trustee pursuant to Section 3.05(e), which shall be entitled "LaSalle National
Bank, as Trustee, in trust for Holders of Asset Securitization Corporation,
Commercial Mortgage Pass-Through Certificates, Series 1997-D4, Excess Interest
Distribution Account" and which must be an Eligible Account. The Excess
Interest Distribution Account shall not be an asset of the Lower-Tier REMIC or
the Upper-Tier REMIC formed hereunder.
"Excess Rate": With respect to each of the Mortgage Loans
indicated on the Mortgage Loan Schedule as having a Revised Rate, the excess of
(i) the applicable Revised Rate over (ii) the applicable Mortgage Rate, each as
set forth in the Mortgage Loan Schedule.
"Exchange Act": The Securities Exchange Act of 1934, as
amended.
"Exchange Act Report": A monthly Distribution Date Statement,
Comparative Financial Status Report, Delinquent Loan Status Report, Historical
Loss Estimate Report, Historical Loan Modification Report, REO Status Report,
Operating Statement Analysis, NOI Adjustment Worksheet, Watch List, or report
pursuant to Section 4.02(b)(i) or Annual Compliance Report to be filed with the
Commission, under cover of the related form required by the Exchange Act.
"FDIC": The Federal Deposit Insurance Corporation, or any
successor thereto.
"FHA": The Federal Housing Administration.
"FHLMC": The Federal Home Loan Mortgage Corporation, or any
successor thereto.
"Final Recovery Determination": With respect to any Specially
Serviced Mortgage Loan or Mortgage Loan subject to repurchase by the Depositor
or the Mortgage Loan Seller pursuant to Sections 2.03(d) or 2.03(e), the
recovery of all Insurance Proceeds, Liquidation Proceeds, the related
Repurchase Price and other payments or recoveries (including proceeds of the
final sale of any REO Property) which the Servicer (or in the case of a
Specially Serviced Mortgage Loan, the Special Servicer), in its reasonable
judgment as evidenced by a certificate of a Servicing Officer delivered to the
Trustee and the Custodian (and the Servicer, if the Certificate is from the
Special Servicer), expects to be finally recoverable. The Servicer shall
maintain records, prepared by a Servicing Officer, of each Final Recovery
Determination until the earlier of (i) its termination as Servicer hereunder
and the transfer of such records to a successor servicer and (ii) five years
following the termination of the Trust Fund.
"Financial Market Publisher": Bloomberg Financial Service.
"Fiscal Agent": ABN AMRO Bank N.V., a Netherlands banking
corporation in its capacity as fiscal agent of the Trustee, or its successor in
interest, or any successor fiscal agent appointed as herein provided.
"Fitch": Fitch Investors Service, L.P., or its successor in
interest.
"Fixed Voting Rights": As defined in the definition of
"Voting Rights."
"Form 8-K": A Current Report on Form 8-K under the Exchange
Act, or such successor form as the Commission may specify from time to time.
"FNMA": The Federal National Mortgage Association, or any
successor thereto.
"Global Certificates": The Class A-1A, Class A-1B, Class
A-1C, Class A-1D, Class A-1E, Class A-CS1, Class PS-1, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class B-1, Class B-2,
Class B-3, Class B-4, Class B-5, and Class B-6 Certificates.
"Hazardous Materials": Any dangerous, toxic or hazardous
pollutants, chemicals, wastes, or substances, including, without limitation,
those so identified pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., or any other
environmental laws now existing, and specifically including, without
limitation, asbestos and asbestos-containing materials, polychlorinated
biphenyls ("PCBs"), radon gas, petroleum and petroleum products, urea
formaldehyde and any substances classified as being "in inventory", "usable
work in process" or similar classification which would, if classified as
unusable, be included in the foregoing definition.
"Historical Loan Modification Report": A report substantially
containing the content described in Exhibit I-3 attached hereto, setting forth,
among other things, those Mortgage Loans which, as of the close of business on
the Due Date immediately preceding the preparation of such report, have been
modified pursuant to this Agreement (i) during the related Collection Period
and (ii) since the Cut-off Date, showing the original and the revised terms
thereof.
"Historical Loss Estimate Report": A report substantially
containing the content described in Exhibit I-4 attached hereto, setting forth,
among other things, as of the close of business on the Due Date immediately
preceding the preparation of such report, (i) the aggregate amount of
Liquidation Proceeds and Liquidation Expenses, both for the current period and
historically, and (ii) the amount of Realized Losses occurring during the
related Collection Period, set forth on a Mortgage Loan-by-Mortgage Loan basis.
"Holder": With respect to any Certificate, a
Certificateholder; with respect to the Classes of Certificates comprising any
Unit, a Unitholder; with respect to any Lower-Tier Regular Interest, the
Trustee.
"Indemnified Party": As defined in Section 8.05(c).
"Independent": When used with respect to any specified
Person, any such Person who (i) does not have any direct financial interest, or
any material indirect financial interest, in any of the Depositor, the Trustee,
the Servicer, the Special Servicer, any Borrower or Manager or any Affiliate
thereof, and (ii) is not connected with any such Person thereof as an officer,
employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.
"Independent Contractor": Either (i) any Person that would be
an "independent contractor" with respect to the Trust Fund within the meaning
of Section 856(d)(3) of the Code if the Trust Fund were a real estate
investment trust (except that the ownership tests set forth in that section
shall be considered to be met by any Person that owns, directly or indirectly,
35% or more of any Class or 35% or more of the aggregate value of all Classes
of Certificates), provided that the Trust Fund does not receive or derive any
income from such Person and the relationship between such Person and the Trust
Fund is at arm's length, all within the meaning of Treasury Regulations Section
1.856-4(b)(5) (except neither the Servicer nor the Special Servicer shall be
considered to be an Independent Contractor under the definition in this clause
(i) unless an Opinion of Counsel (at the expense of the party seeking to be
deemed an Independent) addressed to the Servicer and the Trustee has been
delivered to the Trustee to that effect) or (ii) any other Person (including
the Servicer and the Special Servicer) if the Servicer, on behalf of itself and
the Trustee, has received an Opinion of Counsel (at the expense of the party
seeking to be deemed an Independent Contractor) to the effect that the taking
of any action in respect of any REO Property by such Person, subject to any
conditions therein specified, that is otherwise herein contemplated to be taken
by an Independent Contractor will not cause such REO Property to cease to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code (determined without regard to the exception applicable for purposes of
Section 860D(a) of the Code) or cause any income realized in respect of such
REO Property to fail to qualify as Rents from Real Property (provided that such
income would otherwise so qualify).
"Individual Certificate": Any Certificate in definitive,
fully registered physical form without interest coupons.
"Institutional Accredited Investor": An entity meeting the
requirements of Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated
under the Act, or an entity in which all the equity owners meet such
requirements.
"Instructions": As defined in Section 3.30(d).
"Insurance Proceeds": Proceeds of any fire and hazard
insurance policy, title policy or other insurance policy relating to a Mortgage
Loan (including any amounts paid by the Servicer pursuant to Section 3.08).
"Interest Accrual Amount": With respect to any Distribution
Date and any Class of Certificates (other than the Class A-CS1, Class PS-1,
Class V-1, Class V-2, Class R and Class LR Certificates), an amount equal to
interest for the related Interest Accrual Period at the Pass-Through Rate for
such Class on the related Certificate Balance or Notional Balance, as
applicable (provided, that for interest accrual purposes any distributions in
reduction of Certificate Balance or reductions in Certificate Balance as a
result of allocations of Realized Losses on the Distribution Date occurring in
an Interest Accrual Period shall be deemed to have been made on the first day
of such Interest Accrual Period). The "Interest Accrual Amount" with respect to
any Distribution Date and the Class A-CS1 Certificates is equal to interest for
the related Interest Accrual Period at the Pass-Through Rate for such class for
such Interest Accrual Period on the Notional Balance of such class (provided,
that any reductions in the Notional Balance of such class as a result of
distributions in reduction of the Certificate Balance of the Class A-1A
Certificates or allocations of Realized Losses to the Certificate Balance of
the Class A-1A Certificates on the Distribution Date occurring in an Interest
Accrual Period, shall be deemed to have occurred on the first day of such
Interest Accrual Period). The "Interest Accrual Amount" with respect to any
Distribution Date and the Class PS-1 Certificates shall be equal to interest
for the related Interest Accrual Period at the Pass-Through Rate for such class
for such Interest Accrual Period on the Notional Balance of such class.
Calculations of interest due in respect of the Certificates shall be made on
the basis of a 360-day year consisting of twelve 30-day months. With respect to
any Lower-Tier Regular Interest and any Distribution Date, an amount equal to
interest for the related Interest Accrual Period at the Lower-Tier Pass-Through
Rate for such Interest Accrual Period on the Certificate Balance of such
Lower-Tier Regular Interest, provided that, for such purpose, (i) any
distributions in reduction of Certificate Balance on such Distribution Date and
(ii) reductions of Certificate Balance as a result of allocations of Realized
Losses on such Distribution Date shall be deemed to have been made as of the
first day of such Interest Accrual Period.
"Interest Accrual Period": With respect to any Distribution
Date, the period which commences on the eleventh day of the month preceding the
month in which such Distribution Date occurs and ends on the tenth day of the
month in which such Distribution Date occurs, provided that the Interest
Accrual Period with respect to the Distribution Date occurring in April 1997
shall be assumed to consist of 14 days. Interest for each Interest Accrual
Period, other than the Interest Accrual Period with respect to the Distribution
Date occurring in April 1997, is calculated based on a 360-day year consisting
of twelve 30-day months.
"Interest Reserve Account": The trust account created and
maintained by the Servicer pursuant to Section 3.27, which shall be entitled
"AMRESCO Management, Inc., in trust for LaSalle National Bank, as Trustee, in
trust for Holders of Asset Securitization Corporation, Commercial Mortgage
Pass-Through Certificates, Series 1997-D4, Interest Reserve Account" and which
must be an Eligible Account.
"Interest Reserve Loans": The Mortgage Loans identified as
the Saracen, Burnham Pacific, M&H, Lakeside and Ambassador loans on the
Mortgage Loan Schedule.
"Interest Shortfall": On any Distribution Date for any
Lower-Tier Regular Interest, any shortfall in the amount of interest required
to be distributed to such Lower-Tier Regular Interest on the Certificate
Balance or Component Balance thereof, as the case may be, on such Distribution
Date.
"Interested Person": As of any date of determination, the
Depositor, the Servicer, Special Servicer, the Trustee, the Fiscal Agent, any
Borrower, any manager of a Mortgaged Property, any Independent Contractor
engaged by the Special Servicer pursuant to Section 3.17, or any Person known
to a Responsible Officer of the Trustee to be an Affiliate of any of them.
"Investment Account": As defined in Section 3.07(a).
"Investment Representation Letter": As defined in Section
5.02(c)(i)(A).
"IRS": The Internal Revenue Service.
"Liquidation Expenses": Expenses incurred by the Servicer,
the Special Servicer and the Trustee in connection with the liquidation of any
Mortgage Loan or property acquired in respect thereof (including, without
limitation, legal fees and expenses, committee or referee fees, and, if
applicable, brokerage commissions, and conveyance taxes) and any Property
Protection Expenses incurred with respect to such Mortgage Loan or such
property including interest thereon at the Advance Rate not previously
reimbursed from collections or other proceeds therefrom.
"Liquidation Proceeds": The amount (other than Insurance
Proceeds) received in connection with (i) the taking of a Mortgaged Property
(or portion thereof) by exercise of the power of eminent domain or
condemnation, (ii) the liquidation of a Specially Serviced Mortgage Loan
through a trustee's sale, foreclosure sale or otherwise or (iii) a sale of a
Mortgage Loan or an REO Property in accordance with Section 3.18 or Section
9.01.
"Loan Agreement": With respect to any Mortgage Loan, the loan
agreement, if any, between the Originator and the Borrower, pursuant to which
such Mortgage Loan was made.
"Loan Documents": With respect to any Mortgage Loan, the
documents executed or delivered in connection with the origination of such
Mortgage Loan or subsequently added to the related Mortgage File.
"Loan Number": With respect to any Mortgage Loan, the loan
number by which such Mortgage Loan was identified on the books and records of
the Depositor or any sub-servicer for the Depositor, as set forth in the
Mortgage Loan Schedule.
"Lock-Box Account": With respect to any Mortgaged Property,
if applicable, any account created pursuant to any documents relating to a
Mortgage Loan to receive revenues therefrom. Any Lock-Box Account shall be
beneficially owned for federal income tax purposes by the Person who is
entitled to receive the reinvestment income or gain thereon in accordance with
the terms and provisions of the related Mortgage Loan and Section 3.07, which
Person shall be taxed on all reinvestment income or gain thereon. The Servicer
shall be permitted to make withdrawals therefrom for deposit into the related
Cash Collateral Accounts.
"Lock-Box Agreement": With respect to any Mortgage Loan, the
lock-box agreement, if any, between the Originator or the Mortgage Loan Seller
and the Borrower, pursuant to which the related Lock-Box Account, if any, may
have been established.
"Lock-out Period" With respect to any Mortgage Loan, the
period of time specified in the related Loan Documents during which voluntary
prepayments by the related Borrower are prohibited.
"Lower Rate": As defined in the definition of Minimum
Defaulted Monthly Payment.
"Lower-Tier Pass-Through Rate": With respect to any
Distribution Date and any Class of Lower-Tier Regular Interests, a per annum
rate equal to the Weighted Average Net Mortgage Pass-Through Rate.
"Lower-Tier Regular Interests": The Class A-1A-L, Class
A-1B-L, Class A-1C-L, Class A-1D-L, Class A-1E-L, Class A-2-L, Class A-3-L,
Class A-4-L, Class A-5-L, Class A-6-L, Class A-7-L, Class A-8-L, Class B-1-L,
Class B-2-L, Class B-3-L, Class B-4-L, Class B-5-L, Class B-6-L, Class B-7-L
and Class B-7H-L Interests.
"Lower-Tier REMIC": A segregated asset pool within the Trust
Fund consisting of the Mortgage Loans (exclusive of Default Interest and Excess
Interest), collections thereon, any REO Property acquired in respect thereof
and amounts held from time to time in the Collection Account and the
Distribution Account.
"LTV": With respect to any Mortgage Loan and any date of
determination, the outstanding principal balance of such Mortgage Loan as of
such date divided by the appraised value of the Mortgaged Properties securing
such Mortgage Loan as evidenced by an Updated Appraisal obtained by the
Servicer or an update thereto.
"MAI": Member of the Appraisal Institute.
"Management Agreement": With respect to any Mortgage Loan,
the Management Agreement, if any, by and between the Manager and the related
Borrower, or any successor Management Agreement between such parties.
"Manager": With respect to any Mortgage Loan, any property
manager for the related Mortgaged Properties.
"Maturity Date": With respect to each Mortgage Loan, the
Maturity Date as set forth on the Mortgage Loan Schedule.
"Minimum Defaulted Monthly Payment": With respect to any
extension pursuant to Section 3.30(c) of a Mortgage Loan that is delinquent in
respect of its Balloon Payment, an amount equal to (a) the principal portion of
the Monthly Payment that would have been due on such Mortgage Loan on the
related Due Date based on the original amortization schedule thereof, or, if
there is no amortization schedule, the principal portion of the constant
Monthly Payment that would have been due (in each case calculated with interest
at the Mortgage Rate), assuming such Balloon Payment had not become due, after
giving effect to any modification, and (b) interest at the applicable Default
Rate; provided, however, that the Special Servicer may, in its discretion,
agree that the Minimum Defaulted Monthly Payments may include interest at a
rate lower than the related Default Rate (but in no event lower than the
related Mortgage Rate) (the "Lower Rate"); provided that if, after notice to
all Certificateholders, Holders of Certificates evidencing at least 66-2/3% of
the Voting Rights of each Class, (or, that in the event that the Special
Servicer is not the Servicer and the Servicer would not agree to the Lower
Rate, Certificateholders representing greater than (a) 50% of the aggregate
Voting Rights of all Certificateholders and (b) 66-2/3% of the aggregate Voting
Rights of all Certificateholders who respond to such notice within 30 Business
Days of the delivery of such notice), direct the Special Servicer not to agree
to permit payments to include interest at the Lower Rate, the Special Servicer
shall not agree to payments with interest at the Lower Rate, provided, further,
that, if the Minimum Defaulted Monthly Payment is to include interest at the
Lower Rate, the Special Servicer may agree that interest on such Mortgage Loan
accrues at the Lower Rate if, after notice to all Certificateholders, holders
of Certificates evidencing at least 66-2/3% of the Voting Rights of each Class
direct the Special Servicer that such Mortgage Loan shall accrue interest at
the related Default Rate, then such Mortgage Loan will continue to accrue
interest at the Default Rate thereof and the excess of interest accrued on such
Mortgage Loan over the amount included in the Minimum Defaulted Monthly
Payments (i.e., interest at the Lower Rate) shall be added to the outstanding
principal balance of such Mortgage Loan. Notwithstanding the foregoing, if the
Directing Holders have given Instructions to the Special Servicer to extend,
the Special Servicer shall be required to follow the Directing Holders'
Instructions with respect to interest so long as the Minimum Defaulted Monthly
Payment is at least equal to the Lower Rate.
"Monthly Payment": With respect to any Mortgage Loan (other
than any REO Mortgage Loan) and any Due Date, the scheduled monthly payment of
principal, if any, and interest at the Mortgage Rate, excluding any Balloon
Payment (but not excluding any constant Monthly Payment), which is payable by
the related Borrower on such Due Date under the related Note. With respect to
an REO Mortgage Loan, the monthly payment that would otherwise have been
payable on the related Due Date had the related Note not been discharged,
determined as set forth in the preceding sentence and on the assumption that
all other amounts, if any, due thereunder are paid when due.
"Moody's": Moody's Investors Services, Inc., or its successor
in interest.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first lien on or first priority ownership interest in a Mortgaged
Property securing a Note.
"Mortgage File": With respect to any Mortgage Loan, the
mortgage documents listed in Section 2.01(i) through (xv) pertaining to such
particular Mortgage Loan and any additional documents required to be added to
such Mortgage File pursuant to the express provisions of this Agreement.
"Mortgage Loan": Each of the mortgage loans transferred and
assigned to the Trustee pursuant to Section 2.01 and from time to time held in
the Trust Fund, the mortgage loans originally so transferred, assigned and held
being identified on the Mortgage Loan Schedule as of the Cut-off Date. Such
term shall include any REO Mortgage Loan, Specially Serviced Mortgage Loan or
any Mortgage Loan that has been defeased in whole or in part.
"Mortgage Loan Purchase and Sale Agreement": The Mortgage
Loan Purchase and Sale Agreement dated as of the Cut-off Date, by and between
the Depositor and the Mortgage Loan Seller, a copy of which is attached hereto
as Exhibit H.
"Mortgage Loan Schedule": The list of Mortgage Loans included
in the Trust Fund as of the Closing Date being attached hereto as Exhibit B,
which list shall set forth the following information with respect to each
Mortgage Loan:
(a) the Loan Number;
(b) the property name, city and state where each
related Mortgaged Property is located;
(c) the Monthly Payment in effect as of the Cut-off Date;
(d) the Mortgage Rate;
(e) the Maturity Date;
(f) the Stated Principal Balance as of the Cut-off
Date and, as applicable, the allocation of such
balance to each related Mortgaged Property;
(g) the Originator of such Mortgage Loan; and
(h) whether the Mortgage Loan is an Actual/360
Mortgage Loan.
The Mortgage Loan Schedule shall also set forth the total of the amounts
described under clause (c) and (f) above for all of the Mortgage Loans. The
Mortgage Loan Schedule may also set forth, for selected Mortgage Loans, the net
operating income or debt service coverage ratio. The Mortgage Loan Schedule may
be in the form of more than one list, collectively setting forth all of the
information required.
"Mortgage Loan Seller": Nomura Asset Capital Corporation, a
Delaware corporation, and its successors in interest.
"Mortgage Pass-Through Rate": With respect to the Mortgage
Loans that provide for calculations of interest based on twelve months of 30
days each, the Mortgage Pass-Through Rate for any Interest Accrual Period is
equal to the Mortgage Rate thereof. The Mortgage Pass-Through Rate with respect
to the Actual/360 Mortgage Loans (other than the Mortgage Loans identified on
the Mortgage Loan Schedule as the Nassau Park II, Saracen, Burnham Pacific,
M&H, Lakeside and Ambassador loans) for any Interest Accrual Period, is equal
to the Mortgage Rate thereof multiplied by a fraction the numerator of which is
the actual number of days in such Interest Accrual Period and the denominator
of which is 30. The Mortgage Pass-Through Rate with respect to the Mortgage
Loan secured by Nassau Park II for any Interest Accrual Period is an annual
rate equal to (a) the Mortgage Rate of such Mortgage Loan, multiplied by a
fraction, the numerator of which is the actual number of days in such Interest
Accrual Period and the denominator of which is 30 plus (b) 0.05%. The Mortgage
Pass-Through Rate with respect to the Interest Reserve Loans for any
Distribution Date (a) relating to any Interest Accrual Period commencing in any
January, February, April, June, September and November and in any December
occurring in a year immediately preceding any year which is not a leap year, is
the Mortgage Rate thereof, and (b) relating to any Interest Accrual Period
commencing in any March, May, July, August and October and in any December
occurring in a year immediately preceding a year which is a leap year, is equal
to the Mortgage Rate thereof multiplied by a fraction the numerator of which is
the actual number of days in such Interest Accrual Period and the denominator
of which is 30. Notwithstanding the foregoing, the Mortgage Pass-Through Rate
with respect to each Mortgage Loan (other than the Mortgage Loan identified on
the Mortgage Loan Schedule as the Nassau Park II loan) for the first Interest
Accrual Period is the Mortgage Rate thereof and the Mortgage Pass-Through Rate
for the Mortgage Loan identified on the Mortgage Loan Schedule as the Nassau
Park II loan for the first Interest Accrual Period is the Mortgage Rate thereof
plus (i) 0.05%.
"Mortgage Rate": With respect to each Mortgage Loan and any
Interest Accrual Period, the annual rate, not including any Excess Rate, at
which interest accrues on such Mortgage Loan during such period (in the absence
of a default), as set forth on the Mortgage Loan Schedule. The Mortgage Rate
for purposes of calculating the Weighted Average Net Mortgage Pass-Through Rate
shall be the Mortgage Rate of such Mortgage Loan without taking into account
any reduction in the interest rate by a bankruptcy court pursuant to a plan of
reorganization or pursuant to any of its equitable powers or a reduction in
interest or principal due to a modification pursuant to Section 3.30 hereof.
"Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of a fee simple estate,
and, with respect to certain Mortgage Loans, a leasehold estate or both a
leasehold estate and a fee simple estate, or a leasehold estate in a portion of
the property and a fee simple estate in the remainder, in a parcel of land
improved by a commercial property, together with any personal property,
fixtures, leases and other property or rights pertaining thereto.
"Net Default Interest": As defined in Section 3.05(d).
"Net Income": With respect to any REO Property, all income
received in connection with such REO Property, less any operating expenses,
including, but not limited to, utilities, real estate taxes, property
management fees, insurance premiums, leasing commission fees, expenses for
maintenance and repairs and any other capital expenses directly related to such
REO Property and permitted to be incurred under this Agreement.
"Net Insurance Proceeds": Insurance Proceeds, to the extent
such proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Borrower in accordance with the express
requirements of the Mortgage or Note or other documents included in the
Mortgage File or in accordance with prudent and customary servicing practices.
"Net Liquidation Proceeds": The Liquidation Proceeds received
with respect to any Mortgage Loan net of the amount of (i) Liquidation Expenses
incurred with respect thereto and, (ii) with respect to proceeds received in
connection with the taking of a Mortgaged Property (or portion thereof) by the
power of eminent domain in condemnation, amounts required to be applied to the
restoration or repair of the related Mortgaged Property.
"Net Mortgage Pass-Through Rate": With respect to any
Mortgage Loan and any Distribution Date, the per annum rate equal to the
Mortgage Pass-Through Rate for such Mortgage Loan, minus the aggregate of the
applicable Servicing Fee Rate and Trustee Fee Rate.
"Net REO Proceeds": With respect to each REO Property, REO
Proceeds with respect to such REO Property net of any insurance premiums,
taxes, assessments and other costs and expenses permitted to be paid therefrom
pursuant to Section 3.17(b) of this Agreement.
"New Lease": Any lease of REO Property entered into on behalf
of the Trust Fund, including any lease renewed or extended on behalf of the
Trust Fund if the Trust Fund has the right to renegotiate the terms of such
lease.
"NOI Adjustment Worksheet": A report prepared by the Servicer
or the Special Servicer, as the case may be, substantially containing the
content described in Exhibit I-8 attached hereto, presenting the computations
made in accordance with the methodology described in said Exhibit I-8 to
"normalize" the full year net operating income and debt service coverage
numbers used in the other reports required by this Agreement, sent to the
Trustee with each annual operating statement for a Mortgaged Property pursuant
to Section 3.13(d).
"Nonrecoverable Advance": Any portion of an Advance proposed
to be made or previously made which has not been previously reimbursed to the
Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as applicable,
and which, in the good faith business judgment of the Servicer, the Special
Servicer, the Trustee or the Fiscal Agent, as applicable, will not or, in the
case of a proposed Advance, would not be ultimately recoverable from late
payments, Insurance Proceeds, Liquidation Proceeds and other collections on or
in respect of the related Mortgage Loan. The judgment or determination by the
Servicer, the Special Servicer, the Trustee or the Fiscal Agent that it has
made a Nonrecoverable Advance or that any proposed Advance, if made, would
constitute a Nonrecoverable Advance shall be evidenced in the case of the
Servicer or Special Servicer, by a certificate of a Servicing Officer delivered
to the Trustee, the Fiscal Agent, the Depositor and, in the case of the Special
Servicer, to the Servicer, and in the case of the Trustee or the Fiscal Agent,
by a certificate of a Responsible Officer of the Trustee or Fiscal Agent, as
applicable, delivered to the Depositor (and the Trustee if the Certificate is
from the Fiscal Agent), which in each case sets forth such judgment or
determination and the procedures and considerations of the Servicer, Special
Servicer, Trustee or Fiscal Agent, as applicable, forming the basis of such
determination (including, but not limited to, information selected by the
Person making such judgment or determination in its good faith discretion, such
as related income and expense statements, rent rolls, occupancy status,
property inspections, Servicer, Special Servicer, Trustee or Fiscal Agent
inquiries, third party engineering and environmental reports, and an appraisal
conducted by an MAI appraiser in accordance with MAI standards or any Updated
Appraisal thereof conducted within the past 12 months; copies of such documents
to be included with the certificate of a Servicing Officer or a Responsible
Officer). Any determination of non-recoverability made by the Servicer may be
made without regard to any value determination made by the Special Servicer
other than pursuant to an Updated Appraisal. Notwithstanding the above, the
Trustee and the Fiscal Agent shall be entitled to rely upon any determination
by the Servicer that any Advance previously made is a Nonrecoverable Advance or
that any proposed Advance would, if made, constitute a Nonrecoverable Advance
(and with respect to a proposed P&I Advance, the Trustee and the Fiscal Agent,
as applicable, shall rely on the Servicer's determination that the Advance
would be a Nonrecoverable Advance if the Trustee or Fiscal Agent, as
applicable, determines that it does not have sufficient time to make such a
determination).
"Non-U.S. Person": A person that is not 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, an estate whose income is subject to United States federal
income tax regardless of its source, or a trust if (A) for taxable years
beginning after December 31, 1996 (or for taxable years ending after August 20,
1996, if the trustee has made an applicable election) a court within the United
States is able to exercise primary supervision over the administration of such
trust, and one or more United States fiduciaries have the authority to control
all substantial decisions of such trust, or (B) for all other taxable years,
such trust is subject to United States federal income tax regardless of the
source of its income.
"Note": With respect to any Mortgage Loan as of any date of
determination, the note or other evidence of indebtedness and/or agreements
evidencing the indebtedness of a Borrower under such Mortgage Loan, including
any amendments or modifications, or any renewal or substitution notes, as of
such date.
"Notice of Termination": Any of the notices given to the
Trustee by the Servicer or any Holder of a Class LR Certificate pursuant to
Section 9.01(c).
"Notional Amount" or "Notional Balance": With respect to each
of the Class PS-1 and Class A-CS1 Certificates, (a) on or prior to the
Distribution Date occurring in April 1997, a notional principal amount equal to
the aggregate initial Notional Balance of such Class, as specified in the
Preliminary Statement hereto, and (b)(i) in the case of the Class A-CS1
Certificates, as of any date of determination after the Distribution Date
occurring in April 1997, the Notional Balance of such Class on the Distribution
Date immediately prior to such date of determination, after distributions of
principal on the Class A-1A Certificates and allocations of Realized Losses on
such Class on such prior Distribution Date and (ii) in the case of the Class
PS-1 Certificate, as of any Distribution Date after April 1997 a notional
principal amount equal to the aggregate Stated Principal Balance of the
Mortgage Loans as of the first day of the related Interest Accrual Period.
"Officers' Certificate": A certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the President or a Vice President
(however denominated) and by the Treasurer, the Secretary, one of the Assistant
Treasurers or Assistant Secretaries, any Trust Officer or other officer of the
Servicer 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 of and familiarity with the particular subject, or an authorized
officer of the Depositor, and delivered to the Depositor, the Trustee or the
Servicer, as the case may be.
"Operating Statement Analysis": With respect to each Mortgage
Loan and REO Mortgage Property, a report substantially containing the content
described in Exhibit I-7 attached hereto.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be counsel for the Depositor, the Special Servicer or the
Servicer, as the case may be, acceptable to the Trustee, except that any
opinion of counsel relating to (a) qualification of the Upper-Tier REMIC or
Lower-Tier REMIC as a REMIC or the imposition of tax under the REMIC Provisions
on any income or property of either REMIC, (b) compliance with the REMIC
Provisions (including application of the definition of "Independent
Contractor") or (c) a resignation of the Servicer pursuant to Section 6.04,
must be an opinion of counsel who is Independent of the Depositor and the
Servicer.
"Originator": Any of (i) the Mortgage Loan Seller, and (ii)
Bloomfield Acceptance Company, LLC.
"Ownership Interest": Any record or beneficial interest in a
Class R or Class LR Certificate.
"P&I Advance": As to any Mortgage Loan, any advance made by
the Servicer, the Trustee, or the Fiscal Agent pursuant to Section 4.06. Each
reference to the payment or reimbursement of a P&I Advance shall be deemed to
include, whether or not specifically referred to and without duplication,
payment or reimbursement of interest thereon at the Advance Rate from and
including the date of the making of such P&I Advance through and including the
date of payment or reimbursement.
"Pass-Through Rate": With respect to each Class of
Certificates (other than the Class V-1, Class V-2, Class R and Class LR
Certificates) or Strip Component of a Class of Certificates, the Pass-Through
Rate for such Class or Strip Component are set forth below:
Class/Strip Component Pass-Through Rate
Class A-1A Class A-1A Pass-Through Rate
Class A-1B Class A-1B Pass-Through Rate
Class A-1C Class A-1C Pass-Through Rate
Class A-1D Class A-1D Pass-Through Rate
Class A-1E Class A-1E Pass-Through Rate
Class A-CS1 Class A-CS1 Pass-Through Rate
Class PS-1 Class PS-1 Pass-Through Rate
Class A-2 Class A-2 Pass-Through Rate
Class A-3 Class A-3 Pass-Through Rate
Class A-4 Class A-4 Pass-Through Rate
Class A-5 Class A-5 Pass-Through Rate
Class A-6 Class A-6 Pass-Through Rate
Class A-7 Class A-7 Pass-Through Rate
Class A-8 Class A-8 Pass-Through Rate
Class B-1 Class B-1 Pass-Through Rate
Class B-2 Class B-2 Pass-Through Rate
Class B-3 Class B-3 Pass-Through Rate
Class B-4 Class B-4 Pass Through Rate
Class B-5 Class B-5 Pass Through Rate
Class B-6 Class B-6 Pass Through Rate
Class B-7 Class B-7 Pass-Through Rate
Class B-7H Class B-7H Pass-Through Rate
"Paying Agent": The paying agent appointed pursuant to
Section 5.04.
"Percentage Interest": As to any Certificate, the percentage
interest evidenced thereby in distributions required to be made with respect to
the related Class. With respect to any Certificate (except the Class V-1, Class
V-2, Class R and Class LR Certificates), the percentage interest is equal to
the initial denomination of such Certificate divided by the initial Certificate
Balance or Notional Balance, as applicable, of such Class of Certificates. With
respect to any Class V-1, Class V-2, Class R or Class LR Certificate, the
percentage interest is set forth on the face thereof.
"Permitted Investments": Any one or more of the following
obligations or securities payable on demand or having a scheduled maturity on
or before the Business Day preceding the date upon which such funds are
required to be drawn, regardless of whether issued by the Depositor, the
Servicer, the Trustee or any of their respective Affiliates and having at all
times the required ratings, if any, provided for in this definition, unless
each Rating Agency shall have confirmed in writing to the Servicer that a lower
rating would not, in and of itself, result in a downgrade, qualification or
withdrawal of the then current ratings assigned to the Certificates:
(i) obligations of, or obligations fully guaranteed as to
payment of principal and interest by, the United States or
any agency or instrumentality thereof provided such
obligations are backed by the full faith and credit of the
United States of America including, without limitation,
obligations of: the U.S. Treasury (all direct or fully
guaranteed obligations), the Farmers Home Administration
(certificates of beneficial ownership), the General Services
Administration (participation certificates), the U.S.
Maritime Administration (guaranteed Title XI financing), the
Small Business Administration (guaranteed participation
certificates and guaranteed pool certificates), the U.S.
Department of Housing and Urban Development (local authority
bonds) and the Washington Metropolitan Area Transit Authority
(guaranteed transit bonds); provided, however, that the
investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that
cannot vary or change, (B) if rated by S&P, must not have an
"r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a
fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to
liquidation prior to their maturity;
(ii) Federal Housing Administration debentures;
(iii) obligations of the following United States government
sponsored agencies: Federal Home Loan Mortgage Corp. (debt
obligations), the Farm Credit System (consolidated systemwide
bonds and notes), the Federal Home Loan Banks (consolidated
debt obligations), the Federal National Mortgage Association
(debt obligations), the Student Loan Marketing Association
(debt obligations), the Financing Corp. (debt obligations),
and the Resolution Funding Corp. (debt obligations);
provided, however, that the investments described in this
clause must (A) have a predetermined fixed dollar of
principal due at maturity that cannot vary or change, (B) if
rated by S&P, must not have an "r" highlighter affixed to
their rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and must
move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their
maturity;
(iv) federal funds, unsecured certificates of deposit, time
or similar deposits, bankers' acceptances and repurchase
agreements, with maturities of not more than 365 days, of any
bank, the short term obligations of which are rated in the
highest short term rating category by each Rating Agency (or,
if not rated by DCR, Moody's or Fitch, otherwise acceptable
to DCR, Moody's or Fitch, as applicable, as confirmed in
writing that such investment would not, in and of itself,
result in a downgrade, qualification or withdrawal of the
then current ratings assigned to the Certificates); provided,
however, that the investments described in this clause must
(A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by S&P,
must not have an "r" highlighter affixed to their rating, (C)
if such investments have a variable rate of interest, such
interest rate must be tied to a single interest rate index
plus a fixed spread (if any) and must move proportionately
with that index, and (D) such investments must not be subject
to liquidation prior to their maturity;
(v) fully Federal Deposit Insurance Corporation-insured
demand and time deposits in, or certificates of deposit of,
or bankers' acceptances issued by, any bank or trust company,
savings and loan association or savings bank, the short term
obligations of which are rated in the highest short term
rating category by each Rating Agency (or, if not rated by
DCR, Moody's or Fitch, otherwise acceptable to DCR, Moody's
or Fitch, as applicable, as confirmed in writing that such
investment would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then current
ratings assigned to the Certificates); provided, however,
that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that
cannot vary or change, (B) if rated by S&P, must not have an
"r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a
fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to
liquidation prior to their maturity;
(vi) debt obligations with maturities of not more than 365
days rated by each Rating Agency (or, if not rated by DCR,
Moody's or Fitch, otherwise acceptable to DCR, Moody's or
Fitch, as applicable, as confirmed in writing that such
investment would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then current
ratings assigned to the Certificates) in its highest
long-term unsecured rating category; provided, however, that
the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that
cannot vary or change, (B) if rated by S&P, must not have an
"r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a
fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to
liquidation prior to their maturity;
(vii) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable
on demand or on a specified date not more than one year after
the date of issuance thereof) with maturities of not more
than 365 days and that is rated by each Rating Agency (or, if
not rated by DCR, Moody's or Fitch, otherwise acceptable to
DCR, Moody's or Fitch, as applicable, as confirmed in writing
that such investment would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then current
ratings assigned to the Certificates) in its highest
short-term unsecured debt rating; provided, however, that the
investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that
cannot vary or change, (B) if rated by S&P, must not have an
"r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a
fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to
liquidation prior to their maturity;
(viii) the Federated Prime Obligation Money Market Fund (the
"Fund") so long as the Fund is rated by each Rating Agency in
its highest short-term unsecured debt ratings category (or,
if not rated by DCR, Moody's or Fitch, otherwise acceptable
to DCR, Moody's or Fitch, as applicable, as confirmed in
writing that such investment would not, in and of itself,
result in a downgrade, qualification or withdrawal of the
then current ratings assigned to the Certificates); and
(ix) any other demand, money market or time deposit, demand
obligation or any other obligation, security or investment,
provided that each Rating Agency has confirmed in writing to
the Servicer, Special Servicer or Trustee, as applicable,
that such investment would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then current
ratings assigned to the Certificates;
provided, however, that, in the judgment of the Servicer, such instrument
continues to qualify as a "cash flow investment" pursuant to Code Section
860G(a)(6) earning a passive return in the nature of interest and that no
instrument or security shall be a Permitted Investment if (i) such instrument
or security evidences a right to receive only interest payments or (ii) the
right to receive principal and interest payments derived from the underlying
investment provides a yield to maturity in excess of 120% of the yield to
maturity at par of such underlying investment.
"Permitted Transferee": With respect to a Class R or Class LR
Certificate, any Person or agent thereof that is a Qualified Institutional
Buyer, an Affiliated Person or an Institutional Accredited Investor, other than
(a) a Disqualified Organization, (b) any other Person so designated by the
Certificate Registrar based upon an Opinion of Counsel (provided at the expense
of such Person or the Person requesting the Transfer) to the effect that the
Transfer of an Ownership Interest in any Class R or Class LR Certificate to
such Person may cause the Upper-Tier REMIC or Lower-Tier REMIC to fail to
qualify as a REMIC at any time that the Certificates are outstanding, (c) a
Person that is a Disqualified Non-U.S. Person and (d) a Plan or any Person
investing the assets of a Plan.
"Person": Any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Plan": As defined in Section 5.02(k).
"Prepayment Assumption": The assumption that each Mortgage
Loan with an Anticipated Repayment Date prepays on such date and that each
other Mortgage Loan does not prepay prior to its respective Maturity Date.
"Prepayment Interest Shortfall": With respect to any
Distribution Date, the amount of any shortfall in collections of interest
(adjusted to the applicable Net Mortgage Pass-Through Rate plus the Trustee
Fee) resulting from a Principal Prepayment on such Mortgage Loan during the
related Collection Period and prior to the related Due Date other than
Prepayment Interest Shortfalls relating to any Specially Serviced Mortgage
Loan.
"Prepayment Premium": Payments received on a Mortgage Loan as
the result of a Principal Prepayment thereon, not otherwise due thereon in
respect of principal or interest, other than an amount paid in connection with
the release of the related Mortgaged Property through defeasance, which are
intended to compensate the holder of the related Note for prepayment.
"Principal Distribution Amount": For any Distribution Date
will be equal to the sum of:
(i) the principal component of all scheduled Monthly Payments
(other than Balloon Payments) due on the Mortgage Loans on or before the
related Due Date (if received or advanced);
(ii) the principal component of all Assumed Scheduled
Payments or Minimum Defaulted Monthly Payments, as applicable, due on or before
the related Due Date (if received or advanced) with respect to any Mortgage
Loan that is delinquent in respect of its Balloon Payment;
(iii) the Stated Principal Balance of each Mortgage Loan that
was, during the related Collection Period, repurchased from the Trust Fund in
connection with the breach of a representation or warranty pursuant to Section
2.03 or purchased from the Trust Fund pursuant to Section 9.01;
(iv) the portion of Unscheduled Payments allocable to
principal of any Mortgage Loan that was liquidated during the related
Collection Period;
(v) the principal component of all Balloon Payments and, to
the extent not included in the preceding clauses, any other principal payment
on any Mortgage Loan received on or after the Maturity Date thereof, to the
extent received during the related Collection Period;
(vi) to the extent not included in the preceding clauses
(iii) or (iv), all other Principal Prepayments received in the related
Collection Period; and
(vii) to the extent not included in the preceding clauses,
any other full or partial recoveries in respect of principal, including
Insurance Proceeds, Liquidation Proceeds and Net REO Proceeds received in the
related Collection Period (in the case of clauses (i) through (vii) net of any
reimbursement for related outstanding P&I Advances allocable to principal and
amounts received on a Mortgage Loan which represent recoveries in respect of
any Subordinate Class Advance Amount);
The principal component of the amounts set forth above shall be determined in
accordance with Section 1.02 hereof.
"Principal Prepayment": Any payment of principal made by the
Borrower on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the
full amount of scheduled interest due on any date or dates in any month or
months subsequent to the month of prepayment other than any amount paid in
connection with the release of the related Mortgaged Property through
defeasance.
"Property Advance": As to any Mortgage Loan, any advance made
by the Servicer, Special Servicer, the Trustee or the Fiscal Agent in respect
of Property Protection Expenses or any expenses incurred to protect, preserve
and enforce the security for a Mortgage Loan or taxes and assessments or
insurance premiums, pursuant to Section 3.04 or Section 3.24, as applicable.
Each reference to the payment or reimbursement of a Property Advance shall be
deemed to include, whether or not specifically referred to, payment or
reimbursement of interest thereon at the Advance Rate from and including the
date of the making of such Advance through and including the date of payment or
reimbursement.
"Property Protection Expenses": Any costs and expenses
incurred by the Servicer or the Special Servicer pursuant to Sections 3.04,
3.08, 3.10(b), 3.10(e), 3.10(f), 3.10(g), 3.10(h), 3.10(k), 3.17(b) and 3.18 or
indicated herein as being a cost or expense of the Trust Fund or the Lower-Tier
REMIC or Upper-Tier REMIC to be advanced by the Servicer or the Special
Servicer, as applicable.
"Prospectus": The Depositor's Prospectus Supplement dated
March 26, 1997 relating to the Class A-1A, Class A-1B, Class A-1C, Class A-1D,
Class A-CS1, Class PS-1, Class A-1E, Class A-2, Class A-3, Class A-4, Class
A-5, Class A-6, Class A-7 and Class A-8 Certificates.
"Qualified Institutional Buyer": A qualified institutional
buyer within the meaning of Rule 144A.
"Qualified Insurer": As used in Section 3.08, (i) an
insurance company or security or bonding company qualified to write the related
insurance policy in the relevant jurisdiction which shall have a claims paying
ability of "AA" or better by S&P and Fitch (or, if such company is not rated by
Fitch, is rated at least A-1X by A.M. Best's Key Rating Guide) and "Baa3" or
better by Moody's and "A" or better by DCR (or, if such company is not rated by
DCR, is rated at least in an equivalent category by at least two nationally
recognized statistical ratings organizations), (ii) in the case of public
liability insurance policies required to be maintained with respect to REO
Properties in accordance with Section 3.08(a), shall have a claims paying
ability of "A" or better by S&P and Fitch (or, if such company is not rated by
Fitch, is rated at least A-1X by A.M. Best's Key Rating Guide) and DCR (or, if
such company is not rated by DCR, is rated at least in an equivalent category
by at least two nationally recognized statistical ratings organizations) and
"Baa3" or better by Moody's and (iii) in the case of the fidelity bond and the
errors and omissions insurance required to be maintained pursuant to Section
3.08(c), shall have a claims paying ability rated by each Rating Agency no
lower than two ratings categories (without regard to pluses or minuses or
numeric qualifications) lower than the highest rating of any outstanding Class
of Certificates from time to time (or if such company is not rated by DCR, is
rated at least in an equivalent category by at least two nationally recognized
statistical ratings organizations and, if such company is not rated by Fitch,
is rated at least A-VIII by A.M. Best's Key Rating Guide), but in no event
lower than "BBB" by S&P, Fitch and DCR and "Baa3" by Moody's, unless in any
such case each of the Rating Agencies has confirmed in writing that obtaining
the related insurance from an insurance company that is not rated by each of
the Rating Agencies (subject to the foregoing exceptions) or that has a lower
claims-paying ability than such requirements shall not result, in and of
itself, in a downgrade, qualification or withdrawal of the then current ratings
by such Rating Agency to any Class of Certificates.
"Qualified Mortgage": A Mortgage Loan that is a "qualified
mortgage" within the meaning of Code Section 860G(a)(3) of the Code (but
without regard to the rule in Treasury Regulations 1.860G-2(f)(2) that treats a
defective obligation as a qualified mortgage, or any substantially similar
successor provision).
"Rated Final Distribution Date": April 14, 2029, the next
Distribution Date occurring two years after the latest Assumed Maturity Date of
any of the Mortgage Loans.
"Rating Agency": Any of DCR, Fitch, Moody's or S&P.
References herein to the highest long-term unsecured debt rating category of a
Rating Agency shall mean "AAA" with respect to DCR, Fitch and S&P and "Aaa"
with respect to Moody's and in the case of any other rating agency shall mean
such highest rating category or better without regard to any plus or minus or
numerical qualification.
"Real Property": Land or improvements thereon such as
buildings or other inherently permanent structures thereon (including items
that are structural components of the buildings or structures), in each such
case as such terms are used in the REMIC Provisions.
"Realized Loss": With respect to any Distribution Date shall
mean the amount, if any, by which the aggregate Certificate Balance of the
Certificates after giving effect to distributions made on such Distribution
Date exceeds the aggregate Stated Principal Balance of the Mortgage Loans as of
the Due Date in the month in which such Distribution Date occurs.
"Reassignment of Assignment of Leases, Rents and Profits": As
defined in Section 2.01(viii).
"Record Date": With respect to each Distribution Date, the
close of business on the tenth day of the month in which such Distribution Date
occurs or, if such day is not a Business Day, the preceding Business Day;
provided, however, that with respect to the first Distribution Date, for all
purposes other than receipt of the distribution pursuant to Section 4.01 on
such Distribution Date, the Record Date shall be the Closing Date.
"Reduction Interest Distribution Amount": For the Class PS-1
Certificates, with respect to any Distribution Date and each of clauses ninth,
thirteenth, seventeenth, twenty-first, twenty-fifth, twenty-ninth,
thirty-third, thirty-seventh, forty-first, forty-fifth, forty-ninth,
fifty-third, fifty-seventh and sixty-first of Section 4.01(b) shall be the
amount of interest accrued for the Interest Accrual Period at the applicable
Reduction Interest Pass-Through Rate for such Interest Accrual Period on the
aggregate amount of Appraisal Reduction Amounts and Delinquency Reduction
Amounts notionally allocated to the related classes referred to in subclause
(B) of each such clause as of such Distribution Date, pursuant to Section 4.01(
).
"Reduction Interest Pass-Through Rate": With respect to any
Distribution Date (i) when the Class B-6 Certificates are the most subordinate
class outstanding, the Weighted Average Net Mortgage Pass-Through Rate minus
7.525%, (ii) when the Class B-5 Certificates are the most subordinate class
outstanding, the Weighted Average Net Mortgage Pass-Through Rate minus 7.525%,
(iii) when the Class B-4 Certificates are the most subordinate class
outstanding, the Weighted Average Net Mortgage Pass-Through Rate minus 7.525%,
(iv) when the Class B-3 Certificates are the most subordinate class
outstanding, the Weighted Average Net Mortgage Pass-Through Rate minus 7.525%,
(v) when the Class B-2 Certificates are the most subordinate class outstanding,
the Weighted Average Net Mortgage Pass-Through Rate minus 7.525%, (vi) when the
Class B-1 Certificates are the most subordinate class outstanding, the Weighted
Average Net Mortgage Pass-Through Rate minus 7.525%, (vii) when the Class A-8
Certificates are the most subordinate class outstanding 0.59%, (viii) when the
Class A-7 Certificates are the most subordinate class outstanding 0.94%, (ix)
when the Class A-6 Certificates are the most subordinate class outstanding
0.99%, (x) when the Class A-5 Certificates are the most subordinate class
outstanding 1.08%, (xi) when the Class A-4 Certificates are the most
subordinate class outstanding, 1.13%, (xii) when the Class A-3 Certificates are
the most subordinate class outstanding, 1.16% and (xiii) when the Class A-2
Certificates are the most subordinate class outstanding 1.21%. When the Class
A-1E Certificates are the most subordinate class outstanding, the Weighted
Average Net Mortgage Pass-Through Rate minus 7.525%.
"Reduction Interest Shortfalls": With respect to any
Distribution Date and each of the clauses ninth, thirteenth, seventeenth,
twenty-first, twenty-fifth, twenty-ninth, thirty-third, thirty-seventh,
forty-first, forty-fifth, forty-ninth, fifty-third, fifty-seventh and
sixty-first of Section 4.01(b), any shortfall in the Reduction Interest
Distribution Amount required to be distributed to the Class PS-1 Certificates
pursuant to such clause on such Distribution Date.
"Regular Certificates": The Class A-1A, Class A-1B, Class
A-1C, Class A-1D, Class A-1E, Class A-CS1, Class PS-1, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class B-1, Class B-2,
Class B-3, Class B-4, Class B-5, Class B-6, Class B-7 and Class B-7H
Certificates.
"Regulation D": Regulation D under the Act.
"Regulation S": Regulation S under the Act.
"Regulation S Global Certificate": As defined in Section
5.01.
"Regulation S Investor": With respect to a transferee of an
interest in a Regulation S Global Certificate, a transferee that acquires such
interest pursuant to Regulation S.
"Regulation S Transfer Certificate": A certificate
substantially in the form of Exhibit G hereto.
"Related Certificate" and "Related Lower-Tier Regular
Interest": For any Class or Classes of Lower-Tier Regular Interests, the
related Class of Certificates set forth below and for any Class of Certificates
(other than the Class PS-1, Class A-CS1, Class V-1, Class V-2, Class R and
Class LR), the related Class or Classes of Lower-Tier Regular Interest set
forth below:
Related Lower-Tier
Related Certificate Regular Interest
Class A-1A Class A-1A-L Interest
Class A-1B Class A-1B-L Interest
Class A-1C Class A-1C-L Interest
Class A-1D Class A-1D-L Interest
Class A-1E Class A-1E-L Interest
Class A-2 Class A-2-L Interest
Class A-3 Class A-3-L Interest
Class A-4 Class A-4-L Interest
Class A-5 Class A-5-L Interest
Class A-6 Class A-6-L Interest
Class A-7 Class A-7-L Interest
Class A-8 Class A-8-L Interest
Class B-1 Class B-1-L Interest
Class B-2 Class B-2-L Interest
Class B-3 Class B-3-L Interest
Class B-4 Class B-4-L Interest
Class B-5 Class B-5-L Interest
Class B-6 Class B-6-L Interest
Class B-7 Class B-7-L Interest
Class B-7H Class B-7H-L Interest
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of Subchapter M of Chapter 1 of the Code, and related
provisions, and regulations (including any applicable proposed regulations) and
rulings promulgated thereunder, as the foregoing may be in effect from time to
time.
"Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code, which
income, subject to the terms and conditions of that Section of the Code in its
present form, does not include:
(i) except as provided in Section 856(d)(4) or (6) of
the Code, any amount received or accrued, directly
or indirectly, with respect to such REO Property, if
the determination of such amount depends in whole or
in part on the income or profits derived by any
Person from such property (unless such amount is a
fixed percentage or percentages of receipts or sales
and otherwise constitutes Rents from Real Property);
(ii) any amount received or accrued, directly or
indirectly, from any Person if the Trust Fund owns
directly or indirectly (including by attribution) a
ten percent or greater interest in such Person
determined in accordance with Sections 856(d)(2)(B)
and (d)(5) of the Code;
(iii) any amount received or accrued, directly or
indirectly, with respect to such REO Property if any
Person Directly Operates such REO Property;
(iv) any amount charged for services that are not
customarily furnished in connection with the rental
of property to tenants in buildings of a similar
class in the same geographic market as such REO
Property within the meaning of Treasury Regulations
Section 1.856-4(b)(1) (whether or not such charges
are separately stated); and
(v) rent attributable to personal property unless such
personal property is leased under, or in connection
with, the lease of such REO Property and, for any
taxable year of the Trust Fund, such rent is no
greater than 15 percent of the total rent received
or accrued under, or in connection with, the lease.
"REO Account": As defined in Section 3.17(b).
"REO Mortgage Loan": Any Mortgage Loan as to which the
related Mortgaged Property has become an REO Property.
"REO Proceeds": With respect to any REO Property and the
related REO Mortgage Loan, all revenues received by the Special Servicer with
respect to such REO Property or REO Mortgage Loan which do not constitute
Liquidation Proceeds.
"REO Property": A Mortgaged Property title to which has been
acquired by the Special Servicer on behalf of the Trust Fund through
foreclosure, deed in lieu of foreclosure or otherwise.
"REO Status Report": A report substantially containing the
content described in Exhibit I-5 attached hereto, setting forth, among other
things, with respect to each REO Property that was included in the Trust Fund
as of the close of business on the Due Date immediately preceding the
preparation of such report, (i) the acquisition date of such REO Property, (ii)
the amount of income collected with respect to any REO Property net of related
expenses and other amounts, if any, received on such REO Property during the
related Collection Period and (iii) the value of the REO Property based on the
most recent appraisal or other valuation thereof available to the Special
Servicer as of such date of determination (including any prepared internally by
the Special Servicer).
"Repurchase Price": With respect to any Mortgage Loan to be
repurchased pursuant to Section 2.03(d), 2.03(e) or 9.01, or any Specially
Serviced Mortgage Loan or any REO Mortgage Loan to be sold or repurchased
pursuant to Section 3.18, an amount, calculated by the Servicer, equal to:
(i) the unpaid principal balance of such Mortgage Loan
as of the Due Date as to which a payment was last
made by the Borrower (less any Advances previously
made on account of principal); plus
(ii) unpaid accrued interest from the Due Date as to
which interest was last paid by the Borrower up to
the Due Date in the month following the month in
which the purchase or repurchase occurred at a rate
equal to the Mortgage Rate on the unpaid principal
balance of such Mortgage Loan (less any Advances
previously made on account of interest); plus
(iii) any unreimbursed Advances and unpaid Servicing Fees,
Trustee Fees and Special Servicing Compensation
allocable to such Mortgage Loan together with
interest thereon at the Advance Rate; plus
(iv) in the event that the Mortgage Loan is required to
be repurchased pursuant to Sections 2.03(d) or
2.03(e), expenses reasonably incurred or to be
incurred by the Servicer, the Special Servicer or
the Trustee in respect of the breach or defect
giving rise to the repurchase obligation, including
any expenses arising out of the enforcement of the
repurchase obligation.
"Request for Release": A request for a release signed by a
Servicing Officer, substantially in the form of Exhibit E hereto.
"Reserve Accounts": With respect to any Mortgage Loan,
reserve accounts, if any, established pursuant to the Mortgage or the Loan
Agreement and any Escrow Account. Any Reserve Account may be a sub-account of a
related Cash Collateral Account. Any Reserve Account shall be beneficially
owned for federal income tax purposes by the Person who is entitled to receive
the reinvestment income or gain thereon in accordance with the terms and
provisions of the related Mortgage Loan and Section 3.07, which Person shall be
taxed on all reinvestment income or gain thereon. The Servicer shall be
permitted to make withdrawals therefrom for deposit into the related Cash
Collateral Account, if applicable, or the Collection Account or for the
purposes set forth under the related Mortgage Loan.
"Responsible Officer": Any officer of the Asset-Backed Trust
Services Department of the Trustee or the Fiscal Agent (and, in the event that
the Trustee is the Certificate Registrar or the Paying Agent, of the
Certificate Registrar or the Paying Agent, as applicable) assigned to the
Corporate Trust Office with direct responsibility for the administration of
this Agreement and also, with respect to a particular matter, any other officer
to whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject, and, in the case of any certification
required to be signed by a Responsible Officer, such an officer whose name and
specimen signature appears on a list of corporate trust officers furnished to
the Servicer by the Trustee and the Fiscal Agent, as such list may from time to
time be amended.
"Revised Rate": With respect to the Mortgage Loans, the
increased interest rate after the Anticipated Repayment Date (in the absence of
a default) for each applicable Mortgage Loan, as calculated and as set forth in
the related Mortgage Loan.
"S&P": Standard & Poor's Ratings Services, or its successor
in interest.
"Scheduled Final Distribution Date": As to each Class of
Certificates, April 14, 2027, the next Distribution Date occurring after the
latest maturity date of any Mortgage Loan.
"Securities Legend": With respect to each Residual
Certificate or any Individual Certificate, the legend set forth in, and
substantially in the form of, Exhibit G hereto.
"Separation Date": With respect to any of the Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates, the date
on which such Class is assigned a rating of "BBB" or higher by S&P or Fitch.
"Servicer": AMRESCO Management, Inc., a Texas corporation, or
its successor in interest, or any successor Servicer appointed as herein
provided.
"Servicer Event of Default": As defined in Section 7.01(a).
"Servicer Prepayment Interest Shortfall": With respect to any
Distribution Date, the amount of any shortfall in collections of interest
(adjusted to the applicable Net Mortgage Pass-Through Rate plus the Trustee Fee
Rate) resulting from a Principal Prepayment on a Mortgage Loan during the
related Collection Period and prior to the related Due Date, which Principal
Prepayment, pursuant to the terms of the related Mortgage Loan, was not
permitted to be made on any date other than a Due Date under such Mortgage
Loan, but was nonetheless accepted by the Servicer; provided, however, that the
aggregate amount of the Servicer Prepayment Interest Shortfall with respect to
any Interest Accrual Period shall not exceed the amount of the Servicing Fee
attributable to the Mortgage Loan being prepaid and the investment income
accruing on the related Principal Prepayment with respect to such Interest
Accrual Period.
"Servicer Remittance Date": With respect to any Distribution
Date, the Business Day preceding such Distribution Date.
"Servicer Remittance Report": A report prepared by the
Servicer and/or the Special Servicer in such media as may be agreed upon by the
Servicer, the Special Servicer and the Trustee containing such information
regarding the Mortgage Loans as will permit the Trustee to calculate the
amounts to be distributed pursuant to Section 4.01 and to furnish statements to
Certificateholders pursuant to Section 4.02, including information on the
outstanding principal balances of each Mortgage Loan specified therein, and
containing such additional information as the Servicer, the Special Servicer
and the Trustee may from time to time agree.
"Servicer's Appraisal Estimate": As defined in the definition
of Appraisal Reduction Amount.
"Servicing Compensation": With respect to any Distribution
Date, the related Servicing Fee and any other fees, charges or other amounts
payable to the Servicer on such Distribution Date.
"Servicing Fee": With respect to each Mortgage Loan and for
any Distribution Date, an amount per Interest Accrual Period equal to the
product of (i) one-twelfth of the Servicing Fee Rate and (ii) the Stated
Principal Balance of such Mortgage Loan as of the Due Date (after giving effect
to all payments of principal on such Mortgage Loan on such Due Date) in the
month preceding the month in which such Distribution Date occurs.
"Servicing Fee Rate": A rate equal to 0.04625% per annum.
"Servicing Officer": Any officer or employee of the Servicer
or the Special Servicer, as applicable, involved in, or responsible for, the
administration and servicing of the Mortgage Loans or this Agreement and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's or employee's knowledge of and familiarity
with the particular subject, and, in the case of any certification required to
be signed by a Servicing Officer, such an officer or employee whose name and
specimen signature appears on a list of servicing officers furnished to the
Trustee by the Servicer or the Special Servicer, as applicable, as such list
may from time to time be amended.
"Servicing Standard": With respect to the Servicer or Special
Servicer shall mean the servicing of the Mortgage Loans by the Servicer or
Special Servicer solely in the best interests of and for the benefit of all of
the Certificateholders (as determined by the Servicer or Special Servicer as
the case may be, in its reasonable judgment) and in accordance with applicable
law, the specific terms of the respective Mortgage Loans and this Agreement and
to the extent not inconsistent with the foregoing, in the same manner in which,
and with the same care, skill, prudence and diligence with which, it (i)
services and administers similar mortgage loans for other third-party
portfolios or (ii) administers mortgage loans for its own account, whichever
standard is higher, but in any case without regard to:
(i) any known relationship that the Servicer, the Special
Servicer, any subservicer or any Affiliate of the Servicer,
the Special Servicer or any subservicer may have with any
Borrower or any other parties to the Pooling and Servicing
Agreement;
(ii) the ownership of any Certificate by the Servicer, the
Special Servicer or any Affiliate of the Servicer or Special
Servicer, as applicable;
(iii) the Servicer's or Special Servicer's obligation to make
P&I Advances, Property Advances or to incur servicing
expenses with respect to the Mortgage Loans;
(iv) the Servicer's, Special Servicer's or any sub-servicer's
right to receive compensation for its services hereunder or
with respect to any particular transaction; or
(v) the ownership, or servicing or management for others, by
the Servicer, the Special Servicer or any sub-servicer, of
any other mortgage loans or properties.
"Similar Law": As defined in Section 5.02(k) hereof.
"Special Servicer": The Servicer, in such capacity, or any
successor Special Servicer appointed as provided in Section 3.25. In the event
that the Servicer is terminated or resigns as the Servicer hereunder, the
Servicer shall be terminated as the Special Servicer hereunder.
"Special Servicer Event of Default": As defined in Section
7.01(b).
"Special Servicing Compensation": With respect to any
Mortgage Loan, any of the Special Servicing Fee and Principal Recovery Fee
which shall be due to the Special Servicer.
"Special Servicing Fee": With respect to each Specially
Serviced Mortgage Loan and any Distribution Date, an amount per Special
Servicing Period equal to the product of (i) one-twelfth of the Special
Servicing Fee Rate and (ii) the Stated Principal Balance of such Specially
Serviced Mortgage Loan as of the Due Date (after giving effect to all payments
of principal on such Specially Serviced Mortgage Loan on such Due Date) in the
month preceding the month in which such Distribution Date occurs.
"Special Servicing Fee Rate": A rate equal to 0.50% per annum
(except that if the Special Servicer is, or is an Affiliate of, the Holder or
Holders of Certificates, representing greater than 50% of the Voting Rights of
the most subordinate Class of Certificates then outstanding, the Special
Servicer shall provide written notice thereof to the Servicer and the rate
shall equal 0.25% per annum).
"Special Servicing Period": Any Interest Accrual Period
during which a Mortgage Loan is at any time a Specially Serviced Mortgage Loan.
"Specially Serviced Mortgage Loan": Subject to Section 3.26,
any Mortgage Loan with respect to which:
(i) the related Borrower has not made two consecutive Monthly
Payments (and has not cured at least one such delinquency by
the next due date under the related Mortgage Loan);
(ii) the Servicer, the Trustee or the Fiscal Agent,
individually or collectively, have made four consecutive P&I
Advances (regardless of whether such P&I Advances have been
reimbursed);
(iii) the related Borrower has expressed to the Servicer an
inability to pay or a hardship in paying the Mortgage Loan in
accordance with its terms;
(iv) the Servicer has received notice that the Borrower has
become the subject of any bankruptcy, insolvency or similar
proceeding, admitted in writing the inability to pay its
debts as they come due or made an assignment for the benefit
of creditors;
(v) the Servicer has received notice of a foreclosure or
threatened foreclosure of any lien on the Mortgage Property
securing the Mortgage Loan;
(vi) a default of which (A) the Servicer has notice (other
than a failure by the Borrower to pay principal or interest)
and (B) which materially and adversely affects the interests
of the Certificateholders has occurred and remained
unremedied for the applicable grace period specified in the
Mortgage Loan (or, if no grace period is specified, 60 days);
provided, that a default requiring a Property Advance shall
be deemed to materially and adversely affect the interests of
the Certificateholders;
(vii) the Special Servicer proposes to commence foreclosure
or other workout arrangements;
(viii) the related Borrower has failed to make a Balloon
Payment as and when due; or
(ix) in the opinion of the Servicer (consistent with the
Servicing Standard) a default under a Mortgage Loan is
imminent and such Mortgage Loan deserves the attention of the
Special Servicer.
provided, however, that a Mortgage Loan will cease to be a Specially Serviced
Mortgage Loan:
(a) with respect to the circumstances described in
clause (i) or (ii) or (viii) above, when the
Borrower thereunder has brought the Mortgage Loan
current (or, with respect to the circumstances
described in clause (viii), pursuant to any work-out
implemented by the Special Servicer) and thereafter
made three consecutive full and timely Monthly
Payments (including pursuant to any workout of the
Mortgage Loan);
(b) with respect to the circumstances described in
clause (iii), (iv), (v) and (vii) above, when such
circumstances cease to exist in the good faith
judgment of the Servicer; or
(c) with respect to the circumstances described in
clause (vi) above, when such default is cured;
provided, further, that at that time no circumstance identified in clauses (i)
through (vii) above exists that would cause the Mortgage Loan to continue to be
characterized as a Specially Serviced Mortgage Loan.
"Spread Rate": The Spread Rate for each Class of Certificates
is as set forth below:
Class Spread Rate
Class A-CS1..................................... 2.5%
Class PS-1...................................... 2.1%
Class A-1A...................................... 0.44%
Class A-1B...................................... 0.56%
Class A-1C...................................... 0.59%
Class A-1D...................................... 0.66%
"Startup Day": The day designated as such pursuant to Section
2.06(a) hereof.
"Stated Principal Balance": With respect to any Mortgage
Loan, at any date of determination, an amount equal to (a) the principal
balance as of the Cut-off Date of such Mortgage Loan, minus (b) the sum of (i)
the principal portion of each Monthly Payment due on such Mortgage Loan after
the Cut-off Date up to such date of determination, if received from the
Borrower or advanced (including Subordinate Class Advance Amounts) by the
Servicer, Trustee, or Fiscal Agent, (ii) all voluntary and involuntary
principal prepayments and other unscheduled collections of principal received
with respect to such Mortgage Loan and (iii) any principal forgiven by the
Special Servicer or Interest Shortfalls resulting from reductions or deferrals
of interest resulting from modifications made pursuant to Section 3.30 hereof.
The Stated Principal Balance of a Mortgage Loan with respect to which title to
the related Mortgaged Property has been acquired by the Trust Fund is equal to
the principal balance thereof outstanding on the date on which such title is
acquired less any Net REO Proceeds allocated to principal on such Mortgage
Loan. The Stated Principal Balance of a Specially Serviced Mortgage Loan with
respect to which the Servicer or Special Servicer has made a Final Recovery
Determination is zero.
"Subordinate Class Advance Amount": As defined in Section
4.06(d).
"Successor Manager": As defined in Section 3.19(b) below.
"Tax Returns": The federal income tax return on IRS Form
1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return, including
Schedule Q thereto, Quarterly Notice to Residual Interest Holders of REMIC
Taxable Income or Net Loss Allocation, or any successor forms, to be filed on
behalf of each of the Upper-Tier REMIC or Lower-Tier REMIC under the REMIC
Provisions, together with any and all other information, reports or returns
that may be required to be furnished to the Certificateholders or filed with
the IRS or any other governmental taxing authority under any applicable
provisions of federal, state or local tax laws.
"Terminated Party": As defined in Section 7.01(c).
"Terminating Party": As defined in Section 7.01(c).
"Termination Date": The Distribution Date on which the Trust
Fund is terminated pursuant to Section 9.01.
"Transfer": Any direct or indirect transfer or other form of
assignment of any Ownership Interest in a Class R or Class LR Certificate.
"Transferee Affidavit": As defined in Section 5.02(l)(ii).
"Transferor Letter": As defined in Section 5.02(l)(ii).
"Trust Fund": The corpus of the trust created hereby and to
be administered hereunder, consisting of: (i) such Mortgage Loans as from time
to time are subject to this Agreement, together with the Mortgage Files
relating thereto; (ii) all scheduled or unscheduled payments on or collections
in respect of the Mortgage Loans due after the Cut-off Date; (iii) any REO
Property; (iv) all revenues received in respect of any REO Property; (v) the
Servicer's, the Special Servicer's and the Trustee's rights under the insurance
policies with respect to the Mortgage Loans required to be maintained pursuant
to this Agreement and any proceeds thereof; (vi) any Assignments of Leases,
Rents and Profits and any security agreements; (vii) any indemnities or
guaranties given as additional security for any Mortgage Loans; (viii) all
assets deposited in the Lock-Box Accounts, Cash Collateral Accounts, Escrow
Accounts and Reserve Accounts (to the extent such assets are not assets of the
respective Borrowers), the Collection Account, the Distribution Account, the
Upper-Tier Distribution Account, the Excess Interest Distribution Account,
Interest Reserve Account and the Default Interest Distribution Account,
including reinvestment income; (ix) any environmental indemnity agreements
relating to the Mortgaged Properties; (x) the rights and remedies under the
Mortgage Loan Purchase and Sale Agreement and Bloomfield Purchase Agreement;
and (xi) the proceeds of any of the foregoing (other than any interest earned
on deposits in the Lock-Box Accounts, Cash Collateral Accounts, Escrow Accounts
and any Reserve Accounts, to the extent such interest belongs to the related
Borrower).
"Trust REMICs": The Lower-Tier REMIC and the Upper-Tier
REMIC.
"Trustee": LaSalle National Bank, a nationally chartered
bank, in its capacity as trustee, or its successor in interest, or any
successor trustee appointed as herein provided.
"Trustee Fee": With respect to each Mortgage Loan and for any
Distribution Date, an amount per Interest Accrual Period equal to the product
of (i) one-twelfth of the Trustee Fee Rate multiplied by (ii) the Stated
Principal Balance of such Mortgage Loan as of the Due Date (after giving effect
to all payments of principal on such Mortgage Loan on such Due Date) in the
month preceding the month in which such Distribution Date occurs.
"Trustee Fee Rate": A rate equal to 0.00375% per annum.
"Underwriter": Bear, Stearns & Co. Inc. with respect to the
Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6
Certificates, and Nomura Securities International, Inc. with respect to all
Classes of Certificates.
"Unitholder": Any Certificateholder holding a beneficial
interest in the Classes of Certificates comprising the Units.
"Units": Units consisting of the Class B-1 Certificates, the
Class B-2 Certificates, the Class B-3 Certificates, the Class B-4 Certificates,
the Class B-5 Certificates and the Class B-6 Certificates, subject to any
separation as provided for in Section 5.01(j).
"Unscheduled Payments": With respect to a Mortgage Loan and a
Collection Period, all Net Liquidation Proceeds and Net Insurance Proceeds
payable under such Mortgage Loan, the Repurchase Price of any Mortgage Loan
that is repurchased or purchased pursuant to Sections 2.03(d), 2.03(e) or 9.01,
and any other payments under or with respect to such Mortgage Loan not
scheduled to be made, including Principal Prepayments received by the Servicer,
but excluding Prepayment Premiums, during such Collection Period.
"Updated Appraisal": An appraisal of a Mortgaged Property or
REO Property, as the case may be, conducted subsequent to any appraisal
performed on or prior to the Cut-off Date and in accordance with MAI standards,
the costs of which shall be paid as a Property Advance by the Servicer. Updated
Appraisals shall be conducted by an MAI appraiser selected by the Servicer
after consultation with the Special Servicer.
"Upper-Tier Distribution Account": The trust account or
accounts created and maintained as a separate trust account or accounts by the
Trustee pursuant to Section 3.05(c), which shall be entitled "LaSalle National
Bank, as Trustee, in trust for Holders of Asset Securitization Corporation,
Commercial Mortgage Pass-Through Certificates, Series 1997-D4, Upper-Tier
Distribution Account" and which must be an Eligible Account.
"Upper-Tier REMIC": A segregated asset pool within the Trust
Fund consisting of the Lower-Tier Regular Interests and amounts held from time
to time in the Upper-Tier Distribution Account.
"Voting Rights": The portion of the voting rights of all of
the Certificates that is allocated to any Certificate or Class of Certificates.
At all times during the term of this Agreement, the percentage of the Voting
Rights assigned to each Class shall be (a) 0%, in the case of the Class V-1,
Class V-2, Class R and Class LR Certificates, (b) 0.09% in the case of the
Class A-CS1 Certificates, 3.58% in the case of the Class PS-1 Certificates (the
sum of such percentages for each such Class outstanding is the "Fixed Voting
Rights Percentage"); provided that the Voting Rights of (i) the Class ACS-1
Certificates will be reduced to zero upon the reduction of the Notional Balance
of such class to zero, and (ii) the Class PS-1 Certificates will be reduced to
zero on the Distribution Date on which none of the A-1B, Class A-1C, Class
A-1D, Class A-1E, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and
Class B-6 Certificates are outstanding, (c) in the case of any of the Class
A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-1E, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class B-1, Class B-2,
Class B-3, Class B-4, Class B-5, Class B-6, Class B-7, and Class B-7H
Certificates, a percentage equal to the product of (i) 100% minus the Fixed
Voting Rights Percentage multiplied by (ii) a fraction, the numerator of which
is equal to the aggregate outstanding Certificate Balance of any such Class and
the denominator of which is equal to the aggregate outstanding Certificate
Balances of all Classes of Certificates. The Class A-CS1 and Class PS-1
Certificates shall not be entitled to vote with respect to proposed extensions
of a Specially Serviced Mortgage Loan. The Voting Rights of any Class of
Certificates shall be allocated among Holders of Certificates of such Class in
proportion to their respective Percentage Interests. The aggregate Voting
Rights of Holders of more than one Class of Certificates shall be equal to the
sum of the products of each such Holder's Voting Rights and the percentage of
Voting Rights allocated to the related Class of Certificates. Any
Certificateholder may transfer its Voting Rights without transferring its
ownership interest in the related Certificates provided that such
Certificateholder provides notice of such transfer to the Trustee prior to the
effectiveness of such transfer. The Fixed Voting Right Percentage of the Class
A-CS1 and Class PS-1 Certificates will be proportionally reduced upon the
allocation of Appraisal Reduction Amounts with respect to any component of such
Classes based on the amount of such reduction.
"Watch List": A report substantially containing the content
described in Exhibit I-6 attached hereto, setting forth, among other things,
any Mortgage Loan that is in jeopardy of becoming a Specially Serviced Mortgage
Loan.
"Weighted Average Net Mortgage Pass-Through Rate": With
respect to any Distribution Date, a per annum rate equal to the fraction
(expressed as a percentage) the numerator of which is the sum of the products
of (i) the Net Mortgage Pass-Through Rate of each Mortgage Loan and (ii) the
Stated Principal Balance of each Mortgage Loan and the denominator of which is
the sum of the Stated Principal Balances of each Mortgage Loan, as of the Due
Date occurring in the month preceding the month in which such Distribution Date
occurs.
"Weighted Average Pass-Through Rate": With respect to any
Interest Accrual Period, a fraction (expressed as a percentage), the numerator
of which is the sum of (i) the sum of the products of (A) the Pass-Through Rate
with respect to each class of Certificates having a Pass-Through Rate (other
than the Class PS-1 and Class A-CS1 Certificates) and (B) the Certificate
Balance of such Class as of the first day of such Interest Accrual Period and
(ii) the product of (A) the Pass-Through Rate on the Class A-CS1 Certificates
and (B) the Notional Balance of such class as of such date and the denominator
of which is the sum of the Certificate Balances of each class included in
clause (i)(A) above as of such date (provided in the case of clauses (i) and
(ii), any reductions in Certificate Balance as a result of distributions or
allocations of Realized Losses to such class, respectively, occurring in an
Interest Accrual Period shall be deemed to have been made on the first day of
such Interest Accrual Period).
"Withheld Amounts": As defined in Section 3.27(a).
SECTION 1.02. Certain Calculations.
Unless otherwise specified herein, the following provisions
shall apply:
(a) All calculations of interest with respect to the Mortgage
Loans (other than the Actual/360 Mortgage Loans) and of Advances provided for
herein shall be made on the basis of a 360-day year consisting of twelve 30-day
months. All calculations of interest with respect to the Actual/360 Mortgage
Loans and of Advances provided for herein shall be made as set forth in such
Mortgage Loans with respect to the calculation of the related Mortgage Rate.
(b) Any Mortgage Loan payment is deemed to be received on the
date such payment is actually received by the Servicer, or the Trustee;
provided, however, that for purposes of calculating distributions on the
Certificates, Principal Prepayments with respect to any Mortgage Loan are
deemed to be received on the date they are applied in accordance with Section
3.01(b) to reduce the outstanding principal balance of such Mortgage Loan on
which interest accrues.
(c) Any amounts received in respect of a Mortgage Loan as to
which a default has occurred and is continuing in excess of Monthly Payments
shall be applied to Default Interest and other amounts due on such Mortgage
Loan prior to the application to late fees.
SECTION 1.03. Certain Constructions.
For purposes of the definitions of "Minimum Defaulted Monthly
Payment", "Special Servicing Fee", Section 3.19, Section 3.12, Section 3.25,
Section 3.30 and Section 4.06(d), references to the most or next most
subordinate Class of Certificates (or Lower-Tier Regular Interests) outstanding
at any time shall mean the most or next most subordinate Class of Certificates
(or Lower-Tier Regular Interests) then outstanding as among the Class A-1A,
Class A-1B, Class A-1C, Class A-1D, Class A-CS1, Class PS-1, Class A-1E, Class
A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class
B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7 and Class
B-7H Certificates (and the Classes of Related Lower-Tier Regular Interests).
For such purposes, the Class B-7 and Class B-7H Certificates (and the Classes
of Related Lower-Tier Regular Interests) together shall be considered to be one
Class and the Class A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-CS1 and
Class PS-1 Certificates (and the Classes of Related Lower-Tier Regular
Interests) collectively shall be considered to be one Class. For purposes of
this Agreement, each Class of Certificates other than the Class V-1, Class V-2,
Class LR and Class R Certificates shall be deemed to be outstanding only to the
extent its respective Certificate Balance has not been reduced to zero. For
purposes of this Agreement, the Class V-1 Certificates shall be deemed to be
outstanding so long as there are any Notes outstanding, the Class V-2
Certificates shall be deemed outstanding so long as there are any Notes
outstanding that provide for the payment of Excess Interest, the Class B-7H
Certificates and the Class B-7H-L Interest shall be deemed to be outstanding so
long as there are any Notes outstanding that provide for payments of Prepayment
Premiums in connection with voluntary or involuntary prepayments and the Class
R and Class LR Certificates shall be deemed to be outstanding so long as the
Trust Fund has not been terminated pursuant to Section 9.01. For purposes of
this Agreement, the Class A-CS1 and Class PS-1 Certificates shall be deemed to
be outstanding until their respective Notional Balances have been reduced to
zero.
<PAGE>
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Conveyance of Mortgage Loans;
Assignment of Mortgage Loan Purchase
and Sale Agreement.
The Depositor, concurrently with the execution and delivery
hereof, does hereby sell, transfer, assign, set over and otherwise convey to
the Trustee without recourse (except to the extent herein provided) all the
right, title and interest of the Depositor in and to the Mortgage Loans,
including all rights to payment in respect thereof, except as set forth below,
and any security interest thereunder (whether in real or personal property and
whether tangible or intangible) in favor of the Depositor, and all Reserve
Accounts, Lock-Box Accounts, Cash Collateral Accounts and all other assets
included or to be included in the Trust Fund for the benefit of the
Certificateholders. Such transfer and assignment includes all interest and
principal due on or with respect to the Mortgage Loans after the Cut-off Date.
In connection with such transfer and assignment, the Depositor shall make a
cash deposit to the Collection Account in an amount equal to the Cash Deposit.
The Depositor, concurrently with execution and delivery hereof, does also
hereby transfer, assign, set over and otherwise convey to the Trustee without
recourse (except to the extent provided herein) all the right, title and
interest of the Depositor in, to and under the Mortgage Loan Purchase and Sale
Agreement and, in, to and under each Bloomfield Purchase Agreement as assignee
of the Mortgage Loan Seller's rights thereunder to the extent related to any
Mortgage Loan. The Servicer, Special Servicer or the Trustee shall notify the
Mortgage Loan Seller and the Depositor upon such party's becoming aware of any
breach of the representations and warranties contained in this Agreement or the
Mortgage Loan Purchase and Sale Agreement that gives rise to a cure or
repurchase obligation; provided, that the failure of the Servicer, the Special
Servicer or Trustee to give such notification shall not constitute a waiver of
any cure or repurchase obligation. The Depositor shall cause the Reserve
Accounts, Cash Collateral Accounts and Lock-Box Accounts to be transferred to
and held in the name of the Servicer on behalf of the Trustee as successor to
the Mortgage Loan Seller and the Originators.
In connection with such transfer and assignment, the
Depositor does hereby deliver to, and deposit with, the Custodian (on behalf of
the Trustee), with copies to the Servicer and the Special Servicer, the
following documents or instruments with respect to each Mortgage Loan so
assigned (provided, however, the documents specified in item (ix) shall be
delivered only to the Servicer):
(i) the original of the Note, endorsed without recourse to
the order of the Trustee in the following form: "Pay to the
order of LaSalle National Bank, as Trustee, without
recourse", or in blank, which Note and all endorsements
thereon shall, unless the Mortgage Loan was originated by the
Mortgage Loan Seller (as indicated on the Mortgage Loan
Schedule), show a complete chain of endorsement from the
Originator to the Trustee;
(ii) the original recorded Mortgage or counterpart thereof
showing the Originator as mortgagee or, if any such original
Mortgage has not been returned from the applicable public
recording office, a copy thereof certified to be a true and
complete copy of the original thereof submitted for
recording;
(iii) an executed Assignment of Mortgage in suitable form for
recordation in the jurisdiction in which the Mortgaged
Property is located to "LaSalle National Bank, as Trustee,
without recourse";
(iv) if the related security agreement is separate from the
Mortgage, the original executed version or counterpart
thereof of such security agreement and the assignment thereof
to Trustee;
(v) a copy of the UCC-1 financing statement, together with an
original executed UCC-2 or UCC-3 financing statement, in a
form suitable for filing, disclosing the assignment to the
Trustee of the security interest in the personal property (if
any) constituting security for repayment of the Mortgage
Loan;
(vi) the original of the Loan Agreement or counterpart
thereof relating to such Mortgage Loan, if any;
(vii) the original lender's title insurance policy (or the
original pro forma title insurance policy), together with any
endorsements thereto;
(viii) if any related Assignment of Leases, Rents and Profits
is separate from the Mortgage, the original executed version
or counterpart thereof, together with an executed
reassignment of such instrument to the Trustee (a
"Reassignment of Assignment of Leases, Rents and Profits") in
suitable form for recordation in the jurisdiction in which
the Mortgaged Property is located (which reassignment,
however, may be included in the Assignment of Mortgage and
need not be a separate instrument);
(ix) copies of the original Environmental Reports of the
Mortgaged Properties made in connection with origination of
the Mortgage Loans, if any;
(x) copies of the original Management Agreements, if any, for
the Mortgaged Property;
(xi) a copy of the related ground lease, as amended, for the
Mortgaged Property, if any;
(xii) if the related assignment of contracts is separate from
the Mortgage, the original executed version of such
assignment of contracts and the assignment thereof to the
Trustee;
(xiii) if any related Lock-Box Agreement or Cash Collateral
Agreement is separate from the Mortgage or Loan Agreement, a
copy thereof; with respect to the Reserve Accounts, Cash
Collateral Accounts and Lock-Box Accounts, if any, a copy of
the UCC-1 financing statements, if any, submitted for filing
with respect to the Mortgage Loan Seller's security interest
in the Reserve Accounts, Cash Collateral Accounts and
Lock-Box Accounts and all funds contained therein (and UCC-3
financing statements assigning such security interest to the
Trustee on behalf of the Certificateholders);
(xiv) any and all amendments, modifications and supplements
to, and waivers related to, any of the foregoing; and
(xv) any other written agreements related to the Mortgage
Loan.
On or promptly following the Closing Date, the Servicer
shall, to the extent possession thereof has been delivered to it, at the
expense of the Depositor, (1) record, (a) each Assignment of Mortgage referred
to in Section 2.01(iii) which has not yet been submitted for recording and (b)
each Reassignment of Assignment of Leases, Rents and Profits referred to in
Section 2.01(viii) (if not otherwise included in the related Assignment of
Mortgage) which has not yet been submitted for recordation; and (2) file, each
UCC-2 or UCC-3 financing statement referred to in Section 2.01(v) or (xiii)
which has not yet been submitted for filing. The Servicer shall upon delivery
promptly submit (and in no event later than five Business Days following the
receipt of the related documents in the case of clause 1(a) above and 60 days
following the Closing Date in the case of clauses 1(b) and 2 above) for
recording or filing, as the case may be, in the appropriate public recording
office, each such document. In the event that any such document is lost or
returned unrecorded because of a defect therein, the Servicer, at the expense
of the Depositor, shall use its best efforts to promptly prepare a substitute
document for signature by the Depositor, and thereafter the Servicer shall
cause each such document to be duly recorded. The Servicer shall, promptly upon
receipt of the original recorded copy (and in no event later than five Business
Days following such receipt) deliver such original to the Custodian.
Notwithstanding anything to the contrary contained in this Section 2.01, in
those instances where the public recording office retains the original
Mortgage, Assignment of Mortgage or Reassignment of Assignment of Leases, Rents
and Profits, if applicable, after any has been recorded, the obligations
hereunder of the Depositor shall be deemed to have been satisfied upon delivery
to the Custodian of a copy of such Mortgage, Assignment of Mortgage or
Reassignment of Assignment of Leases, Rents and Profits, if applicable,
certified by the public recording office to be a true and complete copy of the
recorded original thereof. If a pro forma title insurance policy has been
delivered to the Custodian in lieu of an original title insurance policy, the
Depositor will promptly deliver to the Custodian the related original title
insurance policy upon receipt thereof. The Depositor shall promptly cause the
UCC-1's referred to in Section 2.01(v) to be filed in the applicable public
recording office and upon filing will promptly deliver to the Custodian the
related UCC-1, with evidence of filing thereon. The Depositor shall reimburse
the Servicer for all out-of-pocket expenses incurred and filing fees paid by
the Servicer in connection with its obligations under this paragraph. Copies of
recorded or filed Assignments, Reassignments, UCC-1's and UCC-3's shall be
delivered to the Trustee by the Depositor or Servicer, as applicable.
All original documents relating to the Mortgage Loans which
are not delivered to the Custodian are and shall be held by the Depositor, the
Trustee or the Servicer, as the case may be, in trust for the benefit of the
Certificateholders. In the event that any such original document is required
pursuant to the terms of this Section to be a part of a Mortgage File, such
document shall be delivered promptly to the Custodian.
SECTION 2.02. Acceptance by Custodian and the Trustee.
If the Depositor cannot deliver any original or certified
recorded document described in Section 2.01 on the Closing Date, the Depositor
shall use its best efforts, promptly upon receipt thereof and in any case not
later than 45 days from the Closing Date, to deliver such original or certified
recorded documents to the Custodian (unless the Depositor is delayed in making
such delivery by reason of the fact that such documents shall not have been
returned by the appropriate recording office in which case it shall notify the
Custodian and the Trustee in writing of such delay and shall deliver such
documents to the Custodian promptly upon the Depositor's receipt thereof). By
its execution and delivery of this Agreement, the Trustee acknowledges the
assignment to it of the Mortgage Loans in good faith without notice of adverse
claims and declares that the Custodian holds and will hold such documents and
all others delivered to it constituting the Mortgage File (to the extent the
documents constituting the Mortgage File are actually delivered to the
Custodian) for any Mortgage Loan assigned to the Trustee hereunder in trust,
upon the conditions herein set forth, for the use and benefit of all present
and future Certificateholders. With the exception of any Notes listed by the
Trustee on an exception report and delivered to the Depositor on the Closing
Date, the Trustee hereby acknowledges the receipt of the Notes. The Trustee
agrees to review each Mortgage File within 45 days after the later of (a) the
Trustee's receipt of such Mortgage File or (b) execution and delivery of this
Agreement, to ascertain that all documents (other than documents referred to in
clause (ix) of Section 2.01 which shall be delivered to the Servicer) referred
to in Section 2.01 above (in the case of the documents referred to in Section
2.01(iv), (v), (vi), (vii) (in the case of any endorsement thereto), (viii) and
(x) through (xv), as identified to it in writing by the Depositor) and any
original recorded documents referred to in the first sentence of this Section
included in the delivery of a Mortgage File have been received, have been
executed, appear to be what they purport to be, purport to be recorded or filed
(as applicable) and have not been torn, mutilated or otherwise defaced, and
that such documents relate to the Mortgage Loans identified in the Mortgage
Loan Schedule. In so doing, the Trustee may rely on the purported due execution
and genuineness of any such document and on the purported genuineness of any
signature thereon. If at the conclusion of such review any document or
documents constituting a part of a Mortgage File have not been executed or
received, have not been recorded or filed (if required), are unrelated to the
Mortgage Loans identified in the Mortgage Loan Schedule, appear not to be what
they purport to be or have been torn, mutilated or otherwise defaced, the
Trustee shall promptly so notify the Depositor and the Mortgage Loan Seller by
providing a written report, setting forth for each affected Mortgage Loan, with
particularity, the nature of the defective or missing document. The Depositor
shall, or shall cause the Mortgage Loan Seller to, deliver an executed,
recorded or undamaged document, as applicable, or, if the failure to deliver
such document in such form has a material adverse effect on the security
provided by the related Mortgaged Property, the Depositor shall, or shall cause
the Mortgage Loan Seller to, repurchase the related Mortgage Loan in the manner
provided in Section 2.03. None of the Servicer, the Special Servicer and
Trustee shall be responsible for any loss, cost, damage or expense to the Trust
Fund resulting from any failure to receive any document constituting a portion
of a Mortgage File noted on such a report or for any failure by the Depositor
to use its best efforts to deliver any such document.
In reviewing any Mortgage File pursuant to the preceding
paragraph or Section 2.01, the Servicer shall have no responsibility to cause
the Trustee to, and the Trustee will have no responsibility to, determine
whether any document or opinion is legal, valid, binding or enforceable,
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, whether a blanket assignment is
permitted in any applicable jurisdiction, or whether any Person executing any
document or rendering any opinion is authorized to do so or whether any
signature thereon is genuine.
The Trustee shall hold that portion of the Trust Fund
delivered to the Trustee consisting of "instruments" (as such term is defined
in Section 9-105(i) of the Uniform Commercial Code as in effect in Illinois on
the date hereof) in Illinois and, except as otherwise specifically provided in
this Agreement, shall not remove such instruments from Illinois, as applicable,
unless it receives an Opinion of Counsel (obtained and delivered at the expense
of the Person requesting the removal of such instruments from Illinois) that in
the event the transfer of the Mortgage Loans to the Trustee is deemed not to be
a sale, after such removal, the Trustee will possess a first priority perfected
security interest in such instruments.
SECTION 2.03. Representations and Warranties
of the Depositor.
(a) The Depositor hereby represents and warrants that:
(i) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware;
(ii) The Depositor has taken all necessary action to
authorize the execution, delivery and performance of this
Agreement by it, and has the power and authority to execute,
deliver and perform this Agreement and all the transactions
contemplated hereby, including, but not limited to, the power
and authority to sell, assign and transfer the Mortgage Loans
in accordance with this Agreement;
(iii) This Agreement has been duly and validly authorized,
executed and delivered by the Depositor and assuming the due
authorization, execution and delivery of this Agreement by
each other party hereto, this Agreement and all of the
obligations of the Depositor hereunder are the legal, valid
and binding obligations of the Depositor, enforceable in
accordance with the terms of this Agreement, except as such
enforcement may be limited by bankruptcy, insolvency,
reorganization, liquidation, receivership, moratorium or
other laws relating to or affecting creditors' rights
generally, or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law);
(iv) The execution and delivery of this Agreement and the
performance of its obligations hereunder by the Depositor
will not conflict with any provision of its certificate of
incorporation or bylaws, or any law or regulation to which
the Depositor is subject, or conflict with, result in a
breach of or constitute a default under (or an event which
with notice or lapse of time or both would constitute a
default under) any of the terms, conditions or provisions of
any agreement or instrument to which the Depositor is a party
or by which it is bound, or any order or decree applicable to
the Depositor, or result in the creation or imposition of any
lien on any of the Depositor's assets or property, which
would materially and adversely affect the ability of the
Depositor to carry out the transactions contemplated by this
Agreement. The Depositor has obtained any consent, approval,
authorization or order of any court or governmental agency or
body required for the execution, delivery and performance by
the Depositor of this Agreement;
(v) The certificate of incorporation of the Depositor
provides that the Depositor is permitted to engage in only
the following activities:
(A) to acquire, own, hold, sell, transfer, assign,
pledge, finance, refinance and otherwise deal with (I)
loans secured by first or second mortgages, deeds of
trust or similar liens on residential, including
single-family and multi-family, commercial or mixed
commercial and residential properties, shares issued by
private non-profit housing corporations, or manufactured
housing contracts, (II) any participation interest in,
security (in bond or pass-through form) or funding
agreement based on, backed or collateralized by,
directly or indirectly, any of the foregoing (the loans
described in clause (A)(I) and the participation
interests, securities and funding agreements described
in clause (A)(II), collectively, "Mortgage Loans"),
(III) receivables and loan obligations, whether secured
or unsecured, including, but not limited to, retail
automotive, truck or manufactured housing installment
sale contracts or loans or automotive, truck or
manufactured housing leases, consumer or commercial
loans or leases, credit card accounts, accounts
receivable, corporate receivables, trade receivables,
trade bills, boat and recreational vehicle loans,
computer or other equipment loans or leases, mobile home
loans and pads, construction equipment, dealer and floor
plan financing notes, insurance policy loans, medical
and health care receivables, municipal and other
governmental leases, short-term notes secured by a lien
on a small business or all or part of its assets, and
loans to lesser-developed countries, (IV) any
participation interest in, security (in bond or
pass-through form) or funding agreement based on, backed
or collateralized by, directly or indirectly, any of the
foregoing (the receivables and loans described in clause
(A)(III) and the participation interests, securities and
funding agreements described in clause (A)(IV),
collectively, "Receivables");
(B) to authorize and issue one or more series (each, a
"Pass-Through Series") of pass-through securities
("Certificates") pursuant to pooling and servicing
agreements (each, a "Pooling and Servicing Agreement"),
each of which Pass-Through Series (I) represents an
ownership interest in Mortgage Loans or Receivables,
related property and/or collections in respect thereof
and (II) may be structured to contain one or more
classes of Certificates, each class having the
characteristics specified in the related Pooling and
Servicing Agreement, and to acquire, own, hold, sell,
transfer, assign, pledge, finance or refinance one or
more Certificates or classes of Certificates of any
Pass-Through Series;
(C) to establish one or more trusts ("Trusts") to issue,
acquire, own, and hold one or more series (each, a "Bond
Series") of debt obligations ("Bonds"), each issued
pursuant to an indenture ("Indenture"), each of which
bond series (I) is collateralized by Mortgage Loans,
receivables and any supplemental collateral (the
"Supplemental Collateral"; Mortgage Loans, Receivables
and Supplemental Collateral, collectively, the
"Collateral") and/or related property and/or collections
in respect thereof and (II) may be structured to contain
one or more classes of Bonds, each class having the
characteristics specified in the related Indenture, and
to acquire, own, hold, sell, transfer, assign, pledge,
finance or refinance one or more Bonds or classes of
Bonds of any Bond Series; provided, however, that the
Bonds of any Bond Series have been rated in one of the
two highest rating categories by one or more nationally
recognized statistical rating agencies and, provided
further, that the Bonds of any Bond Series other than
the initial Bond Series issued by a Trust have been
rated in the same or a higher rating category by the
nationally recognized statistical rating agency or
agencies that rated the initial Bond Series issued by
such Trust;
(D) to issue, acquire, assume, own, hold, sell,
transfer, assign, pledge and finance indebtedness that
(I) is subordinated to the Bonds; (II) is nonrecourse to
the Depositor and the related Trust other than to cash
flow on the Collateral securing a Bond Series issued by
the related Trust in excess of amounts necessary to pay
holders of Bonds ("Bondholders") of such Bond Series;
(III) does not constitute a claim against the Depositor
to the extent that funds are insufficient to pay such
indebtedness; and (IV) does not result in a lowering or
withdrawal of the rating or ratings then assigned to the
Bonds of any Bond Series issued by the Trust issuing
such subordinated indebtedness, as confirmed in writing
by the nationally recognized statistical rating agency
or agencies rating such Bond Series;
(E) (I) to establish one or more Trusts to engage in any
one or more of the activities described in (A) and (D)
above, each of which Trusts and any Trust formed to
engage in one or more of the activities described in (C)
above may deliver to the Depositor Certificates ("Trust
Certificates") representing the ownership interest in
the assets of such Trust, (II) to acquire, own, hold,
sell, transfer, assign, pledge, finance, and otherwise
deal with any or all of the Trust Certificates in any
Trust that it establishes and (III) to act as settlor or
depositor of such Trusts and to invest in or sell Trust
Certificates; and
(F) to engage in any other acts and activities and to
exercise any powers permitted to corporations under the
laws of the State of Delaware which are incidental to,
or connected with, the foregoing, and necessary,
suitable or convenient to accomplish any of the
foregoing;
Capitalized terms defined in this clause (v) shall apply only
to such clause.
(vi) There is no action, suit or proceeding pending against
the Depositor in any court or by or before any other
governmental agency or instrumentality which would materially
and adversely affect the ability of the Depositor to carry
out its obligations under this Agreement; and
(vii) The Trustee, if not the owner of the related Mortgage
Loan, will have a valid and perfected security interest of
first priority in each of the Mortgage Loans and any proceeds
thereof.
(b) The Depositor hereby represents and warrants
with respect to each Mortgage Loan that:
(i) Immediately prior to the transfer and assignment to the
Trustee, the Note and the Mortgage were not subject to an
assignment or pledge, and the Depositor had good title to,
and was the sole owner of, the Mortgage Loan and had full
right to transfer and sell the Mortgage Loan to the Trustee
free and clear of any encumbrance, equity, lien, pledge,
charge, claim or security interest;
(ii) The Depositor is transferring such Mortgage Loan free
and clear of any and all liens, pledges, charges or security
interests of any nature encumbering such Mortgage Loan;
(iii) The related Assignment of Mortgage constitutes the
legal, valid and binding assignment of such Mortgage from the
Depositor to the Trustee, and any related Reassignment of
Assignment of Leases, Rents and Profits constitutes the
legal, valid and binding assignment from the Depositor to the
Trustee;
(iv) No claims have been made by the Depositor under the
lender's title insurance policy, and the Depositor has not
done, by act or omission, anything which would impair the
coverage of such lender's title insurance policy;
(v) All of the representations and warranties of the Mortgage
Loan Seller contained in the Mortgage Loan Purchase and Sale
Agreement are true and correct as of the Cut-off Date;
(vi) (1) Such Mortgage Loan is directly secured by a Mortgage
on Real Property, and (2) either (i) substantially all of the
proceeds of such Mortgage Loan were used to acquire or
improve or protect an interest in real property that, at the
origination date, was the only security for the Mortgage Loan
(in the case of a Mortgage Loan that has not been modified in
a manner that constituted a deemed exchange under Section
1001 of the Code at a time when the Mortgage Loan was not in
default or default with respect thereto was not reasonably
foreseeable) or (ii) the fair market value of such real
property was at least equal to 80% of the principal amount of
the Mortgage Loan (a) at origination (or, if the Mortgage
Loan has been modified in a manner that constituted a deemed
exchange under Section 1001 of the Code at a time when the
Mortgage Loan was not in default or default with respect
thereto was not reasonably foreseeable, the date of the last
such modification) or (b) at the Closing Date; provided that
for purposes of this clause (ii) the fair market value of the
real property interest must first be reduced by (A) the
amount of any lien on the real property interest that is
senior to the Mortgage Loan (unless such senior lien also
secures a Mortgage Loan, in which event the computation
described in (a) and (b) of this clause (ii) shall be made on
an aggregate basis) and (B) a proportionate amount of any
lien that is in parity with the Mortgage Loan (unless such
other lien secures a Mortgage Loan that is
cross-collateralized with such Mortgage Loan, in which event
the computation described in (a) and (b) of this clause (ii)
shall be made on an aggregate basis); and
(vii) The information set forth with respect to such Mortgage
Loan on the Mortgage Loan Schedule is true and correct in all
material respects as of the dates respecting which such
information is given, or if no date is specified, as of the
Cut-off Date.
(c) It is understood and agreed that the representations and
warranties set forth in this Section 2.03 shall survive delivery of the
respective Mortgage Files to the Trustee until the termination of this
Agreement, and shall inure to the benefit of the Certificateholders and the
Servicer.
(d) Upon discovery by the Custodian, the Servicer, the
Special Servicer or the Trustee of a breach of the representation and warranty
set forth in Section 2.03(b)(vi) or that any Mortgage Loan otherwise fails to
constitute a Qualified Mortgage, such Person shall give prompt notice thereof
to the Depositor and the Depositor shall correct such condition or repurchase
or cause the Mortgage Loan Seller to repurchase such Mortgage Loan at the
Repurchase Price within 90 days of discovery of such failure; it being
understood and agreed that none of such Persons has an obligation to conduct
any investigation with respect to such matters. It is understood and agreed
that the obligations of the Depositor set forth in this Section 2.03(d) to cure
or repurchase a Mortgage Loan which fails to constitute a Qualified Mortgage
shall be the sole remedies available to the Trustee against the Depositor
respecting, a breach of a representation or warranty set forth in Section
2.03(b)(vi).
(e) Upon discovery by the Custodian, the Servicer, the
Special Servicer or the Trustee of a breach of any representation or warranty
of the Mortgage Loan Seller in the Mortgage Loan Purchase and Sale Agreement
with respect to any Mortgage Loan, or that any document required to be included
in the Mortgage File does not conform to the requirements of Section 2.01, such
Person shall give prompt notice thereof to the Mortgage Loan Seller and the
Mortgage Loan Seller shall, to the extent the Mortgage Loan Seller is obligated
to cure or repurchase the related Mortgage Loan under the terms of the Mortgage
Loan Purchase and Sale Agreement, either cure such breach or repurchase said
Mortgage Loan at the Repurchase Price within 90 days of the receipt of notice
of the breach as provided in the Mortgage Loan Purchase and Sale Agreement; it
being understood and agreed that none of the Custodian, the Servicer, the
Special Servicer, and the Trustee has an obligation to conduct any
investigation with respect to such matters (except, in the case of the Mortgage
Files, to the extent provided in Section 2.01); provided, however, that in the
event that such breach is capable of being cured as determined by the Servicer
or the Special Servicer, as applicable, but not within such 90 day period and
the Mortgage Loan Seller has commenced and is diligently proceeding with the
cure of such breach within such 90 day period (other than a breach that is also
a breach of Section 2.03(b)(vi) or 2.03(d)), the Mortgage Loan Seller shall
have an additional 90 days to complete such cure; provided, further, that with
respect to such additional 90 day period the Mortgage Loan Seller shall have
delivered an officer's certificate to the Trustee and the Servicer setting
forth the reason such breach is not capable of being cured within the initial
90 day period and what actions the Mortgage Loan Seller is pursuing in
connection with the cure thereof and stating that the Mortgage Loan Seller
anticipates that such breach will be cured within the additional 90 day period;
and, provided, further, that in the event the Mortgage Loan Seller fails to
cure such breach within such additional 90-day period, the Repurchase Price
shall include interest on any Advances made in respect of the related Mortgage
Loan during such period.
(f) Upon receipt by the Servicer from the Depositor or
Mortgage Loan Seller of the Repurchase Price for the repurchased Mortgage Loan,
the Servicer shall deposit such amount in the Collection Account, and the
Trustee, pursuant to Section 3.11, shall, upon receipt of a certificate of a
Servicing Officer certifying as to the receipt by the Servicer of the
Repurchase Price and the deposit of the Repurchase Price into the Collection
Account pursuant to this Section 2.03(f), release or cause to be released to
the Depositor or the Mortgage Loan Seller the related Mortgage File and shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, representation or warranty, as shall be prepared by the
Servicer to vest in the Depositor or the Mortgage Loan Seller any Mortgage Loan
released pursuant hereto, and any rights of the Depositor in, to and under the
Mortgage Loan Purchase and Sale Agreement as it related to such Mortgage Loan
that was initially transferred to the Trust Fund under Section 2.01, and if
applicable any rights of the Mortgage Loan Seller or Depositor in, to and under
the related Bloomfield Purchase Agreement as it related to such Mortgage Loan
that were initially transferred to the Trust Fund under Section 2.01, and the
Trustee and the Servicer shall have no further responsibility with regard to
such Mortgage File.
(g) In the event that the Mortgage Loan Seller incurs any
expense in connection with curing a breach of a representation or warranty
pursuant to Section 2.03(e) which also constitutes a default under the related
Mortgage Loan, the Mortgage Loan Seller shall have a right, subrogated to that
of the Trustee, as successor to the mortgagee, to recover the amount of such
expenses from the related Borrower. The Servicer shall use reasonable efforts
in recovering, or assisting the Mortgage Loan Seller in recovering, from the
related Borrower the amount of any such expenses.
(h) In the event that any litigation is commenced which
alleges facts which, in the judgment of the Depositor, could constitute a
breach of any of the Depositor's representations and warranties relating to the
Mortgage Loans, the Depositor hereby reserves the right to conduct the defense
of such litigation at its expense.
(i) If for any reason the Mortgage Loan Seller or the
Depositor fails to fulfill its obligations under this Section 2.03 with respect
to any Mortgage Loan, the Servicer shall use reasonable efforts in enforcing
any obligation of the Originator to cure or repurchase such Mortgage Loan under
the terms of the related Bloomfield Purchase Agreement.
SECTION 2.04. Representations, Warranties and Covenants
of the Servicer, Special Servicer and
Trustee
(a) The Servicer, as Servicer, and if it is also the Special
Servicer, as the Special Servicer, hereby represents, warrants and covenants
that as of the Closing Date or as of such date specifically provided herein:
(i) The Servicer is a corporation, duly organized, validly
existing and in good standing under the laws of the State of
Texas and has all licenses necessary to carry on its business
as now being conducted or is in compliance with the laws of
each state in which any Mortgaged Property is located to the
extent necessary to comply with its duties and
responsibilities hereunder with respect to each Mortgage Loan
in accordance with the terms of this Agreement;
(ii) The Servicer has the full corporate power, authority and
legal right to execute and deliver this Agreement and to
perform in accordance herewith; the execution and delivery of
this Agreement by the Servicer and its performance and
compliance with the terms of this Agreement will not violate
the Servicer's charter or by-laws or constitute a default (or
an event which, with notice or lapse of time, or both, would
constitute a default) under, or result in the breach of, any
material contract, agreement or other instrument to which the
Servicer is a party or which may be applicable to the
Servicer or any of its assets;
(iii) This Agreement has been duly and validly authorized,
executed and delivered by the Servicer and, assuming due
authorization, execution and delivery by the other parties
hereto, constitutes a legal, valid and binding obligation of
the Servicer, enforceable against it in accordance with the
terms of this Agreement, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization,
liquidation, receivership, moratorium or other laws relating
to or affecting creditors' rights generally, or by general
principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law), and all requisite corporate action has been taken by
the Servicer to make this Agreement and all agreements
contemplated hereby valid and binding upon the Servicer in
accordance with their terms;
(iv) The Servicer is not in violation of, and the execution
and delivery of this Agreement by the Servicer and its
performance and compliance with the terms of this Agreement
will not constitute a violation with respect to, any order or
decree of any court binding on the Servicer or any order or
regulation of any federal, state, municipal or governmental
agency having jurisdiction, or result in the creation or
imposition of any lien, charge or encumbrance which, in any
such event, would have consequences that would materially and
adversely affect the condition (financial or otherwise) or
operation of the Servicer or its properties or impair the
ability of the Trust Fund to realize on the Mortgage Loans;
(v) There is no action, suit, proceeding or investigation
pending or threatened against the Servicer which, either in
any one instance or in the aggregate, would result in any
material adverse change in the business, operations,
financial condition, properties or assets of the Servicer, or
in any material impairment of the right, or would, if
adversely determined, materially impair the ability of the
Servicer, to carry on its business substantially as now
conducted, or in any material liability on the part of the
Servicer, or which would draw into question the validity of
this Agreement or the Mortgage Loans or of any action taken
or to be taken in connection with the obligations of the
Servicer contemplated herein, or which would be likely to
impair materially the ability of the Servicer to perform
under the terms of this Agreement; and
(vi) No consent, approval, authorization or order of, or
registration or filing with, or notice to any court or
governmental agency or body, is required for the execution,
delivery and performance by the Servicer of or compliance by
the Servicer with this Agreement, or if required, such
approval has been obtained prior to the Cut-off Date.
(b) It is understood and agreed that the representations and
warranties set forth in this Section shall survive delivery of the respective
Mortgage Files to the Trustee or the Custodian on behalf of the Trustee until
the termination of this Agreement, and shall inure to the benefit of the
Trustee, the Depositor and the Servicer or Special Servicer, as the case may
be. Upon discovery by the Depositor, the Servicer, Special Servicer or a
Responsible Officer of the Trustee (or upon written notice thereof from any
Certificateholder) of a breach of any of the representations and warranties set
forth in this Section which materially and adversely affects the interests of
the Certificateholders, the Servicer, Special Servicer or the Trustee in any
Mortgage Loan, the party discovering such breach shall give prompt written
notice to the other parties hereto and the Mortgage Loan Seller.
(c) The Trustee hereby represents and warrants that
as of the Closing Date:
(i) The Trustee is a nationally chartered bank duly
organized, validly existing, and in good standing under the
laws of the United States and has full power, authority and
legal right to own its properties and conduct its business as
presently conducted and to execute, deliver and perform the
terms of this Agreement.
(ii) This Agreement has been duly authorized, executed and
delivered by the Trustee and, assuming due authorization,
execution and delivery by the other parties hereto,
constitutes a legal, valid and binding instrument enforceable
against the Trustee in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the
enforcement of creditors' rights in general and by general
equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(iii) Neither the execution and delivery of this Agreement by
the Trustee nor the consummation by the Trustee of the
transactions herein contemplated to be performed by the
Trustee, nor compliance by the Trustee with the provisions
hereof, will conflict with or result in a breach of, or
constitute a default under, any of the provisions of any
applicable law (subject to the appointment in accordance with
such applicable law of any co-trustee or separate trustee
required pursuant to this Agreement), governmental rule,
regulation, judgment, decree or order binding on the Trustee
or its properties or the organizational documents of the
Trustee or the terms of any material agreement, instrument or
indenture to which the Trustee is a party or by which it is
bound.
SECTION 2.05. Execution and Delivery of Certificates;
Issuance of Lower-Tier Regular Interests.
The Trustee acknowledges the assignment to it of the Mortgage
Loans and the delivery of the Mortgage Files to the Custodian (to the extent
the documents constituting the Mortgage Files are actually delivered to the
Custodian), subject to the provisions of Section 2.01 and Section 2.02 and,
concurrently with such delivery, (i) acknowledges the issuance of and hereby
declares that it holds the Lower-Tier Regular Interests on behalf of the
Upper-Tier REMIC and the Holders of the Regular Certificates and the Class R
Certificates and (ii) has caused to be executed and caused to be authenticated
and delivered to or upon the order of the Depositor, or as directed by the
terms of this Agreement, Class A-1A, Class A-1B, Class A- 1C, Class A-1D, Class
A-CS1, Class PS-1, Class A-1E, Class A-2, Class A-3, Class A-4, Class A-5,
Class A-6, Class A-7, Class A-8, Class B-1, Class B-2, Class B-3, Class B-4,
Class B-5, Class B-6, Class B-7, Class B-7H, Class V-1, Class V-2, Class R and
Class LR Certificates in authorized denominations, in each case registered in
the names set forth in such order or so directed in this Agreement and duly
authenticated by the Authenticating Agent, which Certificates (described in the
preceding clause (ii)) and Lower Tier Regular Interests evidence ownership of
the entire Trust Fund.
SECTION 2.06. Miscellaneous REMIC and Grantor
Trust Provisions.
(a) The Class A-1A-L, Class A-1B-L, Class A-1C-L, Class
A-1D-L, Class A-1E-L, Class A-2-L, Class A-3-L, Class A-4-L, Class A-5-L, Class
A-6-L, Class A-7-L, Class A-8-L, Class B-1-L, Class B-2-L, Class B-3-L, Class
B-4-L, Class B-5-L, Class B-6-L, Class B-7-L and Class B-7H-L Interests are
hereby designated as "regular interests" in the Lower-Tier REMIC within the
meaning of Section 860G(a)(1) of the Code, and the Class LR Certificates are
hereby designated as the sole Class of "residual interests" in the Lower-Tier
REMIC within the meaning of Section 860G(a)(2) of the Code. The Class A-1A,
Class A-1B, Class A-1C, Class A-1D, Class A-1E, Class A-CS1, Class PS-1, Class
A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class
B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7 and Class
B-7H Certificates are hereby designated as "regular interests" in the
Upper-Tier REMIC within the meaning of Section 860G(a)(1) of the Code and the
Class R Certificates are hereby designated as the sole Class of "residual
interests" in the Upper-Tier REMIC within the meaning of Section 860G(a)(2) of
the Code. The Closing Date is hereby designated as the "Startup Day" of the
Lower-Tier REMIC and the Upper-Tier REMIC within the meaning of Section
860G(a)(9) of the Code. The "latest possible maturity date" of the Lower-Tier
Regular Interests and the Regular Certificates for purposes of Section
860G(a)(1) of the Code is the Scheduled Final Distribution Date. The initial
Certificate Balance of each Class of the Lower-Tier Regular Interests is equal
to the Certificate Balance of the Related Certificates. The rate of interest
for each Class of Lower-Tier Regular Interests is a per annum rate equal to the
Weighted Average Net Mortgage Pass-Through Rate.
(b) The Class V-1 Certificates represent pro rata undivided
beneficial interests in the Default Interest subject to the liability of the
Trust Fund to pay interest on Advances at the Advance Rate. The Class V-2
Certificates represent beneficial pro rata undivided interests in the Excess
Interest. The Class V-1 and Class V-2 Certificates do not represent regular or
residual interests in either the Upper-Tier REMIC or the Lower-Tier REMIC.
(c) None of the Depositor, the Trustee, the Servicer, the
Fiscal Agent or the Special Servicer shall enter into any arrangement by which
the Trust Fund will receive a fee or other compensation for services other than
as specifically contemplated herein.
<PAGE>
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
SECTION 3.01. Servicer to Act as Servicer; Administration
of the Mortgage Loans.
(a) The Servicer and the Special Servicer, each as an
independent contractor servicer, shall service and administer the Mortgage
Loans on behalf of the Trust Fund and the Trustee (as trustee for
Certificateholders) in accordance with the Servicing Standard.
The Servicer's or Special Servicer's liability for actions
and omissions in its capacity as Servicer or Special Servicer, as the case may
be, hereunder is limited as provided herein (including, without limitation,
pursuant to Section 6.03 hereof). To the extent consistent with the foregoing
and subject to any express limitations set forth in this Agreement, the
Servicer and Special Servicer shall seek to maximize the timely and complete
recovery of principal and interest on the Notes; provided, however, that
nothing herein contained shall be construed as an express or implied guarantee
by the Servicer or Special Servicer of the collectability of the Mortgage
Loans. Subject only to the Servicing Standard, the Servicer and Special
Servicer shall have full power and authority, acting alone or through
sub-servicers (subject to paragraph (c) of this Section 3.01 and to Section
3.02), to do or cause to be done any and all things in connection with such
servicing and administration which it may deem consistent with the Servicing
Standard and, in its reasonable judgment, in the best interests of the
Certificateholders, including, without limitation, with respect to each
Mortgage Loan, to prepare, execute and deliver, on behalf of the
Certificateholders and the Trustee or any of them: (i) any and all financing
statements, continuation statements and other documents or instruments
necessary to maintain the lien on each Mortgaged Property and related
collateral; (ii) subject to Sections 3.09, 3.10 and 3.30, any modifications,
waivers, consents or amendments to or with respect to any documents contained
in the related Mortgage File; and (iii) any and all instruments of satisfaction
or cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Mortgage Loans and the Mortgaged
Properties. Notwithstanding the foregoing, neither the Servicer nor the Special
Servicer shall modify, amend, waive or otherwise consent to any change of the
terms of any Mortgage Loan except under the circumstances described in Sections
3.09, 3.10, 3.28 and 3.30 or the definition of Minimum Defaulted Monthly
Payment hereof. The Servicer and Special Servicer shall service and administer
the Mortgage Loans in accordance with applicable law and shall provide to the
Borrowers any reports required to be provided to them thereby. Subject to
Section 3.11, the Trustee shall, upon the receipt of a written request of a
Servicing Officer, execute and deliver to the Servicer and Special Servicer any
powers of attorney and other documents prepared by the Servicer and Special
Servicer and necessary or appropriate (as certified in such written request) to
enable the Servicer and Special Servicer to carry out their servicing and
administrative duties hereunder.
(b) Unless otherwise provided in the related Note, the
Servicer shall apply any partial Principal Prepayment received on a Mortgage
Loan on a date other than a Due Date to the principal balance of such Mortgage
Loan as of the Due Date immediately following the date of receipt of such
partial Principal Prepayment. Unless otherwise provided in the related Note,
the Servicer shall apply any amounts received on U.S. Treasury obligations
(which shall not be redeemed by the Servicer prior to the maturity thereof) in
respect of a Mortgage Loan being defeased pursuant to its terms to the
principal balance of and interest on such Mortgage Loan as of the Due Date
immediately following the receipt of such amounts.
(c) Each of the Servicer and the Special Servicer may enter
into sub-servicing agreements with third parties with respect to any of its
respective obligations hereunder, provided, that (i) any such agreement shall
be consistent with the provisions of this Agreement and (ii) no sub-servicer
retained by the Servicer or the Special Servicer, as applicable, shall grant
any modification, waiver or amendment to any Mortgage Loan without the approval
of the Servicer or the Special Servicer, as applicable, which approval shall be
given or withheld in accordance with the procedures set forth in Sections 3.09,
3.10, 3.28 or 3.30 (or the definition of Minimum Defaulted Monthly Payment),
and (iii) such agreement shall be consistent with the Servicing Standard. Any
such sub-servicing agreement may permit the sub-servicer to delegate its duties
to agents or subcontractors so long as the related agreements or arrangements
with such agents or subcontractors are consistent with the provisions of this
Section 3.01(c).
Any sub-servicing agreement entered into by the Servicer or
the Special Servicer, as applicable, shall provide that it may be assumed or
terminated by the Trustee or the Servicer, respectively, if the Trustee or the
Servicer, respectively, has assumed the duties of the Servicer or the Special
Servicer, respectively, or any successor Servicer or Special Servicer, as
applicable, without cost or obligation to the assuming or terminating party or
the Trust Fund, upon the assumption by such party of the obligations of the
Servicer or the Special Servicer, as applicable, pursuant to Section 7.02.
Any sub-servicing agreement, and any other transactions or
services relating to the Mortgage Loans involving a sub-servicer, shall be
deemed to be between the Servicer or the Special Servicer, as applicable, and
such sub-servicer alone, and the Trustee, the Trust Fund and the
Certificateholders shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with respect to the
sub-servicer, except as set forth in Section 3.01(d) and no provision herein
may be construed so as to require the Trust Fund to indemnify any such
sub-servicer.
(d) If the Trustee or any successor Servicer assumes the
obligations of the Servicer, or if the Servicer or any successor Special
Servicer assumes the obligations of the Special Servicer, in each case in
accordance with Section 7.02, the Trustee, the Servicer or such successor, as
applicable, to the extent necessary to permit the Trustee, the Servicer or such
successor, as applicable, to carry out the provisions of Section 7.02, shall,
without act or deed on the part of the Trustee, the Servicer or such successor,
as applicable, succeed to all of the rights and obligations of the Servicer or
the Special Servicer, as applicable, under any sub-servicing agreement entered
into by the Servicer or the Special Servicer, as applicable, pursuant to
Section 3.01(c), subject to the right of termination by the Trustee or
Servicer, as applicable, set forth in Section 3.01(c). In such event, the
Trustee, the Servicer or the successor Servicer or the Special Servicer, as
applicable, shall be deemed to have assumed all of the Servicer's or the
Special Servicer's interest, as applicable, therein (but not any liabilities or
obligations in respect of acts or omissions of the Servicer or the Special
Servicer, as applicable, prior to such deemed assumption) and to have replaced
the Servicer or the Special Servicer, as applicable, as a party to such
sub-servicing agreement to the same extent as if such sub-servicing agreement
had been assigned to the Trustee, the Servicer or such successor Servicer or
successor Special Servicer, as applicable, except that the Servicer or the
Special Servicer, as applicable, shall not thereby be relieved of any liability
or obligations under such sub-servicing agreement that accrued prior to the
succession of the Trustee, the Servicer or the successor Servicer or successor
Special Servicer, as applicable.
In the event that the Trustee, the Servicer or any successor
Servicer or Special Servicer, as applicable, assumes the servicing obligations
of the Servicer or the Special Servicer, as applicable, upon request of the
Trustee, the Servicer or such successor Servicer or Special Servicer, as
applicable, the Servicer or Special Servicer shall at its own expense (except
in the event that the Servicer is terminated pursuant to Section 6.04(c), in
which event, at the expense of the Certificateholders effecting such
termination) deliver to the Trustee, the Servicer or such successor Servicer or
Special Servicer, as applicable, all documents and records relating to any
sub-servicing agreement and the Mortgage Loans then being serviced thereunder
and an accounting of amounts collected and held by it, if any, and will
otherwise use its best efforts to effect the orderly and efficient transfer of
any sub-servicing agreement to the Trustee, the Servicer or the successor
Servicer or Special Servicer, as applicable.
SECTION 3.02. Liability of the Servicer.
Notwithstanding any sub-servicing agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer or Special Servicer and any Person acting as sub-servicer (or its
agents or subcontractors) or any reference to actions taken through any Person
acting as sub-servicer or otherwise, the Servicer or Special Servicer, as
applicable, shall remain obligated and primarily liable to the Trustee and
Certificateholders for the servicing and administering of the Mortgage Loans in
accordance with the provisions of this Agreement without diminution of such
obligation or liability by virtue of such sub-servicing agreements or
arrangements or by virtue of indemnification from the Depositor or any other
Person acting as sub-servicer (or its agents or subcontractors) to the same
extent and under the same terms and conditions as if the Servicer or Special
Servicer, as applicable, alone were servicing and administering the Mortgage
Loans. Each of the Servicer and the Special Servicer shall be entitled to enter
into an agreement with any sub-servicer providing for indemnification of the
Servicer or Special Servicer, as applicable, by such sub-servicer, and nothing
contained in this Agreement shall be deemed to limit or modify such
indemnification, but no such agreement for indemnification shall be deemed to
limit or modify this Agreement.
SECTION 3.03. Collection of Certain Mortgage Loan Payments.
(a) The Servicer or the Special Servicer, as applicable,
shall use reasonable efforts to collect all payments called for under the terms
and provisions of the Mortgage Loans it is obligated to service hereunder, and
shall follow the Servicing Standard with respect to such collection procedures.
With respect to each Specially Serviced Mortgage Loan, the Special Servicer
shall use its reasonable efforts to collect income statements and rent rolls
from Borrowers as required by the Loan Documents and the terms hereof and shall
provide copies thereof to the Servicer as provided herein. The Servicer shall
provide at least six month's notice to the Special Servicer and Borrowers of
Balloon Payments coming due. Consistent with the foregoing, the Servicer or
Special Servicer, as applicable, may in its discretion waive any late payment
charge in connection with any delinquent Monthly Payment or Balloon Payment
with respect to any Mortgage Loan. In addition, the Servicer shall be entitled
to take such actions with respect to the collection of payments on the Mortgage
Loans as are permitted or required under Section 3.28 hereof.
(b) In the event that the Servicer or Special Servicer
receives, or receives notice from the related Borrower that it will be
receiving, Excess Interest in any Collection Period, the Servicer or Special
Servicer, as applicable, will promptly notify the Trustee.
SECTION 3.04. Collection of Taxes, Assessments and
Similar Items; Escrow Accounts.
(a) With respect to each Mortgage Loan (other than any REO
Mortgage Loan), the Servicer shall maintain accurate records with respect to
each related Mortgaged Property reflecting the status of taxes, assessments and
other similar items that are or may become a lien on the related Mortgaged
Property and the status of insurance premiums payable with respect thereto.
From time to time, the Servicer shall (i) obtain all bills for the payment of
such items (including renewal premiums), and (ii) effect payment of all such
bills with respect to such Mortgaged Properties prior to the applicable penalty
or termination date, in each case employing for such purpose Escrow Payments as
allowed under the terms of the related Mortgage Loan. If a Borrower fails to
make any such payment on a timely basis or collections from the Borrower are
insufficient to pay any such item before the applicable penalty or termination
date, the Servicer shall advance the amount of any shortfall as a Property
Advance unless the Servicer determines in its good faith business judgment that
such Advance would be a Nonrecoverable Advance. The Servicer shall be entitled
to reimbursement of Advances, with interest thereon at the Advance Rate, that
it makes pursuant to the preceding sentence from amounts received on or in
respect of the related Mortgage Loan respecting which such Advance was made or
if such Advance has become a Nonrecoverable Advance, to the extent permitted by
Section 3.06 of this Agreement. No costs incurred by the Servicer in effecting
the payment of taxes and assessments on the Mortgaged Properties shall, for the
purpose of calculating distributions to Certificateholders, be added to the
amount owing under the related Mortgage Loans, notwithstanding that the terms
of such Mortgage Loans so permit.
(b) The Servicer shall segregate and hold all funds collected
and received pursuant to any Mortgage Loan constituting Escrow Payments
separate and apart from any of its own funds and general assets and shall
establish and maintain one or more segregated custodial accounts (each, an
"Escrow Account") into which all Escrow Payments shall be deposited within one
(1) Business Day after receipt. The Servicer shall also deposit into each
Escrow Account any amounts representing losses on Permitted Investments
pursuant to Section 3.07(b) and any Insurance Proceeds or Liquidation Proceeds
which are required to be applied to the restoration or repair of any Mortgaged
Property pursuant to the related Mortgage Loan. Escrow Accounts shall be
Eligible Accounts (except to the extent the related Mortgage Loan requires it
to be held in an account that is not an Eligible Account) and shall be entitled
"AMRESCO Management, Inc., as Servicer, in trust for LaSalle National Bank, as
Trustee in trust for Holders of Asset Securitization Corporation, Commercial
Mortgage Pass-Through Certificates, Series 1997-D4, and Various Borrowers".
Withdrawals from an Escrow Account may be made by the Servicer only:
(i) to effect timely payments of items constituting Escrow
Payments for the related Mortgage;
(ii) to transfer funds to the Collection Account to reimburse
the Servicer, the Special Servicer, the Trustee or the Fiscal
Agent, as applicable, for any Advance (with interest thereon
at the Advance Rate) relating to Escrow Payments, but only
from amounts received with respect to the related Mortgage
Loan which represent late collections of Escrow Payments
thereunder;
(iii) for application to the restoration or repair of the
related Mortgaged Property in accordance with the related
Mortgage Loan and the Servicing Standard;
(iv) to clear and terminate such Escrow Account upon the
termination of this Agreement;
(v) to pay from time to time to the related Borrower any
interest or investment income earned on funds deposited in
the Escrow Account if such income is required to be paid to
the related Borrower under law or by the terms of the
Mortgage Loan, or otherwise to the Servicer; and
(vi) to remove any funds deposited in an Escrow Account that
were not required to be deposited therein.
SECTION 3.05. Collection Account; Distribution Account;
Upper-Tier Distribution Account; Default
Interest Distribution Account; and
Excess Interest Distribution Account.
(a) The Servicer shall establish and maintain the Collection
Account in the Trustee's name, for the benefit of the Certificateholders and
the Trustee as the Holder of the Lower-Tier Regular Interests. The Collection
Account shall be established and maintained as an Eligible Account. The
Servicer shall deposit or cause to be deposited in the Collection Account
within one Business Day following receipt the following payments and
collections received or made by it on or with respect to the Mortgage Loans:
(i) all payments on account of principal on the Mortgage
Loans, including the principal component of Unscheduled
Payments;
(ii) all payments on account of interest on the Mortgage
Loans and the interest portion of all Unscheduled Payments
and all Prepayment Premiums;
(iii) any amounts required to be deposited pursuant to
Section 3.07(b), in connection with net losses realized on
Permitted Investments with respect to funds held in the
Collection Account;
(iv) all Net REO Proceeds withdrawn from an REO Account
pursuant to Section 3.17(b) and all Net Insurance Proceeds
and Net Liquidation Proceeds;
(v) any amounts received from Borrowers which represent
recoveries of Property Protection Expenses, to the extent not
permitted to be retained by the Servicer or Special Servicer
as provided herein;
(vi) any other amounts required by the provisions of this
Agreement to be deposited into the Collection Account by the
Servicer or Special Servicer, including, without limitation,
proceeds of any repurchase of a Mortgage Loan pursuant to
Sections 2.03(d) and (e) hereof; and
(vii) any Servicer Prepayment Interest Shortfalls.
The foregoing requirements for deposits in the Collection
Account shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of late
payment charges (subject to Section 3.12 hereof), Assumption Fees, loan
modification fees, loan service transaction fees, extension fees, demand fees,
beneficiary statement charges and similar fees need not be deposited in the
Collection Account by the Servicer and, to the extent permitted by applicable
law, the Servicer or the Special Servicer, as applicable in accordance with
Section 3.12 hereof, shall be entitled to retain any such charges and fees
received with respect to the Mortgage Loans. In the event that the Servicer
deposits in the Collection Account any amount not required to be deposited
therein, it may at any time withdraw such amount from the Collection Account,
any provision herein to the contrary notwithstanding.
(b) The Trustee shall establish and maintain the Distribution
Account in the name of the Trustee, in trust for the benefit of the
Certificateholders and the Trustee as the Holder of the Lower-Tier Regular
Interests. The Distribution Account shall be established and maintained as an
Eligible Account.
(c) The Trustee shall establish and maintain the Upper-Tier
Distribution Account in the name of the Trustee, in trust for the benefit of
the Certificateholders. The Upper-Tier Distribution Account shall be
established and maintained as an Eligible Account. With respect to each
Distribution Date, the Trustee shall withdraw from the Distribution Account and
deposit in the Upper-Tier Distribution Account on or before such date the
amount of Available Funds (including P&I Advances) and Prepayment Premiums to
be distributed in respect of the Lower-Tier Regular Interests pursuant to
Section 4.01 hereof on such date.
(d) Prior to the Servicer Remittance Date relating to any
Collection Period, in which Default Interest is received, the Trustee shall
establish and maintain the Default Interest Distribution Account in the name of
the Trustee in trust for the benefit of the Holders of the Class V-1
Certificates. The Default Interest Distribution Account shall be established
and maintained as an Eligible Account. On or before the Servicer Remittance
Date related to each Distribution Date, the Servicer shall remit to the Trustee
for deposit in the Default Interest Distribution Account an amount equal to (i)
the amount of the aggregate Default Interest received during the preceding
Collection Period, minus (ii) any portions thereof withdrawn from the
Collection Account pursuant to clause (iii) of Section 3.06 (such amount, if
any, the "Net Default Interest" for such Distribution Date).
(e) Prior to the Servicer Remittance Date relating to any
Collection Period, in which Excess Interest is received, the Trustee shall
establish and maintain the Excess Interest Distribution Account in the name of
the Trustee in trust for the benefit of the Holders of the Class V-2
Certificates. The Excess Interest Distribution Account shall be established and
maintained as an Eligible Account. On or before the Servicer Remittance Date
related to the applicable Distribution Date, the Servicer shall remit to the
Trustee for deposit in the Excess Interest Distribution Account an amount equal
to the Excess Interest received during the applicable Collection Period.
Following the distribution of Excess Interest to Certificateholders on the
first Distribution Date after which there are no longer any Mortgage Loans
outstanding which pursuant to their terms could pay Excess Interest, the
Trustee shall terminate the Excess Interest Distribution Account.
(f) Funds in the Collection Account, the Distribution
Account, the Upper-Tier Distribution Account, the Default Interest Distribution
Account and the Excess Interest Distribution Account may be invested in
Permitted Investments in accordance with the provisions of Section 3.07. The
Servicer shall give written notice to the Trustee of the location and account
number of the Collection Account and shall notify the Trustee in writing prior
to any subsequent change thereof.
SECTION 3.06. Permitted Withdrawals from the
Collection Account.
The Servicer may make withdrawals from the Collection Account
only as described below (the order set forth below not constituting an order of
priority for such withdrawals):
(i) to remit to the Trustee for deposit in the Distribution
Account, the Default Interest Distribution Account, the
Interest Reserve Account, and the Excess Interest
Distribution Account, the amounts required to be deposited in
the Distribution Account, the Default Interest Distribution
Account, the Interest Reserve Account, and the Excess
Interest Distribution Account pursuant to Sections 4.06,
3.05(c), 3.05(d), 3.27(a) and 3.05(e);
(ii) to pay or reimburse the Trustee, the Fiscal Agent, the
Servicer and the Special Servicer for Advances (provided,
that the Trustee and the Fiscal Agent shall have priority
with respect to such payment or reimbursement), the
Servicer's right to reimburse any such Person pursuant to
this clause (ii) being limited to (x) any collections on or
in respect of the particular Mortgage Loan or REO Property
with respect to which such Advance was made, (y) with respect
to P&I Advances, any Subordinate Class Advance Amounts with
respect to the related Distribution Date as provided in
Section 4.06(d), or (z) any other amounts in the Collection
Account in the event that such Advances have been deemed to
be Nonrecoverable Advances or are not reimbursed from
recoveries in respect of the related Mortgage Loan or REO
Property after a Final Recovery Determination;
(iii) (A) to pay to the Servicer, the Trustee or the Fiscal
Agent the Advance Interest Amount relating to P&I Advances
(to the extent not reimbursed from Default Interest), and (B)
to pay to the Servicer, Special Servicer, Trustee or Fiscal
Agent any Advance Interest Amounts not relating to any P&I
Advances (provided that in the case of both (A) and (B), the
Trustee and the Fiscal Agent shall have priority with respect
to such payments);
(iv) to pay on or before each Servicer Remittance Date to the
Servicer and the Special Servicer, as applicable, as
compensation, the aggregate unpaid Servicing Compensation and
Special Servicing Compensation (if any), respectively, in
respect of the immediately preceding month, to be paid, in
the case of the Servicing Fee, from interest received on the
related Mortgage Loan, and to pay from time to time to the
Servicer in accordance with Section 3.07(b) any interest or
investment income earned on funds deposited in the Collection
Account) (the Servicer may rely on a certification of the
Special Servicer as to amounts of Special Servicing
Compensation to be withdrawn pursuant to this clause (iv));
(v) to remit to the Distribution Account, an amount equal to
the Trustee Fee in respect of the immediately preceding month
to be paid from interest received on the related Mortgage
Loan;
(vi) to pay on or before each Distribution Date to the
Depositor, the Mortgage Loan Seller or other Originator, as
the case may be, with respect to each Mortgage Loan or REO
Property that has previously been purchased or repurchased by
it pursuant to Section 2.03(d), Section 2.03(e), Section 3.18
or Section 9.01, all amounts received thereon during the
related Collection Period and subsequent to the date as of
which the amount required to effect such purchase or
repurchase was determined;
(vii) to the extent not reimbursed or paid pursuant to any
other clause of this Section 3.06, to reimburse or pay the
Servicer, the Trustee, the Special Servicer, the Depositor or
the Fiscal Agent, as applicable, for unpaid Servicing Fees,
Special Servicing Compensation and other unpaid items
incurred by such Person pursuant to the second sentence of
Section 3.07(c), Section 3.08(a) and (b), Section 3.10,
Section 3.12(e), Section 3.17(a), (b) and (c), Section
3.18(a), the fourth paragraph of Section 3.22, Section 6.03,
Section 7.04, Section 8.01(c)(v), Section 8.05(d) or Section
10.07, or any other provision of this Agreement pursuant to
which such Person is entitled to reimbursement or payment
from the Trust Fund, in each case only to the extent
reimbursable under such Section, it being acknowledged that
this clause (vii) shall not be deemed to modify the substance
of any such Section, including the provisions of such Section
that set forth the extent to which one of the foregoing
Persons is or is not entitled to payment or reimbursement;
(viii) to transfer to the Trustee for deposit in one or more
separate, non-interest bearing accounts any amount reasonably
determined by the Trustee to be necessary to pay any
applicable federal, state or local taxes imposed on the
Upper-Tier REMIC or the Lower-Tier REMIC under the
circumstances and to the extent described in Section 4.05;
(ix) to withdraw any amount deposited into the Collection
Account that was not required to be deposited therein; and
(x) to clear and terminate the Collection Account pursuant to
Section 9.01.
The Servicer shall keep and maintain separate accounting, on
a Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account pursuant to subclauses (ii)-(vii) above.
The Servicer shall pay to the Trustee, the Fiscal Agent or
the Special Servicer from the Collection Account (to the extent permitted by
clauses (i)-(vii) above) amounts permitted to be paid to the Trustee, the
Fiscal Agent or the Special Servicer therefrom, promptly upon receipt of a
certificate of a Responsible Officer of the Trustee or the Fiscal Agent or a
certificate of a Servicing Officer, as applicable, describing the item and
amount to which such Person is entitled. The Servicer may rely conclusively on
any such certificate and shall have no duty to recalculate the amounts stated
therein.
The Trustee, the Fiscal Agent, the Special Servicer and the
Servicer shall in all cases have a right prior to the Certificateholders to any
funds on deposit in the Collection Account from time to time for the
reimbursement or payment of the Servicing Compensation (including investment
income), or Trustee Fees, Special Servicing Compensation, Advances, Advance
Interest Amounts, their respective expenses hereunder to the extent such fees
and expenses are to be reimbursed or paid from amounts on deposit in the
Collection Account pursuant to this Agreement (and to have such amounts paid
directly to third party contractors for any invoices approved by the Trustee,
the Servicer or the Special Servicer, as applicable) and any federal, state or
local taxes imposed on either the Upper-Tier REMIC or Lower-Tier REMIC.
SECTION 3.07. Investment of Funds in the Collection
Account, the REO Account, the Lock-Box
Accounts, the Cash Collateral Accounts,
the Interest Reserve Account
and the Reserve Accounts.
(a) The Servicer (or with respect to any REO Account, the
Special Servicer, or with respect to the Interest Reserve Account, Nomura
Securities International, Inc.) may direct any depository institution
maintaining the Collection Account, any Borrower Accounts (subject to the
second succeeding sentence), the Interest Reserve Account and any REO Account
(each, for purposes of this Section 3.07, an "Investment Account"), to invest
the funds in such Investment Account in one or more Permitted Investments that
bear interest or are sold at a discount, and that mature, unless payable on
demand, no later than the Business Day preceding the date on which such funds
are required to be withdrawn from such Investment Account pursuant to this
Agreement. Any direction by the Servicer, the Special Servicer or by Nomura
Securities International, Inc., to invest funds on deposit in an Investment
Account shall be in writing and shall certify that the requested investment is
a Permitted Investment which matures at or prior to the time required hereby or
is payable on demand. In the case of any Escrow Account, Lock-Box Account, Cash
Collateral Account or Reserve Account (the "Borrower Accounts"), the Servicer
shall act upon the written request of the related Borrower or Manager to the
extent the Servicer is required to do so under the terms of the respective
Mortgage Loan or related documents, provided that in the absence of appropriate
written instructions from the related Borrower or Manager meeting the
requirements of this Section 3.07, the Servicer shall have no obligation to,
but will be entitled to, direct the investment of funds in such accounts in
Permitted Investments. All such Permitted Investments shall be held to
maturity, unless payable on demand. Any investment of funds in an Investment
Account shall be made in the name of the Trustee (in its capacity as such) or
in the name of a nominee of the Trustee. The Trustee shall have sole control
(except with respect to investment direction which shall be in the control of
the Servicer (or Nomura Securities International, Inc., with respect to the
Interest Reserve Account, or the Special Servicer, with respect to any REO
Accounts), as an independent contractor to the Trust Fund) over each such
investment and any certificate or other instrument evidencing any such
investment shall be delivered directly to the Trustee or its agent (which shall
initially be the Servicer), together with any document of transfer, if any,
necessary to transfer title to such investment to the Trustee or its nominee.
The Trustee shall have no responsibility or liability with respect to the
investment directions of the Servicer, the Special Servicer, Nomura Securities
International, Inc., any Borrower or Manager or any losses resulting therefrom,
whether from Permitted Investments or otherwise. The Servicer shall have no
responsibility or liability with respect to the investment directions of Nomura
Securities International, Inc., the Special Servicer, any Borrower or Manager
or any losses resulting therefrom, whether from Permitted Investments or
otherwise. In the event amounts on deposit in an Investment Account are at any
time invested in a Permitted Investment payable on demand, the Servicer (or the
Special Servicer or Nomura Securities International, Inc., as applicable)
shall:
(x) consistent with any notice required to be
given thereunder, demand that payment
thereon be made on the last day such
Permitted Investment may otherwise mature
hereunder in an amount equal to the lesser
of (1) all amounts then payable thereunder
and (2) the amount required to be withdrawn
on such date; and
(y) demand payment of all amounts due
thereunder promptly upon determination by
the Servicer (or the Special Servicer or
Nomura Securities International, Inc., as
applicable) that such Permitted Investment
would not constitute a Permitted Investment
in respect of funds thereafter on deposit
in the related Investment Account.
(b) All income and gain realized from investment of funds
deposited in any Investment Account shall be for the benefit of the Servicer
(except with respect to the investment of funds deposited in (i) any Borrower
Account, which shall be for the benefit of the related Borrower to the extent
required under the Mortgage Loan or applicable law, (ii) any REO Account, which
shall be for the benefit of the Special Servicer or (iii) the Interest Reserve
Account, which shall be for the benefit of Nomura Securities International,
Inc.) and, if held in the Collection Account or REO Account shall be subject to
withdrawal by the Servicer or the Special Servicer, as applicable, in
accordance with Section 3.06 or Section 3.17(b), as applicable, and if held in
the Interest Reserve Account, shall be subject to withdrawal by Nomura
Securities International, Inc. pursuant to written instructions. The Servicer
(or with respect to any REO Account, the Special Servicer or with respect to
the Interest Reserve Account, Nomura Securities International, Inc.) shall
deposit from its own funds into the Collection Account, any REO Account or the
Interest Reserve Account, as applicable, the amount of any loss incurred in
respect of any such Permitted Investment immediately upon realization of such
loss; provided, however, that the Servicer, Special Servicer, or Nomura
Securities International, Inc. as applicable, may reduce the amount of such
payment to the extent it forgoes any investment income in such Investment
Account otherwise payable to it. The Servicer shall also deposit from its own
funds in any Borrower Account the amount of any loss incurred in respect of
Permitted Investments, except to the extent that amounts are invested for the
benefit of the Borrower under the terms of the Mortgage Loan or applicable law.
(c) Except as otherwise expressly provided in this Agreement,
if any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Trustee may, and upon the request of Holders of
Certificates representing greater than 50% of the Percentage Interests of any
Class shall, take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
proceedings. In the event the Trustee takes any such action, the Trust Fund
shall pay or reimburse the Trustee for all reasonable out-of-pocket expenses,
disbursements and advances incurred or made by the Trustee in connection
therewith. In the event that the Trustee does not take any such action, the
Servicer may take such action at its own cost and expense.
SECTION 3.08. Maintenance of Insurance Policies
and Errors and Omissions and
Fidelity Coverage.
(a) The Servicer on behalf of the Trustee, as mortgagee,
shall cause the related Borrower to maintain, to the extent required by each
Mortgage Loan (other than REO Mortgage Loans), and if the Borrower does not so
maintain, shall itself maintain (subject to the provisions of this Agreement
concerning Nonrecoverable Advances) to the extent the Trustee as mortgagee has
an insurable interest and to the extent available at commercially reasonable
rates, (i) fire and hazard insurance with extended coverage on the related
Mortgaged Property in an amount which is at least equal to the lesser of (A)
one hundred percent (100%) of the then "full replacement cost" of the
improvements and equipment, (excluding foundations, footings and excavation
costs), without deduction for physical depreciation, and (B) the outstanding
principal balance of the related Mortgage Loan or such greater amount as is
necessary to prevent any reduction in such policy by reason of the application
of co-insurance and to prevent the Trustee thereunder from being deemed a
co-insurer and provided such policy shall include a "replacement cost" rider,
(ii) insurance providing coverage against 18 months (or such longer period or
with such extended period endorsement as provided in the related Mortgage or
other loan document) of rent interruptions and (iii) such other insurance as is
required in the related Mortgage Loan. The Special Servicer shall maintain fire
and hazard insurance with extended coverage on each REO Property (subject to
the provisions of this Agreement concerning Nonrecoverable Advances) in an
amount which is at least equal to one hundred percent (100%) of the then "full
replacement cost" of the improvements and equipment (excluding foundations,
footings and excavation costs), without deduction for physical depreciation. If
the Special Servicer does not maintain the insurance described in the preceding
sentence or the required flood insurance described below, the Servicer shall,
as soon as practicable after receipt of notice of such failure, maintain such
insurance, and if the Servicer does not maintain such insurance, the insurance
required in the first sentence of this Section 3.08(a) or the required flood
insurance described below (if the related Borrower fails to maintain such
insurance), the Trustee shall, as soon as practicable after receipt of notice
of such failure, maintain such insurance and if the Trustee does not maintain
such insurance, the Fiscal Agent shall do so, provided that, in each such case,
such obligation will be subject to the provisions of this Agreement concerning
Nonrecoverable Advances. The Special Servicer shall maintain, with respect to
each REO Property (i) public liability insurance providing such coverage
against such risks as the Special Servicer determines, consistent with the
related Mortgage and the Servicing Standard, to be in the best interests of the
Trust Fund, (ii) insurance providing coverage against 24 months of rent
interruptions and (iii) such other insurance as was required pursuant to the
terms of the related Mortgage Loan. All insurance for an REO Property shall be
from a Qualified Insurer. Any amounts collected by the Servicer or the Special
Servicer under any such policies (other than amounts required to be applied to
the restoration or repair of the related Mortgaged Property or amounts to be
released to the Borrower in accordance with the terms of the related Mortgage)
shall be deposited into the Collection Account pursuant to Section 3.05,
subject to withdrawal pursuant to Section 3.06. Any cost incurred by the
Servicer, Special Servicer, Trustee or Fiscal Agent in maintaining any such
insurance shall not, for the purpose of calculating distributions to
Certificateholders, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit.
It is understood and agreed that no other additional insurance other than flood
insurance or earthquake insurance subject to the conditions set forth below is
to be required of any Borrower or to be maintained by the Servicer other than
pursuant to the terms of the related Mortgage and pursuant to such applicable
laws and regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property (other than an REO Property) is
located in a federally designated special flood hazard area, the Servicer will
use its best efforts to cause the related Borrower to maintain, to the extent
required by each Mortgage Loan, and if the related Borrower does not so
maintain, will itself obtain (subject to the provisions of this Agreement
concerning Nonrecoverable Advances) flood insurance in respect thereof. Such
flood insurance shall be in an amount equal to the lesser of (i) the unpaid
principal balance of the related Mortgage Loan and (ii) the maximum amount of
such insurance required by the terms of the related Mortgage and as is
available for the related property under the national flood insurance program
(assuming that the area in which such property is located is participating in
such program). If an REO Property (i) is located in a federally designated
special flood hazard area or (ii) is related to a Mortgage Loan pursuant to
which earthquake insurance was in place at the time of origination and
continues to be available at commercially reasonable rates, the Special
Servicer will obtain (subject to the provisions of this Agreement concerning
Nonrecoverable Advances) flood insurance and/or earthquake insurance in respect
thereof providing substantially the same coverage as described in the preceding
sentences or, with respect to earthquake insurance, in the amount required by
the Mortgage Loan or, if not specified, in-place at origination. If at any time
during the term of this Agreement a recovery under a flood or fire and hazard
insurance policy in respect of an REO Property is not available but would have
been available if such insurance were maintained thereon in accordance with the
standards applied to Mortgaged Properties described herein, the Special
Servicer shall (subject to the provisions of this Agreement concerning
Nonrecoverable Advances) either (i) immediately deposit into the Collection
Account from its own funds the amount that would have been recovered or (ii)
apply to the restoration and repair of the property from its own funds the
amount that would have been recovered, if such application would be consistent
with the Servicing Standard; provided, however, that the Special Servicer shall
not be responsible for any shortfall in insurance proceeds resulting from an
insurer's refusal or inability to pay a claim. In the case of any insurance
otherwise required to be maintained pursuant to this Section that is not being
so maintained because the Servicer or the Special Servicer, as applicable, has
determined that it is not available at commercially reasonable rates, the
Servicer or the Special Servicer, as applicable, shall deliver an Officer's
Certificate to the Trustee and each Rating Agency which details the steps that
were taken in seeking such insurance and the factors which led to the
determination that such insurance was not so available. Costs to the Servicer
or Special Servicer of maintaining insurance policies pursuant to this Section
3.08 shall be paid by the Servicer or Special Servicer as a Property Advance
and shall be reimbursable to the Servicer or Special Servicer with interest at
the Advance Rate, which reimbursement may be effected under Section 3.06(ii) or
(vii).
The Servicer (or the Special Servicer, with respect to the
Specially Serviced Mortgage Loans) agrees to prepare and present, on behalf of
itself, the Trustee and the Certificateholders, claims under each related
insurance policy maintained pursuant to this Section 3.08(a) in a timely
fashion in accordance with the terms of such policy and to take such reasonable
steps as are necessary to receive payment or to permit recovery thereunder.
All insurance policies required hereunder shall name the
Trustee or the Servicer or the Special Servicer, on behalf of the Trustee as
the mortgagee, as loss payee.
Any determination made by the Servicer or Special Servicer
that insurance is not commercially reasonably available shall be subject to
confirmation by Fitch that such determination not to purchase such insurance
will not result in a downgrade, qualification or withdrawal of the then current
ratings assigned to the Certificates rated by Fitch.
(b) (I) If the Servicer or the Special Servicer, as
applicable, obtains and maintains a blanket insurance policy insuring
against fire and hazard losses on all of the Mortgaged Properties (other
than REO Properties) as to which the related Borrower has not maintained
insurance required by the related Mortgage Loan or on all of the REO
Properties, as the case may be, it shall conclusively be deemed to have
satisfied its respective obligations concerning the maintenance of
insurance coverage set forth in Section 3.08(a). Any such blanket
insurance policy shall be maintained with a Qualified Insurer. A blanket
insurance policy may contain a deductible clause, in which case the
Servicer or the Special Servicer, as applicable, shall, in the event that
(i) there shall not have been maintained on the related Mortgaged Property
a policy otherwise complying with the provisions of Section 3.08(a), and
(ii) there shall have been one or more losses which would have been
covered by such a policy had it been maintained, immediately deposit into
the Collection Account from its own funds the amount not otherwise payable
under the blanket policy because of such deductible clause to the extent
that any such deductible exceeds the deductible limitation that pertained
to the related Mortgage Loan, or, in the absence of any such deductible
limitation, the deductible limitation which is consistent with the
Servicing Standard. In connection with its activities as Servicer or the
Special Servicer hereunder, as applicable, the Servicer or the Special
Servicer, respectively, agrees to prepare and present, on behalf of
itself, the Trustee and Certificateholders, claims under any such blanket
policy which it maintains in a timely fashion in accordance with the terms
of such policy and to take such reasonable steps as are necessary to
receive payment or permit recovery thereunder.
(II) If the Servicer or the Special Servicer, as applicable,
causes any Mortgaged Property or REO Property to be covered by a master
force placed insurance policy, such policy shall be issued by a Qualified
Insurer and provide no less coverage in scope and amount for such
Mortgaged Property or REO Property than the insurance required to be
maintained pursuant to Section 3.08(a) in which case the Servicer or
Special Servicer shall conclusively be deemed to have satisfied its
respective obligations to maintain insurance pursuant to Section 3.08(a).
Such policy may contain a deductible clause, in which case the Servicer or
the Special Servicer, as applicable, shall, in the event that (i) there
shall not have been maintained on the related Mortgaged Property or REO
Property a policy otherwise complying with the provisions of Section
3.08(a), and (ii) there shall have been one or more losses which would
have been covered by such a policy had it been maintained, immediately
deposit into the Collection Account from its own funds the amount not
otherwise payable under such policy because of such deductible to the
extent that any such deductible exceeds the deductible limitation that
pertained to the related Mortgage Loan, or, in the absence of any such
deductible limitation, the deductible limitation which is consistent with
the Servicing Standard.
(c) The Servicer and the Special Servicer shall maintain a
fidelity bond in the form and amount that would meet the servicing requirements
of prudent institutional commercial mortgage lenders and loan servicers with
the Trustee named as loss payee. The Servicer and the Special Servicer each
shall be deemed to have complied with this provision if one of its respective
Affiliates has such fidelity bond coverage and, by the terms of such fidelity
bond, the coverage afforded thereunder extends to the Servicer and the Special
Servicer, as applicable. In addition, the Servicer and the Special Servicer
shall keep in force during the term of this Agreement a policy or policies of
insurance covering loss occasioned by the errors and omissions of its officers
and employees in connection with its obligations to service the Mortgage Loans
hereunder in the form and amount that would meet the servicing requirements of
prudent institutional commercial mortgage lenders and loan servicers with the
Trustee named as loss payee. The Servicer shall cause each and every
sub-servicer for it to maintain, or cause to be maintained by any agent or
contractor servicing any Mortgage Loan on behalf of such sub-servicer, a
fidelity bond and an errors and omissions insurance policy which satisfy the
requirements for the fidelity bond and the errors and omissions policy to be
maintained by the Servicer pursuant to this Section 3.08(c). All fidelity bonds
and policies of errors and omissions insurance obtained under this Section
3.08(c) shall be issued by a Qualified Insurer.
SECTION 3.09. Enforcement of Due-On-Sale Clauses;
Assumption Agreements; Defeasance
Provisions.
(a) If any Mortgage Loan contains a provision in
the nature of a "due-on-sale" clause, which by its terms:
(i) provides that such Mortgage Loan shall (or may at
the mortgagee's option) become due and payable upon
the sale or other transfer of an interest in the
related Mortgaged Property, or
(ii) provides that such Mortgage Loan may not be assumed
without the consent of the related mortgagee in
connection with any such sale or other transfer,
then, for so long as such Mortgage Loan is included in the Trust Fund, the
Servicer or Special Servicer, as applicable, on behalf of the Trust Fund shall
not be required to enforce such due-on-sale clause and in connection therewith
shall not be required to (x) accelerate payments thereon or (y) withhold its
consent to such an assumption to the extent permitted under the terms of the
related Mortgage Loan if (x) such provision is not exercisable under applicable
law or such exercise is reasonably likely to result in meritorious legal action
by the Borrower or (y) the Servicer or Special Servicer, as applicable,
determines, in accordance with the Servicing Standard, that granting such
consent would be likely to result in a greater recovery, on a present value
basis (discounting at the related Mortgage Rate) than would enforcement of such
clause. If the Servicer or Special Servicer, as applicable, determines that
granting of such consent would likely result in a greater recovery or such
provision is not legally enforceable, the Servicer or Special Servicer, as
applicable, is authorized to take or enter into an assumption agreement from or
with the Person to whom the related Mortgaged Property has been or is about to
be conveyed, and to release the original Borrower from liability upon the
Mortgage Loan and substitute the new Borrower as obligor thereon, provided,
that (a) the credit status of the prospective new Borrower is in compliance
with the Servicer's or Special Servicer's regular commercial mortgage
origination or servicing standards and criteria (as evidenced in writing by the
Servicer or Special Servicer) and the terms of the related Mortgage and (b) the
Servicer or Special Servicer has received written confirmation from each of
Fitch, Moody's and S&P, and, if the Mortgage Loan represents greater than 2% of
the aggregate Stated Principal Balances of the Mortgage Loans, DCR that such
assumption or substitution would not, in and of itself, cause a downgrade,
qualification or withdrawal of the then current ratings assigned to the
Certificates. In connection with each such assumption or substitution entered
into by the Special Servicer, the Special Servicer shall give prior notice
thereof to the Servicer. The Servicer or Special Servicer, as applicable, shall
notify the Trustee that any such assumption or substitution agreement has been
completed by forwarding to the Trustee (with a copy to the Servicer, if
applicable,) the original copy of such agreement, which copies shall be added
to the related Mortgage File and shall, for all purposes, be considered a part
of such Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.
(b) If any Mortgage Loan contains a provision in the nature
of a "due-on-encumbrance" clause, which by its terms:
(i) provides that such Mortgage Loan shall (or may at
the mortgagee's option) become due and payable upon
the creation of any lien or other encumbrance on the
related Mortgaged Property, or
(ii) requires the consent of the related mortgagee
to the creation of any such lien or other
encumbrance on the related Mortgaged Property,
then the Servicer or Special Servicer, as applicable, on behalf of the Trust
Fund, shall not be required to enforce such due-on-encumbrance clause and in
connection therewith will not be required to (i) accelerate the payments on the
related Mortgage Loan or (ii) withhold its consent to such lien or encumbrance
if the Servicer or Special Servicer, as applicable, (x) determines, in
accordance with the Servicing Standard, that such consent would be in the best
interests of the Trust Fund and (y) receives prior written confirmation from
each of Fitch, Moody's and S&P, and, if the Mortgage Loan represents greater
than 2% of the aggregate Stated Principal Balances of the Mortgage Loans, DCR
that granting such consent would not, in and of itself, cause a downgrade,
qualification or withdrawal of any of the then current ratings assigned to the
Certificates.
(c) Nothing in this Section 3.09 shall constitute a waiver of
the Trustee's right, as the mortgagee of record, to receive notice of any
assumption of a Mortgage Loan, any sale or other transfer of the related
Mortgaged Property or the creation of any lien or other encumbrance with
respect to such Mortgaged Property.
(d) In connection with the taking of, or the failure to take,
any action pursuant to this Section 3.09, neither the Servicer nor the Special
Servicer shall agree to modify, waive or amend, and no assumption or
substitution agreement entered into pursuant to Section 3.09(a) shall contain
any terms that are different from, any term of any Mortgage Loan or the related
Note, other than pursuant to Section 3.30.
(e) With respect to any Mortgage Loan which permits release
of Mortgaged Properties through defeasance:
(i) In the event such Mortgage Loan requires that the
Servicer on behalf of the Trustee purchase the
required U.S. government obligations, the Servicer
shall purchase such obligations in accordance with
the terms of such Mortgage Loan; provided, that the
Servicer shall not accept the amounts paid by the
related Borrower to effect defeasance until
acceptable U.S. government obligations have been
identified.
(ii) In the event that such Mortgage Loan permits the
assumption of the obligations of the related
Borrower by a successor mortgagor, prior to
permitting such assumption and to the extent not
inconsistent with such Mortgage Loan, the Servicer
shall obtain written confirmation from each Rating
Agency that such assumption would not, in and of
itself, cause a downgrade, qualification or
withdrawal of the then current ratings assigned to
the Certificates.
(iii) To the extent not inconsistent with such Mortgage
Loan, the Servicer shall require an Opinion of
Counsel to the related Borrower (which shall be an
expense of the related Borrower) to the effect that
the Trustee has a first priority security interest
in the defeasance deposit and the U.S. government
obligations and the assignment thereof is valid and
enforceable; such opinion, together with any other
certificates or documents to be required in
connection with such defeasance shall be in form and
substance acceptable to each Rating Agency.
(iv) To the extent not inconsistent with the Mortgage
Loan, the Servicer shall require a certificate at
the related Borrower's expense from an Independent
certified public accountant certifying that the U.S.
government obligations comply with the requirements
of the related Loan Agreement or Mortgage.
(v) Prior to permitting release of any Mortgaged
Properties through defeasance, to the extent not
inconsistent with the related Mortgage Loan, the
Servicer shall obtain written confirmation from each
Rating Agency that such defeasance would not, in and
of itself, result in a downgrade, qualification or
withdrawal of the then current ratings assigned to
the Certificates.
(vi) Prior to permitting release of any Mortgaged
Property through defeasance, if the related Mortgage
Loan so requires and provides for the related
Borrower to pay the cost thereof, the Servicer shall
require an Opinion of Counsel of the related
Borrower to the effect that such release will not
cause either the Upper-Tier REMIC or Lower-Tier
REMIC to fail to qualify as a REMIC at any time that
any Certificates are outstanding or cause a tax to
be imposed on the Trust Fund under the REMIC
Provisions.
SECTION 3.10. Appraisals; Realization Upon Defaulted
Mortgage Loans.
(a) Contemporaneously with the earliest of (i) the effective
date of any (A) modification of a Mortgage Rate, principal balance or
amortization terms of any Mortgage Loan, or any other term of a Mortgage Loan,
(B) extension of the Maturity Date of a Mortgage Loan as described below in
Section 3.30(c), or (C) consent to the release of any Mortgaged Property from
the lien of the related Mortgage other than pursuant to the terms of the
related Mortgage Loan, (ii) the occurrence of any Appraisal Reduction Event,
(iii) a default in the payment of a Balloon Payment, or (iv) the date on which
the Special Servicer, consistent with the Servicing Standard, requests that an
Updated Appraisal be obtained, the Servicer (after consultation with the
Special Servicer) shall obtain an Updated Appraisal; provided, however, that
the Servicer shall not be required to obtain an Updated Appraisal pursuant to
clauses (i) through (iv) above with respect to any Mortgaged Property for which
there exists an appraisal which is less than twelve months old. The Servicer
shall obtain letter updates to each Updated Appraisal annually and prior to the
Special Servicer granting extensions beyond one year or any subsequent
extension after granting a one year extension with respect to the same Mortgage
Loan. For so long as any Mortgage Loan for which an Updated Appraisal has been
obtained is included in the Trust Fund, the Servicer shall obtain a new Updated
Appraisal with respect to an Updated Appraisal which is more than three years
old. The Servicer shall send all such letter updates and Updated Appraisals to
the Rating Agencies.
(b) Upon the occurrence of a material default under a
Specially Serviced Mortgage Loan, except as otherwise specifically provided in
Section 3.09(a) and (b), the Special Servicer may, consistent with the
Servicing Standard, accelerate such Specially Serviced Mortgage Loan and
commence a foreclosure or other acquisition with respect to the related
Mortgaged Property or Properties, provided, that the Special Servicer
determines that such acceleration and foreclosure are more likely to produce a
greater recovery to Certificateholders on a present value basis (discounting at
the related Mortgage Rate) than would a waiver of such default or an extension
or modification in accordance with the provisions of Section 3.30 hereof. In
connection with any foreclosure or other acquisition as to which the Special
Servicer is not required to act under Instructions from the Directing Holders,
the Servicer shall pay the costs and expenses in any such proceedings as an
Advance unless the Servicer determines, in its good faith judgment, that such
Advance would constitute a Nonrecoverable Advance. The Servicer shall be
entitled to reimbursement of Advances (with interest at the Advance Rate) made
pursuant to the preceding sentence to the extent permitted by Section 3.06(ii),
(iii) and (vii). If the Special Servicer is acting pursuant to Instructions,
the cost and expenses in any such proceeding shall be paid by the Directing
Certificateholders or the Special Servicer, without reimbursement therefor by
the Trust Fund.
(c) If the Special Servicer elects to proceed with a
non-judicial foreclosure in accordance with the laws of the state where the
Mortgaged Property is located, the Special Servicer shall not be required to
pursue a deficiency judgment against the related Borrower or any other liable
party if the laws of the state do not permit such a deficiency judgment after a
non-judicial foreclosure or if the Special Servicer determines, in its best
judgment, that the likely recovery if a deficiency judgment is obtained will
not be sufficient to warrant the cost, time, expense and/or exposure of
pursuing the deficiency judgment and such determination is evidenced by an
Officers' Certificate delivered to the Trustee.
(d) In the event that title to any Mortgaged Property is
acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be issued to the Trustee, or to its nominee (which
shall not include the Special Servicer) or a separate trustee or co-trustee on
behalf of the Trustee as holder of the Lower-Tier Regular Interests and
Certificateholders. Notwithstanding any such acquisition of title and
cancellation of the related Mortgage Loan, such Mortgage Loan shall (except for
purposes of Section 9.01) be considered to be an REO Loan held in the Trust
Fund until such time as the related REO Property shall be sold by the Trust
Fund and shall be reduced only by collections net of expenses. Consistent with
the foregoing, for purposes of all calculations hereunder, so long as such
Mortgage Loan shall be considered to be an outstanding Mortgage Loan:
(i) it shall be assumed that, notwithstanding that the
indebtedness evidenced by the related Note shall have been
discharged, such Note and, for purposes of determining the
Stated Principal Balance thereof, the related amortization
schedule in effect at the time of any such acquisition of
title shall remain in effect; and
(ii) Subject to Section 1.02(b), Net REO Proceeds received in
any month shall be applied to amounts that would have been
payable under the related Note in accordance with the terms
of such Note. In the absence of such terms, Net REO Proceeds
shall be deemed to have been received first in payment of the
accrued interest (not including Excess Interest) that
remained unpaid on the date that the related REO Property was
acquired by the Trust Fund; second in respect of the
delinquent principal installments that remained unpaid on
such date; and thereafter, Net REO Proceeds received in any
month shall be applied to the payment of installments of
principal and accrued interest on such Mortgage Loan deemed
to be due and payable in accordance with the terms of such
Note and such amortization schedule until such principal has
been paid in full and then to Excess Interest and other
amounts due under such Mortgage Loan. If such Net REO
Proceeds exceed the Monthly Payment then payable, the excess
shall be treated as a Principal Prepayment received in
respect of such Mortgage Loan.
(e) Notwithstanding any provision herein to the contrary, the
Special Servicer shall not acquire for the benefit of the Trust Fund any
personal property pursuant to this Section 3.10 unless either:
(i) such personal property is incident to real property
(within the meaning of Section 856(e)(1) of the Code) so
acquired by the Special Servicer for the benefit of the Trust
Fund; or
(ii) the Special Servicer shall have requested and received
an Opinion of Counsel (which opinion shall be an expense of
the Lower-Tier REMIC) to the effect that the holding of such
personal property by the Lower-Tier REMIC will not cause the
imposition of a tax on the Lower-Tier REMIC or Upper-Tier
REMIC under the REMIC Provisions or cause the Lower-Tier
REMIC or Upper-Tier REMIC to fail to qualify as a REMIC at
any time that any Certificate is outstanding.
(f) Notwithstanding any provision to the contrary in this
Agreement, the Special Servicer shall not, on behalf of the Trust Fund, obtain
title to any direct or indirect partnership interest or other equity interest
in any Borrower pledged pursuant to any pledge agreement unless the Special
Servicer shall have requested and received an Opinion of Counsel (which opinion
shall be an expense of the Trust Fund) to the effect that the holding of such
partnership interest or other equity interest by the Trust Fund will not cause
the imposition of a tax on the Lower-Tier REMIC or Upper-Tier REMIC under the
REMIC Provisions or cause the Lower-Tier REMIC or Upper-Tier REMIC to fail to
qualify as a REMIC at any time that any Certificate is outstanding.
(g) Notwithstanding any provision to the contrary contained
in this Agreement, the Special Servicer shall not, on behalf of the Trust Fund,
obtain title to a Mortgaged Property as a result of or in lieu of foreclosure
or otherwise, obtain title to any direct or indirect partnership interest in
any Borrower pledged pursuant to a pledge agreement and thereby be the
beneficial owner of a Mortgaged Property, and shall not otherwise acquire
possession of, or take any other action with respect to, any Mortgaged Property
if, as a result of any such action, the Trustee, for the Trust Fund or the
Certificateholders, would be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or "operator" of such
Mortgaged Property within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from time to time,
or any comparable law, unless the Special Servicer has previously determined in
accordance with the Servicing Standard, based on an updated environmental
assessment report prepared by an Independent Person who regularly conducts
environmental audits, that:
(i) such Mortgaged Property is in compliance with
applicable environmental laws or, if not, after consultation with an
environmental consultant, that it would be in the best economic
interest of the Trust Fund to take such actions as are necessary to
bring such Mortgaged Property in compliance therewith, and
(ii) there are no circumstances present at such
Mortgaged Property relating to the use, management or disposal of any
Hazardous Materials for which investigation, testing, monitoring,
containment, clean-up or remediation could be required under any
currently effective federal, state or local law or regulation, or
that, if any such Hazardous Materials are present for which such
action could be required, after consultation with an environmental
consultant, it would be in the best economic interest of the Trust
Fund to take such actions with respect to the affected Mortgaged
Property.
In the event that the environmental assessment first obtained
by the Special Servicer with respect to a Mortgaged Property indicates that
such Mortgaged Property may not be in compliance with applicable environmental
laws or that Hazardous Materials may be present but does not definitively
establish such fact, the Special Servicer shall cause such further
environmental tests to be conducted by an Independent Person who regularly
conducts such tests as the Special Servicer shall deem prudent to protect the
interests of Certificateholders. Any such tests shall be deemed part of the
environmental assessment obtained by the Special Servicer for purposes of this
Section 3.10.
(h) The environmental assessment contemplated by Section
3.10(g) shall be prepared within three months of the determination that such
assessment is required by any Independent Person who regularly conducts
environmental audits for purchasers of commercial property where the Mortgaged
Property is located, as determined by the Special Servicer in a manner
consistent with the Servicing Standard. The Servicer shall advance the cost of
preparation of such environmental assessments unless the Servicer determines,
in its good faith judgment, that such Advance would be a Nonrecoverable
Advance. The Servicer shall be entitled to reimbursement of Advances (with
interest at the Advance Rate) made pursuant to the preceding sentence in the
manner set forth in Section 3.06.
(i) If the Special Servicer determines pursuant to Section
3.10(g)(i) that a Mortgaged Property is not in compliance with applicable
environmental laws but that it is in the best economic interest of the Trust
Fund to take such actions as are necessary to bring such Mortgaged Property in
compliance therewith, or if the Special Servicer determines pursuant to Section
3.10(g)(ii) that the circumstances referred to therein relating to Hazardous
Materials are present but that it is in the best economic interest of the Trust
Fund to take such action with respect to the containment, clean-up or
remediation of Hazardous Materials affecting such Mortgaged Property as is
required by law or regulation, the Special Servicer shall take such action as
it deems to be in the best economic interest of the Trust Fund, but only if the
Trustee has mailed notice to the Holders of the Regular Certificates of such
proposed action, which notice shall be prepared by the Special Servicer, and
only if the Trustee does not receive, within 30 days of such notification,
instructions from the Holders of greater than 50% of the aggregate Voting
Rights of such Classes directing the Special Servicer not to take such action.
Notwithstanding the foregoing, if the Special Servicer reasonably determines
that it is likely that within such 30-day period irreparable environmental harm
to such Mortgage Property would result from the presence of such Hazardous
Materials and provides a prior written statement to the Trustee setting forth
the basis for such determination, then the Special Servicer may take such
action to remedy such condition as may be consistent with the Servicing
Standard. None of the Trustee, the Servicer or the Special Servicer shall be
obligated to take any action or not take any action pursuant to this Section
3.10(i) at the direction of the Certificateholders unless the
Certificateholders agree to indemnify the Trustee, the Servicer and the Special
Servicer with respect to such action or inaction. The Special Servicer shall
advance the cost of any such compliance, containment, clean-up or remediation
unless the Special Servicer determines, in its good faith judgment, that such
Advance would constitute a Nonrecoverable Advance.
(j) The Special Servicer shall report to the IRS and to the
related Borrower, in the manner required by applicable law, the information
required to be reported regarding any Mortgaged Property which is abandoned or
foreclosed or regarding any cancellation of indebtedness with respect to any
Mortgage Loan. The Special Servicer shall deliver a copy of any such report to
the Trustee.
(k) The costs of any Updated Appraisal obtained pursuant to
this Section 3.10 shall be paid by the Servicer as an Advance and shall be
reimbursable from the Collection Account (or from the Collateral Account to the
extent Advances are otherwise reimbursable therefrom pursuant to this Section
3.10).
SECTION 3.11. Trustee to Cooperate; Release of
Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt
by the Servicer of a notification that payment in full has been escrowed in a
manner customary for such purposes, the Servicer shall immediately notify the
Trustee or the Custodian by a certification (which certification shall include
a statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 3.05 have been or will be so deposited)
of a Servicing Officer and shall request delivery to it of the Mortgage File.
No expenses incurred in connection with any instrument of satisfaction or deed
of reconveyance shall be chargeable to the Trust Fund.
From time to time upon request of the Servicer or Special
Servicer and delivery to the Trustee and the Custodian of a Request for
Release, the Trustee shall promptly cause the Custodian to release the Mortgage
File (or any portion thereof) designated in such Request for Release to the
Servicer or Special Servicer, as applicable. Upon return of the foregoing to
the Custodian, or in the event of a liquidation or conversion of the Mortgage
Loan into an REO Property, receipt by the Trustee of a certificate of a
Servicing Officer stating that such Mortgage Loan was liquidated and that all
amounts received or to be received in connection with such liquidation which
are required to be deposited into the Collection Account or Distribution
Account have been so deposited, or that such Mortgage Loan has become an REO
Property, the Custodian shall deliver a copy of the Request for Release to the
Servicer or Special Servicer, as applicable.
Upon written certification of a Servicing Officer, the
Trustee shall execute and deliver to the Special Servicer any court pleadings,
requests for trustee's sale or other documents prepared by the Special
Servicer, its agents or attorneys, necessary to the foreclosure or trustee's
sale in respect of a Mortgaged Property or to any legal action brought to
obtain judgment against any Borrower on the Note or Mortgage or to obtain a
deficiency judgment, or to enforce any other remedies or rights provided by the
Note or Mortgage or otherwise available at law or in equity. Each such
certification shall include a request that such pleadings or documents be
executed by the Trustee and a statement as to the reason such documents or
pleadings are required, and that the execution and delivery thereof by the
Trustee will not invalidate or otherwise affect the lien of the Mortgage,
except for the termination of such a lien upon completion of the foreclosure or
trustee's sale.
SECTION 3.12. Servicing Fees, Trustee Fees and
Special Servicing Compensation.
(a) As compensation for its activities hereunder, the
Servicer shall be entitled with respect to each Mortgage Loan to the Servicing
Fee, which shall be payable from amounts on deposit in the Collection Account
as set forth in Section 3.06(iv). The Servicer's rights to the Servicing Fee
may not be transferred in whole or in part except in connection with the
transfer of all of the Servicer's responsibilities and obligations under this
Agreement. In addition, the Servicer shall be entitled to receive, as
additional Servicing Compensation, to the extent permitted by applicable law
and the related Mortgage Loans (and not otherwise payable to the Special
Servicer pursuant to Section 3.12(b)), any late payment charges, assumption
fees, loan modification fees, extension fees, loan service transaction fees,
demand fees, beneficiary statement charges or similar items (but not including
any Prepayment Premiums), in each case to the extent received and not required
to be deposited or retained in the Collection Account pursuant to Section 3.05;
provided, however, that the Servicer shall not be entitled to apply or retain
any amounts as additional compensation, any late payment charges with respect
to any Mortgage Loan with respect to which a default or event of default
thereunder has occurred and is continuing unless and until such default or
event of default has been cured and all delinquent amounts (including any
Default Interest) due with respect to such Mortgage Loan have been paid. The
Servicer shall also be entitled pursuant to, and to the extent provided in,
Sections 3.06(iv) and 3.07(b) to withdraw from the Collection Account and to
receive from any Borrower Accounts (to the extent not payable to the related
Borrower under the Mortgage Loan or applicable law), the Distribution Account,
Upper-Tier Distribution Account, Default Interest Distribution Account, and the
Excess Interest Distribution Account, any interest or other income earned on
deposits therein. Notwithstanding the foregoing, the Servicing Fee and
investment income earned on any Principal Prepayments during the related
Collection Period and due to the Servicer on any Distribution Date shall be
reduced by the amount of any Servicer Prepayment Interest Shortfalls.
As compensation for its activities hereunder on each
Distribution Date, the Trustee shall be entitled with respect to each Mortgage
Loan to the Trustee Fee, which shall be payable from amounts on deposit in the
Collection Account as set forth in Section 3.06(v). The Trustee shall pay the
routine fees and expenses of the Certificate Registrar, the Paying Agent, the
Custodian and the Authenticating Agent. The Trustee's rights to the Trustee Fee
may not be transferred in whole or in part except in connection with the
transfer of all of the Trustee's responsibilities and obligations under this
Agreement.
Except as otherwise provided herein, the Servicer shall pay
all expenses incurred by it in connection with its servicing activities
hereunder, including all fees of any sub-servicers retained by it. Except as
otherwise provided herein, the Trustee shall pay all expenses incurred by it in
connection with its activities hereunder.
(b) As compensation for its activities hereunder, the Special
Servicer shall be entitled with respect to each Specially Serviced Mortgage
Loan to the Special Servicing Fee, which shall be payable from amounts on
deposit in the Collection Account as set forth in Section 3.06(iv). The Special
Servicer's rights to the Special Servicing Fee may not be transferred in whole
or in part except in connection with the transfer of all of the Special
Servicer's responsibilities and obligations under this Agreement. In addition,
the Special Servicer shall be entitled to receive, as Special Servicing
Compensation, (i) to the extent permitted by applicable law and the related
Loan Documents, any Assumption Fees, loan service transaction fees, demand
fees, statement charges and other fees relating to any Specially Serviced
Mortgage Loan or with respect to servicing activities performed by the Special
Servicer and, for any modification, extension or other action by the Special
Servicer for which the consent of, or review by, the Servicer is required,
one-half of any modification, extension or other fees payable by the related
Borrower in connection therewith and (ii) any interest or other income earned
on deposits in the REO Accounts. If a review by, or the consent of, the
Servicer is not required in connection with an extension, modification or other
action, the Special Servicer shall be entitled to the full amount of any
modification, extension or other fees.
Except as otherwise provided herein, the Special Servicer
shall pay all expenses incurred by it in connection with its servicing
activities hereunder.
(c) Reserved.
(d) Notwithstanding the foregoing, in the event that the
Special Servicer is, or is an Affiliate of, or has an economic arrangement for
the purpose of retaining the full Special Servicing Fee Rate with, the Holder
or Holders of Certificates representing greater than 50% of the Percentage
Interests of the most subordinate Class of Certificates then outstanding, the
Special Servicer shall provide written notice thereof to the Servicer and the
Special Servicer shall be entitled to receive a Special Servicing Fee that
accrues at a rate equal to one-half of the Special Servicing Fee Rate.
(e) The Servicer, Special Servicer and Trustee shall be
entitled to reimbursement from the Trust Fund for the costs and expenses
incurred by them in the performance of their duties under this Agreement which
are "unanticipated expenses incurred by the REMIC" within the meaning of
Treasury Regulations Section 1.860G-1(b)(3)(iii). Such expenses shall include,
by way of example and not by way of limitation, environmental assessments,
Updated Appraisals and appraisals in connection with foreclosure, the fees and
expenses of any administrative or judicial proceeding and expenses expressly
identified as reimbursable in Section 3.06(vii).
(f) No provision of this Agreement or of the Certificates
shall require the Servicer, the Special Servicer, the Trustee or the Fiscal
Agent to expend or risk their own funds or otherwise incur any financial
liability in the performance of any of their duties hereunder or thereunder, or
in the exercise of any of their rights or powers, if, in the good faith
business judgment of the Servicer, Special Servicer, Trustee or Fiscal Agent,
as the case may be, repayment of such funds would not be ultimately recoverable
from late payments, Net Insurance Proceeds, Net Liquidation Proceeds and other
collections on or in respect of the Mortgage Loans, or from adequate indemnity
from other assets comprising the Trust Fund against such risk or liability.
If the Servicer, the Special Servicer or the Trustee receives
a request or inquiry from a Borrower, any Certificateholder or any other Person
the response to which would, in the Servicer's or the Trustee's good faith
business judgment require the assistance of Independent legal counsel or other
consultant to the Servicer, the Special Servicer or the Trustee, the cost of
which would not be an expense of the Trust Fund hereunder, then the Servicer,
the Special Servicer or the Trustee, as the case may be, shall not be required
to take any action in response to such request or inquiry unless the Borrower
or such Certificateholder or such other Person, as applicable, makes
arrangements for the payment of the Servicer's, the Special Servicer's or the
Trustee's expenses associated with such counsel (including, without limitation,
posting an advance payment for such expenses) satisfactory to the Servicer, the
Special Servicer or the Trustee, as the case may be, in its sole discretion.
Unless such arrangements have been made, the Servicer, the Special Servicer or
the Trustee, as the case may be, shall have no liability to any Person for the
failure to respond to such request or inquiry.
SECTION 3.13. Reports to the Trustee; Collection
Account Statements.
(a) The Servicer shall deliver to the Trustee and the Special
Servicer, no later than 12:00 noon Central time on the Servicer Remittance Date
prior to each Distribution Date, the Servicer Remittance Report with respect to
the related Distribution Date (which shall include, without limitation, the
amount of Available Funds for such related Collection Period) including a
written statement of anticipated P&I Advances for the related Distribution
Date. The Servicer's responsibilities under this Section 3.13(a) with respect
to REO Loans shall be subject to the satisfaction of the Special Servicer's
obligations under Section 3.26.
(b) For so long as the Servicer makes deposits into and
withdrawals from the Collection Account, not later than fifteen days after each
Distribution Date, the Servicer shall forward to the Trustee and the Fiscal
Agent a statement prepared by the Servicer setting forth the status of the
Collection Account as of the close of business on the last Business Day of the
related Collection Period and showing the aggregate amount of deposits into and
withdrawals from the Collection Account of each category of deposit specified
in Section 3.05 and each category of withdrawal specified in Section 3.06 for
the related Collection Period. The Trustee and its agents and attorneys may at
any time during normal business hours, upon reasonable notice, inspect and copy
the books, records and accounts of the Servicer solely relating to the Mortgage
Loans and the performance of its duties hereunder.
(c) No later than 12:00 noon Central time on the Servicer
Remittance Date, the Servicer shall deliver or cause to be delivered to the
Trustee the following reports with respect to the Mortgage Loans (and, if
applicable, the related REO Properties), providing the required information as
of the Due Date: (i) a Comparative Financial Status Report, (ii) a Delinquent
Loan Status Report; (iii) an Historical Loss Estimate Report; (iv) an
Historical Loan Modification Report; and (v) an REO Status Report. Such reports
shall be presented in writing and on a computer readable medium reasonably
acceptable to the Trustee. The information that pertains to Specially Serviced
Mortgage Loans and REO Properties reflected in such reports shall be based
solely upon the reports delivered by the Special Servicer to the Servicer at
least one Business Day prior to the related Servicer Remittance Date in the
form required by Section 3.13(f) or shall be provided by means of such reports
so delivered by the Special Servicer to the Servicer in the form so required.
In the absence of manifest error, the Servicer shall be entitled to
conclusively rely upon, without investigation or inquiry, the information and
reports delivered to it by the Special Servicer, and the Trustee shall be
entitled to conclusively rely upon the Servicer's reports and the Special
Servicer's reports without any duty or obligation to recompute, verify or
recalculate any of the amounts and other information stated therein.
(d) The Servicer shall deliver or cause to be delivered to
the Trustee the following materials, in each case to the extent that such
materials or the information on which they are based have been received by the
Servicer:
(i) At least annually by June 30th, with respect to
each Mortgage Loan and REO Mortgage Loan (to the extent prepared by
and received from the Special Servicer in the case of any Specially
Serviced Mortgage Loan or REO Mortgage Loan), an Operating Statement
Analysis for the related Mortgaged Property or REO Property as of the
end of the preceding fiscal year, together with copies of the
operating statements and rent rolls (but only to the extent the
related Borrower is required by the Mortgage to deliver, or otherwise
agrees to provide such information and, with respect to operating
statements and rent rolls for Specially Serviced Mortgage Loans and
REO Properties, only to the extent requested by the Special Servicer)
for the related Mortgaged Property or REO Property as of the end of
the preceding fiscal year. The Servicer shall use its best reasonable
efforts to obtain said annual operating statements and rent rolls with
respect to each of the Mortgage Loans other than Specially Serviced
Mortgage Loans or REO Mortgage Loans, which efforts shall include a
letter sent to the related Borrower each quarter (followed up with
telephone calls) requesting such annual operating statements and rent
rolls until they are received to the extent such action is consistent
with applicable law and the terms of the Mortgage Loans.
(ii) Within thirty days after receipt by the
Servicer (or the Special Servicer in the case of a Specially Serviced
Mortgage Loan or REO Property) of any annual operating statements with
respect to any Mortgaged Property or REO Property (to the extent
prepared by and received from the Special Servicer in the case of any
Specially Serviced Mortgage Loan or REO Property), an NOI Adjustment
Worksheet for such Mortgaged Property (with the annual operating
statements attached thereto as an exhibit).
The Servicer shall maintain one Operating Statement Analysis report for each
Mortgaged Property and REO Property (to the extent prepared by and received
from the Special Servicer in the case of any REO Property or any Mortgaged
Property constituting security for a Specially Serviced Mortgage Loan). The
Operating Statement Analysis report for each Mortgaged Property (other than any
such Mortgaged Property which is REO Property or constitutes security for a
Specially Serviced Mortgage Loan) is to be updated by the Servicer and such
updated report delivered to the Trustee within thirty days after receipt by the
Servicer of updated operating statements for such Mortgaged Property. The
Servicer will use the "Normalized" column from the NOI Adjustment Worksheet to
update the Operating Statement Analysis report and will use any operating
statements received with respect to any Mortgaged Property (other than any such
Mortgaged Property which is REO Property or constitutes security for a
Specially Serviced Mortgage Loan) to update the Operating Statement Analysis
report for such Mortgaged Property, such updates to be completed and copies
thereof sent to the Trustee within thirty days after receipt of the necessary
information.
The Special Servicer will be required pursuant to Section
3.13(g) to deliver to the Servicer the information required pursuant to this
Section 3.13(d) with respect to Specially Serviced Mortgage Loans and REO
Mortgage Loans on or before June 10th of each year, commencing on June 10,
1997, and within ten days after its receipt of any operating statement for any
related Mortgaged Property or REO Property.
(e) No later than 12:00 noon Central time on the Servicer
Remittance Date, beginning in May 1997, the Servicer shall prepare and deliver
to the Trustee and the Special Servicer, a Watch List of all Mortgage Loans
that the Servicer has determined are in jeopardy of becoming Specially Serviced
Mortgage Loans. For this purpose, Mortgage Loans that are in jeopardy of
becoming Specially Serviced Mortgage Loans shall include, without limitation:
(i) Mortgage Loans having a current Debt Service Coverage Ratio that is 80% or
less of the Debt Service Coverage Ratio as of the Cut-off Date or having a Debt
Service Coverage Ratio that is less than 1.00x, (ii) Mortgage Loans as to which
any required inspection of the related Mortgaged Property conducted by the
Servicer indicates a problem that the Servicer determines can reasonably be
expected to materially adversely affect the cash flow generated by such
Mortgaged Property, (iii) Mortgage Loans which have come to the Servicer's
attention in the performance of its duties under this Agreement (without any
expansion of such duties by reason hereof) that (A) any tenant occupying 25% or
more of the space in the related Mortgaged Property has vacated (without being
replaced by a comparable tenant and lease) or been the subject of bankruptcy or
similar proceedings or (B) relate to a borrower or an affiliate that is the
subject of a bankruptcy or similar proceeding, (iv) Mortgage Loans that are at
least one Collection Period delinquent in payment, and (v) Mortgage Loans that
are within 60 days of maturity.
The Special Servicer shall report to the Servicer any of the
foregoing events promptly upon the Special Servicer having knowledge of such
event. In addition, in connection with their servicing of the Mortgage Loans,
the Servicer and the Special Servicer shall provide to each other and to the
Trustee written notice of any event that comes to their knowledge with respect
to a Mortgage Loan or REO Property that the Servicer or the Special Servicer,
respectively, determines, in accordance with Servicing Standards, would have a
material adverse effect on such Mortgage Loan or REO Property, which notice
shall include an explanation as to the reason for such material adverse effect.
(f) At least one Business Day prior to each Servicer
Remittance Date, the Special Servicer shall deliver, or cause to be delivered,
to the Servicer and S&P and, upon the request of any of the Trustee, the
Depositor or any other Rating Agency, to such requesting party, the following
reports with respect to the Specially Serviced Mortgage Loans (and, if
applicable, the related REO Properties), providing the required information as
of the Due Date: (i) a Delinquent Loan Status Report; (ii) an Historical Loss
Estimate Report; (iii) an Historical Loan Modification Report; (iv) an REO
Status Report; (v) Comparative Financial Status Reports with respect to all
Specially Serviced Mortgage Loans; and (vi) a Watch List. Such reports shall be
presented in writing and on a computer readable magnetic medium.
(g) The Special Servicer shall deliver or cause to be
delivered to the Servicer and S&P and, upon the request of any of the Trustee,
the Depositor or any other Rating Agency, to such requesting party, the
following materials, in each case to the extent that such materials or the
information on which they are based have been received by the Special Servicer:
(i) Annually, on or before June 10 of each year,
commencing with June 10, 1997, with respect to each Specially Serviced
Mortgage Loan and REO Mortgage Loan, an Operating Statement Analysis
for the related Mortgaged Property or REO Property as of the end of
the preceding calendar year, together with copies of the operating
statements and rent rolls for the related Mortgaged Property or REO
Property as of the end of the preceding calendar year. The Special
Servicer shall use its best reasonable efforts to obtain said annual
operating statements and rent rolls with respect to each Mortgaged
Property constituting security for a Specially Serviced Mortgage Loan
and each REO Property, which efforts shall include a letter sent to
the related Borrower or other appropriate party each quarter (followed
up with telephone calls) requesting such annual operating statements
and rent rolls until they are received.
(ii) Within 10 days of receipt by the Special
Servicer of any annual operating statements with respect to any
Mortgaged Property relating to a Specially Serviced Mortgage Loan, or
at least six months of operating information with respect to any REO
Property, an NOI Adjustment Worksheet for such Mortgaged Property or
REO Property (with the annual operating statements attached thereto as
an exhibit).
The Special Servicer shall maintain one Operating Statement Analysis report for
each Mortgaged Property securing a Specially Serviced Mortgage Loan and REO
Property. The Operating Statement Analysis report for each Mortgaged Property
which constitutes security for a Specially Serviced Mortgage Loan or is a REO
Property is to be updated by the Special Servicer and such updated report
delivered to the Servicer within ten days after receipt by the Special Servicer
of updated operating statements for each such Mortgaged Property. The Special
Servicer will use the "Normalized" column from the NOI Adjustment Worksheet to
update the Operating Statement Analysis report and will use any operating
statements received with respect to any Mortgaged Property which constitutes
security for a Specially Serviced Mortgage Loan or is a REO Property to update
the Operating Statement Analysis report for such Mortgaged Property, such
updates to be completed and copies thereof sent to the Servicer within ten days
after receipt of the necessary information.
(h) The Trustee shall be entitled to rely conclusively on and
shall not be responsible for the content or accuracy of any information
provided to it by the Servicer or the Special Servicer pursuant to this
Agreement.
SECTION 3.14. Annual Statement as to Compliance.
The Servicer and the Special Servicer (the "reporting
person") each shall deliver to the Trustee, the Depositor and to the Rating
Agencies on or before March 15 of each year, beginning with March 15, 1998, an
Officer's Certificate stating, as to each signatory thereof, (i) that a review
of the activities of the reporting person during the preceding calendar year
(or such shorter period from the Closing Date to the end of the related
calendar year) and of its performance under this Agreement has been made under
such officer's supervision, (ii) that, to the best of such officer's knowledge,
based on such review, the reporting person has fulfilled all of its obligations
under this Agreement throughout such year (or such shorter period), or, if
there has been a default in the fulfillment of any such obligation, specifying
each such default known to such officer, the nature and status thereof and what
action it proposes to take with respect thereto, (iii) that, to the best of
such officer's knowledge, each related sub-servicer has fulfilled its
obligations under its sub-servicing agreement in all material respects, or, if
there has been a material default in the fulfillment of such obligations,
specifying each such default known to such officer and the nature and status
thereof, and (iv) whether it has received any notice regarding qualification,
or challenging the status, of the Upper-Tier REMIC or Lower-Tier REMIC as a
REMIC from the IRS or any other governmental agency or body.
SECTION 3.15. Annual Independent Public Accountants'
Servicing Report.
On or before March 15 of each year, beginning with March 15,
1998, the Servicer and the Special Servicer (the "reporting person") each at
the reporting person's expense shall cause a firm of nationally recognized
Independent public accountants (who may also render other services to the
reporting person) which is a member of the American Institute of Certified
Public Accountants to furnish a statement (an "Accountant's Statement") to the
Trustee, the Depositor and to the Rating Agencies, to the effect that such firm
has examined certain documents and records relating to the servicing of the
similar mortgage loans under similar agreements and that, on the basis of such
examination conducted substantially in compliance with generally accepted
auditing standards and the Uniform Single Attestation Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for FHLMC, such servicing
has been conducted in compliance with similar agreements except for such
significant exceptions or errors in records that, in the opinion of such firm,
generally accepted auditing standards and the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC require it to report, in which case such exceptions and errors shall be
so reported. Each reporting person shall obtain from the related accountants,
or shall prepare, an electronic version of each Accountant's Statement and
provide such electronic version to the Trustee for filing in accordance with
the procedures set forth in Section 3.22 hereof. With respect to any electronic
version of an Accountant's Statement prepared by the reporting person, the
reporting person shall receive written confirmation from the related
accountants that such electronic version is a conformed copy of the original
Accountant's Statement.
SECTION 3.16. Access to Certain Documentation.
The Servicer and Special Servicer shall provide to any
Certificateholders that are federally insured financial institutions, the
Federal Reserve Board, the FDIC and the OTS and the supervisory agents and
examiners of such boards and such corporations, and any other governmental or
regulatory body to the jurisdiction of which any Certificateholder is subject,
access to the documentation regarding the Mortgage Loans required by applicable
regulations of the Federal Reserve Board, FDIC, OTS or any such governmental or
regulatory body, such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Servicer or Special Servicer. Nothing in this Section 3.16 shall detract from
the obligation of the Servicer and Special Servicer to observe any applicable
law prohibiting disclosure of information with respect to the Borrowers, and
the failure of the Servicer and Special Servicer to provide access as provided
in this Section 3.16 as a result of such obligation shall not constitute a
breach of this Section 3.16.
SECTION 3.17. Title and Management of REO Properties
and REO Account Properties.
(a) In the event that title to any Mortgaged Property is
acquired for the benefit of Certificateholders in foreclosure, by deed in lieu
of foreclosure or upon abandonment or reclamation from bankruptcy, the deed or
certificate of sale shall be taken in the name of the Trustee, or its nominee
(which shall not include the Servicer), or a separate trustee or co-trustee, on
behalf of the Trust Fund. The Special Servicer, on behalf of the Trust Fund,
shall dispose of any REO Property within two years after the Trust Fund
acquires ownership of such REO Property for purposes of Section 860G(a)(8) of
the Code, unless (i) the Special Servicer on behalf of the Lower-Tier REMIC has
applied for an extension of such two-year period pursuant to Sections 856(e)(3)
and 860G(a)(8)(A) of the Code, in which case the Special Servicer shall sell
such REO Property within the applicable extension period or (ii) the Special
Servicer seeks and subsequently receives an Opinion of Counsel (which opinion
shall be an expense of the Trust Fund), addressed to the Special Servicer and
Trustee, to the effect that the holding by the Trust Fund of such REO Property
for an additional specified period will not cause such REO Property to fail to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code (determined without regard to the exception applicable for purposes of
Section 860D(a) of the Code) at any time that any Certificate is outstanding,
in which event such two-year period shall be extended by such additional
specified period subject to any conditions set forth in such Opinion of
Counsel. The Special Servicer, on behalf of the Trust Fund, shall dispose of
any REO Property held by the Trust Fund prior to the last day of such period
(taking into account extensions) by which such REO Property is required to be
disposed of pursuant to the provisions of the immediately preceding sentence in
a manner provided under Section 3.18 hereof. The Special Servicer shall manage,
conserve, protect and operate each REO Property for the Certificateholders
solely for the purpose of its prompt disposition and sale in a manner which
does not cause such REO Property to fail to qualify as "foreclosure property"
within the meaning of Section 860G(a)(8) of the Code (determined without regard
to the exception applicable for purposes of Section 860D(a)).
(b) The Special Servicer shall have full power and authority,
subject only to the specific requirements and prohibitions of this Agreement,
to do any and all things in connection with any REO Property as are consistent
with the manner in which the Special Servicer manages and operates similar
property owned or managed by the Special Servicer or any of its Affiliates, all
on such terms and for such period as the Special Servicer deems to be in the
best interests of Certificateholders, and, in connection therewith, the Special
Servicer shall agree to the payment of management fees that are consistent with
general market standards. Consistent with the foregoing, the Special Servicer
shall cause or permit to be earned with respect to such REO Property any "net
income from foreclosure property," within the meaning of Section 860G(c) of the
Code, which is subject to tax under the REMIC Provisions only if it has
determined, and has so advised the Trustee in writing, that the earning of such
income on a net after-tax basis could reasonably be expected to result in a
greater recovery on behalf of Certificateholders than an alternative method of
operation or rental of such REO Property that would not be subject to such a
tax. The Special Servicer shall segregate and hold all revenues received by it
with respect to any REO Property separate and apart from its own funds and
general assets and shall establish and maintain with respect to any REO
Property a segregated custodial account (each, an "REO Account"), each of which
shall be an Eligible Account and shall be entitled "LaSalle National Bank, as
Trustee, in trust for Holders of Asset Securitization Corporation, Commercial
Mortgage Pass-Through Certificates, Series 1997-D4, REO Account." The Special
Servicer shall be entitled to withdraw for its account any interest or
investment income earned on funds deposited in an REO Account to the extent
provided in Section 3.07(b). The Special Servicer shall deposit or cause to be
deposited in the REO Account within one Business Day after receipt all revenues
received by it with respect to any REO Property (other than Liquidation
Proceeds), and shall withdraw therefrom funds necessary for the proper
operation, management and maintenance of such REO Property and for other
Property Protection Expenses with respect to such REO Property, including:
(i) all insurance premiums due and payable in respect of any
REO Property;
(ii) all real estate taxes and assessments in respect of any
REO Property that may result in the imposition of a lien
thereon;
(iii) all costs and expenses reasonable and necessary to
protect, maintain, manage, operate, repair and restore any
REO Property; and
(iv) any taxes imposed on the Upper Tier REMIC or Lower-Tier
REMIC in respect of net income from foreclosure property in
accordance with Section 4.05.
To the extent that such REO Proceeds are insufficient for the
purposes set forth in clauses (i) through (iii) above and the Special Servicer
has provided written notice of such shortfall to the Servicer at least five
Business Days prior to the date that such amounts are due, the Servicer shall
advance the amount of such shortfall unless the Servicer determines, in its
good faith judgment, that such Advance would be a Nonrecoverable Advance. If
the Servicer does not make any such Advance in violation of the immediately
preceding sentence, the Trustee shall make such Advance; and if the Trustee
fails to make any such Advance, the Fiscal Agent shall make such Advance,
unless in either case, the Trustee or the Fiscal Agent determines that such
Advance would be a Nonrecoverable Advance. The Trustee and the Fiscal Agent
shall be entitled to rely, conclusively, on any determination by the Servicer
that an Advance, if made, would be a Nonrecoverable Advance. The Trustee and
the Fiscal Agent, in determining whether or not a proposed Advance would be a
Nonrecoverable Advance, shall be subject to the standards applicable to the
Servicer hereunder. The Servicer, the Trustee or the Fiscal Agent, as
applicable, shall be entitled to reimbursement of such Advances (with interest
at the Advance Rate) made pursuant to the preceding sentence, to the extent set
forth in Section 3.06. The Special Servicer shall withdraw from each REO
Account and remit to the Servicer for deposit into the Collection Account on a
monthly basis prior to or on the related Due Date the Net REO Proceeds received
or collected from each REO Property, except that in determining the amount of
such Net REO Proceeds, the Special Servicer may retain in each REO Account
reasonable reserves for repairs, replacements and necessary capital
improvements and other related expenses.
Notwithstanding the foregoing, the Special Servicer shall
not:
(i) permit the Trust Fund to enter into, renew or extend
any New Lease, if the New Lease by its terms will
give rise to any income that does not constitute
Rents from Real Property;
(ii) permit any amount to be received or accrued under
any New Lease, other than amounts that will
constitute Rents from Real Property;
(iii) authorize or permit any construction on any REO
Property, other than the repair or maintenance
thereof or the completion of a building or other
improvement thereon, and then only if more than ten
percent of the construction of such building or
other improvement was completed before default on
the related Mortgage Loan became imminent, all
within the meaning of Section 856(e)(4)(B) of the
Code; or
(iv) Directly Operate or allow any Person to Directly
Operate any REO Property on any date more than 90
days after its date of acquisition by the Trust
Fund, unless such Person is an Independent
Contractor;
unless, in any such case, the Special Servicer has requested and received an
Opinion of Counsel addressed to the Special Servicer and the Trustee (which
opinion shall be an expense of the Trust Fund) to the effect that such action
will not cause such REO Property to fail to qualify as "foreclosure property"
within the meaning of Section 860G(a)(8) of the Code (determined without regard
to the exception applicable for purposes of Section 860D(a) of the Code) at any
time that it is held by the Trust Fund, in which case the Special Servicer may
take such actions as are specified in such Opinion of Counsel.
The Special Servicer shall be required to contract with an
Independent Contractor (acceptable to each Rating Agency as evidenced by
written confirmation that contracting with such Independent Contractor would
not, in and of itself cause a downgrade, qualification or withdrawal of the
then current ratings assigned to any Class of Certificates), the fees and
expenses of which shall be an expense of the Trust Fund and payable out of REO
Proceeds, for the operation and management of any REO Property, within 90 days
of the Trust Fund's acquisition thereof (unless the Special Servicer shall have
provided the Trustee with an Opinion of Counsel that the operation and
management of any REO Property other than through an Independent Contractor
shall not cause such REO Property to fail to qualify as "foreclosure property"
within the meaning of Code Section 860G(a)(8)) (which opinion shall be an
expense of the Trust Fund), provided that:
(i) the terms and conditions of any such contract shall be
reasonable and customary for the area and type of property
and shall not be inconsistent herewith;
(ii) any such contract shall require, or shall be
administered to require, that the Independent Contractor pay
all costs and expenses incurred in connection with the
operation and management of such REO Property, including
those listed above, and remit all related revenues (net of
such costs and expenses) to the Special Servicer as soon as
practicable, but in no event later than thirty days following
the receipt thereof by such Independent Contractor;
(iii) none of the provisions of this Section 3.17(b) relating
to any such contract or to actions taken through any such
Independent Contractor shall be deemed to relieve the Special
Servicer of any of its duties and obligations to the Trust
Fund or the Trustee on behalf of the Certificateholders with
respect to the operation and management of any such REO
Property; and
(iv) the Special Servicer shall be obligated with respect
thereto to the same extent as if it alone were performing all
duties and obligations in connection with the operation and
management of such REO Property.
The Special Servicer shall be entitled to enter into any
agreement with any Independent Contractor performing services for it related to
its duties and obligations hereunder for indemnification of the Special
Servicer by such Independent Contractor, and nothing in this Agreement shall be
deemed to limit or modify such indemnification.
(c) Promptly following any acquisition by the Trust Fund of
an REO Property, the Special Servicer shall notify the Servicer thereof, and,
upon receipt of such notice, the Servicer shall obtain an Updated Appraisal
thereof, but only in the event that any Updated Appraisal with respect thereto
is more than 12 months old, in order to determine the fair market value of such
REO Property and shall notify the Depositor, the Special Servicer and the
Trustee hereto of the results of such appraisal. Any such appraisal shall be
conducted in accordance with MAI standards and the cost thereof shall be an
expense of the Trust Fund. The Servicer shall obtain a new Updated Appraisal or
a letter update every 12 months thereafter.
(d) When and as necessary, the Special Servicer shall send to
the Trustee a statement prepared by the Special Servicer setting forth the
amount of net income or net loss, as determined for federal income tax
purposes, resulting from the operation and management of a trade or business
on, the furnishing or rendering of a non-customary service to the tenants of,
or the receipt of any other amount not constituting Rents from Real Property in
respect of, any REO Property in accordance with Sections 3.17(a) and 3.17(b).
SECTION 3.18. Sale of Specially Serviced Mortgage
Loans and REO Properties.
(a) With respect to any Specially Serviced Mortgage Loan or
REO Property which the Special Servicer has determined to sell in accordance
with Section 3.10, the Special Servicer shall deliver to the Trustee an
Officers' Certificate to the effect that pursuant to Section 3.10, the Special
Servicer has determined to sell such Specially Serviced Mortgage Loan or REO
Property in accordance with this Section 3.18. The Special Servicer may then
offer to sell to any Person any Specially Serviced Mortgage Loan or any REO
Property or, subject to the following sentence, purchase any such Specially
Serviced Mortgage Loan or REO Property (in each case at the Repurchase Price
therefor), but shall, in any event, so offer to sell any REO Property no later
than the time determined by the Special Servicer to be sufficient to result in
the sale of such REO Property within the period specified in Section 3.17(a).
The Special Servicer shall deliver such Officers' Certificate and give the
Trustee not less than ten Business Days prior written notice of its intention
to sell any Specially Serviced Mortgage Loan or REO Property, in which case the
Special Servicer shall accept the highest offer (of at least three offers)
received from any Person for any Specially Serviced Mortgage Loan or any REO
Property in an amount at least equal to the Repurchase Price therefor or, at
its option, if it has received no offer at least equal to the Repurchase Price
therefor, purchase the Specially Serviced Mortgage Loan or REO Property at the
Repurchase Price.
In the absence of any such offer or purchase by the Special
Servicer, the Special Servicer shall accept the highest offer received from any
Person that is determined by the Special Servicer to be a fair price, as
determined in accordance with Section 3.18(b), for such Specially Serviced
Mortgage Loan or REO Property, if the highest offeror is a Person other than an
Interested Person, or is determined to be a fair price by the Trustee in
accordance with Section 3.18(b), if the highest offeror is an Interested
Person; provided, that the Trustee shall be entitled to engage, at the expense
of the Trust Fund, an Independent appraiser to determine whether the highest
offer is a fair price and, further provided, that if the highest offeror is an
Interested Person such offer shall not be accepted if it is less than the
Repurchase Price, unless the Rating Agencies have confirmed, in writing, that
such acceptance will not, in itself, result in the qualification, downgrade or
withdrawal of the then-current ratings assigned to the Certificates.
Notwithstanding anything to the contrary herein, neither the Trustee, in its
individual capacity, nor any of its Affiliates may make an offer or purchase
any Specially Serviced Mortgage Loan or any REO Property pursuant hereto.
The Special Servicer shall not be obligated by either of the
foregoing paragraphs or otherwise to accept the highest offer if the Special
Servicer determines, in accordance with the Servicing Standard, that rejection
of such offer would be in the best interests of the Certificateholders. In
addition, the Special Servicer may accept a lower offer if it determines, in
accordance with the Servicing Standard, that acceptance of such offer would be
in the best interests of the Certificateholders (for example, if the
prospective buyer making the lower offer is more likely to perform its
obligations, or the terms offered by the prospective buyer making the lower
offer are more favorable), provided that the offeror is not an Affiliate of the
Special Servicer. In the event that the Special Servicer determines with
respect to any REO Property that the offers being made with respect thereto are
not in the best interests of the Certificateholders and that the end of the
two-year period referred to in Section 3.17(a) with respect to such REO
Property is approaching, the Special Servicer shall seek an extension of such
two-year period in the manner described in Section 3.17(a); provided, however,
that the Special Servicer shall use its best efforts, consistent with the
Servicing Standard, to sell any REO Property prior to the Rated Final
Distribution Date.
(b) In determining whether any offer received from an
Interested Person represents a fair price for any Specially Serviced Mortgage
Loan or any REO Property, the Trustee may conclusively rely on the opinion of
an Independent appraiser or other Independent expert in real estate matters
retained by the Trustee at the expense of the Trust Fund. In determining
whether any offer constitutes a fair price for any Specially Serviced Mortgage
Loan or any REO Property, the Special Servicer (if the highest offeror is not
an Interested Person) or the Trustee (or, if applicable, such appraiser) shall
take into account, and any appraiser or other expert in real estate matters
shall be instructed to take into account, as applicable, among other factors,
any Updated Appraisal previously obtained, the period and amount of any
delinquency on the affected Specially Serviced Mortgage Loan, the physical
(including environmental) condition of the related Mortgaged Property or such
REO Property, the state of the local economy and the Trust Fund's obligation to
dispose of any REO Property within the time period specified in Section
3.17(a).
(c) Subject to the provisions of Section 3.17, the Special
Servicer shall act on behalf of the Trust Fund in negotiating and taking any
other action necessary or appropriate in connection with the sale of any
Specially Serviced Mortgage Loan or REO Property, including the collection of
all amounts payable in connection therewith. Any sale of a Specially Serviced
Mortgage Loan or any REO Property shall be without recourse to, or
representation or warranty by, the Trustee, the Fiscal Agent, the Depositor,
the Servicer, the Special Servicer or the Trust Fund (except that any contract
of sale and assignment and conveyance documents may contain customary
warranties of title, so long as the only recourse for breach thereof is to the
Trust Fund), and, if such sale is consummated in accordance with the duties of
the Special Servicer, the Servicer, the Depositor, the Fiscal Agent and the
Trustee pursuant to the terms of this Agreement, no such Person who so
performed shall have any liability to the Trust Fund or any Certificateholder
with respect to the purchase price therefor accepted by the Special Servicer
or, if the offeror is an Interested Person, the Servicer (or the Trustee, if
the Servicer is an offeror).
(d) The Special Servicer shall file information returns
regarding the abandonment or foreclosure of Mortgaged Properties with the IRS
at the time and in the manner required by the Code.
(e) The proceeds of any sale after deduction of the expenses
of such sale incurred in connection therewith shall be promptly, and in any
event within one Business Day following receipt thereof, deposited in the
Collection Account in accordance with Section 3.05(a)(iv).
SECTION 3.19. Additional Obligations of the Servicer
and Special Servicer; Inspections.
(a) The Servicer (or, with respect to Specially Serviced
Mortgage Loans and REO Properties, the Special Servicer) shall inspect or cause
to be inspected (at its own expense) each Mortgaged Property at such times and
in such manner as are consistent with the Servicing Standard, but in any event
shall inspect each Mortgaged Property with an Allocated Loan Amount of (A)
$2,000,000 or more at least once every 12 months and (B) less than $2,000,000
at least once every 24 months, in each case commencing in May 1997 (or at such
lesser frequency as each Rating Agency shall have confirmed in writing to the
Servicer, will not result a downgrade, qualification or withdrawal of the then
current ratings assigned to any Class of the Certificates) and (C) if the
Mortgage Loan (i) becomes a Specially Serviced Mortgage Loan, (ii) has a debt
service coverage ratio of less than 1.0 or (iii) is delinquent for 60 days,
each related Mortgaged Property shall be inspected by the Special Servicer as
soon as practicable and thereafter at least every 12 months for so long as such
condition exists. The Servicer or Special Servicer, as applicable, shall send
to the Rating Agencies, within 20 days of completion, each inspection report.
(b) With respect to each Mortgage Loan, the Servicer (or the
Special Servicer, in the case of a Specially Serviced Mortgage Loan) shall
enforce the Trustee's rights with respect to the Manager under the related Loan
Documents and Management Agreement, provided, that, if such right accrues under
the related Loan Documents or Management Agreement only because of the
occurrence of the related Anticipated Repayment Date, if any, the Servicer (or
Special Servicer, if applicable) shall irrevocably waive such right with
respect to such date. In the event the Servicer (or Special Servicer, as
applicable) is entitled to terminate the Manager, the Servicer (or Special
Servicer, as applicable) shall promptly give notice to the Trustee (who shall
copy the Certificateholders), the Originator, the Depositor, and each Rating
Agency. After receipt of such notice, the most subordinate Class of
Certificates then outstanding shall have the right to recommend termination of
the Manager, and if so, to recommend a Successor Manager (meeting the
requirements set forth below). Certificateholders representing Percentage
Interests of greater than 50% of such subordinate Class of Certificates will
have ten Business Days from the receipt of such notice to respond to such
notice. Upon receipt of a recommendation to terminate the Manager and appoint a
Successor Manager, the Servicer (or Special Servicer, as applicable) shall give
notice of such recommendation to the Trustee (who shall copy the
Certificateholders), and the Servicer (or Special Servicer, as applicable)
shall effect such recommendation unless: (i) within five Business Days of the
receipt of notice of such recommendation, Certificateholders representing
Percentage Interests of greater than 50% of any Class of Certificates then
outstanding which was assigned a rating by any Rating Agency on the Closing
Date reject such proposed Successor Manager in which case the Servicer (or
Special Servicer, as applicable) shall procure a Successor Manager as set forth
in the following sentence; or (ii) the Servicer (or Special Servicer, as
applicable) determines that effecting such recommendation to terminate is not
consistent with the Servicing Standard, the Servicer (or Special Servicer, as
applicable) shall only effect such recommendation if within 30 days of giving
notice to all other Holders the Servicer (or Special Servicer, as applicable)
has not received a rejection of such recommendation from Holders of
Certificates representing Voting Rights of greater than 50% of any Class of
Certificates then outstanding which is assigned a rating by any Rating Agency
on the Closing Date. If the Servicer (or Special Servicer, as applicable) does
not receive a required response (or if the response received is inconsistent)
or in the event a Manager is otherwise terminated or resigns under the related
Mortgage or Management Agreement and the related Borrower does not appoint a
Successor Manager, the Servicer (or Special Servicer, as applicable) shall use
its best efforts to retain a Successor Manager (or the recommended Successor
Manager, if any) on terms substantially similar to the Management Agreement or,
failing that, on terms as favorable to the Trust Fund as can reasonably be
obtained by the Servicer (or Special Servicer, as applicable). For the purposes
of this paragraph, a "Successor Manager" shall be reasonably acceptable to the
Servicer (or Special Servicer, as applicable) and a professional management
corporation or business entity which (i) manages, and is experienced in
managing, other comparable commercial properties, (ii) will not result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
the Certificates by each of Fitch, Moody's and S&P, and, if the Mortgage Loan
represents greater than 2% of the aggregate Stated Principal Balances of the
Mortgage Loan, DCR and (iii) otherwise satisfies any criteria set forth in the
Mortgage and related documents.
SECTION 3.20. Authenticating Agent.
The Trustee may appoint an Authenticating Agent to execute
and to authenticate Certificates. The Authenticating Agent must be acceptable
to the Depositor and the Servicer and must be a corporation organized and doing
business under the laws of the United States of America or any state, having a
principal office and place of business in a state and city acceptable to the
Depositor and the Servicer, having a combined capital and surplus of at least
$15,000,000, authorized under such laws to do a trust business and subject to
supervision or examination by federal or state authorities. The Trustee shall
serve as the initial Authenticating Agent and the Trustee hereby accepts such
appointment.
Any corporation into which the Authenticating Agent 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
Authenticating Agent shall be party, or any corporation succeeding to the
corporate agency business of the Authenticating Agent, shall be the
Authenticating Agent without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
The Authenticating Agent may at any time resign by giving at
least 30 days' advance written notice of resignation to the Trustee, the
Depositor and the Servicer. The Trustee may at any time terminate the agency of
the Authenticating Agent by giving written notice of termination to the
Authenticating Agent, the Depositor and the Servicer. Upon receiving a notice
of resignation or upon such a termination, or in case at any time the
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 3.20, the Trustee promptly shall appoint a successor
Authenticating Agent, which shall be acceptable to the Servicer and the
Depositor, and shall mail notice of such appointment to all Certificateholders.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers, duties and responsibilities of
its predecessor hereunder, with like effect as if originally named as
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section 3.20.
The Authenticating Agent shall have no responsibility or
liability for any action taken by it as such at the direction of the Trustee.
Any reasonable compensation paid to the Authenticating Agent shall be an
unreimbursable expense of the Trustee.
SECTION 3.21. Appointment of Custodians.
The Trustee may appoint one or more Custodians to hold all or
a portion of the Mortgage Files as agent for the Trustee, by entering into a
Custodial Agreement. The Trustee agrees to comply with the terms of each
Custodial Agreement and to enforce the terms and provisions thereof against the
Custodian for the benefit of the Certificateholders. Each Custodian shall be a
depository institution subject to supervision by federal or state authority,
shall have a combined capital and surplus of at least $10,000,000, shall have a
long-term debt rating of at least "BBB" from Fitch, S&P and DCR and "Baa2" from
Moody's , unless the Trustee shall have received prior written confirmation
from each Rating Agency that the appointment of such Custodian would not cause
such Rating Agency to withdraw, qualify or downgrade any of its then-current
ratings on the Certificates, and shall be qualified to do business in the
jurisdiction in which it holds any Mortgage File. Each Custodial Agreement may
be amended only as provided in Section 10.07. Any reasonable compensation paid
to the Custodian shall be an unreimbursable expense of the Trustee. The Trustee
shall serve as the initial Custodian. The Custodian shall be deemed to have
complied with this provision if one of its respective Affiliates has such
fidelity bond coverage and, by the terms of such fidelity bond, the coverage
afforded thereunder extends to the Custodian. In addition, the Custodian shall
keep in force during the term of this Agreement a policy or policies of
insurance covering loss occasioned by the errors and omissions of its officers
and employees in connection with its obligations hereunder in the form and
amount that are customary for securitizations similar to the securitization
evidenced by this Agreement, with the Trustee named as loss payee. All fidelity
bonds and policies of errors and omissions insurance obtained under this
Section 3.21 shall be issued by a Qualified Insurer.
SECTION 3.22. Reports to the Securities and Exchange
Commission; Available Information.
(a) The Servicer shall prepare and sign, on behalf of the
Depositor, any and all Exchange Act Reports; provided, however, that (i) the
Depositor shall prepare, sign and file with the Commission the initial Form 8-K
relating to the Trust Fund and (ii) the Special Servicer shall prepare and sign
on behalf of the Depositor any Exchange Act Report which includes an Annual
Compliance Report relating to the Special Servicer. Each Exchange Act Report
consisting of a monthly Distribution Date Statement, Comparative Financial
Status Report, Delinquent Loan Status Report, Historical Loss Estimate Report,
Historical Loan Modification Report, REO Status Report, Operating Statement
Analysis, NOI Adjustment Worksheet, Watch List, or report pursuant to Section
4.02(b)(i) shall be prepared as an exhibit or exhibits to a Form 8-K. Each
Exchange Act Report consisting of an Annual Compliance Report shall be prepared
as exhibits to an Annual Report on Form 10-K and shall identify the aggregate
number of Holders of Public Certificates and Direct Participants holding
positions in Public Certificates as of December 31 (or the nearest Business Day
if such date is not a Business Day) of the related year based on information
provided by the Trustee. The Trustee shall provide the Servicer and the Special
Servicer with a list of Certificateholders and Direct Participants holding
Public Certificates as of December 31 of the related year no later than two
Business Days prior to the date on which the Servicer or Special Servicer, as
applicable, is required to deliver the related Exchange Act Report to the
Trustee. For each Exchange Act Report, the Servicer or the Special Servicer, as
applicable, shall prepare (i) a manually-signed paper version of such report
and (ii) an electronic version of such report, which version shall be prepared
as a Microsoft Word for Windows file (or in such other format as the Trustee,
the Depositor and the Servicer or the Special Servicer may agree), provided,
that, with respect to the electronic version of each Exchange Act Report
consisting of a monthly Distribution Date Statement, the Servicer need only
deliver an electronic version of the related Form 8-K and the Trustee shall
attach an electronic version of the related monthly Distribution Date Statement
thereto as an exhibit. Exchange Act Reports consisting of (i) a monthly
Distribution Date Statement shall be filed within ten days after the related
Distribution Date; (ii) a Comparative Financial Status Report, Delinquent Loan
Status Report, Historical Loss Estimate Report, Historical Loan Modification
Report, REO Status Report, Operating Statement Analysis, NOI Adjustment
Worksheet, Watch List, or report pursuant to Section 4.02(b)(i) shall be filed
within ten days after each Distribution Date; and (iii) an Annual Compliance
Report shall be filed on or prior to March 15 of each calendar year. Electronic
versions of each Exchange Act Report shall be delivered to the Trustee on a
computer diskette (delivered by courier in packaging designed to shield such
diskette from damage in transmission) or by means of electronic data transfer
system mutually agreed upon by the Trustee and the Servicer or Special
Servicer. The Trustee shall forward each Exchange Act Report to the Depositor
in a manner and in a format agreed upon by the Trustee and the Depositor.
Manually-signed copies of each Exchange Act Report shall be delivered to the
Depositor to the attention of William Kramer (or such other Persons as are
designated in writing by the Depositor), with a copy to the Trustee.
If information for any Exchange Act Report is incomplete by
the date on which such report is required to be filed under the Exchange Act,
the Servicer or, with respect to any Annual Compliance Report relating to the
Special Servicer, the Special Servicer shall prepare and execute a Form 12b-25
under the Exchange Act and shall deliver an electronic version of such form to
the Trustee for forwarding to the Depositor as provided above. The Servicer or
the Special Servicer, as applicable, shall deliver the related report in
electronic form to the Trustee when such information is available and such
completed report shall be forwarded electronically by the Trustee to the
Depositor.
None of the Servicer, the Special Servicer and the Trustee
shall (i) file a Form ID with respect to the Depositor or (ii) cause the Trust
Fund to stop filing reports, statements and information with the Commission
pursuant to this Section unless directed to do so by the Depositor or the
continued reporting is prohibited under the Exchange Act or any regulations
thereunder. Upon the written request of the Depositor, the Servicer shall file
a Form 15 relating to the Trust Fund with the Commission and send a copy
thereof to the Trustee and the Depositor.
The Trustee shall solicit any and all proxies of the
Certificateholders whenever such proxies are required to be solicited pursuant
to the Exchange Act.
(b) [Intentionally left blank].
(c) The Servicer shall, in accordance with such reasonable
rules and procedures as it may adopt (which may include the requirement that an
agreement that provides that such information shall be used solely for purposes
of evaluating the investment characteristics of the Certificates be executed to
the extent the Servicer deems such action to be necessary or appropriate), also
make available any additional information relating to the Mortgage Loans, the
Mortgaged Properties or the Borrowers, for review by the Depositor, the Rating
Agencies and any other Persons to whom the Servicer believes such disclosure is
appropriate, in each case except to the extent doing so is prohibited by
applicable law or by any related Loan Documents related to a Mortgage Loan.
(d) [Intentionally left blank].
The Servicer and the Special Servicer shall make available at
its offices during normal business hours, or send to the requesting party at
the expense of each such requesting party (other than the Rating Agencies and
the Depositor) for review by the Depositor, the Trustee, the Rating Agencies,
any Certificateholder, any Person identified to the Servicer or the Special
Servicer, as applicable, by a Certificateholder as a prospective transferee of
a Certificate and any other Persons to whom the Servicer or the Special
Servicer, as applicable, believes such disclosure to be appropriate the
following items: (i) all financial statements, occupancy information, rent
rolls, retail sales information, average daily room rates and similar
information received by the Servicer or the Special Servicer, as applicable,
from each Borrower, (ii) the inspection reports prepared by or on behalf of the
Servicer or the Special Servicer, as applicable, in connection with the
property inspections pursuant to Section 3.19, (iii) any and all modifications,
waivers and amendments of the terms of a Mortgage Loan entered into by the
Servicer or the Special Servicer, as applicable and (iv) any and all officer's
certificates and other evidence delivered to the Trustee and the Depositor to
support the Servicer's determination that any Advance was, or if made would be,
a Nonrecoverable Advance. Copies of any and all of the foregoing items shall be
available from the Servicer or the Special Servicer, as applicable, or the
Trustee, as applicable, upon request. However, all such items set forth in
(i)-(iv) shall be delivered to DCR without request (and, to the extent
available, electronically), except that, with respect to clause (i), only
annual reports and statements shall be sent without request.
(e) Notwithstanding the obligations of the Servicer set forth
in the preceding provisions of this Section 3.22, the Servicer may withhold any
information not yet included in a Form 8-K filed with the Commission or
otherwise made publicly available with respect to which the Trustee or the
Servicer has determined that such withholding is appropriate.
(f) Notwithstanding any provisions in this Agreement to the
contrary, the Trustee shall not be required to review the content of any
Exchange Act Report for compliance with applicable securities laws or
regulations, completeness, accuracy or otherwise, and the Trustee shall have no
liability with respect to any Exchange Act Report filed with the Commission or
delivered to Certificateholders. None of the Servicer, the Special Servicer and
the Trustee shall be responsible for the accuracy or completeness of any
information supplied by a Borrower or a third party for inclusion in any Form
8-K, and each of the Servicer, the Special Servicer and the Trustee shall be
indemnified and held harmless by the Trust Fund against any loss, liability or
expense incurred in connection with any legal action relating to any statement
or omission or alleged statement or omission therein. None of the Trustee, the
Special Servicer and the Servicer shall have any responsibility or liability
with respect to any Exchange Act Report filed by the Depositor, and each of the
Servicer, the Special Servicer and the Trustee shall be indemnified and held
harmless by the Trust Fund against any loss, liability or expense incurred in
connection with any legal action relating to any statement or omission or
alleged statement or omission therein.
SECTION 3.23. Lock-Box Accounts, Cash Collateral
Accounts, Escrow Accounts and Reserve
Accounts.
The Servicer shall administer each Lock-Box Account, Cash
Collateral Account, Escrow Account and Reserve Account in accordance with the
related Mortgage or Loan Agreement, Cash Collateral Account Agreement or
Lock-Box Agreement, if any.
SECTION 3.24. Property Advances.
(a) The Servicer (or, to the extent provided in Section
3.24(b), the Trustee or the Fiscal Agent or to the extent specifically provided
for in this Agreement, the Special Servicer) shall make any Property Advances
as and to the extent otherwise required pursuant to the terms hereof. For
purposes of distributions to Certificateholders and compensation to the
Servicer, Special Servicer or Trustee, Property Advances shall not be
considered to increase the principal balance of any Mortgage Loan,
notwithstanding that the terms of such Mortgage Loan so provide.
(b) The Servicer shall notify the Trustee and the Fiscal
Agent, and the Special Servicer shall notify the Servicer, the Trustee and the
Fiscal Agent, in writing promptly upon, and in any event within one Business
Day after, becoming aware that it will be unable to make any Property Advance
required to be made pursuant to the terms hereof, and in connection therewith,
shall set forth in such notice the amount of such Property Advance, the Person
to whom it will be paid, and the circumstances and purpose of such Property
Advance, and shall set forth therein information and instructions for the
payment of such Property Advance, and, on the date specified in such notice for
the payment of such Property Advance, or, if the date for payment has passed or
if no such date is specified, then within five Business Days following such
notice, the Trustee (or with respect to a Property Advance required to be made
by the Special Servicer, the Servicer, and if the Servicer so fails, the
Trustee), subject to the provisions of Section 3.24(c), shall pay the amount of
such Property Advance in accordance with such information and instructions. If
the Trustee fails to make any Property Advance required to be made under this
Section 3.24, the Fiscal Agent, subject to the provisions of Section 3.24(c),
shall make such Advance on the same day the Trustee was required to make such
Property Advance and, thereby, the Trustee shall not be in default under this
Agreement.
(c) None of the Servicer, the Trustee, the Fiscal Agent or
the Special Servicer shall be obligated to make a Property Advance as to any
Mortgage Loan or REO Property if the Servicer, the Trustee, the Fiscal Agent or
the Special Servicer, as applicable, determines that such Advance will be a
Nonrecoverable Advance. The Trustee and the Fiscal Agent (or the Servicer with
respect to a Property Advance required to be made by the Special Servicer)
shall be entitled to rely, conclusively, on any determination by the Servicer
or Special Servicer, as applicable, that a Property Advance, if made, would be
a Nonrecoverable Advance. The Trustee and the Fiscal Agent, in determining
whether or not a Property Advance previously made is, or a proposed Property
Advance, if made, would be, a Nonrecoverable Advance shall be subject to the
standards applicable to the Servicer hereunder.
(d) The Servicer, the Special Servicer, the Trustee and/or
the Fiscal Agent, as applicable, shall be entitled to the reimbursement of
Property Advances made by any of them to the extent permitted pursuant to
Section 3.06(ii) of this Agreement, together with any related Advance Interest
Amount in respect of such Property Advances, and the Servicer and Special
Servicer hereby covenant and agree to promptly seek and effect the
reimbursement of such Property Advances from the related Borrowers to the
extent permitted by applicable law and the related Loan Documents.
SECTION 3.25. Appointment of Special Servicer.
(a) The Servicer is hereby appointed as the initial Special
Servicer to service each Specially Serviced Mortgage Loan.
(b) Certificateholders representing greater than 50% of the
Percentage Interests of the most subordinate Class of Certificates outstanding
at any time shall be entitled to remove the Special Servicer with or without
cause and to appoint a successor Special Servicer, provided that each Rating
Agency confirms to the Trustee in writing that such appointment, in and of
itself, would not have caused a downgrade, qualification or withdrawal of the
then current ratings assigned to any Class of Certificates. If there is a
Special Servicer Event of Default, the Special Servicer shall be removed and
replaced pursuant to Sections 7.01(c) and 7.02.
(c) The appointment of any such successor Special Servicer,
shall not relieve the Servicer, the Trustee or the Fiscal Agent of their
respective obligations to make Advances as set forth herein; provided, however,
the Servicer shall not be liable for any actions or any inaction of such
successor Special Servicer. Any termination fee payable to the terminated
Special Servicer (and it is acknowledged that there is no such fee payable in
the event of a termination of the Servicer as Special Servicer or in the event
of a termination for breach of this Agreement) shall be paid by the
Certificateholders so terminating the Special Servicer and shall not in any
event be an expense of the Trust Fund.
(d) No termination of the Special Servicer and appointment of
a successor Special Servicer shall be effective until the successor Special
Servicer has assumed all of its responsibilities, duties and liabilities
hereunder pursuant to a writing satisfactory to the Trustee and each Rating
Agency, as evidenced in writing, and the Trustee has received written
confirmation from each Rating Agency that such appointment would not cause any
Rating Agency to qualify, withdraw or downgrade any of its then current ratings
on any Certificates. Any successor Special Servicer shall make the
representations and warranties provided for in Section 2.04(a) mutatis
mutandis.
SECTION 3.26. Transfer of Servicing Between Servicer
and Special Servicer; Record Keeping.
(a) Upon determining that any Mortgage Loan has become a
Specially Serviced Mortgage Loan, the Servicer shall immediately give notice
thereof, to the Special Servicer and shall use its best efforts to provide the
Special Servicer with all information, documents (but excluding the original
documents constituting the Mortgage File) and records (including records stored
electronically on computer tapes, magnetic discs and the like) relating to the
Mortgage Loan and reasonably requested by the Special Servicer to enable it to
assume its duties hereunder with respect thereto without acting through a
sub-servicer. The Servicer shall use its best efforts to comply with the
preceding sentence within five Business Days of the date such Mortgage Loan
became a Specially Serviced Mortgage Loan and in any event shall continue to
act as Servicer and administrator of such Mortgage Loan until the Special
Servicer has commenced the servicing of such Mortgage Loan, which shall occur
upon the receipt by the Special Servicer of the information, documents and
records referred to in the preceding sentence. With respect to each Mortgage
Loan that becomes a Specially Serviced Mortgage Loan, the Servicer shall
instruct the related Borrower to continue to remit all payments in respect of
such Mortgage Loan to the Servicer. If AMRESCO Management, Inc. ceases to be
the Servicer or the Special Servicer, respectively, the remaining party of the
two and the successor Servicer or Special Servicer, as applicable, may agree
that, notwithstanding the preceding sentence, with respect to each Mortgage
Loan that became a Specially Serviced Mortgage Loan, the Servicer shall
instruct the related Borrower to remit all payments in respect of such Mortgage
Loan to the Special Servicer, provided that the payee in respect of such
payments shall remain the Servicer. The Special Servicer shall remit to the
Servicer any such payments received by it pursuant to the preceding sentence
within one Business Day of receipt. The Servicer shall forward any notices it
would otherwise send to the Borrower of a Specially Serviced Mortgage Loan to
the Special Servicer who shall send such notice to the related Borrower.
Upon determining that no event has occurred and is continuing
with respect to a Mortgage Loan that causes such Mortgage Loan to be a
Specially Serviced Mortgage Loan, the Special Servicer shall immediately give
notice thereof to the Servicer, and upon giving such notice, such Mortgage Loan
shall cease to be a Specially Serviced Mortgage Loan in accordance with the
first proviso of the definition of Specially Serviced Mortgage Loan, the
Special Servicer's obligation to service such Mortgage Loan shall terminate and
the obligations of the Servicer to service and administer such Mortgage Loan as
a Mortgage Loan that is not a Specially Serviced Mortgage Loan shall resume. In
addition, if the related Borrower has been instructed, pursuant to the last
sentence of the preceding paragraph, to make payments to the Special Servicer,
upon such determination, the Special Servicer shall instruct the related
Borrower to remit all payments in respect of such Specially Serviced Mortgage
Loan directly to the Servicer.
(b) In servicing any Specially Serviced Mortgage Loan, the
Special Servicer shall provide to the Trustee originals of documents included
within the definition of "Mortgage File" for inclusion in the related Mortgage
File (to the extent such documents are in the possession of the Special
Servicer) and copies of any additional related Mortgage Loan information,
including correspondence with the related Borrower, and the Special Servicer
shall promptly provide copies of all of the foregoing to the Servicer as well
as copies of any analysis or internal review prepared by or for the benefit of
the Special Servicer.
(c) Not later than the Business Day preceding each date on
which the Servicer is required to furnish a report under Section 3.13(a) to the
Trustee, the Special Servicer shall deliver to the Trustee, with a copy to the
Servicer, a written statement describing, on a Mortgage Loan by Mortgage Loan
basis, (i) the amount of all payments on account of interest received on each
Specially Serviced Mortgage Loan, the amount of all payments on account of
principal, including Principal Prepayments, on each Specially Serviced Mortgage
Loan, the amount of Net Insurance Proceeds and Net Liquidation Proceeds
received with respect to each Specially Serviced Mortgage Loan, and the amount
of net income or net loss, as determined from management of a trade or business
on, the furnishing or rendering of a non-customary service to the tenants of,
or the receipt of any rental income that does not constitute Rents from Real
Property with respect to the REO Property relating to each applicable Specially
Serviced Mortgage Loan, in each case in accordance with Section 3.17 and (ii)
such additional information relating to the Specially Serviced Mortgage Loans
as the Servicer or Trustee reasonably requests to enable it to perform its
duties under this Agreement.
(d) Notwithstanding the provisions of the preceding
subsection (c), the Servicer shall maintain ongoing payment records with
respect to each of the Specially Serviced Mortgage Loans and shall provide the
Special Servicer with any information reasonably required by the Special
Servicer to perform its duties under this Agreement. The Special Servicer shall
provide the Servicer with any information reasonably required by the Servicer
to perform its duties under this Agreement.
(e) The Servicer shall furnish to the Special Servicer a
current copy of any "watch list" that it maintains with respect to the Mortgage
Loans.
SECTION 3.27. Interest Reserve Account.
(a) On each Servicer Remittance Date relating to any Interest
Accrual Period ending in any February and on any Servicer Remittance Date
relating to any Interest Accrual Period ending in any January which occurs in a
year which is not a leap year, the Servicer shall remit to the Trustee, in
respect of the Interest Reserve Loans, for deposit into the Interest Reserve
Account, an amount equal to one day's interest on the Stated Principal Balance
of the Interest Reserve Loans as of the Due Date occurring in the month
preceding the month in which such Servicer Remittance Date occurs at the
related Mortgage Rate, to the extent a full Monthly Payment or P&I Advance is
made in respect thereof (all amounts so deposited in any consecutive January
and February, "Withheld Amounts").
(b) On each Servicer Remittance Date occurring in March, the
Servicer shall withdraw from the Interest Reserve Account an amount equal to
the Withheld Amounts from the preceding January, if any, and February and
deposit such amount into the Distribution Account.
SECTION 3.28. Limitations on and Authorizations of the
Servicer and Special Servicer with
Respect to Certain Mortgage Loans.
(a) Prior to taking any action with respect to a Mortgage
Loan secured by Mortgaged Properties located in a "one-action" state, the
Servicer or Special Servicer, as applicable, shall consult with legal counsel,
the fees and expenses of which shall be an expense of the Trust Fund.
(b) With respect to any Mortgage Loan which permits the
related Borrower, with the consent or grant of a waiver by mortgagee, to incur
additional indebtedness or to amend or modify the related Borrower's
organizational documents, then the Special Servicer may only consent to either
such action, or grant a waiver with respect thereto, if the Special Servicer
determines that such consent or waiver is likely to result in a greater
recovery on a present value basis (discounted at the related Mortgage Rate)
than would not consenting to such action and the Special Servicer first obtains
written confirmation from each Rating Agency that such consent or grant of a
waiver would not, in and of itself, result in a downgrade, qualification or
withdrawal of any of the then current ratings assigned to the Certificates. The
Servicer shall not be entitled or required to consent to, or grant a waiver
with respect to, either action.
(c) With respect to the Mortgage Loans that require the
related Borrower to pay Rating Agency monitoring or review fees, the Servicer
shall enforce the obligation of the related Borrowers to pay Rating Agency
monitoring or review fees and shall remit such fees from the related Cash
Collateral Account for payment of such fees to the applicable Rating Agencies.
The Servicer shall receive bills from the Rating Agencies for monitoring,
review and surveillance of the Certificates and the Mortgage Loans on behalf of
Nomura Securities International, Inc. and shall promptly notify and send such
bills to Nomura Securities International, Inc., Attention: Sheryl McAfee.
Nomura Securities International, Inc. will notify each Rating Agency to bill
Nomura Securities International, Inc. for such services and to send such bills
to the Servicer. Nomura Securities International, Inc. will pay such portion of
the bill not paid from funds provided by the applicable Borrowers (as described
in this section (c)) and the Servicer shall notify Nomura Securities
International, Inc., of the portion of the bill that it has paid from funds
collected from such Borrowers.
(d) With respect to the Mortgage Loan secured by the
Mortgaged Property known as Marina Harbor Apartments and Anchorage, if a
material payment default has occurred on the related maturity date or, if in
the Servicer's reasonable and good faith judgment, a default in respect of
payment on such Mortgage Loan on the maturity date is reasonably foreseeable
then, notwithstanding Section 3.10 or Section 3.30 hereof, the Servicer shall
extend the term of such Mortgage Loan to the last day of the related
amortization schedule provided that such modification shall contain provisions
substantially similar to the provisions contained in the Mortgage Loans which
have Anticipated Repayment Dates with respect to (i) the application of all
excess Cash Flow to principal, (ii) Excess Interest and (iii) lockboxes has
been executed.
(e) With respect to all Mortgage Loans that provide that the
holder of the related Note may apply the monthly payment against principal,
interest and any other sums due in the order as the holder shall determine, the
Servicer shall apply such Monthly Payment to interest (other than Excess
Interest or Default Interest) under the related Mortgage Loan prior to
application to principal or any other sums due.
(f) With respect to the Mortgage Loans that have Anticipated
Repayment Dates, the Servicer (including the Servicer in its capacity as a
Certificateholder, if applicable), shall not take any enforcement action with
respect to the payment of Excess Interest or principal in excess of the
principal component of the constant Monthly Payment, other than requests for
collection, until the maturity date of the related Mortgage Loan.
(g) To the extent not inconsistent with the related Mortgage
Loan, the Servicer shall not consent to a change of franchise affiliation with
respect to a Mortgaged Property unless it obtains written confirmation from
Fitch, S&P, DCR and Moody's that such consent would not, in and of itself,
result in a downgrade, qualification or withdrawal of the then current ratings
assigned to the Certificates.
(h) With respect to the Mortgaged Property known as the
Residence Inn-Herndon, the Servicer shall require the related borrower to
implement a lockbox if the property manager in place as of the date hereof is
replaced.
(i) With respect to the Mortgage Loans that have Anticipated
Repayment Dates, the Servicer shall be permitted, in its discretion, to waive
all or any accrued Excess Interest if, prior to the related maturity date, the
related Borrower has requested the right to prepay the Mortgage Loan in full
together with all payments required by the Mortgage Loan in connection with
such prepayment except for all or a portion of accrued Excess Interest,
provided that the Servicer's determination to waive the right to such accrued
Excess Interest is reasonably likely to produce a greater payment to
Certificateholders on a present value basis than a refusal to waive the right
to such Excess Interest. Any such waiver shall not be effective until such
prepayment is tendered. The Servicer will have no liability to the Trust Fund,
the Certificateholders or any other person so long as such determination is
based on such criteria. Other than pursuant to Section 3.30, the Special
Servicer shall have no right to waive the payment of Excess Interest under the
circumstances described in this Section 3.28(i).
(j) With respect to the Mortgage Loans that (i) require
earthquake insurance, or (ii) (A) at the date of origination were secured by
Mortgaged Properties on which the related Borrower maintained earthquake
insurance and (B) have provisions which enable the Servicer to continue to
require the related Borrower to maintain earthquake insurance, the Servicer
shall require the related Borrower to maintain such insurance in the amount, in
the case of clause (i), required by the Mortgage Loan and in the amount, in the
case of clause (ii), maintained at origination, in each case, to the extent
such amounts are available at commercially reasonable rates. Any determination
by the Servicer that such insurance is not available at commercially reasonable
rates shall be subject to confirmation by Fitch that such determination not to
purchase such insurance will not result in a downgrade, qualification or
withdrawal of the then current ratings assigned to the Certificates rated by
Fitch.
(k) The Servicer shall send written notice to each Borrower
and the related Manager and clearing bank that, if applicable, the Servicer
and/or the Trustee has been appointed as the "Designee" of the "Lender" under
any related Lock-Box Agreement.
(l) With respect to any Mortgage Loan secured by a hotel the
Special Servicer shall hire a consultant which is experienced in the operation
of hotels in the event that such Mortgage Loan becomes a Specially Serviced
Mortgage Loan.
(m) With respect to the $2,000,000 reserve established by the
borrower with respect to the Sunwest Pool Properties known as Facility Number
5859 and Facility Number 7055, the Servicer shall in accordance with terms of
the Mortgage Loan not release the $2,000,000 to the borrower, except for
testing and remediation, unless and until the environmental issues disclosed in
the related environmental reports with respect to those two properties have
been resolved. If there is an event of default under the related Mortgage Loan,
and the Servicer, in its reasonable judgment, determines that the Trust Fund
may become liable due to such environmental hazards, the Servicer may in
accordance with terms of the Mortgage Loan apply the funds remaining in such
reserve to pay down the related Mortgage Loan in an amount equal to the
Allocated Loan Amount for such properties, and obtain an immediate release of
such properties from the lien of the related Mortgage Loan.
(n) For any Specially Serviced Mortgage Loan and with respect
to which, under the terms of the related Loan Documents, the mortgagee may, in
its discretion, apply Insurance Proceeds, condemnation awards or escrowed funds
to the prepayment of such loan prior to the expiration of the related Lock-out
Period, the Special Servicer may only make such a prepayment if the Special
Servicer has first received (i) the prior written consent of the Servicer
(which consent will be given or withheld in accordance with the Servicing
Standard) or (ii) the affirmative vote in favor of such prepayment from 66 2/3%
of the Voting Rights of all Certificateholders or 66 2/3% of the Voting Rights
of all Certificateholders responding within 20 Business Days of being given
notice by the Trustee of such proposed action. Upon the written request of the
Special Servicer, the Trustee shall forward Certificateholders any request of
the Special Servicer for the vote of the Certificateholders pursuant to this
Section.
(o) If any Mortgage Loan provides that the "Lender" with
respect thereto is required to purchase U.S. government obligations on behalf
of the related Borrower in connection with any defeasance of the related Note,
the Servicer shall purchase such obligations and effectuate such defeasance, at
the Borrower's expense, in accordance with the provisions of the related Loan
Documents, consistent with the Servicing Standard.
SECTION 3.29. [Intentionally left Blank].
SECTION 3.30. Modification, Waiver, Amendment and Consents.
(a) The Special Servicer may, consistent with the Servicing
Standard, agree to any modification, waiver or amendment of any term of any
Mortgage Loan, subject, however, to each of the following limitations,
conditions and restrictions:
(i) the Special Servicer shall not agree to any modification,
waiver or amendment of any term of, or take any action with
respect to, any Mortgage Loan, if such modification, waiver
or amendment relates to any payment term thereof, the release
of the related Borrower from any material term thereunder or
the release or substitution of collateral therefor except in
accordance with clause (b) or (c) of this Section 3.30; and
(ii) the Special Servicer shall not consent to the
modification of any term of a Mortgage Loan pursuant to this
clause (a), or otherwise alter, delete or add, in whole or in
part, any legal right or obligation of the related Borrower
or the Trustee, as holder of the related Mortgage Loan,
unless such modification would not be a "significant
modification" as such term is defined in Treasury Regulations
Section 1.860G-2(b)(3).
(b) The Special Servicer may, consistent with the Servicing
Standard, agree to any modification, waiver or amendment of any term of,
forgive or defer interest on and principal of, and/or add collateral for, any
Mortgage Loan with the consent of Certificateholders representing 100% of the
Percentage Interests of the most subordinate Class of Certificates then
outstanding determined as provided below, subject, however, to each of the
following limitations, conditions and restrictions:
(i) a material default on such Mortgage Loan has occurred or,
in the Special Servicer's reasonable and good faith judgment,
a default in respect of payment on such Mortgage Loan is
reasonably foreseeable, and such modification, waiver,
amendment or other action is reasonably likely to produce a
greater recovery to Certificateholders on a present value
basis (the relevant discounting of anticipated collections
that will be distributable to Certificateholders will be done
at the related Mortgage Rate), than would liquidation;
(ii) the Special Servicer shall not extend the date on which
any Balloon Payment is scheduled to be due on any Specially
Serviced Mortgage Loan except as provided for below;
(iii) no reduction of any scheduled monthly payment of
principal and/or interest on any Specially Serviced Mortgage
Loan may result in a debt service coverage ratio for such
Mortgage Loan of greater than 1.10 to 1, and the Special
Servicer may only agree to reductions lasting a period of no
more than twelve consecutive months and, in the aggregate, no
more than three consecutive reductions of twelve-months or
less each;
(iv) the Special Servicer shall not release or substitute
collateral or release mortgagors or guarantors except as
provided in clause (v) below;
(v) the Special Servicer may only allow a substitution of
collateral and the assumption of a Borrower's obligations
with respect to a Mortgage Loan in accordance with the terms
thereof and the provisions of Section 3.09 hereof;
(vi) the Special Servicer may not forgive an aggregate amount
of principal of the Mortgage Loans in excess of the
Certificate Principal Balance of the most subordinate Class
of Certificates then outstanding (as determined as provided
below) minus the aggregate of the greater of (A) any
Appraisal Reduction Amounts and (B) Delinquency Reduction
Amounts of each Mortgage Loan that, in each case, have not
resulted in a Realized Loss;
(vii) the Special Servicer shall not permit any Borrower to
add any collateral unless (A) the Special Servicer has first
determined in accordance with the Servicing Standard, based
upon an environmental assessment prepared by an Independent
Person who regularly conducts environmental assessments, at
the expense of the Borrower, that such additional collateral
is in compliance with applicable environmental laws and
regulations and that there are no circumstances or conditions
present with respect to such new collateral relating to the
use, management or disposal of any hazardous materials for
which investigation, testing, monitoring, containment,
clean-up or remediation would be required under any then
applicable environmental laws and/or regulations and (B) the
Special Servicer has received an Opinion of Counsel at the
expense of the Special Servicer or the Borrower (unless the
Special Servicer owns the most subordinate Class of
Certificates in which case, at the expense of the Trust
Fund), to the effect that the addition of such collateral
will not cause either the Upper-Tier REMIC or the Lower-Tier
REMIC to fail to qualify as a REMIC or cause a tax to be
imposed on the Trust Fund under the REMIC Provisions; and
(viii) the Special Servicer may waive or reduce a Lock-out
Period or any Prepayment Premiums only if the commencement of
a foreclosure proceeding with respect to the related Mortgage
Loan is imminent and the Special Servicer first receives
written notification from the Servicer that such action in
the opinion of the Servicer, consistent with the Servicing
Standard and based solely upon information furnished by the
Special Servicer without independent investigation of the
Servicer thereof, is more likely to result in a greater
recovery, on a present value basis, than would a foreclosure.
Notwithstanding the foregoing, the Special Servicer shall not
be required to oppose the confirmation of a plan in any bankruptcy or similar
proceeding involving a Borrower if in its reasonable and good faith judgment
such opposition would not (i) ultimately prevent the confirmation of such plan
or one substantially similar and (ii) produce a greater recovery to
Certificateholders on a present value basis.
For purposes of determining the amount of principal which the
Special Servicer may forgive pursuant to clause (vi) above, the most
subordinate Class shall include the next subordinate Class (determined as
provided in the preceding sentence) provided that Certificateholders evidencing
100% of the Percentage Interests of such Class consent to such forgiveness.
(c) Following a default by a Borrower in the payment of a
Balloon Payment on the related Maturity Date, or if the Special Servicer
reasonably determines that a default with respect to such Balloon Loan is
imminent, the Special Servicer may elect to grant a one-year extension of such
Balloon Loan; provided that the Special Servicer may only extend such Balloon
Loan if (i) immediately prior to the default on the Balloon Payment the related
Borrower had made twelve consecutive Monthly Payments on or prior to their Due
Dates, (ii) the Special Servicer determines in its reasonable judgment that
such Borrower has attempted in good faith to refinance such Balloon Loan or
Mortgaged Property, (iii) the Special Servicer determines that (A) extension of
such Balloon Loan is consistent with the Servicing Standard and (B) extension
of such Mortgage Loan is likely to result in a recovery which on a net present
value basis would be greater than the recovery that would result from a
foreclosure, (iv) such extension requires that all cash flow on all related
Mortgaged Property or Properties in excess of amounts required to operate and
maintain such Mortgaged Property or Properties be applied to payments of
principal and interest on such Balloon Loan and (v) the Special Servicer
terminates the related Manager unless the Special Servicer determines that
retaining such Manager is conducive to maintaining the value of the related
Mortgaged Properties; provided, further, the Special Servicer shall provide
notice to the Trustee (and the Trustee hereby agrees to forward such notice
immediately upon receipt to each Certificateholder) that the Special Servicer
has elected to extend the Balloon Loan and submit a case to the Servicer (an
"Extension Case") and if (A) the Servicer, based on such Extension Case but
without any independent investigation thereof, concurs with such Extension Case
but Holders of Certificates evidencing at least 66-2/3% of the Percentage
Interests of each Class of Certificates entitled to vote direct the Special
Servicer not to extend or (B) the Servicer, based on such Extension Case and
without any independent investigation thereof, does not concur with such
Extension Case and Holders of Certificates evidencing greater than (x) 50% of
the aggregate Voting Rights of all Certificateholders entitled to vote and (y)
66-2/3% of the aggregate Voting Rights of all Certificateholders entitled to
vote who respond to such notice within 30 days, direct the Special Servicer not
to extend, then the Special Servicer shall not extend.
The Special Servicer may, consistent with the Servicing
Standard, grant subsequent one-year extensions of such Balloon Loan if (i) the
related Borrower has made twelve consecutive Monthly Payments in an amount
equal to or greater than the Minimum Defaulted Monthly Payments, (ii) the
requirements set forth in clauses (ii) - (iv) of the preceding paragraph are
satisfied; provided, however, the Special Servicer shall provide notice to the
Trustee (and the Trustee hereby agrees to forward such notice immediately upon
receipt to each Certificateholder) that the Special Servicer has elected to
extend the Balloon Loan and submit an Extension Case to the Servicer and if (A)
the Servicer, based on such Extension Case but without any independent
investigation thereof, concurs with such Extension Case but Holders of
Certificates evidencing at least 66-2/3% of the Percentage Interests of each
Class of Certificates entitled to vote direct the Special Servicer not to
extend or (B) the Servicer, based on such Extension Case and without any
independent investigation thereof, does not concur with such Extension Case and
Holders of Certificates evidencing greater than (x) 50% of the aggregate Voting
Rights of all Certificateholders entitled to vote and (y) 66-2/3% of the
aggregate Voting Rights of all Certificateholders entitled to vote who respond
to such notice within 30 Business Days, direct the Special Servicer not to
extend, then the Special Servicer shall not extend. If the related Borrower
fails to make a timely Minimum Defaulted Monthly Payment more than once during
any two year period after an extension of a Balloon Loan, no further extensions
will be granted.
During the 30 day period after notice of a proposed extension
of a Balloon Loan has been given, each of the Servicer and Special Servicer
shall be permitted to communicate with the Certificateholders regarding its
respective position with respect to such extension. Notwithstanding the
foregoing, the Special Servicer shall not agree to any extension of a Mortgage
Loan beyond two years prior to the Rated Final Distribution Date.
Notwithstanding the foregoing, the Special Servicer may extend a defaulted
payment due on the Maturity Date of a Balloon Loan and grant subsequent
extensions pursuant to the Instructions of the Directing Holders (as described
in paragraph (d) below). The Servicer shall within five Business Days after
receipt of an Extension Case from the Special Servicer, give the Special
Servicer written notice as to whether or not it concurs with the extension set
forth in such Extension Case. The Special Servicer shall provide the necessary
information and back-up material for the Servicer to determine whether it would
extend prior to sending any such notice to the Trustee. The Special Servicer
will notify the Servicer of any Mortgage Loan with respect to which the
Borrower has indicated in writing an intent to request an extension.
The Holders of the Class A-CS1 and Class PS-1 Certificates
shall not be entitled to vote with respect to proposed extensions of a Balloon
Loan.
Any extension of a Balloon Loan pursuant to this Section will
require monthly payments in an amount equal to or greater than the Minimum
Defaulted Monthly Payment.
(d) The Special Servicer may be given revocable instructions
("Instructions") (with a copy to the Servicer) to extend a Specially Serviced
Mortgage Loan that has defaulted on a Balloon Payment (which extension shall be
conditioned on the requirements of clauses (ii)-(iv) of Section 3.30(c) above
except that such Instructions shall not be subject to the rejection of the
other Certificateholders and the related Borrower will not be required to have
made twelve consecutive Monthly Payments on or prior to the Due Date) by the
Holders of Certificates representing greater than 50% of the Voting Rights of
the most subordinate Class or Classes of Certificates then outstanding
representing a minimum of 1.0% of the aggregate initial Certificate Balances of
all Classes of Certificates (or if the Certificate Balance of such Class or
Classes has been reduced to less than 40% of its initial Certificate Balance,
the holders of such Class together with the Holders of the next most
subordinate Class) (the "Directing Holders") under the following circumstance:
(i) If the Special Servicer has determined to
commence foreclosure or acquisition proceedings, the Special Servicer
shall notify the Trustee (and the Trustee hereby agrees to notify
Directing Holders ), the Depositor and the Servicer of its proposed
action;
(ii) If the Special Servicer receives contrary
Instructions from the Directing Holders within seven days after notice
was given to the Directing Holders (and the Trustee hereby agrees to
forward to the Special Servicer promptly any Instructions provided by
the Directing Holders), the Special Servicer will delay such
proceedings, and the procedures described below shall apply to the
servicing of such Mortgage Loan; and
(iii) In the event that the Special Servicer does
not receive such Instructions within such seven-day period, the
Special Servicer may proceed in connection with the foreclosure or
acquisition in a manner consistent with the Servicing Standard.
If the Directing Holders revoke their Instructions to extend the Mortgage Loan,
the Special Servicer shall service the Mortgage Loan without regard to such
original Instructions; provided, however, that the Directing Holders shall be
required to maintain the Collateral Account in accordance with this Section
3.30 unless and until the Mortgage Loan is no longer a Specially Serviced
Mortgage Loan for nine consecutive months or has been liquidated; and provided,
further, that any such foreclosure shall be subject to the provisions of
Section 3.10.
(e) If the Special Servicer receives Instructions and the
Servicer has not otherwise been required to obtain an Updated Appraisal as
described in Section 3.10 above within the preceding twelve month period, the
Special Servicer shall notify the Servicer and the Servicer shall as soon as
reasonably practicable obtain an Updated Appraisal of the Mortgaged Property
(the cost of which shall be paid by the Servicer as a Property Advance), in
order to determine the fair market value of such Mortgaged Property, after
accounting for the estimated liquidation and carrying costs (the "Fair Market
Value" of such Mortgaged Property). Within two Business Days after the Special
Servicer's receipt of Instructions, the Servicer shall establish a segregated
account (the "Collateral Account") and the Directing Holders shall deposit
therein (at the Servicer's request), in proportion to their respective
Percentage Interests, an amount equal to the lesser of (i) 125% of the Fair
Market Value of the related Mortgaged Property and (ii) the outstanding
principal balance of the Mortgage Loan plus unreimbursed Advances (with
interest thereon at the Advance Rate) and unpaid accrued interest (the
"Deposit"). If no Updated Appraisal has yet been obtained, the amount of the
Deposit will be determined based on the Servicer's estimate of the Fair Market
Value of the Mortgaged Property, in which case, upon the Servicer's receipt of
such Updated Appraisal, the Servicer shall remit any excess deposit to the
Directing Holders, or the Directing Holders will deposit in the Collateral
Account any shortfall, as the case may be. In the event that the Directing
Holders do not make the required deposit within two Business Days following the
Special Servicer's receipt of Instructions, the Special Servicer shall act in
accordance with the Servicing Standard without regard to such Instructions. The
Directing Holders shall be deemed to have granted to the Servicer for the
benefit of Certificateholders a first priority security interest in the
Collateral Account, as security for the obligations of the Directing Holders.
If the Special Servicer is acting pursuant to Instructions,
the Servicer shall withdraw from the Collateral Account and deposit into the
Collection Account on or prior to the Business Day preceding each Servicer
Remittance Date an amount equal to the sum of (i) the Minimum Defaulted Monthly
Payment on the related Balloon Loan and (ii) any Property Protection Expenses
or any expenses incurred to protect and preserve the security for a Mortgage
Loan or taxes and assessments or insurance premiums (without regard to a
non-recoverability determination), and the Directing Holders shall, upon
request therefor by the Servicer, deposit from their own funds into the
Collateral Account the amount of such P&I Advance or Property Advance. Such
withdrawals shall be reimbursed, with interest, at the Advance Rate (but in no
event greater than the Default Rate on the related Mortgage Loan), and shall be
recoverable only from funds recovered from the related Mortgage Loan (whether
pursuant to liquidation or the Mortgage Loan being brought current) but only
after such funds have been applied to the purposes set forth in Section
3.06(i)-(x). If the Directing Holders fail to make such deposit within one (1)
Business Day after receipt of the Servicer's request, the Special Servicer
shall no longer be required to follow such Instructions and shall specially
service such Mortgage Loan as though no Instructions had been given; provided,
however, that the Directing Holders shall be required to maintain the
Collateral Account in accordance with the requirements of this Section 3.30
unless and until the related Mortgage Loan is no longer a Specially Serviced
Mortgage Loan for nine consecutive months or has been liquidated. The Servicer
shall invest amounts on deposit in the Collateral Account in Permitted
Investments upon direction by the Directing Holders. Directing Holders shall be
entitled to reinvestment income as received, and will reimburse the Collateral
Account for any losses incurred. Any Collateral Account established hereunder
will be an "outside reserve fund" beneficially owned by the related Directing
Holders for federal income tax purposes, and any amounts paid or reimbursed
from the Upper-Tier REMIC or Lower-Tier REMIC to the Collateral Account will be
treated as paid to the Directing Holders as beneficial owners.
(f) If a Balloon Loan or the related Mortgaged Property which
is subject to Instructions is liquidated or disposed of all Net Liquidation
Proceeds shall be deposited in the Collection Account and the Servicer shall
withdraw from the Collateral Account, and deposit into the Collection Account
as additional Liquidation Proceeds for distribution to Certificateholders the
lesser of (a) the amount by which 125% of the Fair Market Value (determined at
the time of the Deposit) (plus accrued and unpaid interest, accumulated
carrying costs and conveyance expenses) exceeds the net sales proceeds, and (b)
the amount by which the outstanding principal balance of the related Mortgage
Loan plus unreimbursed Advances (with interest thereon) and unpaid accrued
interest exceeds the net sales proceeds, provided that in no event shall such
additional Liquidation Proceeds exceed the unpaid principal balance, accrued
and unpaid interest (including Default Interest), unpaid Advances made by the
Servicer, Special Servicer, Trustee or Fiscal Agent and interest thereon, and
any expenses paid by the Trust Fund with respect to such Mortgage Loan.
If the amount realized upon disposition of the Mortgage Loan
or Mortgaged Property exceeds 125% of the Fair Market Value, the Servicer shall
deposit the excess in the Collection Account to the extent not required by
applicable law to be paid to the related Borrower. If the Mortgage Loan has not
been sold, liquidated or disposed of on or before the third anniversary of the
Instructions (or such earlier date so that the Trust Fund owns the Mortgaged
Property for no longer than the period permitted by Section 3.17(a)), the
Directing Holders shall immediately purchase the Mortgage Loan for a purchase
price equal to Fair Market Value (determined at the time of the Deposit) plus
accrued and unpaid interest, accumulated carrying costs and conveyance expenses
and, in connection therewith, amounts then on deposit in the Collateral Account
shall be applied first in payment of such purchase price. For purposes of this
paragraph, if the Updated Appraisal is dated more than twelve months prior to
the date on which such purchase is to occur, then the Servicer shall obtain an
Updated Appraisal upon which the calculation of Fair Market Value shall be
based and the term "Fair Market Value" for purposes of the purchase price and
the first paragraph of this section (d) shall be the greater of (i) the Fair
Market Value calculated at the time the Instructions were first given and (ii)
the Fair Market Value calculated in connection with the referenced Updated
Appraisal, provided that in no event shall such price exceed the unpaid
principal balance, accrued interest (including Default Interest), unpaid
Advances made by the Servicer, Special Servicer, Trustee or Fiscal Agent, and
interest thereon and expenses paid by the Trust Fund with respect to such
Mortgage Loan.
If at any time following the establishment of a Collateral
Account and prior to the disposition of the Specially Serviced Mortgage Loan or
Mortgaged Property, the Mortgaged Property suffers a hazard loss that results
in the Mortgaged Property not being rebuilt and payments to the Trustee are
made under the related hazard insurance policy, the Servicer shall pay all
amounts on deposit in the Collateral Account to the Directing Holders. In
addition, after amounts required to be deposited in the Collection Account as
set forth above have been withdrawn from the Collateral Account following
foreclosure, liquidation, disposition, purchase by Directing Holders, or if the
related Mortgage Loan is no longer a Specially Serviced Mortgage Loan for nine
consecutive months, any remaining amounts in the Collateral Account shall be
released to the Directing Holders.
(h) Until the disposition of the Specially Serviced Mortgage
Loan or Mortgaged Property as to which Directing Holders have provided
Instructions or the cure of such default, no P&I Advances shall be made in
respect of amounts otherwise distributable to the Class of the Directing
Holders in respect of such Mortgage Loan. The Trustee shall notify the Servicer
at least five Business Days prior to the Servicer Remittance Date of the amount
of distributions to be made to the Directing Holders on the related
Distribution Date.
(i) The Special Servicer shall provide copies of any
modifications or extensions to each Rating Agency. All modifications, waivers,
amendments and other actions entered into or taken in respect of the Mortgage
Loans pursuant to this Section 3.30 shall be in writing. The Special Servicer
shall notify the Servicer and the Trustee, in writing, of any modification,
waiver, amendment or other action entered into or taken in respect of any
Mortgage Loan pursuant to this Section 3.30, prior to the effective date
thereof and the date as of which the related modification, waiver or amendment
is to take effect, and shall deliver to the Trustee or the related Custodian
for deposit in the related Mortgage File (with a copy to the Servicer) an
original counterpart of the agreement relating to such modification, waiver,
amendment or other action, promptly (and in any event within 10 Business Days)
following the execution thereof. Following the execution of any modification,
waiver or amendment agreed to by the Special Servicer pursuant to the clause
(a) or (b)(i) above, the Special Servicer shall deliver to the Trustee (with a
copy to the Servicer) an Officer's Certificate setting forth in reasonable
detail the basis of the determination made by it pursuant to clause (a) or
(b)(i) above.
(j) If a modification, waiver or amendment results, in and of
itself, in the withdrawal, downgrade or qualification of any of the
then-current ratings assigned to any Class of Certificates (not including the
Class of Certificates, if any, that consented to such actions), then the
Special Servicer shall be terminated and shall be replaced pursuant to Section
7.02.
(k) Any payment of interest which is deferred as described
herein shall not, for purposes, including, without limitation, of calculating
monthly distributions to Certificateholders, be added to the unpaid principal
balance of the related Mortgage Loan, notwithstanding that the terms of such
Mortgage Loan so permit or that such interest may actually be capitalized.
SECTION 3.31. Notices to Unitholders.
Unless and until a Certificate has been separated from a Unit
pursuant to Section 5.01(j) hereof, all notices, reports, requests or any other
information required to be sent to Holders of any of the Class B-1, Class B-2,
Class B-3, Class B-4, Class B-5 or Class B-6 Certificates shall be sent to the
related Unitholder as well as to the Holder of the Individual Certificates of
the Class B-1, Class B-2 and Class B-4 Certificates each having an initial
Certificate Balance of $9.00. Only one copy of any such notice, report, request
or other information shall be sent to each Unitholder, unless such notice,
report, request or information is different with respect to each Class.
<PAGE>
ARTICLE IV
DISTRIBUTIONS TO CERTIFICATEHOLDERS
SECTION 4.01. Distributions.
(a) On each Distribution Date, to the extent of Available
Funds, amounts held in the Distribution Account shall be withdrawn and
distributed on the Lower-Tier REMIC Regular Interests as follows:
(i) The amounts and timing of principal and interest payments
on each Lower-Tier REMIC Regular Interest will be identical
to such amounts and timing on the corresponding Related
Certificates for such Distribution Date, except that, solely
for this purpose, all calculations with respect to the
Related Certificates shall be made as though (x) the Class
A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-1E, Class
A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7,
Class A-8, Class B-1, Class B-2, Class B-3, Class B-4, Class
B-5, and Class B-6 Certificate Pass-Through Rates were equal
to the Weighted Average Net Mortgage Pass-Through Rate, (y)
the Class PS-1 and Class A-CS1 Notional Balances were zero at
all times, and (z) any Reduction Interest Distribution Amount
and Reduction Interest shortfall allocated to, or any
[restoration] of amounts corresponding to such Reduction
Interest Distribution Amount and Reduction Interest Shortfall
distributed on, the Class PS-1 Certificates on such
Distribution Date based on notional reductions to the
Certificate Balance of a Related Certificate were allocated
to or distributed on, as the case may be, the Lower-Tier
Regular Interest that corresponds to such Related
Certificate.
(ii) [Intentionally left blank]
(iii) Realized Losses shall be allocated to, and shall reduce
the Certificate Balances of, each Class of Lower-Tier Regular
Interests without distribution on any Distribution Date, to
the extent that the Certificate Balance of such Class exceeds
the Certificate Balance of the corresponding Related
Certificates because of Realized Losses allocated to such
Related Certificates. Amounts recovered in respect of any
amounts previously written off as Realized Losses will be
distributed to the Related Lower-Tier Regular Interests, to
the extent that amounts recovered in respect of any amounts
previously written off as Realized Losses are distributed to
the corresponding Related Certificates.
(b) On each Distribution Date, (x) amounts distributed on the
Lower-Tier Regular Interests shall be deposited in the Upper-Tier Distribution
Account, (y) any amounts remaining in the Distribution Account shall be
distributed to the holders of the Class LR Certificates and (z) Holders of each
Class of Certificates (other than the Class LR Certificates) shall receive
distributions from amounts on deposit in the Upper-Tier Distribution Account in
respect of interest and principal, in the amounts and in the order of priority
set forth below:
(i) First, pro rata, in respect of interest, to the Class
A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-CS1 and
Class PS-1 Certificates, up to an amount equal to the
aggregate Class Interest Distribution Amounts of such
Classes;
(ii) Second, pro rata, to the Class A-1A, Class A-1B, Class
A-1C, Class A-1D, Class A-CS1 and Class PS-1 Certificates, in
respect of interest, up to an amount equal to the aggregate
unpaid Class Interest Shortfalls previously allocated to such
Classes;
(iii) Third, prior to the Crossover Date, to the Class A-1A
Certificates, in reduction of the Certificate Balance
thereof, an amount equal to the Principal Distribution Amount
until the Certificate Balance thereof is reduced to zero;
(iv) Fourth, prior to the Crossover Date, to the Class A-1B
Certificates, in reduction of the Certificate Balance
thereof, an amount equal to the Principal Distribution Amount
less amounts of Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Balance
of such Class is reduced to zero;
(v) Fifth, prior to the Crossover Date, to the Class A-1C
Certificates, in reduction of the Certificate Balance
thereof, an amount equal to the Principal Distribution Amount
less amounts of Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Balance
of such Class is reduced to zero;
(vi) Sixth, prior to the Crossover Date, to the Class A-1D
Certificates, in reduction of the Certificate Balance
thereof, an amount equal to the Principal Distribution Amount
less amounts of Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Balance
of such Class is reduced to zero;
(vii) Seventh, on and after the Crossover Date, to the Class
A-1A, Class A-1B, Class A-1C and Class A-1D Certificates, pro
rata, in reduction of the Certificate Balances thereof, an
amount equal to the Principal Distribution Amount less
amounts of Principal Distribution Amount distributed pursuant
to all prior clauses, until the Certificate Balances thereof
are reduced to zero;
(viii) Eighth, to the Class A-1E Certificates in respect of
interest, up to an amount equal to the aggregate Class
Interest Distribution Amount of such Class;
(ix) Ninth, pro rata, (A) to the Class A-1E Certificates in
respect of interest, up to an amount equal to the aggregate
unpaid Class Interest Shortfalls previously allocated to such
Class, (B) to the Class PS-1 Certificates in respect of the
Reduction Interest Distribution Amount attributable to the
notional reduction in the Certificate Balance of the Class
A-1E Certificates pursuant to Section 4.01(i) up to an amount
equal to the aggregate Reduction Interest Distribution Amount
so attributable and (C) to the Class PS-1 Certificates, up to
an amount equal to the aggregate unpaid Reduction Interest
Shortfalls previously allocated to the Class PS-1 Certificate
in respect of Reduction Interest Distribution Amounts under
Clause (B);
(x) Tenth, to the Class A-1E Certificates, in reduction of
the Certificate Balance thereof, an amount equal to the
Principal Distribution Amount less amounts of Principal
Distribution Amount distributed pursuant to all prior
clauses, until the Certificate Balance of such Class is
reduced to zero;
(xi) Eleventh, to the Class A-1E Certificates, to the extent
not distributed pursuant to all prior clauses, for the
unreimbursed amounts of Realized Losses, if any, an amount
equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class;
(xii) Twelfth, to the Class A-2 Certificates in respect of
interest, up to an amount equal to the aggregate Class
Interest Distribution Amount of such Class;
(xiii) Thirteenth, pro rata, (A) to the Class A-2
Certificates in respect of interest, up to an amount equal to
the aggregate unpaid Class Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1 Certificates
in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate
Balance of the Class A-2 Certificates pursuant to Section
4.01(i) up to an amount equal to the aggregate Reduction
Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the
aggregate unpaid Reduction Interest Shortfalls previously
allocated to the Class PS-1 Certificates in respect of
Reduction Interest Distribution Amounts under Clause (B);
(xiv) Fourteenth, to the Class A-2 Certificates, in reduction
of the Certificate Balance thereof, an amount equal to the
Principal Distribution Amount less amounts of Principal
Distribution Amount distributed pursuant to all prior
clauses, until the Certificate Balance of such Class is
reduced to zero;
(xv) Fifteenth, to the Class A-2 Certificates, to the extent
not distributed pursuant to all prior clauses, for the
unreimbursed amounts of Realized Losses, if any, an amount
equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class;
(xvi) Sixteenth, to the Class A-3 Certificates in respect of
interest, up to an amount equal to the aggregate Class
Interest Distribution Amount of such Class;
(xvii) Seventeenth, pro rata, (A) to the Class A-3
Certificates in respect of interest, up to an amount equal to
the aggregate unpaid Class Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1 Certificates
in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate
Balance of the Class A-3 Certificates pursuant to Section
4.01(i) up to an amount equal to the aggregate Reduction
Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the
aggregate unpaid Reduction Interest Shortfalls previously
allocated to the Class PS-1 Certificates in respect of
Reduction Interest Distribution Amounts under Clause (B);
(xviii) Eighteenth, to the Class A-3 Certificates in
reduction of the Certificate Balance thereof, an amount equal
to the Principal Distribution Amount, less the amount of the
Principal Distribution Amount distributed pursuant to all
prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xix) Nineteenth, to the Class A-3 Certificates, to the
extent not distributed pursuant to all prior clauses, for the
unreimbursed amounts of Realized Losses, if any, up to an
amount equal to the aggregate of such unreimbursed Realized
Losses previously allocated to such Class;
(xx) Twentieth, to the Class A-4 Certificates in respect of
interest, up to an amount equal to the aggregate Class
Interest Distribution Amount of such Class;
(xxi) Twenty-first, pro rata, (A) to the Class A-4
Certificates in respect of interest, up to an amount equal to
the aggregate unpaid Class Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1 Certificates
in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate
Balance of the Class A-4 Certificates pursuant to Section
4.01(i) up to an amount equal to the aggregate Reduction
Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the
aggregate unpaid Reduction Interest Shortfalls previously
allocated to the Class PS-1 Certificates in respect of
Reduction Interest Distribution Amounts under Clause (B);
(xxii) Twenty-second, to the Class A-4 Certificates, in
reduction of the Certificate Balance thereof, an amount equal
to the Principal Distribution Amount less amounts of
Principal Distribution Amount distributed pursuant to all
prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xxiii) Twenty-third, to the Class A-4 Certificates, to the
extent not distributed pursuant to all prior clauses, for the
unreimbursed amounts of Realized Losses, if any, an amount
equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class;
(xxiv) Twenty-fourth, to the Class A-5 Certificates in
respect of interest, up to an amount equal to the aggregate
Class Interest Distribution Amount of such Class;
(xxv) Twenty-fifth, pro rata, (A) to the Class A-5
Certificates in respect of interest, up to an amount equal to
the aggregate unpaid Class Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1 Certificates
in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate
Balance of the Class A-5 Certificates pursuant to Section
4.01(i) up to an amount equal to the aggregate Reduction
Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the
aggregate unpaid Reduction Interest Shortfalls previously
allocated to the Class PS-1 Certificates in respect of
Reduction Interest Distribution Amounts under Clause (B);
(xxvi) Twenty-sixth, to the Class A-5 Certificates in
reduction of the Certificate Balance thereof, an amount equal
to the Principal Distribution Amount, less the amount of the
Principal Distribution Amount distributed pursuant to all
prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xxvii) Twenty-seventh, to the Class A-5 Certificates, to the
extent not distributed pursuant to all prior clauses, for the
unreimbursed amounts of Realized Losses, if any, an amount
equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class;
(xxviii) Twenty-eighth, to the Class A-6 Certificates in
respect of interest, up to an amount equal to the aggregate
Class Interest Distribution Amount of such Class;
(xxix) Twenty-ninth, pro rata, (A) to the Class A-6
Certificates in respect of interest, up to an amount equal to
the aggregate unpaid Class Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1 Certificates
in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate
Balance of the Class A-6 Certificates pursuant to Section
4.01(i) up to an amount equal to the aggregate Reduction
Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the
aggregate unpaid Reduction Interest Shortfalls previously
allocated to the Class PS-1 Certificates in respect of
Reduction Interest Distribution Amounts under Clause (B);
(xxx) Thirtieth, to the Class A-6 Certificates in reduction
of the Certificate Balance thereof, an amount equal to the
Principal Distribution Amount, less the amount of the
Principal Distribution Amount distributed pursuant to all
prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xxxi) Thirty-first, to the Class A-6 Certificates, to the
extent not distributed pursuant to all prior clauses, for the
unreimbursed amounts of Realized Losses, if any, an amount
equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class;
(xxxii) Thirty-second, to the Class A-7 Certificates in
respect of interest, up to an amount equal to the aggregate
Class Interest Distribution Amount of such Class;
(xxxiii) Thirty-third, pro rata, (A) to the Class A-7
Certificates in respect of interest, up to an amount equal to
the aggregate unpaid Class Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1 Certificates
in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate
Balance of the Class A-7 Certificates pursuant to Section
4.01(i) up to an amount equal to the aggregate Reduction
Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the
aggregate unpaid Reduction Interest Shortfalls previously
allocated to the Class PS-1 Certificates in respect of
Reduction Interest Distribution Amounts under Clause (B);
(xxxiv) Thirty-fourth, to the Class A-7 Certificates in
reduction of the Certificate Balance thereof, an amount equal
to the Principal Distribution Amount, less the amount of the
Principal Distribution Amount distributed pursuant to all
prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xxxv) Thirty-fifth, to the Class A-7 Certificates, to the
extent not distributed pursuant to all prior clauses, for the
unreimbursed amounts of Realized Losses, if any, an amount
equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class;
(xxxvi) Thirty-sixth, to the Class A-8 Certificates in
respect of interest, up to an amount equal to the aggregate
Class Interest Distribution Amount of such Class;
(xxxvii) Thirty-seventh, pro rata, (A) to the Class A-8
Certificates in respect of interest, up to an amount equal to
the aggregate unpaid Class Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1 Certificates
in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate
Balance of the Class A-8 Certificates pursuant to Section
4.01(i) up to an amount equal to the aggregate Reduction
Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the
aggregate unpaid Reduction Interest Shortfalls previously
allocated to the Class PS-1 Certificates in respect of
Reduction Interest Distribution Amounts under Clause (B);
(xxxviii) Thirty-eighth, to the Class A-8 Certificates in
reduction of the Certificate Balance thereof, an amount equal
to the Principal Distribution Amount, less the amount of the
Principal Distribution Amount distributed pursuant to all
prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xxxix) Thirty-ninth, to the Class A-8 Certificates, to the
extent not distributed pursuant to all prior clauses, for the
unreimbursed amounts of Realized Losses, if any, an amount
equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class;
(xl) Fortieth, to the Class B-1 Certificates in respect of
interest, up to an amount equal to the aggregate Class
Interest Distribution Amount of such Class;
(xli) Forty-first, pro rata, (A) to the Class B-1
Certificates in respect of interest, up to an amount equal to
the aggregate unpaid Class Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1 Certificates
in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate
Balance of the Class B-1 Certificates pursuant to Section
4.01(i) up to an amount equal to the aggregate Reduction
Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the
aggregate unpaid Reduction Interest Shortfalls previously
allocated to the Class PS-1 Certificates in respect of
Reduction Interest Distribution Amounts under Clause (B);
(xlii) Forty-second, to the Class B-1 Certificates, in
reduction of the Certificate Balance thereof, an amount equal
to the Principal Distribution Amount less amounts of
Principal Distribution Amount distributed pursuant to all
prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xliii) Forty-third, to the Class B-1 Certificates, to the
extent not distributed pursuant to all prior clauses, for the
unreimbursed amounts of Realized Losses, if any, an amount
equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class;
(xliv) Forty-fourth, to the Class B-2 Certificates in respect
of interest, up to an amount equal to the aggregate Class
Interest Distribution Amount of such Class;
(xlv) Forty-fifth, pro rata, (A) to the Class B-2
Certificates in respect of interest, up to an amount equal to
the aggregate unpaid Class Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1 Certificates
in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate
Balance of the Class B-2 Certificates pursuant to Section
4.01(i) up to an amount equal to the aggregate Reduction
Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the
aggregate unpaid Reduction Interest Shortfalls previously
allocated to the Class PS-1 Certificates in respect of
Reduction Interest Distribution Amounts under Clause (B);
(xlvi) Forty-sixth, to the Class B-2 Certificates, in
reduction of the Certificate Balance thereof, an amount equal
to the Principal Distribution Amount less amounts of
Principal Distribution Amount distributed pursuant to all
prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xlvii) Forty-seventh, to the Class B-2 Certificates, to the
extent not distributed pursuant to all prior clauses, for the
unreimbursed amounts of Realized Losses, if any, an amount
equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class;
(xlviii) Forty-eighth, to the Class B-3 Certificates in
respect of interest, up to an amount equal to the aggregate
Class Interest Distribution Amount of such Class;
(xlix) Forth-ninth, pro rata, (A) to the Class B-3
Certificates in respect of interest, up to an amount equal to
the aggregate unpaid Class Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1 Certificates
in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate
Balance of the Class B-3 Certificates pursuant to Section
4.01(i) up to an amount equal to the aggregate Reduction
Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the
aggregate unpaid Reduction Interest Shortfalls previously
allocated to the Class PS-1 Certificates in respect of
Reduction Interest Distribution Amounts under Clause (B);
(l) Fiftieth, to the Class B-3 Certificates, in
reduction of the Certificate Balance thereof, an
amount equal to the Principal Distribution Amount less
amounts of Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(li) Fifty-first, to the Class B-3 Certificates, to
the extent not distributed pursuant to all prior
clauses, for the unreimbursed amounts of Realized
Losses, if any, an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated
to such Class;
(lii) Fifty-second, to the Class B-4 Certificates in
respect of interest, up to an amount equal to the
aggregate Class Interest Distribution Amount of such
Class;
(liii) Fifty-third, (A) to the Class B-4 Certificates
in respect of interest, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1
Certificates in respect of the Reduction Interest
Distribution Amount attributable to the notional
reduction in the Certificate Balance of the Class B-4
Certificates pursuant to Section 4.01( ) up to an
amount equal to the aggregate Reduction Interest
Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the
aggregate unpaid Reduction Interest Shortfalls
previously allocated to the Class PS-1 Certificates in
respect of Reduction Interest Distribution Amounts
under Clause (B);
(liv) Fifty-fourth, to the Class B-4 Certificates, in
reduction of the Certificate Balance thereof, an
amount equal to the Principal Distribution Amount less
amounts of Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(lv) Fifty-fifth, to the Class B-4 Certificates, to
the extent not distributed pursuant to all prior
clauses, for the unreimbursed amounts of Realized
Losses, if any, an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated
to such Class;
(lvi) Fifty-sixth, to the Class B-5 Certificates in
respect of interest, up to an amount equal to the
aggregate Class Interest Distribution Amount of such
Class;
(lvii) Fifty-seventh, pro rata, (A) to the Class B-5
Certificates in respect of interest, up to an amount
equal to the aggregate unpaid Class Interest
Shortfalls previously allocated to such Class, (B) to
the Class PS-1 Certificates in respect of the
Reduction Interest Distribution Amount attributable to
the notional reduction in the Certificate Balance of
the Class B-5 Certificates pursuant to Section 4.01(i)
up to an amount equal to the aggregate Reduction
Interest Distribution Amount so attributable and (C)
to the Class PS-1 Certificates, up to an amount equal
to the aggregate unpaid Reduction Interest Shortfalls
previously allocated to the Class PS-1 Certificates in
respect of Reduction Interest Distribution Amounts
under Clause (B);
(lviii) Fifty-eighth, to the Class B-5 Certificates,
in reduction of the Certificate Balance thereof, an
amount equal to the Principal Distribution Amount less
amounts of Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(lix) Fifty-ninth, to the Class B-5 Certificates, to
the extent not distributed pursuant to all prior
clauses, for the unreimbursed amounts of Realized
Losses, if any, an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated
to such Class;
(lx) Sixtieth, to the Class B-6 Certificates in
respect of interest, up to an amount equal to the
aggregate Class Interest Distribution Amount of such
Class;
(lxi) Sixty-first, pro rata, (A) to the Class B-6
Certificates in respect of interest, up to an amount
equal to the aggregate unpaid Class Interest
Shortfalls previously allocated to such Class, (B) to
the Class PS-1 Certificates in respect of the
Reduction Interest Distribution Amount attributable to
the notional reduction in the Certificate Balance of
the Class B-6 Certificates pursuant to Section 4.01(i)
up to an amount equal to the aggregate Reduction
Interest Distribution Amount so attributable and (C)
to the Class PS-1 Certificates, up to an amount equal
to the aggregate unpaid Reduction Interest Shortfalls
previously allocated to the Class PS-1 Certificates in
respect of Reduction Interest Distribution Amounts
under Clause (B);
(lxii) Sixty-second, to the Class B-6 Certificates, in
reduction of the Certificate Balance thereof, an
amount equal to the Principal Distribution Amount less
amounts of Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate
Balance of such Class is reduced to zero;
(lxiii) Sixty-third, to the Class B-6 Certificates, to
the extent not distributed pursuant to all prior
clauses, for the unreimbursed amounts of Realized
Losses, if any, an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated
to such Class;
(lxiv) Sixty-fourth, pro rata, to the Class B-7 and
Class B-7H Certificates in respect of interest, up to
an amount equal to the aggregate Class Interest
Distribution Amounts of such classes;
(lxv) Sixty-fifth, pro rata, to the Class B-7 and
Class B-7H Certificates in respect of interest, up to
an amount equal to the aggregate unpaid Class Interest
Shortfalls previously allocated to such classes;
(lxvi) Sixty-sixth, pro rata, based on Certificate
Balance to the Class B-7 and Class B-7H Certificates
in reduction of the Certificate Balances thereof, an
amount equal to the Principal Distribution Amount less
amounts of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the
Certificate Balance of each such class is reduced to
zero;
(lxvii) Sixty-seventh, pro rata, to the Class B-7 and
Class B-7H Certificates, to the extent not distributed
pursuant to all prior clauses, for the unreimbursed
amounts of Realized Losses, if any, an amount equal to
the aggregate of such unreimbursed Realized Losses
previously allocated to such classes; and
(lxviii) Sixty-eighth, to the Class R Certificates.
On each Distribution Date, amounts received on a Mortgage
Loan that represent Subordinate Class Advance Recoveries shall be allocated by
the Trustee to the Class of Certificates and the Related Lower-Tier Regular
Interest that advanced the related Subordinate Class Advance Amount in respect
of the distributions to which such Class of Certificates and Related Lower-Tier
Regular Interest were entitled on the Distribution Date on which such
distributions were reduced by such Subordinate Class Advance Amount. Amounts
allocated with respect to interest shall be applied, first, to any related
unpaid Interest Shortfalls or Class Interest Shortfalls. On each Distribution
Date, the Paying Agent shall distribute Subordinate Class Advance Recoveries
allocated to the related Class of Certificates and Related Lower-Tier Regular
Interest pursuant to this paragraph to such Class and Related Lower-Tier
Regular Interest.
All references to pro rata in the preceding clauses with
respect to interest and Interest Shortfalls shall mean pro rata based on the
amount distributable pursuant to such clauses, with respect to distribution of
principal other than for unreimbursed Realized Losses shall mean pro rata based
on Certificate Balance and with respect to distributions with respect to
unreimbursed Realized Losses shall mean pro rata based on the amount of
unreimbursed Realized Losses previously allocated to the applicable Classes.
(c) (i) On each Distribution Date, following the distribution
from the Distribution Account in respect of the Lower-Tier Regular Interests
pursuant to Section 4.01(c)(ii), the Paying Agent shall make distributions of
Prepayment Premiums with respect to any Principal Prepayments received in the
related Collection Period from amounts deposited in the Upper-Tier Distribution
Account pursuant to Section 3.05(c) in the following amounts and order of
priority, with respect to the Certificates of each Class in each case to the
extent remaining amounts of Prepayment Premiums are available therefor:
(I) First, to the Class A-CS1 Certificates, an amount equal
to (A) the present value (discounted at the Discount Rate (as
defined below) for the Class A-CS1 Certificates plus the
Spread Rate (as defined below) for the Class A-CS1
Certificates) of the aggregate interest that would have been
paid in respect of the Class A-CS1 Certificates from the
Distribution Date occurring in the following month until the
Notional Balance of the Class A-CS1 Certificates would have
been reduced to zero had the related prepayment not occurred,
minus the present value (discounted at the Discount Rate for
the Class A-CS1 Certificates plus the Spread Rate for the
Class A-CS1 Certificates) of the aggregate interest that will
be paid in respect of Class A-CS1 Certificates from the
Distribution Date occurring in the following month until the
Notional Balance of the Class A-CS1 Certificates is reduced
to zero following such prepayment (assuming no further
prepayments are made except that all Mortgage Loans prepay on
Anticipated Repayment Dates where applicable);
(II) Second, to the Class PS-1 Certificates, an amount equal
to (A) the present value (discounted at the Discount Rate for
the Class PS-1 Certificates plus the Spread Rate for the
Class PS-1 Certificates) of the aggregate interest that would
have been paid in respect of the Class PS-1 Certificates from
the Distribution Date occurring in the following month until
the Notional Balance of the Class PS-1 Certificates would
have been reduced to zero had the related prepayment not
occurred, minus the present value (discounted at the Discount
Rate for the Class PS-1 Certificates plus the Spread Rate for
the Class PS-1 Certificates) of the aggregate interest that
will be paid in respect of Class PS-1 Certificates from the
Distribution Date occurring in the following month until the
Notional Balance of the Class PS-1 Certificates is reduced to
zero following such prepayment (assuming no further
prepayments are made except that all Mortgage Loans prepay on
Anticipated Repayment Dates where applicable);
(III) Third, to the Class A-1A Certificates, an amount equal
to (A) the present value (discounted at the Discount Rate for
the Class A-1A Certificates plus the Spread Rate for the
Class A-1A Certificates) of the aggregate principal and
interest that would have been paid in respect of the Class
A-1A Certificates from the Distribution Date occurring in the
following month until the Certificate Balance of the Class
A-1A Certificates would have been reduced to zero had the
related prepayment not occurred, minus the sum of (B) the
amount of such prepayment distributed in respect of the Class
A-1A Certificates and (C) the present value (discounted at
the Discount Rate for the Class A-1A Certificates plus the
Spread Rate for the Class A-1A Certificates) of the aggregate
principal and interest that will be paid in respect of the
Class A-1A Certificates from the Distribution Date occurring
in the following month until the Certificate Balance of the
Class A-1A Certificates is reduced to zero following such
prepayment (assuming no further prepayments are made except
that all Mortgage Loans prepay on Anticipated Repayment Dates
where applicable);
(IV) Fourth, to the Class A-1B Certificates, an amount equal
to (A) the present value (discounted at the Discount Rate for
the Class A-1B Certificates plus the Spread Rate for the
Class A-1B Certificates) of the aggregate principal and
interest that would have been paid in respect of the Class
A-1B Certificates from the Distribution Date occurring in the
following month until the Certificate Balance of the Class
A-1B Certificates would have been reduced to zero had the
related prepayment not occurred, minus the sum of (B) the
amount of such prepayment distributed in respect of the Class
A-1B Certificates and (C) the present value (discounted at
the Discount Rate for the Class A-1B Certificates plus the
Spread Rate for the Class A-1B Certificates) of the aggregate
principal and interest that will be paid in respect of the
Class A-1B Certificates from the Distribution Date occurring
in the following month until the Certificate Balance of the
Class A-1B Certificates is reduced to zero following such
prepayment (assuming no further prepayments are made except
that all Mortgage Loans prepay on Anticipated Repayment Dates
where applicable); and
(V) Fifth, to the Class A-1C Certificates, an amount equal to
(A) the present value (discounted at the Discount Rate for
the Class A-1C Certificates plus the Spread Rate for the
Class A-1C Certificates) of the aggregate principal and
interest that would have been paid in respect of the Class
A-1C Certificates from the Distribution Date occurring in the
following month until the Certificate Balance of the Class
A-1C Certificates would have been reduced to zero had the
related prepayment not occurred, minus the sum of (B) the
amount of such prepayment distributed in respect of the Class
A-1C Certificates and (C) the present value (discounted at
the Discount Rate for the Class A-1C Certificates plus the
Spread Rate for the Class A-1C Certificates) of the aggregate
principal and interest that will be paid in respect of the
Class A-1C Certificates from the Distribution Date occurring
in the following month until the Certificate Balance of the
Class A-1C Certificates is reduced to zero following such
prepayment (assuming no further prepayments are made except
that all Mortgage Loans prepay on Anticipated Repayment Dates
where applicable); and
(VI) Sixth, to the Class A-1D Certificates, an amount equal
to (A) the present value (discounted at the Discount Rate for
the Class A-1D Certificates plus the Spread Rate for the
Class A-1D Certificates) of the aggregate principal and
interest that would have been paid in respect of the Class
A-1D Certificates from the Distribution Date occurring in the
following month until the Certificate Balance of the Class
A-1D Certificates would have been reduced to zero had the
related prepayment not occurred, minus the sum of (B) the
amount of such prepayment distributed in respect of the Class
A-1D Certificates and (C) the present value (discounted at
the Discount Rate for the Class A-1D Certificates plus the
Spread Rate for the Class A-1D Certificates) of the aggregate
principal and interest that will be paid in respect of the
Class A-1D Certificates from the Distribution Date occurring
in the following month until the Certificate Balance of the
Class A-1D Certificates is reduced to zero following such
prepayment (assuming no further prepayments are made except
that all Mortgage Loans prepay on Anticipated Repayment Dates
where applicable).
In all clauses above, Prepayment Premiums will only be distributed on a
Distribution Date (i) if the respective Certificate Balance or Notional Balance
of the related Class or Classes is greater than zero on the last Business Day
of the Interest Accrual Period ending immediately prior to such Distribution
Date and (ii) if the amount computed pursuant to the related clause above is
greater than zero. Any Prepayment Premiums remaining following the
distributions described in the preceding clauses (I) through (VI) shall be
distributed to holders of the Class B-7H Certificates regardless of whether the
Certificate Balance thereof has been reduced to zero.
Notwithstanding the foregoing, Prepayment Premiums shall be distributed on any
Distribution Date only to the extent they are received in respect of the
Mortgage Loans in the related Collection Period.
(ii) On each Distribution Date, prior to the distributions to
the Certificates from the Upper-Tier Distribution Account pursuant to Section
4.01(c)(i), the Class A-1A-L Interest shall receive distributions in respect of
Prepayment Premiums distributable to the Class A-1A and Class A-CS1
Certificates, the Class A-1B-L Interest shall receive distributions in respect
of Prepayment Premiums distributable to the Class A-1B Certificates, the Class
A-1C-L Interest shall receive distributions in respect of Prepayment Premiums
distributable to the Class A-1C Certificates, the Class A-1D-L Interest shall
receive distributions in respect of Prepayment Premiums distributable to the
Class A-1D Certificates, the Class A-2-L Interest, shall receive distributions
in respect of Prepayment Premiums distributable to the Class PS-1 Certificates
pro rata based on the amounts of interest distributable to each such Class on
such Distribution Date and the Class B-7H-L Interest shall receive
distributions in respect of Prepayment Premiums distributable to the Class B-7H
Certificates, in each case from amounts on deposit in the Distribution Account.
The Class A-1A-L, Class A-1B-L, Class A-1C-L, Class A-1D-L, Class A-2-L and
Class B-7H-L Interests shall be entitled to receive distributions of such
Prepayment Premiums regardless of whether the respective Certificate Balances
have been reduced to zero.
(d) (i) On each Distribution Date, Net Default Interest for
such Distribution Date shall be distributed to the Class V-1 Certificates.
(ii) On any applicable Distribution Date, Excess Interest for
such Distribution Date shall be distributed to the Class V-2 Certificates.
(e) The Certificate Balances of each Class of Regular
Certificates (other than the Class A-CS1 and Class PS-1 Certificates) will be
reduced without distribution on any Distribution Date as a write-off to the
extent of any Realized Losses allocated to such Class with respect to such
date. Any such write-offs will be applied to Classes of Regular Certificates in
the following order, in each case until the Certificate Balance of such Class
is reduced to zero: first, to the Class B-7 Certificates and Class B-7H
Certificates, pro rata, based on their respective Certificate Balances; second
to the Class B-6 Certificates; third, to the Class B-5 Certificates; fourth, to
the Class B-4 Certificates, fifth, to the Class B-3 Certificates; sixth, to the
Class B-2 Certificates; seventh, to the Class B-1 Certificates; eighth, to the
Class A-8 Certificates; ninth, to the Class A-7 Certificates; tenth, to the
Class A-6 Certificates; eleventh, to the Class A-5 Certificates; twelfth, to
the Class A-4 Certificates; thirteenth, to the Class A-3 Certificates;
fourteenth, to the Class A-2 Certificates; fifteenth, to the Class A-1E
Certificates, and finally, to the Class A-1A, Class A-1B, A-1C and Class A-1D
Certificates, pro rata, based on their respective Certificate Balances.
Shortfalls in Available Funds due to servicing or trustee compensation other
than the Servicing Fee and the Trustee Fee (including servicing compensation
resulting solely from interest on Advances (to the extent not payable from
Default Interest)), extraordinary expenses of the Trust Fund (other than
indemnification expenses), a reduction in the Mortgage Rate on a Mortgage Loan
by a bankruptcy court pursuant to a plan of reorganization or pursuant to any
of its equitable powers, or otherwise, shall be allocated in the same manner as
Realized Losses.
Realized Losses and such other amounts described above which
are applied to each Class of Lower-Tier Regular Interests will be allocated to
reduce the Certificate Balance of the Related Certificates (and
correspondingly, to reduce the Component Balances of the related components).
(f) All amounts distributable to a Class of Certificates
pursuant to this Section 4.01 on each Distribution Date shall be allocated pro
rata among the outstanding Certificates in each such Class based on their
respective Percentage Interests. Such distributions shall be made on each
Distribution Date other than the Termination Date to each Certificateholder of
record or, in the case of the Classes of Certificates comprising the Units,
each Unitholder of record on the related Record Date by check mailed by first
Class mail to the address set forth therefor in the Certificate Register or,
provided that such Holder holds Certificates with an aggregate initial
Certificate Balance in excess of $5,000,000, and shall have provided the Paying
Agent with wire instructions in writing at least five Business Days prior to
the related Record Date, by wire transfer of immediately available funds to the
account of such Holder at a bank or other entity located in the United States
and having appropriate facilities therefor. The final distribution on each
Certificate shall be made in like manner, but only upon presentment and
surrender of such Certificate at the office of the Trustee or its agent (which
may be the Paying Agent or the Certificate Registrar acting as such agent)
maintained in the Borough of Manhattan that is specified in the notice to
Holders of such final distribution.
(g) Except as otherwise provided in Section 9.01 with respect
to an Anticipated Termination Date, the Trustee shall, no later than the
fifteenth day of the month in the month preceding the month in which the final
distribution with respect to any Class of Certificates is expected to be made,
mail to each Holder of such Class of Certificates, on such date a notice to the
effect that:
(A) the Trustee reasonably expects based upon
information previously provided to it that the final
distribution with respect to such Class of
Certificates will be made on such Distribution Date,
but only upon presentation and surrender of such
Certificates at the office of the Trustee therein
specified, and
(B) if such final distribution is made on such
Distribution Date, no interest shall accrue on such
Certificates from and after such Distribution Date;
provided, however, that the Class V-1, Class V-2, Class R and Class LR
Certificates shall remain outstanding until there is no other Class of
Certificates or Lower-Tier Regular Interests outstanding and the Class B-7H
Certificates shall be deemed to be outstanding so long as there are any
Mortgage Loans outstanding that provide for payments of Prepayment Premiums in
connection with voluntary or involuntary prepayments.
Any funds not distributed to any Holder or Holders of such
Classes of Certificates on such Distribution Date because of the failure of
such Holder or Holders to tender their Certificates shall, on such date, be set
aside and held in trust for the benefit of the appropriate non-tendering Holder
or Holders. If any Certificates as to which notice has been given pursuant to
this Section 4.01(g) shall not have been surrendered for cancellation within
six months after the time specified in such notice, the Trustee shall mail a
second notice to the remaining non-tendering Holders to surrender their
Certificates for cancellation to receive the final distribution with respect
thereto. If within one year after the second notice not all of such
Certificates shall have been surrendered for cancellation, the Trustee may,
directly or through an agent, take appropriate steps to contact the remaining
non-tendering Holders concerning surrender of their Certificates. The costs and
expenses of holding such funds in trust and of contacting such Holders shall be
paid out of such funds. If within two years after the second notice any such
Certificates shall not have been surrendered for cancellation, the Paying Agent
shall pay to the Trustee all amounts distributable to the Holders thereof, and
the Trustee shall thereafter hold such amounts for the benefit of such Holders
until the earlier of (i) its termination as Trustee hereunder and the transfer
of such amounts to a successor Trustee and (ii) the termination of the Trust
Fund and distribution of such amounts to the Class R Certificateholders. No
interest shall accrue or be payable to any Holder on any amount held in trust
hereunder or by the Trustee as a result of such Holder's failure to surrender
its Certificate(s) for final payment thereof in accordance with this Section
4.01(g). Any such amounts transferred to the Trustee may be invested in
Permitted Investments and all income and gain realized from investment of such
funds shall be for the benefit of the Trustee.
(h) Notwithstanding any provision in this Agreement to the
contrary, the aggregate amount distributable to each Class pursuant to this
Section 4.01 shall be reduced by the aggregate amount paid to any Person
pursuant to Section 6.03 or Section 8.05(b) and (d), such reduction to be
allocated among such Classes pro rata, based upon the respective amounts so
distributable without taking into account the provision of this Section
4.01(h). Such reduction of amounts otherwise distributable to a Class shall be
allocated first in respect of interest and second in respect of principal. For
purposes of determining Interest Shortfalls and Certificate Balances, the
amount of any such reduction so allocated to a Class shall be deemed to have
been distributed to such Class.
(i) On or after any Distribution Date on which the Class B-6
Certificates are the most subordinate class of Certificates outstanding, the
Certificate Balances of the Class B-6, Class B-5, Class B-4, Class B-3, Class
B-2, Class B-1, Class A-8, Class A-7, Class A-6, Class A-5, Class A-4, Class
A-3, Class A-2 and Class A-1E Certificates shall be notionally reduced on any
Distribution Date to the extent of any Delinquency Reduction Amounts or
Appraisal Reduction Amounts with respect to such Distribution Date; provided
that (i) if a Delinquency and an Appraisal Reduction Event occur with respect
to the same Distribution Date and the same Mortgage Loan, the reduction shall
equal the Appraisal Reduction Amount, (ii) following the occurrence of an
Appraisal Reduction Event with respect to any Mortgage Loan, no further
Delinquency Reduction Amounts shall be applied with respect to such Mortgage
Loan and any Delinquency Reduction Amounts previously applied shall be reversed
and (iii) for any Distribution Date, the aggregate of the Appraisal Reduction
Amounts and Delinquency Reduction Amounts shall not exceed the Certificate
Balance (as adjusted by any notional reductions) of the most subordinate class
of Certificates outstanding among the Class B-6, Class B-5, Class B-4, Class
B-3, Class B-2, Class B-1, Class A-8, Class A-7, Class A-6, Class A-5, Class
A-4, Class A-3, Class A-2 and Class A-1E Certificates (and to the extent the
aggregate of the Appraisal Reduction Amounts and Delinquency Reduction Amounts
exceeds such Certificate Balance, such excess shall be applied notionally to
the next most subordinate Class of Certificates on the next Distribution Date).
Any such reductions shall be applied notionally to the Class B-6 Certificates,
second, to the Class B-5 Certificates, third, to the Class B-4 Certificates,
fourth, to the Class B-3 Certificates, fifth, to the Class B-2 Certificates,
sixth, to the Class B-1 Certificates, seventh, to the Class A-8 Certificates,
eighth, to the Class A-7 Certificates, ninth, to the Class A-6 Certificates,
tenth to the Class A-5 Certificate, eleventh to the Class A-4 Certificates,
twelfth, to the Class A-3 Certificates, thirteenth, to the Class A-2
Certificates and finally, to the Class A-1E Certificates (provided in each case
that no Certificate Balance in respect of any such class shall be notionally
reduced below zero). Any notional reduction of the Certificate Balance of such
Certificates as a result of any Delinquency or Appraisal Reduction Event shall
be reversed to the extent there is a recovery of any or all of the Delinquency
Amounts or a Realized Loss. Additionally, a reversal or additional reduction
shall occur to the extent that the Servicer's Appraisal Estimate is less than
or greater than the Appraisal Reduction as adjusted to take into account a
subsequent independent MAI Appraisal. For purposes of calculating Interest
Accrual Amounts, any such reversal or additional reductions made on the
Distribution Date occurring in an Interest Accrual Period shall be deemed to
have been made on the first day of such Interest Accrual Period.
(j) Shortfalls in Available Funds resulting from (i)
unanticipated indemnification expenses of the Trust Fund and (ii) Prepayment
Interest Shortfalls in excess of Servicer Prepayment Interest Shortfalls, shall
be allocated to, and be deemed distributed to, each Class of Certificates, pro
rata, based upon amounts distributable to each such Class and, in the case of
indemnification expenses, be allocated, first, in respect of interest and,
second, in respect of principal. Servicer Prepayment Interest Shortfalls shall
be deposited by the Servicer into the Collection Account on or prior to the
Servicer Remittance Date.
SECTION 4.02. Statements to Certificateholders; Reports
by Trustee; Other Information Available
to the Holders and Others.
(a) On each Distribution Date, based upon the information set
forth in the Servicer Remittance Report prepared by the Servicer and the other
reports prepared by the Servicer and Special Servicer relating to such
Distribution Date, and only to the extent such information is provided to the
Trustee by the Servicer or Special Servicer, the Trustee shall prepare and
forward, or shall cause the Paying Agent to prepare and forward, by first class
mail to each Holder of a Certificate, with copies to the Depositor, the
Servicer, the Special Servicer, each Underwriter and each Rating Agency a
written report (a "Distribution Date Statement") setting forth the following
information:
(i) the aggregate amount of the distribution to be made on
such Distribution Date to the Holders of each Class of
Certificates (other than the Class R and Class LR
Certificates) applied to reduce the respective Certificate
Balance thereof;
(ii) the aggregate amount of the distribution to be made on
such Distribution Date to the Holders of each Class of
Certificates allocable to (A) the Interest Accrual Amount
less any Prepayment Interest Shortfalls (in excess of the
Prepayment Interest Shortfalls paid by the Servicer pursuant
to Section 4.01(j)), (B) Prepayment Premiums and/or (C)
Reduction Interest Distribution Amounts;
(iii) the aggregate Certificate Balance or aggregate Notional
Balance, as the case may be, of each Class of Certificates,
before and after giving effect to the distributions made on
such Distribution Date, separately identifying any reduction
in the aggregate Certificate Balance (or, if applicable, the
aggregate Notional Balance) of each such Class due to
Realized Losses and/or additional Trust Fund expenses;
(iv) the Pass-Through Rate and the Reduction Interest
Pass-Through Rate, if any, for each Class of Certificates
applicable to such Distribution Date;
(v) the number of outstanding Mortgage Loans and the
aggregate unpaid principal balance of the Mortgage Loans at
the close of business on the related Due Date;
(vi) the number and aggregate unpaid principal balance of
Mortgage Loans (A) delinquent one Collection Period, (B)
delinquent two Collection Periods, (C) delinquent three or
more Collection Periods, (D) that are Specially Serviced
Mortgage Loans that are not delinquent, or (E) as to which
foreclosure proceedings have been commenced;
(vii) with respect to any REO Mortgage Loan as to which the
related Mortgaged Property became an REO Property during the
preceding calendar month, the city, state, property type,
latest Debt Service Coverage Ratio, Stated Principal Balance
and the unpaid principal balance of such Mortgage Loan as of
the date it became an REO Mortgage Loan;
(viii) as to any Mortgage Loan repurchased by the Mortgage
Loan Seller or otherwise liquidated or disposed of during the
related Collection Period, (A) the Loan Number of the related
Mortgage Loan and (B) the amount of proceeds of any
repurchase of a Mortgage Loan, Liquidation Proceeds and/or
other amounts, if any, received thereon during the related
Collection Period and the portion thereof included in the
Available Funds for such Distribution Date;
(ix) with respect to any REO Property included in the Trust
Fund at the close of business on the related Due Date (A) the
Loan Number of the related Mortgage Loan, (B) the value of
such REO Property based on the most recent appraisal or
valuation, and (C) the aggregate amount of Net Income and
other revenues collected by the Special Servicer with respect
to such REO Property during the related Collection Period and
the portion thereof included in the Available Funds for such
Distribution Date;
(x) with respect to any REO Property sold or otherwise
disposed of during the related Collection Period and for
which a Final Recovery Determination has been made, (A) the
Loan Number of the related Mortgage Loan, (B) the Realized
Loss attributable to such Mortgage Loan, (C) the amount of
sale proceeds and other amounts, if any, received in respect
of such REO Property during the related Collection Period and
the portion thereof included in the Available Funds for such
Distribution Date and (D) the date of the Final Recovery
Determination;
(xi) [Intentionally left blank];
(xii) the aggregate amount of Principal Prepayments (other
than Liquidation Proceeds and Insurance Proceeds) made during
the related Collection Period and any Prepayment Interest
Shortfall in excess of Servicer Prepayment Interest Shortfall
for such Distribution Date;
(xiii) the amount of Property Advances and P&I Advances
outstanding (net of reimbursed Advances) which have been made
by the Servicer, the Special Servicer the Trustee, or the
Fiscal Agent in the aggregate and by Mortgaged Property or
Mortgage Loan, as the case may be;
(xiv) the aggregate amount of Servicing Fees, Special
Servicing Fees, Principal Recovery Fees and other servicing
compensation retained by or paid to the Servicer and the
Special Servicer during the related Collection Period;
(xv) the amount of any Appraisal Reduction Amounts allocated
during the related Collection Period on a loan-by-loan basis;
the total Appraisal Reduction Amounts allocated during the
related Collection Period; and the total Appraisal Reduction
Amounts as of such Distribution Date on a loan-by-loan basis;
and
(xvi) the amount of Realized Losses, Trust Fund expenses,
Interest Shortfalls, and Reduction Interest Shortfalls if
any, incurred with respect to the Mortgage Loans during the
related Collection Period and in the aggregate for all prior
Collection Periods (except to the extent reimbursed or paid).
In the case of information furnished pursuant to subclauses
(i), (ii) and (iii) above, the amounts shall be expressed as a dollar amount in
the aggregate for all Certificates of each applicable Class and per $1,000 of
original Certificate Balance or Notional Balance, as the case may be.
On each Distribution Date, the Trustee shall forward to each
Holder of a Class R or Class LR Certificate a copy of the reports forwarded to
the other Certificateholders on such Distribution Date and a statement setting
forth the amounts, if any, actually distributed with respect to the Class R or
Class LR Certificates on such Distribution Date. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that it provided
substantially comparable information pursuant to any requirements of the Code
as from time to time in force.
Within a reasonable period of time after the end of each
calendar year, the Trustee shall send to each Person who at any time during the
calendar year was a Certificateholder of record, a report summarizing on an
annual basis (if appropriate) the items provided to Certificateholders pursuant
to Section 4.02(a)(ii) above and such other information as may be required to
enable such Certificateholders to prepare their federal income tax returns.
Such information shall include the amount of original issue discount accrued on
each Class of Certificates held by Persons other than Holders exempted from the
reporting requirements and information regarding the expenses of the Trust.
Such requirement shall be deemed to be satisfied to the extent such information
is provided pursuant to applicable requirements of the Code from time to time
in force.
(b) On each Distribution Date, the Trustee shall deliver or
cause to be delivered by first class mail to each Certificateholder, each
prospective investor in a Certificate (upon request), the Depositor, the
Servicer, the Special Servicer, each Underwriter, and each Rating Agency a
report containing information regarding the Mortgage Loans as of the end of the
related Collection Period (after giving effect to Principal Prepayments and
other collections of principal required to be distributed on such Distribution
Date), which report shall contain substantially the categories of information
regarding the Mortgage Loans set forth in the Prospectus under the caption
"Description of the Mortgage Pool--Certain Terms and Conditions of the Mortgage
Loans" (calculated, where applicable, on the basis of the most recent relevant
information provided by the Borrowers to the Servicer or the Special Servicer,
as the case may be, and by the Servicer or the Special Servicer, as the case
may be, to the Trustee), which shall also include a loan-by-loan listing (in
descending balance order) showing loan name, property type, location, unpaid
principal balance, Mortgage Rate, paid through date, maturity date, net
interest portion of the Monthly Payment, principal portion of the Monthly
Payment and any Prepayment Premium. Such report shall be made available
electronically; provided, however, that the Trustee will provide
Certificateholders with a written copy of such report upon written request.
(c) On each Distribution Date, the Trustee shall deliver or
shall cause to be delivered by first class mail to each Certificateholder, each
prospective investor in a Certificate (upon request), Beneficial Owner (if
known), the Depositor, each Underwriter and each Rating Agency a copy of the
Comparative Financial Status Report, the Delinquent Loan Status Report, the
Historical Loss Estimate Report, the Historical Loan Modification Report, the
REO Status Report and a Watch List (indicating those Mortgage Loans that the
Servicer has determined are in jeopardy of becoming Specially Serviced Mortgage
Loans) provided by the Servicer to the Trustee pursuant to Section 3.13(c) and
3.13(e) on the Servicer Remittance Date. The information that pertains to
Specially Serviced Mortgage Loans and REO Properties reflected in such reports
shall be based solely upon the reports delivered by the Special Servicer to the
Servicer at least one Business Day prior to the related Servicer Remittance
Date. Absent manifest error, (i) none of the Servicer, the Special Servicer or
the Trustee shall be responsible for the accuracy or completeness of any
information supplied to it by a Borrower or third party that is included in any
reports, statements, materials or information prepared or provided by the
Servicer, the Special Servicer or the Trustee, as applicable, (ii) the Trustee
shall not be responsible for the accuracy or completeness of any information
supplied to it by the Servicer or Special Servicer that is included in any
reports, statements, materials or information prepared or provided by the
Servicer or Special Servicer, as applicable, and (iii) the Trustee shall be
entitled to conclusively rely upon the Servicer's reports and the Special
Servicer's reports without any duty or obligation to recompute, verify or
re-evaluate any of the amounts or other information stated therein.
The Trustee shall deliver a copy of each Operating Statement
Analysis report and NOI Adjustment Worksheet that it receives from the Servicer
and Special Servicer to the Depositor, each Underwriter and each Rating Agency
promptly after its receipt thereof. Upon request, the Trustee shall make such
reports available to the Certificateholders and the Special Servicer. Upon
request, the Trustee shall also make available any NOI Adjustment Worksheet for
a Mortgaged Property or REO Property in the possession of the Trustee to any
potential investor in the Certificates.
(d) The Trustee shall make available at its offices, during
normal business hours, upon not less than two Business Day's prior notice, for
review by any Certificateholder, any prospective investor in a Certificate, the
Depositor, the Servicer, the Special Servicer, either Rating Agency, and any
other Person to whom the Depositor believes such disclosure is appropriate,
originals or copies of documents relating to the Mortgage Loans and any related
REO Properties to the extent in its possession, including, without limitation,
the following items (except to the extent prohibited by applicable law or by
the terms of any of the Mortgage Documents): (i) this Agreement and any
amendments thereto; (ii) all Distribution Date Statements delivered to the
Certificateholders since the Closing Date; (iii) all annual Officers'
Certificates and all accountants' reports delivered by the Servicer or Special
Servicer to the Trustee since the Closing Date regarding compliance with the
relevant agreements; (iv) the most recent property inspection report prepared
by or on behalf of the Servicer or the Special Servicer in respect of each
Mortgaged Property; (v) the most recent annual (or more frequent, if available)
operating statements, rent rolls (to the extent such rent rolls have been made
available by the related Borrower) and/or lease summaries and retail sales
information, if any, collected by or on behalf of the Servicer or the Special
Servicer in respect to each Mortgaged Property; (vi) any and all modifications,
waivers and amendments of the terms of a Mortgage Loan entered into by the
Servicer and/or the Special Servicer; (vii) any and all Officers' Certificates
and other evidence delivered to or by the Trustee to support the Servicer's,
the Trustee's or the Fiscal Agent's, as the case may be, determination that any
Advance, if made, would be a Nonrecoverable Advance; and (viii) any other
materials not otherwise required to be provided hereunder provided to a
requesting Certificateholder as provided in this Agreement in situations where
such requesting Certificateholder declined to enter into a confidentiality
agreement with the Servicer. Copies of any and all of the foregoing items will
be available from the Trustee upon request. The Trustee will be permitted to
require payment by the requesting party (other than a Rating Agency) of a sum
sufficient to cover the reasonable costs and expenses of making such
information available and providing any copies thereof. The Trustee's
obligation under this Section 4.02(d) to make available any document is subject
to the Trustee's receipt of such document.
The Trustee shall provide access to the information in the
Distribution Date Statements referred to in Section 4.02(a) telephonically
through the Trustee's ASAP System or by such other mechanism as the Trustee may
have in place from time to time.
(e) On or within two Business Days following each
Distribution Date, the Trustee shall prepare and furnish to the Financial
Market Publisher and the Underwriter, using the format and media mutually
agreed upon by the Trustee, the Financial Market Publisher and the
Underwriters, the following information regarding each Mortgage Loan and any
other information reasonably requested by the Underwriters and available to the
Trustee:
(i) the Loan Number;
(ii) each related Mortgage Rate; and
(iii) the principal balance as of such
Distribution Date.
The Trustee shall only be obligated to deliver the statements, reports and
information contemplated by Section 4.02 to the extent it receives the
necessary underlying information from the Servicer or the Special Servicer and
shall not be liable for any failure to deliver any thereof on the prescribed
due dates, to the extent caused by failure to receive timely such underlying
information. Nothing herein shall obligate the Trustee, the Servicer or the
Special Servicer to violate any applicable law prohibiting disclosure of
information with respect to any Borrower and the failure of the Trustee, the
Servicer or the Special Servicer to disseminate information for such reason
shall not be a breach hereof.
SECTION 4.03. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the
Paying Agent shall comply with all federal withholding requirements with
respect to payments to Certificateholders of interest or original issue
discount that the Paying Agent reasonably believes are applicable under the
Code. The consent of Certificateholders shall not be required for any such
withholding. The Paying Agent agrees that it will not withhold with respect to
payments of interest or original issue discount in the case of a Holder that is
non-U.S. Person that has furnished or caused to be furnished (i) an effective
Form W-8 or Form W-9 or an acceptable substitute form or a successor form and
who is not a "10-percent shareholder" within the meaning of Code Section
871(h)(3)(B) or a "controlled foreign corporation" described in Code Section
881(c)(3)(C) with respect to the Trust Fund or the Depositor, or (ii) an
effective Form 4224 or an acceptable substitute form or a successor form. In
the event the Paying Agent or its agent withholds any amount from interest or
original issue discount payments or advances thereof to any Certificateholder
pursuant to federal withholding requirements, the Paying Agent shall indicate
the amount withheld to such Certificateholder or, in the case of the Classes of
Certificates comprising the Units, such Unitholder. Any amount so withheld
shall be treated as having been distributed to such Certificateholder or
Unitholder for all purposes of this Agreement.
SECTION 4.04. REMIC Compliance.
(a) The parties intend that each of the Upper-Tier REMIC and
the Lower-Tier REMIC shall constitute, and that the affairs of each of the
Upper-Tier REMIC and the Lower-Tier REMIC shall be conducted so as to qualify
it as, a "real estate mortgage investment conduit" as defined in, and in
accordance with, the REMIC Provisions, and the provisions hereof shall be
interpreted consistently with this intention. In furtherance of such intention,
the Trustee shall, to the extent permitted by applicable law, act as agent, and
is hereby appointed to act as agent, of each of the Upper-Tier REMIC and the
Lower-Tier REMIC and shall on behalf of each of the Upper-Tier REMIC and the
Lower-Tier REMIC: (i) prepare, sign and file, or cause to be prepared and
filed, all required Tax Returns for each of the Upper-Tier REMIC and the
Lower-Tier REMIC, using a calendar year as the taxable year for each of the
Upper-Tier REMIC and the Lower-Tier REMIC when and as required by the REMIC
Provisions and other applicable federal, state or local income tax laws; (ii)
make an election, on behalf of each of the Upper-Tier REMIC and the Lower-Tier
REMIC, to be treated as a REMIC on Form 1066 for its first taxable year, in
accordance with the REMIC Provisions; (iii) prepare and forward, or cause to be
prepared and forwarded, to the Certificateholders and the Internal Revenue
Service and applicable state and local tax authorities all information reports
as and when required to be provided to them in accordance with the REMIC
Provisions of the Code and Section 4.07; (iv) if the filing or distribution of
any documents of an administrative nature not addressed in clauses (i) through
(iii) of this Section 4.05(a) is then required by the REMIC Provisions in order
to maintain the status of the Upper-Tier REMIC or the Lower-Tier REMIC as a
REMIC or is otherwise required by the Code, prepare, sign and file or
distribute, or cause to be prepared and signed and filed or distributed, such
documents with or to such Persons when and as required by the REMIC Provisions
or the Code or comparable provisions of state and local law; (v) within thirty
days of the Closing Date, furnish or cause to be furnished to the Internal
Revenue Service, on Form 8811 or as otherwise may be required by the Code, the
name, title and address of the Person that the Holders of the Certificates may
contact for tax information relating thereto (and the Trustee shall act as the
representative of each of the Upper-Tier REMIC and the Lower-Tier REMIC for
this purpose), together with such additional information as may be required by
such Form, and shall update such information at the time or times and in the
manner required by the Code (and the Depositor agrees within 10 Business Days
of the Closing Date to provide any information reasonably requested by the
Servicer, the Special Servicer or the Trustee and necessary to make such
filing); and (vi) maintain such records relating to each of the Upper-Tier
REMIC and the Lower-Tier REMIC as may be necessary to prepare the foregoing
returns, schedules, statements or information, such records, for federal income
tax purposes, to be maintained on a calendar year and on an accrual basis. The
Holder of the largest Percentage Interest in the Class R or Class LR
Certificates shall be the tax matters person of the Upper-Tier REMIC or the
Lower-Tier REMIC, respectively, pursuant to Treasury Regulations Section
1.860F-4(d). If more than one Holder should hold an equal Percentage Interest
in the Class R or Class LR Certificates larger than that held by any other
Holder, the first such Holder to have acquired such Class R or Class LR
Certificates shall be such tax matters person. The Trustee shall act as
attorney-in-fact and agent for the tax matters person of each of the Upper-Tier
REMIC and Lower-Tier REMIC, and each Holder of a Percentage Interest in the
Class R or Class LR Certificates, by acceptance hereof, is deemed to have
consented to the Trustee's appointment in such capacity and agrees to execute
any documents required to give effect thereto, and any fees and expenses
incurred by the Trustee in connection with any audit or administrative or
judicial proceeding shall be paid by the Trust Fund. The Trustee shall not
intentionally take any action or intentionally omit to take any action if, in
taking or omitting to take such action, the Trustee knows that such action or
omission (as the case may be) would cause the termination of the REMIC status
of the Upper-Tier REMIC or the Lower-Tier REMIC or the imposition of tax on the
Upper-Tier REMIC or the Lower-Tier REMIC (other than a tax on income expressly
permitted or contemplated to be received by the terms of this Agreement).
Notwithstanding any provision of this paragraph to the contrary, the Trustee
shall not be required to take any action that the Trustee in good faith
believes to be inconsistent with any other provision of this Agreement, nor
shall the Trustee be deemed in violation of this paragraph if it takes any
action expressly required or authorized by any other provision of this
Agreement, and the Trustee shall have no responsibility or liability with
respect to any act or omission of the Depositor, the Servicer or the Special
Servicer which does not enable the Trustee to comply with any of clauses (i)
through (vi) of the fifth preceding sentence or which results in any action
contemplated by clauses (i) or (ii) of the next succeeding sentence. In this
regard the Trustee shall (i) exercise reasonable care not to allow the
occurrence of any "prohibited transactions" within the meaning of Code Section
860F(a), unless the party seeking such action shall have delivered to the
Trustee an Opinion of Counsel (at such party's expense) that such occurrence
would not (A) result in a taxable gain, (B) otherwise subject the Upper-Tier
REMIC or Lower-Tier REMIC to tax (other than a tax at the highest marginal
corporate tax rate on net income from foreclosure property), or (C) cause
either the Upper-Tier REMIC or Lower-Tier REMIC to fail to qualify as a REMIC;
and (ii) exercise reasonable care not to allow the Trust Fund to receive income
from the performance of services or from assets not permitted under the REMIC
Provisions to be held by a REMIC (provided, however, that the receipt of any
income expressly permitted or contemplated by the terms of this Agreement shall
not be deemed to violate this clause). None of the Servicer, the Special
Servicer and the Depositor shall be responsible or liable (except in connection
with any act or omission referred to in the two preceding sentences) for any
failure by the Trustee to comply with the provisions of this Section 4.04. The
Depositor, the Servicer and the Special Servicer shall cooperate in a timely
manner with the Trustee in supplying any information within the Depositor's,
the Servicer's or the Special Servicer's control (other than any confidential
information) that is reasonably necessary to enable the Trustee to perform its
duties under this Section 4.04.
(b) The following assumptions are to be used for purposes of
determining the anticipated payments of principal and interest for calculating
the original yield to maturity and original issue discount with respect to the
Regular Certificates: (i) each Mortgage Loan will pay principal and interest in
accordance with its terms and scheduled payments will be timely received on
their Due Dates, provided that the Mortgage Loans in the aggregate will prepay
in accordance with the Prepayment Assumption; (ii) none of the Servicer, the
Depositor and the Class LR Certificateholders will exercise the right described
in Section 9.01 of this Agreement to cause early termination of the Trust Fund;
and (iii) no Mortgage Loan is repurchased by the Mortgage Loan Seller, the
Depositor or an Mortgage Loan Seller pursuant to Article II hereof. Unless and
until required otherwise by applicable Treasury Regulations, the Trustee shall
treat the Units as a single aggregate debt instrument for original issue
discount computation and reporting purposes.
SECTION 4.05. Imposition of Tax on the Trust Fund.
In the event that any tax, including interest, penalties or
assessments, additional amounts or additions to tax, is imposed on the
Upper-Tier REMIC or Lower-Tier REMIC, such tax shall be charged against amounts
otherwise distributable to the Holders of the Certificates; provided, that any
taxes imposed on any net income from foreclosure property pursuant to Code
Section 860G(d) or any similar tax imposed by a state or local jurisdiction
shall instead be treated as an expense of the related REO Property in
determining Net REO Proceeds with respect to the REO Property (and until such
taxes are paid, the Special Servicer from time to time shall withdraw from the
REO Account and transfer to the Trustee amounts reasonably determined by the
Trustee to be necessary to pay such taxes, which the Trustee shall maintain in
a separate, non-interest-bearing account, and the Trustee shall deposit in the
Collection Account the excess determined by the Trustee from time to time of
the amount in such account over the amount necessary to pay such taxes) and
shall be paid therefrom; provided that any such tax imposed on net income from
foreclosure property that exceeds the amount in any such reserve shall be
retained from Available Funds as provided in Section 3.06(viii) and the next
sentence. Except as provided in the preceding sentence, the Trustee is hereby
authorized to and shall retain or cause to be retained from Available Funds
sufficient funds to pay or provide for the payment of, and to actually pay,
such tax as is legally owed by the Upper-Tier REMIC or Lower-Tier REMIC (but
such authorization shall not prevent the Trustee from contesting, at the
expense of the Trust Fund, any such tax in appropriate proceedings, and
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings). The Trustee is hereby authorized to and shall segregate or
cause to be segregated, into a separate non-interest bearing account, (i) the
net income from any "prohibited transaction" under Code Section 860F(a) or (ii)
the amount of any contribution to the Upper-Tier REMIC or Lower-Tier REMIC
after the Startup Day that is subject to tax under Code Section 860G(d) and use
such income or amount, to the extent necessary, to pay such tax (and return the
balance thereof, if any, to the Collection Account or the Upper-Tier
Distribution Account, as the case may be). To the extent that any such tax is
paid to the Internal Revenue Service, the Trustee shall retain an equal amount
from future amounts otherwise distributable to the Holders of the Class R or
the Class LR Certificates as the case may be, and shall distribute such
retained amounts to the Holders of Regular Certificates or Lower-Tier Regular
Interests, as applicable, until they are fully reimbursed and then to the
Holders of the Class R Certificates or the Class LR Certificates, as
applicable. Neither the Servicer, the Special Servicer nor the Trustee shall be
responsible for any taxes imposed on the Upper-Tier REMIC or Lower-Tier REMIC
except to the extent such tax is attributable to a breach of a representation
or warranty of the Servicer, the Special Servicer or the Trustee or an act or
omission of the Servicer, the Special Servicer or the Trustee in contravention
of this Agreement in both cases, provided, further, that such breach, act or
omission could result in liability under Section 6.03, in the case of the
Servicer or Section 4.04 or 8.01, in the case of the Trustee. Notwithstanding
anything in this Agreement to the contrary, in each such case, the Servicer or
the Special Servicer shall not be responsible for Trustee's breaches, acts or
omissions, and the Trustee shall not be responsible for the breaches, acts or
omissions of the Servicer or the Special Servicer.
SECTION 4.06. Remittances; P&I Advances.
(a) "Applicable Monthly Payment" shall mean, for any Mortgage
Loan with respect to any month, (A) if such Mortgage Loan is delinquent as to
its Balloon Payment (including any such Mortgage Loan as to which the related
Mortgaged Property has become an REO Property), the related Assumed Scheduled
Payment, (B) if such Mortgage Loan has been extended in accordance with the
terms and conditions otherwise set forth in this Agreement, the Minimum
Defaulted Monthly Payment and (C) if such Mortgage Loan is not described by the
preceding two sentences (including any such Mortgage Loan as to which the
related Mortgaged Property has become an REO Property), the Monthly Payment
(after giving effect to any modification other than as described in (A) or (B)
above); provided, however, that for purposes of calculating the amount of any
P&I Advance required to be made by the Servicer, the Trustee or the Fiscal
Agent, notwithstanding the amount of such Applicable Monthly Payment, interest
shall be calculated at the Mortgage Pass-Through Rate. The Applicable Monthly
Payment shall be reduced, for purposes of P&I Advances, by any modifications
pursuant to Section 3.30 or otherwise and by any reductions by a bankruptcy
court pursuant to a plan of reorganization or pursuant to any of its equitable
powers.
(b) On the Servicer Remittance Date immediately preceding
each Distribution Date, the Servicer shall:
(i) remit to the Trustee for deposit in the
Distribution Account an amount equal to the
Prepayment Premiums received by the
Servicer or Special Servicer in the
Collection Period preceding such
Distribution Date;
(ii) remit to the Trustee for deposit in the
Distribution Account an amount equal to the
aggregate of the Available Funds (other
than P&I Advances) and Subordinate Class
Advance Recoveries for such Distribution
Date; and
(iii) make a P&I Advance, by depositing into the
Distribution Account, in an amount equal to
the sum of the Applicable Monthly Payments
for each Mortgage Loan to the extent such
amounts were not received on such Mortgage
Loan as of the close of business on the
immediately preceding Due Date (and
therefore are not included in the
remittance described in the preceding
clause (ii)).
(c) [Intentionally left blank].
(d) Notwithstanding Section 4.06(b)(iii), the Servicer shall
(i) make only one full advance in respect of each Mortgage Loan pursuant to
such Section in respect of the most subordinate Class of Certificates then
outstanding unless the related Delinquency is cured prior to the following Due
Date and (ii) not make any P&I Advance in respect of Reduction Interest
Distribution Amounts and Reduction Interest Shortfalls, and accordingly, the
Servicer may reduce the aggregate amount of P&I Advances to be deposited by the
Servicer on the related Servicer Remittance Date in respect of such amounts the
Servicer is not required to advance. For purposes of clause (i) of the
preceding sentence, the Servicer shall reduce the aggregate amount of the P&I
Advance it would otherwise be required to make with respect to any Mortgage
Loans that have had more than one uncured Delinquency by the lesser of (a) the
total amount that would be distributable to the most subordinate outstanding
Class in respect of all Mortgage Loans on such Distribution Date if the
Servicer were to make a full P&I Advance and (b) the amount of the delinquent
Monthly Payment on such Mortgage Loans. In the event that there is more than
one Mortgage Loan that has had more than one uncured Delinquency as of any
Servicer Remittance Date and the amount determined pursuant to clause (b) of
the preceding sentence exceeds the P&I amount determined pursuant to clause (a)
thereof, the P&I Advance that the Servicer makes in respect of such Delinquent
Loans (i.e., the amount by which clause (b) exceeds clause (a) will be deemed
to have been made in respect of such delinquent Monthly Payment, pro rata in
accordance with the amounts of delinquent Monthly Payments. (The first P&I
Advance made by the Servicer in respect of a Mortgage Loan shall be deemed to
be in respect of the most subordinate Class for purposes of clause (i) of the
last sentence of this paragraph.) In addition, on any Servicer Remittance Date
on which the Servicer is not required to make a P&I Advance for the benefit of
the most subordinate class as described above, the Servicer shall initially
make such P&I Advance (for accounting purposes only) and shall, immediately
subsequent to the making of the P&I Advance on such Servicer Remittance Date,
reimburse itself for such P&I Advance from amounts otherwise distributable to
such most subordinate class on the related Distribution Date (such amount of
reimbursement or any amount not advanced by the Servicer which, if advanced,
could have been so reimbursed, the "Subordinate Class Advance Amount"). The
Trustee shall provide to the Servicer written statements one Business Day prior
to the Servicer Remittance Date listing (i) the aggregate Reduction Interest
Distribution Amounts and Reduction Interest Shortfalls for such Distribution
Date and (ii) the distribution due to the Holders of the most subordinate Class
of Certificates.
(e) The Servicer shall not be required or permitted to make
an advance for Excess Interest or Default Interest or in respect of Reduction
Interest Distribution Amounts and Reduction Interest Shortfalls. The amount
required to be advanced by the Servicer in respect of Applicable Monthly
Payments on Mortgage Loans that have been subject to an Appraisal Reduction
Event will equal the product of (i) the amount required to be advanced by the
Servicer without giving effect to such Appraisal Reduction Amounts and (ii) a
fraction, the numerator of which is the Stated Principal Balance of the
Mortgage Loan (as of the last day of the related Collection Period) less any
Appraisal Reduction Amounts thereof and the denominator of which is the Stated
Principal Balance (as of the last day of the related Collection Period). The
amount to be advanced by the Servicer in respect of any Mortgage Loan on any
Distribution Date shall be reduced by the greater of the reduction in respect
of any Appraisal Reduction Event and the reduction described in clause (d)(i)
above.
(f) Any amount advanced by the Servicer pursuant to Section
4.06(b)(iii) shall constitute a P&I Advance for all purposes of this Agreement
and the Servicer shall be entitled to reimbursement (with interest at the
Advance Rate) thereof to the full extent as otherwise set forth in this
Agreement.
(g) If as of 11:00 a.m., New York City time, on any
Distribution Date the Servicer shall not have made the P&I Advance required to
have been made on the related Servicer Remittance Date pursuant to Section
4.06(b)(iii), the Trustee shall immediately notify the Fiscal Agent by
telephone promptly confirmed in writing, and the Trustee shall no later than
12:00 noon, New York City time, on such Business Day deposit into the
Distribution Account in immediately available funds an amount equal to the P&I
Advances otherwise required to have been made by the Servicer. If the Trustee
fails to make any P&I Advance required to be made under this Section 4.06, the
Fiscal Agent shall make such P&I Advance not later than 2:00 p.m., New York
City time, on such Business Day and, thereby, the Trustee shall not be in
default under this Agreement.
(h) None of the Servicer, the Trustee or the Fiscal Agent
shall be obligated to make a P&I Advance as to any Monthly Payment or Assumed
Scheduled Payment or Minimum Defaulted Monthly Payment on any date on which a
P&I Advance is otherwise required to be made by this Section 4.06 if the
Servicer, the Trustee or Fiscal Agent, as applicable, determines that such
advance will be a Nonrecoverable Advance. The Servicer shall be required to
provide notice to the Trustee and the Fiscal Agent on or prior to the Servicer
Remittance Date of any such non-recoverability determination made on or prior
to such date. The Trustee and the Fiscal Agent shall be entitled to rely,
conclusively, on any determination by the Servicer that a P&I Advance, if made,
would be a Nonrecoverable Advance (and with respect to a P&I Advance, the
Trustee or the Fiscal Agent, as applicable, shall rely on the Servicer's
determination that the Advance would be a Nonrecoverable Advance if the Trustee
or Fiscal Agent, as applicable, determines that it does not have sufficient
time to make such determination); provided, however, that if the Servicer has
failed to make a P&I Advance for reasons other than a determination by the
Servicer that such Advance would be a Nonrecoverable Advance, the Trustee or
Fiscal Agent, as applicable, shall make such advance within the time periods
required by Section 4.06(g) unless the Trustee or the Fiscal Agent, in good
faith, makes a determination prior to the times specified in Section 4.06(g)
that such advance would be a Nonrecoverable Advance. The Trustee and the Fiscal
Agent, in determining whether or not an Advance previously made is, or a
proposed Advance, if made, would be, a Nonrecoverable Advance shall be subject
to the standards applicable to the Servicer hereunder.
(i) The Servicer, the Trustee or the Fiscal Agent, as
applicable, shall be entitled to the reimbursement of P&I Advances it makes to
the extent permitted pursuant to Section 3.06(ii) of this Agreement together
with any related Advance Interest Amount in respect of such P&I Advances to the
extent permitted pursuant to Section 3.06(iii) and the Servicer and Special
Servicer hereby covenant and agree to promptly seek and effect the
reimbursement of such Advances from the related Borrowers to the extent
permitted by applicable law and the related Mortgage Loan.
SECTION 4.07. Grantor Trust Reporting.
The parties intend that the portions of the Trust Fund
consisting of (i) the Default Interest and the Default Interest Distribution
Account and (ii) the Excess Interest and the Excess Interest Distribution
Account shall constitute, and that the affairs of the Trust Fund (exclusive of
the Trust REMICs) shall be conducted so as to qualify such portion as a
"grantor trust" under the Code, and the provisions hereof shall be interpreted
consistently with this intention. In furtherance of such intention, the Trustee
shall furnish or cause to be furnished to Class V-1 and Class V-2
Certificateholders and shall file or cause to be filed with the Internal
Revenue Service together with Form 1041 or such other form as may be
applicable, income with respect to their applicable share of Default Interest
and the amount of any interest on unreimbursed Advances payable to the
Servicer, the Trustee and the Fiscal Agent, as applicable, therefrom pursuant
to Section 3.06(iii) in the case of the Class V-1 Certificates, and Excess
Interest in the case of the Class V-2 Certificates, at the time or times and in
the manner required by the Code.
<PAGE>
ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates.
(a) The Certificates consist of the Class A-1A Certificates,
the Class A-1B Certificates, the Class A-1C Certificates, the Class A-1D
Certificates, the Class A-CS1 Certificates, the Class PS-1 Certificates, the
Class A-1E Certificates, the Class A-2 Certificates, the Class A-3
Certificates, the Class A-4 Certificates, the Class A-5 Certificates, the Class
A-6 Certificates, the Class A-7 Certificates, the Class A-8 Certificates, the
Class B-1 Certificates, the Class B-2 Certificates, the Class B-3 Certificates,
the Class B-4 Certificates, the Class B-5 Certificates, the Class B-6
Certificates, the Class B-7 Certificates, the Class B-7H Certificates, the
Class V-1 Certificates, the Class V-2 Certificates, the Class R Certificates
and the Class LR Certificates.
The Class A-1A, Class A-1B, Class A-1C, Class A-1D, Class
A-CS1, Class PS-1, Class A-1E, Class A-2, Class A-3, Class A-4, Class A-5,
Class A-6, Class A-7, Class A-8, Class B-1, Class B-2, Class B-3, Class B-4,
Class B-5, Class B-6, Class B-7, Class B-7H, Class V-1, Class V-2, Class R and
Class LR Certificates will be substantially in the forms annexed hereto as
Exhibits A-1 through A-19, as set forth in the Table of Exhibits hereto. The
Certificates of each Class will be issuable in registered form only, in minimum
denominations of authorized Certificate Balance or Notional Balance, as
applicable, as described in the succeeding table, and multiples of $1 in excess
thereof (or such lesser amount if the Certificate or Notional Balance, as
applicable, is not a multiple of $1) except with respect to the Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates, which
may be in multiples of $5, $5, $2, $3, $2 and $2, respectively, in excess
thereof. Notwithstanding the foregoing, one Individual Certificate for each of
the Class B-1 and B-2 and Class B-4 Certificates shall be issued, each having
an initial Certificate Balance of $9.00. With respect to any Certificate or any
beneficial interest in a Certificate, the "Denomination" thereof shall be (i)
the amount (A) set forth on the face thereof or (B) in the case of any Global
Certificate, set forth on a schedule attached thereto or, in the case of any
beneficial interest in a Global Certificate, the amount set forth on the books
and records of the related Participant or Indirect Participant, as applicable,
(ii) expressed in terms of Initial Certificate Balance or Notional Balance, as
applicable, and (iii) be in an authorized denomination, as set forth below.
Minimum Aggregate Denomination of all
Class Denomination Certificates of Class
A-1A $50,000.00 $127,000,000.00
A-1B $50,000.00 $91,010,000.00
A-1C $50,000.00 $65,000,000.00
A-1D $50,000.00 $671,228,903.00
A-CS1(1) $50,000.00 $84,197,550.00
PS-1(2) $50,000.00 $127,000,000.00
A-1E $50,000.00 $1,403,292,505.00
A-2 $50,000.00 $28,065,850.00
A-3 $50,000.00 $49,115,237.00
A-4 $50,000.00 $21,049,387.00
A-5 $50,000.00 $42,098,775.00
A-6 $50,000.00 $28,065,850.00
A-7 $50,000.00 $21,049,387.00
A-8 $50,000.00 $21,049,387.00
B-1 $50,000.00 $35,082,312.00
B-2 $50,000.00 $35,082,312.00
B-3 $20,000.00 $14,032,925.00
B-4 $30,000.00 $21,049,387.00
B-5 $20,000.00 $14,032,925.00
B-6 $20,000.00 $14,032,925.00
B-7 $100,000.00 $21,048,393.00
B-7H $ 1,000.00 $1,000.35
The Class B-7 Certificates shall each be issued as one or
more Individual Certificates, substantially in the form of Exhibit A-22 hereto.
Such Certificates shall not be issuable as Global Certificates unless the
Depositor determines that issuance in such form is feasible under Procedures of
the Depository (after consideration of the date of the Distribution Date and
the requirements of the Depository) and the Paying Agent concurs in such
determination.
Each Certificate will share ratably in all rights of the
related Class. The Class B-7H Certificates shall be issuable in a single,
registered definitive physical certificate evidencing its aggregate initial
Certificate Balance. The Class V-1, Class V-2, Class R and LR Certificates will
each be issuable in one or more registered, definitive physical certificates in
minimum denominations of 5% Percentage Interests and integral multiples of a 1%
Percentage Interest in excess thereof and together aggregating the entire 100%
Percentage Interest in each such Class.
The Global Certificates shall be issued as one or more
certificates registered in the name of a nominee designated by the Depository,
and Beneficial Owners shall hold interests in the Global Certificates through
the book-entry facilities of the Depository in the minimum Denominations and
aggregate Denominations and Classes as set forth above. The Global Certificates
representing each of the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5
and Class B-6 Certificates shall be issued as and, prior to the Separation Date
with respect to any such Class, shall comprise a part of the Units. All
references to the Global Certificates herein are deemed to include the Global
Certificate comprising the Units.
The Global Certificates shall in all respects be entitled to
the same benefits under this Agreement as Individual Certificates authenticated
and delivered hereunder.
(b) Except insofar as pertains to any Individual Certificate,
the Trust Fund, the Paying Agent and the Trustee may for all purposes
(including the making of payments due on the Global Certificates and the giving
of notice to Holders thereof) deal with the Depository as the authorized
representative of the Beneficial Owners with respect to the Global Certificates
for the purposes of exercising the rights of Certificateholders hereunder;
provided, however, that, for purposes of providing information pursuant to
Section 3.22 or transmitting communications pursuant to Section 5.05(a), to the
extent that the Depositor has provided the Trustee with the names of
Certificateholders (even if such Certificateholders hold their Certificates
through the Depository) the Trustee shall provide such information to such
Beneficial Owners directly. The rights of Beneficial Owners with respect to
Global Certificates shall be limited to those established by law and agreements
between such Certificateholders and the Depository and Depository Participants.
Except as set forth in Section 5.01(e) below, Beneficial Owners of Global
Certificates shall not be entitled to physical certificates for the Global
Certificates as to which they are the Beneficial Owners. Requests and
directions from, and votes of, the Depository as Holder of the Global
Certificates shall not be deemed inconsistent if they are made with respect to
different Beneficial Owners. The Certificate Registrar may establish a
reasonable record date in connection with solicitations of consents from or
voting by Certificateholders and give notice to the Depository of such record
date. Without the written consent of the Depositor and the Certificate
Registrar, no Global Certificate may be transferred by the Depository except to
a successor Depository that agrees to hold the Global Certificates for the
account of the Beneficial Owners.
(c) Any of the Certificates may be issued with appropriate
insertions, omissions, substitutions and variations, and may have imprinted or
otherwise reproduced thereon such legend or legends, not inconsistent with the
provisions of this Agreement, as may be required to comply with any law or with
rules or regulations pursuant thereto, or with the rules of any securities
market in which the Certificates are admitted to trading, or to conform to
general usage.
(d) The Global Certificates (i) shall be delivered by the
Certificate Registrar to the Depository or, pursuant to the Depository's
instructions on behalf of the Depository to, and deposited with, the
Certificate Custodian, and in either case shall be registered in the name of
Cede & Co. and (ii) shall bear a legend substantially to the following effect:
"Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Certificate Registrar 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."
The Global Certificates may be deposited with such other
Depository as the Certificate Registrar may from time to time designate, and
shall bear such legend as may be appropriate.
(e) If (i) the Depository advises the Trustee in writing that
the Depository is no longer willing, qualified or able properly to discharge
its responsibilities as Depository, and the Trustee is unable to locate a
qualified successor, (ii) the Depositor or the Trustee, at its sole option,
elects to terminate the book-entry system through the Depository with respect
to all or any portion of any Class of Certificates or (iii) after the
occurrence of an Event of Default, Beneficial Owners owning not less than a
majority in Certificate Balance or Notional Balance, as applicable, of the
Global Certificate for any Class then outstanding advise the Depository through
Depository Participants in writing that the continuation of a book-entry system
through the Depository is no longer in the best interest of the Beneficial
Owner or Owners of such Global Certificate, the Trustee shall notify the
affected Beneficial Owner or Owners through the Depository of the occurrence of
such event and the availability of Individual Certificates to such Beneficial
Owners requesting them. Upon surrender to the Trustee of Global Certificates by
the Depository, accompanied by registration instructions from the Depository
for registration of transfer, the Trustee shall issue the Individual
Certificates. Neither the Trustee, the Fiscal Agent, the Certificate Registrar,
the Servicer, the Special Servicer nor the Depositor shall be liable for any
actions taken by the Depository or its nominee, including, without limitation,
any delay in delivery of such instructions. Upon the issuance of Individual
Certificates, the Trustee, the Fiscal Agent, the Certificate Registrar, the
Servicer, the Special Servicer, and the Depositor shall recognize the Holders
of Individual Certificates as Certificateholders hereunder.
(f) If the Trustee, its agents or the Servicer or Special
Servicer has instituted or has been directed to institute any judicial
proceeding in a court to enforce the rights of the Certificateholders under the
Certificates, and the Trustee, the Servicer or the Special Servicer has been
advised by counsel that in connection with such proceeding it is necessary or
appropriate for the Trustee, the Servicer or the Special Servicer to obtain
possession of the Certificates, the Trustee, the Servicer or the Special
Servicer may in its sole discretion determine that the Certificates represented
by the Global Certificates shall no longer be represented by such Global
Certificates. In such event, the Trustee or the Authenticating Agent will
execute and authenticate and the Certificate Registrar will deliver, in
exchange for such Global Certificates, Individual Certificates (and if the
Trustee or the Certificate Custodian has in its possession Individual
Certificates previously executed, the Authenticating Agent will authenticate
and the Certificate Registrar will deliver such Certificates) in a Denomination
equal to the aggregate Denomination of such Global Certificates.
(g) If the Trust Fund ceases to be subject to Section 13 or
15(d) of the Exchange Act, the Trustee shall make available to each Holder of a
Class B-7, Class B-7H, Class V-1, Class V-2, Class R or Class LR Certificate,
upon request of such a Holder, information substantially equivalent in scope to
the information currently filed by the Servicer with the Commission pursuant to
the Exchange Act, plus such additional information required to be provided for
securities qualifying for resales under Rule 144A under the Act, all of which
information referred to in this paragraph shall be provided on a timely basis
to the Trustee by the Servicer.
For so long as the Class B-7, Class B-7H, Class V-1, Class
V-2, Class R or Class LR Certificates remain outstanding, neither the Depositor
nor the Trustee nor the Certificate Registrar shall take any action which would
cause the Trust Fund to fail to be subject to Section 15(d) of the Exchange
Act.
(h) Each Certificate may be printed or in typewritten or
similar form, and each Certificate shall, upon original issue, be executed and
authenticated by the Trustee or the Authenticating Agent and delivered to the
Depositor. All Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee or Authenticating Agent by an authorized officer or
signatory. Certificates bearing the signature of an individual who was at any
time the proper officer or signatory of the Trustee or Authenticating Agent
shall bind the Trustee or Authenticating Agent, notwithstanding that such
individual has ceased to hold such office or position prior to the delivery of
such Certificates or did not hold such office or position at the date of such
Certificates. No Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication in the form set forth in Exhibits
A-1 through A-26 executed by the Authenticating Agent by manual signature, and
such certificate of authentication 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 authentication.
(i) Prior to the Separation Date of any Class of Certificates
comprising the Units, each such Certificate shall bear the following legend on
the face thereof:
THIS CERTIFICATE IS INITIALLY ISSUED AS PART OF A UNIT, THE
UNITS CONSIST OF THE CLASS B-1, CLASS B-2, CLASS B-3, CLASS
B-4, CLASS B-5 AND CLASS B-6 COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 1997-D4, EACH ISSUED PURSUANT TO THE
POOLING AND SERVICING AGREEMENT (AS DEFINED BELOW). PRIOR TO
THE CLOSE OF BUSINESS ON THE DATE THAT THE CLASS OF
CERTIFICATES OF WHICH THIS CERTIFICATE IS A PART IS ASSIGNED
A RATING OF "BBB" OR HIGHER BY STANDARD & POOR'S RATINGS
SERVICES OR FITCH INVESTORS SERVICES, L.P. (THE "SEPARATION
DATE"), THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED
SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY AS
PART OF SUCH UNIT. FOLLOWING THE SEPARATION DATE, THIS
CERTIFICATE SHALL ONLY BE TRANSFERRED OR EXCHANGED SEPARATELY
FROM SUCH UNIT.
(j) Upon any Separation Date for any Class of Certificates,
the Trustee shall notify the Unitholders of (i) the Class of Certificates
affected, (ii) the rating or ratings assigned to such Class by S&P and/or Fitch
and the date such rating or ratings were assigned. Such notice shall also state
that, from such date, such Class shall be traded separately from the Units.
SECTION 5.02. Registration, Transfer and Exchange of
Certificates.
(a) The Trustee shall keep or cause to be kept at the
Corporate Trust Office books (the "Certificate Register") for the registration,
transfer and exchange of Certificates (the Trustee, in such capacity, being the
"Certificate Registrar"). The names and addresses of all Certificateholders and
the names and addresses of the transferees of any Certificates shall be
registered in the Certificate Register; provided, however, in no event shall
the Certificate Registrar be required to maintain in the Certificate Register
the names of the individual Participants holding beneficial interests in the
Trust Fund through the Depository. The Person in whose name any Certificate is
so registered shall be deemed and treated as the sole owner and Holder thereof
for all purposes of this Agreement and the Depositor, Certificate Registrar,
the Servicer, Special Servicer, the Trustee, the Fiscal Agent, any Paying Agent
and any agent of any of them shall not be affected by any notice or knowledge
to the contrary. An Individual Certificate is transferable or exchangeable only
upon the surrender of such Certificate to the Certificate Registrar at the
Corporate Trust Office together with an assignment and transfer (executed by
the Holder or his duly authorized attorney), subject to the requirements of
Sections 5.01(i) and 5.02(c), (d), (e), (f), (g) and (h). Upon request of the
Trustee, the Certificate Registrar shall provide the Trustee with the names,
addresses and Percentage Interests of the Holders.
(b) Upon surrender for registration of transfer of any
Individual Certificate, subject to the requirements of Sections 5.02(c), (d),
(e), (f), (g), (h) and (i), the Trustee shall execute and the Authenticating
Agent shall duly authenticate in the name of the designated transferee or
transferees, one or more new Certificates in Denominations of a like aggregate
Denomination as the Individual Certificate being surrendered. Such Certificates
shall be delivered by the Certificate Registrar in accordance with Section
5.02(e). Each Certificate surrendered for registration of transfer shall be
canceled and subsequently destroyed by the Certificate Registrar. Each new
Certificate issued pursuant to this Section 5.02 shall be registered in the
name of any Person as the transferring Holder may request, subject to the
provisions of Sections 5.01(i) and 5.02(c), (d), (e), (f), (g), (h) and (i).
(c) In addition to the provisions of Sections 5.01(i) and
5.02(d), (e), (f), (g) and (h) and the rules of the Depository; the exchange,
transfer and registration of transfer of Individual Certificates shall be
subject to the following restrictions:
(i) Transfers between Holders of Individual
Certificates. With respect to the transfer and registration
of transfer of an Individual Certificate representing an
interest in the Class B-7, Class B-7H, Class V-1, Class V-2,
Class R or Class LR Certificates to a transferee that takes
delivery in the form of an Individual Certificate:
(A) The Certificate Registrar shall
register the transfer of an Individual Certificate
if the requested transfer is being made by a
transferee who has provided the Certificate
Registrar with an Investment Representation Letter
substantially in the form of Exhibit D-1 hereto (an
"Investment Representation Letter"), to the effect
that the transfer is being made to a Qualified
Institutional Buyer in accordance with Rule 144A;
(B) The Certificate Registrar shall
register the transfer of an Individual Certificate
pursuant to Regulation S after the expiration of the
Restricted Period if (1) the transferor has provided
the Certificate Registrar with a Regulation S
Transfer Certificate substantially in the form of
Exhibit G hereto (a "Regulation S Transfer
Certificate"), and (2) the transferee furnishes to
the Certificate Registrar an Investment
Representation Letter; and
(C) The Certificate Registrar shall
register the transfer of an Individual Certificate
if prior to the transfer such transferee furnishes
to the Certificate Registrar (1) an Investment
Representation Letter to the effect that the
transfer is being made to an Institutional
Accredited Investor or to an Affiliated Person in
accordance with an applicable exemption under the
Act, and (2) an opinion of counsel acceptable to the
Certificate Registrar that such transfer is in
compliance with the Act;
and, in each case, the Certificate Registrar shall register
the transfer of an Individual Certificate only if prior to
the transfer the transferee furnishes to the Certificate
Registrar a written undertaking by the transferor to
reimburse the Trust for any costs incurred by it in
connection with the proposed transfer. In addition, the
Certificate Registrar may, as a condition of the registration
of any such transfer, require the transferor to furnish such
other certificates, legal opinions or other information (at
the transferor's expense) as the Certificate Registrar may
reasonably require to confirm that the proposed transfer is
being made pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Act and
other applicable laws.
(ii) [Intentionally left Blank].
(iii) All Transfers. An exchange of an
Individual Certificate or Certificates for another
Individual Certificate or Certificates may be made only
in accordance with this Section 5.02.
(d) If Certificates are issued upon the transfer, exchange or
replacement of Certificates not bearing the Securities Legend, the Certificates
so issued shall not bear the Securities Legend. If Certificates are issued upon
the transfer, exchange or replacement of Certificates bearing the Securities
Legend, or if a request is made to remove the Securities Legend on a
Certificate, the Certificates so issued shall bear the Securities Legend, or
the Securities Legend shall not be removed, as the case may be, unless there is
delivered to the Certificate Registrar such satisfactory evidence, which may
include an opinion of counsel (at the expense of the party requesting the
removal of such legend) familiar with United States securities laws, as may be
reasonably required by the Certificate Registrar, that neither the Securities
Legend nor the restrictions on transfers set forth therein are required to
ensure that transfers of any Certificate comply with the provisions of Rule
144A or Rule 144 under the Act or that such Certificate is not a "restricted
security" within the meaning of Rule 144 under the Act. Upon provision of such
satisfactory evidence, the Certificate Registrar shall execute and deliver a
Certificate that does not bear the Securities Legend.
(e) Subject to the restrictions on transfer and exchange set
forth in Section 5.01(i) and in this Section 5.02, the Holder of any Individual
Certificate may transfer or exchange the same in whole or in part (with a
denomination equal to any authorized denomination) by surrendering such
Certificate at the Corporate Trust Office or at the office of any transfer
agent appointed as provided under this Agreement, together with an instrument
of assignment or transfer (executed by the Holder or its duly authorized
attorney), in the case of transfer, and a written request for exchange, in the
case of exchange. Following a proper request for transfer or exchange, the
Certificate Registrar shall, within five Business Days of such request if made
at such Corporate Trust Office or within ten Business Days if made at the
office of a transfer agent (other than the Certificate Registrar), execute and
deliver at the Corporate Trust Office or at the office of such transfer agent,
as the case may be, to the transferee (in the case of transfer) or Holder (in
the case of exchange) or send by first Class mail (at the risk of the
transferee in the case of transfer or Holder in the case of exchange) to such
address as the transferee or Holder, as applicable, may request, an Individual
Certificate or Certificates, as the case may require, for a like aggregate
Denomination and in such Denomination or Denominations as may be requested. The
presentation for transfer or exchange of any Individual Certificate shall not
be valid unless made at the Corporate Trust Office or at the office of a
transfer agent by the registered Holder in person, or by a duly authorized
attorney-in-fact. The Certificate Registrar may decline to accept any request
for an exchange or registration of transfer of any Certificate during the
period of fifteen days preceding any Distribution Date.
(f) An Individual Certificate may only be transferred to
Eligible Investors, as described herein. In the event that a Responsible
Officer of the Certificate Registrar becomes aware that such an Individual
Certificate is being held by or for the benefit of a Person who is not an
Eligible Investor, or that such holding is unlawful under the laws of a
relevant jurisdiction, then the Certificate Registrar shall have the right to
void such transfer, if permitted under applicable law, or to require the
investor to sell such Individual Certificate to an Eligible Investor within
fourteen days after notice of such determination and each Certificateholder by
its acceptance of a Certificate authorizes the Certificate Registrar to take
such action.
(g) Subject to the provisions of Section 5.01(i) and this
Section 5.02 regarding transfer and exchange, transfers of the Global
Certificates shall be limited to transfers of such Global Certificates in
whole, but not in part, to nominees of the Depository or to a successor of the
Depository or such successor's nominee.
(h) No fee or service charge shall be imposed by the
Certificate Registrar for its services in respect of any registration of
transfer or exchange referred to in this Section 5.02 other than for transfers
to Institutional Accredited Investors, as provided herein. In connection with
any transfer to an Institutional Accredited Investor, the transferor shall
reimburse the Trust Fund for any costs (including the cost of the Certificate
Registrar's counsel's review of the documents and any legal opinions, submitted
by the transferor or transferee to the Certificate Registrar as provided
herein) incurred by the Certificate Registrar in connection with such transfer.
The Certificate Registrar may require payment by each transferor of a sum
sufficient to cover any tax, expense or other governmental charge payable in
connection with any such transfer.
(i) Subject to Section 5.02(e), transfers of the Class B-7,
Class B-7H, Class V-1, Class V-2, Class R and Class LR Certificates may be made
only in accordance with this Section 5.02(i). The Certificate Registrar shall
register the transfer of a Class B-7, Class B-7H, Class V-1, Class V-2, Class R
or Class LR Certificate only if (x) the transferor has advised the Certificate
Registrar in writing that such Certificate is being transferred to a Qualified
Institutional Buyer, an Affiliated Person or an Institutional Accredited
Investor] and (y) prior to such transfer the transferee furnishes to the
Certificate Registrar an Investment Representation Letter. In addition, the
Certificate Registrar may as a condition of the registration of any such
transfer require the transferor to furnish such other certifications, legal
opinions or other information (at the transferor's expense) as it may
reasonably require to confirm that the proposed transfer is being made pursuant
to an exemption from, or in a transaction not subject to, the registration
requirements of the Act and other applicable laws.
(j) Neither the Depositor, the Servicer, the Trustee nor the
Certificate Registrar is obligated to register or qualify the Class B-7, Class
B-7H, Class V-1, Class V-2, Class R or Class LR Certificates under the Act or
any other securities law or to take any action not otherwise required under
this Agreement to permit the transfer of such Certificates without registration
or qualification. Any Certificateholder desiring to effect such a transfer
shall, and does hereby agree to, indemnify the Depositor, the Servicer, the
Trustee and the Certificate Registrar, against any loss, liability or expense
that may result if the transfer is not so exempt or is not made in accordance
with such federal and state laws.
(k) No transfer of any Class A-1E, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class B-1, Class B-2,
Class B-3, Class B-4, Class B-5, Class B-6, Class B-7, Class B-7H, Class V-1,
Class V-2, Class R or Class LR Certificate (each, a "Restricted Certificate")
shall be made to (i) an employee benefit plan subject to the fiduciary
responsibility provisions of ERISA, or Section 4975 of the Code, or a
governmental plan subject to any federal, state or local law ("Similar Law"),
which is to a material extent, similar to the foregoing provisions of ERISA or
the Code (collectively, a "Plan") or (ii) a collective investment fund in which
a Plan is invested, an insurance company that is using the assets of any
insurance company separate account or general account in which the assets of
any such Plan are invested (or which are deemed pursuant to ERISA or any
Similar Law to include assets of Plans) to acquire any such Restricted
Certificate or any other Person acting on behalf of any Plan or using the
assets of any Plan to acquire any such Restricted Certificate, other than an
insurance company using the assets of its general account under circumstances
whereby such transfer to such insurance company would not constitute a
"prohibited transaction" within the meaning of Section 406 or 407 of ERISA,
Section 4975 of the Code, or a materially similar characterization under any
Similar Law. Each prospective transferee of a Restricted Certificate shall
either (i) deliver to the Depositor, the Certificate Registrar and the Trustee,
a transfer or representation letter, substantially in the form of Exhibit D-2
hereto, stating that the prospective transferee is not a Person referred to in
(i) or (ii) above or (ii) in the event the transferee is such an entity
specified in (i) or (ii) above, except in the case of a Residual Certificate,
which may not be transferred unless the transferee represents it is not such an
entity, such entity shall provide an opinion of counsel in form and substance
satisfactory to the Certificate Registrar that the purchase or holding of the
certificates by or on behalf of a plan will not result in the assets of the
trust being deemed to be "plan assets" and subject to the fiduciary
responsibility provisions of ERISA or the prohibited transaction provisions of
ERISA and the Code or Similar Law, will not constitute or result in a
prohibited transaction within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code, and will not subject the Servicer, the Special
Servicer, the Depositor, the Trustee or the Certificate Registrar to any
obligation or liability. Neither the Trustee, the Servicer nor the Certificate
Registrar shall register a Class R or Class LR Certificate in any Person's name
unless such Person has provided the letter referred to in clause (i) of the
preceding sentence. The transferee of a beneficial interest in a Global
Certificate that is a Restricted Certificate shall be deemed to represent that
it is not a Plan or a Person acting on behalf of any Plan or using the assets
of any Plan to acquire such interest other than an insurance company using the
assets of its general account under circumstances whereby such transfer to such
insurance company would not constitute a "prohibited transaction" within the
meaning of Section 406 or 407 of ERISA, Section 4975 of the Code, or a
materially similar characterization under any Similar Law. Any transfer of a
Restricted Certificate that would violate or result in a prohibited transaction
under ERISA or Section 4975 of the Code shall be deemed absolutely null and
void ab initio.
(l) Each Person who has or acquires any Ownership Interest
shall be deemed by the acceptance or acquisition of such Ownership Interest to
have agreed to be bound by the following provisions and the rights of each
Person acquiring any Ownership Interest are expressly subject to the following
provisions:
(i) Each Person acquiring or holding any Ownership Interest
shall be a Permitted Transferee and shall not acquire or hold
such Ownership Interest as agent (including a broker, nominee
or other middleman) on behalf of any Person that is not a
Permitted Transferee. Any such Person shall promptly notify
the Certificate Registrar of any change or impending change
in its status (or the status of the beneficial owner of such
Ownership Interest) as a Permitted Transferee. Any
acquisition described in the first sentence of this Section
5.02(l) by a Person who is not a Permitted Transferee or by a
Person who is acting as an agent of a Person who is not a
Permitted Transferee shall be void and of no effect, and the
immediately preceding owner who was a Permitted Transferee
shall be restored to registered and beneficial ownership of
the Ownership Interest as fully as possible.
(ii) No Ownership Interest may be Transferred, and no such
Transfer shall be registered in the Certificate Register,
without the express written consent of the Certificate
Registrar, and the Certificate Registrar shall not recognize
the Transfer, and such proposed Transfer shall not be
effective, without such consent with respect thereto. In
connection with any proposed Transfer of any Ownership
Interest, the Certificate Registrar shall, as a condition to
such consent, (x) require delivery to it in form and
substance satisfactory to it, and the proposed transferee
shall deliver to the Certificate Registrar and to the
proposed transferor an affidavit in substantially the form
attached as Exhibit C-1 (a "Transferee Affidavit") of the
proposed transferee (A) that such proposed transferee is a
Permitted Transferee and (B) stating that (i) the proposed
transferee historically has paid its debts as they have come
due and intends to do so in the future, (ii) the proposed
transferee understands that, as the holder of an Ownership
Interest, it may incur liabilities in excess of cash flows
generated by the residual interest, (iii) the proposed
transferee intends to pay taxes associated with holding the
Ownership Interest as they become due, (iv) the proposed
transferee will not transfer the Ownership Interest to any
Person that does not provide a Transferee Affidavit or as to
which the proposed transferee has actual knowledge that such
Person is not a Permitted Transferee or is acting as an agent
(including a broker, nominee or other middleman) for a Person
that is not a Permitted Transferee, and (v) the proposed
transferee expressly agrees to be bound by and to abide by
the provisions of this Section 5.02(e) and (y) other than in
connection with the initial issuance of the Class R and Class
LR Certificates, require a statement from the proposed
transferor substantially in the form attached as Exhibit C-2
(the "Transferor Letter"), that the proposed transferor has
no actual knowledge that the proposed transferee is not a
Permitted Transferee and has no actual knowledge or reason to
know that the proposed transferee's statements in the
preceding clauses (x)(B)(i) or (iii) are false.
(iii) Notwithstanding the delivery of a Transferee Affidavit
by a proposed transferee under clause (ii) above, if a
Responsible Officer of the Certificate Registrar has actual
knowledge that the proposed transferee is not a Permitted
Transferee, no Transfer to such proposed transferee shall be
effected and such proposed Transfer shall not be registered
on the Certificate Register; provided, however, that the
Certificate Registrar shall not be required to conduct any
independent investigation to determine whether a proposed
transferee is a Permitted Transferee.
Upon notice to the Certificate Registrar that there has
occurred a Transfer to any Person that is a Disqualified Organization or an
agent thereof (including a broker, nominee, or middleman) in contravention of
the foregoing restrictions, and in any event not later than 60 days after a
request for information from the transferor of such Ownership Interest, or such
agent, the Certificate Registrar and the Trustee agree to furnish to the IRS
and the transferor of such Ownership Interest or such agent such information
necessary to the application of Section 860E(e) of the Code as may be required
by the Code, including, but not limited to, the present value of the total
anticipated excess inclusions with respect to such Class R or Class LR
Certificate (or portion thereof) for periods after such Transfer. At the
election of the Certificate Registrar and the Trustee, the Certificate
Registrar and the Trustee may charge a reasonable fee for computing and
furnishing such information to the transferor or to such agent referred to
above; provided, however, that such Persons shall in no event be excused from
furnishing such information.
SECTION 5.03. Mutilated, Destroyed, Lost or
Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the
Certificate Registrar, or the Certificate Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate, and (ii)
there is delivered to the Certificate Registrar such security or indemnity as
may be required by it to save it, the Trustee and the Servicer harmless, then,
in the absence of actual knowledge by a Responsible Officer of the Certificate
Registrar that such Certificate has been acquired by a bona fide purchaser, the
Trustee or the Authenticating Agent shall execute and authenticate and the
Certificate Registrar shall deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of the same
Class and of like tenor and Percentage Interest. Upon the issuance of any new
Certificate under this Section 5.03, the Certificate Registrar 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 Certificate Registrar) connected therewith. Any replacement
Certificate issued pursuant to this Section 5.03 shall constitute complete and
indefeasible evidence of ownership of the corresponding interest in the Trust
Fund, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
SECTION 5.04. Appointment of Paying Agent.
The Trustee may appoint a paying agent for the purpose of
making distributions to Certificateholders pursuant to Section 4.01. The
Trustee shall cause such Paying Agent, if other than the Trustee or the
Servicer, to execute and deliver to the Servicer and the Trustee an instrument
in which such Paying Agent shall agree with the Servicer and 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 have been paid to the Certificateholders or disposed of
as otherwise provided herein. The initial Paying Agent shall be the Trustee.
Except for LaSalle National Bank, as the initial Paying Agent, the Paying Agent
shall at all times be an entity having a long-term unsecured debt rating of at
least "AA" by Fitch, S&P and DCR and "Aa2" by Moody's, or shall be otherwise
acceptable to each Rating Agency.
SECTION 5.05. Access to Certificateholders'
Names and Addresses.
(a) If any Certificateholder (for purposes of this Section
5.05, an "Applicant") applies in writing to the Certificate Registrar, and such
application states that the Applicant desires to communicate with other
Certificateholders, the Certificate Registrar shall furnish or cause to be
furnished to such Applicant a list of the names and addresses of the
Certificateholders as of the most recent Record Date, at the expense of the
Applicant.
(b) Every Certificateholder, by receiving and holding its
Certificate, agrees with the Trustee that the Trustee and the Certificate
Registrar shall not be held accountable in any way by reason of the disclosure
of any information as to the names and addresses of the Certificateholders
hereunder, regardless of the source from which such information was derived.
SECTION 5.06. 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 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 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 which 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 Servicer in reliance thereon,
whether or not notation of such action is made upon such Certificate.
(d) The Trustee or Certificate Registrar may require such
additional proof of any matter referred to in this Section 5.06 as it shall
deem necessary.
<PAGE>
ARTICLE VI
THE DEPOSITOR, THE SERVICER AND THE SPECIAL SERVICER
SECTION 6.01. Liability of the Depositor, the Servicer
and the Special Servicer.
The Depositor, the Servicer and the Special Servicer each
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed by this Agreement.
SECTION 6.02. Merger or Consolidation of the Servicer.
Subject to the following paragraph, the Servicer will keep in
full effect its existence, rights and good standing as a corporation under the
laws of the State of Texas and will not jeopardize its ability to do business
in each jurisdiction in which the Mortgaged Properties are located or to
protect the validity and enforceability of this Agreement, the Certificates or
any of the Mortgage Loans and to perform its respective duties under this
Agreement.
The Servicer may be merged or consolidated with or into any
Person, or transfer all or substantially all of its assets to any Person, in
which case any Person resulting from any merger or consolidation to which it
shall be a party, or any Person succeeding to its business, shall be the
successor of the Servicer hereunder, and shall be deemed to have assumed all of
the liabilities of the Servicer hereunder, if each of the Rating Agencies has
confirmed in writing that such merger or consolidation or transfer of assets
and succession, in and of itself, will not cause a downgrade, qualification or
withdrawal of the then current ratings assigned by such Rating Agency to any
Class of Certificates.
SECTION 6.03. Limitation on Liability of the
Depositor, the Servicer and Others.
(a) Neither the Depositor, the Servicer, the Special Servicer
nor any of the directors, officers, employees or agents of the Depositor or the
Servicer or the Special 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, in good faith pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect the
Depositor or the Servicer or the Special Servicer or any such Person against
any breach of warranties or representations made herein, or against any
liability which would otherwise be imposed by reason of willful misconduct, bad
faith, fraud or negligence in the performance of duties or by reason of
reckless disregard of obligations or duties hereunder. The Depositor, the
Servicer, the Special Servicer and any director, officer, employee or agent of
the Depositor, the Servicer or the Special Servicer may rely in good faith on
any document of any kind which, prima facie, is properly executed and submitted
by any appropriate Person respecting any matters arising hereunder. The
Depositor, the Servicer, the Special Servicer and any director, officer,
employee or agent of the Depositor or the Servicer or the Special Servicer
shall be indemnified and held harmless by the Trust Fund against any loss,
liability or expense (including legal fees and expenses) (i) incurred in
connection with any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense incurred by reason of
willful misconduct, bad faith, fraud or negligence (or in the case of the
Servicer, by reason of any specific liability imposed for a breach of the
Servicing Standard) in the performance of duties hereunder or by reason of
reckless disregard of obligations or duties hereunder, in each case by the
Person being indemnified or (ii) imposed by any taxing authority if such loss,
liability or expense is not specifically reimbursable pursuant to the terms of
this Agreement. Neither the Depositor nor the Servicer nor the Special Servicer
shall be under any obligation to appear in, prosecute or defend any legal
action unless such action is related to its respective duties under this
Agreement and in its opinion does not expose it to any expense or liability;
provided, however, that the Depositor or the Servicer or the Special Servicer
may in its discretion undertake any action related to its obligations hereunder
which it may deem necessary or desirable with respect to this Agreement and the
rights and duties of the parties hereto and the interests of the
Certificateholders hereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be expenses, costs and
liabilities of the Trust Fund, and the Depositor, the Servicer and the Special
Servicer shall be entitled to be reimbursed therefor from the Collection
Account as provided in Section 3.06 of this Agreement.
SECTION 6.04. Limitation on Resignation of the Servicer
and the Special Servicer; Termination of
the Servicer and the Special Servicer.
(a) The Servicer and the Special Servicer may assign their
respective rights and delegate their respective duties and obligations under
this Agreement in connection with the sale or transfer of a substantial portion
of their mortgage servicing or asset management portfolio, provided that: (i)
the purchaser or transferee accepting such assignment and delegation (A) shall
be satisfactory to the Trustee and to the Depositor, (B) shall be an
established mortgage finance institution, bank or mortgage servicing
institution, organized and doing business under the laws of any state of the
United States or the District of Columbia, authorized under such laws to
perform the duties of a servicer of mortgage loans or a Person resulting from a
merger, consolidation or succession that is permitted under Section 6.02, (C)
shall be acceptable to each Rating Agency as confirmed by a letter from each
Rating Agency delivered to the Trustee that such assignment or delegation will
not cause a downgrade, withdrawal or qualification of the then current ratings
of the Certificates, (D) shall be rated at least "A" by DCR or otherwise
acceptable to DCR, and (E) shall execute and deliver to the Trustee an
agreement, in form and substance reasonably satisfactory to the Trustee, which
contains an assumption by such Person of the due and punctual performance and
observance of each covenant and condition to be performed or observed by the
Servicer under this Agreement from and after the date of such agreement; (ii)
as confirmed by a letter from each Rating Agency delivered to the Trustee, each
Rating Agency's rating or ratings of the Regular Certificates in effect
immediately prior to such assignment, sale or transfer will not be qualified,
downgraded or withdrawn as a result of such assignment, sale or transfer; (iii)
the Servicer or the Special Servicer shall not be released from its obligations
under this Agreement that arose prior to the effective date of such assignment
and delegation under this Section 6.04; and (iv) the rate at which the Servicer
Compensation or Special Servicer Compensation, as applicable (or any component
thereof) is calculated shall not exceed the rate then in effect. Upon
acceptance of such assignment and delegation, the purchaser or transferee shall
be the successor Servicer or Special Servicer, as applicable, hereunder.
(b) Except as provided in this Section 6.04, the Servicer and
the Special Servicer shall not resign from their respective obligations and
duties hereby imposed on them except upon determination that such duties
hereunder are no longer permissible under applicable law. Any such
determination permitting the resignation of the Servicer or the Special
Servicer, as applicable, shall be evidenced by an Opinion of Counsel (obtained
at the resigning Servicer's or Special Servicer's expense) to such effect
delivered to the Trustee.
(c) The Depositor shall be permitted to remove the Servicer
provided that (i) (x) the replacement Servicer is an acquired servicing unit
and (y) is an affiliate of the Depositor and (ii) each Rating Agency has
confirmed in writing that such removal and replacement will not result in a
downgrade, qualification or withdrawal of the then current ratings by such
Rating Agency to any class of Certificates. If the Depositor removes the
Servicer pursuant to the preceding sentence, the Depositor shall pay for all
costs and expenses that would otherwise be incurred by the Trust Fund in
connection with such removal and replacement. Without limiting the generality
of the succeeding paragraph, no such removal shall be effective unless and
until (i) the Servicer or the Special Servicer has been paid any unpaid
Servicer Compensation or Special Servicer Compensation, as applicable,
unreimbursed Advances (including Advance Interest Amounts thereon to which it
is entitled) and all other amounts to which the Servicer or the Special
Servicer is entitled hereunder to the extent such amounts accrue prior to such
effective date and (ii) with respect to a resignation by the Servicer, the
successor Servicer has deposited into the Investment Accounts from which
amounts were withdrawn to reimburse the terminated Servicer, an amount equal to
the amounts so withdrawn, to the extent such amounts would not have been
permitted to be withdrawn except pursuant to this paragraph, in which case the
successor Servicer shall, immediately upon deposit, have the same right of
reimbursement or payment as the terminated Servicer had immediately prior to
its termination without regard to the operation of this paragraph.
No resignation or removal of the Servicer or the Special
Servicer as contemplated by the preceding paragraphs shall become effective
until the Trustee or a successor Servicer or Special Servicer shall have
assumed the Servicer's or the Special Servicer's responsibilities, duties,
liabilities and obligations hereunder. If no successor Servicer or Special
Servicer can be obtained to perform such obligations for the same compensation
to which the terminated Servicer or Special Servicer would have been entitled,
additional amounts payable to such successor Servicer or Special Servicer shall
be treated as Realized Losses.
SECTION 6.05. Rights of the Depositor and the Trustee
in Respect of the Servicer and the
Special Servicer.
The Servicer and the Special Servicer shall afford the
Depositor, the Trustee and the Rating Agencies, upon reasonable notice, during
normal business hours access to all records maintained by it in respect of its
rights and obligations hereunder and access to its officers responsible for
such obligations. Upon request, the Servicer and the Special Servicer shall
furnish to the Depositor, Servicer, Special Servicer and the Trustee its most
recent financial statements (or in the case of the Servicer or Special
Servicer, the financial statements of AMRESCO INC. if no separate financial
statements have been prepared for the Servicer) and such other information in
its possession regarding its business, affairs, property and condition,
financial or otherwise as the party requesting such information, in its
reasonable judgment, determines to be relevant to the performance of the
obligations hereunder of the Servicer and the Special Servicer. The Depositor
may, but is not obligated to, enforce the obligations of the Servicer or the
Special Servicer hereunder which are in default and may, but is not obligated
to, perform, or cause a designee to perform, any defaulted obligation of such
Person hereunder or exercise its rights hereunder, provided that the Servicer
and the Special Servicer shall not be relieved of any of its obligations
hereunder by virtue of such performance by the Depositor or its designee. In
the event the Depositor or its designee undertakes any such action it will be
reimbursed by the Trust Fund from the Collection Account as provided in Section
3.06 and Section 6.03(a) hereof to the extent not recoverable from the Servicer
or Special Servicer, as applicable. Neither the Depositor nor the Trustee and
neither the Servicer, with respect to the Special Servicer, nor the Special
Servicer, with respect to the Servicer, shall have any responsibility or
liability for any action or failure to act by the Servicer or the Special
Servicer and neither such Person is obligated to monitor or supervise the
performance of the Servicer or the Special Servicer under this Agreement or
otherwise. Neither the Servicer nor the Special Servicer shall be under any
obligation to disclose confidential or proprietary information pursuant to this
Section.
SECTION 6.06. Servicer or Special Servicer as
Owner of a Certificate.
The Servicer or an Affiliate of the Servicer or the Special
Servicer or an Affiliate of the Special Servicer may become the Holder (or with
respect to a Global Certificate, Beneficial Owner) of any Certificate with the
same rights it would have if it were not the Servicer or the Special Servicer
or an Affiliate thereof. If, at any time during which the Servicer or the
Special Servicer or an Affiliate of the Servicer or the Special Servicer is the
Holder or Beneficial Owner of any Certificate, the Servicer or the Special
Servicer proposes to take action (including for this purpose, omitting to take
action) that (i) is not expressly prohibited by the terms hereof and would not,
in the Servicer's or the Special Servicer's good faith judgment, violate the
Servicing Standard, and (ii) if taken, might nonetheless, in the Servicer's or
the Special Servicer's good faith judgment, be considered by other Persons to
violate the Servicing Standard, the Servicer or the Special Servicer may seek
the approval of the Certificateholders to such action by delivering to the
Trustee a written notice that (i) states that it is delivered pursuant to this
Section 6.06, (ii) identifies the Percentage Interest in each Class of
Certificates beneficially owned by the Servicer or the Special Servicer or an
Affiliate of the Servicer or the Special Servicer, and (iii) describes in
reasonable detail the action that the Servicer or the Special Servicer proposes
to take. The Trustee, upon receipt of such notice, shall forward it to the
Certificateholders (other than the Servicer and its Affiliates or the Special
Servicer and its Affiliates, as appropriate) together with such instructions
for response as the Trustee shall reasonably determine. If at any time
Certificateholders holding greater than 50% of the Voting Rights of all
Certificateholders (calculated without regard to the Certificates beneficially
owned by the Servicer or its Affiliates or the Special Servicer or its
Affiliates) shall have consented in writing to the proposal described in the
written notice, and if the Servicer or the Special Servicer shall act as
proposed in the written notice, such action shall be deemed to comply with the
Servicing Standard. The Trustee shall be entitled to reimbursement from the
Servicer or the Special Servicer, as applicable, of the reasonable expenses of
the Trustee incurred pursuant to this paragraph. It is not the intent of the
foregoing provision that the Servicer or the Special Servicer be permitted to
invoke the procedure set forth herein with respect to routine servicing matters
arising hereunder, except in the case of unusual circumstances.
<PAGE>
ARTICLE VII
DEFAULT
SECTION 7.01. Events of Default.
(a) "Servicer Event of Default", wherever used herein, means
any one of the following events:
(i) any failure by the Servicer to remit to the Collection
Account or any failure by the Servicer to remit to the
Trustee for deposit into the Distribution Account, Upper-Tier
Distribution Account, Excess Interest Distribution Account,
Interest Reserve Account or Default Interest Distribution
Account, any amount required to be so deposited by the
Servicer (including a P&I Advance) pursuant to, and at the
time specified by the terms of this Agreement; or
(ii) any failure on the part of the Servicer duly to observe
or perform in any material respect any other of the covenants
or agreements or the breach of any representations or
warranties on the part of the Servicer contained in this
Agreement which continues unremedied for a period of 30 days
after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to
the Servicer by the Depositor or the Trustee, or to the
Servicer, the Depositor and the Trustee by the Holders of
Certificates evidencing Percentage Interests of at least 25%
of any Class affected thereby; or
(iii) confirmation in writing by any Rating Agency that
failure to remove the Servicer will, in and of itself, cause
a downgrade, qualification or withdrawal of the then current
ratings assigned to any Class of Certificates; or
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an
involuntary case under any present or future federal or state
bankruptcy, insolvency or similar law for the appointment of
a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the Servicer and
such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or
(v) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Servicer, or of or
relating to all or substantially all of its property; or
(vi) the Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to
take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors,
or voluntarily suspend payment of its obligations; or
(vii) the Servicer shall fail to make any Property Advance
required to be made by the Servicer hereunder (whether or not
the Trustee or the Fiscal Agent makes such Advance), which
failure continues unremedied for a period of fifteen (15)
days after the date on which such Property Advance was first
due (or for any shorter period as may be required, if
applicable, to avoid any lapse in insurance coverage required
under any Mortgage or this Agreement with respect to any
Mortgaged Property or to avoid any foreclosure or similar
action with respect to any Mortgaged Property by reason of a
failure to pay real estate taxes and assessments and if the
Trustee makes a required Property Advance pursuant to Section
3.08(a) due to the Servicer's failure to make a required
Advance, such Event of Default shall occur immediately upon
such Advance); or
(viii) the Servicer shall no longer be an "approved" servicer
by each of the Rating Agencies for mortgage pools similar to
the Trust Funds;
then, and in each and every such case, so long as a Servicer Event of Default
shall not have been remedied, the Trustee may, and at the written direction of
the Holders of at least 25% of the aggregate Voting Rights of all Certificates
shall, terminate the Servicer.
In the event that the Servicer is also the Special Servicer
and the Servicer is terminated as provided in this Section 7.01, the Servicer
shall also be terminated as Special Servicer.
(b) "Special Servicer Event of Default", wherever used
herein, means any one of the following events:
(i) any failure by the Special Servicer to remit to the
Collection Account any amount required to be so deposited by
the Special Servicer pursuant to and in accordance with the
terms of this Agreement; or
(ii) any failure on the part of the Special Servicer duly to
observe or perform in any material respect any other of the
covenants or agreements or the breach of any representations
or warranties on the part of the Special Servicer contained
in this Agreement which continues unremedied for a period of
30 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been
given to the Special Servicer by the Servicer, the Depositor
or the Trustee, or to the Special Servicer, the Servicer, the
Depositor and the Trustee by the Holders of Certificates
evidencing Percentage Interests of at least 25% of any Class
affected thereby; or
(iii) confirmation in writing by any Rating Agency that
failure to remove the Special Servicer would, in and of
itself, cause a downgrade, qualification or withdrawal of the
then current ratings assigned to any Class of Certificates;
or
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an
involuntary case under any present or future federal or state
bankruptcy, insolvency or similar law for the appointment of
a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the Special
Servicer and such decree or order shall have remained in
force undischarged or unstayed for a period of 60 days; or
(v) the Special Servicer shall consent to the appointment of
a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Special Servicer,
or of or relating to all or substantially all of its
property; or
(vi) the Special 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
(vii) the Special Servicer shall no longer be an "approved"
special servicer by each of the Rating Agencies for mortgage
pools similar to the Trust Fund;
then, and in each and every such case, so long as a Special Servicer Event of
Default shall not have been remedied, the Trustee may, and at the written
direction of the Holders of at least 25% of the aggregate Voting Rights of all
Certificates shall, terminate the Special Servicer.
(c) In the event that the Servicer or the Special Servicer is
terminated pursuant to this Section 7.01, the Trustee (the "Terminating Party")
shall, by notice in writing to the Servicer or the Special Servicer, as the
case may be (the "Terminated Party"), terminate all of its rights and
obligations under this Agreement and in and to the Mortgage Loans and the
proceeds thereof, other than any rights the Terminated Party may have hereunder
as a Certificateholder and any rights or obligations that accrued prior to the
date of such termination (including the right to receive all amounts accrued or
owing to it under this Agreement, plus interest at the Advance Rate on such
amounts until received to the extent such amounts bear interest as provided in
this Agreement, with respect to periods prior to the date of such termination
and the right to the benefits of Section 6.03 notwithstanding any such
termination). On or after the receipt by the Terminated Party, of such written
notice, all of its authority and power under this Agreement, whether with
respect to the Certificates (except that the Terminated Party shall retain its
rights as a Certificateholder in the event and to the extent that it is a
Certificateholder) or the Mortgage Loans or otherwise, shall pass to and be
vested in the Terminating Party pursuant to and under this Section and, without
limitation, the Terminating Party is hereby authorized and empowered to execute
and deliver, on behalf of and at the expense of the Terminated Party, 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 or assignment of the Mortgage Loans and related documents, or
otherwise. The Servicer and the Special Servicer each agree in the event it is
terminated pursuant to this Section 7.01 to promptly (and in any event no later
than ten Business Days subsequent to such notice) provide, at its own expense,
the Terminating Party with all documents and records requested by the
Terminating Party to enable the Terminating Party to assume its functions
hereunder, and to cooperate with the Terminating Party and the successor to its
responsibilities hereunder in effecting the termination of its responsibilities
and rights hereunder, including, without limitation, the transfer to the
successor Servicer or Special Servicer or the Terminating Party, as applicable,
for administration by it of all cash amounts which shall at the time be or
should have been credited by the Servicer or the Special Servicer to the
Collection Account, and any REO Account, Lock-Box Account or Cash Collateral
Account thereafter be received with respect to the Mortgage Loans, and shall
promptly provide the Terminating Party or such successor Servicer or successor
Special Servicer (which may include the Trustee), as applicable, all documents
and records reasonably requested by it, such documents and records to be
provided in such form as the Terminating Party or such successor Servicer or
Special Servicer shall reasonably request (including electromagnetic form), to
enable it to assume the Servicer's or Special Servicer's function hereunder.
All reasonable costs and expenses of the Terminating Party or the successor
Servicer or successor Special Servicer incurred in connection with transferring
the Mortgage Files to the successor Servicer or Special Servicer and amending
this Agreement to reflect such succession as successor Servicer or successor
Special Servicer pursuant to this Section 7.01 shall be paid by the predecessor
Servicer or the Special Servicer, as applicable, upon presentation of
reasonable documentation of such costs and expenses. If the predecessor
Servicer or Special Servicer (as the case may be) has not reimbursed the
Terminating Party or the successor Servicer or Special Servicer for such
expenses within 90 days after the presentation of reasonable documentation,
such expense shall be reimbursed by the Trust Fund; provided that the
Terminated Party shall not thereby be relieved of its liability for such
expenses. If and to the extent that the Terminated Party has not reimbursed
such costs and expenses, the Terminating Party shall have an affirmative
obligation to take all reasonable actions to collect such expenses on behalf of
the Trust Fund.
SECTION 7.02. Trustee to Act; Appointment of Successor.
On and after the time the Servicer or the Special Servicer
receives a notice of termination pursuant to Section 7.01, the Terminating
Party shall be its successor in all respects in its capacity as Servicer or
Special Servicer under this Agreement and the transactions set forth or
provided for herein and, except as provided herein, shall be subject to all the
responsibilities, duties, limitations on liability and liabilities relating
thereto and arising thereafter placed on the Servicer or Special Servicer by
the terms and provisions hereof; provided, however, that (i) the Terminating
Party shall have no responsibilities, duties, liabilities or obligations with
respect to any act or omission of the Servicer or Special Servicer and (ii) any
failure to perform, or delay in performing, such duties or responsibilities
caused by the Terminated Party's failure to provide, or delay in providing,
records, tapes, disks, information or monies shall not be considered a default
by such successor hereunder. The Trustee, as successor Servicer or successor
Special Servicer, shall be indemnified to the full extent provided the Servicer
or Special Servicer, as applicable, under this Agreement prior to the
Servicer's or the Special Servicer's termination. The appointment of a
successor Servicer or successor Special Servicer shall not affect any liability
of the predecessor Servicer or Special Servicer which may have arisen prior to
its termination as Servicer or Special Servicer. The Terminating Party shall
not be liable for any of the representations and warranties of the Servicer or
Special Servicer herein or in any related document or agreement, for any acts
or omissions of the predecessor Servicer or predecessor Special Servicer or for
any losses incurred in respect of any Permitted Investment by the Servicer
pursuant to Section 3.07 hereunder nor shall the Trustee be required to
purchase any Mortgage Loan hereunder. As compensation therefor, the Terminating
Party as successor Servicer or successor Special Servicer shall be entitled to
the Servicing Compensation or Special Servicing Compensation, as applicable,
and all funds relating to the Mortgage Loans that accrue after the date of the
Terminating Party's succession to which the Servicer or Special Servicer would
have been entitled if the Servicer or Special Servicer, as applicable, had
continued to act hereunder. In the event any Advances made by the Servicer and
the Trustee or the Fiscal Agent shall at any time be outstanding, or any
amounts of interest thereon shall be accrued and unpaid, all amounts available
to repay Advances and interest hereunder shall be applied entirely to the
Advances made by the Trustee or the Fiscal Agent (and the accrued and unpaid
interest thereon), until such Advances and interest shall have been repaid in
full. Notwithstanding the above, the Trustee may, if it shall be unwilling to
so act, or shall, if it is unable to so act, or if the Holders of Certificates
entitled to at least 25% of the aggregate Voting Rights so request in writing
to the Trustee, or if neither the Trustee nor the Fiscal Agent is rated by each
Rating Agency in one of its two highest long-term debt rating categories or if
the Rating Agencies do not provide written confirmation that the succession of
the Trustee, as Servicer or Special Servicer, as applicable, will not cause a
downgrade, qualification or withdrawal of the then current ratings assigned to
the Certificates, promptly appoint, or petition a court of competent
jurisdiction to appoint, any established mortgage loan servicing institution
the appointment of which will not result in a downgrade, qualification or
withdrawal of the then current rating or ratings assigned to any Class of
Certificates as evidenced in writing by each Rating Agency, as the successor to
the Servicer or Special Servicer, as applicable, hereunder in the assumption of
all or any part of the responsibilities, duties or liabilities of the Servicer
or Special Servicer hereunder. No appointment of a successor to the Servicer or
Special Servicer hereunder shall be effective until the assumption by such
successor of all the Servicer's or Special Servicer's responsibilities, duties
and liabilities hereunder. Pending appointment of a successor to the Servicer
(or the Special Servicer if the Special Servicer is also the Servicer)
hereunder, unless the Trustee shall be prohibited by law from so acting, the
Trustee shall act in such capacity as herein above provided. Pending the
appointment of a successor to the Special Servicer, unless the Servicer is also
the Special Servicer, the Servicer shall act in such capacity. In connection
with such appointment and assumption described herein, the Trustee may make
such arrangements for the compensation of such successor out of payments on
Mortgage Loans as it and such successor shall agree; provided, however, that no
such compensation shall be in excess of that permitted the Terminated Party
hereunder, provided, further, that if no successor to the Terminated Party can
be obtained to perform the obligations of such Terminated Party hereunder,
additional amounts shall be paid to such successor and such amounts in excess
of that permitted the Terminated Party shall be treated as Realized Losses. The
Depositor, the Trustee, the Servicer or Special Servicer and such successor
shall take such action, consistent with this Agreement, as shall be necessary
to effectuate any such succession.
SECTION 7.03. Notification to Certificateholders.
(a) Upon any termination pursuant to Section 7.01 above or
appointment of a successor to the Servicer or the Special Servicer, the Trustee
shall give prompt written notice thereof to Certificateholders at their
respective addresses appearing in the Certificate Register and to each Rating
Agency.
(b) Within 30 days after the occurrence of any Event of
Default of which a Responsible Officer of the Trustee has actual knowledge, the
Trustee shall transmit by mail to all Holders of Certificates and to each
Rating Agency notice of such Event of Default, unless such Event of Default
shall have been cured or waived.
SECTION 7.04. Other Remedies of Trustee.
During the continuance of any Servicer Event of Default or a
Special Servicer Event of Default, so long as such Servicer Event of Default or
Special Servicer Event of Default, if applicable, shall not have been remedied,
the Trustee, in addition to the rights specified in Section 7.01, shall have
the right, in its own name as trustee of an express trust, to take all actions
now or hereafter existing at law, in equity or by statute to enforce its rights
and remedies and to protect the interests, and enforce the rights and remedies,
of the Certificateholders (including the institution and prosecution of all
judicial, administrative and other proceedings and the filing of proofs of
claim and debt in connection therewith). In such event, the legal fees,
expenses and costs of such action and any liability resulting therefrom shall
be expenses, costs and liabilities of the Trust Fund, and the Trustee shall be
entitled to be reimbursed therefor from the Collection Account as provided in
Section 3.06. Except as otherwise expressly provided in this Agreement, no
remedy provided for by this Agreement shall be exclusive of any other remedy,
and each and every remedy shall be cumulative and in addition to any other
remedy and no delay or omission to exercise any right or remedy shall impair
any such right or remedy or shall be deemed to be a waiver of any Servicer
Event of Default or Special Servicer Event of Default, if applicable.
SECTION 7.05. Waiver of Past Events of
Default; Termination.
The Holders of Certificates evidencing not less than 66-2/3%
of the aggregate Voting Rights of the Certificates may, on behalf of all
Holders of Certificates, waive any default by the Servicer or Special Servicer
in the performance of its obligations hereunder and its consequences, except a
default in making any required deposits (including P&I Advances) to or payments
from the Collection Account or the Distribution Account or in remitting
payments as received, in each case 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.
<PAGE>
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
(a) The Trustee, prior to the occurrence of an Event of
Default of which a Responsible Officer of the Trustee has actual knowledge and
after the curing or waiver 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 and no permissive right of the Trustee shall be
construed as a duty. During the continuance of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge, the Trustee, subject
to the provisions of Sections 7.02 and 7.05 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 person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) The Trustee, upon receipt of any resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform on their face to the requirements of this
Agreement; provided, however, that, the Trustee shall not be responsible for
the accuracy or content of any such resolution, certificate, statement,
opinion, report, document, order or other instrument provided to it hereunder.
If any such instrument is found not to conform on its face to the requirements
of this Agreement in a material manner, the Trustee shall take action as it
deems appropriate to have the instrument corrected, and if the instrument is
not corrected to the Trustee's reasonable satisfaction, the Trustee will
provide notice thereof to the Certificateholders.
(c) Neither the Trustee nor any of its officers, directors,
employees, agents or "control" persons within the meaning of the Act shall have
any liability arising out of or in connection with this Agreement, provided,
that, subject to Section 8.02, no provision of this Agreement shall be
construed to relieve the Trustee, or any such person, from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct or its own bad faith; and provided, further, that:
(i) Prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge, and
after the curing or waiver 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 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 resolutions,
certificates, statements, reports, opinions, documents,
orders or other instruments furnished to the Trustee that
conform on their face to the requirements of this Agreement
without responsibility for investigating the contents
thereof;
(ii) The Trustee shall not be personally liable for an error
of judgment made in good faith by a Responsible Officer or
Responsible Officers, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of Holders of
Certificates entitled to greater than 50% of the Percentage
Interests (or such other percentage as is specified herein)
of each affected Class, or of the aggregate Voting Rights of
the Certificates, 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;
(iv) Neither the Trustee nor any of its respective directors,
officers, employees, agents or control persons shall be
responsible for any act or omission of any Custodian, Paying
Agent or Certificate Registrar that is not an Affiliate of
the Trustee and that is selected other than by the Trustee,
performed or omitted in compliance with any custodial or
other agreement, or any act or omission of the Servicer,
Special Servicer, the Depositor or any other Person,
including, without limitation, in connection with actions
taken pursuant to this Agreement;
(v) The Trustee shall not be under any obligation to appear
in, prosecute or defend any legal action which is not
incidental to its respective duties as Trustee in accordance
with this Agreement (and, if it does, all legal expenses and
costs of such action shall be expenses and costs of the Trust
Fund), and the Trustee shall be entitled to be reimbursed
therefor from the Collection Account, unless such legal
action arises out of the negligence or bad faith of the
Trustee or any breach of an obligation, representation,
warranty or covenant of the Trustee contained herein; and
(vi) The Trustee shall not be charged with knowledge of any
act, failure to act or breach of any Person upon the
occurrence of which the Trustee may be required to act,
unless a Responsible Officer of the Trustee obtains actual
knowledge of such failure. The Trustee shall be deemed to
have actual knowledge of the Servicer's or the Special
Servicer's failure to provide scheduled reports, certificates
and statements when and as required to be delivered to the
Trustee pursuant to this Agreement.
None of the provisions contained in this Agreement shall
require either the Trustee, in its capacity as Trustee, or the Fiscal Agent, 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 in the opinion of the Trustee or the Fiscal Agent,
respectively, 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 Servicer or the Special 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 Servicer or the Special Servicer
in accordance with the terms of this Agreement. Neither the Trustee nor the
Fiscal Agent shall be required to post any surety or bond of any kind in
connection with its performance of its obligations under this Agreement and
neither the Trustee nor the Fiscal Agent shall be liable for any loss on any
investment of funds pursuant to this Agreement.
SECTION 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may request and/or rely upon and shall be
protected in acting or refraining from acting upon any
resolution, Officers' Certificate, certificate of auditors or
any other certificate, statement, instrument, opinion,
report, notice, request, consent, order, appraisal, bond or
other paper or document reasonably believed by it to be
genuine and to have been signed or presented by the proper
party or parties and the Trustee shall have no responsibility
to ascertain or confirm the genuineness of any such 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 accordance with
such Opinion of Counsel;
(iii) (A) The Trustee shall be under no obligation 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; (B) 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 willful misconduct in the
performance of any such act; and (C) provided, that subject
to the foregoing clause (A), nothing contained herein shall
relieve the Trustee of the obligations, upon the occurrence
of an Event of Default (which has not been cured or waived)
of which a Responsible Officer of the Trustee has actual
knowledge, 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 person would
exercise or use under the circumstances in the conduct of
such person's own affairs;
(iv) Neither the Trustee nor any of its directors, officers,
employees, Affiliates, agents or "control" persons within the
meaning of the Act shall be personally liable for any action
taken, suffered or omitted by it in good faith and reasonably
believed by the Trustee to be authorized or within the
discretion or rights or powers conferred upon it by this
Agreement;
(v) 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
document, unless requested in writing to do so by Holders of
Certificates entitled to at least 25% (or such other
percentage as is specified herein) of the Percentage
Interests of any affected Class; 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 expense
or liability as a condition to taking any such action. The
reasonable expense of every such investigation shall be paid
by the Servicer or the Special Servicer if an Event of
Default shall have occurred and be continuing relating to the
Servicer, or the Special Servicer, respectively, and
otherwise by the Certificateholders requesting the
investigation; and
(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 but shall not be relieved
of the obligations hereunder.
(b) Following the Start-up Day, the Trustee shall not, except
as expressly required by any provision of this Agreement, accept any
contribution of assets to the Trust Fund unless the Trustee shall have received
an Opinion of Counsel (the costs of obtaining such opinion to be borne by the
Person requesting such contribution) to the effect that the inclusion of such
assets in the Trust Fund will not cause either the Upper-Tier REMIC or the
Lower-Tier REMIC to fail to qualify as a REMIC at any time that any
Certificates are outstanding or subject either the Upper-Tier REMIC or the
Lower-Tier REMIC to any tax under the REMIC Provisions or other applicable
provisions of federal, state and local law or ordinances.
(c) All rights of action under this Agreement or under any of
the Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial
or other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
The Trustee shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the repurchase of
any Mortgage Loan by the Depositor pursuant to this Agreement or the
eligibility of any Mortgage Loan for purposes of this Agreement.
SECTION 8.03. Trustee and Fiscal Agent Not Liable for
Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates shall
not be taken as the statements of the Trustee, the Fiscal Agent, the Servicer,
or the Special Servicer and the Trustee, the Fiscal Agent, the Servicer and the
Special Servicer assume no responsibility for their correctness. The Trustee,
the Fiscal Agent, the Servicer and the Special Servicer make no representations
or warranties as to the validity or sufficiency of this Agreement, of the
Certificates or any prospectus used to offer the Certificates for sale or the
validity, enforceability or sufficiency of any Mortgage Loan, or related
document. Neither the Trustee nor the Fiscal Agent shall at any time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Mortgage, any Mortgage Loan, or the perfection and
priority of any Mortgage or the maintenance of any such perfection and
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. Without limiting the foregoing, neither the Trustee nor the
Fiscal Agent shall be liable or responsible for: the existence, condition and
ownership of any Mortgaged Property; the existence of any hazard or other
insurance thereon (other than if the Trustee shall assume the duties of the
Servicer or the Special Servicer pursuant to Section 7.02) or the
enforceability thereof; the existence of any Mortgage Loan or the contents of
the related Mortgage File on any computer or other record thereof (other than
if the Trustee shall assume the duties of the Servicer or the Special Servicer
pursuant to Section 7.02); the validity of the assignment of any Mortgage Loan
to the Trust Fund or of any intervening assignment; the completeness of any
Mortgage File; the performance or enforcement of any Mortgage Loan (other than
if the Trustee shall assume the duties of the Servicer or the Special Servicer
pursuant to Section 7.02); the compliance by the Depositor, the Servicer or the
Special 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 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
any of the Depositor, the Servicer or the Special Servicer (other than if the
Trustee shall assume the duties of the Servicer or Special Servicer pursuant to
Section 7.02) or any subservicer or any Borrower; any action of the Servicer or
Special Servicer (other than if the Trustee shall assume the duties of the
Servicer or Special Servicer pursuant to Section 7.02) or any subservicer taken
in the name of the Trustee, except to the extent such action is taken at the
express written direction of the Trustee; the failure of the Servicer or the
Special Servicer or any subservicer to act or perform any duties required of it
on behalf of the Trust Fund or the Trustee hereunder; or any action by or
omission of the Trustee taken at the instruction of the Servicer or the Special
Servicer (other than if the Trustee shall assume the duties of the Servicer or
the Special Servicer pursuant to Section 7.02) unless the taking of such action
is not permitted by the express terms of this Agreement; provided, however,
that the foregoing shall not relieve the Trustee of its obligation to perform
its duties as specifically set forth in this Agreement. Neither the Trustee nor
the Fiscal Agent shall be accountable for the use or application by the
Depositor, the Servicer or the Special 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 Depositor, the Servicer or the Special Servicer in respect of
the assignment of the Mortgage Loans or deposited in or withdrawn from the
Collection Account, Distribution Account, Upper-Tier Distribution Account, Lock
Box Account, Cash Collateral Account, Reserve Accounts, Interest Reserve
Account, Default Interest Distribution Account or Excess Interest Distribution
Account or any other account maintained by or on behalf of the Servicer or the
Special Servicer, other than any funds held by the Trustee or the Fiscal Agent,
as applicable. Neither the Trustee nor the Fiscal Agent shall have any
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 (unless the Trustee shall
have become the successor Servicer) or to record this Agreement. In making any
calculation hereunder which includes as a component thereof the payment or
distribution of interest for a stated period at a stated rate "to the extent
permitted by applicable law," the Trustee shall assume that such payment is so
permitted unless a Responsible Officer of the Trustee has actual knowledge, or
receives an Opinion of Counsel (at the expense of the Person asserting the
impermissibility) to the effect, that such payment is not permitted by
applicable law.
SECTION 8.04. Trustee and Fiscal Agent May
Own Certificates.
The Trustee, the Fiscal Agent and any agent of the Trustee
and Fiscal Agent in its individual capacity or any other capacity may become
the owner or pledgee of Certificates, and may deal with the Depositor and the
Servicer in banking transactions, with the same rights it would have if it were
not Trustee, Fiscal Agent or such agent.
SECTION 8.05. Payment of Trustee's Fees and Expenses;
Indemnification.
(a) The Trustee or any successor Trustee shall be entitled,
on each Distribution Date, to the Trustee Fee (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 the Trustee in the execution of the trusts
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee, which Trustee Fee shall be paid to the Trustee
prior to the distribution on such Distribution Date of amounts to the
Certificateholders. In the event that the Trustee assumes the servicing
responsibilities of the Servicer or the Special Servicer hereunder pursuant to
or otherwise arising from the resignation or removal of the Servicer or the
Special Servicer, the Trustee shall be entitled to the compensation to which
the Servicer or the Special Servicer, as the case may be, would have been
entitled.
(b) The Trustee and the Fiscal Agent shall each be paid or
reimbursed by the Trust Fund upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee or the Fiscal Agent
pursuant to and in accordance with any of the provisions of this Agreement
(including the reasonable compensation and the expenses and disbursements of
its counsel and of all persons not regularly in its employ) to the extent such
payments are "unanticipated expenses incurred by the REMIC" within the meaning
of Treasury Regulations Section 1.860G-1(b)(iii) except any such expense,
disbursement or advance as may arise from its negligence or bad faith;
provided, however, that, subject to the last paragraph of Section 8.01, neither
the Trustee nor the Fiscal Agent shall refuse to perform any of its duties
hereunder solely as a result of the failure to be paid the Trustee Fee and the
Trustee's expenses or any sums due to the Fiscal Agent.
The Servicer and the Special Servicer covenant and agree to
pay or reimburse the Trustee for the reasonable expenses, disbursements and
advances incurred or made by the Trustee in connection with any transfer of the
servicing responsibilities of the Servicer or the Special Servicer,
respectively, hereunder, pursuant to or otherwise arising from the resignation
or removal of the Servicer, in accordance with any of the provisions of this
Agreement (and including the reasonable fees and expenses and disbursements of
its counsel and all other persons not regularly in its employ), except any such
expense, disbursement or advance as may arise from the negligence or bad faith
of the Trustee; provided, that in the event that the Servicer is terminated
pursuant to Section 6.04(c), expenses incurred in connection with such transfer
shall be paid by the Certificateholders effecting such termination.
(c) Each of the Paying Agent, the Certificate Registrar, the
Custodian, the Depositor, the Servicer and the Special Servicer (each, an
"Indemnifying Party") shall indemnify the Trustee and the Fiscal Agent and
their respective Affiliates and each of the directors, officers, employees and
agents of the Trustee, the Fiscal Agent and their respective Affiliates (each,
an "Indemnified Party"), and hold each of them harmless against any and all
claims, losses, damages, penalties, fines, forfeitures, reasonable and
necessary legal fees and related costs, judgments, and any other costs, fees
and expenses that the Indemnified Party may sustain in connection with this
Agreement (including, without limitation, reasonable fees and disbursements of
counsel incurred by the Indemnified Party in any action or proceeding between
the Indemnifying Party and the Indemnified Party or between the Indemnified
Party and any third party or otherwise) related to each such Indemnifying
Party's respective willful misconduct, bad faith, fraud and/or negligence in
the performance of each of its respective duties hereunder or by reason of
reckless disregard of its respective obligations and duties hereunder
(including in the case of the Servicer, any agent of the Servicer or
subservicer).
(d) The Trust Fund shall indemnify each Indemnified Party
from, and hold it harmless against, any and all losses, liabilities, damages,
claims or unanticipated expenses (including, without limitation, reasonable
fees and disbursements of counsel incurred by the Indemnified Party in any
action or proceeding between the Indemnifying Party and the Indemnified Party
or between the Indemnified Party and any third party or otherwise) arising in
respect of this Agreement or the Certificates, in each case to the extent and
only to the extent, such payments are expressly reimbursable under this
Agreement or are "unanticipated expenses incurred by the REMIC" within the
meaning of Treasury Regulations Section 1.860G-1(b)(3)(iii), other than (i)
those resulting from the negligence, fraud, bad faith or willful misconduct of
the Indemnified Party and (ii) those as to which such Indemnified Party is
entitled to indemnification pursuant to Section 8.05(c). The term
"unanticipated expenses incurred by a REMIC" shall include any fees, expenses
and disbursement of any separate trustee or co-trustee appointed hereunder,
only to the extent such fees, expenses and disbursements were not reasonably
anticipated as of the Closing Date and the losses, liabilities, damages, claims
or expenses (including reasonable attorneys' fees) incurred or advanced by an
Indemnified Party in connection with any litigation arising out of this
Agreement, including, without limitation, under Section 2.03, Section 3.10, the
third paragraph of Section 3.11, Section 4.05 and Section 7.01. The right of
reimbursement of the Indemnified Parties under this Section 8.05(d) shall be
senior to the rights of all Certificateholders.
(e) Notwithstanding anything herein to the contrary, this
Section 8.05 shall survive the termination or maturity of this Agreement or the
resignation or removal of the Trustee or the Fiscal Agent, as the case may be,
as regards rights accrued prior to such resignation or removal and (with
respect to any acts or omissions during their respective tenures) the
resignation, removal or termination of the Servicer, the Special Servicer, the
Paying Agent, the Certificate Registrar or the Custodian.
(f) This Section 8.05 shall be expressly construed to
include, but not be limited to, such indemnities, compensation, expenses,
disbursements, advances, losses, liabilities, damages and the like, as may
pertain or relate to any environmental law or environmental matter.
SECTION 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or
association organized and doing business under the laws of any state or the
United States of America, authorized under such laws to exercise corporate
trust powers and to accept the trust conferred under this Agreement, having a
combined capital and surplus of at least $50,000,000 and a rating on its
unsecured long-term debt of at least "BBB" by Fitch and DCR, S&P and "Baa2" by
Moody's (or at any time when there is no Fiscal Agent appointed and acting
hereunder or any such Fiscal Agent so appointed has a rating on its long-term
unsecured debt that is lower than "AA" by Fitch and S&P and "Aa2" by Moody's
(without regard to any plus or minus or numeric qualifier) the rating on the
unsecured long term debt of the Trustee must be at least "AA" by Fitch and DCR,
S&P and "Aa2" by Moody's, or meet different standards provided that each Rating
Agency shall have confirmed in writing that such different standards would not,
in and of itself, result in a downgrade, qualification or withdrawal of the
then current ratings assigned to the Certificates) and subject to supervision
or examination by federal or state authority and shall not be an Affiliate of
the Servicer (except during any period when the Trustee has assumed the duties
of the Servicer pursuant to Section 7.02); provided that, notwithstanding that
the long-term unsecured debt of LaSalle National Bank and ABN AMRO Bank N.V.
are not rated by DCR and Fitch, LaSalle National Bank shall not fail to qualify
as Trustee solely by virtue of the lack of such ratings until such time as
Fitch or DCR shall notify the Trustee, the Servicer and the Special Servicer in
writing that LaSalle National Bank is no longer exempt from the foregoing
rating requirements imposed by this sentence. If a corporation or association
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for
purposes 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 the event that the place of
business from which the Trustee administers the Trust Fund is a state or local
jurisdiction that imposes a tax on the Trust Fund or the net income of a REMIC
(other than a tax corresponding to a tax imposed under the REMIC Provisions)
the Trustee shall elect either to (i) resign immediately in the manner and with
the effect specified in Section 8.07, (ii) pay such tax and continue as Trustee
or (iii) administer the Trust Fund from a state and local jurisdiction that
does not impose such a tax. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 8.07.
SECTION 8.07. Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice thereof to the Depositor, the
Servicer and each Rating Agency. Upon such notice of resignation, the Fiscal
Agent shall also be deemed to have been removed and, accordingly, the Servicer
shall promptly appoint a successor Trustee, the appointment of which would not,
as evidenced in writing, in and of itself, result in a downgrade, qualification
or withdrawal of the then current ratings assigned to the Certificates, and a
successor Fiscal Agent (if necessary to satisfy the requirements contained in
Section 8.06), the appointment of which, if the successor Trustee is not rated
by each Rating Agency in one of its two highest long-term debt rating
categories, would not, as evidenced in writing, in and of itself, result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
the Certificates), by written instrument, in triplicate, which instrument shall
be delivered to the resigning Trustee, with a copy to the Fiscal Agent deemed
removed, and the successor Trustee and successor Fiscal Agent. If no successor
Trustee and successor Fiscal Agent shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee and the Fiscal Agent may petition any court
of competent jurisdiction for the appointment of a successor Trustee and
successor Fiscal Agent.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 and shall fail to resign after
written request therefor by the Depositor or Servicer, 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 upon a confirmation in writing by any Rating Agency that not
terminating the Trustee, or the Fiscal Agent, as applicable, would, in and of
itself, cause the then-current rating assigned to any class of Certificates to
be qualified, withdrawn or downgraded, then the Depositor or the Servicer may
remove the Trustee and the Fiscal Agent and the Servicer shall promptly appoint
a successor Trustee and successor Fiscal Agent by written instrument, which
shall be delivered to the Trustee and the Fiscal Agent so removed and to the
successor Trustee and the successor Fiscal Agent.
The Holders of Certificates entitled to at least 50% of the
Voting Rights may at any time remove the Trustee and the Fiscal Agent (and any
removal of the Trustee shall be deemed to be a removal also of the Fiscal
Agent) and appoint a successor Trustee and successor Fiscal Agent by written
instrument or instruments, in seven originals, signed by such Holders or their
attorneys-in-fact duly authorized, one complete set of which instruments shall
be delivered to the Depositor, one complete set to the Servicer, one complete
set to the Trustee so removed, one complete set to the Fiscal Agent deemed
removed, one complete set to the successor Trustee so appointed and one
complete set to the successor Fiscal Agent so appointed.
In the event of removal of the Trustee the Fiscal Agent shall
be deemed to have been removed.
In the event that the Trustee or Fiscal Agent is terminated
or removed pursuant to this Section 8.07, all of its rights and obligations
under this Agreement and in and to the Mortgage Loans shall be terminated,
other than any rights or obligations that accrued prior to the date of such
termination or removal (including the right to receive all fees, expenses and
other amounts accrued or owing to it under this Agreement, plus interest at the
Advance Rate on all such amounts until received to the extent such amounts bear
interest as provided in this Agreement, with respect to periods prior to the
date of such termination or removal).
Any resignation or removal of the Trustee and Fiscal Agent
and appointment of a successor Trustee and, if such trustee is not rated by
each Rating Agency in one of its two highest long-term debt rating categories,
a successor Fiscal Agent pursuant to any of the provisions of this Section 8.07
shall not become effective until acceptance of appointment by the successor
Trustee and, if necessary, successor Fiscal Agent as provided in Section 8.08.
SECTION 8.08. Successor Trustee and Fiscal Agent.
(a) Any successor Trustee and any successor Fiscal Agent
appointed as provided in Section 8.07 shall execute, acknowledge and deliver to
the Depositor, the Servicer and to the predecessor Trustee and predecessor
Fiscal Agent, as the case may be, instruments accepting their appointment
hereunder, and thereupon the resignation or removal of the predecessor Trustee
and predecessor Fiscal Agent shall become effective and such successor Trustee
and successor Fiscal Agent, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as Trustee
or Fiscal Agent herein, provided that the appointment of such successor Trustee
and successor Fiscal Agent shall not, as evidenced in writing, result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
the Certificates. The predecessor Trustee shall deliver to the successor
Trustee all Mortgage Files and related documents and statements held by it
hereunder, and the Depositor and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for more fully and certainly vesting and confirming in the successor Trustee
all such rights, powers, duties and obligations. No successor Trustee shall
accept appointment as provided in this Section 8.08 unless at the time of such
acceptance such successor Trustee shall be eligible under the provisions of
Section 8.06.
Upon acceptance of appointment by a successor Trustee as
provided in this Section 8.08, the Depositor 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 Depositor fails to mail
such notice within 10 days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be mailed at the
expense of the Depositor.
(b) Any successor Trustee or Fiscal Agent appointed pursuant
to this Agreement shall satisfy the eligibility requirements set forth in
Section 8.06 hereof.
SECTION 8.09. Merger or Consolidation of Trustee.
Any corporation into which the 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 Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided that such corporation shall be eligible under the
provisions of Section 8.06, 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 8.10. Appointment of Co-Trustee or
Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Fund or property securing the same may at the time be
located, the Depositor 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 (at the expense of the Trustee) 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, such title to the Trust Fund, or any part thereof,
and, subject to the other provisions of this Section 8.10, such powers, duties,
obligations, rights and trusts as the Depositor and the Trustee may consider
necessary or desirable. If the Depositor shall not have joined in such
appointment within 15 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. Except as required by
applicable law, the appointment of a co-trustee or separate trustee shall not
relieve the Trustee of its responsibilities, obligations and liabilities
hereunder. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor Trustee under Section 8.06
hereunder and no notice to Holders of Certificates of the appointment of
co-trustee(s) or separate trustee(s) shall be required under Section 8.08
hereof.
In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10, 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 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 by
such separate trustee or co-trustee solely at the direction of the Trustee.
No trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement. The
Depositor and the Trustee acting jointly may at any time accept the resignation
of or remove any separate trustee or co-trustee, or if the separate trustee or
co-trustee is an employee of the Trustee, the Trustee acting alone may accept
the resignation of or remove any separate trustee or co-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 VIII. Every such instrument shall be filed with
the Trustee. 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. In no event shall any such separate trustee or co-trustee be entitled
to any provision relating to the conduct of affecting the liability of or
affording protection to such separate trustee or co-trustee that imposes a
standard of conduct less stringent than that imposed by the Trustee hereunder,
affording greater protection than that afforded to the Trustee hereunder or
providing a greater limit on liability than that provided to the Trustee
hereunder.
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 8.11. Fiscal Agent Appointed; Concerning
the Fiscal Agent.
(a) The Trustee hereby appoints ABN AMRO Bank N.V. as the
initial Fiscal Agent hereunder for the purposes of exercising and performing
the obligations and duties imposed upon the Fiscal Agent by Sections 3.24 and
4.06.
(b) The Fiscal Agent undertakes to perform such duties and
only such duties as are specifically set forth in Sections 3.24 and 4.06.
(c) No provision of this Agreement shall be construed to
relieve the Fiscal Agent from liability for its own negligent failure to act or
its own willful misfeasance or for a breach of a representation or warranty
contained herein; provided, however, that (i) the duties and obligations of the
Fiscal Agent shall be determined solely by the express provisions of Sections
3.24 and 4.06, the Fiscal Agent shall not be liable except for the performance
of such duties and obligations, no implied covenants or obligations shall be
read into this Agreement against the Fiscal Agent and, in the absence of bad
faith on the part of the Fiscal Agent, the Fiscal Agent may conclusively rely,
as to the truth and correctness of the statements or conclusions expressed
therein, upon any resolutions, certificates, statements, opinions, reports,
documents, orders or other instruments furnished to the Fiscal Agent by the
Depositor, the Servicer, the Special Servicer or the Trustee and which on their
face do not contradict the requirements of this Agreement, and (ii) the
provisions of clause (ii) of Section 8.01(c) shall apply to the Fiscal Agent.
(d) Except as otherwise provided in Section 8.11(c), the
Fiscal Agent also shall have the benefit of provisions of clauses (i), (ii),
(iii) (other than the proviso thereto), (iv), (v) (other than the proviso
thereto) and (vi) of Section 8.02(a).
<PAGE>
ARTICLE IX
TERMINATION
SECTION 9.01. Termination.
(a) The respective obligations and responsibilities of the
Servicer, the Special Servicer, the Depositor, the Trustee and the Fiscal Agent
created hereby with respect to the Certificates (other than the obligation to
make certain payments and to send certain notices to Certificateholders as
hereinafter set forth) shall terminate immediately following the occurrence of
the last action required to be taken by the Trustee pursuant to this Article IX
on the Termination Date; provided, however, that in no event shall the trust
created hereby continue beyond the expiration of twenty-one years from the
death of the last survivor of the descendants of Joseph P. Kennedy, the late
Ambassador of the United States to the United Kingdom, living on the date
hereof.
(b) The Trust Fund, the Upper-Tier REMIC and the Lower-Tier
REMIC shall be terminated and the assets of the Trust Fund shall be sold or
otherwise disposed of in connection therewith, only pursuant to a "plan of
complete liquidation" within the meaning of Code Section 860F(a)(4)(A)
providing for the actions contemplated by the provisions hereof pursuant to
which the applicable Notice of Termination is given and requiring that the
Trust Fund, the Upper-Tier REMIC and the Lower-Tier REMIC shall terminate on a
Distribution Date occurring not more than 90 days following the date of
adoption of the plan of complete liquidation. For purposes of this Section
9.01(b), the Notice of Termination given pursuant to Section 9.01(c) shall
constitute the adoption of the plan of complete liquidation as of the date such
notice is given, which date shall be specified by the Servicer in the final
federal income tax returns of the Upper-Tier REMIC and the Lower-Tier REMIC.
(c) Any holder of a Class LR Certificate representing greater
than a 50% Percentage Interest in such Class may effect an early termination of
the Trust Fund, upon not less than 30 days' prior Notice of Termination given
to the Trustee and Servicer any time on or after the Early Termination Notice
Date specifying the Anticipated Termination Date, by purchasing on such date
all, but not less than all, of the Mortgage Loans then included in the Trust
Fund, and all property acquired in respect of any Mortgage Loan, at a purchase
price, payable in cash, equal to not less than the greater of:
(i) the sum of
(A) 100% of the unpaid principal balance of each
Mortgage Loan included in the Trust Fund as of the
last day of the month preceding such Distribution
Date (less any P&I Advances previously made on
account of principal);
(B) the fair market value of all other property included
in the Trust Fund as of the last day of the month
preceding such Distribution Date, as determined by
an Independent appraiser acceptable to the Servicer
as of the date not more than 30 days prior to the
last day of the month preceding such Distribution
Date;
(C) all unpaid interest accrued on such principal
balance of each such Mortgage Loan (including for
this purpose any Mortgage Loan as to which title to
the related Mortgaged Property has been acquired) at
the Mortgage Rate (plus the Excess Rate, to the
extent applicable), to the last day of the month
preceding such Distribution Date (less any P&I
Advances previously made on account of interest);
(D) the aggregate amount of unreimbursed Advances, with
interest thereon at the Advance Rate, and unpaid
Servicing Compensation, Special Servicing
Compensation, Trustee Fees and Trust Fund expenses;
and
(ii) the aggregate fair market value of the Mortgage
Loans, and all other property acquired in respect of
any Mortgage Loan in the Trust Fund, on the last day
of the month preceding such Distribution Date, as
determined by an Independent appraiser acceptable to
the Servicer as of a date not more than 30 days
prior to the last day of the month preceding such
Distribution Date, together with one month's
interest thereon at the Mortgage Rate.
The Servicer or the Depositor may also effect such
termination as provided above if it first notifies each Holder of a Class LR
Certificate through the Trustee of its intention to do so in writing at least
30 days prior to the Early Termination Notice Date and no Class LR Holder
terminates the Trust Fund as described above within such 30-day period. All
costs and expenses incurred by any and all parties to this Agreement or by the
Trust Fund in connection with the purchase of the Mortgage Loans and other
assets of the Trust Fund pursuant to this Section 9.01(c) shall be borne by the
party exercising its purchase rights hereunder. The Trustee shall be entitled
to rely conclusively on any determination made by an Independent appraiser
pursuant to this subsection (c).
Anything in this Section 9.01 to the contrary
notwithstanding, the holders of the Class V-1 Certificates shall receive that
portion of the proceeds of a sale of the assets of the Trust Fund allocable to
the Net Default Interest, as their interests may appear, and the holders of the
Class V-2 Certificates shall receive that portion of the proceeds of a sale of
the assets of the Trust Fund allocable to Excess Interest, as their interests
may appear.
(d) If the Trust Fund has not been previously terminated
pursuant to subsection (c) of this Section 9.01, the Trustee shall determine as
soon as practicable the Distribution Date on which the Trustee reasonably
anticipates, based on information with respect to the Mortgage Loans previously
provided to it, that the final distribution will be made (i) to the Holders of
outstanding Regular Certificates, and to the Trustee in respect of the
Lower-Tier Regular Interests notwithstanding that such distribution may be
insufficient to distribute in full the Certificate Balance of each Certificate
or Lower-Tier Regular Interest, together with amounts required to be
distributed on such Distribution Date pursuant to Section 4.01(a), (b), (c) or
(d) or (ii) if no such Classes of Certificates are then outstanding, to the
Holders of the Class LR Certificates of any amount remaining in the Collection
Account or the Distribution Account and to the Holders of the Class R
Certificates of any amount remaining in the Upper-Tier Distribution Account, in
either case, following the later to occur of (A) the receipt or collection of
the last payment due on any Mortgage Loan included in the Trust Fund or (B) the
liquidation or disposition pursuant to Section 3.18 of the last asset held by
the Trust Fund.
(e) Notice of any termination of the Trust Fund pursuant to
this Section 9.01 shall be mailed by the Trustee to affected Certificateholders
with a copy to the Servicer and each Rating Agency at their addresses shown in
the Certificate Registrar as soon as practicable after the Trustee shall have
received, given or been deemed to have received a Notice of Termination but in
any event not more than thirty days, and not less than ten days, prior to the
Anticipated Termination Date. The notice mailed by the Trustee to affected
Certificateholders shall:
(i) specify the Anticipated Termination Date on which the
final distribution is anticipated to be made to Holders of
Certificates of the Classes specified therein;
(ii) specify the amount of any such final distribution, if
known; and
(iii) state that the final distribution to Certificateholders
will be made only upon presentation and surrender of
Certificates at the office of the Paying Agent therein
specified.
If the Trust Fund is not terminated on any Anticipated Termination Date for any
reason, the Trustee shall promptly mail notice thereof to each affected
Certificateholder.
(f) Any funds not distributed on the Termination Date because
of the failure of any Certificateholders to tender their Certificates shall be
set aside and held in trust for the account of the appropriate non-tendering
Certificateholders, whereupon the Trust Fund shall terminate. If any
Certificates as to which notice of the Termination Date has been given pursuant
to this Section 9.01 shall not have been surrendered for cancellation within
six months after the time specified in such notice, the Trustee shall mail a
second notice to the remaining Certificateholders, at their last addresses
shown in the Certificate Register, to surrender their Certificates for
cancellation in order to receive, from such funds held, the final distribution
with respect thereto. If within one year after the second notice any
Certificate shall not have been surrendered for cancellation, the Trustee may,
directly or through an agent, take appropriate steps to contact the remaining
Certificateholders concerning surrender of their Certificates. The costs and
expenses of maintaining such funds and of contacting Certificateholders shall
be paid out of the assets which remain held. If within two years after the
second notice any Certificates shall not have been surrendered for
cancellation, the Paying Agent shall pay to the Trustee all amounts
distributable to the Holders thereof, and the Trustee shall thereafter hold
such amounts for the benefit of such Holders until the earlier of (i) its
termination as Trustee hereunder and the transfer of such amounts to a
successor Trustee and (ii) the termination of the Trust Fund and distribution
of such amounts to the Class LR Certificateholders. No interest shall accrue or
be payable to any Certificateholder on any amount held as a result of such
Certificateholder's failure to surrender its Certificate(s) for final payment
thereof in accordance with this Section 9.01. Any such amounts transferred to
the Trustee may be invested in Permitted Investments and all income and gain
realized from investment of such funds shall be for the benefit of the Trustee.
(g) The Holder of a 100% Percentage Interest in the Class LR
Certificates may purchase any Mortgage Loan on its Anticipated Repayment Date,
if any, at a price equal to the sum of the following:
(i) 100% of the outstanding principal balance of such
Mortgage Loan on such Anticipated Repayment Date (less any
P&I Advances previously made on account of principal);
(ii) all unpaid interest accrued on such principal balance of
such Mortgage Loan at the Mortgage Rate thereof, to the last
day of the Interest Accrual Period preceding such Anticipated
Repayment Date (less any P&I Advances previously made on
account of interest);
(iii) the aggregate amount of all unreimbursed Advances with
respect to such Mortgage Loan, with interest thereon at the
Advance Rate, and unpaid Special Servicing Compensation,
Servicing Compensation, Trustee Fees and Trust Fund expenses;
and
(iv) the amount of any Liquidation Expenses incurred by the
Trust Fund in connection with such purchase;
provided, that, such Holder, at its expense, has provided the Trustee with an
opinion of counsel to the effect that such purchase would not (x) result in a
gain which would be subject to the tax on net income derived from "prohibited
transactions" imposed by Code Section 860F(a)(1) or otherwise result in the
imposition of any other tax on the Lower-Tier REMIC or the Upper-Tier REMIC
under the REMIC Provisions or (y) cause either the Upper-Tier REMIC or the
Lower-Tier REMIC to fail to qualify as a REMIC; such opinion relying upon
appraisals of the fair market value (for the purposes of Section 860F(c)(1) of
the Code) of such Mortgage Loan by at least three Independent appraisers.
Notwithstanding the foregoing, such Mortgage Loan may not be
purchased if the fair market value of the Mortgage Loan is greater than 100% of
the outstanding principal balance of such Mortgage Loan.
The Holder of 100% of the most subordinate Class of
Certificates (provided that the Class 7H Certificates shall not be considered a
Class for such purposes) may purchase any Mortgage Loan on or after its
Anticipated Repayment Date under the same terms and conditions hereunder as in
the case of a purchase by the Holder of the Class LR Certificates if the Holder
of the Class LR Certificates either (i) notifies the Holder of the most
subordinate Class of Certificates that it will not purchase such Mortgage Loan
or (ii) does not, in fact, purchase such Mortgage Loan on its Anticipated
Repayment Date.
The proceeds of any such purchase hereunder shall be
deposited in the Collection Account and disbursed as provided herein.
<PAGE>
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. Counterparts. 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 10.02. 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 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
expressly provided for herein) 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.
No Certificateholder shall have any right to institute any
suit, action or proceeding in equity or at law upon or under or with respect to
this Agreement or any Mortgage Loan, 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
representing Percentage Interests of at least 25% of each affected Class of
Certificates 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 60 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 is understood and intended, and expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates of any Class shall have any right in any
manner whatever by virtue of any provision of this Agreement to affect, disturb
or prejudice the rights of the Holders of any other of such 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 Holders of
Certificates of such Class. For the protection and enforcement of the
provisions of this Section, each and every Certificateholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.
SECTION 10.03. 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 10.04. Notices.
All demands, notices and communications hereunder shall be in
writing, shall be deemed to have been given upon receipt (except that notices
to Holders of Class B-7, Class B-7H, Class V-1, Class V-2, Class R and Class LR
Certificates or Holders of any Class of Certificates no longer held through a
Depository and instead held in registered, definitive form shall be deemed to
have been given upon being sent by first class mail, postage prepaid) as
follows:
If to the Trustee, to:
LaSalle National Bank
135 South LaSalle Street
Suite 1740
Chicago, Illinois 60603
Attention: Asset-Backed Securities
Trust Services, Nomura 1997-D4
If to the Fiscal Agent, to:
ABN AMRO Bank, N.V.
c/o LaSalle National Bank
135 South LaSalle Street
Chicago, IL 60603
Attention: Asset-Backed Securities
Trust Services, Nomura 1997-D4
<PAGE>
If to the Depositor, to:
Asset Securitization Corporation
2 World Financial Center
Building B, 21st Floor
New York, New York 10281-1198
Attention: Perry Gershon and
Sheryl McAfee
With copies to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Anna H. Glick
If to the Servicer or Special Servicer, to:
AMRESCO Management, Inc.
235 Peachtree Street
Suite 900
Atlanta, Georgia 30303
Attention: Legal Counsel
With copies to:
AMRESCO, INC.
700 N. Pearl Street
Suite 2400
Dallas, Texas 75201
Attention: General Counsel
and
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Paul T. Cohn
<PAGE>
If to the Mortgage Loan Seller, to:
Nomura Asset Capital Corporation
2 World Financial Center
Building B, 21st Floor
New York, NY 10281-1198
Attention: Perry Gershon and
Sheryl McAfee
If to any Certificateholder, to:
the address set forth in the
Certificate Register,
or, in the case of the parties to this Agreement, to such other address as such
party shall specify by written notice to the other parties hereto.
SECTION 10.05. 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, to the extent permitted by applicable law, 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.
SECTION 10.06. Notice to the Depositor and Each
Rating Agency.
(a) The Trustee shall use its best efforts to promptly
provide notice to the Depositor and each Rating Agency with respect to each of
the following of which a Responsible Officer of the Trustee has actual
knowledge:
(i) any material change or amendment to this Agreement;
(ii) the occurrence of any Event of Default that has not been
cured;
(iii) the merger, consolidation, resignation or termination
of the Servicer, Special Servicer, the Trustee or Fiscal
Agent;
(iv) the repurchase of Mortgage Loans pursuant to Section
2.03(d) or 2.03(e);
(v) the final payment to any Class of Certificateholders;
(vi) any change in the location of the Collection Account or
the Distribution Account;
(vii) any event that would result in the voluntary or
involuntary termination of any insurance of the accounts of
the Servicer;
(viii) each report to Certificateholders described in Section
4.02 and Section 3.22;
(ix) any change in the lien priority of a Mortgage Loan;
(x) any new lease of an anchor or a termination of an anchor
lease at a retail Mortgaged Property;
(xi) any termination of licensing certification at a
Mortgaged Property securing a Senior Housing/Healthcare Loan;
(xii) any material damage to a Mortgaged Property; and
(xiii) any amendment, modification, consent or waiver to or
of any provision of a Mortgage Loan.
(b) The Servicer shall promptly furnish to each Rating Agency
copies of the following:
(i) each of its annual statements as to compliance described
in Section 3.14;
(ii) each of its annual independent public accountants'
servicing reports described in Section 3.15; and
(iii) a copy of each rent roll and each operating and other
financial statement and occupancy reports, to the extent such
information is required to be delivered under a Mortgage
Loan, in each case to the extent collected pursuant to
Section 3.03. However, with respect to DCR, the Servicer
shall provide only the annual statements or reports.
(c) The Servicer shall furnish each Rating Agency and the
Depositor with such information with respect to the Trust Fund, a Mortgaged
Property, a Borrower and a non-performing or Specially Serviced Mortgage Loan
as such Rating Agency or the Depositor shall reasonably request and which the
Servicer can reasonably obtain. The Rating Agencies shall not be charged any
fee or expense in connection therewith. The Servicer shall send copies to the
Depositor of any information provided to any Rating Agency.
<PAGE>
(d) Notices to each Rating Agency shall be
addressed as follows:
Duff & Phelps Credit Rating Co.
55 E. Monroe Street, 35th Floor
Chicago, Illinois 60603
Attention: Structured Finance -
Commercial Real Estate Monitoring
Fitch Investors Service, L.P.
One State Street Plaza
New York, New York 10004
Attention: Commercial Mortgage Surveillance
Moody's Investor Services, Inc.
99 Church Street
New York, New York 10007
Attention: Managing Director
Commercial Mortgage-Backed Securities
Standard & Poor's Rating Services
26 Broadway
New York, New York 10004
Attention: Commercial Mortgage Surveillance
or in each case to such other address as either Rating Agency shall specify by
written notice to the parties hereto.
SECTION 10.07. Amendment.
This Agreement or any Custodial Agreement may be amended from
time to time by the Depositor, the Servicer, the Special Servicer, the Trustee
and the Fiscal Agent, without the consent of any of the Certificateholders, (i)
to cure any ambiguity, (ii) to correct or supplement any provisions herein or
therein that may be defective or inconsistent with any other provisions herein
or therein, (iii) to amend any provision hereof to the extent necessary or
desirable to maintain the rating or ratings assigned to each of the Classes of
Regular Certificates by each Rating Agency, (iv) to amend or supplement any
provisions herein or therein that shall not adversely affect in any material
respect the interests of any Certificateholder not consenting thereto, as
evidenced in writing by an Opinion of Counsel, at the expense of the party
requesting such amendment or confirmation in writing from each Rating Agency
that such amendment or supplement will not result in a qualification,
withdrawal or downgrading of the then-current ratings assigned to the
Certificates, or (v) to make any other provisions with respect to matters or
questions arising under this Agreement, which shall not be inconsistent with
the provisions of this Agreement and will not result in a downgrade,
qualification or withdrawal of the then current rating or ratings then assigned
to any outstanding Class of Certificates, as confirmed by each Rating Agency in
writing.
This Agreement or any Custodial Agreement may also be amended
from time to time by the Depositor, the Servicer, the Special Servicer, the
Trustee and the Fiscal Agent with the consent of the Holders of each of the
Classes of Regular Certificates representing not less than 66-2/3% of the
Percentage Interests of each Class of Certificates affected by the amendment
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, payments received on Mortgage Loans which
are required to be distributed on any Certificate
without the consent of all the holders of all
Certificates representing all Percentage Interests
of the Class or Classes affected thereby;
(ii) change the percentages of Voting Rights of Holders
of Certificates which are required to consent to any
action or inaction under this Agreement, without the
consent of the Holders of all Certificates
representing all of the Percentage Interest of the
Class or Classes affected hereby;
(iii) alter the Servicing Standard or the obligations of
the Servicer, the Special Servicer, the Trustee or
the Fiscal Agent to make a P&I Advance or Property
Advance without the consent of the Holders of all
Certificates representing all of the Percentage
Interests of the Class or Classes affected thereby;
or
(iv) amend any section hereof which relates to the
amendment of this Agreement without the consent of
all the holders of all Certificates representing all
Percentage Interests of the Class or Classes
affected thereby.
Further, the Depositor, the Servicer, the Special Servicer,
the Trustee and the Fiscal Agent, at any time and from time to time, without
the consent of the Certificateholders, may amend this Agreement to modify,
eliminate or add to any of its provisions to such extent as shall be necessary
to maintain the qualification of the Trust REMIC as two separate REMICs, or to
prevent the imposition of any additional material state or local taxes, at all
times that any Certificates are outstanding; provided, however, that such
action, as evidenced by an Opinion of Counsel (obtained at the expense of the
Trust Fund), is necessary or helpful to maintain such qualification or to
prevent the imposition of any such taxes, and would not adversely affect in any
material respect the interest of any Certificateholder.
In the event that neither the Depositor nor any successor
thereto, if any, is in existence, any amendment under this Section 10.07 shall
be effective with the consent of the Trustee, the Fiscal Agent, and the
Servicer, in writing, and to the extent required by this Section, the
Certificateholders. Promptly after the execution of any amendment, the Servicer
shall forward to the Trustee and the Trustee shall furnish written notification
of the substance of such amendment to each Certificateholder and each Rating
Agency.
It shall not be necessary for the consent of
Certificateholders under this Section 10.07 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall
approve the substance thereof. The method of obtaining such consents and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable regulations as the Trustee may prescribe;
provided, however, that such method shall always be by affirmation and in
writing.
Notwithstanding any contrary provision of this Agreement, no
amendment shall be made to this Agreement or any Custodial Agreement unless, if
requested by the Servicer and/or the Trustee, the Servicer and the Trustee
shall have received an Opinion of Counsel, at the expense of the party
requesting such amendment (or, if such amendment is required by either Rating
Agency to maintain the rating issued by it or requested by the Trustee for any
purpose described in clause (i) or (ii) of the first sentence of this Section,
then at the expense of the Trust Fund), to the effect that such amendment will
not cause either the Upper-Tier REMIC or Lower-Tier REMIC to fail to qualify as
a REMIC at any time that any Certificates are outstanding or cause a tax to be
imposed on the Trust Fund under the REMIC Provisions (other than a tax at the
highest marginal corporate tax rate on net income from foreclosure property).
Prior to the execution of any amendment to this Agreement or
any Custodial Agreement, the Trustee, the Fiscal Agent, the Special Servicer
and the Servicer may request and shall be entitled to rely conclusively upon an
Opinion of Counsel, at the expense of the party requesting such amendment (or,
if such amendment is required by either Rating Agency to maintain the rating
issued by it or requested by the Trustee for any purpose described in clause
(i), (ii), (iii) or (v) (which do not modify or otherwise relate solely to the
obligations, duties or rights of the Trustee) of the first sentence of this
Section, then at the expense of the Trust Fund) stating that the execution of
such amendment is authorized or permitted by this Agreement. The Trustee and
the Fiscal Agent may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's or the Fiscal Agent's own rights, duties
or immunities under this Agreement.
SECTION 10.08. Confirmation of Intent.
It is the express intent of the parties hereto that the
conveyance of the Trust Fund (including the Mortgage Loans) by the Depositor to
the Trustee on behalf of Certificateholders as contemplated by this Agreement
and the sale by the Depositor of the Certificates be, and be treated for all
purposes as, a sale by the Depositor of the undivided portion of the beneficial
interest in the Trust Fund represented by the Certificates. It is, further, not
the intention of the parties that such conveyance be deemed a pledge of the
Trust Fund by the Depositor to the Trustee to secure a debt or other obligation
of the Depositor. However, in the event that, notwithstanding the intent of the
parties, the Trust Fund is held to continue to be property of the Depositor
then (a) this Agreement shall also be deemed to be a security agreement under
applicable law; (b) the transfer of the Trust Fund provided for herein shall be
deemed to be a grant by the Depositor to the Trustee on behalf of
Certificateholders of a first priority security interest in all of the
Depositor's right, title and interest in and to the Trust Fund and all amounts
payable to the holders of the Mortgage Loans in accordance with the terms
thereof and all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, instruments, securities or other property, including,
without limitation, all amounts from time to time held or invested in the
Collection Account, the Distribution Account, Upper-Tier Account, Default
Interest Distribution Account and Excess Interest Distribution Account, whether
in the form of cash, instruments, securities or other property; (c) the
possession by the Trustee (or the Custodian on its behalf) of Notes and such
other items of property as constitute instruments, money, negotiable documents
or chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
Delaware and Illinois Uniform Commercial Code; and (d) notifications to Persons
holding such property, and acknowledgments, receipts or confirmations from
Persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Trustee for the purpose of perfecting
such security interest under applicable law. Any assignment of the interest of
the Trustee pursuant to any provision hereof shall also be deemed to be an
assignment of any security interest created hereby. The Depositor shall, and
upon the request of the Servicer, the Trustee shall, to the extent consistent
with this Agreement (and at the expense of the Trust Fund), take such actions
as may be necessary to ensure that, if this Agreement were deemed to create a
security interest in the Mortgage Loans, such security interest would be deemed
to be a perfected security interest of first priority under applicable law and
will be maintained as such throughout the term of this Agreement. It is the
intent of the parties that such a security interest would be effective whether
any of the Certificates are sold, pledged or assigned.
SECTION 10.09. Streit Act.
Any provisions required to be contained in this Agreement by
Section 126 and/or Section 130-k or Article 4-A of the New York Real Property
Law are hereby incorporated herein, and such provisions shall be in addition to
those conferred or imposed by this Agreement; provided, however, that to the
extent that such Section 126 and/or Section 130-k shall not have any effect,
and if said Section 126 and/or Section 130-k should at any time be repealed or
cease to apply to this Agreement or be construed by judicial decision to be
inapplicable, said Section 126 and/or Section 130-k shall cease to have any
further effect upon the provisions of this Agreement. In case of a conflict
between the provisions of this Agreement and any mandatory provisions of
Article 4-A of the New York Real Property Law, such mandatory provisions of
said Article 4-A shall prevail, provided that if said Article 4-A shall not
apply to this Agreement, should at any time be repealed, or cease to apply to
this Agreement or be construed by judicial decision to be inapplicable, such
mandatory provisions of such Article 4-A shall cease to have any further effect
upon the provisions of this Agreement.
SECTION 10.10. No Intended Third-Party Beneficiaries.
No Person other than a party to this Agreement and any
Certificateholder shall have any rights with respect to the enforcement of any
of the rights or obligations hereunder. Without limiting the foregoing, the
parties to this Agreement specifically state that no Borrower, property manager
or other party to a Mortgage Loan is an intended third-party beneficiary of
this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Servicer, the Special
Servicer, the Trustee and the Fiscal Agent 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.
Signed and acknowledged ASSET SECURITIZATION
in the presence of: CORPORATION,
_____________________________ as Depositor
Print Name:
By:_____________________________
_____________________________ Name:
Print Name: Title:
Signed and acknowledged AMRESCO MANAGEMENT, INC.
in the presence of as Servicer and Special Servicer
_____________________________ By:_____________________________
Print Name: Name:
Title:
_____________________________
Print Name:
Signed and acknowledged LASALLE NATIONAL BANK,
in the presence of: as Trustee, Custodian, Certificate
Registrar and Paying Agent
_____________________________
Print Name:
By:_____________________________
_____________________________ Name:
Print Name: Title:
ABN AMRO BANK N.V., ABN AMRO BANK N.V.,
as Fiscal Agent as Fiscal Agent
By:__________________________ By:__________________________
Name: Name:
Title: Title:
Acknowledged by
Nomura Securities
International,
Inc., solely with
respect to Section
3.07 and Section
5.02(l)
By:__________________________
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK)
On this ____ day of March, 1997, before me, the undersigned,
a Notary Public in and for the State of New York, duly commissioned and sworn,
personally appeared ___________, to me known who, by me duly sworn, did depose
and acknowledge before me and say that s/he resides at Two World Financial
Center, New York, New York; that s/he is the _____________ of ASSET
SECURITIZATION CORPORATION, a Delaware corporation, the corporation described
in and that executed the foregoing instrument; and that s/he signed her/his
name thereto under authority of the board of directors of said corporation and
on behalf of such corporation.
WITNESS my hand and seal hereto affixed the day and year
first above written.
------------------------------
NOTARY PUBLIC in and for the
State of New York.
My Commission expires:
(stamp)
(seal)
This instrument prepared by:
- ---------------------------
Name: Daniel Vinson
Address: 100 Maiden Lane
New York, New York 10038
<PAGE>
STATE OF __________ )
) ss:
COUNTY OF ________ )
On this ____ day of March, 1997, before me, the undersigned,
a Notary Public in and for the State of _______, duly commissioned and sworn,
personally appeared _____________________, to me known who, by me duly sworn,
did depose and acknowledge before me and say that s/he resides at
is the ____________________ of AMRESCO Management, Inc., the corporation
described in and that executed the foregoing instrument; and that he/she signed
his/her name thereto under authority of the board of directors of said
corporation and on behalf of such corporation.
WITNESS my hand and seal hereto affixed the day and year
first above written.
------------------------------
NOTARY PUBLIC in and for the
State of ___________________
My Commission expires:
(stamp)
(seal)
This instrument prepared by:
- ---------------------------
Name: Daniel Vinson
Address: 100 Maiden Lane
New York, New York 10038
<PAGE>
STATE OF )
) ss:
COUNTY OF )
On this ____ day of March, 1997, before me, the undersigned,
a Notary Public in and for the State of ________, duly commissioned and sworn,
personally appeared _____________________, to me known who, by me duly sworn,
did depose and acknowledge before me and say that he resides at
___________________________; that he is a _________ of LASALLE NATIONAL BANK, a
nationally chartered bank, the corporation described in and that executed the
foregoing instrument; and that he signed his name thereto under authority of
the board of directors of said corporation and on behalf of such corporation.
WITNESS my hand and seal hereto affixed the day and year
first above written.
------------------------------
NOTARY PUBLIC in and for
the State of __________
My Commission expires:
(stamp)
(seal)
This instrument prepared by:
- ---------------------------
Name: Daniel Vinson
Address: 100 Maiden Lane
New York, New York 10038
<PAGE>
STATE OF )
) ss:
COUNTY OF )
On this ____ day of __________, 1997, before me, the
undersigned, a Notary Public in and for the State of _______, duly commissioned
and sworn, personally appeared _____________, to me known who, by me duly
sworn, did depose and acknowledge before me and say that s/he resides at
_____________, _____________, ______; that s/he is a _____________ of ABN AMRO
BANK N.V., a nationally chartered bank, the corporation described in and that
executed the foregoing instrument; and that s/he signed her/his name thereto
under authority of the board of directors of said corporation and on behalf of
such corporation.
WITNESS my hand and seal hereto affixed the day and year
first above written.
------------------------------
NOTARY PUBLIC in and for
the State of ________
My Commission expires:
(stamp)
(seal)
This instrument prepared by:
- ---------------------------
Name: Daniel Vinson
Address: 100 Maiden Lane
New York, New York 10038
