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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 20, 1998
REGISTRATION NO. 333-47641
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT ON FORM S-11*
UNDER THE SECURITIES ACT OF 1933
----------------
UNION PLANTERS MORTGAGE FINANCE CORP.
(Registrant)
(Exact name of registrant as specified in its charter)
DELAWARE
(State of Incorporation)
62-1712370
----------
(I.R.S. Employer Identification Number)
7130 GOODLETT FARMS PARKWAY
CORDOVA, TENNESSEE 38018
(901) 580-6000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------------------
<TABLE>
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JAMES K. PLUNKETT Copy to:
VICE PRESIDENT AND SECRETARY KEVIN J. BUCKLEY, ESQUIRE
7130 GOODLETT FARMS PARKWAY HUNTON & WILLIAMS
CORDOVA, TENNESSEE 38018 RIVERFRONT PLAZA, EAST TOWER
(901) 580-6543 951 EAST BYRD STREET
(901) 580-6923 (FAX) RICHMOND, VIRGINIA 23219-4074
(Name, address, including zip code and telephone (804) 788-8616
number, including area code, of agent for service) (804) 788-8218 (FAX)
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE
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================================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED(1) PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
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Mortgage Pass-Through Certificates $100,000,000 100% $100,000,000 $29,500 (2)
and Collateralized Mortgage Bonds
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(1) Estimated solely for calculating the registration fee.
(2) Previously paid on February 27, 1998, as a component portion of the fee paid
in connection with the joint shelf Registration Statement on Form S-3 (No.
333-35471) and Form S-11 (No. 333-47641) in the aggregate principal amount of
$900,000,000, of which $100,000,000 is allocated hereto. Pursuant to Rule 429,
Registrant may reallocate a portion of the amount of the Securities registered
under either of the above-mentioned Registration Statements to the other
Registration Statement.
--------------------------
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 THE REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- ----------------
* THE ORIGINAL FILING OF THIS REGISTRATION STATEMENT WAS MADE ON MARCH
10, 1998 AS A JOINT FORM S-3/FORM S-11 REGISTRATION STATEMENT. THE REGISTRATION
STATEMENT ON FORM S-3 TO WHICH THE ORIGINAL FILING RELATED HAS A COMMISSION FILE
NO. OF 333-35471.
<PAGE> 2
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 this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE> 3
CROSS REFERENCE SHEET
PURSUANT TO RULE 501(A) OF REGULATION S-K
<TABLE>
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ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS
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1. Forepart of Registration
Statement and Outside Front Forepart of Registration Statement and
Cover Page of Prospectus................................. Outside Front Cover Page**
2. Inside Front and Outside Back
Cover Pages of Prospectus................................ Inside Cover Page; Outside Back Cover
Page**
3. Summary Information, Risk
Factors and Ratio of Earnings Summary of Prospectus; Risk Factors;
to Fixed Charges......................................... The Depositor**
4. Determination of Offering
Price.................................................... *
5. Dilution................................................. *
6. Selling Security Holders................................. *
7. Plan of Distribution..................................... Plan of Distribution**
8. Use of Proceeds.......................................... Use of Proceeds
9. Selected Financial Data.................................. *
10. Management's Discussion and
Analysis of Financial
Condition and Results of
Operations............................................... *
11. General Information as to Summary of Prospectus; The Depositor;
Registrant............................................... Description of the Trust Funds
12. Policy With Respect to Certain Summary of Prospectus; The Depositor;
Activities............................................... Description of the Offered Securities
13. Investment Policies of Summary of Prospectus; Description of
Registrant............................................... the Trust Funds; Description of the
Offered Securities; Insurance Policies
on the Mortgage Loans
14. Description of Real Estate............................... Summary of Prospectus; Description of
the Trust Funds**
15. Operating Data........................................... *
16. Tax Treatment of Registrant Summary of Prospectus; Federal Income
and its Security Holders................................. Tax Consequences
17. Market Price of and Dividends
on the Registrant's Common
Equity and Related Shareholder
Matters.................................................. *
</TABLE>
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<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS
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18. Description of Registrant's Outside Front Cover Page; Summary of
Securities............................................... Prospectus; Yield Considerations;
Description of the Offered Securities;
Description of Credit Support**
19. Legal Proceedings........................................ The Depositor
20. Security Ownership of Certain
Beneficial Owners and
Management............................................... The Depositor
21. Directors and Executive
Officers................................................. The Depositor
22. Executive Compensation................................... The Depositor
23. Certain Relationships and
Related Transactions..................................... The Depositor
24. Selection, Management and
Custody of Registrant's Outside Front Cover Page; Summary of
Investments.............................................. Prospectus Summary; Description of the
Trust Funds; Description of the
Agreements; Insurance Policies on the
Mortgage Loans; Certain Legal Aspects
of Mortgage Loans
25. Policies With Respect to
Certain Transactions..................................... *
26. Limitations of Liability................................. Description of the Agreements
27. Financial Statements and
Information.............................................. The Depositor
28. Interests of Named Experts and
Counsel.................................................. Legal Matters; Experts
29. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities........................... [See Item 37(c)]*
30. Quantitative and
Qualitative Disclosures
About Market Risk........................................ *
</TABLE>
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* Answer negative or item inapplicable
** To be completed from time to time by Prospectus Supplement
<PAGE> 5
PROSPECTUS
MORTGAGE PASS-THROUGH CERTIFICATES
COLLATERALIZED MORTGAGE BONDS
(Issuable in Series)
UNION PLANTERS MORTGAGE FINANCE CORP.
Depositor
The Certificates and the Bonds (collectively, the "Securities") offered
(hereby and by Supplements to this Prospectus (together, the "Offered
Securities") will be offered from time to time in one or more series (each, a
"Series"). As specified in the related Prospectus Supplement, each Series of
Certificates will represent in the aggregate the entire beneficial ownership
interest in a trust fund (each, a "Trust Fund") consisting of one or more
segregated pools of various types of one- to four-family first lien residential
mortgage loans (the "Mortgage Loans"), mortgage pass-through certificates,
mortgage-backed securities evidencing interests in or secured by one- to
four-family first lien residential mortgage loans ("MBS"), mortgage related
securities issued or guaranteed by the United States, agencies or
instrumentalities thereof or agencies created thereby (the "Agency Securities")
or a combination of Mortgage Loans, MBS and/or Agency Securities (collectively,
"Assets"). The Trust Fund for any Series of Securities may include FHA Loans and
VA Loans (as defined herein) that are past due or non-performing as of the
related Cut-off Date. The Mortgage Loans included in the Trust Fund for any
Series may be underwritten in accordance with underwriting standards for
"non-conforming credits," which include mortgagors whose creditworthiness and
repayment ability do not satisfy Fannie Mae or Freddie Mac underwriting
guidelines. Mortgage Loans originated in accordance with underwriting standards
for non-conforming credits are also referred to as "sub-prime" loans.
Consequently, such Mortgage Loans may experience rates of delinquency and
foreclosure that are higher, and may be substantially higher, than mortgage
loans originated in accordance with Fannie Mae or Freddie Mac underwriting
guidelines. As a result, losses on such Mortgage Loans may be higher than
losses on mortgage loans originated in accordance with such guidelines, and
certain Securities collateralized by such Mortgage Loans may experience an
increased risk of loss or delay in payment. See "Risk Factors -- Underwriting
standards for certain Mortgage Loans may be less stringent and increase the
potential for delinquencies" herein. As specified in the related Prospectus
Supplement, the Bonds of a Series will be issued pursuant to and secured by an
Indenture and will represent indebtedness of the related Trust Fund. If so
specified in the related Prospectus Supplement, the Trust Fund for a Series of
Securities may include letters of credit, insurance policies, reserve funds or
other types of credit support, or any combination thereof (collectively, "Credit
Support"), one or more facilities to enhance the liquidity of the Securities
(each, a "Liquidity Facility"), and currency or interest rate exchange
agreements and other financial assets, or any combination thereof (collectively,
"Cash Flow Agreements"). In addition, if so specified in the related Prospectus
Supplement, the Trust Fund will include monies on deposit in one or more trust
accounts to be established with a Trustee, which may include a Pre-Funding
Account, as described herein, which would be used to purchase additional Assets
for the related Trust Fund during the period specified in the related Prospectus
Supplement. See "Description of the Trust Funds," "Description of the Offered
Securities" and "Description of Credit Support."
Each Series of Securities will consist of one or more classes (each, a
"Class") of Offered Securities that may (i) provide for the accrual of interest
thereon based on fixed, variable or adjustable rates; (ii) be senior or
subordinate to one or more other Classes of Securities in respect of certain
distributions on the Securities; (iii) be entitled to principal distributions
with disproportionately low, nominal or no interest distributions; (iv) be
entitled to interest distributions, with disproportionately low, nominal or no
principal distributions; (v) provide for distributions of accrued interest
thereon commencing only following the occurrence of certain events, such as the
retirement of one or more other Classes of Securities of such Series; (vi)
provide for distributions of principal sequentially, based on specified payment
schedules or other methodologies; and/or (vii) provide for distributions based
on a combination of two or more components thereof with one or more of the
characteristics described in this paragraph, to the extent of the Available
Distribution Amount, in each case as described in the related Prospectus
Supplement. See "Description of the Offered Securities."
Principal of and interest on the Offered Securities will be
distributable monthly, quarterly, semi-annually or at such other intervals and
on the dates specified in the related Prospectus Supplement. Distributions on
the Offered Securities of any Series will be made only from the Assets of the
related Trust Fund. The Assets will be held in trust for the benefit of the
holders of the related Series of Securities pursuant to a Pooling and Servicing
Agreement, a Trust Agreement or an Indenture (each, an "Agreement"), as more
fully described herein and in the Prospectus Supplement.
The yield on each Class of Securities will be affected by, among other
things, the rate of payment of principal (including prepayments, repurchases and
defaults) on the Assets in the related Trust Fund and the timing of receipt of
such payments as described under the caption "Yield Considerations" herein and
in the related Prospectus Supplement. A Trust Fund may be subject to early
termination or one or more Classes of Securities of a Series may be subject to
redemption under the circumstances described herein and in the related
Prospectus Supplement.
One or more elections may be made to treat the related Trust Fund or a
designated portion thereof as one or more "real estate mortgage investment
conduits" (each, a "REMIC") for federal income tax purposes. See also "Federal
Income Tax Consequences" herein.
THE SECURITIES OF A GIVEN SERIES REPRESENT BENEFICIAL INTERESTS IN, OR
OBLIGATIONS OF, THE RELATED TRUST FUND ONLY AND DO NOT REPRESENT INTERESTS IN OR
OBLIGATIONS OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SUB-SERVICER, THE TRUSTEE
OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT TO THE EXTENT DESCRIBED IN THE
RELATED PROSPECTUS SUPPLEMENT. NEITHER THE SECURITIES NOR THE ASSETS ARE INSURED
OR GUARANTEED BY ANY GOVERNMENTAL AGENCY, EXCEPT TO THE LIMITED EXTENT DESCRIBED
IN THE RELATED PROSPECTUS SUPPLEMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTIVE INVESTORS IN THE OFFERED SECURITIES SHOULD CONSIDER, AMONG
OTHER THINGS, THE MATERIAL RISKS SET FORTH UNDER THE CAPTION "RISK FACTORS"
COMMENCING ON PAGE 10 HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT BEFORE
PURCHASING ANY OFFERED SECURITY.
Prior to issuance there will have been no market for the Offered
Securities and there can be no assurance that a secondary market for any Offered
Securities will develop or that, if it does develop, it will continue to provide
investors with liquidity of investment. This Prospectus may not be used to
consummate sales of the Offered Securities unless accompanied by the related
Prospectus Supplement.
Offers of the Offered Securities may be made through one or more
different methods, including offerings through Underwriters, as more fully
described under "Plan of Distribution" herein and in the related Prospectus
Supplement.
MARCH 20, 1998
<PAGE> 6
PROSPECTUS SUPPLEMENT
As described herein, each Prospectus Supplement relating to the Offered
Securities will, among other things, set forth, as applicable: (i) a description
of the Class or Classes of Offered Securities, the payment provisions with
respect to such Offered Securities and the Pass-Through Rate, Interest Rate or
method of determining the Pass-Through Rate or Interest Rate with respect to
such Offered Securities; (ii) the aggregate principal amount and distribution
dates relating to such Offered Securities and the final scheduled distribution
dates; (iii) information as to the Assets comprising the Trust Fund, including
the general characteristics of the Assets included therein, including any Credit
Support, Liquidity Facility, or Cash Flow Agreements (with respect to any
Series, the "Trust Assets"); (iv) the circumstances, if any, under which the
Trust Fund may be subject to early termination; (v) additional information with
respect to the method of distribution of such Offered Securities; (vi) whether
one or more REMIC elections will be made and designation of the various
interests thereof; (vii) the aggregate original percentage ownership interest in
the Trust Fund to be evidenced by each Class of Securities and the original
Security Principal Balance of each Class of Securities; (viii) information as to
any Master Servicer, any Sub-Servicer and the Trustee; (ix) the percentage of
Assets comprised of Mortgage Loans, MBS and/or Agency Securities; (x)
information as to the nature and extent of subordination with respect to any
Class of Offered Securities that is subordinate in right of payment to any other
Class and (xi) whether such Offered Securities will be initially issued in
definitive or book-entry form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement (of which this Prospectus forms a
part) under the Securities Act of 1933, as amended, with respect to the Offered
Securities. This Prospectus and the Prospectus Supplement relating to each
Series of Offered Securities contain summaries of the material terms of the
documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional
Offices located as follows: 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. In addition,
the Commission maintains a Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants,
including the Depositor, that file electronically with the Commission.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Offered Securities
or an offer of the Offered Securities to any person in any state or other
jurisdiction in which such offer would be unlawful. The delivery of this
Prospectus 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.
The Depositor will be required to file or cause to be filed periodic
reports with the Commission with respect to each Trust Fund in compliance with
the requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder. The
Depositor does not intend to file periodic reports under the Exchange Act
following the expiration of the reporting period prescribed by Rule 15d-1 of
Regulation 15D under the Exchange Act. If the Prospectus Supplement for a Series
of Securities provides that one or more Classes of Securities are to be issued
in book-entry form, then unless and until definitive securities are issued, such
reports will be sent on behalf of the related Trust Fund to Cede & Co. ("Cede"),
as nominee of The Depository Trust Company ("DTC") and registered holder of the
Offered Securities, pursuant to the applicable
ii
<PAGE> 7
Agreement. Such reports may be available to holders of the Offered Securities
(the "Securityholders") upon request to their respective DTC participants. See
"Description of the Offered Securities -- Reports to Securityholders" and
"Description of the Agreements -- Evidence as to Compliance."
iii
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Table of Contents
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Page
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PROSPECTUS SUPPLEMENT.................................................................................. ii
AVAILABLE INFORMATION.................................................................................. ii
SUMMARY OF PROSPECTUS.................................................................................. 1
RISK FACTORS........................................................................................... 10
DESCRIPTION OF THE TRUST FUNDS......................................................................... 15
Assets........................................................................................ 15
Mortgage Loans................................................................................ 16
MBS........................................................................................... 21
Agency Securities............................................................................. 21
Accounts...................................................................................... 27
Credit Support................................................................................ 27
Liquidity Facilities.......................................................................... 27
Cash Flow Agreements.......................................................................... 27
Pre-Funding................................................................................... 28
YIELD CONSIDERATIONS................................................................................... 29
General....................................................................................... 29
Pass-Through Rate and Interest Rate........................................................... 29
Timing of Payment of Interest................................................................. 29
Payments of Principal; Prepayments............................................................ 29
Prepayments -- Maturity and Weighted Average Life............................................. 30
Other Factors Affecting Weighted Average Life................................................. 31
THE DEPOSITOR.......................................................................................... 33
DESCRIPTION OF THE OFFERED SECURITIES.................................................................. 38
General....................................................................................... 38
Distributions................................................................................. 39
Available Distribution Amount................................................................. 39
Distributions of Interest..................................................................... 40
Distributions of Principal.................................................................... 41
Components.................................................................................... 41
Allocation of Losses and Shortfalls........................................................... 41
Advances in Respect of Delinquencies.......................................................... 41
Reports to Securityholders.................................................................... 42
Termination................................................................................... 44
Book-Entry Registration....................................................................... 45
DESCRIPTION OF THE AGREEMENTS.......................................................................... 46
Assignment of Assets; Repurchases............................................................. 47
Representations and Warranties; Repurchases................................................... 48
Security Account and Other Collection Accounts................................................ 49
Collection and Other Servicing Procedures..................................................... 52
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iv
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Table of Contents (cont'd)
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Sub-Servicers................................................................................. 54
Realization Upon Defaulted Mortgage Loans..................................................... 55
Fidelity Bonds and Errors and Omissions Insurance............................................. 57
Due-on-Sale Provisions........................................................................ 57
Retained Interest; Servicing Compensation and Payment of Expenses............................. 57
Evidence as to Compliance..................................................................... 58
Certain Matters Regarding a Master Servicer and the Depositor................................. 58
Special Servicers............................................................................. 59
Events of Default............................................................................. 59
Certificateholder Rights Upon Event of Default................................................ 60
Amendment..................................................................................... 60
The Trustee................................................................................... 61
Duties of the Trustee......................................................................... 61
Certain Matters Regarding the Trustee......................................................... 61
Resignation and Removal of the Trustee........................................................ 62
Certain Terms of the Indenture................................................................ 62
DESCRIPTION OF CREDIT SUPPORT.......................................................................... 64
General....................................................................................... 64
Maintenance of Credit Support................................................................. 64
Reduction or Substitution of Credit Support................................................... 64
Subordinate Securities........................................................................ 66
Cross-Support Provisions...................................................................... 66
Insurance or Guarantees with Respect to the Assets............................................ 66
Letter of Credit.............................................................................. 66
Insurance Policies and Surety Bonds........................................................... 66
Special Hazard Insurance Policies............................................................. 66
Mortgagor Bankruptcy Bond..................................................................... 67
Reserve Funds................................................................................. 67
Overcollateralization......................................................................... 67
Credit Support with respect to MBS............................................................ 68
INSURANCE POLICIES ON THE MORTGAGE LOANS............................................................... 68
Primary Mortgage Guaranty Insurance Policies.................................................. 68
Hazard Insurance Policies..................................................................... 69
FHA Mortgage Insurance........................................................................ 70
VA Mortgage Guaranty.......................................................................... 70
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS................................................................ 71
General....................................................................................... 71
Types of Mortgage Instruments................................................................. 71
Interest in Real Property..................................................................... 72
Foreclosure................................................................................... 72
Anti-Deficiency Legislation and Other Limitations on Lenders.................................. 75
Environmental Legislation..................................................................... 76
Due-on-Sale Clauses........................................................................... 77
Prepayment Charges............................................................................ 77
Subordinate Financing......................................................................... 77
Applicability of Usury Laws................................................................... 78
Alternative Mortgage Instruments.............................................................. 78
</TABLE>
v
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Table of Contents (cont'd)
<TABLE>
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Soldiers' and Sailors' Civil Relief Act of 1940............................................... 79
Forfeitures in Drug and RICO Proceedings...................................................... 79
Other Legal Considerations.................................................................... 79
USE OF PROCEEDS........................................................................................ 80
FEDERAL INCOME TAX CONSEQUENCES........................................................................ 80
General ...................................................................................... 80
REMIC Securities ............................................................................. 81
Non-REMIC Certificates........................................................................105
Non-REMIC Collateralized Mortgage Bonds.......................................................111
Partnership Trust Funds.......................................................................112
STATE TAX CONSIDERATIONS...............................................................................121
ERISA CONSIDERATIONS...................................................................................121
LEGAL INVESTMENT.......................................................................................122
PLAN OF DISTRIBUTION...................................................................................123
LEGAL MATTERS..........................................................................................124
EXPERTS................................................................................................124
FINANCIAL INFORMATION..................................................................................124
RATINGS................................................................................................124
GLOSSARY...............................................................................................125
</TABLE>
vi
<PAGE> 11
SUMMARY OF PROSPECTUS
The following summary of material information is qualified in
its entirety by reference to the more detailed information appearing elsewhere
in this Prospectus and in the Prospectus Supplement. Capitalized Terms used
herein have the meanings assigned thereto in the Glossary included at the end of
this Prospectus.
<TABLE>
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Title of Securities.............. Mortgage Pass-Through Certificates, issuable
in Series (the "Certificates") and
Collateralized Mortgage Bonds, issuable in
Series (the "Bonds" and together with the
Certificates, the "Securities").
Risk Factors..................... An investment in the Securities involves
various risks, and prospective investors
should consider carefully the matters
discussed under "Risk Factors" herein
and in the related Prospectus Supplement
prior to making an investment in the
Securities
Depositor........................ Union Planters Mortgage Finance Corp., a
Delaware corporation, and limited-purpose
wholly-owned financing subsidiary of Union
Planters Bank, N.A. See "The Depositor."
Master Servicer.................. Union Planters Bank, N.A., (in such
capacity, the "Master Servicer"), a
wholly-owned subsidiary of Union Planters
Corporation, or such other party specified
in the related Prospectus Supplement.
The Trust Assets................. Each Series of Certificates will represent
in the aggregate the entire beneficial
ownership interest in a Trust Fund. Each
Series of Bonds will represent indebtedness
of either the Depositor or the Trust Fund
and will be secured by a security interest
in the Assets of the Trust Fund. A Trust
Fund will consist primarily of any of the
following assets:
(a) Mortgage Loans......... The Mortgage Loans with respect to each
Series of Securities will consist of a pool
or pools of one- to four-family first lien
residential loans (collectively, the
"Mortgage Loans"). The Mortgage Loans will
not be guaranteed or insured by the
Depositor or any of its affiliates or any
other person. If provided in the Prospectus
Supplement, the Trust Fund may include
Mortgage Loans guaranteed or insured by a
governmental agency or instrumentality,
including the Federal Housing Administration
("FHA"), a division of the United States
Department of Housing and Urban Development
("HUD") or the United States Department of
Veterans Affairs ("VA"). The Mortgage Loans
will be secured by first liens on one- to
four-family residential properties. The
Prospectus Supplement will indicate the
geographic dispersion of the Mortgaged
Properties with respect to the Mortgage
Loans of the related Series. All Mortgage
Loans will have been originated by persons
other than the Depositor, and all Assets,
except for Assets purchased with Pre-Funded
Amounts, will have been purchased, either
directly or indirectly, by the Depositor on
or before the date of issuance of the
related Series of Securities.
Mortgage Loans will provide for accrual of
interest thereon at an interest rate (a
"Mortgage Rate") that is either (i) fixed
over its term, (ii) that adjusts from time
to time, or (iii) that
</TABLE>
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<TABLE>
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may be converted from an adjustable to a
fixed Mortgage Rate, or from a fixed to an
adjustable Mortgage Rate, from time to time
at the related Mortgagor's election.
Adjustable Mortgage Rates may be based on
one or more indices. Mortgage Loans will
provide for either (i) scheduled payments to
maturity, or (ii) payments that adjust from
time to time to accommodate changes in the
Mortgage Rate or to reflect the occurrence
of certain events, and (iii) may provide for
negative amortization or accelerated
amortization. Mortgage Loans will either (i)
be fully amortizing or (ii) require a
balloon payment due on its stated maturity
date. Some Mortgage Loans may contain
prohibitions on prepayment or require
payment of a premium or a yield maintenance
penalty in connection with a prepayment. The
Mortgage Loans will provide for payments of
principal, interest or both, on due dates
that occur monthly, quarterly, semi-annually
or at another interval. The Prospectus
Supplement will provide more detail
regarding the characteristics of the
Mortgage Loans of any Series. See
"Description of the Trust Funds -- Assets."
As specified in the related Prospectus
Supplement, certain Mortgage Loans included
in the Trust Fund may be one or more months
delinquent with regard to payment of
principal and interest at the time of their
deposit into a Trust Fund. The FHA Loans and
VA Loans with respect to any Series may
include (i) Mortgage Loans that, as of any
date of determination, have more than 12
scheduled payments of principal and interest
past due under the terms of the related
Mortgage Note (each, a "Non-Performing
Mortgage Loan"), (ii) Mortgage Loans that,
as of any date of determination have more
than three but less than 12 scheduled
payments of principal and interest past due
under the terms of the related Mortgage Note
(each, a "Sub-Performing Mortgage Loan"),
and (iii) Mortgage Loans that have had more
than three scheduled payments of principal
and interest past due under the terms of the
related Mortgage Note one or more times
during the term of the related Mortgage
Loan, but at the related Cut-off Date for
the Series are current in payment (each, a
"Reinstated Mortgage Loan").
The Mortgage Loans with respect to any
Series may be guaranteed or insured with
respect to payment of interest and/or
principal by the United States, agencies or
instrumentalities thereof or created
thereby, state or local governments,
agencies or instrumentalities, or private
insurance providers. See "Insurance Policies
on the Mortgage Loans -- FHA Mortgage
Insurance" and "-- VA Mortgage Guaranty"
herein.
(b) MBS.................... The MBS included in a Trust Fund will
consist of mortgage pass-through
certificates or other mortgage-backed
securities evidencing
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interests in or secured by Mortgage Loans
that (a) have been previously offered and
distributed to the public pursuant to an
effective registration statement; or (b)
have been previously purchased in a
transaction not involving any public
offering from an entity that is not an
affiliate of the issuer of such securities
at the time of sale (nor an affiliate
thereof at any time during the three
preceding months); provided, a period of two
years has elapsed since the later of the
date the securities were acquired from
the issuer or an affiliate thereof
(collectively, "MBS").
(c) Agency Securities...... The Trust Fund may include real estate
related government securities, issued or
guaranteed by the United States, agencies or
instrumentalities thereof or agencies
created thereby that provide for payment of
interest and/or principal (collectively,
"Agency Securities"). Agency Securities may
include Fannie Mae Certificates, Freddie Mac
Certificates, GNMA Certificates, VA Vendee
Mortgage Trust Certificates or other
government securities evidencing interests
in real property.
(d) Accounts............... Each Trust Fund will include one or more
accounts established and maintained on
behalf of the Securityholders into which the
person or persons designated in the related
Prospectus Supplement will, to the extent
described herein and in such Prospectus
Supplement, deposit payments and collections
received or advanced with respect to the
Trust Assets. Such an account may be
maintained as an interest bearing or a
non-interest bearing account, and funds held
therein may be held as cash or invested in
certain short-term, investment grade
obligations, in each case as described in
the related Prospectus Supplement. See
"Description of the Agreements -- Security
Account and Other Collection Accounts."
(e) Credit Support......... If so provided in the related Prospectus
Supplement, partial or full protection
against certain defaults and losses on the
Assets in the related Trust Fund may be
provided to one or more Classes of Offered
Securities in the form of subordination of
one or more other Classes of Securities of
such Series, which other Classes may include
one or more Classes of Offered Securities,
or by one or more other types of credit
support, such as a letter of credit,
insurance policy, reserve fund or
another type of credit support, or a
combination thereof (collectively, "Credit
Support"). The amount and types of coverage,
the identification of the entity providing
the coverage and related information with
respect to each type of Credit Support will
be described in the related Prospectus
Supplement. The Prospectus Supplement also
will describe the credit support of any
underlying MBS that are included in the
related Trust Fund. See "Risk Factors --
Availability of Credit Support does
not eliminate risk of loss on Offered
Securities" and "Description of Credit
Support."
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(f) Liquidity Facilities... If so specified in the related Prospectus
Supplement, the Trust Fund with respect to a
Series of Securities may include one or more
Liquidity Facilities, which may be used by
the Trustee to make any required
distributions of principal of, or interest
on, the Securities of the related Series, to
the extent funds are not otherwise
available. See "Description of the Trust
Funds -- Liquidity Facilities."
(g) Cash Flow Agreements... The Trust Fund may include guaranteed
investment contracts pursuant to which
moneys held in the funds and accounts
established for the related Series will be
invested at a specified rate. The Trust Fund
may also include certain other agreements,
such as interest rate exchange agreements,
interest rate cap or floor agreements,
currency exchange agreements or similar
agreements provided to reduce the effects of
interest rate or currency exchange rate
fluctuations on the Trust Assets or on one
or more Classes of Offered Securities. The
principal terms of any such guaranteed
investment contract or other agreement (any
such agreement, a "Cash Flow Agreement"),
including, without limitation, provisions
relating to the timing, manner and amount of
payments thereunder and provisions relating
to the termination thereof, will be
described in the Prospectus Supplement. In
addition, the Prospectus Supplement will
provide certain information with respect to
the obligor under any such Cash Flow
Agreement. The Prospectus Supplement also
will describe any cash flow agreements that
are included as part of the trust fund
evidenced by or providing security for MBS
collateral included in the related Trust
Fund. See "Description of the Trust Funds --
Cash Flow Agreements."
(h) Pre-Funding Accounts... If so specified in the related Prospectus
Supplement, a portion of the issuance
proceeds of the Securities of a particular
Series (such amount, the "Pre-Funded
Amount") may be deposited in an account (the
"Pre-Funding Account") to be established
with the Trustee, which will be used to
acquire additional Assets from time to time
during the period specified in the related
Prospectus Supplement (the "Pre-Funding
Period"). Prior to the investment of the
Pre-Funded Amount in additional Assets, such
Pre-Funded Amount may be invested in one or
more Permitted Investments. Any Permitted
Investment must mature no later than the
Business Day prior to the next Distribution
Date.
During any Pre-Funding Period, the Depositor
will be obligated (subject only to the
availability thereof) to transfer to the
related Trust Fund additional Assets from
time to time during such Pre-Funding Period.
Such additional Assets will be required to
satisfy certain eligibility criteria more
fully set forth in the related Prospectus
Supplement, which eligibility criteria will
be consistent with the eligibility criteria
of the Assets included in the Trust Fund as
of the Cut-off Date, subject to such
exceptions as are expressly stated in such
Prospectus Supplement.
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Use of a Pre-Funding Account with respect to
any Series of Securities will be subject to
the following general conditions: (a) the
Pre-Funding Period will not exceed three
months from the related Closing Date, (b)
the additional Assets to be acquired during
the Pre-Funding Period will be subject to
the same underwriting standards,
representations and warranties as the Assets
included in the related Trust Fund on the
Closing Date (although additional criteria
may also be required to be satisfied, as
described in the related Prospectus
Supplement), (c) the Pre-Funded Amount will
be not exceed 25% of the principal amount of
the Series of Securities issued, (d) the
Pre- Funded Amount will not exceed 25% of
the scheduled principal balance of the
Assets (inclusive of the related Pre- Funded
Amount) as of the Cut-off Date, and (e) the
Pre- Funded Amount shall be invested in
Permitted Investments. See "Description of
the Trust Funds -- Pre-Funding" herein.
Description of the
Offered Securities ............ Each Series of Certificates evidencing an
interest in a Trust Fund will be issued
pursuant to a pooling and servicing
agreement or trust agreement. Each Series of
Bonds secured by Assets pledged to the
Trustee will be issued pursuant to an
indenture. Pooling and servicing agreements,
trust agreements and indentures are referred
to herein as the "Agreements." Each Series
of Certificates will represent in the
aggregate the entire beneficial ownership
interest in the Trust Fund. See "--
Distributions on Securities" and
"Description of the Offered Securities --
General." Each Class of Offered Securities
(other than certain Stripped Interest
Securities, as defined below) will have a
stated principal amount (a "Security
Balance") and (other than certain Stripped
Principal Securities, as defined below),
will accrue interest thereon based on a
fixed, variable or adjustable interest rate
(a "Pass-Through Rate" or an "Interest
Rate"). The Prospectus Supplement will
specify the Security Balance and the
Pass-Through Rate or Interest Rate, if any,
for each Class of Offered Securities or, in
the case of a variable or adjustable
Pass-Through Rate or Interest Rate, the
method for determining the Pass-Through Rate
or Interest Rate.
Distributions on Securities...... A Class of Securities may (i) provide for
the accrual of interest thereon based on
fixed, variable or adjustable rates; (ii) be
senior (collectively, "Senior Securities")
or subordinate (collectively, "Subordinate
Securities") to one or more other Classes of
Securities in respect of certain
distributions; (iii) be entitled to
principal distributions, with
disproportionately low, nominal or no
interest distributions (collectively,
"Stripped Principal Securities"); (iv) be
entitled to interest distributions, with
disproportionately low, nominal or no
principal distributions (collectively,
"Stripped Interest Securities"); (v) provide
for distributions of accrued interest
thereon commencing only following the
occurrence of certain events, such as the
retirement of one or more other Classes of
Securities (collectively, "Accrual
Securities"); (vi) provide for
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distributions of principal sequentially,
based on specified payment schedules or
other methodologies; and/or (vii) provide
for distributions based on a combination of
two or more components thereof with one or
more of the characteristics described in
this paragraph, including a Stripped
Principal Security component and a Stripped
Interest Security component, in the
aggregate to the extent of the Available
Distribution Amount for the related Series.
Distributions on one or more Classes of
Securities may be limited to collections
from a designated portion of the Assets (as
defined herein) (each such portion of
Assets, an "Asset Group"). See "Description
of the Offered Securities -- General."
References herein to Security Balance,
notional amount, Pass-Through Rate and
Interest Rate with respect to Securities
with multiple components refer to the
characteristics for such components.
The Offered Securities will not be
guaranteed by the Depositor or any of its
affiliates, by any governmental agency or
instrumentality or by any other person. See
"Risk Factors -- Securityholders must look
solely to the Trust Assets for distributions
of principal and interest" and "Description
of the Offered Securities."
(a) Interest............... Interest on each Class of Offered Securities
(other than Stripped Principal Securities
will accrue at the applicable Pass- Through
Rate or Interest Rate on the outstanding
Security Balance thereof and will be
distributed to Securityholders as provided
in the related Prospectus Supplement (each
of the specified dates on which
distributions are to be made, a
"Distribution Date"). Distributions with
respect to interest on Stripped Interest
Securities may be made on each Distribution
Date on the basis of a notional amount as
described in the related Prospectus
Supplement. Distributions of interest with
respect to one or more Classes of Offered
Securities may be reduced to the extent of
certain delinquencies, losses, prepayment
interest shortfalls, and other contingencies
described herein and in the related
Prospectus Supplement. See "Risk Factors --
Prepayment timing and frequency may
adversely affect yield of Securityholders,"
"Yield Considerations" and "Description of
the Offered Securities -- Distributions of
Interest."
(b) Principal.............. The Offered Securities of a Series initially
will have an aggregate Security Balance no
greater than the sum of (i) the outstanding
principal balance of the Assets as of the
close of business on the specified day of
the month of formation of the related Trust
Fund (the "Cut-off Date"), after application
of scheduled payments due on or before such
date, whether or not received and (ii)
amounts on deposit in the related
Pre-Funding Account, if any, as of the
Closing Date. The Security Balance of an
Offered Security outstanding from time to
time represents the maximum amount that the
holder thereof
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is then entitled to receive in respect of
principal from future cash flow on the Trust
Assets. Distributions of principal will be
made on each Distribution Date to the
Classes of Offered Securities entitled
thereto until the Security Balances of such
Offered Securities have been reduced to
zero. Distributions of principal of any
Class of Securities will be made as
described in the related Prospectus
Supplement. Stripped Interest Securities
with no Security Balance will not receive
distributions in respect of principal. See
"Description of the Offered Securities --
Distributions of Principal."
Advances......................... The Master Servicer may be obligated as part
of its servicing responsibilities to make
certain advances that in its good faith
judgment it deems recoverable with respect
to delinquent scheduled payments on Mortgage
Loans. The Master Servicer also may be
obligated to advance delinquent payments of
taxes, insurance premiums and escrowed
items, as well as liquidation-related
expenses with respect to Mortgage Loans.
Neither the Depositor nor any of its
affiliates will have any responsibility to
make such advances. Advances made by a
Master Servicer would be reimbursable
generally from subsequent recoveries in
respect of such Mortgage Loans and otherwise
to the extent described herein and in the
related Prospectus Supplement. The
Prospectus Supplement will describe any
advance obligations in connection with MBS
collateral. See "Description of the Offered
Securities -- Advances in Respect of
Delinquencies."
Termination...................... If so specified in the related Prospectus
Supplement, a Series of Securities may be
subject to optional early termination
through the repurchase of the Assets in the
related Trust Fund by the party specified
therein, under the circumstances and in the
manner set forth therein. If so provided in
the related Prospectus Supplement, upon the
reduction of the Security Balance of a
specified Class or Classes of Securities to
a specified percentage or amount or on and
after a date specified in such Prospectus
Supplement, the party specified therein will
solicit bids for the purchase of all of the
Assets of the Trust Fund, or of a sufficient
portion of such Assets to retire such Class
or Classes, or purchase such Assets at a
price set forth in the related Prospectus
Supplement. In addition, if so provided in
the related Prospectus Supplement, the
Securities of a Series may be redeemed prior
to their final Distribution Date at the
option of the Depositor, the Master Servicer
or another party by the purchase of the
outstanding Securities of such Series,
under the circumstances and in the manner
provided therein. See "Description of the
Offered Securities -- Termination."
Book-Entry Securities............ If so provided in the related Prospectus
Supplement, one or more Classes of the
Offered Securities will initially be
represented by one or more certificates or
notes, as applicable, registered in the name
of Cede & Co., as the nominee of DTC. No
person acquiring an interest in Offered
Securities
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so registered will be entitled to receive a
definitive certificate or note, as
applicable, representing such person's
interest except in the event that definitive
certificates or notes, as applicable, are
issued under the limited circumstances
described herein. See "Risk Factors --
Book-Entry Registration" and "Description of
the Securities -- Book-Entry Registration."
Tax Status of the
Offered Securities............. The federal income tax consequences to
Securityholders will vary depending on
whether one or more elections are made to
treat the Trust Fund or specified portions
thereof as one or more REMICs under the
provisions of the Code. The Prospectus
Supplement for each Series of Securities
will specify whether such an election will
be made. The opinion of Hunton & Williams,
counsel to the Depositor, regarding the
federal income tax treatment of each Class
of Securities is contained herein. See
"Federal Income Tax Consequences --
General", herein.
If an election is made to treat all or a
portion of the Trust Fund relating to a
Series of Securities as a REMIC, each Class
of Securities of each Series will constitute
"regular interests" in a REMIC or "residual
interests" in a REMIC, as specified in the
related Prospectus Supplement.
A Series of Offered Securities also may be
issued pursuant to an arrangement to be
classified as a grantor trust under Subpart
E, Part I of Subchapter J of the Code and
not as an association taxable as a
corporation and therefore holders of
Securities will be treated as the owners of
a pro rata undivided interest in each of the
Assets. In other cases, sale of the Offered
Securities will produce a separation in the
ownership of all or a portion of the
principal payments from all or a portion of
the interest payments on the Assets.
If a Trust Fund is classified as a
partnership for federal income tax purposes,
the Trust Fund will not be treated as an
association or a publicly traded partnership
taxable as a corporation as long as all of
the provisions of the applicable Agreement
are complied with and the statutory and
regulatory requirements are satisfied.
If Bonds are issued by such Trust Fund, such
Bonds will be treated as indebtedness for
federal income tax purposes. The holders of
the Certificates issued by such Trust Fund,
if any, will agree to treat the Certificates
as equity interests in a partnership.
Alternatively, if Bonds are issued by the
Depositor, such Bonds will be treated as
indebtedness of the Depositor for federal
income tax purposes.
The material federal income tax consequences
for investors associated with the purchase,
ownership and disposition of the Securities
are set forth herein under "Federal Income
Tax
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Consequences." The material federal income
tax consequences for investors associated
with the purchase, ownership and disposition
of Offered Securities will be set forth
under the heading "Federal Income Tax
Consequences" in the related Prospectus
Supplement. See "Federal Income Tax
Consequences."
ERISA Considerations............. A fiduciary of an employee benefit plan and
certain other retirement plans and
arrangements, including individual
retirement accounts, annuities, Keogh plans,
and collective investment funds and separate
accounts in which such plans, accounts,
annuities or arrangements are invested, that
is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),
or Section 4975 of the Code should carefully
review with its legal advisors whether the
purchase or holding of Offered Securities
could give rise to a transaction that is
prohibited or is not otherwise permissible
either under ERISA or Section 4975 of the
Code. See "ERISA Considerations" herein and
in the related Prospectus Supplement.
Legal Investment................. The Prospectus Supplement will specify
which, if any, of the Classes of Offered
Securities will constitute "mortgage related
securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984
("SMMEA"). Offered Securities designated as
qualifying as "mortgage related securities"
will continue to qualify as such for so long
as they are rated in one of the two highest
rating categories by at least one nationally
recognized statistical rating organization.
Classes of Offered Securities that qualify
as "mortgage related securities" under SMMEA
will be legal investments for persons,
trusts, corporations, partnerships,
associations, business trusts and business
entities (including depository institutions,
life insurance companies and pension funds)
created pursuant to or existing under the
laws of the United States or of any state
whose authorized investments are subject to
state regulation to the same extent as,
under applicable law, obligations issued by
or guaranteed as to principal and interest
by the United States or any agency or
instrumentality thereof constitute legal
investments for any such entities. Investors
should consult their own legal advisors
regarding applicable investment restrictions
and the effect of such restrictions on the
purchase of any Class of Securities and the
liquidity of any investment in any Class of
Securities. See "Legal Investment" herein
and in the related Prospectus Supplement.
Ratings.......................... It is a condition to the issuance of the
Offered Securities that they be rated in one
of the two highest rating categories
(without regard to modifiers) by at least
one nationally recognized statistical rating
organization (a "Rating Agency").
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RISK FACTORS
Investors should consider, in connection with the purchase of Offered
Securities, among other things, the following factors, which represent the
principal factors that make an offering of Securities speculative or one of high
risk.
PREPAYMENT TIMING AND FREQUENCY MAY ADVERSELY AFFECT YIELD OF SECURITYHOLDERS
Prepayments (including those caused by defaults) on the Assets in any
Trust Fund likely will result in a faster rate of principal payments on one or
more Classes of the Offered Securities than if payments on such Assets were made
as scheduled. Thus, the prepayment experience on the Assets may affect the
average life of each Class of related Offered Securities. The rate of principal
payments on pools of mortgage loans varies between pools and from time to time
is influenced by a variety of economic, demographic, geographic, tax, legal and
other factors. There can be no assurance as to the rate of prepayment on the
Assets in any Trust Fund or that the rate of payments will conform to any model
described herein or in any Prospectus Supplement. If prevailing interest rates
fall significantly below the applicable mortgage interest rates, principal
prepayments are likely to be higher than if prevailing rates remain at or above
the rates borne by the Mortgage Loans underlying or comprising the Assets in any
Trust Fund. As a result, the actual maturity of any Class of Offered Securities
could occur significantly earlier than expected. A Series of Securities may
include one or more Classes offered at a significant premium or discount. Yields
on such Classes of Offered Securities will be sensitive, and in some cases
extremely sensitive, to prepayments on Assets and, where the amount of interest
payable with respect to a Class is disproportionately high, as compared to the
amount of principal, as with certain Classes of Stripped Interest Securities, a
holder might, in some prepayment scenarios, fail to recoup its original
investment. A Series of Securities may include one or more Classes of Offered
Securities that provide for distribution of principal thereof from amounts
attributable to interest accrued but not currently distributable on one or more
Classes of Accrual Securities and, as a result, yields on such Offered
Securities will be sensitive to (a) the provisions of such Accrual Securities
relating to the timing of distributions of interest thereon and (b) if such
Accrual Securities accrue interest at a variable or adjustable Pass-Through Rate
or Interest Rate, changes in such rate. Additionally, in the case of FHA Loans
and VA Loans, certain events of default may result in delayed payment of
principal and interest for certain Classes of Securities due to particular
aspects of FHA Insurance Policies and VA Guaranties. See "Yield Considerations"
herein and in the related Prospectus Supplement.
SECURITYHOLDERS MUST LOOK SOLELY TO THE TRUST ASSETS FOR DISTRIBUTIONS OF
PRINCIPAL AND INTEREST
The Securities will not represent an interest in or obligation of the
Depositor, the Master Servicer, any Sub-Servicer or any of their affiliates. The
only obligations with respect to the Securities or the Assets will be the
obligations (if any) of the Warrantying Party (as defined herein) pursuant to
certain limited representations and warranties made with respect to the Mortgage
Loans, the Master Servicer's and any Sub-Servicer's servicing obligations under
the related Agreement (including the limited obligation to make certain advances
in the event of delinquencies on the Mortgage Loans, but only to the extent
deemed recoverable) and, if and to the extent expressly described in the related
Prospectus Supplement, certain limited obligations of the Master Servicer in
connection with an agreement to purchase or act as remarketing agent with
respect to a convertible ARM Loan (as defined herein) upon conversion to a fixed
rate. Because certain representations and warranties with respect to the Assets
may have been made and/or assigned in connection with transfers of such Assets
prior to the Closing Date, the rights of the Trustee and the Securityholders
with respect to such representations or warranties will be limited to their
rights as an assignee thereof. None of the Depositor, the Master Servicer or any
affiliate thereof will have any obligation with respect to representations or
warranties made by any other entity. Neither the Offered Securities nor the
underlying Assets will be guaranteed or insured by the Depositor, the Master
Servicer, any Sub-Servicer or any of their affiliates, or, except as may be
specified in the related Prospectus Supplement, by any governmental agency or
instrumentality. Proceeds of the Trust Assets (including the Assets and any form
of Credit Support) will be the sole source of payments on the Offered
Securities, and there will be no recourse to the Depositor or any other entity
in the event that such proceeds are insufficient or otherwise unavailable to
make all payments provided for under the Offered Securities.
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<PAGE> 21
Except to the extent described herein with respect to Covered Trusts, a
Series of Securities will not have any claim against or security interest in the
Trust Funds for any other Series. If the related Trust Fund is insufficient to
make payments on such Securities, no other assets will be available for payment
of the deficiency. Additionally, certain amounts remaining in certain funds or
accounts, including the Security Account and any accounts maintained as Credit
Support, may be withdrawn under certain conditions, as described in the related
Prospectus Supplement. In the event of such withdrawal, such amounts will not be
available for future payment of principal of or interest on the Offered
Securities. If so provided in the Prospectus Supplement for a Series of
Securities containing one or more Classes of Subordinate Securities, on any
Distribution Date in respect of which losses or shortfalls in collections on the
Assets have been incurred, the amount of such losses or shortfalls will be borne
first by one or more Classes of the Subordinate Securities, and, thereafter, by
the remaining Classes of Securities in the priority and manner and subject to
the limitations specified in such Prospectus Supplement.
THE BANKRUPTCY OR INSOLVENCY OF THE DEPOSITOR MAY INCREASE RISKS OF LOSS OR
DELAYED PAYMENT TO BONDHOLDERS
The bankruptcy or insolvency of the Depositor could adversely affect
payments on the Bonds. For this reason, the Depositor was formed as a
limited-purpose financing subsidiary of Union Planters Bank, N.A. See "The
Depositor." Notwithstanding its limited purpose, in the event of a bankruptcy
or insolvency of the Depositor, the automatic stay imposed by Title 11 of the
United States Code (the "Bankruptcy Code") could prevent enforcement of the
obligations of the Depositor, including its obligations under the Bonds and an
Indenture, or actions against any of the Depositor's property, including the
related Trust Assets, prior to modification of the stay. In addition, the
trustee in bankruptcy for the Depositor or the Depositor itself as
debtor-in-possession may be able to accelerate payment of the Bonds and
liquidate the Trust Assets. In the event the principal of the bonds is declared
due and payable, the Bondholders would lose the right to future payments of
interest and might suffer reinvestment loss in a lower interest rate environment
and (i) in the case of Bonds purchased at a premium from their parity price, may
fail to recover fully their initial investments, and (ii) in the case of Bonds
purchased at a discount from their parity price, may be entitled, under
applicable provisions of the Bankruptcy Code, to receive no more than an amount
equal to the unpaid principal amount thereof less unamortized original issue
discount ("Accreted Value"). There is no assurance as to how such Accreted
Value would be determined if such event occurred.
THE INSOLVENCY, RECEIVERSHIP OR CONSERVATORSHIP OF UNION PLANTERS BANK, N.A.
MAY INCREASE RISKS OF LOSS OR DELAYED PAYMENT TO BONDHOLDERS
The Depositor believes that each transfer of Assets from Union Planters
Bank, N.A. to the Depositor will constitute an absolute and unconditional
sale. However, in the event of a Federal Deposit Insurance Corporation
("FDIC") receivership or conservatorship of Union Planters Bank, N.A., the
FDIC could attempt to recharacterize the sale of the Assets as a borrowing
secured by a pledge of the Assets. Such an attempt, even if unsuccessful, could
result in delays in distributions on the Bonds. If such an attempt were
successful, the FDIC could elect to accelerate payment of the Bonds and
liquidate the Assets, with the holders of the Bonds entitled to no more than the
then outstanding principal amount of such Bonds together with interest at the
applicable Interest Rate to the date of payment. There is no assurance that the
proceeds of any such sale would be sufficient to pay such amounts. In the event
the principal of the Bonds is declared due and payable, the Bondholders of the
Bonds would lose the right to future payments of interest and might suffer
reinvestment loss in a lower interest rate environment and (i) in the case of
Bonds purchased at a premium from their parity price, may fail to recover fully
their initial investments, and (ii) in the case of Bonds purchased at a discount
from their parity price, may be entitled to receive no more than an amount equal
to the Accreted value. There is no assurance as to how such Accreted Value
would be determined if such event occurred.
NON-PERFORMING MORTGAGE LOANS, SUB-PERFORMING MORTGAGE LOANS, REINSTATED
MORTGAGE LOANS CREATE RISKS THAT SECURITYHOLDERS MAY NOT RECOVER THEIR INITIAL
INVESTMENT AND MAY ADVERSELY AFFECT YIELD
The Mortgage Assets included in the Trust Fund for any Series may
include Non-Performing Mortgage Loans, Sub-Performing Mortgage Loans and
Reinstated Mortgage Loans. Repayment of the principal amount of the Offered
Securities for such Series would be dependent, in large part, upon the ability
of the Master Servicer to cause such Mortgage Loans to become or remain current
in payment, to sell or foreclose upon such Mortgage Loans or to acquire title to
the Mortgaged Properties by other means and to liquidate the related REO
Properties. There can be no assurance as to whether the Master Servicer will be
successful in such efforts or as to the timing thereof. The ability of the
Master Servicer to sell an REO Property will depend upon its ability to find a
willing purchaser at a price acceptable to the Master Servicer, subject to
certain guidelines. In addition, certain rights of redemption in various states
may limit or prevent the Master Servicer from selling an REO Property at what
would otherwise be an appropriate time for sale. See "Certain Legal Aspects of
Mortgage Loans" herein.
Non-Performing Mortgage Loans, Sub-Performing Mortgage Loans and
Reinstated Mortgage Loans included in a Trust Fund will be insured by a
governmental agency. There is no obligation on the part of the Depositor, the
Master Servicer or any other person to repurchase or replace any Mortgage Loan,
except under the limited circumstances described herein and in the Prospectus
Supplement.
Certain Mortgage Loans may be non-recourse loans or loans for which
recourse may be restricted or unenforceable, or as to which recourse may be had
only against the specific Mortgaged Property and such other assets, if any, as
have been pledged to secure the related Mortgage Loan. With respect to those
Mortgage Loans that provide for recourse against the Mortgagor and his assets
generally, there can be no assurance that such recourse will ensure a recovery
in respect of a defaulted Mortgage Loan greater than the liquidation value, if
any, of the related Mortgaged Property. The ability of the Master Servicer to
liquidate any Mortgaged Property or REO Property, and the liquidation value
thereof, may be adversely affected by risks generally incident to interests in
real property, including changes or weakness in general or local economic
conditions, declines in real estate values, the volume of other similar
properties for sale, adverse changes in interest rates, real estate and personal
property tax rates, energy costs and other expenses, environmental concerns,
acts of God, and other factors that are beyond the Master Servicer's control.
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UNDERWRITING STANDARDS FOR SUB-PRIME MORTGAGE LOANS MAY BE LESS
STRINGENT AND INCREASE THE POTENTIAL FOR DELINQUENCIES.
Certain Mortgage Loans may be originated under underwriting standards
less stringent than the underwriting guidelines of Fannie Mae or Freddie Mac
(sub-prime Mortgage Loans). Such sub-prime Mortgage Loans generally will bear
higher rates of interest than Mortgage Loans that are originated in accordance
with Fannie Mae and Freddie Mac underwriting guidelines. Such "non-conforming"
Mortgage Loans generally will be underwritten in accordance with the
underwriting standards described under "Description of the Trust Funds -
Mortgage Loans - Non-conforming Credits," which are intended to provide for the
origination of single-family mortgage loans for non-conforming credits. A
mortgage loan made to a "non-conforming credit" means a mortgage loan that is
ineligible for purchase by Fannie Mae or Freddie Mac due to borrower credit
characteristics that do not meet Fannie Mae or Freddie Mac underwriting
guidelines, including a loan made to a borrower whose creditworthiness and
repayment ability do not satisfy such Fannie Mae or Freddie Mac underwriting
guidelines or a borrower who may have a record of major derogatory credit items,
such as default on a prior mortgage loan, credit write-offs, outstanding
judgments and prior bankruptcies. Accordingly, such Mortgage Loans are likely
to experience rates of delinquency and foreclosure that are higher, and may be
substantially higher, than Mortgage Loans originated in accordance with Fannie
Mae or Freddie Mac underwriting guidelines. As a result, losses on such
non-conforming (or sub-prime) Mortgage Loans are likely to be higher than losses
on Mortgage Loans originated in accordance with such guidelines.
The primary considerations in underwriting a Mortgage Loan, other than
the creditworthiness of the Mortgagor, are the value of the Mortgaged Property
and the adequacy of such property as collateral in relation to the amount of the
Mortgage Loan. Because delinquencies and foreclosures are likely to be more
frequent for sub-prime Mortgage Loans originated under underwriting standards
for non-conforming credits than for Mortgage Loans originated in accordance with
Fannie Mae or Freddie Mac underwriting guidelines, changes in the values of the
related Mortgaged Property may have a greater effect on the loss experience of
the sub-prime Mortgage Loans than on Mortgage Loans originated in accordance
with Fannie Mae or Freddie Mac underwriting guidelines. No assurance can be
given that the values of Mortgaged Property have remained or will remain at the
levels in effect on the dates of origination of the related Mortgage Loans. If
the values of the Mortgaged Properties decline after the dates of origination of
the Mortgage Loans, the rate and severity of losses on the Mortgage Loans may
increase, and such increase may be substantial.
CREDIT RATINGS PROVIDED BY RATING AGENCIES DO NOT ADDRESS ALL RISKS OF AN
INVESTMENT IN THE OFFERED SECURITIES
The ratings assigned by each Rating Agency to a Class of Offered
Securities will reflect such Rating Agency's assessment solely of the likelihood
that such Securityholders will receive payments to which such Securityholders
are entitled under the related Agreement. Such rating will not constitute an
assessment of the likelihood that principal prepayments (including those caused
by defaults) on the related Assets will be made, the degree to which the rate of
such prepayments might differ from that originally anticipated or the likelihood
of early optional termination of the Trust Fund or redemption of the Offered
Securities. Such rating will not address the possibility that prepayment at
higher or lower rates than anticipated by an investor may cause such investor to
experience a lower than anticipated yield or that an investor purchasing an
Offered Security at a significant premium might fail to recoup its initial
investment under certain prepayment scenarios.
The amount, type and nature of Credit Support, if any, established with
respect to a Series of Securities will be determined on the basis of criteria
established by each Rating Agency. Such criteria generally are based upon an
actuarial analysis of the behavior of mortgage assets. 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 any particular pool of Assets. See "Description of Credit Support"
and "Ratings."
THERE WILL BE A LIMITED MARKET FOR THE OFFERED SECURITIES
There can be no assurance that a secondary market for the Offered
Securities will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Offered Securities remain
outstanding. The market value of Offered Securities will fluctuate with changes
in prevailing rates of interest. Consequently, sales of Offered Securities by a
Securityholder in any secondary market that may develop may be at a discount
from their purchase price. Except to the extent described herein and in the
Prospectus Supplement, Securityholders will have no redemption rights and the
Offered Securities are subject to early retirement only under certain specified
circumstances described herein and in the Prospectus Supplement. See
"Description of the Offered Securities -- Termination."
AVAILABILITY OF CREDIT SUPPORT DOES NOT ELIMINATE RISK OF LOSS ON OFFERED
SECURITIES
The Prospectus Supplement for a Series of Securities will describe any
Credit Support in the related Trust Fund, which may include letters of credit,
insurance policies, guarantees, reserve funds or other types of credit support,
or combinations thereof. Use of Credit Support will be subject to the conditions
and limitations described herein and in the related Prospectus Supplement, will
not provide protection against all contingencies and will cover certain
contingencies only to a limited extent. Moreover, such Credit Support may not
cover all potential losses or risks; for example, Credit Support may or may not
cover fraud or negligence by a mortgage loan originator or other parties.
SECURITYHOLDERS SUBJECT TO LOSS IF RATE OF DELINQUENCIES AND AMOUNT OF LOSSES
EXCEED CERTAIN LEVELS
A Series of Securities may include one or more Classes of Subordinate
Securities (which may include Offered Securities), if so provided in the related
Prospectus Supplement. Although subordination is intended to reduce the risk to
holders of Senior Securities of delinquent distributions or ultimate losses, the
amount of subordination will be limited and may decline under certain
circumstances. In addition, if principal payments on one or more Classes of
Offered Securities of a Series are made in a specified order of priority, any
limits with respect to the aggregate amount of claims under any related Credit
Support may be exhausted before the principal of the lower priority Classes of
Offered Securities of such Series has been repaid. As a result, significant
losses and shortfalls on the Assets may fall primarily upon those Classes of
Offered Securities having a lower priority of payment. Moreover, if a form of
Credit Support covers more than one Series of Securities (each, a "Covered
Trust"), holders of Offered Securities evidencing an interest in a Covered Trust
will be subject to the risk that such Credit Support will be exhausted by the
claims of other Covered Trusts.
The amount of any applicable Credit Support supporting one or more
Classes of Offered Securities, including the subordination of one or more
Classes of Securities, will be determined on the basis of criteria established
by each Rating Agency rating such Classes of Securities. Such Credit Support
generally will be based on an assumed level of defaults, delinquencies, other
losses or other factors. There can, however, be no assurance that the loss
experience on the related Assets will not exceed such assumed levels. See "--
Credit ratings provided by Rating Agencies do not address all risks in an
investment in the Offered Securities," "Description of the Offered Securities"
and "Description of Credit Support."
Regardless of the Credit Support provided, the amount of coverage will
be limited in amount and in most cases will be subject to periodic reduction in
accordance with a schedule or formula. The Master Servicer will generally be
permitted to reduce, terminate or substitute all or a portion of the Credit
Support for any Series of Securities if the applicable Rating Agencies indicate
that the then-current ratings thereof will not be adversely affected. The rating
of any Series of Securities by any applicable Rating Agency may be lowered
following the initial issuance thereof as a result of the downgrading of the
obligations of any applicable credit support provider, or as a result of losses
on the related Assets substantially in excess of the levels contemplated by such
Rating Agency at the time of its initial rating analysis. None of the Depositor,
the Master Servicer or any of their affiliates will have any obligation to
replace or supplement any Credit Support, or to take any other action to
maintain any rating of any Series of Securities.
VALUE OF ASSETS IS DEPENDENT ON VARIOUS CONDITIONS
An investment in the Offered Securities, which generally represent
interests in mortgage loans, may be affected by, among other things, a decline
in real estate values and changes in the Mortgagors' financial condition. No
assurance can be given that values of the Mortgaged Properties have remained or
will remain at their levels on the dates of origination of the related Mortgage
Loans. If the residential real estate market experiences an overall decline in
property values such that the outstanding balances of the Mortgage Loans becomes
equal to or greater than the value of the Mortgaged Properties, then the actual
rates of delinquencies, foreclosures and losses could become higher than those
now generally experienced in the mortgage lending industry. In addition, in the
case of Mortgage Loans that are subject to negative amortization, the principal
balances of such Mortgage Loans could be increased to an amount equal to, or in
excess of, the value of the underlying Mortgaged Properties, thereby increasing
the likelihood of default. To the extent that such losses are not covered by the
applicable Credit Support, holders of Securities will bear all risk of loss
resulting from default by Mortgagors. Certain types of Mortgage Loans may
involve additional uncertainties not present in traditional types of loans. For
example, certain of the Mortgage Loans may provide for escalating or variable
payments by the Mortgagor under the Mortgage Loan, as to which the Mortgagor is
generally qualified on the basis of the initial payment amount. In some
instances the Mortgagor's income may not be sufficient to enable him to continue
to make his loan payments as such payments increase and thus the likelihood of
default will increase. In addition to the foregoing, certain geographic regions
of the United States from time to time will experience weaker economic
conditions and housing markets, and consequently generally will experience
higher rates of loss and delinquency than will be experienced on mortgage loans.
The Mortgage Loans underlying certain Series of Securities may be concentrated
in these regions, and such concentration may present particular risks.
Furthermore, the rate of default on Mortgage Loans that are refinanced, limited
documentation mortgage loans, or have high Loan-to-Value Ratios may be higher
than for other types of Mortgage Loans. See "Certain Legal Aspects of Mortgage
Loans" herein.
Some Mortgage Loans may be one or more months delinquent with regard to
payment of principal or interest at the time of their deposit into a Trust Fund.
Certain Mortgage Loans may have incomplete legal files that, as of the time of
deposit into a Trust Fund, may be missing such documents as a Mortgage Note, a
copy of the Mortgage or a title insurance policy, or may contain documents that
are defective because they are incomplete, contain incorrect information, are
unsigned by the appropriate parties or have other defects.
To the extent that losses on any Mortgage Loan are not covered by any
Credit Support, the related Securityholders (or specific Classes thereof) will
bear all risk of loss resulting from default by the related Mortgagors, and will
have to look primarily to the value of the Mortgaged Properties for recovery of
the outstanding
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THE EXTENSION OR MODIFICATION OF MORTGAGE LOANS MAY CREATE RISKS TO
SECURITYHOLDERS
The Master Servicer or a Sub-Servicer may be permitted (within
prescribed parameters) to extend and modify Mortgage Loans that are in default
or as to which a payment default is imminent. While any such Master Servicer or
Sub-Servicer generally will be required to determine that any such extension or
modification is reasonably 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
payment default is imminent.
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YIELD TO SECURITYHOLDERS MAY BE ADVERSELY AFFECTED BY ACCRUAL PERIODS,
SHORTFALLS AND REALIZED LOSSES
The effective yield to Securityholders may be lower than the yield
otherwise produced by the applicable Pass-Through Rates or Interest Rates and
purchase prices of the Offered Securities because the distribution of interest
may not be made until the Distribution Date in the month following the month of
accrual. In addition, the effective yield on the Offered Securities may be
reduced by any prepayment interest shortfalls and realized losses allocated to
such Offered Securities.
CREDIT RISK FROM SUBORDINATION OF THE SUBORDINATED SECURITIES TO THE SENIOR
SECURITIES
As described herein, payments of principal and interest on the Assets
will be available to make distributions on any Subordinated Securities only
after required distributions have been made on the Senior Securities. Further,
all realized losses on the Assets generally will be allocated to the
Subordinated Securities, if any, prior to being allocated to the Senior
Securities.
OFFERED SECURITIES PURCHASED AT A DISCOUNT OR PREMIUM MAY BE ISSUED WITH
ORIGINAL ISSUE DISCOUNT
Discount Offered Securities generally will be treated as issued with
original issue discount for federal income tax purposes. In addition, certain
Classes of premium Offered Securities (e.g., interest-only Securities) may be
treated by the Trustee under applicable provisions of the Code as stripped
coupons issued with original issue discount. The Trustee will report original
issue discount with respect to such discount and premium Offered Securities on
an accrual basis, which may be prior to the receipt of cash associated with such
income. See "Federal Income Tax Consequences" herein.
SECURITYHOLDERS MAY REALIZE LOSSES IF STATE LAW PROVIDES EXCEPTIONS TO THE
ENFORCEABILITY OF MORTGAGE LOAN DOCUMENTS
Certain of the Mortgages may contain due-on-sale clauses, which permit
the lender to accelerate the maturity of the related Mortgage Loan if the
Mortgagor sells, transfers or conveys the related Mortgaged Property or its
interest in the Mortgaged Property. Mortgages may also include a
debt-acceleration clause, which permits the lender to accelerate the debt upon a
monetary or non-monetary default of the Mortgagor. Such clauses are generally
enforceable subject to certain exceptions. Generally, state courts will enforce
due-on-sale clauses and clauses providing for acceleration in the event of a
material payment default. State equity courts, however, may refuse the
foreclosure of 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.
ASSETS WITH BALLOON PAYMENT PROVISIONS PRESENT PARTICULAR RISKS TO
SECURITYHOLDERS
Certain of the Mortgage Loans that provide for "balloon" payment
provisions (the "Balloon Mortgage Loans") will not be fully amortizing over
their terms to maturity and, thus, will require substantial principal payments
(i.e., balloon payments) at their stated maturity. Mortgage Loans with balloon
payments involve a greater degree of risk because the ability of a Mortgagor to
make a balloon payment typically will depend upon its ability either to
refinance the loan or to sell the related Mortgaged Property in a timely
fashion. The ability of a Mortgagor to accomplish either of these goals
generally will be affected by a number of factors, including the level of
mortgage interest rates at the time of sale or refinancing, the mortgagor's
equity in the related Mortgaged Property, the financial condition of the
mortgagor, tax laws, prevailing general economic conditions and the availability
of credit for single family real properties. Neither the Depositor, the Trustee,
the Master Servicer, any Sub-Servicer nor any of their affiliates will be
required to refinance any Balloon Mortgage Loan.
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SECURITYHOLDERS MAY BE SUBJECT TO ERISA RESTRICTIONS
Generally, ERISA applies to investments made by employee benefit plans
and transactions involving the assets of such plans. 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 Offered Securities.
THE OFFERED SECURITIES MAY BE REGISTERED IN BOOK-ENTRY FORM
If so provided in the Prospectus Supplement, one or more Classes of the
Offered Securities may be represented initially by one or more certificates
registered in the name of Cede & Co., the nominee for DTC, and will not be
registered in the names of the beneficial owners of the Securities or their
nominees. The Trustee will recognize the registered holder of the book-entry
Securities as the "Securityholder" (as that term is to be used in the related
Agreement). Beneficial owners of Securities will be able to exercise the rights
of Securityholders only indirectly through DTC and its participating
organizations. See "Description of the Offered Securities -- Book-Entry
Registration."
Book-entry registration may reduce the liquidity of the Offered
Securities in the secondary trading market because investors may be unwilling to
purchase Offered Securities for which they cannot obtain physical certificates.
Because transactions in book-entry securities can be effected only through DTC,
participating organization, financial intermediaries and certain banks, the
ability of a Securityholder to pledge a book-entry security to persons or
entities that do not participate in the DTC system may be limited due to lack of
a physical certificate representing such securities.
In addition, Securityholders may experience some delay in their receipt
of distributions of interest and principal on book-entry securities because
distributions are required to be forwarded by the Trustee to DTC and DTC will
thereafter be required to credit such distribution to the accounts of
Participants that thereafter will be required to credit them to the accounts of
Securityholders either directly or indirectly through financial intermediaries.
CREDIT RATINGS PROVIDED BY RATING AGENCIES ARE SUBJECT TO DOWNGRADE
The credit ratings provided by the Rating Agencies to each Class of
Securities offered hereunder are subject to downgrade or withdrawal at any
time. The downgrade or withdrawal of any credit rating would likely decrease
the market value and liquidity of the affected Class of Securities. In
addition, the credit ratings assigned to Classes of Securities that are
subordinated to other Classes of Securities are more likely to change than
credit ratings assigned to more senior Classes. See "Description of Credit
Support" and "Ratings."
DESCRIPTION OF THE TRUST FUNDS
ASSETS
Permissable categories of assets of each Trust Fund include (i) one- to
four-family first lien residential mortgage loans (the "Mortgage Loans"), (ii)
pass-through certificates or other mortgage-backed securities evidencing
interests in or secured by one or more Mortgage Loans that (a) have been
previously offered and distributed to the public pursuant to an effective
registration statement; or (b) have been previously purchased in a transaction
not involving any public offering from an entity that is not an affiliate of the
issuer of such securities at the time of sale (nor an affiliate thereof at any
time during the three preceding months); provided, a period of two years has
elapsed since the later of the date the securities were acquired from the issuer
or an affiliate thereof ("MBS"), (iii) mortgage related securities issued or
guaranteed by the United States, agencies or instrumentalities thereof or
agencies created thereby which are not subject to redemption prior to maturity
at the option of the issuer and are (a) interest-bearing securities, (b)
non-interest-bearing securities, (c) originally interest-bearing securities from
which coupons representing the right to payment of interest have been removed,
or (d) interest-bearing securities from which the right to payment of principal
has been removed (the "Agency Securities"), or (iv) a combination of Mortgage
Loans, MBS and Agency Securities (collectively, the "Assets"). As used herein,
"Mortgage Loans" refers to both mortgage loans held directly by a Trust Fund and
mortgage loans underlying MBS and/or Agency Securities. Mortgage Loans that
secure, or interests in which are evidenced by, MBS are herein sometimes
referred to as "Underlying Mortgage Loans." The Assets will not be guaranteed or
insured by any governmental agency or instrumentality or by any other person
except as specified in the related Prospectus Supplement.
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Except to the extent, if any, specified in the related Prospectus
Supplement, the Offered Securities will be entitled to payment only from the
related Trust Assets and will not be entitled to payments in respect of the
Trust Assets of any other Series. The Trust Assets may consist of certificates
representing beneficial ownership interests in another trust fund that contains
the Trust Assets.
MORTGAGE LOANS
General
The Mortgage Loans will be secured by first liens on Mortgaged
Properties consisting of one- to four-family residential properties. The
Mortgaged Properties may include leasehold interests in real properties, the
title to which is held by third party lessors. The term of any such leasehold
shall exceed the term of the related Mortgage Note by at least five years. Each
Mortgage Loan will have been originated by a person (the "Originator") other
than the Depositor. The related Prospectus Supplement will indicate if any
Originator is an affiliate of the Depositor. Generally, the Mortgage Loans will
be evidenced by promissory notes (the "Mortgage Notes") secured by mortgages,
deeds of trust or similar security instruments (the "Mortgages") creating a lien
on the Mortgaged Properties.
The Trust Fund may include Mortgage Loans ("FHA Loans") insured by the
Federal Housing Administration ("FHA"), a division of the United States
Department of Housing and Urban Development ("HUD"), Mortgage Loans ("VA Loans")
partially guaranteed by the Veterans Administration ("VA"), and Mortgage Loans
not insured or guaranteed by the FHA or VA. Certain Mortgage Loans may contain
prohibitions on prepayment (a "Lock-out Period" and, the date of expiration
thereof, a "Lock-out Date") or require payment of a premium or a yield
maintenance penalty (a "Prepayment Premium") in connection with a prepayment, in
each case as described in the related Prospectus Supplement. In the event that
holders of any Class of Offered Securities will be entitled to all or a portion
of any Prepayment Premiums collected in respect of Mortgage Loans, the related
Prospectus Supplement will specify the method or methods by which any such
amounts will be allocated. The Mortgage Loans may have fixed interest rates or
adjustable interest rates ("Mortgage Rates") and may provide for fixed level
payments or may be Mortgage Loans pursuant to which the monthly payments by the
Mortgagor during the early years of the related Mortgage are less than the
amount of interest that would otherwise be payable thereon, with the interest
not so paid added to the outstanding principal balance of such Mortgage Loan
("GPM Loans"), Mortgage Loans subject to temporary buy-down plans ("BuyDown
Mortgage Loans"), pursuant to which the monthly payments made by the Mortgagor
during the early years of the Mortgage Loan will be less than the scheduled
monthly payments on the Mortgage Loan, Mortgage Loans that provide for payment
every other week during the term thereof ("Bi-Weekly Loans"), Mortgage Loans
that experience negative amortization, Mortgage Loans that require a larger
payment of principal upon maturity (a "Balloon Amount") that may be all or a
portion of the principal thereof ("Balloon Loans"), or Mortgage Loans with other
payment characteristics as described below or in the related Prospectus
Supplement.
If so specified in the related Prospectus Supplement, the Trust Fund
may include Mortgage Loans that have been modified (each, a "Modified Mortgage
Loan"). Such modifications may include conversions from an adjustable to a fixed
Mortgage Rate (discussed below) or other changes in the related Mortgage Note.
If a Mortgage Loan is a Modified Mortgage Loan, references to origination
generally shall be deemed to be references to the date of modification.
The Mortgaged Properties may consist of detached individual dwellings,
individual condominiums, townhouses, duplexes, row houses, individual units in
planned unit developments, two-to four-family dwellings and other attached
dwelling units. To the extent specified in the related Prospectus Supplement,
the Mortgaged Properties may include vacation homes, second homes and
non-owner-occupied investment properties. Mortgage Loans secured by investment
properties (including two-to four-unit dwellings) may also be secured by an
assignment of leases and rents and operating or other cash flow guarantees
relating to the Mortgage Loans.
The Mortgage Loans may be "equity refinance" Mortgage Loans, as to
which a portion of the proceeds are used to refinance an existing mortgage loan,
and the remaining proceeds may be retained by the Mortgagor or
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used for purposes unrelated to the Mortgaged Property. Alternatively, the
Mortgage Loans may be "rate and term refinance" Mortgage Loans, as to which
substantially all of the proceeds (net of related costs incurred by the
Mortgagor) are used to refinance an existing mortgage loan or loans (which may
include a junior lien) primarily in order to change the interest rate or other
terms thereof. The Mortgage Loans may be mortgage loans that have been
consolidated and/or have had various terms changed, mortgage loans that have
been converted from adjustable rate mortgage loans to fixed rate mortgage loans,
or construction loans which have been converted to permanent mortgage loans. In
addition, a Mortgaged Property may be subject to secondary financing at the time
of origination of the Mortgage Loan or thereafter.
Mortgage Loans that have adjustable Mortgage Rates ("ARM Loans")
generally will provide for a fixed initial Mortgage Rate until the first date on
which such Mortgage Rate is to be adjusted. Thereafter, the Mortgage Rate is
subject to periodic adjustment as described in the related Prospectus
Supplement, subject to the applicable limitations, to a rate based on a
specified index (the "Index") plus a specified percentage (the "Gross Margin"),
as described in the related Prospectus Supplement. The initial Mortgage Rate on
an ARM Loan may be lower than the sum of the then-applicable Index and the Gross
Margin for such ARM Loan.
ARM Loans have features that provide different investment
considerations than fixed-rate mortgage loans. For example, adjustable mortgage
rates can cause payment increases that may exceed some Mortgagors' capacity to
cover such payments. However, to the extent specified in the related Prospectus
Supplement, an ARM Loan may provide that its Mortgage Rate may not be adjusted
to a rate above the applicable maximum Mortgage Rate (the "Maximum Mortgage
Rate") or below the applicable minimum Mortgage Rate (the "Minimum Mortgage
Rate"), if any, for such ARM Loan. In addition, to the extent specified in the
related Prospectus Supplement, certain of the ARM Loans may provide for
limitations on the maximum amount by which their Mortgage Rates may adjust for
any single adjustment period (the "Periodic Cap"). Some ARM Loans provide for
limitations on the amount of scheduled payments of principal and interest
payable by the Mortgagor (a "Payment Cap").
Certain ARM Loans may be subject to negative amortization from time to
time prior to their maturity (such ARM Loans, "Neg-Am ARM Loans"). Such negative
amortization may result from either the adjustment of the Mortgage Rate on a
more frequent basis than the adjustment of the scheduled payment or the
application of a Payment Cap. In the first case, negative amortization results
if an increase in the Mortgage Rate occurs prior to an adjustment of the
scheduled payment on the related Mortgage Loan and such increase causes accrued
monthly interest on the Mortgage Loan to exceed the scheduled payment of
interest on such Distribution Date. In the second case, negative amortization
results if an increase in the Mortgage Rate causes accrued monthly interest on a
Mortgage Loan to exceed the applicable Payment Cap. In the event that the
scheduled payment is not sufficient to pay the accrued monthly interest on a
Neg-Am ARM Loan, the amount of accrued monthly interest that exceeds the
scheduled payment of interest on such Mortgage Loans (the "Deferred Interest")
is added to the principal balance of such ARM Loan and is to be repaid from
future scheduled payments. Neg-Am ARM Loans do not provide for the extension of
their original stated maturity to accommodate changes in their Mortgage Rate.
A Trust Fund may contain ARM Loans that allow the Mortgagors to convert
the adjustable rates on such Mortgage Loans to a fixed rate at one or more
specified periods during the life of such Mortgage Loans (each, a "Convertible
Mortgage Loan"). If specified in the related Prospectus Supplement, upon any
conversion, the Depositor, the Master Servicer or a third party may be required
to purchase the converted Mortgage Loan as and to the extent set forth in the
related Prospectus Supplement. Alternatively, if specified in the related
Prospectus Supplement, the Master Servicer (or another party specified therein)
may agree to act as remarketing agent with respect to such converted Mortgage
Loans and, in such capacity, to use its best efforts to arrange for the sale of
such converted Mortgage Loans under specified conditions. Upon the failure of
any party so obligated to purchase any such converted Mortgage Loan, the
inability of any remarketing agent to arrange for the sale of the converted
Mortgage Loans and the unwillingness of such remarketing agent to exercise any
election to purchase the converted Mortgage Loans for its own account, the
related Converted Mortgage Loan will remain in the Trust Fund as a fixed rate
Mortgage Loan.
If specified in the related Prospectus Supplement, certain of the
Mortgage Loans may be BuyDown Mortgage Loans pursuant to which the payments made
by the Mortgagor during the early years of the Mortgage
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Loan (the "BuyDown Period") will be less than the scheduled payments on the
Mortgage Loan, the resulting difference to be made up from (i) amounts (such
amount, exclusive of investment earnings thereon, being hereinafter referred to
as "BuyDown Funds") contributed by the seller of the Mortgaged Property or
another source and placed in an escrow account, (ii) investment earnings on such
BuyDown Funds or (iii) funds contributed over time by the Mortgagor's employer
or another source.
The related Prospectus Supplement will provide material information
concerning the types and characteristics of the Mortgage Loans included in a
Trust Fund as of the related Cut-off Date. In the event that Mortgage Loans are
added to or deleted from the Trust Fund after the date of the related Prospectus
Supplement and prior to the Closing Date for the related Series of Securities,
the final characteristics of the Mortgage Loans included in the Trust Fund will
be noted on a Form 8-K filed by the Depositor.
Loan-to-Value Ratio
The "Loan-to-Value Ratio" of a Mortgage Loan on any date of
determination is a ratio (expressed as a percentage), the numerator of which is
the then outstanding principal balance of the Mortgage Loan, and the denominator
of which is the Value of the related Mortgaged Property. The "Value" of a
Mortgaged Property, other than with respect to Refinance Loans, is generally the
lesser of (a) the appraised value determined in an appraisal obtained by the
originator at origination of such loan and (b) the sales price for such
property. "Refinance Loans" are loans made to refinance existing loans. The
Value of the Mortgaged Property securing a Refinance Loan is the appraised value
thereof determined in an appraisal obtained at the time of origination of the
Refinance Loan. The Value of a Mortgaged Property as of the related Cut-off Date
may be less than the origination value and will fluctuate from time to time
based upon changes in economic conditions. Certain Mortgage Loans that are
subject to negative amortization will have Loan-to-Value Ratios that will
increase after origination as a result of such negative amortization. In the
case of seasoned Mortgage Loans, the appraisals upon which Loan-to-Value Ratios
have been calculated may no longer be accurate valuations of the related
Mortgaged Properties. Certain Mortgaged Properties may be located in regions
where property values have declined significantly since the time of origination
and the Loan-to-Value Ratio may not be reflective of such decline.
Mortgage Loan Information in Prospectus Supplements
Each Prospectus Supplement will contain information, as of the related
Cut-off Date, with respect to the Mortgage Loans, including (i) the aggregate
outstanding principal balance and the largest, smallest and average outstanding
principal balance of the Mortgage Loans, (ii) the type of property securing the
Mortgage Loans, (iii) the weighted average (by principal balance) of the
original and remaining terms to maturity of the Mortgage Loans, (iv) the
earliest and latest origination date and maturity date of the Mortgage Loans,
(v) the weighted average (by principal balance) of the Loan-to-Value Ratios at
origination of the Mortgage Loans, (vi) the Mortgage Rates or range of Mortgage
Rates and the weighted average Mortgage Rate borne by the Mortgage Loans, (vii)
the jurisdictions in which the Mortgaged Properties are located, (viii)
information with respect to the prepayment provisions, if any, of the Mortgage
Loans, (ix) the weighted average Retained Interest, if any, (x) with respect to
Mortgage Loans with adjustable Mortgage Rates ("ARM Loans"), the index, the
frequency of the adjustment dates, the highest, lowest and weighted average note
margin and pass-through margin, and the maximum Mortgage Rate or monthly payment
variation at the time of any adjustment thereof and over the life of the ARM
Loan and the frequency of such monthly payment adjustments, and (xi) information
regarding the payment characteristics of the Mortgage Loans, including without
limitation balloon payment and other amortization provisions. If specific
information respecting the Mortgage Loans has not been identified in time for
inclusion in a Prospectus Supplement, more general information of the nature
described above will be provided in the Prospectus Supplement, and specific
information will be set forth in a report which will be available to purchasers
of the related Offered Securities at or before the initial issuance thereof and
will be filed as part of a Current Report on Form 8-K with the Securities and
Exchange Commission within fifteen days after such initial issuance.
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Non-conforming Credits (Sub-Prime Mortgage Loans)
If specified in the Prospectus Supplement, the underwriting guidelines
used to originate certain sub-prime Mortgage Loans may be less stringent than
those of Fannie Mae or Freddie Mac, primarily in that they generally permit the
Mortgagor to have a higher debt-to-income ratio and a larger number of
derogatory credit items than do the underwriting guidelines of Fannie Mae or
Freddie Mac.
Delinquent and Reinstated Mortgage Loans
Certain Mortgage Loans included in the Trust Fund may be one or more
months delinquent with regard to payment of principal or interest at the time of
their deposit into a Trust Fund. The related Prospectus Supplement will set
forth the percentage of Mortgage Loans that are so delinquent. In addition, the
related Prospectus Supplement will set forth the percentage of Mortgage Loans
that have been delinquent more than once during the preceding twelve months.
Delinquent Mortgage Loans may be more likely to result in losses than Mortgage
Loans that have a current payment status.
The FHA Loans and VA Loans with respect to any Series may contain (i)
Mortgage Loans that, as of any date of determination have more than 12 scheduled
payments of principal and interest past due under the terms of the related
Mortgage Note (each, a "Non-Performing Mortgage Loan"), (ii) Mortgage Loans
that, as of any date of determination, have more than three but less than 12
scheduled payments of principal and interest past due under the terms of the
related Mortgage Note (each, a "Sub-Performing Mortgage Loan"), and (iii)
Mortgage Loans that have had more than three scheduled payments of principal and
interest past due under the terms of the related Mortgage Note one or more times
during the term of the related Mortgage Loan, but at the related Cut-off Date
for the Series is current in payment (each, a "Reinstated Mortgage Loan"). The
Prospectus Supplement for any Series shall fully set forth the particular
characteristics and risks of an investment in a pool containing such Mortgage
Loans.
The Prospectus Supplement for any Series of Securities will include
tabular disclosure regarding the number of Assets, the percentage by number,
the Aggregate Principal Balance as of the Cut-off Date, and the percent by
Aggregate Principal Balance as of the Cut-off Date for the Non-Performing
Mortgage Loans, Sub-Performing Mortgage Loans and Reinstated Mortgage Loans,
if any, included in the related Trust Fund. In addition, the disclosure
concerning the Master Servicer will include related tabular delinquency and
foreclosure experience.
The VA Loan Program
VA is an Executive Branch Department of the United States, headed by
the Secretary of Veterans Affairs. VA currently administers a variety of federal
assistance programs on behalf of eligible veterans and their dependents and
beneficiaries, including the VA loan guaranty program.
Under the VA loan guaranty program, a VA Loan may be made to any
eligible veteran by an approved private sector mortgage lender. VA guarantees
payment to the holder of that loan of a fixed percentage of the loan
indebtedness, up to a maximum dollar amount, in the event of default by the
veteran borrower. When a delinquency is reported to VA and no realistic
alternative to foreclosure is developed by the servicer or through VA's
supplemental servicing of the loan, VA determines, through an economic analysis,
whether VA will (a) authorize the servicer to convey the property securing the
VA Loan to the Secretary of Veterans Affairs following termination or (b) pay
the loan guaranty amount to the holder. The decision as to disposition of
properties securing defaulted VA Loans is made on a case-by-case basis using the
procedures set forth in 38 U.S.C. Section 3732(c), as amended.
The FHA Loan Program
FHA is an organizational unit within the Department of Housing and
Urban Development. FHA was established to encourage improvement in housing
standards and conditions and to exert a stabilizing influence on the mortgage
market. FHA provides insurance for private lenders against loss on eligible
mortgages.
Under the FHA mortgage insurance program, an FHA home mortgage may be
made to borrowers meeting certain credit standards by an approved mortgage
lender. FHA insures payment to the holder of that loan (or to a servicer on its
behalf) in the event of default by the borrower. Upon default, the servicer,
depending upon the circumstances, may (a) assign the mortgage to FHA, (b)
acquire (through foreclosure or deed in lieu of foreclosure) and convey title to
FHA or (c) work with the borrower to sell the property before the foreclosure
sale. The servicer will receive insurance benefits equal to the unpaid principal
balance of the loan, plus approved expenses.
Underwriting Policies
The Depositor generally expects that the Originator of each of the
Mortgage Loans will have applied, consistent with applicable federal and state
laws and regulations, underwriting procedures intended to evaluate the
borrower's credit standing and repayment ability and/or the value and adequacy
of the related property as collateral. Any FHA Loans or VA Loans will have been
originated in compliance with the underwriting policies of the FHA or VA,
respectively. The underwriting criteria applied by the Originators of the
Mortgage Loans included in a Trust
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Fund may vary significantly. The related Prospectus Supplement will describe
generally certain underwriting criteria to the extent known by the Depositor,
that were applied by the Originators of such Mortgage Loans.
General Standards
Generally, each Mortgagor will have been required to complete an
application designed to provide to the original lender pertinent credit
information concerning the Mortgagor. As part of the description of the
Mortgagor's financial condition, such Mortgagor will have furnished information
which may be supplied solely in such application with respect to its assets,
liabilities, income, credit history, employment history and personal information
and furnished an authorization to apply for a credit report which summarizes the
borrower's credit history with local merchants and lenders and any record of
bankruptcy. The Mortgagor may also have been required to authorize verifications
of deposits at financial institutions where the Mortgagor had demand or savings
accounts. In the case of investment properties, only income derived from the
Mortgaged Properties may have been considered for underwriting purposes, rather
than the income of the Mortgagor from other sources. With respect to Mortgaged
Property consisting of vacation or second homes, no income derived from the
property generally will have been considered for underwriting purposes.
As described in the related Prospectus Supplement, certain Mortgage
Loans may have been originated under "limited documentation" or "no
documentation" programs which require less documentation and verification than
do traditional "full documentation" programs. Generally, under such a program,
minimal investigation into the Mortgagor's credit history and income profile is
undertaken by the originator and such underwriting may be based primarily or
entirely on an appraisal of the Mortgaged Property and the Loan-to-Value Ratio
at origination.
The adequacy of the Mortgaged Property as security for repayment of the
related Mortgage Loan will generally have been determined by appraisal in
accordance with pre-established appraisal procedure guidelines for appraisals
established by or acceptable to the originator. Appraisers may be staff
appraisers employed by the originator or independent appraisers selected in
accordance with pre-established guidelines established by the originator. The
appraisal procedure guidelines generally will have required the appraiser or an
agent on its behalf to personally inspect the property and to verify whether the
property was in good condition and that construction, if new, had been
substantially completed. The appraisal generally will have been based upon a
market data analysis of recent sales of comparable properties and, when deemed
applicable, an analysis based on income generated from the property or a
replacement cost analysis based on the current cost of constructing or
purchasing a similar property.
The underwriting standards applied by an originator generally require
that the underwriting officers be satisfied that the value of the property being
financed, as indicated by an appraisal or other acceptable valuation method,
currently supports and is anticipated to support in the future the outstanding
loan balance. In fact, certain states where the Mortgaged Properties may be
located have "anti-deficiency" laws requiring, in general, that lenders
providing credit on single family property look solely to the property for
repayment in the event of foreclosure. See "Certain Legal Aspects of Mortgage
Loans." Any of these factors could change nationwide or merely could affect a
locality or region in which all or some of the Mortgaged Properties are located.
However, declining values of real estate, as experienced recently in certain
regions, or increases in the principal balances of certain Mortgage Loans, such
as GPM Loans and Neg-Am ARM Loans, could cause the principal balance of some or
all of the Mortgage Loans to exceed the value of the Mortgaged Properties.
Based on the data provided in the application, certain verifications
(if required by the Originator of the Mortgage Loans) and the appraisal or other
valuation of the Mortgaged Property, a determination will have been made by the
original lender that the Mortgagor's monthly income would be sufficient to
enable the Mortgagor to meet its monthly obligations on the Mortgage Loan and
other expenses related to the property (such as property taxes, utility costs,
standard hazard and primary mortgage insurance and other fixed obligations other
than housing expenses. The Originator's guidelines for Mortgage Loans generally
will specify that scheduled payments on a Mortgage Loan during the first year of
its term plus taxes and insurance (including primary mortgage insurance) and all
scheduled payments on obligations that extend beyond one year (including those
mentioned above and other
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fixed obligations) would equal no more than specified percentages of the
prospective Mortgagor's gross income. The Originator may also consider the
amount of liquid assets available to the Mortgagor after origination.
Underwriting standards, employed by Originators, generally include a
set of specific criteria pursuant to which the underwriting evaluation is made.
However, the application of such underwriting standards does not imply that each
specific criterion was satisfied individually. Rather, a Mortgage Loan will be
considered to be originated in accordance with a given set of underwriting
standards if, based on an overall qualitative evaluation, the loan is in
substantial compliance with such underwriting standards. For example, a Mortgage
Loan may be considered to comply with a set of underwriting standards, even if
one or more specific criteria included in such underwriting standards were not
satisfied, if other factors compensated for the criteria that were not satisfied
or if the Mortgage Loan is considered to be in substantial compliance with the
underwriting standards.
MBS
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, a trust agreement, an indenture or
similar agreement (an "MBS Agreement"). A seller (the "MBS Issuer") and/or
servicer (the "MBS Servicer") of the underlying Mortgage Loans (or Underlying
MBS) will have entered into the MBS Agreement with a trustee or a custodian, if
any, under the MBS Agreement (the "MBS Trustee") or with the original purchaser
of the interest in the underlying Mortgage Loans or MBS evidenced by the MBS.
Distributions of any principal or interest, as applicable, will be made
on MBS on the dates specified in the related Prospectus Supplement. The MBS may
be issued in one or more Classes with characteristics similar to the Classes of
Offered Securities described in this Prospectus. Any principal or interest
distributions will be made on the MBS by the MBS Trustee or the MBS Servicer.
The MBS Issuer or the MBS Servicer or another person specified in the related
Prospectus Supplement may have the right or obligation to repurchase or
substitute assets underlying the MBS after a certain date or under other
circumstances specified in the related Prospectus Supplement.
Credit Support in the form of reserve funds, subordination or other
forms of credit support similar to that described for the Offered Securities
under "Description of Credit Support" may be provided with respect to the MBS.
The type, characteristics and amount of such credit support, if any, will be a
function of certain characteristics of the Mortgage Loans or Underlying MBS
evidenced by or securing such MBS and other factors and generally will have been
established for the MBS on the basis of requirements of either any Rating Agency
that may have assigned a rating to the MBS or the initial purchasers of the MBS.
The Prospectus Supplement for a Series of Offered Securities evidencing
interests in Assets that include MBS will specify, (i) the aggregate approximate
initial and outstanding principal amount or notional amount, as applicable, and
type of the MBS to be included in the Trust Fund, (ii) the original and
remaining term to stated maturity of the MBS, if applicable, (iii) whether such
MBS is entitled only to interest payments, only to principal payments or to
both, (iv) the pass-through or bond rate of the MBS or formula for determining
such rates, if any, (v) the applicable payment provisions for the MBS,
including, but not limited to, any priorities, payment schedules and
subordination features, (vi) the MBS Issuer, MBS Servicer and MBS Trustee, as
applicable, (vii) certain characteristics of the credit support, if any, such as
subordination, reserve funds, insurance policies, letters of credit or
guarantees relating to the related Underlying Mortgage Loans, the Underlying MBS
or directly to such MBS, (viii) the terms on which the related Underlying
Mortgage Loans or Underlying MBS may, or are required to, be purchased prior to
their maturity, (ix) the terms on which Underlying Mortgage Loans or Underlying
MBS may be substituted for those originally underlying the MBS, (x) the
servicing fees payable under the MBS Agreement, (xi) the characteristics of any
cash flow agreements that are included as part of the trust fund evidenced or
secured by the MBS and (xii) whether the MBS is in certificated form, book-entry
form or held through a depository.
AGENCY SECURITIES
The Prospectus Supplement for a Series of Offered Securities evidencing
interests in Assets of a Trust Fund that include Agency Securities will specify,
to the extent available, (i) the aggregate approximate initial and
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outstanding principal amounts or notional amounts, as applicable, and types of
the Agency Securities to be included in the Trust Fund, (ii) the original and
remaining terms to stated maturity of the Agency Securities, (iii) whether such
Agency Securities are entitled only to interest payments, only to principal
payments or to both, (iv) the interest rates of the Agency Securities or the
formula to determine such rates, if any, (v) the applicable payment provisions
for the Agency Securities, (vi) the issuer of the Agency Securities and any
guarantor thereof, (vii) generally, the assets that collateralize the Agency
Securities, and (viii) to what extent, if any, the obligation evidenced thereby
is backed by the full faith and credit of the United States.
Government National Mortgage Association
GNMA is a wholly-owned corporate instrumentality of the United States
within the United States Department of Housing and Urban Development. Section
306(g) of Title II of the National Housing Act of 1934, as amended (the "Housing
Act"), authorizes GNMA to guarantee the timely payment of the principal of and
interest on certificates (the "GNMA Certificates") that represent an interest in
a pool of mortgage loans insured by the FHA under the Housing Act or Title V of
the Housing Act of 1949 ("FHA Loans"), or partially guaranteed by the VA under
the Servicemen's Readjustment Act of 1944, as amended, or Chapter 37 of Title
38, United States Code ("VA Loans").
Section 306(g) of the Housing Act provides that "the full faith and
credit of the United States is pledged to the payment of all amounts which may
be required to be paid under any guaranty under this subsection." In order to
meet its obligations under any such guaranty, GNMA may, under Section 306(d) of
the Housing Act, borrow from the United States Treasury in an unlimited amount
which is at any time sufficient to enable GNMA to perform its obligations under
its guarantee.
GNMA Certificates
Each GNMA Certificate held in a Trust Fund (which may be issued under
either the GNMA I program (each such certificate, a "GNMA I Certificate") or the
GNMA II program (each such certificate, a "GNMA II Certificate")) will be a
"fully modified pass-through" mortgage-backed certificate issued and serviced by
a mortgage banking company or other financial concern ("GNMA Issuer") approved
by GNMA or by Fannie Mae as a seller-servicer of FHA Loans and/or VA Loans. The
mortgage loans underlying the GNMA Certificates will consist of FHA Loans and/or
VA Loans. Each such mortgage loan is secured by a one-to-four-family or
multifamily residential property. GNMA will approve the issuance of each such
GNMA Certificate in accordance with a guaranty agreement (a "Guaranty
Agreement") between GNMA and the GNMA Issuer. Pursuant to its Guaranty
Agreement, a GNMA Issuer will be required to advance its own funds in order to
make timely payments of all amounts due on each such GNMA Certificate if the
payments received by the GNMA Issuer on the FHA Loans or VA Loans underlying
each such GNMA Certificate are less than the amounts due on each such GNMA
Certificate.
The full and timely payment of principal of and interest on each GNMA
Certificate will be guaranteed by GNMA, which obligation is backed by the full
faith and credit of the United States. Each such GNMA Certificate will have an
original maturity of not more than 30 years (but may have original maturities of
substantially less than 30 years). Each such GNMA Certificate will be based on
and backed by a pool of FHA Loans or VA Loans secured by one-to-four-family
residential properties and will provide for the payment by or on behalf of the
GNMA Issuer to the registered holder of such GNMA Certificate of scheduled
monthly payments of principal and interest equal to the registered holder's
proportionate interest in the aggregate amount of the monthly principal and
interest payment on each FHA Loan or VA Loan underlying such GNMA Certificate,
less the applicable servicing and guaranty fee, which together equal the
difference between the interest on the FHA Loan or VA Loan and the pass-through
rate on the GNMA Certificate. In addition, each payment will include
proportionate pass-through payments of any prepayment of principal on the FHA
Loans or VA Loans underlying such GNMA Certificate and liquidation proceeds in
the event of a foreclosure or other disposition of any such FHA Loans or VA
Loans.
If a GNMA Issuer is unable to make the payments on a GNMA Certificate
as it becomes due, it must properly notify GNMA and request GNMA to make such
payment. Upon notification and request, GNMA will make such payments directly to
the registered holder of such GNMA Certificate. In the event no payment is made
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by a GNMA Issuer and the GNMA Issuer fails to notify and request GNMA to make
such payments, the holder of such GNMA Certificate will have recourse only
against GNMA to obtain such payment. The Trustee or its nominee, as registered
holder of the GNMA Certificates held in a Trust Fund, will have the right to
proceed directly against GNMA under the terms of the Guaranty Agreements
relating to such GNMA Certificates for any amounts that are not paid when due.
All mortgage loans underlying a particular GNMA I Certificate must have
the same interest rate (except for pools of mortgage loans secured by
manufactured homes). The interest rate on such GNMA I Certificate will equal the
interest rate on the mortgage loans included in the pool of mortgage loans
underlying such GNMA I Certificate, less one-half percentage point per annum of
the unpaid principal balance of the mortgage loans.
Mortgage loans underlying a particular GNMA II Certificate may have per
annum interest rates that vary from each other by up to one percentage point.
The interest rate on each GNMA II Certificate will be between one-half
percentage point and one and one-half percentage points lower than the highest
interest rate on the mortgage loans included in the pool of mortgage loans
underlying such GNMA II Certificate (except for pools of mortgage loans secured
by manufactured homes).
Regular monthly installment payments on each GNMA Certificate held in a
Trust Fund will be comprised of interest due as specified on such GNMA
Certificate plus the scheduled principal payments on the FHA Loans or VA Loans
underlying such GNMA Certificate due on the first day of the month in which the
scheduled monthly installments on such GNMA Certificate are due. Such regular
monthly installments on each such GNMA Certificate are required to be paid to
the Trustee as registered holder by the 15th day of each month in the case of a
GNMA I Certificate and are required to be mailed to the Trustee by the 20th day
of each month in the case of a GNMA II Certificate. Any principal prepayments on
any FHA Loans or VA Loans underlying a GNMA Certificate held in a Trust Fund or
any other early recovery of principal on such loans will be passed through to
the Trustee as the registered holder of such GNMA Certificate.
Certain GNMA Certificates may be backed by graduated payment mortgage
loans or by Buydown Mortgage Loans for which funds will have been provided (and
deposited into escrow accounts) for application to the payment of a portion of
the borrowers' monthly payments during the early years of such mortgage loan.
Payments due the registered holders of GNMA Certificates backed by pools
containing Buydown Mortgage Loans will be computed in the same manner as
payments derived from other GNMA Certificates and will include amounts to be
collected from both the borrower and the related escrow account. The graduated
payment mortgage loans will provide for graduated interest payments that, during
the early years of such mortgage loans, will be less than the amount of stated
interest on such mortgage loans. The interest not so paid will be added to the
principal of such graduated payment mortgage loans and, together with interest
thereon will be paid in subsequent years. The obligations of GNMA and of a GNMA
Issuer will be the same irrespective of whether the GNMA Certificates are backed
by graduated payment mortgage loans or Buydown Mortgage Loans. No statistics
comparable to the FHA's prepayment experience on level payment, non-"buydown"
mortgage loans are available in respect of graduated payment or Buydown Mortgage
Loans. GNMA Certificates related to a Series of Securities may be held in
book-entry form.
The GNMA Certificates included in a Trust Fund, and the related
underlying mortgage loans, may have characteristics and terms other than those
described above. Any such characteristics and terms will be described in the
related Prospectus Supplement.
Federal Home Loan Mortgage Corporation
Freddie Mac is a corporate instrumentality of the United States created
pursuant to Title III of the Emergency Home Finance Act of 1970, as amended (the
"Freddie Mac Act"). The common stock of Freddie Mac is owned by the Federal Home
Loan Banks and its preferred stock is owned by stockholders of the Federal Home
Loan Banks. Freddie Mac was established primarily for the purpose of increasing
the availability of mortgage credit for the financing of urgently needed
housing. It seeks to provide an enhanced degree of liquidity for residential
mortgage investments primarily by assisting in the development of secondary
markets for conventional mortgages. The principal activity
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of Freddie Mac currently consists of the purchase of first lien conventional
mortgage loans or participation interests in such mortgage loans and the sale of
the mortgage loans or participations so purchased in the form of mortgage
securities, primarily Freddie Mac Certificates. Freddie Mac is confined to
purchasing, so far as practicable, mortgage loans that it deems to be of such
quality, type and class as to meet generally the purchase standards imposed by
private institutional mortgage investors.
Freddie Mac Certificates
Each Freddie Mac Certificate represents an undivided interest in a pool
of mortgage loans that may consist of first lien conventional loans, FHA Loans
or VA Loans. Freddie Mac Certificates are sold under the terms of a Mortgage
Participation Certificate Agreement. A Freddie Mac Certificate may be issued
under either Freddie Mac's Cash Program or Guarantor Program.
Mortgage loans underlying the Freddie Mac Certificates held by a Trust
Fund will consist of mortgage loans with original terms to maturity of between
10 and 40 years. Each such mortgage loan must meet the applicable standards set
forth in the Freddie Mac Act. Such mortgage loans will be secured by loans on
properties that would qualify as Mortgaged Properties. A Freddie Mac Certificate
group may include whole loans, participation interests in whole loans and
undivided interests in whole loans and/or participations comprising another
Freddie Mac Certificate group. Under the Guarantor Program, any such Freddie Mac
Certificate Group may include only whole loans or participation interests in
whole loans.
Freddie Mac guarantees to such registered holder of a Freddie Mac
Certificate the timely payment of interest on the underlying mortgage loans to
the extent of the applicable certificate interest rate on the registered
holder's pro rata share of the unpaid principal balance outstanding on the
underlying mortgage loans in the Freddie Mac Certificate group represented by
such Freddie Mac Certificate, whether or not received. Freddie Mac also
guarantees to each registered holder of a Freddie Mac Certificate collection by
such holder of all principal on the underlying mortgage loans, without any
offset or deduction, to the extent of such holder's pro rata share thereof, but
does not, except if and to the extent specified in the related Prospectus
Supplement for a Series of Securities, guarantee the timely payment of scheduled
principal. Under Freddie Mac's Gold PC Program, Freddie Mac guarantees the
timely payment of principal based on the difference between the pool factor
published in the month preceding the month of distribution and the pool factor
published in such month of distribution. Pursuant to its guaranties, Freddie Mac
indemnifies holders of Freddie Mac Certificates against any diminution in
principal by reason of charges for property repairs, maintenance and
foreclosure. Freddie Mac may remit the amount due on account of its guaranty of
collection of principal at any time after default on an underlying mortgage
loan, but not later than (i) 30 days following foreclosure sale, (ii) 30 days
following payment of the claim by any mortgage insurer or (iii) 30 days
following the expiration of any right of redemption, whichever occurs later, but
in any event no later than one year after demand has been made upon the
mortgagor for accelerated payment of principal. In taking actions regarding the
collection of principal after default on the mortgage loans underlying Freddie
Mac Certificates, including the timing of demand for acceleration, Freddie Mac
reserves the right to exercise its judgment with respect to the mortgage loans
in the same manner as for mortgage loans that it has purchased but not sold. The
length of time necessary for Freddie Mac to determine that a mortgage loan
should be accelerated varies with the particular circumstances of each
mortgagor, and Freddie Mac has not adopted standards which require that the
demand be made within any specified period.
Freddie Mac Certificates are not guaranteed by the United States or by
any Federal Home Loan Bank and do not constitute debts or obligations of the
United States or any Federal Home Loan Bank. The obligations of Freddie Mac
under its guaranty are obligations solely of Freddie Mac and are not backed by,
or entitled to, the full faith and credit of the United States. If Freddie Mac
were unable to satisfy such obligations, distributions to holders of Freddie Mac
Certificates would consist solely of payments and other recoveries on the
underlying mortgage loans and, accordingly, monthly distributions to holders of
Freddie Mac Certificates would be affected by delinquent payments and defaults
on such mortgage loans.
Registered holders of Freddie Mac Certificates are entitled to receive
their monthly pro rata share of all principal payments on the underlying
mortgage loans received by Freddie Mac, including any scheduled principal
payments, full and partial prepayments of principal and principal received by
Freddie Mac by virtue of condemnation,
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insurance, liquidation or foreclosure, and repurchases of the mortgage loans by
Freddie Mac or the seller thereof. Freddie Mac is required to remit each
registered Freddie Mac certificateholder's pro rata share of principal payments
on the underlying mortgage loans, interest at the Freddie Mac pass-through rate
and any other sums such as prepayment fees, within 60 days of the date on which
such payments are deemed to have been received by Freddie Mac.
Under Freddie Mac's Cash Program, there is no limitation on the amount
by which interest rates on the mortgage loans underlying a Freddie Mac
Certificate may exceed the pass-through rate on the Freddie Mac Certificate.
Under such program, Freddie Mac purchases groups of whole mortgage loans from
sellers at specified percentages of their unpaid principal balances, adjusted
for accrued or prepaid interest, which when applied to the interest rate of the
mortgage loans and participations purchased results in the yield (expressed as a
percentage) required by Freddie Mac. The required yield, which includes a
minimum servicing fee retained by the servicer, is calculated using the
outstanding principal balance. The range of interest rates on the mortgage loans
and participations in a Freddie Mac Certificate group under the Cash Program
will vary since mortgage loans and participations are purchased and assigned to
a Freddie Mac Certificate group based upon their yield to Freddie Mac rather
than on the interest rate on the underlying mortgage loans. Under Freddie Mac's
Guarantor Program, the pass-through rate on a Freddie Mac Certificate is
established based upon the lowest interest rate on the underlying mortgage
loans, minus a minimum servicing fee and the amount of Freddie Mac's management
and guaranty income as agreed upon between the seller and Freddie Mac.
Freddie Mac Certificates duly presented for registration of ownership
on or before the last Business Day of a month are registered effective as of the
first day of the month. The first remittance to a registered holder of a Freddie
Mac Certificate will be distributed so as to be received normally by the 15th
day of the second month following the month in which the purchaser became a
registered holder of such Freddie Mac Certificate. Thereafter, such remittance
will be distributed monthly to the registered holder so as to be received
normally by the 15th day of each month. The Federal Reserve Bank of New York
maintains book-entry accounts with respect to Freddie Mac Certificates sold by
Freddie Mac on or after January 2, 1985, and makes payments of principal and
interest each month to the registered holders thereof in accordance with such
holders' instructions.
The Freddie Mac Certificates included in a Trust Fund, and the related
underlying mortgage loans, may have characteristics and terms other than those
described above. Any such characteristics and terms will be described in the
related Prospectus Supplement.
Fannie Mae
Fannie Mae is a federally chartered and privately owned corporation
organized and existing under the Federal National Mortgage Association Charter
Act, as amended. Fannie Mae was originally established in 1938 as a United
States government agency to provide supplemental liquidity to the mortgage
market and was transformed into a stockholder-owned and privately-managed
corporation by legislation enacted in 1968.
Fannie Mae provides funds to the mortgage market primarily by
purchasing mortgage loans from lenders, thereby replenishing their funds for
additional lending. Fannie Mae acquires funds to purchase mortgage loans from
many capital market investors that may not ordinarily invest in mortgages,
thereby expanding the total amount of funds available for housing. Operating
nationwide, Fannie Mae helps to redistribute mortgage funds from capital-surplus
to capital-short areas.
Fannie Mae Certificates
Fannie Mae Certificates are guaranteed mortgage pass-through
certificates representing fractional undivided interests in a pool of mortgage
loans formed by Fannie Mae. Each mortgage loan must meet the applicable
standards of the Fannie Mae purchase program. Mortgage loans comprising a pool
are either provided by Fannie Mae from its own portfolio or purchased pursuant
to the criteria of the Fannie Mae purchase program.
Mortgage loans underlying Fannie Mae Certificates held by a Trust Fund
will consist of conventional mortgage loans, FHA Loans or VA Loans. Original
maturities of substantially all of the conventional, level payment mortgage
loans underlying a Fannie Mae Certificate are expected to be between either 8 to
15 years or 20
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to 40 years. The original maturities of substantially all of the fixed rate,
level payment FHA Loans or VA Loans are expected to be 30 years. Such mortgage
loans will be secured by properties that would qualify as Mortgaged Properties.
Mortgage loans underlying a Fannie Mae Certificate may have annual
interest rates that vary by as much as two percentage points from each other.
The rate of interest payable on a Fannie Mae Certificate is equal to the lowest
interest rate of any mortgage loan in the related pool, less a specified minimum
annual percentage representing servicing compensation and Fannie Mae's guaranty
fee. Under a regular servicing option (pursuant to which the mortgagee or each
other servicer assumes the entire risk of foreclosure losses), the annual
interest rates on the mortgage loans underlying a Fannie Mae Certificate will be
between 50 basis points and 250 basis points greater than its annual
pass-through rate and under a special servicing option (pursuant to which Fannie
Mae assumes the entire risk for foreclosure losses), the annual interest rates
on the mortgage loans underlying a Fannie Mae Certificate will generally be
between 55 basis points and 255 basis points greater than the annual Fannie Mae
Certificate pass-through rate. Fannie Mae Certificates may be backed by
adjustable rate mortgages.
Fannie Mae guarantees to each registered holder of a Fannie Mae
Certificate that it will distribute amounts representing such holder's
proportionate share of scheduled principal and interest payments at the
applicable pass-through rate provided for by such Fannie Mae Certificate on the
underlying mortgage loans, whether or not received, and such holder's
proportionate share of the full principal amount of any foreclosed or other
finally liquidated mortgage loan, whether or not such principal amount is
actually recovered. The obligations of Fannie Mae under its guaranties are
obligations solely of Fannie Mae and are not backed by, or entitled to, the full
faith and credit of the United States. Although the Secretary of the Treasury of
the United States has discretionary authority to lend Fannie Mae up to $2.25
billion outstanding at any time, neither the United States nor any agency
thereof is obligated to finance Fannie Mae's operations or to assist Fannie Mae
in any other manner. If Fannie Mae were unable to satisfy its obligations,
distributions to holders of Fannie Mae Certificates would consist solely of
payments and other recoveries on the underlying mortgage loans and, accordingly,
monthly distributions to holders of Fannie Mae Certificates would be affected by
delinquent payments and defaults on such mortgage loans.
Fannie Mae Certificates evidencing interests in pools of mortgage loans
formed on or after May 1, 1985 (other than Fannie Mae Certificates backed by
pools containing graduated payment mortgage loans or mortgage loans secured by
multifamily projects) are available in book-entry form only. Distributions of
principal and interest on each Fannie Mae Certificate will be made by Fannie Mae
on the 25th day of each month to the persons in whose name the Fannie Mae
Certificate is entered in the books of the Federal Reserve Banks (or registered
on the Fannie Mae Certificate register in the case of fully registered Fannie
Mae Certificates) as of the close of business on the last day of the preceding
month. With respect to Fannie Mae Certificates issued in book-entry form,
distributions thereon will be made by wire, and with respect to fully registered
Fannie Mae Certificates, distributions thereon will be made by check.
The Fannie Mae Certificates included in a Trust Fund, and the related
underlying mortgage loans, may have characteristics and terms other than those
described above. Any such characteristics and terms will be described in the
related Prospectus Supplement.
Stripped Mortgage-Backed Securities
Agency Securities may consist of one or more stripped mortgage-backed
securities, each as described herein and in the related Prospectus Supplement.
Each such Agency Security will represent an undivided interest in all or part of
either the principal distributions (but not the interest distributions) or the
interest distributions (but not the principal distributions), or in some
specified portion of the principal and interest distributions (but not all of
such distributions) on certain Freddie Mac, Fannie Mae or GNMA Certificates. The
yield on and value of stripped Agency Securities are extremely sensitive to the
timing and amount of principal prepayments on the underlying securities. The
underlying securities will be held under a trust agreement by Freddie Mac,
Fannie Mae or GNMA, each as trustee, or by another trustee named in the related
Prospectus Supplement. Freddie Mac, Fannie Mae or GNMA will guarantee each
stripped Agency Security to the same extent as such entity guarantees the
underlying securities backing such stripped Agency Security.
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Other Agency Securities
If specified in the related Prospectus Supplement, a Trust Fund may
include other mortgage pass-through certificates issued or guaranteed by GNMA,
Fannie Mae or Freddie Mac. The characteristics of any such mortgage pass-through
certificates will be described in such Prospectus Supplement. If so specified, a
combination of different types of Agency Securities may be held in a Trust Fund.
ACCOUNTS
Each Trust Fund will include one or more accounts established and
maintained on behalf of the Securityholders into which the person or persons
designated in the related Prospectus Supplement will, to the extent described
herein and in such Prospectus Supplement deposit all payments and collections
received or advanced with respect to the Trust Assets. Such an account may be
maintained as an interest bearing or a non-interest bearing account, and funds
held therein may be held as cash or invested in certain short-term, investment
grade obligations, in each case as described in the related Prospectus
Supplement. See "Description of the Agreements -- Security Account and Other
Collection Accounts."
CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Trust Assets may be
provided to one or more Classes of Offered Securities in the form of
subordination of one or more other Classes of Securities (including Offered
Securities) in such Series or by one or more other types of credit support, such
as a letter of credit, insurance policy, reserve fund or another type of credit
support, or a combination thereof (any such coverage with respect to the
Securities of any Series, "Credit Support"). The amount and types of coverage,
the identification of the entity providing the coverage (if applicable) and
related information with respect to each type of Credit Support, if any, will
be described in the Prospectus Supplement. See "Risk Factors -- Availability of
Credit Support does not eliminate risk of loss on Offered Securities" and
"Description of Credit Support."
LIQUIDITY FACILITIES
If so provided in the related Prospectus Supplement, the Depositor will
establish one or more Liquidity Facilities, which may be used by the Trustee to
make certain required distributions of principal of, or interest on, the
Securities of the related Series to the extent funds are not otherwise
available. The Depositor may fund a Liquidity Facility by depositing cash,
certificates of deposit and/or letters of credit therein on the Closing Date, or
a Liquidity Facility may be funded by the Trustee's deposit therein of Available
Distribution Amounts not required to pay servicing or administrative fees or to
make distributions on the Securities on a Distribution Date until amounts on
deposit in the Liquidity Facility equal a required amount. The method of funding
any Liquidity Facility will be described in the related Prospectus Supplement.
Any Liquidity Facility will be maintained in trust but may not constitute a part
of the Trust Fund for the related Series. The Depositor may have certain rights
on any Distribution Date to cause the Trustee to make withdrawals from a
Liquidity Facility for a Series and to pay such amounts in accordance with the
instructions of the Depositor to the extent that such funds are no longer
required to be maintained for the Securityholders.
CASH FLOW AGREEMENTS
A Trust Fund may include guaranteed investment contracts pursuant to
which moneys held in the funds and accounts established for the related Series
will be invested at a specified rate. The Trust Fund may also include certain
other agreements, such as interest rate exchange agreements, interest rate cap
or floor agreements, currency exchange agreements or similar agreements provided
to reduce the effects of interest rate or currency exchange rate fluctuations on
the Assets or on one or more Classes of Offered Securities. (Currency exchange
agreements might be included in the Trust Fund if some or all of the Assets
(such as Mortgage Loans secured by Mortgaged Properties located outside the
United States) were denominated in a non-United States currency.) The principal
terms of any such guaranteed investment contract or other agreement (any such
agreement, a "Cash Flow Agreement"), including, without limitation, provisions
relating to the timing, manner and amount of payments thereunder and provisions
relating to the termination thereof, will be described in the Prospectus
Supplement. In
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addition, the related Prospectus Supplement will provide certain information
with respect to the obligor under any such Cash Flow Agreement.
PRE-FUNDING
If so specified in the related Prospectus Supplement, a portion of the
issuance proceeds of the Securities of a particular Series (such amount, the
"Pre-Funded Amount") will be deposited in an account (the "Pre-Funding Account")
to be established with the Trustee, which will be used to acquire additional
Assets from time to time during the time period specified in the related
Prospectus Supplement (the "Pre-Funding Period"). Prior to the investment of the
Pre-Funded Amount in additional Assets, such Pre-Funded Amount may be invested
in one or more Permitted Investments. Any Permitted Investment must mature no
later than the Business Day prior to the next Distribution Date.
During any Pre-Funding Period, the Depositor will be obligated (subject
only to the availability thereof) to transfer to the related Trust Fund
additional Assets from time to time during such Pre-Funding Period. Such
additional Assets will be required to satisfy certain eligibility criteria more
fully set forth in the related Prospectus Supplement, which eligibility criteria
will be consistent with the eligibility criteria of the Assets included in the
Trust Fund as of the Closing Date, subject to such exceptions as are expressly
stated in such Prospectus Supplement.
Use of a Pre-Funding Account with respect to any Series of Securities
will be subject to the following general conditions: (a) the Pre-Funding Period
will not exceed three months from the related Closing Date, (b) the additional
Assets to be acquired during the Pre-Funding Period will be subject to the same
underwriting standards, representations and warranties as the Assets included in
the related Trust Fund on the Closing Date (although additional criteria may
also be required to be satisfied, as described in the related Prospectus
Supplement), (c) the Pre-Funded Amount will be not exceed 25% of the principal
amount of the Securities issued as a Series, (d) the Pre-Funded Amount will not
exceed 25% of the scheduled principal balance of the Assets (inclusive of the
related Pre-Funded Amount) as of the Cut-off Date, and (e) the Pre-Funded Amount
shall be invested in Permitted Investments.
To the extent that amounts on deposit in the Pre-Funding Account have
not been fully applied to the purchase of additional Assets by the end of the
Pre-Funding Period, the related Securityholders then entitled to receive
distributions of principal will receive a prepayment of principal in an amount
equal to the related Pre-Funded Amount remaining in the Pre-Funding Account on
the first Distribution Date following the end of the Pre-Funding Period. Any
such prepayment of principal would have an adverse effect on the yield to
maturity of Securities purchased at a premium, and would expose Securityholder
to the risk that alternative investments of equivalent value may not be
available at such later time. If specified in the related Prospectus Supplement,
the Depositor may be required to deposit cash into an account maintained by the
Trustee (the "Capitalized Interest Account") for the purpose of assuring the
availability of funds to pay interest with respect to the Securities during the
Pre-Funding Period. Any amount remaining in the Capitalized Interest Account at
the end of the Pre-Funding Period will be remitted as specified in the related
Prospectus Supplement.
A maximum of 5% of the Assets (including Assets acquired after the
Closing Date with Pre-Funded Amounts) included in the Trust Fund will deviate
from the characteristics of the Assets described in the related Prospectus
Supplement. Further, information regarding additional Assets acquired by a Trust
Fund during the Pre-Funding Period comparable to the disclosure regarding the
Assets in the related Prospectus Supplement will be filed on a Current Report on
Form 8-K (in addition to any other reporting requirements of the Trust Fund
under the Exchange Act) within fifteen days following the end of the Pre-Funding
Period.
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YIELD CONSIDERATIONS
GENERAL
The yield on any Offered Security will depend on the price paid by the
Securityholder, the Pass-Through Rate or Interest Rate of the Offered Security,
the receipt and timing of receipt of distributions on the Offered Security and
the weighted average life of the related Trust Assets (which may be affected by
prepayments, defaults, liquidations or repurchases). See "Risk Factors."
ANY REDEMPTION OR TERMINATION OF THE SECURITIES WILL HAVE AN ADVERSE
AFFECT ON THE YIELD TO MATURITY OF ANY SECURITIES PURCHASED AT A PREMIUM,
BECAUSE SUCH REDEMPTION OR TERMINATION WILL HAVE THE SAME EFFECT AS A
PREPAYMENT IN FULL OF THE ASSETS.
PASS-THROUGH RATE AND INTEREST RATE
Offered Securities may have fixed, variable or adjustable Pass-Through
Rates or Interest Rates, which may or may not be based upon the interest rates
borne by the related Trust Assets. The Prospectus Supplement will specify the
Pass-Through Rate or Interest Rate for each Class of Offered Securities or, in
the case of a variable or adjustable Pass-Through Rate or Interest Rate, the
method of determining the Pass-Through Rate or Interest Rate; the effect, if
any, of the prepayment of any Asset on the Pass-Through Rate or Interest Rate of
one or more Classes of Offered Securities; and whether the distributions of
interest on the Offered Securities of any Class will be dependent, in whole or
in part, on the performance of any obligor under a Cash Flow Agreement.
The effective yield to maturity to each holder of Offered Securities
entitled to payments of interest will be less than that otherwise produced by
the applicable Pass-Through Rate or Interest Rate and purchase price of such
Offered Security because, while interest may accrue on each Asset during a
certain period, the distribution of such interest will be made following the
period of accrual.
TIMING OF PAYMENT OF INTEREST
Each payment of interest on the Offered Securities (or addition to the
Security Balance of a Class of Accrual Securities) on a Distribution Date will
include interest accrued during the Interest Accrual Period for such
Distribution Date. As indicated above under "-- Pass-Through Rate and Interest
Rate," if the Interest Accrual Period ends on a date other than a Distribution
Date for the related Series, the yield realized by the holders of such
Securities may be lower than the yield that would result if the Interest Accrual
Period ended on such Distribution Date. In addition, if so specified in the
related Prospectus Supplement, interest accrued for an Interest Accrual Period
for one or more Classes of Offered Securities may be calculated on the
assumption that distributions of principal (and additions to the Security
Balance of Accrual Securities) and allocations of losses on the Assets may be
made on the first day of the Interest Accrual Period for a Distribution Date and
not on such Distribution Date. Such method would produce a lower effective yield
than if interest were calculated on the basis of the actual principal amount
outstanding during an Interest Accrual Period. The Interest Accrual Period for
any Class of Offered Securities will be specified in the related Prospectus
Supplement.
PAYMENTS OF PRINCIPAL; PREPAYMENTS
The yield to maturity on the Offered Securities will be affected by the
rate of principal payments on the Assets (including principal prepayments on
Mortgage Loans resulting from both voluntary prepayments by the mortgagors and
involuntary liquidations). The rate at which principal prepayments occur on the
Assets will be affected by a variety of factors, including, without limitation,
the terms of the Mortgage Loans, the level of prevailing interest rates, the
availability of mortgage credit and economic, demographic, geographic, tax,
legal and other factors. In general, however, if prevailing interest rates fall
significantly below the Mortgage Rates on the Mortgage Loans comprising or
underlying the Trust Assets, such Mortgage Loans are likely to be the subject of
higher principal prepayments than if prevailing rates remain at or above the
rates borne by such Mortgage Loans. In this regard, it should be noted that
certain Assets may consist of Mortgage Loans with different Mortgage Rates and
the stated pass-through or pay-through interest rate of certain MBS may be a
number of percentage points higher or lower than certain of the underlying
Mortgage Loans. The rate of principal payments on some or all of the Classes of
Offered Securities will correspond to the rate of principal payments on the
Trust Assets and is likely to be affected by the existence of Lock-out Periods
and Prepayment Premium provisions of the Mortgage Loans underlying or comprising
such Trust Assets, and by the extent to which the servicer of any such Mortgage
Loan is able to enforce such provisions. Mortgage Loans with a Lock-out Period
or a Prepayment Premium provision, to the extent enforceable, generally would be
expected to experience a lower rate of principal prepayments than
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otherwise identical Mortgage Loans without such provisions, with shorter
Lock-out Periods or with lower Prepayment Premiums.
If the purchaser of an Offered Security sold at a discount calculates
its anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Assets, the
actual yield to maturity will be lower than that so calculated. Conversely, if
the purchaser of an Offered Security sold at a premium calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is slower than that actually experienced on the Assets, the
actual yield to maturity will be lower than that so calculated. In either case,
the effect of prepayments on yield may be mitigated or exacerbated by provisions
for sequential or selective distribution of principal.
When a full prepayment is made on a Mortgage Loan, the mortgagor is
charged interest on the principal amount of the Mortgage Loan so prepaid for the
number of days in the month actually elapsed up to the date of the prepayment.
The effect of prepayments in full will be to reduce the amount of interest paid
or available to be paid in the following month to holders of Securities entitled
to payments of interest because interest on the principal amount of any Mortgage
Loan so prepaid will be paid only to the date of prepayment rather than for a
full month. Generally, a partial prepayment of principal is applied so as to
reduce the outstanding principal balance of the related Mortgage Loan as of the
Due Date in the month in which such partial prepayment is received. As a result,
the effect of a partial prepayment on a Mortgage Loan will be to reduce the
amount of interest passed through to holders of Securities in the month
following the receipt of such partial prepayment by an amount equal to one
month's interest at the applicable Pass-Through Rate or Interest Rate on the
prepaid amount. Additionally, in the case of FHA Loans and VA Loans, certain
events of default may result in delayed payment of principal and interest for
certain Classes of Securities.
The timing of changes in the rate of principal payments on the Assets
may significantly affect an investor's actual yield to maturity, even if the
average rate of distributions of principal is consistent with an investor's
expectation. In general, the earlier a principal payment is received on the
Assets and distributed on a Security, the greater the effect on such investor's
yield to maturity. The effect on an investor's yield of principal payments
occurring at a rate higher (or lower) than the rate anticipated by the investor
during a given period may not be offset by a subsequent like decrease (or
increase) in the rate of principal payments.
PREPAYMENTS -- MATURITY AND WEIGHTED AVERAGE LIFE
The rates at which principal payments are received on the Trust Assets
and the rate at which payments are made from any Credit Support or Cash Flow
Agreement for a Series of Securities may affect the maturity and the weighted
average life of each related Class of Offered Securities. Prepayments on the
Mortgage Loans will generally accelerate the rate at which principal is paid on
some or all of the related Classes of Securities.
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a Security until each dollar of principal of
such Security will be repaid to the investor. The weighted average life of the
Securities will be influenced by the rate at which principal on the Mortgage
Loans comprising or underlying the Assets is paid to such Class, which may be in
the form of scheduled amortization or prepayments (for this purpose, the term
"Prepayment" includes prepayments, in whole or in part, and liquidations due to
default).
Prepayments on loans are also commonly measured relative to a
prepayment standard or model, such as the Constant Prepayment Rate ("CPR")
prepayment model or the Standard Prepayment Assumption ("SPA") prepayment model,
each as described below. CPR represents a constant assumed rate of prepayment
each month relative to the then outstanding principal balance of a pool of loans
for the life of such loans. SPA represents an assumed rate of prepayment each
month relative to the then outstanding principal balance of a pool of loans. A
prepayment assumption of 100% of SPA assumes prepayment rates of 0.2% per annum
of the then outstanding principal balance of such loans in the first month of
the life of the loans and an additional 0.2% per annum in each month thereafter
until the thirtieth month. Beginning in the thirtieth month and in each month
thereafter during the life of the loans, 100% of SPA assumes a constant
prepayment rate of 6% per annum each month.
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Neither CPR nor SPA nor any other prepayment model or assumption
purports to be a historical description of prepayment experience or a prediction
of the anticipated rate of prepayment of any pool of loans, including the
Mortgage Loans.
In general, if interest rates fall below the Mortgage Rates on
fixed-rate Mortgage Loans, the rate of prepayment is expected to increase.
The Prospectus Supplement may contain tables, if applicable, setting
forth the projected weighted average life of the Offered Securities of such
Series and the percentage of the initial Security Balance thereof that would be
outstanding on specified Distribution Dates based on the assumptions stated
therein, including assumptions that prepayments on the Mortgage Loans are made
at rates corresponding to various percentages of CPR, SPA or at such other rates
specified in such Prospectus Supplement. Such tables and assumptions are
intended to illustrate the sensitivity of weighted average life of the Offered
Securities to various prepayment rates and will not be intended to predict or to
provide information that will enable investors to predict the actual weighted
average life of the Offered Securities. It is unlikely that prepayment of any
Mortgage Loans will conform to any particular level of CPR, SPA or any other
rate specified in the related Prospectus Supplement.
OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
Type of Asset
To the extent specified in the related Prospectus Supplement, Mortgage
Loans may have balloon payments due at maturity. Because the ability of a
mortgagor to make a balloon payment depends upon its ability either to refinance
the loan or to sell the related Mortgaged Property, there is a risk that Balloon
Mortgage Loans will default at maturity. In the case of defaults, recovery of
proceeds may be delayed by, among other things, bankruptcy of the mortgagor or
adverse conditions in the market where the property is located. In order to
minimize losses on defaulted Mortgage Loans, the Master Servicer or Sub-Servicer
may, to the extent and under the circumstances set forth in the related
Prospectus Supplement, be permitted to modify Mortgage Loans that are in default
or as to which a payment default is imminent. Any defaulted balloon payment or
modification that extends the maturity of a Mortgage Loan will tend to extend
the weighted average life of the Offered Securities.
With respect to certain Mortgage Loans (particularly ARM Loans), the
Mortgage Rate at origination may be below the rate that would result if the
index and margin relating thereto were applied at origination. Under certain
underwriting standards, the mortgagor under each Mortgage Loan will be qualified
on the basis of the Mortgage Rate in effect at origination. The repayment of any
such Mortgage Loan may thus be dependent on the ability of the mortgagor to make
larger level monthly payments following the adjustment of the Mortgage Rate. In
addition, Buydown Mortgage Loans provide for a period of time (the "Buydown
Period") during which the monthly payment made by the Mortgagor will be less
than the scheduled monthly payment thereon. The periodic increase in the amount
paid by the mortgagor of a Buydown Mortgage Loan during or at the end of the
applicable Buydown Period may create a greater financial burden for the
mortgagor, who might not have otherwise qualified for a mortgage, and may
accordingly increase the risk of default.
The Mortgage Rates on certain ARM Loans subject to negative
amortization generally adjust monthly and their amortization schedules adjust
less frequently. During a period of rising interest rates as well as immediately
after origination (initial Mortgage Rates are generally lower than the sum of
the applicable index at origination and the related margin over such index at
which interest accrues), the amount of interest accruing on the principal
balance of such Mortgage Loans may exceed the amount of the minimum scheduled
monthly payment thereon. As a result, a portion of the accrued interest on
negatively amortizing Mortgage Loans may be added to the principal balance
thereof and will bear interest at the applicable Mortgage Rate. The addition of
deferred interest to the Security Principal Balance of Offered Securities will
lengthen the weighted average life thereof and may adversely affect yield to
holders thereof, particularly those purchased at a premium from their parity
price. In addition, with respect to certain ARM Loans subject to negative
amortization, during a period of declining interest rates, it might be expected
that each minimum scheduled monthly payment on such a Mortgage Loan would exceed
the amount of scheduled principal and accrued interest on the principal balance
thereof, and because such excess will be applied
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to reduce the Security Principal Balance of the related Class or Classes of
Securities, the weighted average life of such Securities will be reduced and may
adversely affect yield to holders thereof, depending upon the price at which
such Securities were purchased.
Defaults
The rate of defaults on the Mortgage Loans will also affect the rate
and timing of principal payments on the Assets and thus the yield on the Offered
Securities. In general, defaults on mortgage loans are expected to occur with
greater frequency in their early years. The rate of default on Mortgage Loans
which are refinance or limited documentation mortgage loans, and on Mortgage
Loans with high Loan-to-Value Ratios, may be higher than for other types of
Mortgage Loans. Reinstated Mortgage Loans will likely experience a higher rate
of default than Mortgage Loans that have no history of delinquent Mortgagor
payments. Furthermore, the rate and timing of prepayments, defaults and
liquidations on the Mortgage Loans will be affected by the general economic
condition of the geographic region in which the related Mortgaged Properties are
located. The risk of delinquencies and loss is greater and prepayments are less
likely in regions where a weak or deteriorating economy exists, as may be
evidenced by, among other factors, increasing unemployment or falling property
values.
Foreclosures
The number of foreclosures and the principal amount of the Mortgage
Loans that are foreclosed in relation to the number and principal amount of
Mortgage Loans that are repaid in accordance with their terms will affect the
weighted average life of the Mortgage Loans and, accordingly, that of the
related Offered Securities.
Refinancing
At the request of a mortgagor, the Master Servicer or a Sub-Servicer
may allow the refinancing of a Mortgage Loan by accepting prepayments thereon
and permitting a new loan secured by a mortgage on the same property. In the
event of such a refinancing, the new loan would not be included in the related
Trust Fund and, therefore, such refinancing would have the same effect as a
prepayment in full of the related Mortgage Loan. A Sub-Servicer or the Master
Servicer may, from time to time, implement programs designed to encourage
refinancing. Such programs may include, without limitation, modifications of
existing loans, general or targeted solicitations, the offering of pre-approved
applications, reduced origination fees or closing costs, or other financial
incentives. In addition, Sub-Servicers may encourage the refinancing of Mortgage
Loans, including defaulted Mortgage Loans, that would permit creditworthy
borrowers to assume the outstanding indebtedness of such Mortgage Loans.
Due-on-Sale Clauses
Acceleration of mortgage payments as a result of certain transfers of
underlying Mortgaged Property is another factor affecting prepayment rates that
may not be reflected in the prepayment standards or models used in the relevant
Prospectus Supplement. A number of the Mortgage Loans may include "due-on-sale"
clauses that allow the holders of the Mortgage Loans to demand payment in full
of the remaining principal balance of the Mortgage Loans upon sale, transfer or
conveyance of the related Mortgaged Property. With respect to any Mortgage
Loans, the Master Servicer will generally enforce any due-on-sale clause to the
extent it has knowledge of the conveyance or proposed conveyance of the
underlying Mortgaged Property and it is entitled to do so under applicable law;
provided, however, that the Master Servicer will not take any action in relation
to the enforcement of any due-on-sale provision which would adversely affect or
jeopardize coverage under any applicable insurance policy. See "Certain Legal
Aspects of Mortgage Loans -- Due-on-Sale Clauses" and "Description of the
Agreements -- Due-on-Sale Provisions."
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THE DEPOSITOR
Union Planters Mortgage Finance Corp., the Depositor, is a direct
wholly-owned finance subsidiary of Union Planters Bank, N.A. and was
incorporated in the State of Delaware on September 5, 1997. The principal
executive offices of the Depositor are located at 7130 Goodlett Farms Parkway,
Cordova, Tennessee, 38018. Its telephone number is (901) 580-6000.
The Depositor does not have, nor is it expected in the future to have,
any significant assets.
Financial Information.
The Depositor was incorporated on September 5, 1997, and has no
business operations other than issuing Securities collateralized by mortgage
related assets, and transactions related thereto. Subsequent to incorporation,
the Depositor issued 1,000 shares of common stock to the Bank on September 5,
1997. Because the Depositor has no history of business operations, no Selected
Financial Data and no Management's Discussion and Analysis of Financial
Condition and Results of Operations are presented.
Financial Statements and Supplementary Data.
33
<PAGE> 44
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
Union Planters Mortgage Finance Corp.
In our opinion, the accompanying balance sheet presents
fairly, in all material respects, the financial position of Union Planters
Mortgage Finance Corp. (the "Company"), a wholly-owned subsidiary of Union
Planters Bank, N.A., at December 31, 1997 in conformity with generally accepted
accounting principles. This financial statement is the responsibility of the
Company's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the balance sheet
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall balance sheet presentation. We believe that our audit of
the balance sheet provides a reasonable basis for the opinion expressed above.
/s/Price Waterhouse LLP
Memphis, Tennessee
March 16, 1998
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<PAGE> 45
UNION PLANTERS MORTGAGE FINANCE CORP.
(A WHOLLY-OWNED SUBSIDIARY
OF UNION PLANTERS BANK, N.A.)
AUDITED BALANCE SHEET AS OF
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Cash $ 10,000
TOTAL ASSETS $ 10,000
STOCKHOLDER'S EQUITY
Common stock, par value $0.01 per share, 1000 shares authorized,
issued and outstanding 10
Additional paid-in-capital 9,990
TOTAL STOCKHOLDER'S EQUITY $ 10,000
</TABLE>
The notes to the balance sheet are an integral part of this statement.
35
<PAGE> 46
UNION PLANTERS MORTGAGE FINANCE CORP.
(A WHOLLY-OWNED SUBSIDIARY
OF UNION PLANTERS BANK, N.A.)
NOTES TO THE BALANCE SHEET
NOTE 1 - ORGANIZATION OF THE COMPANY
Union Planters Mortgage Finance Corp. (the "Company"), a wholly-owned subsidiary
of Union Planters Bank, N.A. (the "Bank"), was incorporated on September 5,
1997. The Company was organized to facilitate the financing of mortgage-backed
securities and mortgage loans originated or purchased by affiliates of the Bank
and other entities, through the issuance and sale of mortgage participation
securities and mortgage-backed bonds. On September 5, 1997, the Company sold
1,000 shares of common stock to the Bank for $10,000. The Company had no
operations, income or cash flows for the period prior to December 31, 1997.
NOTE 2--SECURITIES ISSUANCES
The Company has filed initial registration statements with the Securities and
Exchange Commission on September 12, 1997 and March 10, 1998, providing for
the issuance of securities in the aggregate principal amount of $900,000,000.
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<PAGE> 47
Properties.
The Depositor has no physical properties. The Depositor's principal
place of business is 7130 Goodlett Farms Parkway, Cordova, Tennessee, which is
the Bank's administrative office. The Depositor has no rental or other
agreement with the Bank for the use of any office space. Its primary assets
will be Collateral pledged to a trustee to secure a Series of Securities.
Security Ownership of Certain Beneficial Owners and Management.
The Depositor is a wholly-owned subsidiary of the Bank. The
Depositor's officers and directors do no own any shares of the Bank or any
Securities issued by the Depositor.
Directors and Executive Officers.
The directors and executive officers of the Depositor are:
<TABLE>
<CAPTION>
Name Position Age
---- -------- ---
<S> <C> <C>
John E. Gnuschke, Ph.D. Director 53
Joel R. Katz Director; President 42
James K. Plunkett Director; Vice President;
Secretary 37
Leslie M. Stratton Director 61
</TABLE>
Dr. Gnuschke has been a Director since February 24, 1998. He is
serving a one-year term as Director. Dr. Gnuschke's business experience for the
past five years is as follows: he is currently director of the Bureau of
Business and Economic Research and the Center for Manpower Studies and
Professor of Economics at the University of Memphis. The Bureau and the Center
are the applied business, economic, and labor market research divisions within
the Fogelman College of Business and Economics. The divisions also support
research and publication efforts of faculty members and interact with other
research organizations. The programs of the units include public service to
government agencies and the business community. Dr. Gnuschke received Ph.D. and
M.A. degrees from the University of Missouri and a B.S. from Utah State.
Mr. Katz has been Chairman of the Board of Directors and President of
the Depositor since its organization. He is serving a one-year term as
Director. Mr. Katz's business experience for the past five years is as follows:
he has been president of Union Planters Mortgage since February 1, 1998. Prior
to his employment with Union Planters Mortgage, Mr. Katz was president and
chief executive officer of Boatmen's National Mortgage, Inc. In addition to
overall management of Boatmen's National Mortgage, Inc., Mr. Katz's
responsibilities included servicing acquisitions and servicing activities
involved with the company's REMIC, CMO and other structured finance
transactions. His prior employment also includes several years as an attorney
with Brown & Wood in New York, New York.
Mr. Plunkett has been a Director, Vice President and Secretary of the
Depositor since its organization. He is serving a one-year term as Director.
Mr. Plunkett's business experience for the past five years is as follows: he
has been Senior Vice President in the Funds Management Division of Union
Planters Corporation since March 1, 1995. Mr. Plunkett was Senior Vice
President and manager of Investments and Funds Management for Sunburst Bank in
Grenada, Mississippi for several years prior to joining Union Planters
Corporation. His responsibilities in both positions include Net Interest Margin
and Asset Liability Management, portfolio strategy and execution,
securitization and the sale of loans, and other trading and balance sheet
management activities.
Mr. Stratton has been a Director of the Depositor since its
organization. He is serving a one-year term as Director. Mr. Stratton's
business experience for the past five years is as follows: he is the Chairman
and owner of Leslie M. Stratton, a wholesale distributor of hardware and
equipment.
Executive Compensation.
The executive officers of the Depositor do not receive any
remuneration from the Depositor. Dr. Gnuschke currently receives $3,600
annually for serving as a director of the Depositor, and the remaining
Directors do not receive any remuneration for serving as Directors of the
Depositor.
Certain Relationships and Related Transactions.
With respect to each Series of Securities, the Depositor may purchase
from the Bank, or an affiliate thereof, certain of the Collateral that will
secure such Series of Securities. The Bank will advance to, or contribute to
the capital of, the Depositor funds as necessary to pay certain Security
issuance costs and administrative expenses. The Depositor will be obligated to
repay any advances and, in addition, to reimburse the Bank for amounts for
which the Bank may become obligated to any bank issuing a letter of credit used
to fund the various funds comprising a portion of the collateral for a Series.
Such reimbursement obligations, however, will be subordinate to the Depositor's
obligations to the security holders.
The Bank, a subsidiary of Union Planters Corporation, will provide the
Depositor with accounting and administrative services, including services of
officers, and will charge the Depositor for such services. Payment for such
services will be subordinate to the Depositor's obligations to the holders of
Securities. The Bank may act as a master servicer or serviceer with respect to
mortgage loans comprising a portion of the collateral. The Bank will receive
customary master servicing and servicing fees, as applicable, for such services.
Legal Proceedings.
There are no pending legal proceedings to which the Depositor is a
party or to which any property of the Depositor is subject.
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<PAGE> 48
DESCRIPTION OF THE OFFERED SECURITIES
GENERAL
Each Series of Bonds will be issued pursuant to an indenture (the
"Indenture") between the Depositor (or a trust established by the Depositor) and
the trustee named in the related Prospectus Supplement as trustee (the
"Trustee") with respect to such Series. A form of Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
Certificates will also be issued in Series pursuant to separate agreements
(each, a "Pooling and Servicing Agreement" or a "Trust Agreement") among the
Depositor, the Master Servicer, and the Trustee. A form of each Agreement has
been filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The Indenture, the Pooling and Servicing Agreement and the Trust
Agreement are herein referred to as the "Agreements." A Series may consist of
both Bonds and Certificates.
The following summaries describe certain provisions in the Agreements
common to each Series of Securities. The summaries do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, the
provisions of the Agreements and the Prospectus Supplement. Where particular
provisions or terms used in the Agreements are referred to, the actual
provisions (including the definitions of terms) are incorporated herein by
reference as part of such summaries.
Each Class of Securities may (i) provide for the accrual of interest
thereon based on fixed, variable or adjustable rates; (ii) be senior
(collectively, "Senior Securities") or subordinate (collectively, "Subordinate
Securities") to one or more other Classes of Securities in respect of certain
distributions; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions (collectively,
"Stripped Principal Securities"); (iv) be entitled to interest distributions,
with disproportionately low, nominal or no principal distributions
(collectively, "Stripped Interest Securities"); (v) provide for distributions of
accrued interest thereon commencing only following the occurrence of certain
events, such as the retirement of one or more other Classes of Securities
(collectively, "Accrual Securities"); (vi) provide for payments of principal
sequentially, based on specified payment schedules, from only a portion of the
Assets in such Trust Fund or based on specified calculations; and/or (vii)
provide for distributions based on a combination of two or more components
thereof with one or more of the characteristics described in this paragraph
including a Stripped Principal Security component and a Stripped Interest
Security component, in the aggregate to the extent of the Available Distribution
Amount. Distributions on one or more Classes of Securities may be limited to
collections from a designated portion of the Assets (each such portion of
Assets, an "Asset Group").
Each Class of Offered Securities will be issued in minimum
denominations corresponding to the Security Balances or, in case of Stripped
Interest Securities, notional amounts or percentage interests specified in the
related Prospectus Supplement. The transfer of any Offered Securities may be
registered and such Offered Securities may be exchanged without the payment of
any service charge payable in connection with such registration of transfer or
exchange, but the Depositor or the Trustee or any agent thereof may require
payment of a sum sufficient to cover any tax or other governmental charge. One
or more Classes of Offered Securities may be issued, in definitive form or in
book-entry form ("Book-Entry Securities"), as provided in the related Prospectus
Supplement. See "Risk Factors -- The Offered Securities may be registered in
book-entry form" and "Description of the Offered Securities -- Book-Entry
Registration." Definitive Securities will be exchangeable for other Securities
of the same Class and Series of a like aggregate Security Balance, notional
amount or percentage interest, but of different authorized denominations.
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<PAGE> 49
DISTRIBUTIONS
Distributions on the Offered Securities will be made by or on behalf of
the Trustee on each Distribution Date as specified in the related Prospectus
Supplement from the Available Distribution Amount for such Series and such
Distribution Date. Unless a different date is specified in the related
Prospectus Supplement, distributions (other than the final distribution) will be
made to the persons in whose names the Offered Securities are registered at the
close of business on the last Business Day of the month preceding the month in
which the Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date
specified in the related Prospectus Supplement (the "Determination Date"). All
distributions with respect to each Class of Securities on each Distribution Date
will be allocated as described in the related Prospectus Supplement. Payments
will be made either by wire transfer of immediately available funds to the
account of a Securityholder at a bank or other entity having appropriate
facilities therefor, if such Securityholder has so notified the Trustee or other
person required to make such payments no later than the date specified in the
related Prospectus Supplement (and, if so provided in the related Prospectus
Supplement, holds Securities in the requisite amount specified therein), or by
check mailed to the address of the person entitled thereto as it appears on the
Security Register; provided, however, that the final distribution in retirement
of the Securities will be made only upon presentation and surrender of the
Securities at the location specified in the notice to Securityholders of such
final distribution.
AVAILABLE DISTRIBUTION AMOUNT
All distributions on the Offered Securities of each Series on each
Distribution Date will be made from the Available Distribution Amount described
below, in accordance with the terms described in the related Prospectus
Supplement. Generally, the "Available Distribution Amount" for each Distribution
Date will equal the sum of the following amounts:
(i) the total amount of all cash on deposit in the
related Security Account as of the corresponding Determination Date,
exclusive of:
(a) all scheduled payments of principal and interest
collected but due on a date subsequent to the related Due
Period,
(b) all prepayments, together with related payments
of the interest thereon and related Prepayment Premiums,
Liquidation Proceeds, Insurance Proceeds and other unscheduled
recoveries received subsequent to the related Due Period,
(c) all amounts in the Security Account that are due
or reimbursable to the Depositor, the Trustee, an Asset
Seller, a Sub-Servicer, the Master Servicer or any other
entity as specified in the related Prospectus Supplement or
that are payable in respect of certain expenses of the related
Trust Fund, and
(d) all amounts received subsequent to the related
Due Period for a repurchase of an Asset from the Trust Fund
for defective documentation or a breach of representation or
warranty;
(ii) if the related Prospectus Supplement so provides,
interest or investment income on amounts on deposit in the Security
Account, including any net amounts paid under any Cash Flow Agreements;
(iii) all advances made by a Master Servicer, a
Sub-Servicer or any other entity as specified in the related Prospectus
Supplement with respect to such Distribution Date;
39
<PAGE> 50
(iv) if and to the extent the related Prospectus
Supplement so provides, amounts paid by a Master Servicer, a
Sub-Servicer or any other entity as specified in the related Prospectus
Supplement with respect to interest shortfalls resulting from
prepayments during the related Prepayment Period; and
(v) to the extent not on deposit in the related Security
Account as of the corresponding Determination Date, any amounts
collected under, from or in respect of any Credit Support or Liquidity
Facilities with respect to such Distribution Date.
As described below, the entire Available Distribution Amount will be
distributed among the related Securities (including any Securities not offered
hereby) on each Distribution Date, and accordingly will be released from the
Trust Fund and will not be available for any future distributions. The related
Prospectus Supplement for a Series of Securities will describe any variation in
the calculation of the Available Distribution Amount for such Series.
DISTRIBUTIONS OF INTEREST
Each Class of Offered Securities (other than Classes of Stripped
Principal Securities that have no Pass-Through Rate or Interest Rate) may have a
different Pass-Through Rate or Interest Rate, which will be a fixed, variable or
adjustable rate at which interest will accrue on such Class or a component
thereof. The related Prospectus Supplement will specify the Pass-Through Rate or
Interest Rate for each Class or component or, in the case of a variable or
adjustable Pass-Through Rate or Interest Rate, the method for determining the
Pass-Through Rate or Interest Rate. Interest on the Offered Securities will be
calculated on the basis of a 360-day year consisting of twelve 30-day months or
on the basis of actual days elapsed, as specified in the related Prospectus
Supplement.
Distributions of interest in respect of the Offered Securities will be
made on each Distribution Date (other than any Class of Accrual Securities,
which will be entitled to distributions of accrued interest commencing only on
the Distribution Date or under the circumstances specified in the related
Prospectus Supplement, and any Class of Stripped Principal Securities that are
not entitled to any distributions of interest) based on the Accrued Security
Interest for such Class and such Distribution Date, subject to the sufficiency
of the portion of the Available Distribution Amount allocable to such Class on
such Distribution Date. Prior to the time interest is distributable on any Class
of Accrual Securities, the amount of Accrued Security Interest otherwise
distributable on such Class will be added to the Security Balance thereof on
each Distribution Date. With respect to each Class of Securities and each
Distribution Date (other than certain Classes of Stripped Interest Securities),
"Accrued Security Interest" will be equal to interest accrued for a specified
period on the outstanding Security Balance thereof immediately prior to the
Distribution Date, at the applicable Pass-Through Rate or Interest Rate, subject
to certain reductions described below or in the related Prospectus Supplement.
Accrued Security Interest on Stripped Interest Securities will be equal to
interest accrued for a specified period on the outstanding notional amount
thereof immediately prior to each Distribution Date, at the applicable
Pass-Through Rate or Interest Rate, subject to certain reductions as described
below, or accrued as otherwise described in the related Prospectus Supplement.
The method of determining the notional amount for any Class of Stripped Interest
Securities will be described in the related Prospectus Supplement. Reference to
notional amount is solely for convenience in certain calculations and does not
represent the right to receive any distributions of principal. Unless otherwise
provided in the related Prospectus Supplement, Accrued Security Interest on a
Series of Securities will be reduced in the event of prepayment interest
shortfalls, which are shortfalls in collections of interest for a full accrual
period resulting from prepayments prior to the due date in such accrual period
on the Mortgage Loans comprising or underlying the Assets in the Trust Fund for
such Series. The particular manner in which such shortfalls are to be allocated
among some or all of the Classes of Securities will be specified in the related
Prospectus Supplement. The related Prospectus Supplement will also describe the
extent to which the amount of Accrued Security Interest that is otherwise
distributable on (or, in the case of Accrual Securities, that may otherwise be
added to the Security Balance of) a Class of Offered Securities may be reduced
as a result of any other contingencies, including delinquencies, losses and
deferred interest on or in respect of the Mortgage Loans comprising or
underlying the Assets in the related Trust Fund. Unless otherwise provided in
the related Prospectus Supplement, any reduction in the amount of Accrued
Security Interest otherwise distributable on a Class of Securities by reason of
the allocation to such Class of a portion of any deferred interest on the
Mortgage Loans comprising or underlying the Assets in the related Trust Fund
will result in a corresponding increase in the
40
<PAGE> 51
Security Balance of such Class. See "Risk Factors -- Prepayment timing and
frequency may adversely affect yield of Securityholders" and "Yield
Considerations."
DISTRIBUTIONS OF PRINCIPAL
The Securities of each Series, other than certain Classes of Stripped
Interest Securities, will have a "Security Balance" which, at any time, will
equal the then maximum amount that the holder will be entitled to receive in
respect of principal out of the future cash flow on the Trust Assets. Generally,
the outstanding Security Balance of a Security will be reduced to the extent of
distributions of principal thereon from time to time and, if and to the extent
so provided in the related Prospectus Supplement, by the amount of losses
incurred in respect of the related Assets that are allocated to such Class.
Moreover, Security Balances may be increased through interest deferral on the
related Mortgage Loans and, in the case of Accrual Securities prior to the
Distribution Date on which distributions of interest are required to commence,
Security Balances will be increased by any related Accrued Security Interest.
The initial aggregate Security Balance of all Classes of Securities of a Series
will not be greater than the sum of (i) the outstanding aggregate principal
balance of the Assets as of the Cut-off Date and (ii) amounts on deposit in the
Pre-Funding Account, if any, as of the Closing Date. The initial aggregate
Security Balance of a Series and each Class thereof will be specified in the
related Prospectus Supplement. Distributions of principal will be made on each
Distribution Date to the Class or Classes of Securities entitled thereto in
accordance with the provisions described in such Prospectus Supplement until the
Security Balance of such Class has been reduced to zero. Stripped Interest
Securities with no Security Balance are not entitled to any principal
distributions.
COMPONENTS
To the extent specified in the related Prospectus Supplement,
distribution on a Class of Offered Securities may be based on a combination of
two or more different components as described under "-- General" above. To such
extent, the descriptions set forth under "-- Distributions of Interests" and "
- -- Distributions of Principal" above also relate to components. In such case,
reference in such sections to Security Balance and Pass-Through Rate or Interest
Rate refer to the principal balance, if any, of any such component and the
Pass-Through Rate or Interest Rate, if any, on any such component, respectively.
ALLOCATION OF LOSSES AND SHORTFALLS
If so provided in the Prospectus Supplement for a Series of Securities
consisting of one or more Classes of Subordinate Securities, on any Distribution
Date in respect of which losses or shortfalls in collections on the Assets have
been incurred, the amount of such losses or shortfalls will be borne first by a
Class of Subordinate Securities in the priority and manner and subject to the
limitations specified in such Prospectus Supplement. See "Description of Credit
Support" for a description of the types of protection that may be included in a
Trust Fund against losses and shortfalls on Assets comprising such Trust Fund.
ADVANCES IN RESPECT OF DELINQUENCIES
The Master Servicer (or another entity described in the Prospectus
Supplement) may be required to advance as part of its servicing responsibilities
on or before each Distribution Date its own funds or funds held in a collection
account for the Securities in an amount equal to the aggregate of payments of
principal (other than any balloon payments) and interest (net of related
servicing fees and Retained Interest) that were due on the Mortgage Loans during
the related Due Period but delinquent on the related Determination Date and
delinquent payments of taxes, insurance premiums and escrowed items in respect
of related Assets and liquidation-related expenses, each subject to the Master
Servicer's (or such other entity's) good faith determination that such advances
will be reimbursable from Related Proceeds (as defined below). In the case of
certain Series of Securities that include Subordinate Securities, the Master
Servicer's (or such other entity's) advance obligation may be limited to the
portion of such delinquencies necessary to make the required distributions on
Classes of Senior Securities and/or may be subject to the Master Servicer's (or
such other entity's) good faith determination that such advances will be
reimbursable not only from Related Proceeds but also from collections on Assets
otherwise distributable to other Subordinate Securities. See "Description of
Credit Support."
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<PAGE> 52
Advances are intended to maintain or a regular flow of scheduled
interest and principal payments to holders of Securities entitled thereto,
rather than to guarantee or insure against losses. Advances of the Master
Servicer's (or another entity's) funds will be reimbursable out of recoveries on
related Mortgage Loans (including amounts received under any form of Credit
Support) (as to any Mortgage Loan, "Related Proceeds"). In addition, an advance
will be reimbursable from amounts in the Security Account prior to distributions
being made on the Securities if the Master Servicer (or such other entity)
determines in good faith that such advance (a "Nonrecoverable Advance")
ultimately is not recoverable from Related Proceeds. If advances have been made
by the Master Servicer from excess funds in the Security Account that are
required to be distributed to Securityholders on the related Distribution Date,
the Master Servicer will be required to replace such funds in the Security
Account on any future Distribution Date to the extent that funds in the Security
Account on such Distribution Date are less than payments required to be made to
Securityholders on such date. If so specified in the related Prospectus
Supplement, the obligations of the Master Servicer (or another entity) to make
advances may be secured by a cash advance reserve fund, a surety bond, a letter
of credit or another form of limited guaranty. If applicable, information
regarding the characteristics of, and the identity of any obligor on any such
surety bond will be set forth in the related Prospectus Supplement.
The Prospectus Supplement will describe any corresponding advancing
obligation of any person in connection with MBS included in the Trust Fund.
REPORTS TO SECURITYHOLDERS
With each distribution to holders of any Class of Securities, the
Master Servicer or the Trustee, as provided in the related Prospectus
Supplement, will forward or cause to be forwarded to each such holder, to the
Depositor and to such other parties as may be specified in the related
Agreement, a statement setting forth, in each case to the extent applicable and
available:
(i) the amount of such distribution to holders of
Securities of such Class applied to reduce the Security Balance
thereof;
(ii) the amount of such distribution to holders of
Securities of such Class allocable to Accrued Security Interest;
(iii) the amount of such distribution allocable to
Prepayment Premiums;
(iv) the amount of related servicing compensation received
by a Master Servicer (and, if payable directly out of the related Trust
Fund, by any Sub-Servicer) and such other customary information as any
such Master Servicer or the Trustee deems necessary or desirable, or
that a Securityholder reasonably requests, to enable Securityholders to
prepare their tax returns;
(v) the aggregate amount of advances included in such
distribution, and the aggregate amount of unreimbursed advances at the
close of business on such Distribution Date;
(vi) the aggregate principal balance of the Assets at the
close of business on such Distribution Date;
(vii) the number and aggregate principal balance of
Mortgage Loans in the Trust Fund in respect of which (a) one scheduled
payment is delinquent, (b) two scheduled payments are delinquent, (c)
three or more scheduled payments are delinquent and (d) foreclosure
proceedings have been commenced;
(viii) with respect to any Mortgage Loan in the Trust Fund
liquidated during the related Due Period, (a) the portion of such
liquidation proceeds payable or reimbursable to the Master Servicer (or
any other entity) in respect of such Mortgage Loan and (b) the amount
of any loss to Securityholders;
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<PAGE> 53
(ix) with respect to each REO Property relating to a
Mortgage Loan and included in the Trust Fund as of the end of the
related Due Period, the date of acquisition;
(x) with respect to each REO Property relating to a
Mortgage Loan and included in the Trust Fund as of the end of the
related Due Period, (a) the principal balance of the related Mortgage
Loan immediately following such Distribution Date (calculated as if
such Mortgage Loan were still outstanding taking into account certain
limited modifications to the terms thereof specified in the Agreement),
(b) the aggregate amount of unreimbursed servicing expenses and
unreimbursed advances in respect thereof and (c) if applicable, the
aggregate amount of interest accrued and payable on related servicing
expenses and related advances;
(xi) with respect to any such REO Property sold during the
related Due Period (a) the aggregate amount of sale proceeds, (b) the
portion of such sales proceeds payable or reimbursable to the Master
Servicer in respect of such REO Property or the related Mortgage Loan
and (c) the amount of any loss to Securityholders in respect of the
related Mortgage Loan;
(xii) the aggregate Security Balance or notional amount, as
the case may be, of each Class of Securities (including any Class of
Securities not offered hereby) at the close of business on such
Distribution Date, separately identifying any reduction in such
Security Balance due to the allocation of any loss and increase in the
Security Balance of a Class of Accrual Securities in the event that
Accrued Security Interest has been added to such balance;
(xiii) the aggregate amount of principal prepayments made
during the related Due Period;
(xiv) the amount deposited in the reserve fund, if any, on
such Distribution Date;
(xv) the amount remaining in the reserve fund, if any, as
of the close of business on such Distribution Date;
(xvi) the amount deposited in the liquidity fund, if any,
on such Distribution Date;
(xvii) the amount remaining in the liquidity fund, if any,
as of the close of business on such Distribution Date;
(xviii) the aggregate unpaid Accrued Security Interest, if
any, on each Class of Securities at the close of business on such
Distribution Date;
(ixx) in the case of Securities with a variable
Pass-Through Rate or Interest Rate, the Pass-Through Rate or Interest
Rate applicable to such Distribution Date, and, if available, the
immediately succeeding Distribution Date, as calculated in accordance
with the method specified in the related Prospectus Supplement;
(xx) in the case of Securities with an adjustable
Pass-Through Rate or Interest Rate, for statements to be distributed in
any month in which an adjustment date occurs, the adjustable
Pass-Through Rate or Interest Rate applicable to such Distribution Date
and the immediately succeeding Distribution Date as calculated in
accordance with the method specified in the related Prospectus
Supplement;
(xxi) as to any Series which includes Credit Support, the
amount of coverage of each instrument of Credit Support included
therein and any draws thereon as of the close of business on such
Distribution Date;
(xxii) as to any Series which includes a Liquidity Facility,
the amount of coverage of each Liquidity Facility included therein and
any draws thereon as of the close of business on such Distribution
Date;
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<PAGE> 54
(xxiii) as to any Series which includes any Cash Flow
Agreement, the amount of coverage of any such Cash Flow Agreement
included therein and any draws thereon as of the close of business on
such Distribution Date;
(xiv) during the Pre-Funding Period, the remaining
Pre-Funded Amount and the portion of the Pre-Funding Amount used to
acquire additional Assets since the preceding Distribution Date;
(xxv) during the Pre-Funding Period, the amount remaining
in the related Capitalized Interest Account;
(xxvi) as to any Series that includes Mortgage Loans insured
or guaranteed by any government agency or instrumentality, the amount
of all proceeds from governmental guarantors and insurers paid with
respect to such Mortgage Loans as of the close of business on such
Distribution Date; and
(xxvii) the aggregate amount of payments by the Mortgagors of
(a) default interest, (b) late charges and (c) assumption and
modification fees collected during the related Due Period.
The Master Servicer or the Trustee, as specified in the related
Prospectus Supplement, will forward or cause to be forwarded to each holder, to
the Depositor and to such other parties as may be specified in the Agreement, a
copy of any statements or reports received by the Master Servicer or the
Trustee, as applicable, with respect to any MBS. The Prospectus Supplement for
each Series of Offered Securities will describe any additional information to be
included in reports to the holders of such Offered Securities.
Within a reasonable period of time after the end of each calendar year,
the Master Servicer or the Trustee shall furnish to each Securityholder of
record at any time during the calendar year such information required by the
Code and applicable regulations thereunder to enable Securityholders to prepare
their federal income tax returns. See "-- Book-Entry Registration."
TERMINATION
To the extent and under the circumstances specified in the related
Prospectus Supplement, the Securities of a Series may be redeemed prior to their
final Distribution Date at the option of the Depositor, the Master Servicer or
such other party as may be specified in the related Prospectus Supplement by
purchase of the outstanding Securities of such Series. The right so to redeem
the Securities of a Series may be conditioned upon (1) the passage of a certain
date specified in the Prospectus Supplement and/or (2) (a) the decline of the
aggregate principal balance of the Trust Assets to less than a percentage
(specified in the related Prospectus Supplement) of the aggregate principal
balance of the Trust Assets at the related Cut-off Date or (b) the decline of
the aggregate Security Balance of a specified Class or Classes of Securities to
less than a percentage (specified in the related Prospectus Supplement) of the
aggregate Security Balance of the applicable Class or Classes of Securities at
the Closing Date for the Series. The percentages of the aggregate principal
balance of the Assets and the aggregate Security Balance of a Class referred to
in (2)(a) and (2)(b), respectively, above, may range from 5% to 25%. The
maximum amount of Assets or Securities that may be outstanding at the time of
an optional redemption shall be 25%, with respect to any Series of Bonds, or
10%, with respect to any Series of Certificates. In the event the option to
redeem the Securities is exercised, the purchase price distributed with respect
to each Security offered hereby and by the related Prospectus Supplement will
equal 100% of its then outstanding principal amount, plus accrued and unpaid
interest thereon at the applicable Pass-Through Rate or Interest Rate, less any
unreimbursed advances and unrealized losses allocable to such Security. Notice
of the redemption of the Securities will be given to Securityholders as
provided in the related Agreement.
In addition, the Depositor, the Master Servicer or such other party as
may be specified in the related Prospectus Supplement may at their respective
options purchase all of the assets of the Trust Fund at a time specified in the
related Prospectus Supplement, which will be when the aggregate principal
balance of such Assets is less than a percentage (specified in the related
Prospectus Supplement, ranging from 5% to 25%) of the aggregate principal
balance of the Assets on the Cut-off Date, or when the aggregate Security
Balance of a specified Class or Classes of Securities is less than a percentage
(specified in the related Prospectus Supplement, ranging from 5% to 25%) of the
aggregate Security Balance of such Class or Classes at the Closing Date. The
maximum amount of Assets or Securities that may be outstanding at the time of
an optional termination shall be 25%, with respect to any Series of Bonds, or
10%, with respect to any Series of Certificates. The termination price for
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a Trust Fund will be specified in the related Agreement, and will generally
equal the sum of (1) any Liquidation Expenses incurred by the Master Servicer in
respect of any Asset that has not yet been liquidated; (2) all amounts required
to be reimbursed or paid in respect of previously unreimbursed advances; and (3)
the greater of (a) the sum of (i) the aggregate unpaid principal balance of the
related Assets, plus accrued and unpaid interest thereon through the Interest
Accrual Period preceding the date of repurchase at the rates borne by such
Assets, plus (ii) the lesser of (A) the aggregate unpaid principal balance of
each Asset that had been secured by any REO Property remaining in the Trust
Fund, plus accrued interest thereon at the rates borne by such Assets through
the Interest Accrual Period preceding such purchase, and (B) the current
appraised value of any such REO Property (net of Liquidation Expenses to be
incurred in connection with the disposition of such property reasonably
estimated in good faith by the Master Servicer), such appraisal to be conducted
by an appraiser mutually agreed upon by the Master Servicer and the Trustee,
plus all previously unreimbursed advances made in respect of such REO Property,
and (b) the aggregate fair market value of the Trust Assets (as reasonably
determined by the Master Servicer as described in the related Agreement), plus
all previously unreimbursed advances made with respect to the related Assets;
provided, however, that in no event shall the termination price be less than
the then outstanding Security Principal Balance of all then outstanding Classes
of Securities, plus accrued and unpaid interest thereon, and less any losses
or shortfalls otherwise allocable to any such Class of Securities on the
Payment Date or Distribution Date of such termination . The fair market value
of the Trust Assets as determined for purposes of a terminating purchase shall
be deemed to include accrued interest through the Interest Accrual Period
preceding the date of such purchase at the applicable rate on the unpaid
principal balance of each Asset (including any Asset that has become a REO
Property, which REO Property has not yet been disposed of by the Master
Servicer). The basis for any such valuation shall be furnished by the Master
Servicer to the Securityholders upon request.
If specified in the related Prospectus Supplement, at the time
specified, the Trustee may be required to solicit bids for the purchase of all
Assets and REO Properties remaining in the Trust Fund. The Trustee would sell
such Assets and REO Properties only if the net proceeds to the Trust Fund from
such sale would be at least equal to the termination price, and the net proceeds
from such sale will be distributed first to the Master Servicer to reimburse it
for all previously unreimbursed Liquidation Expenses paid and advances made by,
and not previously reimbursed to, it with respect to the Assets and second to
the Securityholders in accordance with the distribution priorities set forth in
the Prospectus Supplement. If the net proceeds from such sale would not at least
equal the termination price, the Trustee would decline to sell the Assets and
REO Properties and would not be under any obligation to solicit any further bids
or otherwise negotiate any further sale of the Assets and REO Properties.
Following the transfer of Assets and REO Properties by the Trust Fund, the
Securityholders shall have no continuing liabilities with respect thereto,
either direct or indirect.
On the date set for termination of a Trust Fund, the termination price
shall be distributed (1) first to the Master Servicer to reimburse it for all
previously unreimbursed Liquidation Expenses paid and advances made by the
Master Servicer with respect to the related Assets and (2) second to the
Securityholders in accordance with the payment priorities that apply on each
Distribution Date as described in the related Prospectus Supplement. This will
result in the distribution with respect to each Offered Security of an amount
equal to 100% of its then outstanding principal amount, plus accrued and unpaid
interest thereon at the applicable Pass-Through Rate or Interest Rate, less any
unreimbursed advances and unrealized losses allocable to such Security.
ANY REDEMPTION OR TERMINATION OF THE SECURITIES WILL HAVE AN ADVERSE
AFFECT ON THE YIELD TO MATURITY OF ANY SECURITIES PURCHASED AT A PREMIUM,
BECAUSE SUCH REDEMPTION OR TERMINATION WILL HAVE THE SAME EFFECT AS A
PREPAYMENT IN FULL OF THE ASSETS.
BOOK-ENTRY REGISTRATION
If so provided in the related Prospectus Supplement, one or more
Classes of the Offered Securities of any Series may be issued as Book-Entry
Securities, and each such Class will be represented by one or more single
Securities registered in the name of a nominee for DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code ("UCC") and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for its participating organizations ("Participants") and facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in their accounts, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system also is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
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Investors that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
Book-Entry Securities may do so only through Participants and Indirect
Participants. In addition, such investors ("Security Owners") will receive all
distributions on the Book-Entry Securities through DTC and its Participants.
Under a book-entry format, Security Owners will receive payments after the
related Distribution Date because, while payments are required to be forwarded
to Cede, on each such date, DTC will forward such payments to its Participants
which thereafter will be required to forward them to Indirect Participants or
Security Owners. If provided in the related Prospectus Supplement, the only
"Securityholder" (as such term is used in the Agreement) will be Cede, as
nominee of DTC, and the Security Owners will not be recognized by the Trustee as
Securityholders under the Agreement. Security Owners will be permitted to
exercise the rights of Securityholders under the related Agreement only
indirectly through the Participants who in turn will exercise their rights
through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Book-Entry Securities
and is required to receive and transmit distributions of principal of and
interest on the Book-Entry Securities. Participants and Indirect Participants
with which Security Owners have accounts with respect to the Book-Entry
Securities similarly are required to make book-entry transfers and receive and
transmit such payments on behalf of their respective Security Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Security
Owner to pledge its interest in the Book-Entry Securities to persons or entities
that do not participate in the DTC system, or otherwise take actions in respect
of its interest in the Book-Entry Securities, may be limited due to the lack of
a physical certificate evidencing such interest.
DTC has advised the Depositor that it will take any action permitted to
be taken by a Securityholder under an Agreement only at the direction of one or
more Participants to whose account with DTC interests in the Book-Entry
Securities are credited.
Securities initially issued in book-entry form will be issued in fully
registered, certificated form to Security Owners or their nominees ("Definitive
Securities"), rather than to DTC or its nominee only if (i) the Depositor
advises the Trustee in writing that DTC is no longer willing or able to properly
discharge its responsibilities as depository with respect to the Securities and
the Depositor is unable to locate a qualified successor or (ii) the Depositor,
at its option, elects to terminate the book-entry system through DTC.
Upon the occurrence of either of the events described in the
immediately preceding paragraph, DTC is required to notify all Participants of
the availability through DTC of Definitive Securities for the Security Owners.
Upon surrender by DTC of the certificate or certificates representing the
Book-Entry Securities, together with instructions for re-registration, the
Trustee will issue (or cause to be issued) to the Security Owners identified in
such instructions the Definitive Securities to which they are entitled, and
thereafter the Trustee will recognize the holders of such Definitive Securities
as Securityholders under the Agreement.
None of the Depositor, the Master Servicer, any Sub-Servicer, the
Trustee, or any of their affiliates will have any responsibility for any aspect
of the records relating to or payments made on account of beneficial ownership
interests of the Book-Entry Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DESCRIPTION OF THE AGREEMENTS
Each Series of Bonds will be issued pursuant to an Indenture between
the Depositor (or a trust established by the Depositor) and the Trustee. Each
Series of Certificates evidencing interests in a Trust Fund including Mortgage
Loans will be issued pursuant to a Pooling and Servicing Agreement among the
Depositor, a Master Servicer (or Master Servicers) and the Trustee. Each Series
of Certificates evidencing interests in a Trust Fund
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not including Mortgage Loans will be issued pursuant to a Trust Agreement
between the Depositor and a Trustee. Any Master Servicer and the Trustee with
respect to any Series of Securities will be named in the related Prospectus
Supplement. In any Series of Securities for which there are multiple Master
Servicers there will be multiple Asset Groups, each corresponding to a
particular Master Servicer, and, if the related Prospectus Supplement so
specifies, the servicing obligations of each Master Servicer will be limited to
the Mortgage Loans in the corresponding Asset Group. Alternatively, a servicer
may be appointed pursuant to the related Agreement for any Trust Fund. Such
servicer may service all or a significant number of Mortgage Loans directly
without a Sub-Servicer. The obligations of any servicer shall be commensurate
with those of the Master Servicer described herein. References in this
prospectus to Master Servicer and its rights and obligations shall be deemed to
also be references to any servicer directly servicing Mortgage Loans. A manager
or administrator may be appointed pursuant to the Trust Agreement for any Trust
Fund. The provisions of each Agreement will vary depending upon the nature of
the Securities to be issued thereunder and the nature of the related Trust Fund.
The following summaries describe certain provisions that may appear in each
Agreement. The summaries do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all of the provisions of the
Agreement for each Trust Fund and the description of such provisions in the
related Prospectus Supplement. As used herein with respect to any Series, the
term "Security" refers to all of the Securities of that Series, whether or not
offered hereby and by the related Prospectus Supplement. Certain provisions that
may appear separately in an Indenture relating to the Bonds of a Series are
summarized under "-- Certain Terms of the Indenture." The Depositor will
provide a copy of the Agreement (without exhibits) relating to any Series of
Securities without charge upon written request of a Securityholder addressed to
Union Planters Mortgage Finance Corp., 7130 Goodlett Farms Parkway, Cordova,
Tennessee 38018, Attention: President.
ASSIGNMENT OF ASSETS; REPURCHASES
At the time of issuance of any Series of Securities, the Depositor will
assign (or cause to be assigned) to the designated Trustee the Trust Assets,
together with all principal and interest to be received on or with respect to
such Trust Assets after the Cut-off Date, other than principal and interest due
on or before the Cut-off Date and other than any Retained Interest. The Trustee
will, concurrently with such assignment, deliver the Securities to the Depositor
in exchange for the Trust Assets. Each Asset will be identified in a schedule
appearing as an exhibit to the related Agreement. Such schedule will include
detailed information (i) in respect of each Mortgage Loan, including without
limitation, the address of the related Mortgaged Property and type of such
property, the Mortgage Rate and, if applicable, the applicable index, margin,
adjustment date and any rate cap information, the original and remaining term to
maturity, the original and outstanding principal balance and balloon payment, if
any, the existence of FHA, VA or other government insurance or guarantees, the
Value and Loan-to-Value Ratio as of the date indicated and payment and
prepayment provisions, if applicable, and (ii) in respect of each MBS, including
without limitation, the MBS Issuer, MBS Servicer and MBS Trustee, the
pass-through or bond rate or formula for determining such rate, the issue date
and original and remaining term to maturity, if applicable, the original and
outstanding principal amount and payment provisions, if applicable.
With respect to each Mortgage Loan, the Depositor will deliver or cause
to be delivered to the Trustee (or to the custodian hereinafter referred to)
certain loan documents, which will include the original Mortgage Note endorsed,
without recourse, in blank or to the order of the Trustee, the original Mortgage
(or a certified copy thereof) with evidence of recording indicated thereon and
an assignment of the Mortgage to the Trustee in recordable form. Notwithstanding
the foregoing, a Trust Fund may include Mortgage Loans where the original
Mortgage Note is not delivered to the Trustee if the Depositor delivers to the
Trustee or the custodian a copy or a duplicate original of the Mortgage Note,
together with an affidavit certifying that the original thereof has been lost or
destroyed. With respect to such Mortgage Loans, the Trustee (or its nominee) may
not be able to enforce the Mortgage Note against the related borrower. The Asset
Seller will be required to repurchase, or substitute for, each such Mortgage
Loan that is subsequently in default if the enforcement thereof or of the
related Mortgage is materially adversely affected by the absence of the original
Mortgage Note. The related Agreement will require the Depositor or another party
specified therein to promptly cause each such assignment of Mortgage to be
recorded in the appropriate public office for real property records, except in
states where, in the opinion of counsel acceptable to the Trustee, such
recording is not required to protect the Trustee's interest in the related
Mortgage Loan against the claim of any subsequent
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transferee or any successor to or creditor of the Depositor, the Master
Servicer, the relevant Asset Seller or any other prior holder of the Mortgage
Loan.
The Trustee (or a custodian) will review such Mortgage Loan documents
within a specified period of days after receipt thereof, and the Trustee (or a
custodian) will hold such documents in trust for the benefit of the
Securityholders. If any such document is found to be missing or defective in any
material respect, the Trustee (or such custodian) shall immediately notify the
Master Servicer and the Depositor, and the Master Servicer shall immediately
notify the relevant Asset Seller. If the Asset Seller cannot cure the omission
or defect within a specified number of days after receipt of such notice, then
the Asset 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 an Asset Seller will fulfill this repurchase or substitution obligation,
and neither the Master Servicer nor the Depositor will be obligated to
repurchase or substitute for such Mortgage Loan if the Asset Seller defaults on
its obligation. This repurchase or substitution obligation constitutes the sole
remedy available to the Securityholders and the Trustee for omission of, or a
material defect in, a constituent document. To the extent specified in the
related Prospectus Supplement, in lieu of curing any omission or defect in the
Asset or repurchasing or substituting for such Asset, the Asset Seller may agree
to cover any losses suffered by the Trust Fund as a result of such breach or
defect.
With respect to each Agency Security or MBS in certificated form, the
Depositor will deliver or cause to be delivered to the Trustee (or the
custodian) the original certificate or other definitive evidence of such Agency
Security or MBS, as applicable, together with bond power or other instruments,
certifications or documents required to transfer fully such Agency Security or
MBS, as applicable, to the Trustee for the benefit of the Securityholders. With
respect to each Agency Security or MBS in uncertificated or book-entry form or
held through a "clearing corporation" within the meaning of the UCC, the
Depositor and the Trustee will cause such Agency Security or MBS to be
registered directly or on the books of such clearing corporation or of a
financial intermediary in the name of the Trustee for the benefit of the
Securityholders. The related Agreement will require that either the Depositor or
the Trustee promptly cause any MBS and Agency Securities in certificated form
not registered in the name of the Trustee to be re-registered, with the
applicable persons, in the name of the Trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
The Depositor will, with respect to each Mortgage Loan, assign certain
representations and warranties, as of a specified date (the person making such
representations and warranties, the "Warrantying Party") covering, by way of
example, the following types of matters: (i) the accuracy of the information set
forth for such Mortgage Loan on the schedule of Assets appearing as an exhibit
to the related Agreement; (ii) the existence of title insurance insuring the
lien priority of the Mortgage Loan; (iii) the authority of the Warrantying Party
to sell the Mortgage Loan; (iv) the payment status of the Mortgage Loan and the
status of payments of taxes, assessments and other charges affecting the related
Mortgaged Property; (v) the existence of customary provisions in the related
Mortgage Note and Mortgage to permit realization against the Mortgaged Property
of the benefit of the security of the Mortgage; and (vi) the existence of hazard
and extended perils insurance coverage on the Mortgaged Property.
Representations and warranties made in respect of an Asset may have
been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between such date and the date of initial
issuance of the related Series of Securities evidencing an interest in such
Asset. In the event of a breach of any such representation or warranty, the
Warranting Party will be obligated to reimburse the Trust Fund for losses
caused by any such breach or either cure such breach or repurchase or replace
the affected Asset as described below. Because the representations and
warranties will not address events that may occur following the date as of
which they were made, the Warranting Party will have no reimbursement, cure,
repurchase or substitution obligation in connection with such subsequent
events, even if they occur prior to the date of the initial issuance of the
related Series of Securities. Such party would have not such obligations if the
relevant event that causes such breach occurs after such date.
Each Warrantying Party, if other than the Depositor, shall be an Asset
Seller or an affiliate thereof or such other person acceptable to the Depositor
and shall be identified in the related Prospectus Supplement.
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Each Agreement will provide that the Master Servicer and/or Trustee
will be required to notify promptly the relevant Warrantying Party of any breach
of any representation or warranty made by it in respect of an Asset that
materially and adversely affects the value of such Asset or the interests
therein of the Securityholders. If such Warrantying Party cannot cure such
breach within a specified period following the date on which such party was
notified of such breach, then such Warrantying Party will be obligated to
repurchase such Asset from the Trustee within a specified period from the date
on which the Warrantying Party was notified of such breach, at the Purchase
Price therefor. As to any Asset, the "Purchase Price" generally is equal to the
sum of the unpaid principal balance thereof, plus unpaid accrued interest
thereon at the applicable coupon rate from the date as to which interest was
last paid to the due date in the Due Period in which the relevant purchase is to
occur, plus certain servicing expenses that are reimbursable to the Master
Servicer. If so provided in the Prospectus Supplement for a Series, a
Warrantying Party, rather than repurchase an Asset as to which a breach has
occurred, will have the option, within a specified period after initial issuance
of such Securities, to cause the removal of such Asset from the Trust Fund and
substitute in its place one or more other Assets, in accordance with the
standards described in the related Prospectus Supplement. If so provided in the
Prospectus Supplement for a Series, a Warrantying Party, rather than repurchase
or substitute an Asset as to which a breach has occurred, will have the option
to reimburse the Trust Fund or the Securityholders for any losses caused by such
breach. This reimbursement, repurchase or substitution obligation will
constitute the sole remedy available to holders of Offered Securities or the
Trustee for a breach of representation by a Warrantying Party.
Neither the Depositor (except to the extent that it is the Warrantying
Party) nor the Master Servicer will be obligated to purchase or substitute for
an Asset if a Warrantying Party defaults on its obligation to do so, and no
assurance can be given that Warrantying Parties will carry out such obligations
with respect to Assets.
A Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Agreement. Generally, a breach of any such
representation of the Master Servicer that materially and adversely affects the
interests of the Securityholders and continues unremedied for thirty days after
the giving of written notice of such breach to the Master Servicer by the
Trustee or the Depositor, or to the Master Servicer, the Depositor and the
Trustee by a percentage of Securityholders evidencing not less than 25% of the
Voting Rights will constitute an Event of Default under such Agreement. See
"-- Events of Default" and "-- Rights Upon Event of Default."
SECURITY ACCOUNT AND OTHER COLLECTION ACCOUNTS
General
The Master Servicer and/or the Trustee will, as to each Trust Fund,
establish and maintain or cause to be established and maintained one or more
separate accounts for the collection of payments on the related Trust Assets
(collectively, the "Security Account"), which must be either (i) an account or
accounts the deposits in which are insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the Federal Deposit Insurance Corporation
("FDIC") (to the limits established by the FDIC) and the uninsured deposits in
which are otherwise secured such that the Securityholders have a claim with
respect to the funds in the Security Account or a perfected first priority
security interest against any collateral securing such funds that is superior to
the claims of any other depositors or general creditors of the institution with
which the Security Account is maintained or (ii) otherwise maintained with a
bank or trust company, and in a manner, satisfactory to the Rating Agencies
rating any Class of Securities of such Series. The collateral eligible to secure
amounts in the Security Account is limited to United States government
securities and other investment grade obligations specified in the Agreement
("Permitted Investments"). A Security Account may be maintained as an interest
bearing or a non-interest bearing account and the funds held therein may be
invested pending each succeeding Distribution Date in certain short-term
Permitted Investments. Any interest or other income earned on funds in the
Security Account will be paid to a Master Servicer or its designee as additional
servicing compensation to the extent provided in the related Prospectus
Supplement. The Security Account may be maintained with an institution that is
an affiliate of the Master Servicer, if applicable, provided that such
institution meets the standards imposed by the Rating Agencies. If specified in
the related Prospectus Supplement, a Security Account may contain funds relating
to more than one Series of Securities
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and may contain other funds respecting payments on mortgage loans belonging to
the Master Servicer or serviced or master serviced by it on behalf of others.
Deposits
A Master Servicer or the Trustee will deposit or cause to be deposited
in the Security Account for one or more Trust Funds on a daily basis, unless
otherwise provided in the related Agreement, the following payments and
collections received, or advances made, by or on behalf of the Master Servicer
or the Trustee subsequent to the Cutoff Date (other than payments due on or
before the Cut-off Date, and exclusive of any amounts representing a Retained
Interest):
(i) all payments of principal, including principal
prepayments, on the Assets;
(ii) all payments of interest on the Assets, including any
default interest collected, in each case net of any portion thereof
retained by a Master Servicer or a Sub-Servicer as its servicing
compensation and net of any Retained Interest;
(iii) all proceeds of the hazard insurance policies, flood
insurance policies and primary mortgage insurance policies, if any, to
be maintained in respect of each Mortgaged Property securing a Mortgage
Loan (to the extent such proceeds are not applied to the restoration of
the property or released to the mortgagor in accordance with the normal
servicing procedures of a Master Servicer or the related Sub-Servicer,
subject to the terms and conditions of the related Mortgage and
Mortgage Note) (collectively, "Insurance Proceeds") and all other
amounts received and retained in connection with the liquidation of
defaulted Mortgage Loans, by foreclosure or otherwise ("Liquidation
Proceeds"), together with the net proceeds on a monthly basis with
respect to any Mortgaged Properties acquired for the benefit of
Securityholders by foreclosure or by deed in lieu of foreclosure or
otherwise;
(iv) any amounts paid under any instrument or drawn from
any fund that constitutes Credit Support for the related Series of
Securities as described under "Description of Credit Support";
(v) any amounts paid under any instrument or drawn from
any fund that constitutes a Liquidity Facility for the related Series
of Securities;
(vi) any advances made as described under "Description of
the Offered Securities -- Advances in Respect of Delinquencies";
(vii) any amounts paid under any Cash Flow Agreement, as
described under "Description of the Trust Funds -- Cash Flow
Agreements";
(viii) all proceeds of any Asset or, with respect to a
Mortgage Loan, property acquired in respect thereof purchased by the
Depositor, any Asset Seller or any other specified person as described
under "Assignment of Assets; Repurchases" and "Representations and
Warranties; Repurchases," all proceeds of any defaulted Mortgage Loan
purchased as described under "Realization Upon Defaulted Mortgage
Loans," and all proceeds of any Asset purchased as described under
"Description of the Offered Securities -- Termination";
(ix) if specified in the related Agreement, any amounts
paid by a Master Servicer to cover interest shortfalls arising out of
the prepayment of Mortgage Loans as described under "Description of the
Agreements -- Retained Interest; Servicing Compensation and Payment of
Expenses";
(x) to the extent that any such item does not constitute
additional servicing compensation to a Master Servicer, any payments on
account of modification or assumption fees, late payment charges or
Prepayment Premiums on the Assets;
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(xi) all payments required to be deposited in the Security
Account with respect to any deductible clause in any blanket insurance
policy described under "Hazard Insurance Policies";
(xii) any amount required to be deposited by a Master
Servicer or the Trustee in connection with losses realized on
investments for the benefit of the Master Servicer or the Trustee, as
the case may be, of funds held in the Security Account;
(xiii) all proceeds of insurance or guarantees with respect
to Mortgage Loans provided by any governmental agency or
instrumentality; and
(xiv) any other amounts required to be deposited in the
Security Account as provided in the related Agreement and described in
the related Prospectus Supplement.
Withdrawals
A Master Servicer or the Trustee may, from time to time, make
withdrawals from the Security Account for each Trust Fund for any of the
following purposes, as applicable:
(i) to make distributions to the Securityholders on each
Distribution Date;
(ii) to reimburse a Master Servicer (or other entity) for
unreimbursed advances as described under "Description of the Offered
Securities -- Advances in Respect of Delinquencies," such reimbursement
to be made out of amounts identified and applied by the Master Servicer
(or other entity) as late collections of interest (net of related
servicing fees and Retained Interest) on and principal of the related
Mortgage Loans or out of amounts drawn under any related form of Credit
Support or Liquidity Facilities;
(iii) to reimburse a Master Servicer (or other entity) for
unpaid servicing fees earned and certain unreimbursed servicing
expenses incurred with respect to Mortgage Loans and properties
acquired in respect thereof, such reimbursement made out of Liquidation
Proceeds and Insurance Proceeds collected on related Mortgage Loans and
properties, and net income collected thereon, with respect to which
such fees were earned or such expenses were incurred, or out of amounts
drawn under any related form of Credit Support or Liquidity Facilities;
(iv) to reimburse a Master Servicer (or other entity) for
advances described in clause (ii) above and any servicing expenses
described in clause (iii) above which, in the Master Servicer's (or
such other entity's) good faith judgment, will not be recoverable from
the amounts described in clauses (ii) and (iii), respectively, or, if
and to the extent so provided by the related Agreement and described in
the related Prospectus Supplement, from amounts collected on unrelated
Assets otherwise distributable on Subordinate Securities, if any remain
outstanding, and otherwise any outstanding Class of Securities, of the
related Series;
(v) to reimburse a Master Servicer, the Depositor, or any
of their respective directors, officers, employees and agents, as the
case may be, for certain expenses, costs and liabilities incurred
thereby, as and to the extent described under "Certain Matters
Regarding a Master Servicer and the Depositor";
(vi) if and to the extent described in the related
Prospectus Supplement, to pay (or to transfer to a separate account for
purposes of escrowing for the payment of) the Trustee's fees;
(vii) to reimburse the Trustee or any of its directors,
officers, employees and agents, as the case may be, for certain
expenses, costs and liabilities incurred thereby, as and to the extent
described under "Certain Matters Regarding the Trustee";
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(viii) to pay the person entitled thereto any amounts
deposited in the Security Account that were identified and applied by
the Master Servicer as recoveries of Retained Interest;
(ix) to pay for costs reasonably incurred in connection
with the proper management and maintenance of any Mortgaged Property
acquired for the benefit of Securityholders by foreclosure or by deed
in lieu of foreclosure or otherwise, such payments to be made out of
income received on such property;
(x) if one or more elections have been made to treat the
Trust Fund or designated portions thereof as a REMIC, to pay any
federal, state or local taxes imposed on the Trust Fund or its assets
or transactions, as and to the extent described under "Federal Income
Tax Consequences" or in the related Prospectus Supplement;
(xi) to pay for the cost of an independent appraiser or
other expert in real estate matters retained to determine a fair sale
price for a defaulted Mortgage Loan or a property acquired in respect
thereof in connection with the liquidation of such Mortgage Loan or
property;
(xii) to pay for the cost of various opinions of counsel
obtained pursuant to the related Agreement for the benefit of
Securityholders;
(xiii) to pay for the costs of recording the related
Agreement if such recordation materially and beneficially affects the
interests of Securityholders, provided that such payment shall not
constitute a waiver with respect to the obligation of the Warrantying
Party to remedy any breach of representation or warranty under the
Agreement;
(xiv) to pay the person entitled thereto any amounts
deposited in the Security Account in error, including amounts received
on any Asset after its removal from the Trust Fund whether by reason of
purchase or substitution as contemplated by "-- Assignment of Assets;
Repurchase" and "-- Representations and Warranties; Repurchases" or
otherwise;
(xv) to make any other withdrawals permitted by the
related Agreement; and
(xvi) to clear and terminate the Security Account at the
termination of the Trust Fund.
Other Collection Accounts
Notwithstanding the foregoing, if so specified in the related
Prospectus Supplement, an Agreement may provide for the establishment and
maintenance of a separate collection account into which the Master Servicer or
any related Sub-Servicer will deposit on a daily basis the amounts described
under "-- Deposits" above. Any amounts on deposit in any such collection
account will be withdrawn therefrom and deposited into the appropriate Security
Account by a time specified in the related Prospectus Supplement. To the extent
specified in the related Prospectus Supplement, any amounts which could be
withdrawn from the Security Account as described under "-- Withdrawals" above,
may also be withdrawn from any such collection account. The Prospectus
Supplement will set forth any restrictions with respect to any such collection
account, including investment restrictions and any restrictions with respect to
financial institutions with which any such collection account may be maintained.
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer, directly or through Sub-Servicers, is required to
make reasonable efforts to collect all scheduled payments under the Mortgage
Loans and will follow or cause to be followed such collection procedures as it
would follow with respect to mortgage loans that are comparable to the Mortgage
Loans and held for its own account, provided such procedures are consistent with
(i) the terms of the related Agreement and any related hazard insurance policy
or instrument of Credit Support or Liquidity Facilities included in the related
Trust Fund described herein, (ii) applicable law and (iii) the general servicing
standard specified in the related Prospectus Supplement or,
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if no such standard is so specified, its normal servicing practices (in either
case, the "Servicing Standard"). In connection therewith, the Master Servicer
will be permitted discretion to waive any late payment charge or penalty
interest in respect of a late Mortgage Loan payment.
The Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining hazard
insurance policies as described herein and in any related Prospectus Supplement,
and filing and settling claims thereunder; maintaining escrow or impoundment
accounts of mortgagors for payment of taxes, insurance and other items required
to be paid by any mortgagor pursuant to the terms of the Mortgage Loan;
processing assumptions or substitutions in those cases where the Master Servicer
has determined not to enforce any applicable due-on-sale clause; attempting to
cure delinquencies; supervising foreclosures; inspecting and managing Mortgaged
Properties under certain circumstances; and maintaining accounting records
relating to the Mortgage Loans. The Master Servicer will be responsible for
filing and settling claims in respect of particular Mortgage Loans under any
applicable instrument of Credit Support. See "Description of Credit Support."
The Master Servicer may agree to modify, waive or amend any term of any
Mortgage Loan in a manner consistent with the Servicing Standard so long as the
modification, waiver or amendment will not (i) affect the amount or timing of
any scheduled payments of principal or interest on the Mortgage Loan or (ii) in
its judgment, materially impair the security for the Mortgage Loan or reduce the
likelihood of timely payment of amounts due thereon. The Master Servicer also
may agree to any modification, waiver or amendment that would so affect or
impair the payments on, or the security for, a Mortgage Loan if, (i) in its
judgment, a material default on the Mortgage Loan has occurred or a payment
default is imminent and (ii) in its judgment, such modification, waiver or
amendment is reasonably likely to produce a greater recovery on a present value
basis than would liquidation. The Master Servicer is required to notify the
Trustee in the event of any modification, waiver or amendment of any Mortgage
Loan.
VA Loan Servicing Procedures
The VA Loans will be serviced pursuant to the related Agreement and
other servicing agreements by the Master Servicer either directly or through
Sub-Servicers. This servicing will be conducted generally in compliance with
Fannie Mae or Freddie Mac standards and otherwise consistent with prudent
residential mortgage loan servicing standards generally accepted in the
servicing industry. The Master Servicer shall be diligent in abiding by VA
collection and default timetables.
Each Agreement will require the Master Servicer, directly or through
Sub-Servicers, to exercise a degree of skill and care that is generally in
compliance with Fannie Mae or Freddie Mac standards and consistent with prudent
residential mortgage loan servicing standards generally accepted in the
servicing industry. Consistently with such standards, the Master Servicer in its
discretion may waive late payment charges or assumption fees and arrange with a
mortgagor a schedule for repayment of due and unpaid principal and interest so
long as, by such action, the Master Servicer does not knowingly or intentionally
cause the termination of the REMIC status of the related REMIC or the imposition
of an entity-level tax on the related Trust Fund. Any such payment schedule
modification will not affect the computation of the amount required to be
distributed for the related Securities.
A notice to VA of intent to begin action need not be given within any
prescribed period of time. This flexibility affords the Master Servicer time to
work with a deserving Mortgagor to avoid liquidation. Barring exceptional
circumstances, the notice should not be given until a default has continued for
90 days. If the Mortgaged Property is in jeopardy, however, the notice should be
filed as soon as the risk becomes known to the Master Servicer. Except upon
express waiver by VA, the Master Servicer may not begin foreclosure until VA has
been notified 30 days in advance of this intent to liquidate. In the case of a
Mortgage Loan assumption, the Master Servicer must make a good faith effort to
notify the original Mortgagor of its intention by certified mail. Failure to
notify the original Mortgagor may result in the loss of the VA Guaranty with
respect to such Mortgaged Property. The Master Servicer must request a
liquidation appraisal at least 30 days prior to the projected foreclosure sale
in addition to furnishing VA with a VA "status of account" form to estimate the
projected claim amount that is necessary to prepare the bid amount.
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The Master Servicer must deliver to VA the lender's "election to
convey" within 15 days of the foreclosure sale or the Master Servicer loses its
right to transfer the Mortgaged Property. Upon receipt of advice that VA elects
not to specify a bid amount, the Master Servicer may waive or satisfy a portion
of the indebtedness on behalf of the related Trust Fund in order to reduce the
amount owing to an amount that would allow VA to specify a bid amount under 38
C.F.R. Section 36.4320.
FHA Loan Servicing Procedures
The FHA Loans will be serviced pursuant to the related Agreement and
other servicing agreements by Master Servicers. The Master Servicer will be
required to be diligent in pursuing claims for defaulted FHA Loans as a lender
and in abiding by FHA collection and default timetables.
Under the FHA mortgage insurance program the lender may accelerate an
insured loan following a default on such loan only after the lender or its agent
has contacted the borrower to discuss the reasons for the default and to seek
its cure. If the borrower does not cure the default or agree to a modification
agreement or repayment plan, the lender will notify the borrower in writing
that, unless within 30 days the default is cured or the borrower enters into a
modification agreement or repayment plan, the loan will be accelerated and that,
if the default persists, the lender will report the default to an appropriate
credit agency. The lender may rescind the acceleration of maturity after full
payment is due and reinstate the loan only if the borrower brings the loan
current, executes a modification agreement or agrees to an acceptable repayment
plan.
Following acceleration of maturity upon a secured FHA Loan, the lender
may either (a) proceed against the property under any security instrument, or
(b) make a claim under the lender's contract of insurance. If the lender chooses
to proceed against the property under a security instrument (or it accepts a
voluntary conveyance or surrender of the property), the lender may file an
insurance claim only with the prior approval of the Secretary of HUD.
When a lender files an insurance claim with the FHA, the FHA reviews
the claim, the complete loan file and documentation of the lender's efforts to
obtain recourse, certification of compliance with applicable state and local
laws in carrying out any foreclosure, and evidence that the lender has properly
filed proofs of claims, where the borrower is bankrupt or deceased. Generally,
an action to initiate foreclosure on any FHA insured mortgage loan must be filed
with the local jurisdiction within nine months after the date of default.
Concurrently with the subsequent filing of the insurance claim for reimbursement
for loss, the lender assigns to the United States of America the lender's entire
interest in the related security instrument and in any claim filed in any legal
proceedings. If, at the time the ownership in the property is conveyed to the
United States, the FHA has reason to believe that the title is not marketable,
the FHA may deny the claim and reconvey the property to the lender. If either
such defect is discovered after the FHA has paid a claim, the FHA may require
the lender to repurchase the paid claim and to accept a reassignment of the loan
note. If the lender subsequently obtains a valid and enforceable judgment
against the borrower, the lender may resubmit a new insurance claim with an
assignment of the judgment. Although the FHA may contest any insurance claim and
make a demand for repurchase of the loan at any time up to two years from the
date the claim was certified for payment and may do so thereafter in the event
of fraud or misrepresentation on the part of the lender, the FHA has expressed
an intention to limit the period of time within which it will take such action
to one year from the date the claim was certified for payment.
The Secretary of HUD may deny a claim for insurance in whole or in part
for any violations of the regulations governing the FHA program; however, the
Secretary of HUD may waive such violations if it determines that enforcement of
the regulations would impose an injustice upon a lender which has substantially
complied with the regulations in good faith.
SUB-SERVICERS
A Master Servicer may delegate its servicing obligations in respect of
the Mortgage Loans to third-party servicers (each, a "Sub-Servicer"), but such
Master Servicer will remain obligated under the related Agreement. Each
sub-servicing agreement between a Master Servicer and a Sub-Servicer (a
"Sub-Servicing Agreement") must
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be consistent with the terms of the related Agreement and must provide that, if
for any reason the Master Servicer is no longer acting in such capacity, the
Trustee or any successor Master Servicer may assume the Master Servicer's rights
and obligations under such Sub-Servicing Agreement.
The Master Servicer will be solely liable for all fees owed by it to
any Sub-Servicer, whether or not the Master Servicer's compensation pursuant to
the related Agreement is sufficient to pay such fees. However, a Sub-Servicer
may be entitled to Retained Interests. Each Sub-Servicer will be reimbursed by
the Master Servicer for certain expenditures that it makes, generally to the
same extent the Master Servicer would be reimbursed under an Agreement. See "--
Retained Interest, Servicing Compensation and Payment of Expenses."
REALIZATION UPON DEFAULTED MORTGAGE LOANS
A Mortgagor's failure to make required payments may reflect inadequate
income or the diversion of that income from payments due under the Mortgage
Loan, and may call into question such Mortgagor's ability to make timely payment
of taxes and to pay for necessary maintenance of the related Mortgaged Property.
The Master Servicer is required to monitor any Mortgage Loan in default, contact
the Mortgagor concerning the default, evaluate whether the causes of the default
can be cured over a reasonable period without significant impairment of the
value of the Mortgaged Property, initiate corrective action in cooperation with
the Mortgagor if cure is likely, inspect the Mortgaged Property and take such
other actions as are consistent with the Servicing Standard. A significant
period of time may elapse before the Master Servicer is able to assess the
success of such corrective action or the need for additional initiatives.
The time within which the Master Servicer makes the initial
determination of appropriate action, evaluates the success of corrective action,
develops additional initiatives, institutes foreclosure proceedings and actually
forecloses (or takes a deed to a Mortgaged Property in lieu of foreclosure) on
behalf of the Securityholders, may vary considerably depending on the particular
Mortgage Loan, the Mortgaged Property, the mortgagor, the presence of an
acceptable party to assume the Mortgage Loan and the laws of the jurisdiction in
which the Mortgaged Property is located. Under federal bankruptcy law, the
Master Servicer in certain cases may not be permitted to accelerate a Mortgage
Loan or to foreclose on a Mortgaged Property for a considerable period of time.
See "Certain Legal Aspects of Mortgage Loans."
Any Agreement relating to a Trust Fund that includes Mortgage Loans may
grant to the Master Servicer and/or the holders of Securities a right of first
refusal to purchase from the Trust Fund at a predetermined purchase price any
Mortgage Loan as to which a specified number of scheduled payments thereunder
are delinquent. Any such right granted to the holder of an Offered Security will
be described in the related Prospectus Supplement. The related Prospectus
Supplement will also describe any such right granted to any person if the
predetermined purchase price is less than the Purchase Price described under "--
Representations and Warranties; Repurchases."
If so specified in the related Prospectus Supplement, the Master
Servicer may offer to sell any defaulted Mortgage Loan described in the
preceding paragraph and not otherwise purchased by any person having a right of
first refusal with respect thereto, if and when the Master Servicer determines,
consistent with the Servicing Standard, that such a sale would produce a greater
recovery on a present value basis than would liquidation through foreclosure or
similar proceeding. The related Agreement will provide that any such offering be
made in a commercially reasonable manner for a specified period and that the
Master Servicer accept the highest cash bid received from any person (including
itself, an affiliate of the Master Servicer or any Securityholder) that
constitutes a fair price for such defaulted Mortgage Loan. In the absence of any
bid determined in accordance with the related Agreement to be fair, the Master
Servicer shall proceed with respect to such defaulted Mortgage Loan as described
below. Any bid in an amount at least equal to the Purchase Price described
herein under "-- Representations and Warranties; Repurchases" will in all cases
be deemed fair.
The Master Servicer, on behalf of the Trustee, may at any time
institute foreclosure proceedings, exercise any power of sale contained in any
mortgage, obtain a deed in lieu of foreclosure, or otherwise acquire title to a
Mortgaged Property securing a Mortgage Loan by operation of law or otherwise, if
such action is consistent with
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the Servicing Standard and a default on such Mortgage Loan has occurred or, in
the Master Servicer's judgment, is imminent.
If title to any Mortgaged Property is acquired by a Trust Fund as to
which a REMIC election has been made, the Master Servicer, on behalf of the
Trust Fund, generally will be required to sell the Mortgaged Property by the end
of the third taxable year after the taxable year of acquisition, unless (i) the
Internal Revenue Service grants an extension of time to sell such property or
(ii) the Trustee receives an opinion of independent counsel to the effect that
the holding of the property by the Trust Fund subsequent to three years after
its acquisition will not result in the imposition of a tax on the Trust Fund or
cause the Trust Fund to fail to qualify as a REMIC under the Code at any time
that any Security is outstanding. Subject to the foregoing, the Master Servicer
will be required to (i) solicit bids for any Mortgaged Property so acquired in
such a manner as will be reasonably likely to realize a fair price for such
property and (ii) accept the first (and, if multiple bids are contemporaneously
received, the highest) cash bid received from any person that constitutes a fair
price.
The limitations imposed by the related Agreement and the REMIC
provisions of the Code (if a REMIC election has been made with respect to the
related Trust Fund) on the ownership and management of any Mortgaged Property
acquired on behalf of the Trust Fund may result in the recovery of an amount
less than the amount that would otherwise be recovered. See "Certain Legal
Aspects of Mortgage Loans -- Foreclosure."
If recovery on a defaulted Mortgage Loan under any related instrument
of Credit Support is not available, the Master Servicer nevertheless will be
obligated to follow or cause to be followed normal practices and procedures
necessary or advisable to realize thereupon. If the reimbursable Liquidation
Proceeds are less than the outstanding principal balance of the defaulted
Mortgage Loan, plus interest accrued thereon at the Mortgage Rate and the
aggregate amount of expenses incurred by the Master Servicer in connection with
such proceedings, the Trust Fund will realize a loss in the amount of such
difference. The Master Servicer may withdraw or cause to be withdrawn from the
Security Account out of Liquidation Proceeds recovered on a defaulted Mortgage
Loan, prior to the distribution of such Liquidation Proceeds to Securityholders,
amounts representing normal servicing compensation, unreimbursed servicing
expenses incurred and any unreimbursed advances of delinquent payments made.
If any property securing a defaulted Mortgage Loan is damaged and
proceeds, if any, from the related hazard insurance policy are insufficient to
restore the damaged property to a condition sufficient to permit recovery under
related Credit Support, if any, the Master Servicer is not required to expend
its own funds to restore the damaged property unless it determines (i) that such
restoration will increase the proceeds to Securityholders on liquidation of the
Mortgage Loan after reimbursement of the Master Servicer for its expenses and
(ii) that such expenses will be recoverable by it from related Insurance
Proceeds or Liquidation Proceeds.
As servicer of the Mortgage Loans, a Master Servicer, on behalf of
itself, the Trustee and the Securityholders, will present claims to the obligor
under each instrument of Credit Support, and will take such reasonable steps as
are necessary to receive payment or to permit recovery thereunder with respect
to defaulted Mortgage Loans.
If a Master Servicer or its designee recovers payments under any
instrument of Credit Support with respect to a defaulted Mortgage Loan, the
Master Servicer will be entitled to withdraw or cause to be withdrawn from the
Security Account out of such payments, prior to distribution thereof to
Securityholders, its normal servicing compensation on such Mortgage Loan,
unreimbursed servicing expenses incurred with respect thereto and any related
unreimbursed advances of delinquent payments. See "-- Hazard Insurance Policies"
and "Description of Credit Support."
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FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE
Each Servicing Agreement and Pooling and Servicing Agreement will
require that the Master Servicer obtain and maintain in effect a fidelity bond
or similar form of insurance coverage (which may provide blanket coverage) or
any combination thereof insuring against loss occasioned by fraud, theft or
other intentional misconduct of the officers, employees and agents of the Master
Servicer. The related Agreement may allow the Master Servicer to self-insure
against loss occasioned by the errors and omissions of the officers, employees
and agents of the Master Servicer so long as certain criteria set forth in the
Agreement are met.
DUE-ON-SALE PROVISIONS
Certain Mortgage Loans may contain clauses requiring the consent of the
mortgagee to any sale or other transfer of the related Mortgaged Property, or
due-on-sale clauses entitling the mortgagee to accelerate payment of the
Mortgage Loan upon any sale, transfer or conveyance of the related Mortgaged
Property. The Master Servicer generally will enforce due-on-sale clauses to the
extent it has knowledge of the conveyance or proposed conveyance of the
underlying Mortgaged Property and it is entitled to do so under applicable law;
provided, however, that the Master Servicer will not take any action in relation
to the enforcement of any due-on-sale provision that would adversely affect or
jeopardize coverage under any applicable insurance policy. Fees collected by or
on behalf of the Master Servicer for entering into an assumption agreement will
be retained by or on behalf of the Master Servicer as additional servicing
compensation. See "Certain Legal Aspects of Mortgage Loans -- Due-on-Sale and
Due-on-Encumbrance."
RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Each Prospectus Supplement will specify whether there will be any
Retained Interest, and, if so, the initial owner thereof. Retained Interest will
be established on a loan-by-loan basis and will be specified on an exhibit to
the related Agreement. A "Retained Interest" in an Asset represents a specified
portion of the interest payable thereon. The Retained Interest will be deducted
from mortgagor payments as received and will not be part of the related Trust
Fund.
The Master Servicer's and a Sub-Servicer's primary servicing
compensation will come from the periodic payment to it of a portion of the
interest payment on each Asset. Because any Retained Interest and the Master
Servicer's primary compensation are a function of the principal balance of the
Assets, such amounts may decrease with amortization. The Prospectus Supplement
may provide that, as additional compensation, the Master Servicer or the
Sub-Servicers will retain all or a portion of assumption fees, modification
fees, late payment charges or Prepayment Premiums collected from mortgagors and
any interest or other income which may be earned on funds held in the Security
Account or any account established by a Sub-Servicer.
The Master Servicer may, to the extent provided in the related
Prospectus Supplement, pay from servicing compensation expenses incurred in
connection with its servicing and managing of the Assets, including, without
limitation, payment of the fees and disbursements of the Trustee and independent
accountants, payment of expenses incurred in connection with distributions and
reports to Securityholders, and payment of any other expenses described in the
related Prospectus Supplement. Certain other expenses, including certain
expenses relating to defaults and liquidations on the Mortgage Loans and, to the
extent so provided in the related Prospectus Supplement, interest thereon at the
rate specified therein may be borne by the Trust Fund.
If and to the extent provided in the related Prospectus Supplement, the
Master Servicer may be required to apply servicing compensation otherwise
payable to it in respect of any Due Period to cover certain interest shortfalls
resulting from the voluntary prepayment of any Asset in the related Trust Fund
during such period.
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EVIDENCE AS TO COMPLIANCE
Each Agreement with respect to Mortgage Loan collateral will provide
that on or before a specified date in each year, beginning with the first such
date at least six months after the related Cut-off Date, a firm of independent
public accountants will furnish a statement to the Trustee to the effect that,
on the basis of the examination by such firm conducted substantially in
compliance with the Uniform Single Attestation Program for Mortgage Bankers, the
servicing by or on behalf of the Master Servicer of mortgage loans under
agreements substantially similar to each other (including the related Agreement)
was conducted in compliance with the terms of such agreements or such program
except for any significant exceptions or errors in records that, in the opinion
of the firm, the Uniform Single Attestation Program for Mortgage Bankers, or
such other program, requires it to report. In rendering its statement such firm
may rely, as to matters relating to the direct servicing of mortgage loans by
Sub-Servicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers (rendered within one year of such statement) of firms of
independent public accountants with respect to the related Sub-Servicer.
Each such Agreement also will provide for delivery to the Trustee, on
or before a specified date in each year, of an annual statement signed by two
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding calendar
year or other specified twelve-month period.
Copies of such annual accountants' statement and such statements of
officers will be obtainable by Securityholders without charge upon written
request to the Master Servicer at the address set forth in the related
Prospectus Supplement.
CERTAIN MATTERS REGARDING A MASTER SERVICER AND THE DEPOSITOR
The Master Servicer, if any, or a servicer for the Mortgage Loans under
each Agreement will be named in the related Prospectus Supplement. The entity
serving as Master Servicer (or as such servicer) may be an affiliate of the
Depositor and may have other normal business relationships with the Depositor or
the Depositor's affiliates. Reference herein to the Master Servicer shall be
deemed to include a servicer, if applicable.
The related Agreement will provide that the Master Servicer may resign
from its obligations and duties thereunder only upon a determination that its
duties under the Agreement are no longer permissible under applicable law or are
in material conflict by reason of applicable law with other activities carried
on thereby at the time the related Series was initially issued, and upon the
appointment of an acceptable successor Master Servicer. No such resignation will
become effective until the Trustee or a successor servicer has assumed the
Master Servicer's obligations under the Agreement.
Each Servicing Agreement and Pooling and Servicing Agreement will
further provide that neither the Master Servicer, the Depositor nor any
director, officer, employee, or agent of a Master Servicer or the Depositor will
be liable to the related Trust Fund or Securityholders for any action taken, or
for refraining from the taking of any action, in good faith pursuant to the
Agreement, or for errors in judgment provided, however, that neither a Master
Servicer, the Depositor nor any such person will be protected against any breach
of a representation, warranty or covenant made in such Agreement, or against any
liability specifically imposed thereby, or against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of obligations or duties thereunder or by reason
of reckless disregard of obligations and duties thereunder. Each Agreement will
further provide that any Master Servicer, the Depositor and any director,
officer, employee or agent of a Master Servicer or the Depositor may rely in
good faith on any document of any kind prima facia properly executed and
submitted by any person respecting any matters arising under such Agreement.
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In addition, each Agreement will provide that neither the Master
Servicer nor the Depositor will be under any obligation to appear in, prosecute
or defend any legal action not incidental to its respective responsibilities
under the Agreement and that in its opinion may involve an expense or liability.
Any such Master Servicer or the Depositor may, however, in its discretion
undertake any such action which it may deem necessary or desirable with respect
to such Agreement and the rights and duties of the parties thereto and the
interests of the Securityholders thereunder. In such event, the legal expenses
and costs of such action and any liability resulting therefrom will be expenses,
costs and liabilities of the Securityholders, and the Master Servicer or the
Depositor, as the case may be, will be entitled to be reimbursed from the
Security Account.
Any person into which the Master Servicer or the Depositor may be
merged or consolidated, or any person resulting from any merger or consolidation
to which the Master Servicer or the Depositor is a party, or any person
succeeding to the business of the Master Servicer or the Depositor, will be the
successor of the Master Servicer or the Depositor, as the case may be, under the
related Agreement.
SPECIAL SERVICERS
If and to the extent specified in the related Prospectus Supplement, a
special servicer (a "Special Servicer") may be a party to the related Agreement
or may be appointed by the Servicer or another specified party to perform
certain specified duties in respect of servicing the related Mortgage Loans that
would otherwise be performed by the Master Servicer (for example, the workout
and/or foreclosure of defaulted Mortgage Loans). The rights and obligations of
any Special Servicer will be specified in the related Prospectus Supplement, and
the Master Servicer will be liable for the performance of a Special Servicer
only if, and to the extent, set forth in such Prospectus Supplement.
EVENTS OF DEFAULT UNDER POOLING AND SERVICING AGREEMENTS
Events of Default under any Pooling and Servicing Agreement generally
will include (a) any failure by the Master Servicer to remit funds in the
Security Account or to make certain required advances, and the continuance of
such failure unremedied for a period of five days after the date upon which such
payment or remittance was due; (b) any failure on the part of the Master
Servicer duly to observe or perform in any material respect certain of the
covenants or agreements on the part of the Master Servicer in the Pooling and
Servicing Agreement, which failure continues unremedied for a period of 60 days
after the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Master Servicer by the Trustee, or to the
Master Servicer and the Trustee by the Holders of Certificates of a Series
entitled to at least 25% of the related Voting Rights; (c) the issuance of 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 or appointing a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, against the Master Servicer, and the
remaining of such decree or order in force undischarged or unstayed for a period
of 60 consecutive days; (d) the Master Servicer's consent to the appointment of
a conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings of, or relating
to, the Master Servicer or of, or relating to, all or substantially all of the
property of the Master Servicer; or (e) the Master Servicer's (1) admission in
writing of its inability to pay its debts generally as they become due, (2)
filing of a petition to take advantage of, or commence a voluntary case under,
any applicable insolvency or reorganization statute, (3) making of an assignment
for the benefit of its creditors, or (4) voluntarily suspending payment of its
obligations.
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The manner of determining the "Voting Rights" of a Security or Class or
Classes of Securities will be specified in the related Prospectus Supplement.
CERTIFICATEHOLDER RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under a Pooling and Servicing Agreement
remains unremedied, the Depositor or the Trustee may, and at the direction of
holders of Securities evidencing not less than 51% of the Voting Rights, the
Trustee shall, terminate all of the rights and obligations of the Master
Servicer under the Agreement and in and to the Assets (other than as a
Securityholder or as the owner of any Retained Interest), whereupon the Trustee
will succeed to all of the responsibilities, duties and liabilities of the
Master Servicer under the Agreement (except that if the Trustee is prohibited by
law from obligating itself to make advances regarding delinquent mortgage loans,
or if the related Prospectus Supplement so specifies, then the Trustee will not
be obligated to make such advances) and will be entitled to similar compensation
arrangements. In the event that the Trustee is unwilling or unable so to act, it
may or, at the written request of the holders of Securities entitled to at least
51% of the Voting Rights, it shall appoint, or petition a court of competent
jurisdiction for the appointment of, a loan servicing institution acceptable to
each Rating Agency with a net worth at the time of such appointment of at least
$15,000,000 to act as successor to the Master Servicer under the Agreement.
Pending such appointment, the Trustee is obligated to act in such capacity. The
Trustee and any such successor may agree upon the servicing compensation to be
paid, which in no event may be greater than the compensation payable to the
Master Servicer under the Agreement.
The holders of at least 66 2/3% of the Voting Rights allocated to the
respective Classes of Certificates affected by any Event of Default will be
entitled to waive such Event of Default; provided, however, that an Event of
Default involving a failure to distribute a required payment to Securityholders
described in clause (a) under "Events of Default" may be waived only by all of
the Securityholders. Upon any such waiver of an Event of Default, such Event of
Default shall cease to exist and shall be deemed to have been remedied for every
purpose under the Agreement.
No Securityholder will have the right under any Pooling and Servicing
Agreement to institute any proceeding with respect thereto unless such holder
previously has given to the Trustee written notice of default and unless the
holders of Securities evidencing not less than 25% of the Voting Rights have
made written request upon the Trustee to institute such proceeding in its own
name as Trustee thereunder and have offered to the Trustee reasonable indemnity,
and the Trustee for sixty days has neglected or refused to institute any such
proceeding. The Trustee, however, is under no obligation to exercise any of the
trusts or powers vested in it by any Pooling and Servicing Agreement or to make
any investigation of matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order or
direction of any of the holders of Securities covered by such Agreement, unless
such Securityholders have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby.
AMENDMENT
Each Trust Agreement, each Pooling and Servicing Agreement and the
Indenture may be amended by the parties thereto, without the consent of any of
the holders of Securities covered by the Agreement, (i) to cure any ambiguity,
(ii) to correct, modify or supplement any provision therein that may be
inconsistent with any other provision therein, (iii) to make any other
provisions with respect to matters or questions arising under the Agreement that
are not materially inconsistent with the provisions thereof, or (iv) to comply
with any requirements imposed by the Code; provided that such amendment (other
than an amendment for the purpose specified in clause (iv) above) will not (as
evidenced either by an opinion of counsel or by the confirmation of each Rating
Agency that the credit ratings assigned to the Securities will not be downgraded
or withdrawn) adversely affect in any material respect the interests of any
holder of Securities covered by the Agreement. Each Agreement may also be
amended by the Depositor, the Master Servicer, if any, and the Trustee, with the
consent of the holders of Securities affected thereby evidencing not less than
66 2/3% of the Voting Rights, for any purpose; provided, however, that no such
amendment may (i) reduce in any manner the amount of or delay the timing of,
payments received or advanced on Assets that are required to be distributed on
any Security without the consent of the holder of such Security, (ii) adversely
affect in any material respect the interests of the
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holders of any Class of Securities in any additional manner not described in
(i), without the consent of the holders of all Securities of such Class or (iii)
modify the provisions of such Agreement described in this paragraph without the
consent of the holders of all Securities covered by such Agreement then
outstanding. However, with respect to any Series of Securities as to which a
REMIC election is to be made, the Trustee will not consent to any amendment of
the Agreement unless it shall first have received an opinion of counsel to the
effect that such amendment will not result in the imposition of a tax on the
related Trust Fund or cause the related Trust Fund to fail to qualify as a REMIC
at any time that the related Securities are outstanding.
THE TRUSTEE
The Trustee under each Agreement will be named in the related
Prospectus Supplement. The commercial bank, national banking association,
banking corporation or trust company serving as Trustee may have a banking
relationship with the Depositor and its affiliates and with any Master Servicer
and its affiliates.
The Trustee, and any successor Trustee, with respect to any Series
containing Bonds offered hereunder, each will have a combined capital and
surplus of at least $50,000,000, or will be a member of a bank holding system,
the aggregate combined capital and surplus of which is at least $50,000,000,
provided that such Trustee's and any such successor Trustee's separate capital
and surplus shall at all times be at least the amount specified in Section
310(a)(2) of the Trust Indenture Act of 1939 and that the Trustee and such
successor Trustee will be subject to supervision or examination by federal or
state authorities and will have an office in the United States.
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or
sufficiency of any Agreement, the Offered Securities or any Asset or related
document and is not accountable for the use or application by or on behalf of
any Master Servicer of any funds paid to the Master Servicer or its designee in
respect of the Offered Securities or the Trust Assets, or deposited into or
withdrawn from the Security Account or any other account by or on behalf of the
Master Servicer. If no Event of Default has occurred and is continuing, the
Trustee is required to perform only those duties specifically required under the
related Agreement. However, upon receipt of the various certificates, reports or
other instruments required to be furnished to it, the Trustee is required to
examine such documents and to determine whether they conform to the requirements
of the Agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
The Trustee and any director, officer, employee or agent of the Trustee
shall be entitled to indemnification out of the Security Account for any loss,
liability or expense (including costs and expenses of litigation, and of
investigation, counsel fees, damages, judgments and amounts paid in settlement)
incurred in connection with the Trustee's (i) enforcing its rights and remedies
and protecting the interests, and enforcing the rights and remedies, of the
Securityholders during the continuance of an Event of Default, (ii) defending or
prosecuting any legal action in respect of the related Agreement or Securities,
(iii) being the mortgagee of record with respect to the Mortgage Loans in a
Trust Fund and the owner of record with respect to any Mortgaged Property
acquired in respect thereof for the benefit of Securityholders, or (iv) acting
or refraining from acting in good faith at the direction of the holders of the
related Series of Securities entitled to not less than 25% (or such other
percentage as is specified in the related Agreement with respect to any
particular matter) of the Voting Rights for such Series; provided, however, that
such indemnification will not extend to any loss, liability or expense that
constitutes a specific liability of the Trustee pursuant to the related
Agreement, or to any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence on the part of the Trustee in the
performance of its obligations and duties thereunder, or by reason of its
reckless disregard of such obligations or duties, or as may arise from a breach
of any representation, warranty or covenant of the Trustee made therein.
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RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trustee may at any time resign from its obligations and duties
under any Trust Agreement or Pooling and Servicing Agreement by giving written
notice thereof to the Depositor, the Master Servicer, if any, and all
Securityholders. Upon receiving such notice of resignation, the Depositor is
required promptly to appoint a successor trustee acceptable to the Master
Servicer, if any. If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible to continue as
such under any Trust Agreement or Pooling and Servicing Agreement, or if at
any time the Trustee shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall
be appointed, or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Depositor may remove the Trustee and
appoint a successor trustee acceptable to the Master Servicer, if any. Holders
of the Securities of any Series entitled to at least 51% of the Voting Rights
for such Series may at any time remove the Trustee without cause and appoint a
successor trustee.
Any resignation or removal of the Trustee and appointment of a
successor trustee shall not become effective until acceptance of appointment by
the successor trustee.
CERTAIN TERMS OF THE INDENTURE
The following summaries describe certain provisions of the Indenture.
When particular provisions or terms used in the Indenture are referred to, the
actual provisions (including definitions of terms) are incorporated by reference
as part of such summaries.
GENERAL
The Indenture does not limit the amount of Bonds that can be issued
thereunder and provides that Bonds of any Series may be issued thereunder up to
the aggregate principal amount that may be authorized from time to time by the
Depositor.
MODIFICATION OF INDENTURE
With the consent of the Holders of not less than a majority in
principal balance of the outstanding Bonds of each Series to be affected or, if
fewer than all Classes of a Series would be affected, of each Class to be
affected, the Trustee and the Depositor may execute a supplemental indenture to
add provisions to, or change in any manner or eliminate provisions of, the
Indenture relating to such Series, or to such Class or Classes, or modify in any
manner the rights of the Holders of the Bonds of such Series, or of such Class
or Classes. If any such supplemental indenture would adversely affect the
Holders of any Senior Bonds or of any subordinated Bonds, then approval of
Holders of a majority in principal balance of such outstanding Senior Bonds or
of such outstanding subordinated Bonds, as the case may be, would also be
required.
Without the consent of the Bondholders of each outstanding Bond
affected, however, no supplemental indenture may (i) change the Stated Maturity
Date of the principal of, or timing of any installment of principal or interest
on, any Bond, reduce the principal amount thereof or the interest thereon or the
redemption price thereof or the time for redemption with respect thereto, change
the provisions relating to the application of proceeds of the Trust Estate to
the payment of principal on the Bonds, change any place where, or the currency
in which, any Bond or interest thereon is payable, or impair the right to
institute suit for payment on or after the maturity thereof or, in the case of
redemption, on or after the redemption date, (ii) reduce the percentage in
principal amount of Bonds of the affected Series whose Holders must consent to
any supplemental indenture or to any waiver of compliance with certain
provisions of the Indenture or certain defaults thereunder or their
consequences, (iii) impair or adversely affect the collateral securing a
Series, (iv) permit the creation of any lien ranking prior to or on a par with
the lien of the Indenture with respect to any part of the Trust Estate or
terminate the lien of the Indenture on any part of the Trust Estate or on any
property at any time subject to the Indenture or deprive the Holder of the
security afforded by the lien of the Indenture, (v) change the definition of
default under the Indenture, or reduce the percentage of Bondholders of Bonds
of any Series whose consent is required to direct the Trustee to liquidate the
collateral for such Series, (vi) change any condition precedent for the
redemption of any Series of Bonds or (vii) modify any of the provisions of the
Indenture with respect to supplemental indentures except to increase the
percentage of outstanding Bonds whose consent is required for any such action
or to provide that certain other provisions of the Indenture cannot be modified
or waived without the consent of the Bondholders of each outstanding Bond of a
Class affected thereby. The issuance of additional Bonds in accordance with the
provisions and limitations contained in a Series Supplement relating to
outstanding Bonds will be deemed not to have changed the timing of any
installment of principal of or interest on any outstanding Class of Bonds
issued under such Series Supplement for purposes of requiring Bondholder
consent pursuant to clause (i) above.
The Depositor and the Trustee, upon advice of counsel, also may enter
into supplemental indentures, without obtaining the consent of Bondholders, for
the purpose of, among other things, (i) setting forth the terms of and security
for any previously unissued Series, (ii) adding to the covenants of the
Depositor or the Trustee for the benefit of the Bondholders, and (iii) curing
ambiguities, or correcting or supplementing any defective, ineffective or
inconsistent provision or amending any other provision with respect to matters
or questions relating to the Indenture, provided the interests of the
Bondholders would not be materially adversely affected. For purposes of clause
(iii) above, among other things, a supplemental indenture will be conclusively
deemed not to adversely affect a particular Series if (i) the Trustee receives a
letter or other writing from each Rating Agency rating the Class or Series to
the effect that execution of the supplemental indenture will not result in any
change in the current rating assigned by that Rating Agency to the Class or
Series and (ii) the supplemental indenture effects no change in principal
priority schedules, interest rates, redemption prices, substitution of
collateral, Payment Dates, record dates, Accounting Dates, terms of optional or
mandatory redemption, application of Surplus to the payment of a Series or other
payment terms established by the Series Supplement for the Series.
EVENTS OF DEFAULT
An event of default ("Event of Default") with respect to a Series or
Class of Bonds will be described in the related Prospectus Supplement.
Generally, an Event of Default with respect to the Senior Bonds of a Series
(and, so long as 91 days have passed during which no Senior Bond has been
outstanding, a Class of the subordinated Bonds of a Series) is (i) failure to
pay required interest and principal when any related available credit
enhancement amount has been reduced to zero, (ii) failure to pay principal in
full prior to the Stated Maturity Date for such Bonds and (iii) default in the
performance of certain covenants in the Indenture and the continuation of such
default for 60 days after notice to the Depositor by the Trustee or to the
Trustee and the Depositor by the Bondholders of at least 25% in principal
amount of such Bonds. Certain events of bankruptcy, insolvency, reorganization
or receivership of the Depositor constitute an Event of Default for all Bonds
of a Series.
Generally, (i) a breach of a representation, warranty or covenant in
the Servicing Agreement will not constitute an Event of Default under the
Indenture and (ii) an Event of Default with respect to one Series will not
constitute an Event of Default with respect to any other Series.
Within 90 days after the occurrence of any default that is, or with
notice or the lapse of time or both would become, an Event of Default with
respect to the Bonds, the Trustee is required under the Indenture to transmit
notice of such default, if known to the Trustee, to all Bondholders, unless such
default shall have been cured or waived, or the Trustee determines in good faith
that the withholding of such notice is in the interest of the Bondholders.
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If an Event of Default with respect to the Senior Bonds of a Series
occurs and is continuing, the Bondholders of not less than 25% in principal
balance of the outstanding Senior Bonds of such Series may declare the principal
of all of the Bonds of such Series to be immediately due and payable, by a
notice in writing to the Depositor and to the Trustee. If an Event of Default
with respect to the subordinated Bonds of a Series occurs and is continuing, the
Bondholders of not less than 25% in principal balance of the outstanding
subordinated Bonds (and of the outstanding Senior Bonds, if any) of such Series
may declare the principal of all of the Bonds of such Series to be immediately
due and payable, by a notice in writing to the Depositor and to the Trustee. Any
such declaration may be rescinded by the Bondholders of not less than a majority
in principal balance of the outstanding Bonds that were entitled to vote on the
declaration. Following any such declaration that is not rescinded, the Trustee
shall sell the collateral as described in the Indenture. If an Event of Default
has occurred and is continuing and no Bonds of the Series have been declared due
and payable, or any such declaration and its consequences has been rescinded,
the Trustee may, and on the direction of a majority in principal balance of the
outstanding Senior Bonds (or, if no Senior Bonds are outstanding, subordinated
Bonds) shall give notice to the Depositor of its election to preserve the Trust
Estate, collect the proceeds thereof and make and apply all payments in respect
of the Bonds in accordance with the Indenture.
Proceeds from the liquidation of the collateral for a Series
of Bonds will be applied, after all required payments and reimbursements to the
Trustee, Servicer, and any special Servicer, in the order set forth in the
Series Supplement and related Prospectus Supplement for such Series of Bonds.
Declaration of acceleration and liquidation of the collateral pursuant to the
foregoing procedures shall be the sole remedy for the Bondholders upon an Event
of Default. In the event that a Series of Bonds is declared due and payable, as
described above, and the collateral securing the Bonds is sold, the net
proceeds from such sale may be insufficient to pay the full unpaid amount of
principal of and interest due on each outstanding Class of Bonds of such
Series. Furthermore, in the event that the principal of the Bonds of a Series
is declared due and payable, as described above, and the collateral securing
such Series is sold, the Bondholders of any discount Bonds may be entitled to
receive no more than an amount equal to the unpaid principal amount thereof
less the unamortized original issue discount. No assurance can be given about
how the amount of the original issue discount that has not been amortized will
be determined.
Subject to the provisions of the Indenture relating to the duties of
the Trustee in case an Event of Default will occur and be continuing, the
Trustee will be under no obligation to exercise any of the rights or powers
under the Indenture at the request or direction of any Bondholders of the Bonds
of a Series, unless such Bondholders will have offered to the Trustee reasonable
security or indemnity. Subject to such provisions for indemnification and
certain limitations contained in the Indenture, Holders of a majority in
principal amount of the outstanding Senior Bonds (or the most senior of any
subordinated Bonds if no Senior Bonds are outstanding) of a Series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee with respect to the Bonds of such Series; and the Bondholders of the
majority in principal amount of the outstanding Senior Bonds (or the
subordinated Bonds if no Senior Bonds are outstanding) of a Series may, in
certain cases, waive any default with respect to such Series.
No Bondholder of any of the Bonds of a Series will have the right to
institute any proceeding with respect to the Indenture, unless (i) such
Bondholder previously has given to the Trustee written notice of an Event of
Default, (ii) the Bondholders of not less than 25% in principal amount of the
outstanding Senior Bonds (or the subordinate Bonds if no Senior Bonds are
outstanding) of the same Series have made written request upon the Trustee to
institute such proceedings in its own name as Trustee and have offered the
Trustee reasonable indemnity, (iii) the Trustee has for 60 days failed to
institute any such proceeding, and (iv) no direction inconsistent with such
written request has been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the outstanding Senior Bonds (or
the subordinated Bonds if no Senior Bonds are outstanding) of a Series.
At such time as an Event of Default for a Series is declared and so
long as Senior Bonds of such Series remain outstanding, the Trustee will cease
to act on behalf of the Holders of subordinated Bonds and will thereafter act
only on behalf of the Holders of the Senior Classes of Bonds. The Depositor is
required in such circumstances to appoint a separate trustee for the Holders of
the subordinated Bonds. Such trustee may seek to act in a manner adverse to the
Holders of the Senior Bonds, and such action may result in a delay in
disposition of the Trust Estate or the exercise of other remedies and,
consequently, a delay in payment to the Holders of the Senior Bonds. Should the
Depositor fail to appoint a separate trustee within 60 days after such Event of
Default, the Trustee will petition a court of competent jurisdiction to appoint
a separate trustee.
AUTHENTICATION AND DELIVERY OF BONDS
The Depositor may from time to time deliver Bonds executed by it to the
Trustee and request that the Trustee authenticate such Bonds. Upon the receipt
of such Bonds and such request, and subject to the Depositor's compliance with
certain conditions specified in the Indenture, the Trustee will authenticate and
deliver such Bonds as the Depositor may direct.
LIST OF BONDHOLDERS
Three or more Bondholders of the Bonds of a Series, each of whom has
owned a Bond of such Series for at least six months, may, by written request to
the Trustee, obtain access to the list of all Bondholders of Bonds of the same
Series or of all Bonds, as specified in the request, maintained by the Trustee
for the purpose of communicating with other Bondholders with respect to their
rights under the Indenture. The Trustee may elect not to afford the requesting
Bondholders access to the list of Bondholders if it agrees to mail the desired
communication or proxy, on behalf of the requesting Bondholders, to all such
Bondholders.
ANNUAL COMPLIANCE STATEMENT
The Depositor will be required to file annually with the Trustee a
written statement as to fulfillment of its obligations under the Indenture.
REPORTS TO BONDHOLDERS
On or before each Payment Date for a Series, the Trustee will transmit
by mail to each Bondholder of such Series a report with respect to the principal
balance of the Bonds of such Series held by such Bondholder as of the
immediately preceding Payment Date and the amount of principal, interest and
premium, if any, paid with respect to the Bonds of such Series held by such
Bondholder since the immediately preceding Payment Date. Such report also will
include information regarding the levels of
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delinquencies and losses on the collateral, losses with respect to each related
Class of Bonds, and the amount of servicing and master servicing fees paid with
respect to the collateral in the related collateral pool for the applicable
Payment Date.
TRUSTEE'S ANNUAL REPORT
The Trustee under present law is required to mail each year to all
registered Bondholders of Bonds of a Series a brief report with respect to any
of the following events that may have occurred within the previous year (but if
no such event has occurred, no report is required): any change in its
eligibility and qualifications to continue as the Trustee under the Indenture,
any amounts advanced by it under the Indenture, the amount, interest rate and
maturity date of certain indebtedness owing by the Depositor to it in the
Trustee's individual capacity, any change in the property and funds relating to
such Series physically held by the Trustee as such, any additional issue of
Bonds of such Series not previously reported, any change in the release or
release and substitution of any property relating to such Series subject to the
lien of the Indenture, and any action taken by it that materially affects the
Bonds or the Trust Estate for such Series and that has not been previously
reported. In any event, the Trustee will make such information available to all
Bondholders on an annual basis.
TRUSTEE
The Trustee for each Series of Bonds will be specified in the
respective Prospectus Supplement. The commercial bank or trust company serving
as Trustee may have normal banking relationships with the Depositor or any of
its affiliates.
The Trustee may resign at any time, in which event the Depositor will
be obligated to appoint a successor Trustee. The Depositor may remove the
Trustee and appoint a successor Trustee if the Trustee ceases to be eligible to
act as Trustee under the Indenture or if the Trustee becomes insolvent or
otherwise incapable of acting with respect to any Series of Bonds. The Depositor
may also remove the Trustee and appoint a successor Trustee for any Series of
Bonds at any time provided that the Depositor receives confirmation that the
appointment of the successor Trustee will not result in the lowering of the
rating of that Series of Bonds. The Trustee with respect to a Series of Bonds
may also be removed at any time by the holders of a majority in principal amount
of the Bonds of such Series then outstanding.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will be discharged as to a Series upon the cancellation
of all of the Bonds of such Series or, with certain limitations, upon deposit
with the Trustee of funds sufficient for the payment or redemption thereof.
DESCRIPTION OF CREDIT SUPPORT
GENERAL
For any Series of Securities, Credit Support may be provided with
respect to one or more Classes thereof or the related Assets. Credit Support
may be in the form of the subordination of one or more Classes of Securities,
letters of credit, insurance policies, the establishment of one or more reserve
funds or other methods described in the related Prospectus Supplement, or any
combination of the foregoing. If so provided in the related Prospectus
Supplement, any form of Credit Support may be structured so as to be drawn upon
by more than one Series, to the extent described therein.
Credit Support will not provide protection against all risks of loss
and will not guarantee repayment of the entire Security Balance of the Offered
Securities together with interest thereon. If losses or shortfalls occur that
exceed the amount of Credit Support or that are not covered by Credit Support,
Securityholders will bear risk of loss. Moreover, if a form of Credit Support
covers more than one Series of Securities (each, a "Covered Trust"), holders of
Securities evidencing interests in any of such Covered Trusts will be subject to
the risk that such Credit Support will be exhausted by the claims of other
Covered Trusts prior to such Covered Trust receiving any such coverage.
The Prospectus Supplement will include a description of (a) the nature
and amount of coverage under any Credit Support, (b) any conditions to payment
thereunder not otherwise described herein, (c) the conditions (if any) under
which the amount of coverage under such Credit Support may be reduced and under
which such Credit Support may be terminated or replaced and (d) the material
provisions relating to Credit Support. Additionally, the
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Prospectus Supplement will set forth certain information with respect to the
obligor under any instrument of Credit Support, including (i) a brief
description of its principal business activities, (ii) its principal place of
business, place of incorporation and the jurisdiction under which it is
chartered or licensed to do business, (iii) if applicable, the identity of
regulatory agencies that exercise primary jurisdiction over the conduct of its
business and (iv) its total assets, and its stockholders' or policyholders'
surplus, if applicable. See "Risk Factors -- Availability of Credit Support does
not eliminate risk of loss on Offered Securities."
MAINTENANCE OF CREDIT SUPPORT
If Credit Support has been obtained for a Series of Securities, the
Master Servicer, or such other party specified in the related Prospectus
Supplement, will be obligated to exercise its best reasonable efforts to keep or
cause to be kept such Credit Support in full force and effect throughout the
term of the applicable Agreement, unless coverage thereunder has been exhausted
through payment of claims or otherwise, or substitution therefor is made as
described below under "-- Reduction or Substitution of Credit Enhancement." The
Master Servicer or such other party will be required to provide information
required for the Trustee to draw under any applicable Credit Support.
The Master Servicer, or such other party specified in the related
Prospectus Supplement, will agree to pay the premiums for any instrument of
Credit Support, if applicable, on a timely basis, in accordance with the terms
of the related Agreement. In the event the related insurer ceases to be
qualified under applicable law to transact such insurance business (a "Qualified
Insurer") or coverage is terminated for any reason other than exhaustion of such
coverage, the Master Servicer or such other party will use its best reasonable
efforts to obtain from another Qualified Insurer a comparable replacement
insurance policy or bond with a total coverage equal to the then outstanding
coverage of such policy or bond. If the cost of the replacement policy is
greater than the cost of such policy or bond, the coverage of the replacement
policy or bond will, unless otherwise agreed to by the Master Servicer, be
reduced to a level such that its premium rate does not exceed the premium rate
on the original insurance policy.
If any property securing a defaulted Mortgage Loan is damaged and
proceeds, if any, from the related hazard insurance policy or any applicable
special hazard insurance policy are insufficient to restore the damaged property
to a condition sufficient to permit recovery under any instrument of Credit
Support, the Master Servicer is not required to expend its own funds to restore
the damaged property unless it determines (i) that such restoration will
increase the proceeds to one or more Classes of Securityholders on liquidation
of the Mortgage Loan after reimbursement of the Master Servicer for its expenses
and (ii) that such expenses will be recoverable by it through Liquidation
Proceeds or Insurance Proceeds. If recovery under any instrument of Credit
Support or any related Primary Insurance Policy is not available because the
Master Servicer has been unable to make the above determinations, has made such
determinations incorrectly or recovery is not available for any other reason,
the Master Servicer is nevertheless obligated to follow such normal practices
and procedures (subject to the preceding sentence) as it deems necessary or
advisable to realize upon the defaulted Mortgage Loan and in the event such
determination has been incorrectly made, is entitled to reimbursement of its
expenses in connection with such restoration.
REDUCTION OR SUBSTITUTION OF CREDIT SUPPORT
The amount of Credit Support provided with respect to any Series of
Securities may be reduced under certain specified circumstances. In most cases,
the amount available as Credit Support will be subject to periodic reduction on
a non-discretionary basis in accordance with a schedule or formula set forth in
the related Agreement. Additionally, in the event that the credit rating of any
obligor under any applicable credit enhancement is downgraded, the credit rating
of each Class of the related Securities may be downgraded to a corresponding
level, and the Master Servicer or such other party specified in the Prospectus
Supplement will not be obligated to obtain replacement credit support in order
to restore the rating of the Securities. The Master Servicer or such other party
will also be permitted to replace such credit support with other credit
enhancement instruments issued by obligors whose credit ratings are equivalent
to such downgraded level and in lower amounts which would satisfy such
downgraded level, provided that the then-current rating of each Class of the
related Series of Securities is maintained.
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SUBORDINATE SECURITIES
If so specified in the related Prospectus Supplement, one or more
Classes of Securities of a Series may be Subordinate Securities. To the extent
specified in the related Prospectus Supplement, the rights of the holders of
Subordinate Securities to receive distributions of principal and interest from
the Security Account on any Distribution Date will be subordinated to the rights
of the holders of Senior Securities. If so provided in the related Prospectus
Supplement, subordination may apply only in the event of (or may be limited to)
certain types of losses or shortfalls. The related Prospectus Supplement will
set forth information concerning the amount of subordination of Subordinate
Securities, the circumstances in which such subordination will be applicable and
the manner, if any, in which the amount of subordination will be affected.
CROSS-SUPPORT PROVISIONS
If the Assets are divided into separate groups, each supporting a
separate Class or Classes of Securities, credit support may be provided by
cross-support provisions requiring that distributions be made on Senior
Securities evidencing interests in one group of Assets prior to distributions on
Subordinate Securities evidencing interests in a different group of Assets
within the Trust Fund. The Prospectus Supplement for a Series that includes a
cross-support provision will describe the manner and conditions for applying
such provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO THE ASSETS
If so provided in the Prospectus Supplement, the Assets in the related
Trust Fund will be covered for various default risks by insurance policies or
guarantees. A copy of any such material instrument will be filed with the
Commission as an exhibit to a Current Report on Form 8-K to be filed within 15
days of issuance of the Securities.
LETTER OF CREDIT
If so provided in the Prospectus Supplement, deficiencies in amounts
otherwise payable on Securities will be covered by one or more letters of
credit, issued by a bank or financial institution specified in such Prospectus
Supplement (the "L/C Bank"). Under a letter of credit, the L/C Bank will be
obligated to honor draws thereunder in an aggregate fixed dollar amount, net of
unreimbursed payments thereunder, generally equal to a percentage specified in
the Prospectus Supplement of the aggregate principal balance of the Assets on
the related Cut-off Date or of the initial aggregate Security Balance of one or
more Classes of Securities. If so specified in the Prospectus Supplement, the
letter of credit may permit draws in the event of only certain types of losses
and shortfalls. The amount available under the letter of credit will, in all
cases, be reduced to the extent of the unreimbursed payments thereunder and may
otherwise be reduced as described in the related Prospectus Supplement. A copy
of any such letter of credit will be filed with the Commission as an exhibit to
a Current Report on Form 8-K to be filed within 15 days of issuance of the
Securities.
INSURANCE POLICIES AND SURETY BONDS
If so provided in the Prospectus Supplement, deficiencies in amounts
otherwise payable on the Securities or certain Classes thereof will be covered
by pool insurance policies, other insurance policies and/or surety bonds
provided by one or more insurance companies or sureties. Such instruments may
cover, with respect to one or more Classes of Securities, timely distributions
of interest and/or full distributions of principal on the basis of a schedule of
principal distributions set forth in or determined in the manner specified in
the related Prospectus Supplement. A copy of any such instrument for a Series
will be filed with the Commission as an exhibit to a Current Report on Form 8-K
to be filed within 15 days of issuance of the Securities.
SPECIAL HAZARD INSURANCE POLICIES
If so specified in the related Prospectus Supplement, a special hazard
insurance policy may also be obtained for the related Trust Fund in the amount
set forth in such Prospectus Supplement. The special hazard insurance
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policy will, subject to the limitations described in the related Prospectus
Supplement, protect against certain losses by reason of damage to Mortgaged
Properties caused by certain hazards not insured against under the standard form
of hazard insurance policy for the respective states in which the Mortgaged
Properties are located. The amount and principal terms of any such coverage will
be set forth in the Prospectus Supplement.
MORTGAGOR BANKRUPTCY BOND
If so specified in the related Prospectus Supplement, losses resulting
from a bankruptcy proceeding relating to a Mortgagor affecting the Mortgage
Loans in a Trust Fund with respect to a Series of Securities may be covered
under a mortgagor bankruptcy bond or any other instrument. Any mortgagor
bankruptcy bond or such other instrument will provide for coverage in an amount
meeting the criteria of the Rating Agency or Rating Agencies rating the
Securities of the related Series, which amount will be set forth in the related
Prospectus Supplement. The amount and principal terms of any such coverage will
be set forth in the Prospectus Supplement.
RESERVE FUNDS
If so provided in the Prospectus Supplement, deficiencies in amounts
otherwise payable on the Securities or certain Classes thereof will be covered
by one or more reserve funds in which cash, a letter of credit, Permitted
Investments, a demand note or a combination thereof will be deposited, in the
amounts so specified in such Prospectus Supplement. The reserve funds may also
be funded over time by depositing therein a specified amount of the
distributions received on the related Assets, as specified in the related
Prospectus Supplement.
Amounts on deposit in any reserve fund, together with the reinvestment
income thereon, if any, will be applied for the purposes, in the manner, and to
the extent specified in the related Prospectus Supplement. A reserve fund may be
provided to increase the likelihood of timely distributions of principal of and
interest on the Securities. If so specified in the related Prospectus
Supplement, reserve funds may be established to provide limited protection
against only certain types of losses and shortfalls. Following each Distribution
Date amounts in a reserve fund in excess of any amount required to be maintained
therein may be released from the reserve fund under the conditions and to the
extent specified in the related Prospectus Supplement, and may not be available
for further application to the Securities.
Moneys deposited in any reserve funds will be invested in Permitted
Investments. Reinvestment income or other gain from such investments may be
credited to the related reserve fund for such Series, and any loss resulting
from such investments may be charged to such reserve fund. Such income may be
payable to any related Master Servicer or another service provider as additional
compensation.
Additional information concerning any reserve fund will be set forth in
the related Prospectus Supplement, including the initial balance, the balance
required to be maintained therein, the manner in which such required balance
will decrease over time, the manner of funding, the purposes for which funds may
be applied to make distributions to Securityholders and use of investment
earnings, if any.
OVERCOLLATERALIZATION
If specified in the related Prospectus Supplement, subordination
provisions of a Trust Fund may be used to accelerate to a limited extent the
amortization of one or more Classes of Securities relative to the amortization
of the related Assets. The accelerated amortization is achieved by the
application of certain excess interest to the payment of principal of one or
more Classes of Securities. This acceleration feature creates, with respect to
the Assets or groups thereof, overcollateralization which is the excess of the
aggregate principal balance of the related Assets, or a group thereof, over the
Security Principal Balance of the related Class or Classes of Securities. Such
acceleration may continue for the life of the related Security, or may be
limited. In the case of limited acceleration, once the required level of
overcollateralization is reached, and subject to certain provisions specified in
the related Prospectus Supplement, such limited acceleration feature may cease,
unless necessary to maintain the required level of overcollateralization.
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CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the Prospectus Supplement, the MBS in the related
Trust Fund and/or the Mortgage Loans underlying such MBS may be covered by one
or more of the types of credit support. The related Prospectus Supplement will
specify each such form of credit support, to the extent such information is
material and available.
INSURANCE POLICIES ON THE MORTGAGE LOANS
Each Mortgage Loan will be required to be covered by a hazard insurance
policy (as described below) and, in certain cases, a Primary Insurance Policy.
In addition, FHA Loans and VA Loans will be covered by the government mortgage
insurance programs described below. The descriptions of any insurance policies
set forth in this Prospectus or any related Prospectus Supplement and the
coverage thereunder do not purport to be complete and are qualified in their
entirety by reference to such forms of policies.
PRIMARY MORTGAGE GUARANTY INSURANCE POLICIES
(i) Each Mortgage Loan having a Loan-to-Value Ratio at origination of
over 80% will be covered by a primary mortgage guaranty insurance policy (a
"Primary Insurance Policy") insuring against default on such Mortgage Loan as
to at least the principal amount thereof exceeding 75% of the appraised value
of the Mortgaged Property at origination of the Mortgage Loan, unless and until
the principal balance of the Mortgage Loan is reduced to a level that would
produce a Loan-to-Value Ratio equal to or less than 80%, and (ii) the Asset
Seller will represent and warrant that, to the best of such entity's knowledge,
such Mortgage Loans are so covered. The Master Servicer will have the ability
to cancel any Primary Insurance Policy if the Loan-to-Value Ratio of the
Mortgage Loan is reduced below 80% (or a lesser specified percentage) based on
an appraisal of the Mortgaged Property after the related Closing Date or as a
result of principal payments that reduce the principal balance of the Mortgage
Loan after such Closing Date. Mortgage Loans that are subject to negative
amortization will only be covered by a Primary Insurance Policy if such
coverage was so required upon their origination, notwithstanding that
subsequent negative amortization may cause such Mortgage Loan's Loan-to-Value
Ratio (based upon the then-current balance) to subsequently exceed the limits
which would have required such coverage upon their origination.
While the terms and conditions of the Primary Insurance Policies issued
by one primary mortgage insurer (a "Primary Insurer") will differ from those in
Primary Insurance Policies issued by other Primary Insurers, each Primary
Insurance Policy generally will pay either: (i) the insured percentage of the
loss on the related Mortgaged Property; (ii) the entire amount of such loss,
after receipt by the Primary Insurer of good and merchantable title to, and
possession of, the Mortgaged Property; or (iii) at the option of the Primary
Insurer under certain Primary Insurance Policies, the sum of the delinquent
monthly payments plus any advances made by the insured, both to the date of the
claim payment and, thereafter, monthly payments in the amount that would have
become due under the Mortgage Loan if it had not been discharged plus any
advances made by the insured until the earlier of (a) the date the Mortgage Loan
would have been discharged in full if the default had not occurred or (b) an
approved sale of the related Mortgaged Property. The amount of the loss as
calculated under a Primary Insurance Policy covering a Mortgage Loan will
generally consist of the unpaid principal amount of such Mortgage Loan and
accrued and unpaid interest thereon and reimbursement of certain expenses, less
(i) rents or other payments received by the insured (other than the proceeds of
hazard insurance) that are derived from the related Mortgaged Property, (ii)
hazard insurance proceeds received by the insured in excess of the amount
required to restore such Mortgaged Property and which have not been applied to
the payment of the Mortgage Loan, (iii) amounts expended, but not approved by
the Primary Insurer, (iv) claim payments previously made on such Mortgage Loan
and (v) unpaid premiums and certain other amounts.
As conditions precedent to the filing or payment of a claim under a
Primary Insurance Policy, in the event of default by the Mortgagor, the insured
will typically be required, among other things, to (i) advance or discharge (a)
hazard insurance premiums and (b) as necessary and approved in advance by the
Primary Insurer, real estate taxes, protection and preservation expenses and
foreclosure and related costs; (ii) in the event of any physical loss
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or damage to the Mortgaged Property, have the Mortgaged Property restored to at
least its condition at the effective date of the Primary Insurance Policy
(ordinary wear and tear excepted); and (iii) tender to the Primary Insurer good
and merchantable title to, and possession of, the Mortgaged Property.
The related Agreement for a Series generally will require that the
Master Servicer maintain, or cause to be maintained, coverage under a Primary
Insurance Policy to the extent such coverage was in place on the Cut-off Date.
HAZARD INSURANCE POLICIES
The terms of the Mortgage Loans require each Mortgagor to maintain a
hazard insurance policy providing for such coverage as is required under the
related Mortgage or, if any Mortgage permits the holder thereof to dictate to
the Mortgagor the insurance coverage to be maintained on the related Mortgaged
Property, then such coverage as is consistent with the Servicing Standard. Such
coverage will be in general in an amount equal to the lesser of the principal
balance owing on such Mortgage Loan and the amount necessary to fully compensate
for any damage or loss to the improvements on the Mortgaged Property on a
replacement cost basis, but in either case not less than the amount necessary to
avoid the application of any co-insurance clause contained in the hazard
insurance policy. The ability of the Master Servicer to assure that hazard
insurance proceeds are appropriately applied may be dependent upon its being
named as an additional insured under any hazard insurance policy and under any
other insurance policy referred to below, or upon the extent to which
information in this regard is furnished by Mortgagors. All amounts collected by
the Master Servicer under any such policy (except for amounts to be applied to
the restoration or repair of the Mortgaged Property or released to the Mortgagor
in accordance with the Master Servicer's normal servicing procedures, subject to
the terms and conditions of the related Mortgage and Mortgage Note) will be
deposited in the Security Account. The Agreement will provide that the Master
Servicer may satisfy its obligation to cause each Mortgagor to maintain such a
hazard insurance policy by the Master Servicer's maintaining a blanket policy
insuring against hazard losses on the Mortgage Loans. If such blanket policy
contains a deductible clause, the Master Servicer will be required to deposit in
the Security Account all sums that would have been deposited therein but for
such clause.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements of the property by
fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and
civil commotion, subject to the conditions and exclusions specified in each
policy. Although the policies relating to the Mortgage Loans will be
underwritten by different insurers under different state laws in accordance with
different applicable state forms, and therefore will not contain identical terms
and conditions, the basic terms thereof are dictated by respective state laws,
and most such policies typically do not cover any physical damage resulting from
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 risks.
The hazard insurance policies covering the Mortgaged Properties
securing the Mortgage Loans will typically contain a co-insurance clause that in
effect requires the insured at all times to carry insurance of a specified
percentage (generally 80% to 90%) of the full replacement value of the
improvements on the property in order to recover the full amount of any partial
loss. If the insured's coverage falls below this specified percentage, such
clause generally provides that the insurer's liability in the event of partial
loss does not exceed the lesser of (i) the replacement cost of the improvements
less physical depreciation and (ii) such proportion of the loss as the amount of
insurance carried bears to the specified percentage of the full replacement cost
of such improvements.
Each Agreement for a Trust Fund will require the Master Servicer to
cause the Mortgagor on each Mortgage Loan to maintain all such other insurance
coverage with respect to the related Mortgaged Property as is consistent with
the terms of the related Mortgage and the Servicing Standard, which insurance
may include flood insurance (if the related Mortgaged Property was located at
origination in a federally designated flood area or is included in a Federal
Emergency Management Agency remapping at any time during the life of the related
Mortgage Loan).
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Under the terms of the Mortgage Loans, Mortgagors generally will be
required to present claims to insurers under hazard insurance policies
maintained on the related Mortgaged Properties. The Master Servicer, on behalf
of the Trustee and Securityholders, 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 Master Servicer to present or cause to be presented such claims is
dependent upon the extent to which information in this regard is furnished to
the Master Servicer by Mortgagors.
FHA MORTGAGE INSURANCE
The National Housing Act of 1934, as amended (the "Housing Act"),
authorizes various FHA mortgage insurance programs. Some of the Mortgage Loans
may be insured under either Section 203(b), Section 234 or Section 235 of the
Housing Act. Under Section 203(b), FHA insures mortgage loans with original
terms up to 30 years for the purchase of one- to four-family dwelling units.
Mortgage loans for the purchase of condominium units are insured by FHA under
Section 234. Loans insured under these programs must bear interest at a rate not
exceeding the maximum rate in effect at the time the loan is made, as
established by HUD, and may not exceed specified percentages of the lesser of
the appraised value of the property and the sale price, less seller paid closing
costs for the property, up to certain specified maximums. In addition, FHA
imposes initial investment minimums and other requirements on mortgage loans
insured under the Section 203(b) and Section 234 programs.
Under Section 235, assistance payments are paid by HUD to the mortgagee
on behalf of eligible mortgagors for as long as the mortgagors continue to be
eligible for the payments. To be eligible, a mortgagor must have income within
the limits prescribed by HUD at the time of initial occupancy, must occupy the
property and must meet requirements for recertification at least annually.
The regulations governing these programs provide that insurance
benefits are payable either (i) upon foreclosure (or other acquisition of
possession) and conveyance of the mortgaged premises to HUD or (ii) upon
assignment of the defaulted mortgage loan to HUD. The FHA insurance that may be
provided under these programs upon conveyance of the home to HUD is equal to
100% of the outstanding principal balance of the mortgage loan, plus accrued
interest, as described below, and certain additional costs and expenses. When
entitlement to insurance benefits results from assignment of the mortgage loan
to HUD, the insurance payment is computed as of the date of assignment and
includes the unpaid principal amount of the mortgage loan plus mortgage interest
accrued and unpaid at the debenture rate.
When entitlement to insurance benefits results from foreclosure (or
other acquisition of possession) and conveyance, the insurance payment is equal
to the unpaid principal amount of the mortgage loan, adjusted to reimburse the
mortgagee for certain tax, insurance and similar payments made by it and to
deduct certain amounts received or retained by the mortgagee after default, plus
reimbursement not to exceed two-thirds of the mortgagee's foreclosure costs.
VA MORTGAGE GUARANTY
The Servicemen's Readjustment Act of 1944, as amended, permits a
veteran (or, in certain instances, his or her spouse) to obtain a mortgage loan
guaranty by the VA covering mortgage financing of the purchase of a one-to
four-family dwelling unit to be occupied as the veteran's home at an interest
rate not exceeding the maximum rate in effect at the time the loan is made, as
established by HUD. The program has no limit on the amount of a mortgage loan,
requires no down payment from the purchaser and permits the guaranty of mortgage
loans with terms limited by the estimated economic life of the property, up to
30 years. The maximum guaranty that may be issued by the VA under this program
is 50% of the original principal amount of the mortgage loan up to a certain
dollar limit established by the VA. The liability on the guaranty is reduced or
increased pro rata with any reduction or increase in the amount of indebtedness,
but in no event will the amount payable on the guaranty exceed the amount of the
original guaranty. Notwithstanding the dollar and percentage limitations of the
guaranty, a mortgagee will ordinarily suffer a monetary loss only where the
difference between the unsatisfied indebtedness and the proceeds of a
foreclosure sale of mortgaged premises is greater than the original guaranty as
adjusted. The VA
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may, at its option, and without regard to the guaranty, make full payment to a
mortgagee of the unsatisfied indebtedness on a mortgage upon its assignment to
the VA (such procedure, a "VA No-Bid").
Because there is no limit imposed by the VA on the principal amount of
a VA-guaranteed mortgage loan but there is a limit on the amount of the VA
guaranty, additional coverage under a Primary Insurance Policy may be required
by the Depositor for VA loans in excess of certain amounts. The amount of any
such additional coverage will be set forth in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains summaries, necessarily general in
nature, of certain legal aspects of mortgage loans secured by single-family
residential properties. Because such legal aspects are governed primarily by
applicable state law (which may differ substantially), the summaries do not
purport to be complete nor to reflect the laws of any particular state, nor to
encompass the laws of all states in which the security for the Mortgage Loans is
situated. The summaries are qualified in their entirety by reference to the
applicable federal and state laws governing the Mortgage Loans. See "Description
of the Trust Funds -- Assets."
GENERAL
All of the Mortgage Loans are loans evidenced by a note or bond and
secured by instruments granting a security interest in real property which may
be mortgages, deeds of trust, security deeds or deeds to secure debt, depending
upon the prevailing practice and law in the state in which the Mortgaged
Property is located. Mortgages, deeds of trust and deeds to secure debt are
herein collectively referred to as "mortgages." Any of the foregoing types of
mortgages will create a lien upon, or grant a title interest in, the subject
property, the priority of which will depend on the terms of the particular
security instrument, as well as separate, recorded, contractual arrangements
with others holding interests in the mortgaged property, the knowledge of the
parties to such instrument, and the order of recordation of the instrument in
the appropriate public recording office. However, recording does not generally
establish priority over governmental claims for real estate taxes and
assessments and other charges imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
A mortgage either creates a lien against or constitutes a conveyance of
real property between two parties -- a mortgagor (the borrower and usually the
owner of the subject property) and a mortgagee (the lender). In contrast, a deed
of trust is a three-party instrument, among a trustor (the equivalent of a
mortgagor), a trustee to whom the mortgaged property is conveyed, and a
beneficiary (the lender) for whose benefit the conveyance is made. As used in
this Prospectus, unless the context otherwise requires, "Mortgagor" includes the
trustor under a deed of trust and a grantor under a security deed or a deed to
secure debt. Under a deed of trust, the mortgagor grants the property,
irrevocably until the debt is paid, in trust, generally with a power of sale as
security for the indebtedness evidenced by the related note. A deed to secure
debt typically has two parties. By executing a deed to secure debt, the grantor
conveys title to, as opposed to merely creating a lien upon, the subject
property to the grantee until such time as the underlying debt is repaid,
generally with a power of sale as security for the indebtedness evidenced by the
related mortgage note. In case the mortgagor under a mortgage is a land trust,
there would be an additional party because legal title to the property is held
by a land trustee under a land trust agreement for the benefit of the mortgagor.
At origination of a mortgage loan involving a land trust, the mortgagor executes
a separate undertaking to make payments on the mortgage note. The mortgagee's
authority under a mortgage, the trustee's authority under a deed of trust and
the grantee's authority under a deed to secure debt are governed by the express
provisions of the mortgage, the law of the state in which the real property is
located, certain federal laws (including, without limitation, the Soldiers' and
Sailors' Civil Relief Act of 1940) and, in some cases, in deed of trust
transactions, the directions of the beneficiary.
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INTEREST IN REAL PROPERTY
The real property covered by a mortgage, deed of trust, security deed
or deed to secure debt is most often the fee estate in land and improvements.
However, such an instrument may encumber other interests in real property such
as a tenant's interest in a lease of land or improvements, or both, and the
leasehold estate created by such lease. An instrument covering an interest in
real property other than the fee estate requires special provisions in the
instrument creating such interest or in the mortgage, deed of trust, security
deed or deed to secure debt, to protect the mortgagee against termination of
such interest before the mortgage, deed of trust, security deed or deed to
secure debt is paid. The Depositor or the Asset Seller will make certain
representations and warranties with respect to any Mortgage Loans that are
secured by an interest in a leasehold estate. Such representation and
warranties, if applicable, will be set forth in the Prospectus Supplement.
FORECLOSURE
General
Foreclosure is a legal procedure that allows the mortgagee to recover
its mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the mortgagor defaults in payment or performance of its obligations
under the note or mortgage, the mortgagee has the right to institute foreclosure
proceedings to sell the mortgaged property at public auction to satisfy the
indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage
vary from state to state. Two primary methods of foreclosing a mortgage are
judicial foreclosure and non-judicial foreclosure pursuant to a power of sale
granted in the mortgage instrument. There are several other foreclosure
procedures available that are either infrequently used or available only in
certain limited circumstances, such as strict foreclosure.
Judicial Foreclosure
A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. Generally, the action is initiated by
the service of legal pleadings upon all parties having an interest you record in
the real property. Delays in completion of the foreclosure may occasionally
result from difficulties in locating defendants. When the lender's right to
foreclose is contested, the legal proceedings can be time-consuming. Upon
successful completion of a judicial foreclosure proceeding, the court generally
issues a judgment of foreclosure and appoints a referee or other officer to
conduct a public sale of the mortgaged property, the proceeds of which are used
to satisfy the judgment. Such sales are made in accordance with procedures that
vary from state to state.
Equitable Limitations on Enforceability of Certain Provisions
United States courts have traditionally imposed general equitable
principles to limit the remedies available to a mortgagee in connection with
foreclosure. These equitable principles are generally designed to relieve the
mortgagor from the legal effect of mortgage defaults, to the extent that such
effect is perceived as harsh or unfair. Relying on such principles, a court may
alter the specific terms of a loan to the extent it considers necessary to
prevent or remedy an injustice, undue oppression or overreaching, or may require
the lender to undertake affirmative and expensive actions to determine the cause
of the mortgagor's default and the likelihood that the mortgagor will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's and have required that lenders reinstate loans or recast payment
schedules in order to accommodate mortgagors who are suffering from a temporary
financial disability. In other cases, courts have limited the right of the
lender to foreclose if the default under the mortgage is not monetary, e.g., the
mortgagor failed to maintain the mortgaged property adequately or the mortgagor
executed a junior mortgage on the mortgaged property. The exercise by the court
of its equity powers will depend on the individual circumstances of each case
presented to it. Finally, some courts have been faced with the issue of whether
federal or state constitutional provisions reflecting due process concerns for
adequate notice require that a mortgagor receive notice in addition to
statutorily-prescribed minimum notice. For the most part, these cases have
upheld the reasonableness of the notice provisions or have found that a public
sale under a mortgage providing for a power of sale does not involve sufficient
state action to afford constitutional protections to the mortgagor.
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Non-Judicial Foreclosure/Power of Sale
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale pursuant to the power of sale granted in the deed of
trust. A power of sale is typically granted in a deed of trust. It may also be
contained in any other type of mortgage instrument. A power of sale allows a
non-judicial public sale to be conducted generally following a request from the
beneficiary/lender to the trustee to sell the property upon any default by the
mortgagor under the terms of the mortgage note or the mortgage instrument and
after notice of sale is given in accordance with the terms of the mortgage
instrument, as well as applicable state law. In some states, prior to such sale,
the trustee under a deed of trust must record a notice of default and notice of
sale and send a copy to the mortgagor and to any other party who has recorded a
request for a copy of a notice of default and notice of sale. In addition, in
some states the trustee must provide notice to any other party having an
interest of record in the real property, including junior lienholders. A notice
of sale must be posted in a public place and, in most states, published for a
specified period of time in one or more newspapers. The mortgagor or junior
lienholder may then have the right, during a reinstatement period required in
some states, to cure the default by paying the entire actual amount in arrears
(without acceleration) plus the expenses incurred in enforcing the obligation.
In other states, the mortgagor or the junior lienholder is not provided a period
to reinstate the loan, but has only the right to pay off the entire debt to
prevent the foreclosure sale. Generally, the procedure for public sale, the
parties entitled to notice, the method of giving notice and the applicable time
periods are governed by state law and vary among the states. Foreclosure of a
deed to secure debt is also generally accomplished by a non-judicial sale
similar to that required by a deed of trust, except that the lender or its
agent, rather than a trustee, is typically empowered to perform the sale in
accordance with the terms of the deed to secure debt and applicable law.
Public Sale
A third party may be unwilling to purchase a mortgaged property at a
public sale because of the difficulty in determining the value of such property
at the time of sale, due to, among other things, redemption rights which may
exist and the possibility of physical deterioration of the property during the
foreclosure proceedings. For these reasons, it is common for the lender to
purchase the mortgaged property for an amount equal to or less than the
underlying debt and accrued and unpaid interest plus the expenses of
foreclosure. Generally, state law controls the amount of foreclosure costs and
expenses which may be recovered by a lender. Thereafter, subject to the
mortgagor's right in some states to remain in possession during a redemption
period, if applicable, the lender will become the owner of the property and have
both the benefits and burdens of ownership of the mortgaged property. For
example, the lender will become obligated to pay taxes, obtain casualty
insurance and to make such repairs at its own expense as are necessary to render
the property suitable for sale. The lender will commonly obtain the services of
a real estate broker and pay the broker's commission in connection with the sale
of the property. Depending upon market conditions, the ultimate proceeds of the
sale of the property may not equal the lender's investment in the property.
Moreover, a lender commonly incurs substantial legal fees and court costs in
acquiring a mortgaged property through contested foreclosure and/or bankruptcy
proceedings. Generally, state law controls the amount of foreclosure expenses
and costs, including attorneys' fees, that may be recovered by a lender.
The proceeds received by the referee or trustee from the sale are
applied first to the costs, fees and expenses of sale and then in satisfaction
of the indebtedness secured by the mortgage under which the sale was conducted.
Any proceeds remaining after satisfaction of senior mortgage debt are generally
payable to the holders of junior mortgages and other liens and claims in order
of their priority, whether or not the mortgagor is in default. Any additional
proceeds are generally payable to the mortgagor. The payment of the proceeds to
the holders of junior mortgages may occur in the foreclosure action of the
senior mortgage or a subsequent ancillary proceeding or may require the
institution of separate legal proceedings by such holders.
REO Properties
With respect to Trust Funds for which one or more REMIC elections
exist, if title to any Mortgaged Property is acquired by the Trustee on behalf
of the Securityholders, the Master Servicer or any related Sub-servicer or the
Special Servicer, on behalf of such holders, will be required to sell the
Mortgaged Property by the end of the third taxable year after the taxable year
of acquisition, unless (i) the Internal Revenue Service grants
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an extension of time to sell such property (an "REO Extension") or (ii) it
obtains an opinion of counsel generally to the effect that the holding of the
property for more than three years after its acquisition will not result in the
imposition of a tax on the Trust Fund or cause any REMIC created pursuant to the
Agreement to fail to qualify as a REMIC under the Code. Subject to the
foregoing, the Master Servicer or any related Sub-servicer will generally be
required to solicit bids for any Mortgaged Property so acquired in such a manner
as will be reasonably likely to realize a fair price for such property. The
Master Servicer or any related Sub-servicer may retain an independent contractor
to operate and manage any REO Property; however, the retention of an independent
contractor will not relieve the Master Servicer or any related Sub-servicer of
its obligations with respect to such REO Property.
In general, the Master Servicer or any related Sub-servicer or an
independent contractor employed by the Master Servicer or any related
Sub-servicer at the expense of the Trust Fund will be obligated to operate and
manage any Mortgaged Property acquired as REO Property in a manner that would,
to the extent commercially feasible, maximize the Trust Fund's net after-tax
proceeds from such property. After the Master Servicer or any related
Sub-servicer reviews the operation of such property and consults with the
Trustee to determine the Trust Fund's federal income tax reporting position with
respect to the income it is anticipated that the Trust Fund would derive from
such property, the Master Servicer or any related Sub-servicer could determine
(particularly in the case of an REO Property that is a hospitality or
residential health care facility) that it would not be commercially feasible to
manage and operate such property in a manner that would avoid the imposition of
a tax on "net income from foreclosure property," within the meaning of Section
857(b)(4)(B) of the Code or a tax on "prohibited transactions" under Sections
860F or 860L of the Code (any such tax referred to herein as an "REO Tax"). To
the extent that income the Trust Fund receives from an REO Property is subject
to a tax on (i) "net income from foreclosure property" such income would be
subject to federal income tax at the highest marginal corporate tax rate
(currently 35%) or (ii) "prohibited transactions," such income would be subject
to federal income tax at a 100% rate. The determination as to whether income
from an REO Property would be subject to an REO Tax will depend on the specific
facts and circumstances relating to the management and operation of each REO
Property. Generally, income from an REO Property that is directly operated by
the Master Servicer or any related Sub-servicer would be apportioned and
classified as "service" or "non-service" income. The "service" portion of such
income could be subject to federal income tax either at the highest marginal
corporate tax rate or at the 100% rate on "prohibited transactions," and the
"non-service" portion of such income could be subject to federal income tax at
the highest marginal corporate tax rate or, although it appears unlikely, at the
100% rate applicable to "prohibited transactions." Any REO Tax imposed on from
an REO Property would reduce the amount available for distribution to
Securityholders. Securityholders are advised to consult their tax advisors
regarding the possible imposition of REO Taxes in connection with the operation
of commercial REO Properties by REMICs. See "Federal Income Tax Consequences"
herein.
Rights of Redemption
The purposes of a foreclosure action are to enable the mortgagee to
realize upon its security and to bar the mortgagor, and all persons who have an
interest in the property which is subordinate to the mortgage being foreclosed,
from exercise of their "equity of redemption." The doctrine of equity of
redemption provides that, until the property covered by a mortgage has been sold
in accordance with a properly conducted foreclosure and foreclosure sale, those
having an interest which is subordinate to that of the foreclosing mortgagee
have an equity of redemption and may redeem the property by paying the entire
debt with interest. In addition, in some states, when a foreclosure action has
been commenced, the redeeming party must pay certain costs of such action. Those
having an equity of redemption must generally be made parties and joined in the
foreclosure proceeding in order for their equity of redemption to be cut off and
terminated.
The equity of redemption is a common-law (non-statutory) right which
exists prior to completion of the foreclosure, is not waivable by the mortgagor,
must be exercised prior to foreclosure sale and should be distinguished from the
post-sale statutory rights of redemption. In some states, after sale pursuant to
a deed of trust or foreclosure of a mortgage, the mortgagor and foreclosed
junior lienors are given a statutory period in which to redeem the property from
the foreclosure sale. In some states, statutory redemption may occur only upon
payment
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of the foreclosure sale price. In other states, redemption may be authorized if
the former mortgagor pays only a portion of the sums due. The effect of a
statutory right of redemption is to diminish the ability of the lender to sell
the foreclosed property. The exercise of a right of redemption would defeat the
title of any purchaser from a foreclosure sale or sale under a deed of trust.
Consequently, the practical effect of the redemption right is to force the
lender to maintain the property and pay the expenses of ownership until the
redemption period has expired. In some states, a post-sale statutory right of
redemption may exist following a judicial foreclosure, but not following a
trustee's sale under a deed of trust.
Under the REMIC Provisions currently in effect, property acquired by
foreclosure generally must not be held beyond the end of the third taxable year
after the taxable year of foreclosure. With respect to a Series of Securities
for which an election is made to qualify the Trust Fund or a part thereof as a
REMIC, the Agreement will permit foreclosed property to be held for more than
three years if the Internal Revenue Service grants an extension of time within
which to sell such property or independent counsel renders an opinion to the
effect that holding such property for such additional period is permissible
under the REMIC Provisions.
ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS
Statutes in some states limit the right of a beneficiary under a deed
of trust or a mortgagee under a mortgage to obtain a deficiency judgment against
the mortgagor following foreclosure or sale under a deed of trust. A deficiency
judgment would be a personal judgment against the former mortgagor equal to the
difference between the net amount realized upon the public sale of the real
property and the amount due to the lender. Some states require the lender to
exhaust the security afforded under a mortgage by foreclosure in an attempt to
satisfy the full debt before bringing a personal action against the mortgagor.
In certain other states, the lender has the option of bringing a personal action
against the mortgagor on the debt without first exhausting such security;
however, in some of these states, the lender, following judgment on such
personal action, may be deemed to have elected a remedy and may be precluded
from exercising remedies with respect to the security. In some cases, a lender
will be precluded from exercising any additional rights under the note or
mortgage if it has taken any prior enforcement action. Consequently, the
practical effect of the election requirement, in those states permitting such
election, is that lenders will usually proceed against the security first rather
than bringing a personal action against the mortgagor. Finally, other statutory
provisions limit any deficiency judgment against the former mortgagor following
a judicial sale to the excess of the outstanding debt over the fair market value
of the property at the time of the public sale. The purpose of these statutes is
generally to prevent a lender from obtaining a large deficiency judgment against
the former mortgagor as a result of low or no bids at the judicial sale.
In addition to laws limiting or prohibiting deficiency judgments,
numerous other federal and state statutory provisions, including the federal
bankruptcy laws and state laws affording relief to debtors, may interfere with
or affect the ability of the secured mortgage lender to realize upon collateral
or enforce a deficiency judgment. For example, with respect to federal
bankruptcy law, a court with federal bankruptcy jurisdiction may permit a debtor
through his or her Chapter 11 or Chapter 13 rehabilitative plan to cure a
monetary default in respect of a mortgage loan on a debtor's residence by paying
arrearages within a reasonable time period and reinstating the original mortgage
loan payment schedule even though the lender accelerated the mortgage loan and
final judgment of foreclosure had been entered in state court (provided no sale
of the residence had yet occurred) prior to the filing of the debtor's petition.
Some courts with federal bankruptcy jurisdiction have approved plans, based on
the particular facts of the reorganization case, that effected the curing of a
mortgage loan default by paying arrearages over a number of years.
Courts with federal bankruptcy jurisdiction have also indicated that
the terms of a mortgage loan secured by property of the debtor may be modified.
These courts have allowed modifications that include reducing the amount of each
monthly payment, changing the rate of interest, altering the repayment schedule,
forgiving all or a portion of the debt and reducing the lender's security
interest to the value of the residence, thus leaving the lender a general
unsecured creditor for the difference between the value of the residence and the
outstanding balance of the loan. Generally, however, the terms of a mortgage
loan secured only by a mortgage on real property that is
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the debtor's principal residence may not be modified pursuant to a plan
confirmed pursuant to Chapter 11 or Chapter 13 except with respect to mortgage
payment arrearages, which may be cured within a reasonable time period.
Certain tax liens arising under the Internal Revenue Code of 1986, as
amended, may in certain circumstances provide priority over the lien of a
mortgage or deed of trust. In addition, substantive requirements are imposed
upon mortgage lenders in connection with the origination and the servicing of
mortgage loans by numerous federal and some state consumer protection laws.
These laws include the federal Truth-in-Lending Act, Real Estate Settlement
Procedures Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair
Credit Reporting Act and related statutes. These federal laws impose specific
statutory liabilities upon lenders who originate mortgage loans and who fail to
comply with the provisions of the law. In some cases this liability may affect
assignees of the mortgage loans.
ENVIRONMENTAL LEGISLATION
Real property pledged as security to a lender may be subject to certain
environmental risks. Under the laws of certain states, contamination of a
property may give rise to a lien on the property to secure recovery of the costs
of clean-up. In several states, such a lien has priority over the lien of an
existing mortgage against such property. In addition, under the laws of some
states and under the federal Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended ("CERCLA"), a lender may be liable, as an
"owner" or "operator," for costs of addressing releases or threatened releases
of hazardous substances that require remedy at a property securing a mortgage
loan owned by such lender, if agents or employees of the lender have become
sufficiently involved in the operations of the related obligor, regardless of
whether or not the environmental damage or threat was caused by such lender's
obligor or by a prior owner. A lender also risks such liability arising out of
foreclosure of a mortgaged property securing a mortgage loan owned by such
lender. Until recent legislation was adopted, it was uncertain what actions
could be taken by a secured lender in the event of a loan default without it
incurring exposure under CERCLA in the event the property was environmentally
contaminated. The Asset Conservation, Lender Liability and Deposit Insurance Act
of 1996 (the "1996 Lender Liability Act") provides for a safe harbor for secured
lenders from CERCLA liability even though the lender forecloses and sells the
real estate securing the loan, provided the secured lender sells "at the
earliest practicable, commercially reasonable time, at commercially reasonable
terms, taking into account market conditions and legal and regulatory
requirements." Although the 1996 Lender Liability Act provides significant
protection to secured lenders, it has not been construed by the courts, and
there are circumstances in which actions taken could expose a secured lender to
CERCLA liability. And, the transferee from the secured lender is not entitled to
the protections enjoyed by a secured lender. Thus, contamination may decrease
the amount that prospective buyers are willing to pay for a Mortgaged Property
and, thus, decrease the likelihood that the Trust Fund will recover fully on the
Mortgage Loan through foreclosure.
Application of environmental laws other than CERCLA could also result
in the imposition of liability on lenders for costs associated with
environmental hazards. The most significant of these other laws is the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), and state regulatory
programs implemented thereunder. Subtitle I of RCRA imposes cleanup liabilities
on owners or operators of underground storage tanks. Some states also impose
similar liabilities on owners and operators of aboveground storage tanks. The
definition of "owner" under RCRA Subtitle I contains a security interest
exemption nearly identical to the CERCLA security interest exemption. However,
as with CERCLA costs, it is possible that such costs, if imposed in connection
with a Mortgage Loan included in a Trust Fund, could become a liability of the
related Trust in certain circumstances.
At the time the Mortgage Loans were originated, it is possible that no
environmental assessment or a very limited environmental assessment of the
related Mortgaged Properties was conducted. No representations or warranties are
made by the Asset Seller or Depositor as to the absence or effect of hazardous
wastes or hazardous substances on any of the related Mortgaged Properties. In
addition, the Master Servicer has not made any representations or warranties or
assumed any liability with respect to the absence or effect of hazardous wastes
or hazardous substances on any Mortgaged Property or any casualty resulting from
the presence or effect of hazardous wastes or hazardous substances on any
Mortgaged Property, and any loss or liability resulting from the presence or
effect of such hazardous wastes or hazardous substances will reduce the amounts
otherwise available to pay to Securityholders.
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Pursuant to the Agreement, the Master Servicer is not required to
foreclose on any Mortgaged Property if one of its principal officers has actual
knowledge that such property is contaminated with or affected by hazardous
wastes or hazardous substances. If the Master Servicer does not foreclose on the
Mortgaged Property underlying a defaulted Mortgage Loan, the amounts otherwise
available to pay to the Securityholders may be reduced. The Master Servicer will
not be liable to the Securityholders if it fails to foreclose on a Mortgaged
Property that it believes may be so contaminated or affected, even if such
Mortgaged Property is, in fact, not so contaminated or affected. Similarly, the
Master Servicer will not be liable to the Securityholders if the Master Servicer
forecloses on a Mortgaged Property and takes title to a Mortgaged Property that
is so contaminated or affected.
DUE-ON-SALE CLAUSES
The Mortgage Loans will contain due-on-sale clauses unless the related
Prospectus Supplement indicates otherwise. These clauses generally provide that
the lender may accelerate the maturity of the loan if the mortgagor sells,
transfers or conveys the related Mortgaged Property. The enforceability of
due-on-sale clauses has been the subject of legislation or litigation in many
states and, in some cases, the enforceability of these clauses was limited or
denied. However, with respect to certain loans the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn-St. Germain Act") preempts state
constitutional, statutory and case law that prohibits the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in accordance
with their terms, subject to certain limited exceptions. Due-on-sale clauses
contained in mortgage loans originated by federal savings and loan associations
of federal savings banks are fully enforceable pursuant to regulations of the
United States Federal Home Loan Bank Board, as succeeded by the Office of Thrift
Supervision, which preempt state law restrictions on the enforcement of such
clauses. Similarly, due-on-sale clauses in mortgage loans made by national banks
and federal credit unions are now fully enforceable pursuant to preemptive
regulations of the Comptroller of the Currency and the National Credit Union
Administration, respectively.
The Garn-St. Germain Act also sets forth nine specific instances in
which a mortgage lender covered by the act (including federal savings and loan
associations and federal savings banks) may not exercise a due-on-sale clause,
notwithstanding the fact that a transfer of the property may have occurred.
These include intra-family transfers, certain transfers by operation of law,
leases of fewer than three years and the creation of a junior encumbrance.
Regulations promulgated under the Garn-St Germain Act also prohibit the
imposition of a prepayment penalty upon the acceleration of a loan pursuant to a
due-on-sale clause. The inability to enforce a due-on-sale clause may result in
a mortgage that bears an interest rate below the current market rate being
assumed by a new home buyer rather than being paid off, which may affect the
average life of the Mortgage Loans and the number of Mortgage Loans which may
extend to maturity.
PREPAYMENT CHARGES
Under certain state laws, prepayment charges may not be imposed after a
certain period of time following the origination of mortgage loans secured by
liens encumbering owner-occupied residential properties, if such loans are paid
prior to maturity. Because many of the Mortgaged Properties will be
owner-occupied, it is anticipated that prepayment charges may not be imposed
with respect to many of the Mortgage Loans. The absence of such a restraint on
prepayment, particularly with respect to fixed rate Mortgage Loans having higher
Mortgage Rates, may increase the likelihood of refinancing or other early
retirement of such loans.
SUBORDINATE FINANCING
Where a mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the mortgagor
may have difficulty servicing and repaying multiple loans. In addition, if the
junior loan permits recourse to the mortgagor (as junior loans often do) and the
senior loan does not, a mortgagor may be more likely to repay sums due on the
junior loan than those on the senior loan. Second, acts of the senior lender
that prejudice the junior lender or impair the junior lender's security may
create a superior equity in favor of the junior lender. For example, if the
mortgagor and the senior lender agree to an increase in the principal amount of
or the interest rate payable on the senior loan, the senior lender may lose its
priority to the extent any existing junior lender is harmed or the mortgagor is
additionally burdened. Third, if the mortgagor
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defaults on the senior loan and/or any junior loan or loans, the existence of
junior loans and actions taken by junior lenders can impair the security
available to the senior lender and can interfere with or delay the taking of
action by the senior lender. Moreover, the bankruptcy of a junior lender may
operate to stay foreclosure or similar proceedings by the senior lender.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980, enacted in March 1980 ("Title V"), provides that state
usury limitations shall not apply to certain types of residential first mortgage
loans originated by certain lenders after March 31, 1980. A similar federal
statute was in effect with respect to mortgage loans made during the first three
months of 1980. The Office of Thrift Supervision is authorized to issue rules
and regulations and to publish interpretations governing implementation of Title
V. The statute authorized any state to reimpose interest rate limits by
adopting, before April 1, 1983, a law or constitutional provision that expressly
rejects application of the federal law. In addition, even where Title V is not
so rejected, any state is authorized by the law to adopt a provision limiting
discount points or other charges on mortgage loans covered by Title V. Certain
states have taken action to reimpose interest rate limits and/or to limit
discount points or other charges.
The Depositor believes that a court interpreting Title V would hold
that residential first mortgage loans that are originated on or after January 1,
1980 are subject to federal preemption. Therefore, in a state that has not taken
the requisite action to reject application of Title V or to adopt a provision
limiting discount points or other charges prior to origination of such mortgage
loans, any such limitation under such state's usury law would not apply to such
mortgage loans.
In any state in which application of Title V has been expressly
rejected or a provision limiting discount points or other charges is adopted, no
mortgage loan originated after the date of such state action will be eligible
for inclusion in a Trust Fund unless (i) such mortgage loan provides for such
interest rate, discount points and charges as are permitted in such state or
(ii) such mortgage loan provides that the terms thereof shall be construed in
accordance with the laws of another state under which such interest rate,
discount points and charges would not be usurious and the mortgagor's counsel
has rendered an opinion that such choice of law provision would be given effect.
Statutes differ in their provisions as to the consequences of a
usurious loan. One group of statutes requires the lender to forfeit the interest
due above the applicable limit or impose a specified penalty. Under this
statutory scheme, the mortgagor may cancel the recorded mortgage or deed of
trust upon paying its debt with lawful interest, and the lender may foreclose,
but only for the debt plus lawful interest. A second group of statutes is more
severe. A violation of this type of usury law results in the invalidation of the
transaction, thereby permitting the mortgagor to cancel the recorded mortgage or
deed of trust without any payment or prohibiting the lender from foreclosing.
ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including adjustable rate mortgage
loans and early ownership mortgage loans, originated by non-federally chartered
lenders have historically been subject to a variety of restrictions. Such
restrictions differed from state to state, resulting in difficulties in
determining whether a particular alternative mortgage instrument originated by a
state-chartered lender was in compliance with applicable law. These difficulties
were alleviated substantially as a result of the enactment of Title VIII of the
Garn-St Germain Act ("Title VIII"). Title VIII provides that, notwithstanding
any state law to the contrary, state-chartered banks may originate alternative
mortgage instruments in accordance with regulations promulgated by the
Comptroller of the Currency with respect to origination of alternative mortgage
instruments by national banks; state-chartered credit unions may originate
alternative mortgage instruments in accordance with regulations promulgated by
the National Credit Union Administration with respect to origination of
alternative mortgage instruments by federal credit unions; and all other
non-federally chartered housing creditors, including state-chartered savings and
loan associations, state-chartered savings banks and mutual savings banks and
mortgage banking companies, may originate alternative mortgage instruments in
accordance with the regulations promulgated by the Federal Home Loan Bank Board,
predecessor
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to the Office of Thrift Supervision, with respect to origination of alternative
mortgage instruments by federal savings and loan associations. Title VIII
provides that any state may reject applicability of the provisions of Title VIII
by adopting, prior to October 15, 1985, a law or constitutional provision
expressly rejecting the applicability of such provisions. Certain states have
taken such action.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended (the "Relief Act"), a mortgagor who enters military service after the
origination of such mortgagor's Mortgage Loan (including a mortgagor who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such mortgagor's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
mortgagors who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to mortgagors
who enter military service (including reservists who are called to active duty)
after origination of the related Mortgage Loan, no information can be provided
as to the number of loans that may be affected by the Relief Act. Application of
the Relief Act would adversely affect, for an indeterminate period of time, the
ability of any servicer to collect full amounts of interest on certain of the
Mortgage Loans. Any shortfalls in interest collections resulting from the
application of the Relief Act would result in a reduction of the amounts
distributable to the holders of the related Series of Certificates, and would
not be covered by advances or, if specified in the related Prospectus
Supplement, any form of Credit Support provided in connection with such
Securities. 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.
OTHER LEGAL CONSIDERATIONS
The Mortgage Loans are also subject to federal laws, including: (i)
Regulation Z, which requires certain disclosures to the borrowers regarding the
terms of the Mortgage Loans; (ii) the Equal Opportunity Act and Regulation B
promulgated thereunder, which prohibit discrimination on the basis of age, race,
color, sex, religion, marital status, national origin, receipt of public
assistance or the exercise of any right under the Consumer Credit Protection
Act, in the extension of credit; and (iii) the Fair Credit Reporting Act, which
regulates the use and reporting of information related to the borrower's credit
experience. Violations of certain provisions of these federal laws may limit the
ability of persons to collect all or part of the principal of or interest on the
Mortgage Loans and in addition could subject certain persons to damages and
administrative enforcement.
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USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of
each Series of Securities will be used to purchase the Assets related to such
Series or to reimburse the amounts previously used to effect such a purchase,
the costs of carrying such Assets until the sale of the related Securities and
other expenses connected with pooling the Assets and issuing the Securities.
FEDERAL INCOME TAX CONSEQUENCES
The following represents the opinion of Hunton & Williams as to the
anticipated material federal income tax consequences of the purchase, ownership,
and disposition of the Securities offered hereunder. The opinion is based upon
laws, regulations, rulings, and decisions now in effect, all of which are
subject to change, and any such change could apply retroactively. Because REMIC
status may be elected with respect to certain Series, this discussion includes a
summary of the federal income tax consequences to holders of REMIC Securities.
The discussion does not purport to deal with the federal income tax consequences
to all categories of investors subject to special rules (such as foreign
investors, certain regulated entities and other investors subject to special
rules). The discussion focuses primarily on investors who will hold the
Securities as "capital assets" (generally, property held for investment) within
the meaning of Section 1221 of the Internal Revenue Code, although much of the
discussion is applicable to other investors as well. Investors should note that,
although final regulations under the REMIC provisions of the Code (the "REMIC
Regulations") have been issued by the Treasury, no currently effective
regulations or other administrative guidance has been issued with respect to
certain provisions of the Code that are or may be applicable to Securityholders,
particularly the provisions dealing with market discount and stripped debt
securities. Although the Treasury recently issued final regulations dealing with
original issue discount and premium, those regulations do not address directly
the treatment of REMIC Regular Securities and certain other types of securities.
Furthermore, the REMIC Regulations do not address many of the issues that arise
in connection with the formation and operation of a REMIC. Hence, definitive
guidance cannot be provided with respect to many aspects of the tax treatment of
Securityholders, particularly Residual Securityholders (as described below).
Moreover, this opinion is based on current law, and there can be no assurance
that the Service will not take positions that would be materially adverse to
investors. Finally, the opinion does not purport to address the anticipated
state income tax consequences to investors of owning and disposing of the
Securities. Consequently, Investors should consult their own tax advisors in
determining the federal, state, foreign, and any other tax consequences to them
of the purchase, ownership, and disposition of the Securities.
GENERAL
Many aspects of the federal income tax treatment of the Securities of a
particular Series will depend upon whether an election is made to treat the
Trust, or one or more segregated pools of Trust assets, as a REMIC. The
Prospectus Supplement for each Series will indicate whether a REMIC election or
elections will be made with respect to the related Trust. For each Series with
respect to which one or more REMIC elections are to be made, Hunton & Williams,
counsel to the Depositor, is of the opinion that, assuming timely filing of a
REMIC election or elections and compliance with the relevant Trust Agreement and
certain other documents specified in the opinion, the Trust Fund (or one or more
segregated pools of Trust assets) will qualify as one or more REMICs (each, a
"Series REMIC"). For each Series of Mortgage Pass-Through Certificates with
respect to which a REMIC election is not to be made, Hunton & Williams is of the
opinion that, assuming compliance with the relevant Trust Agreement and certain
other documents, the Trust will be treated as a grantor trust under subpart E,
Part I of subchapter J of the Code or as a partnership and not as an
association, publicly-traded partnership or taxable mortgage pool taxable as a
corporation. In addition, for each Series of Collateralized Mortgage Bonds with
respect to which a REMIC election is not to be made, Hunton & Williams is of the
opinion that, assuming compliance with the relevant Agreement and certain other
documents, the Bonds will be treated for federal income tax purposes as
indebtedness, and not as an ownership interest in the Assets or an equity
interest in a separate association taxable as a corporation. Those opinions will
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be based on existing law, but there can be no assurance that the law will not
change or that contrary positions will not be taken by the Service.
REMIC SECURITIES
REMIC Securities will be classified as either REMIC Regular Securities,
which generally are treated as debt for federal income tax purposes, or Residual
Securities, which generally are not treated as debt for such purposes, but
rather as representing rights and responsibilities with respect to the taxable
income or loss of the related REMIC. The Prospectus Supplement for each Series
of REMIC Securities will indicate which of the Securities of such Series will be
classified as REMIC Regular Securities and which will be classified as Residual
Securities. REMIC Securities held by a thrift institution taxed as a "domestic
building and loan association" will constitute a "regular or residual interest
in a REMIC," as the case may be, within the meaning of Section
7701(a)(19)(C)(xi) of the Code; and REMIC Securities held by a real estate
investment trust ("REIT") will constitute "real estate assets" within the
meaning of Section 856(c)(5)(A) of the Code; and interest on such Securities
will be considered "interest on obligations secured by mortgages on real
property" within the meaning of Section 856(c)(3)(B), all in the same proportion
that the related REMIC's assets would so qualify. If 95 percent or more of the
assets of a given Series REMIC constitute qualifying assets for Thrift
Institutions and REITs, the related REMIC Securities and the income thereon will
be treated entirely as qualifying assets and income for such purposes. REMIC
Regular and Residual Securities held by a financial institution to which Section
585 of the Code applies will be treated as evidences of indebtedness for
purposes of Section 582(c)(1) of the Code. The REMIC Regular Securities
generally will be "qualified mortgages" within the meaning of Section 860G(a)(3)
of the Code with respect to other REMICs. Effective September 1, 1997, REMIC
Regular Securities held by a financial asset securitization investment trust (a
"FASIT") will qualify for treatment as "permitted assets" within the meaning of
Section 860L(c)(1)(G) of the Code. In the case of a Series for which two or more
Series REMICs will be created, all Series REMICs will be treated as a single
REMIC for purposes of determining the extent to which the related Securities and
the income thereon will be treated as qualifying assets and income for such
purposes. However, REMIC Securities will not qualify as government securities
for REITs and regulated investment companies ("RICs") in any case.
Tax Treatment of REMIC Regular Securities
Payments received by holders of REMIC Regular Securities generally
should be accorded the same tax treatment under the Code as payments received on
ordinary taxable corporate debt instruments. Except as described below for REMIC
Regular Securities issued with original issue discount or acquired with market
discount or premium, interest paid or accrued on REMIC Regular Securities will
be treated as ordinary income to the Securityholder and a principal payment on
such Securities will be treated as a return of capital to the extent that the
Securityholder's basis in the Security is allocable to that payment. Holders of
REMIC Regular (or Residual) Securities must report income from such Securities
under an accrual method of accounting, even if they otherwise would have used
the cash receipts and disbursements method. The Trustee or the Master Servicer
will report annually to the Service and to Securityholders of record with
respect to interest paid or accrued and original issue discount, if any, accrued
on the Securities.
Under temporary Treasury regulations, holders of REMIC Regular
Securities issued by "single-class REMICs" who are individuals, trusts, estates,
or pass-through entities in which such investors hold interests may be required
to recognize certain amounts of income in addition to interest and discount
income. A single-class REMIC, in general, is a REMIC that (i) would be
classified as an investment trust in the absence of a REMIC election or (ii) is
substantially similar to an investment trust. Under the temporary Treasury
regulations, each holder of a regular or residual interest in a single-class
REMIC is allocated (i) a share of the REMIC's "allocable investment expenses"
(i.e., expenses normally allowable under Section 212 of the Code, which may
include servicing and administrative fees and insurance premiums) and (ii) a
corresponding amount of additional income. Section 67 of the Code permits an
individual, trust or estate to deduct miscellaneous itemized expenses (including
Section 212 expenses) only to the extent that such expenses, in the aggregate,
exceed 2% of its adjusted gross income. Consequently, an individual, trust or
estate that holds a regular interest in a single-class REMIC (either directly or
through a pass-through entity) will recognize additional income with respect to
such regular interest to
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the extent that its share of allocable investment expenses, when combined with
its other miscellaneous itemized deductions for the taxable year, fails to
exceed 2% of its adjusted gross income. Any such additional income will be
treated as interest income. In addition, Code Section 68 provides that the
amount of itemized deductions otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds the applicable amount ($100,000,
or $50,000 in the case of a separate return by a married individual within the
meaning of Code Section 7703 for taxable year 1991 and adjusted for inflation
each year thereafter) will be reduced by the lesser of (i) 3% of the excess of
adjusted gross income over the applicable amount, and (ii) 80% of the amount of
itemized deductions otherwise allowable for such taxable year. The amount of
such additional taxable income recognized by holders who are subject to the
limitations of either Section 67 or Section 68 may be substantial and may reduce
or eliminate the after-tax yield to such holders of an investment in the
Securities of an affected Series. Where appropriate, the Prospectus Supplement
for a particular Series REMIC will indicate that the holders of Securities of
such Series may be required to recognize additional income as a result of the
application of the limitations of either Section 67 or Section 68 of the Code.
Non-corporate holders of REMIC Regular Securities evidencing an interest in a
single-class REMIC also should be aware that miscellaneous itemized deductions,
including allocable investment expenses attributable to such REMIC, are not
deductible for purposes of the alternative minimum tax ("AMT").
Original Issue Discount
Certain Classes of REMIC Regular Securities may be issued with
"original issue discount" within the meaning of Section 1273(a) of the Code. In
general, such original issue discount, if any, will equal the difference between
the "stated redemption price at maturity" of the REMIC Regular Security
(generally, its principal amount) and its issue price. Holders of REMIC Regular
Securities as to which there is original issue discount should be aware that
they generally must include original issue discount in income for federal income
tax purposes on an annual basis under a constant yield accrual method that
reflects compounding. In general, original issue discount is treated as ordinary
income and must be included in income in advance of the receipt of the cash to
which it relates.
The amount of original issue discount required to be included in a
REMIC Regular Securityholder's income in any taxable year will be computed in
accordance with Section 1272(a)(6) of the Code, which provides for the accrual
of original issue discount under a constant yield method for certain debt
instruments, such as the REMIC Regular Securities, that are subject to
prepayment by reason of prepayments of underlying obligations. Under Section
1272(a)(6), the amount and rate of accrual of original issue discount on a REMIC
Regular Security generally is to be calculated based on (i) a single constant
yield to maturity and (ii) the prepayment rate for the related mortgage
collateral and the reinvestment rate on amounts held pending distribution that
were assumed in pricing the REMIC Regular Security (the "Pricing Prepayment
Assumptions"). No regulatory guidance currently exists under Code Section
1272(a)(6). Accordingly, until the Treasury issues guidance to the contrary, the
Master Servicer or other person responsible for computing the amount of original
issue discount to be reported to a REMIC Regular Securityholder each taxable
year (the "Tax Administrator") will, except as otherwise provided herein, base
its computations on Code Section 1272(a)(6), final regulations governing the
accrual of original issue discount on debt instruments that were issued by the
Treasury on January 27, 1994, but that do not address directly the treatment of
instruments that are subject to Code Section 1272(a)(6) (the "OID Regulations"),
and certain other guidance, all as described below. However, there can be no
assurance that such methodology represents the correct manner of calculating
original issue discount on the REMIC Regular Securities. The Tax Administrator
will account for income on certain REMIC Regular Securities that provide for one
or more contingent payments as described in "Federal Income Tax Consequences --
Original Issue Discount -- Interest Weighted Securities and Non-VRDI
Securities" herein. Prospective purchasers should be aware that none of the
Depositor, the Master Servicer, any Servicer or the Trustee will make any
representation that the Assets underlying a Series will in fact prepay at a rate
conforming to the related Pricing Prepayment Assumptions or at any other rate.
The amount of original issue discount on a REMIC Regular Security is
the excess, if any, of the Security's "stated redemption price at maturity" over
its "issue price." Under the OID Regulations, a debt instrument's stated
redemption price at maturity is the sum of all payments provided by the
instrument other than "qualified stated interest" ("Deemed Principal Payments").
Qualified stated interest, in general, is stated interest that is
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unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at (i) a single fixed rate or (ii) a variable rate
that meets certain requirements set out in the OID Regulations. See "Federal
Income Tax Consequences -- REMIC Securities -- Original Issue Discount --
Variable Rate Securities" below. Thus, in the case of any REMIC Regular
Security, the stated redemption price at maturity will equal the total amount of
all Deemed Principal Payments due on that Security. In the case of any REMIC
Regular Security that does not require unconditional payments of interest at
least annually, the stated redemption price at maturity of such Security will
equal the aggregate of all payments due, whether designated as principal,
accrued interest, or current interest. The issue price of a REMIC Regular
Security generally will equal the initial price at which a substantial amount of
Securities of the same Class is sold to the public.
The OID Regulations contain an aggregation rule (the "Aggregation
Rule") under which two or more debt instruments issued in connection with the
same transaction or related transactions (determined based on all the facts and
circumstances) generally are treated as a single debt instrument for federal
income tax accounting purposes if issued by a single issuer to a single holder.
The Aggregation Rule, however, does not apply if the debt instrument is part of
an issue (i) a substantial portion of which is traded on an established market
or (ii) a substantial portion of which is issued for cash (or property traded on
an established market) to parties who are not related to the issuer or holder
and who do not purchase other debt instruments of the same issuer in connection
with the same transaction or related transactions. In most cases, the
Aggregation Rule will not apply to REMIC Regular Securities of different Classes
because one or both of the exceptions to the Aggregation Rule will have been
met. Although the Tax Administrator currently intends to apply the Aggregation
Rule to all REMIC regular interests in a Series REMIC that are held by a related
Series REMIC, it generally will not apply the Aggregation Rule to REMIC Regular
Securities for purposes of reporting to Securityholders.
Under a de minimis rule, a REMIC Regular Security will be considered to
have no original issue discount if the amount of original issue discount is less
than 0.25% of the Security's stated redemption price at maturity multiplied by
the weighted average maturity ("WAM") of all Deemed Principal Payments. For that
purpose, the WAM of a REMIC Regular Security is the sum of the amounts obtained
by multiplying the amount of each Deemed Principal Payment by a fraction, the
numerator of which is the number of complete years from the Security's issue
date until the payment is made, and the denominator of which is the Security's
stated redemption price at maturity. Although no Treasury regulations have been
issued under the relevant provisions of the 1986 Act, it is expected that the
WAM of a REMIC Regular Security will be computed using the Pricing Prepayment
Assumptions. A REMIC Regular Securityholder will include de minimis original
issue discount in income on a pro rata basis as stated principal payments on the
Security are received or, if earlier, upon disposition of the Security, unless
the Securityholder makes the "All OID Election" (as defined below).
REMIC Regular Securities of certain Series may bear interest under
terms that provide for a teaser rate period, interest holiday, or other period
during which the rate of interest payable on the Securities is lower than the
rate payable during the remainder of the life of the Securities ("Teaser
Securities"). Under certain circumstances, a Teaser Security may be considered
to have a de minimis amount of original issue discount even though the amount of
original issue discount on the Security would be more than de minimis as
determined as described above if the stated interest on a Teaser Security would
be qualified stated interest but for the fact that during one or more accrual
periods its interest rate is below the rate applicable for the remainder of its
term, the amount of original issue discount on such Security that is measured
against the de minimis amount of original issue discount allowable on the
Security is the greater of (i) the excess of the stated principal amount of such
Security over its issue price ("True Discount") and (ii) the amount of interest
that would be necessary to be payable on such Security in order for all stated
interest to be qualified stated interest.
The holder of a REMIC Regular Security generally must include in gross
income the sum, for all days during his taxable year on which he holds the REMIC
Regular Security, of the "daily portions" of the original issue discount on such
Security. In the case of an original holder of a REMIC Regular Security, the
daily portions of original issue discount with respect to such Security
generally will be determined by allocating to each day in any accrual period the
Security's ratable portion of the excess, if any, of (i) the sum of (a) the
present value of all payments under the Security yet to be received as of the
close of such period plus (b) the amount of any Deemed
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Principal Payments received on the Security during such period over (ii) the
Security's "adjusted issue price" at the beginning of such period. The present
value of payments yet to be received on a REMIC Regular Security is to be
computed using the Pricing Prepayment Assumptions and the Security's original
yield to maturity (adjusted to take into account the length of the particular
accrual period), and taking into account Deemed Principal Payments actually
received on the Security prior to the close of the accrual period. The adjusted
issue price of a REMIC Regular Security at the beginning of the first period is
its issue price. The adjusted issue price at the beginning of each subsequent
period is the adjusted issue price of the Security at the beginning of the
preceding period increased by the amount of original issue discount allocable to
that period and reduced by the amount of any Deemed Principal Payments received
on the Security during that period. Thus, an increased (or decreased) rate of
prepayments received with respect to a REMIC Regular Security will be
accompanied by a correspondingly increased (or decreased) rate of recognition of
original issue discount by the holder of such Security.
The yield to maturity of a Regular Security is calculated based on (i)
the Pricing Prepayment Assumptions and (ii) any contingencies not already taken
into account under the Pricing Prepayment Assumptions that, considering all of
the facts and circumstances as of the issue date, are more likely than not to
occur. Contingencies, such as the exercise of "mandatory redemptions," that are
taken into account by the parties in pricing the Regular Security typically will
be subsumed in the Pricing Prepayment Assumptions and thus will be reflected in
the Security's yield to maturity. The Tax Administrator's determination of
whether a contingency relating to a Class of Regular Securities is more likely
than not to occur is binding on each holder of a Regular Security of such Class
unless the holder explicitly discloses on its federal income tax return that its
determination of the yield and maturity of the Security is different from that
of the Tax Administrator.
In many cases, REMIC Regular Securities will be subject to optional
redemption before their stated maturity dates. Under the OID Regulations, the
Depositor will be presumed to exercise its option to redeem for purposes of
computing the accrual of original issue discount if, and only if, by using the
optional redemption date as the maturity date and the optional redemption price
as the stated redemption price at maturity, the yield to maturity of the
Security is lower than it would be if the Security were not redeemed early. If
the Depositor is presumed to exercise its option to redeem the Securities,
original issue discount on such Securities will be calculated as if the
redemption date were the maturity date and the optional redemption price were
the stated redemption price at maturity. In cases in which all of the Securities
of a particular Series are issued at par or at a discount, the Depositor will
not be presumed to exercise its option to redeem the Securities because a
redemption by the Depositor would not lower the yield to maturity of the
Securities. If, however, some Securities of a particular Series are issued at a
premium, the Depositor may be able to lower the yield to maturity of the
Securities by exercising its redemption option. In determining whether the
Depositor will be presumed to exercise its option to redeem Securities when one
or more Classes of the Securities is issued at a premium, the Tax Administrator
will take into account all Classes of Securities that are subject to the
optional redemption to the extent that they are expected to remain outstanding
as of the optional redemption date, based on the Pricing Prepayment Assumptions.
If, determined on a combined weighted average basis, the Securities of such
Classes were issued at a premium, the Tax Administrator will presume that the
Depositor will exercise its option. However, the OID Regulations are unclear as
to how the redemption presumption rules should apply to instruments such as the
Securities, and there can be no assurance that the Service will agree with the
Tax Administrator's position.
A REMIC Regular Security having original issue discount may be acquired
subsequent to its issuance for more than its adjusted issue price. If the
subsequent holder's adjusted basis in such a Security, immediately after its
acquisition, exceeds the sum of all Deemed Principal Payments to be received on
the Security after the acquisition date, the Security will no longer have
original issue discount, and the holder may be entitled to reduce the amount of
interest income recognized on the Security by the amount of amortizable premium.
See "Federal Income Tax Consequences -- REMIC Securities -- Amortizable
Premium." If the subsequent holder's adjusted basis in the Security, immediately
after the acquisition, exceeds the adjusted issue price of the Security, but is
less than or equal to the sum of the Deemed Principal Payments to be received on
the Security after the acquisition date, the amount of original issue discount
on the Security will be reduced by a fraction, the numerator of which is the
excess of the Security's adjusted basis immediately after its acquisition over
the adjusted issue price of the Security and the denominator of which is the
excess of the sum of all Deemed Principal Payments to be received on the
Security after the acquisition date over the adjusted issue price of the
Security. For that purpose, the adjusted basis
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of a REMIC Regular Security generally is reduced by the amount of any qualified
stated interest that is accrued but unpaid as of the acquisition date.
Alternatively, the subsequent holder of a REMIC Regular Security having original
issue discount may make an All OID Election (as defined below) with respect to
the Security.
The OID Regulations provide that a Securityholder generally may make an
election (an "All OID Election") to include in gross income all stated interest,
original issue discount, de minimis original issue discount, market discount (as
described below under "Federal Income Tax Consequences -- REMIC Securities --
Market Discount"), and de minimis market discount that accrues on a REMIC
Regular Security (reduced by any acquisition premium or amortizable premium, as
described below under "Federal Income Tax Consequences -- REMIC Securities --
Amortizable Premium") under the constant yield method used to account for
original issue discount. To make the All OID Election, the holder of the
Security must attach a statement to its timely filed federal income tax return
for the taxable year in which the holder acquired the Security. The statement
must identify the instruments to which the election applies. An All OID Election
is irrevocable unless the holder obtains the consent of the Service. If an All
OID Election is made for a debt instrument with market discount, the holder is
deemed to have made an election to include in income currently the market
discount on all of the holder's other debt instruments with market discount, as
described in "Federal Income Tax Consequences -- REMIC Securities -- Market
Discount" below. In addition, if an All OID Election is made for a debt
instrument with amortizable bond premium, the holder is deemed to have made an
election to amortize the premium on all of the holder's other debt instruments
with amortizable premium under the constant yield method. See "Federal Income
Tax Consequences -- REMIC Securities -- Amortizable Premium." Securityholders
should be aware that the law is unclear as to whether an All OID Election is
effective for a Security that is subject to the contingent payment rules. See
"Federal Income Tax Consequences -- REMIC Securities -- Original Issue Discount
- -- Interest Weighted Securities and Non-VRDI Securities."
If the interval between the issue date of a Current Interest Security
and the first Distribution Date (the "First Distribution Period") contains more
days than the number of days of stated interest that are payable on the first
Distribution Date, the effective interest rate received by the Securityholder
during the First Distribution Period will be less than the Security's stated
interest rate, making such Security a Teaser Security. If the amount of original
issue discount on the Security measured under the expanded de minimis test
exceeds the de minimis amount of original issue discount allowable on the
Security, the amount by which the stated interest on the Security exceeds the
interest that would be payable on the Security at the effective rate of interest
for the First Distribution Period would be treated as part of the Security's
stated redemption price at maturity. Accordingly, the holder of a Teaser
Security may be required to recognize ordinary income arising from original
issue discount in the First Distribution Period in addition to any qualified
stated interest that accrues in that period.
Similarly, if the First Distribution Period is shorter than the
interval between subsequent Distribution Dates, the effective rate of interest
payable on a Security during the First Distribution Period will be higher than
the stated rate of interest if a Securityholder receives interest on the first
Distribution Date based on a full accrual period. Unless the "Pre-Issuance
Accrued Interest Rule" described below applies, such Security (a "Rate Bubble
Security") would be issued with original issue discount unless the amount of
original issue discount is de minimis. The amount of original issue discount on
a Rate Bubble Security attributable to the First Distribution Period would be
the amount by which the interest payment due on the first Distribution Date
exceeds the amount that would have been payable had the effective rate for that
Period been equal to the stated interest rate. However, under the "Pre-Issuance
Accrued Interest Rule," if, (i) a portion of the initial purchase price of a
Rate Bubble Security is allocable to interest that has accrued under the terms
of the Security prior to its issue date ("Pre-Issuance Accrued Interest") and
(ii) the Security provides for a payment of stated interest on the First
Distribution Date within one year of the issue date that equals or exceeds the
amount of the Pre-Issuance Accrued Interest, the Security's issue price may be
computed by subtracting from the issue price the amount of Pre-Issuance Accrued
Interest. If the Securityholder opts to apply the Pre-Issuance Accrued Interest
Rule, the portion of the interest received on the first Distribution Date equal
to the Pre-Issuance Accrued Interest would be treated as a return of such
Interest and would not be treated as a payment on the Security. Thus, where the
Pre-Issuance Accrued Interest Rule applies, a Rate Bubble Security will not have
original issue discount attributable to the First Distribution Period, provided
that the increased effective interest rate for that Period is attributable
solely to Pre-Issuance Accrued Interest, as typically will be the case. The
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Tax Administrator intends to apply the Pre-Issuance Accrued Interest Rule to
each Rate Bubble Security for which it is available if the Security's stated
interest otherwise would be qualified stated interest. If, however, the First
Distribution Period of a Rate Bubble Security is longer than subsequent Payment
Periods, the application of the Pre-Issuance Accrued Interest Rule typically
will not prevent disqualification of the Security's stated interest because its
effective interest rate during the First Distribution Period will be less than
its stated interest rate. Thus, a REMIC Regular Security with a long First
Distribution Period typically will be a Teaser Security, as discussed above. The
Pre-Issuance Accrued Interest Rule will not apply to any amount paid at issuance
for such a Teaser Security that is nominally allocable to interest accrued under
the terms of such Security before its issue date. All amounts paid for such a
Teaser Security at issuance, regardless of how designated, will be included in
the issue price of such Security for federal income tax accounting purposes.
It is not entirely clear how income should be accrued with respect to a
REMIC Regular Security, the payments on which consist entirely or primarily of a
specified nonvarying portion of the interest payable on one or more of the
qualified mortgages held by the REMIC (an "Interest Weighted Security"). Unless
and until the Service provides contrary administrative guidance on the income
tax treatment of an Interest Weighted Security, the Tax Administrator will take
the position that an Interest Weighted Security does not bear qualified stated
interest, and will account for the income thereon as described in "Federal
Income Tax Consequences -- REMIC Securities -- Original Issue Discount --
Interest Weighted Securities and Non-VRDI Securities," herein. Some Interest
Weighted Securities may provide for a relatively small amount of principal and
for interest that can be expressed as qualified stated interest at a very high
fixed rate with respect to that principal ("Superpremium Securities").
Superpremium Securities technically are issued with amortizable premium.
However, because of their close similarity to other Interest Weighted Securities
it appears more appropriate to account for Superpremium Securities in the same
manner as for other Interest Weighted Securities. Consequently, in the absence
of further administrative guidance, the Tax Administrator intends to account for
Superpremium Securities in the same manner as other Interest Weighted
Securities. However, there can be no assurance that the Service will not assert
a position contrary to that taken by the Tax Administrator, and, therefore,
holders of Superpremium Securities should consider making a protective election
to amortize premium on such Securities.
In view of the complexities and current uncertainties as to the manner
of inclusion in income of original issue discount on the REMIC Regular
Securities, each investor should consult his own tax advisor to determine the
appropriate amount and method of inclusion in income of original issue discount
on such Securities for federal income tax purposes.
Variable Rate Securities
A REMIC Regular Security may pay interest at a variable rate (a
"Variable Rate Security"). A Variable Rate Security that qualifies as a
"variable rate debt instrument" as that term is defined in the OID Regulations
(a "VRDI") will be governed by the rules applicable to VRDIs in the OID
Regulations, which are described below. A Variable Rate Security qualifies as a
VRDI under the OID Regulations if (i) the Security is not issued at a premium to
its noncontingent principal amount in excess of the lesser of (a) .015
multiplied by the product of such noncontingent principal amount and the WAM (as
that term is defined above in the discussion of the de minimis rule) of the
Security and (b) 15 percent of such noncontingent principal amount (an "Excess
Premium"); (ii) stated interest on the Security compounds or is payable
unconditionally at least annually at (a) one or more "qualified floating rates,"
(b) a single fixed rate and one or more qualified floating rates, (c) a single
"objective rate," or (d) a single fixed rate and a single objective rate that is
a "qualified inverse floating rate"; (iii) the qualified floating rate or the
objective rate in effect during an accrual period is set at a current value of
that rate (i.e., the value of the rate on any day occurring during the interval
that begins three months prior to the first day on which that value is in effect
under the Security and ends one year following that day); and (iv) the Security
does not provide for contingent principal payments.
Under Treasury regulations, a rate is a qualified floating rate if
variations in the rate reasonably can be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the debt
instrument is denominated. A qualified floating rate may measure contemporaneous
variations in borrowing
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costs for the issuer of the debt instrument or for issuers in general. A
multiple of a qualified floating rate is considered a qualified floating rate
only if the rate is equal to either (a) the product of a qualified floating rate
and a fixed multiple that is greater than .65 but not more than 1.35 or (b) the
product of a qualified floating rate and a fixed multiple that is greater than
.65 but not more than 1.35, increased or decreased by a fixed rate. If a REMIC
Regular Security provides for two or more qualified floating rates that
reasonably can be expected to have approximately the same values throughout the
term of the Security, the qualified floating rates together will constitute a
single qualified floating rate. Two or more qualified floating rates
conclusively will be presumed to have approximately the same values throughout
the term of a Security if the values of all rates on the issue date of the
Security are within 25 basis points of each other.
A variable rate will be considered a qualified floating rate if it is
subject to a restriction or restrictions on the maximum stated interest rate (a
"Cap"), a restriction or restrictions on the minimum stated interest rate (a
"Floor"), a restriction or restrictions on the amount of increase or decrease in
the stated interest rate (a "Governor"), or other similar restriction only if:
(a) the Cap, Floor, Governor, or similar restriction is fixed throughout the
term of the related Security or (b) the Cap, Floor, Governor, or similar
restriction is not reasonably expected, as of the issue date, to cause the yield
on the Security to be significantly less or significantly more than the expected
yield on the Security determined without such Cap, Floor, Governor, or similar
restriction, as the case may be. Although the OID Regulations are unclear, it
appears that a VRDI, the principal rate on which is subject to a Cap, Floor, or
Governor that itself is a qualified floating rate, bears interest at an
objective rate.
An objective rate is a rate (other than a qualified floating rate) that
(i) is determined using a single fixed formula, (ii) is based on objective
financial or economic information, and (iii) is not based on information that
either is within the control of the issuer (or a related party) or is unique to
the circumstances of the issuer (or related party), such as dividends, profits,
or the value of the issuer's (or related party's) stock. That definition would
include, in addition to a rate that is based on one or more qualified floating
rates or on the yield of actively traded personal property, a rate that is based
on changes in a general inflation index. In addition, a rate would not fail to
be an objective rate merely because it is based on the credit quality of the
issuer. An objective rate is a qualified inverse floating rate if (i) the rate
is equal to a fixed rate minus a qualified floating rate and (ii) the variations
in the rate can reasonably be expected to inversely reflect contemporaneous
variations in the qualified floating rate (disregarding certain Caps, Floors,
and Governors).
If interest on a Variable Rate Security is stated at a fixed rate for
an initial period of less than one year followed by a variable rate that is
either a qualified floating rate or an objective rate for a subsequent period,
and the value of the variable rate on the issue date is intended to approximate
the fixed rate, the fixed rate and the variable rate together constitute a
single qualified floating rate or objective rate. A variable rate conclusively
will be presumed to approximate an initial fixed rate if the value of the
variable rate on the issue date does not differ from the value of the fixed rate
by more than 25 basis points.
All interest payable on a Variable Rate Security that qualifies as a
VRDI and provides for stated interest unconditionally payable in cash or
property at least annually at a single qualified floating rate or a single
objective rate (a "Single Rate VRDI Security") is treated as qualified stated
interest. The amount and accrual of original issue discount on a Single Rate
VRDI Security is determined, in general, by converting such Security into a
hypothetical fixed rate security and applying the rules applicable to fixed rate
securities described under "Federal Income Tax Consequences -- REMIC Securities
- -- Original Issue Discount" above to such hypothetical fixed rate security.
Qualified stated interest or original issue discount allocable to an accrual
period with respect to a Single Rate VRDI Security also must be increased (or
decreased) if the interest actually accrued or paid during such accrual period
exceeds (or is less than) the interest assumed to be accrued or paid during such
accrual period under the related hypothetical fixed rate security.
Except as provided below, the amount and accrual of original issue
discount on a Variable Rate Security that qualifies as a VRDI but is not a
Single Rate VRDI Security (a "Multiple Rate VRDI Security") is determined by
converting such Security into a hypothetical equivalent fixed rate security that
has terms that are identical to those provided under the Multiple Rate VRDI
Security, except that such hypothetical equivalent fixed rate security will
provide for fixed rate substitutes in lieu of the qualified floating rates or
objective rate provided for under the
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Multiple Rate VRDI Security. A Multiple Rate VRDI Security that provides for a
qualified floating rate or rates or a qualified inverse floating rate is
converted to a hypothetical equivalent fixed rate security by assuming that each
qualified floating rate or the qualified inverse floating rate will remain at
its value as of the issue date. A Multiple Rate VRDI Security that provides for
an objective rate or rates is converted to a hypothetical equivalent fixed rate
security by assuming that each objective rate will equal a fixed rate that
reflects the yield that reasonably is expected for the Multiple Rate VRDI
Security. Qualified stated interest or original issue discount allocable to an
accrual period with respect to a Multiple Rate VRDI Security must be increased
(or decreased) if the interest actually accrued or paid during such accrual
period exceeds (or is less than) the interest assumed to be accrued or paid
during such accrual period under the hypothetical equivalent fixed rate
security.
The amount and accrual of original issue discount on a Multiple Rate
VRDI Security that provides for stated interest at either one or more qualified
floating rates or at a qualified inverse floating rate and in addition provides
for stated interest at a single fixed rate (other than an initial fixed rate
that is intended to approximate the subsequent variable rate) is determined
using the method described above for all other Multiple Rate VRDI Securities
except that prior to its conversion to a hypothetical equivalent fixed rate
security, such Multiple Rate VRDI Security is treated as if it provided for a
qualified floating rate (or a qualified inverse floating rate), rather than the
fixed rate. The qualified floating rate (or qualified inverse floating rate)
replacing the fixed rate must be such that the fair market value of the Multiple
Rate VRDI Security as of its issue date would be approximately the same as the
fair market value of an otherwise identical debt instrument that provides for
the qualified floating rate (or qualified inverse floating rate), rather than
the fixed rate.
REMIC Regular Securities of certain Series may provide for interest
based on a weighted average of the interest rates on some or all of the Mortgage
Loans or regular interests in a second REMIC held subject to the related Trust
Agreement ("Weighted Average Securities"). Under the OID Regulations, it appears
that Weighted Average Securities relating to a REMIC whose assets consist
exclusively of ARM Loans bear interest at an "objective rate," provided the ARM
Loans themselves bear interest at qualified floating rates. However, under the
OID Regulations, Weighted Average Securities relating to a REMIC whose assets do
not bear interest at qualified floating rates ("Non-Objective Weighted Average
Securities" or "NOWA Securities") do not bear interest at an objective or a
qualified floating rate and, consequently, do not qualify as VRDIs. Accordingly,
unless and until the Service provides contrary administrative guidance on the
income tax treatment of NOWA Securities, the Tax Administrator intends to
account for the income on such Securities as described in "Federal Income Tax
Consequences -- REMIC Securities -- Original Issue Discount -- Interest Weighted
Securities and Non-VRDI Securities."
REMIC Regular Securities of certain Series may provide for the payment
of interest at a rate determined as the difference between two interest rate
parameters, one of which is a variable rate and the other of which is a fixed
rate or a different variable rate ("Inverse Floater Securities"). Under the OID
Regulations, Inverse Floater Securities generally bear interest at objective
rates, because their rates either constitute "qualified inverse floating rates"
under those Regulations or, although not qualified floating rates themselves,
are based on one or more qualified floating rates. Consequently, if such
Securities are not issued at an Excess Premium and their interest rates
otherwise meet the test for qualified stated interest, the income on such
Securities will be accounted for under the rules applicable to VRDIs described
above. However, an Inverse Floater Security may have an interest rate parameter
equal to the weighted average of the interest rates on some or all of the Assets
(or other interest bearing assets) held by the related REMIC in a case where one
or more of those rates is a fixed rate or otherwise may not qualify as a VRDI.
Unless and until the Service provides contrary administrative guidance on the
income tax treatment of such Inverse Floater Securities, the Tax Administrator
intends to account for the income on such Securities as described in "Federal
Income Tax Consequences -- REMIC Securities -- Original Issue Discount --
Interest Weighted Securities and Non-VRDI Securities" herein.
Interest Weighted Securities and Non-VRDI Securities
The treatment of a NOWA Security, a Variable Rate Security that is
issued at an Excess Premium, any other Variable Rate Security that does not
qualify as a VRDI (each a "Non-VRDI Security") or an Interest Weighted Security
is unclear under current law. The OID Regulations contain provisions (the
"Contingent Payment
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Regulations") that address the federal income tax treatment of debt obligations
that provide for one or more contingent payments ("Contingent Payment
Obligations"). Under the Contingent Payment Regulations, any variable rate debt
instrument that is not a VRDI is classified as a Contingent Payment Obligation.
However, the Contingent Payment Regulations, by their terms, do not apply to
REMIC regular interests and other instruments that are subject to Section
1272(a)(6) of the Code. In the absence of further guidance, the Tax
Administrator will account for Non-VRDI Securities, Interest Weighted
Securities, and other REMIC Regular Securities that are Contingent Payment
Obligations in accordance with Code Section 1272(a)(6) and the accounting
methodology described in this paragraph. Income will be accrued on such
securities based on a constant yield that is derived from a projected payment
schedule as of the Closing Date. The projected payment schedule will take into
account the related Pricing Prepayment Assumptions and the interest payments
that are expected to be made on such Securities based on the value of any
relevant indices on the issue date. To the extent that actual payments differ
from projected payments for a particular taxable year, appropriate adjustments
to interest income and expense accruals will be made for that year. In the case
of a Weighted Average Security, the projected payments schedule will be derived
based on the assumption that the principal balances of the Mortgage Loans that
collateralize the Security pay down pro rata.
The method described in the foregoing paragraph for accounting for
Interest Weighted Securities and Non-VRDI Securities is consistent with Code
section 1272(a)(6) and the legislative history thereof. Because of the
uncertainty with respect to the treatment of such Securities under the OID
Regulations, however, there can be no assurance that the Service will not assert
successfully that a method less favorable to Securityholders will apply. In view
of the complexities and the current uncertainties as to income inclusions with
respect to Non-VRDI Securities and Interest Weighted Securities, particularly
with respect to the method that should be used to account for the income on such
Securities, each investor should consult his or her own tax advisor to determine
the appropriate amount and method of income inclusion on such Securities for
federal income tax purposes.
Anti-Abuse Rule
Concerned that taxpayers might be able to structure debt instruments or
transactions, or to apply the bright-line or mechanical rules of the OID
Regulations, in a way that produce unreasonable tax results, the Treasury issued
regulations containing an anti-abuse rule on the same date as the issuance of
the OID Regulations. The regulations provide that if a principal purpose in
structuring a debt instrument, engaging in a transaction, or applying the OID
Regulations is to achieve a result that is unreasonable in light of the purposes
of the applicable statutes, the Service can apply or depart from the OID
Regulations as necessary or appropriate to achieve a reasonable result. A result
is not considered unreasonable under the regulations, however, in the absence of
a substantial effect on the present value of a taxpayer's tax liability.
Market Discount
A subsequent purchaser of a REMIC Regular Security at a discount from
its outstanding principal amount (or, in the case of a REMIC Regular Security
having original issue discount, its adjusted issue price) will acquire such
Security with "market discount." The purchaser generally will be required to
recognize the market discount (in addition to any original issue discount
remaining with respect to the Security) as ordinary income. A person who
purchases a REMIC Regular Security at a price lower than the remaining
outstanding Deemed Principal Payments but higher than its adjusted issue price
does not acquire the Security with market discount, but will be required to
report original issue discount, appropriately adjusted to reflect the excess of
the price paid over the adjusted issue price. See "Federal Income Tax
Consequences -- REMIC Securities -- Original Issue Discount." A REMIC Regular
Security will not be considered to have market discount if the amount of such
market discount is de minimis, i.e., less than the product of (i) 0.25% of the
remaining principal amount of the Security (or, in the case of a REMIC Regular
Security having original issue discount, the adjusted issue price of such
Security), multiplied by (ii) the weighted average maturity of the Security
(determined as for original issue discount) remaining after the date of
purchase. Regardless of whether the subsequent purchaser of a REMIC Regular
Security with more than a de minimis amount of market discount is a cash-basis
or accrual-basis taxpayer, market discount generally will be taken into income
as principal payments (including, in the case of a REMIC Regular Security having
original issue discount, any Deemed Principal Payments) are received, in an
amount equal to the lesser of (i) the amount
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of the principal payment received or (ii) the amount of market discount that has
"accrued" (as described below), but that has not yet been included in income.
The purchaser may make a special election, which generally applies to all market
discount instruments held or acquired by the purchaser in the taxable year of
election or thereafter, to recognize market discount currently on an uncapped
accrual basis (the "Current Recognition Election"). The Service has set forth in
Revenue Procedure 92-67 the manner in which a Current Recognition Election may
be made. In addition, a purchaser may make an All OID Election with respect to a
REMIC Regular Security purchased with market discount. See "Federal Income Tax
Consequences -- REMIC Securities -- Original Issue Discount" above.
Until the Treasury promulgates applicable regulations, the purchaser of
a REMIC Regular Security with market discount generally may elect to accrue the
market discount either: (i) on the basis of a constant interest rate; (ii) in
the case of a REMIC Regular Security not issued with original issue discount, in
the ratio of stated interest payable in the relevant period to the total stated
interest remaining to be paid from the beginning of such period; or (iii) in the
case of a REMIC Regular Security issued with original issue discount, in the
ratio of original issue discount accrued for the relevant period to the total
remaining original issue discount at the beginning of such period. The Service
indicated in Revenue Procedure 92-67 the manner in which an election may be made
to accrue market discount on a REMIC Regular Security on the basis of a constant
interest rate. Regardless of which computation method is elected, the Pricing
Prepayment Assumptions must be used to calculate the accrual of market discount.
A Securityholder who has acquired any REMIC Regular Security with
market discount generally will be required to treat a portion of any gain on a
sale or exchange of the Security 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 principal payments were received. Moreover, such Securityholder
generally must defer interest deductions attributable to any indebtedness
incurred or continued to purchase or carry the Security to the extent they
exceed income on the Security. Any such deferred interest expense, in general,
is allowed as a deduction not later than the year in which the related market
discount income is recognized. If a Regular Securityholder makes a Current
Recognition Election or an All OID Election, the interest deferral rule will not
apply.
Treasury regulations implementing the market discount rules have not
yet been issued, and uncertainty exists with respect to many aspects of those
rules. For example, the treatment of a REMIC Regular Security subject to
redemption at the option of the Depositor that is acquired at a market discount
is unclear. It appears likely, however, that the market discount rules
applicable in such a case would be similar to the rules pertaining to original
issue discount. Due to the substantial lack of regulatory guidance with respect
to the market discount rules, it is unclear how those rules will affect any
secondary market that develops for a given Class of REMIC Regular Securities.
Prospective investors in REMIC Regular Securities should consult their own tax
advisors as to the application of the market discount rules to those Securities.
Amortizable Premium
A purchaser of a REMIC Regular Security who purchases the Security at a
premium over the total of its Deemed Principal Payments may elect to amortize
such premium under a constant yield method that reflects compounding based on
the interval between payments on the Securities. The legislative history of the
1986 Act indicates that premium is to be accrued in the same manner as market
discount. Accordingly, it appears that the accrual of premium on a REMIC Regular
Security will be calculated using the Pricing Prepayment Assumptions. Under the
Code, except as otherwise provided in Treasury regulations to be issued,
amortized premium would be treated as an offset to interest income on a REMIC
Regular Security and not as a separate deduction item. If a holder makes an
election to amortize premium on a REMIC Regular Security, such election will
apply to all taxable debt instruments (including all REMIC regular interests)
held by the holder at the beginning of the taxable year in which the election is
made, and to all taxable debt instruments acquired thereafter by such holder,
and will be irrevocable without the consent of the Service. Purchasers who pay a
premium for the REMIC Regular Securities should consult their tax advisors
regarding the election to amortize premium and the method to be employed.
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Amortizable premium on a REMIC Regular Security that is subject to
redemption at the option of the Trust generally must be amortized as if the
optional redemption price and date were the Security's principal amount and
maturity date if doing so would result in a smaller amount of premium
amortization during the period ending with the optional redemption date. Thus, a
Securityholder would not be able to amortize any premium on a REMIC Regular
Security that is subject to optional redemption at a price equal to or greater
than the Securityholder's acquisition price unless and until the redemption
option expires. In cases where premium must be amortized on the basis of the
price and date of an optional redemption, the Security will be treated as having
matured on the redemption date for the redemption price and then having been
reissued on that date for that price. Any premium remaining on the Security at
the time of the deemed reissuance will be amortized on the basis of (i) the
original principal amount and maturity date or (ii) the price and date of any
succeeding optional redemption, under the principles described above.
Consequences of Realized Losses
Under section 166 of the Code, both corporate holders of REMIC Regular
Securities and noncorporate holders that acquire REMIC Regular Securities in
connection with a trade or business should be allowed to deduct, as ordinary
losses, any losses sustained during a taxable year in which their REMIC Regular
Securities become wholly or partially worthless as the result of one or more
Realized Losses on the underlying Assets. However, a noncorporate holder that
does not acquire a REMIC Regular Security in connection with its trade or
business will not be entitled to deduct a loss under Code Section 166 until its
REMIC Regular Security becomes wholly worthless (i.e., until its outstanding
Security Principal Balance has been reduced to zero), and the loss will be
characterized as short-term capital loss).
Each holder of a REMIC Regular Security will be required to accrue
original issue discount income with respect to such Certificate without giving
effect to any reduction in distributions attributable to a default or
delinquency on the underlying Assets until a Realized Loss is allocated to such
Security or until such earlier time as it can be established that any such
reduction ultimately will not be recoverable. As a result, the amount of
original issue discount reported in any period by the holder of a REMIC Regular
Security could exceed significantly the amount of economic income actually
realized by the holder in such period. Although the holder of a REMIC Regular
Security eventually will recognize a loss or a reduction in income attributable
to previously included original issue discount that, as a result of a Realized
Loss, ultimately will not be realized, the law is unclear with respect to the
timing and character of such loss or reduction in income. Accordingly, holders
of REMIC Regular Securities should consult with their own tax advisors with
respect to the federal income tax consequences of Realized Losses on original
issue discount.
The Tax Administrator will adjust the accrual of original issue
discount on REMIC Regular Securities in a manner that it believes to be
appropriate to reflect Realized Losses. However, there can be no assurance that
the Service will not contend successfully that a different method of accounting
for the effect of Realized Losses is correct and that such method will not have
an adverse effect upon the holders of REMIC Regular Securities.
Gain or Loss on Disposition
If a REMIC Regular Security is sold, the Securityholder will recognize
gain or loss equal to the difference between the amount realized on the sale and
his adjusted basis in the Security. The adjusted basis of a REMIC Regular
Security generally will equal the cost of the Security to the Securityholder,
increased by any original issue discount or market discount previously
includable in the Securityholder's gross income with respect to the Security,
and reduced by the portion of the basis of the Security allocable to payments on
the Security (other than qualified stated interest) previously received by the
Securityholder and by any amortized premium. Similarly, a Securityholder who
receives a scheduled or prepaid principal payment with respect to a REMIC
Regular Security will recognize gain or loss equal to the difference between the
amount of the payment and the allocable portion of his adjusted basis in the
Security. Except to the extent that the market discount rules apply and except
as provided below, any gain or loss on the sale or other disposition of a REMIC
Regular Security generally will be capital gain or loss. Such gain or loss will
be long-term gain or loss if the Security is held as a capital asset for more
than the applicable holding period.
The Taxpayer Relief Act of 1997 reduces the maximum rates on long-term
capital gains recognized on capital assets held by individual taxpayers for
more than eighteen months as of the date of disposition (and would further
reduce the maximum rates on such gains in the year 2001 and thereafter for
certain individual taxpayers who meet specified conditions). Prospective
investors should consult their own tax advisors concerning these tax law
changes.
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If the holder of a REMIC Regular Security is a bank, thrift, or similar
institution described in Section 582 of the Code, any gain or loss on the sale
or exchange of the REMIC Regular Security will be treated as ordinary income or
loss. In the case of other types of holders, gain from the disposition of a
REMIC Regular Security that otherwise would be capital gain will be treated as
ordinary income to the extent that the amount actually includable in income with
respect to the Security by the Securityholder during his holding period is less
than the amount that would have been includable in income if the yield on that
Security during the holding period had been 110% of a specified U.S. Treasury
borrowing rate as of the date that the Securityholder acquired the Security.
Although the legislative history to the 1986 Act indicates that the portion of
the gain from disposition of a REMIC Regular Security that will be
recharacterized as ordinary income is limited to the amount of original issue
discount (if any) on the Security that was not previously includable in income,
the applicable Code provision contains no such limitation.
A portion of any gain from the sale of a REMIC Regular Security that
might otherwise be capital gain may be treated as ordinary income to the extent
that such Security is held as part of a "conversion transaction" within the
meaning of Section 1258 of the Code. A conversion transaction generally is one
in which the taxpayer has taken two or more positions in Securities or similar
property that reduce or eliminate market risk, if substantially all of the
taxpayer's return is attributable to the time value of the taxpayer's net
investment in such transaction. The amount of gain realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate "applicable federal rate" (which rate is computed and
published monthly by the Service) at the time the taxpayer entered into the
conversion transaction, subject to appropriate reduction for prior inclusion of
interest and other ordinary income from the transaction.
Currently, the highest marginal individual income tax bracket is 36%,
and a 10% surtax is imposed on taxpayers whose taxable income for 1993 and later
years exceeds $250,000 (resulting in a 39.6% marginal rate). The alternative
minimum tax ("AMT") rate for individuals is 26% with respect to AMT income up to
$175,000 and 28% with respect to AMT income over $175,000. The recently enacted
Taxpayer Relief Act of 1997 (the "Relief Act") established a three-tier rate
structure with respect to the net capital gain of individuals. Under the
Relief Act, the highest marginal federal tax rate on net capital gains for
individuals with respect to assets held for 18 months or less is 28%, as under
prior law. However, the Relief Act reduces the highest marginal federal tax
rate with respect to net capital gain on assets held by individuals for more
than 18 months from 28% to 20%, and, for taxable years beginning after December
31, 2000 and with respect to assets held for more than 5 years, to 18%.
Accordingly, there can be a significant marginal tax rate differential between
net capital gains and ordinary income for individuals. The highest marginal
corporate tax rate is 35% for corporate taxable income over $10 million, and
the marginal tax rate on corporate net capital gains also is 35%.
Tax Treatment of Residual Securities
Overview
Residual Securities will be considered residual interests in the Series
REMIC to which they relate. A REMIC is an entity for federal income tax purposes
consisting of a fixed pool of mortgages or other mortgage-backed assets in which
investors hold multiple classes of interests. To be treated as a REMIC, the
Trust (or one or more segregated pools of Trust assets) underlying a Series must
meet certain continuing qualification requirements, and a REMIC election must be
in effect. See "REMIC Qualification." A Series REMIC generally will be treated
as a pass-through entity for federal income tax purposes, i.e., as not subject
to entity-level tax. All interests in a Series REMIC other than the Residual
Securities must be regular interests, i.e., REMIC Regular Securities. As
described in "Tax Treatment of Regular Securities" above, a regular interest
generally is an interest whose terms are analogous to those of a debt instrument
and it generally is treated as such an instrument for federal income tax
purposes. REMIC Regular Securities will generate interest and original issue
discount deductions for the REMIC. As a residual interest, a Residual Security
represents the right to (i) stated principal and interest on such Security, if
any, and (ii) the income generated by the REMIC assets in excess of the amount
necessary to service the regular interests and pay the REMIC's expenses. In a
manner similar to that employed in the taxation of partnerships, REMIC taxable
income or loss will be determined at the REMIC level, but passed through to the
Residual Securityholders. Thus, REMIC taxable income or loss will be allocated
pro rata to the Residual Securityholders, and each Residual Securityholder will
report his share of REMIC taxable income or loss on his own federal income tax
return. Prospective investors in Residual Securities should be aware that the
obligation to account for the REMIC's income or loss will continue until all of
the REMIC Regular Securities have been retired,
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which may not occur until well beyond the date on which the last payments on
Residual Securities are made. In addition, because of the way in which REMIC
taxable income is calculated, a Residual Securityholder may recognize "phantom"
income (i.e., income recognized for tax purposes in excess of income as
determined under financial accounting or economic principles) which will be
matched in later years by a corresponding tax loss or reduction in taxable
income, but which could lower the yield to Residual Securityholders due to the
lower present value of such loss or reduction.
A portion of the income of Residual Securityholders in certain Series
REMICs will be treated unfavorably in three contexts: (i) it may not be offset
by current or net operating loss deductions; (ii) it will be considered
unrelated business taxable income ("UBTI") to tax-exempt entities; and (iii) it
is ineligible for any statutory or treaty reduction in the 30 percent
withholding tax otherwise available to a foreign Residual Securityholder.
The concepts presented in this overview are discussed more fully below.
Taxation of Residual Securityholders
A Residual Securityholder will recognize his share of REMIC taxable
income or loss for each day during his taxable year on which he holds the
Residual Security. The amount so recognized will be characterized as ordinary
income or loss and generally will not be taxed separately to the REMIC. If a
Residual Security is transferred during a calendar quarter, REMIC taxable income
or loss for that quarter will be prorated between the transferor and the
transferee on a daily basis.
A REMIC generally determines its taxable income or loss in a manner
similar to that of an individual using a calendar year and the accrual method of
accounting. REMIC taxable income or loss will be characterized as ordinary
income or loss and will consist of the REMIC's gross income, including interest,
original issue discount, and market discount income, if any, on the REMIC's
assets (including temporary cash flow investments) premium amortization on the
REMIC Regular Securities, income from foreclosure property, and any cancellation
of indebtedness income due to the allocation of realized losses to REMIC Regular
Securities, reduced by the REMIC's deductions, including deductions for interest
and original issue discount expense on the REMIC Regular Securities, premium
amortization and servicing fees on such assets, the administration expenses of
the REMIC and the REMIC Regular Securities, any tax imposed on the REMIC's
income from foreclosure property, and any bad debt deductions with respect to
the Mortgage Loans. However, the REMIC may not take into account any items
allocable to a "prohibited transaction." See "Federal Income Tax Consequences --
REMIC Securities -- REMIC-Level Taxes." The deduction of REMIC expenses by
Residual Securityholders who are individuals is subject to certain limitations
as described below in "Federal Income Tax Consequences -- REMIC Securities --
Special Considerations for Certain Types of Investors -- Individuals and
Pass-Through Entities."
The amount of the REMIC's net loss with respect to a calendar quarter
that may be deducted by a Residual Securityholder is limited to such
Securityholder's adjusted basis in the Residual Security as of the end of that
quarter (or time of disposition of the Residual Security, if earlier),
determined without taking into account the net loss for that quarter. A Residual
Securityholder's basis in its Residual Security initially is equal to the price
paid for such Security. Such basis is increased by the amount of income
recognized with respect to the Residual Security and decreased (but not below
zero) by the amount of distributions made and the amount of net losses
recognized with respect to that Security. The amount of the REMIC's net loss
allocable to a Residual Securityholder that is disallowed under the basis
limitation may be carried forward indefinitely, but may be used only to offset
income with respect to the related Residual Security. The ability of Residual
Securityholders to deduct net losses with respect to a Residual Security may be
subject to additional limitations under the Code, as to which Securityholders
should consult their tax advisors. A distribution with respect to a Residual
Security is treated as a non-taxable return of capital up to the amount of the
Residual Securityholder's adjusted basis in his Residual Security. If a
distribution exceeds the adjusted basis of the Residual Security, the excess is
treated as gain from the sale of such Residual Security.
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Although the law is unclear in certain respects, a Residual
Securityholder effectively should be able to recover some or all of the basis in
his Residual Security as the REMIC recovers the basis of its assets through
either the amortization of premium on such assets or the allocation of basis to
principal payments received on such assets. The REMIC's initial aggregate basis
in its assets will equal the sum of the issue prices of all Residual Securities
and REMIC Regular Securities. In general, the issue price of a REMIC Regular
Security of a particular Class is the initial price at which a substantial
amount of the Securities of such Class is sold to the public. In the case of a
REMIC Regular Security of a Class not offered to the public, the issue price is
either the price paid by the first purchaser of such Security or the fair market
value of the property received in exchange for such Security, as appropriate.
The REMIC's aggregate basis will be allocated among its assets in proportion to
their respective fair market values.
The assets of certain Series REMICs may have bases that exceed their
principal amounts. Except as indicated in "Federal Income Tax Consequences --
REMIC Securities -- Treatment by the REMIC of Original Issue Discount, Market
Discount, and Amortizable Premium," the premium on such assets will be
amortizable under the constant yield method and the same prepayment assumptions
used in pricing the Securities. The amortized premium will reduce the REMIC's
taxable income or increase its tax loss for each year which will offset a
corresponding amount of the stated interest or other residual cash flow, if any,
allocable to the Residual Securityholders. It should be noted, however, that the
law concerning the amortization of premium on mortgage loans and Mortgage
Certificates is unclear in certain respects. If the Service were to contend
successfully that part or all of the premium on the REMIC's assets underlying
certain Series REMICs is not amortizable, the Residual Securityholders would
recover the basis attributable to the unamortizable premium only as principal
payments are received on such assets or upon the disposition or worthlessness of
their Residual Securities. The inability to amortize part or all of the premium
could give rise to timing differences between the REMIC's income and deductions,
creating phantom income. Because phantom income arises from timing differences,
it will be matched by a corresponding loss or reduction in taxable income in
later years, during which economic or financial income will exceed REMIC taxable
income. Any acceleration of taxable income, however, could lower the yield to a
Residual Securityholder, since the present value of the tax paid on that income
will exceed the present value of the corresponding tax reduction in the later
years. The amount and timing of any phantom income are dependent upon (i) the
structure of the particular Series REMIC and (ii) the rate of prepayment on the
mortgage loans comprising or underlying the REMIC's assets and, therefore,
cannot be predicted without reference to a particular Series REMIC.
The assets of certain Series REMICs may have bases that are less than
their principal amounts. In such a case, a Residual Securityholder will recover
the basis in his Residual Security as the REMIC recovers the portion of its
basis in the assets that is attributable to the residual interest. The REMIC's
basis in the assets is recovered as it is allocated to principal payments
received by the REMIC.
A portion of the REMIC's taxable income may be subject to special
treatment. That portion ("excess inclusion income") generally is any taxable
income beyond that which the Residual Securityholder would have recognized had
the Residual Security been a conventional debt instrument bearing interest at
120 percent of the applicable long-term federal rate (based on quarterly
compounding) as of the date on which the Residual Security was issued. Excess
inclusion income generally is intended to approximate phantom income and may
result in unfavorable tax consequences for certain investors. See "Federal
Income Tax Consequences -- REMIC Securities -- Taxation of Residual
Securityholders Limitations on Offset or Exemption of REMIC Income" and "Federal
Income Tax Consequences -- REMIC Securities -- Special Considerations for
Certain Types of Investors."
Limitations on Offset or Exemption of REMIC Income
Generally, a Residual Securityholder's taxable income for any taxable
year may not be less than such Securityholder's excess inclusion income for that
taxable year. Excess inclusion income is equal to the excess of REMIC taxable
income for the quarterly period for the Residual Securities over the product of
(i) 120% of the long-term applicable federal rate that would have applied to the
Residual Securities if they were debt instruments for federal income tax
purposes on the date of their issuance and (ii) the adjusted issue price of such
Residual Securities at the beginning of such quarterly period. For this purpose,
the adjusted issue price of a Residual Security at the beginning of a quarter is
the issue price of the Residual Security, increased by the amount of the daily
accruals of
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REMIC income for all prior quarters, decreased by any distributions made with
respect to such Residual Security prior to the beginning of such quarterly
period. If the Residual Securityholder is an organization subject to the tax on
UBTI imposed by Code Section 511, the Residual Securityholder's excess inclusion
income will be treated as UBTI. In addition, under Treasury regulations yet to
be issued, if a REIT or a RIC owns a Residual Security that generates excess
inclusion income, a pro rata portion of the dividends paid by the REIT or the
RIC generally will constitute excess inclusion income for its shareholders.
Finally, Residual Securityholders that are foreign persons will not be entitled
to any exemption from the 30% withholding tax or a reduced treaty rate with
respect to their excess inclusion income from the REMIC. See "Federal Income Tax
Consequences -- REMIC Securities -- Taxation of Certain Foreign Holders of REMIC
Securities -- Residual Securities" below.
Non-Recognition of Certain Transfers for Federal Income Tax Purposes
In addition to the limitations specified above, the REMIC Regulations
provide that the transfer of a "noneconomic residual interest" to a United
States person will be disregarded for tax purposes unless no significant purpose
of the transfer was to impede the assessment or collection of tax. A Residual
Security will constitute a noneconomic residual interest unless, at the time the
interest is transferred, (i) the present value of the expected future
distributions with respect to the Residual Security equals or exceeds the
product of the present value of the anticipated excess inclusion income and the
highest corporate tax rate for the year in which the transfer occurs, and (ii)
the transferor reasonably expects that the transferee will receive distributions
from the REMIC in amounts sufficient to satisfy the taxes on excess inclusion
income as they accrue. If a transfer of a residual interest is disregarded, the
transferor would continue to be treated as the owner of the Residual Security
and thus would continue to be subject to tax on its allocable portion of the net
income of the related REMIC. A significant purpose to impede the assessment or
collection of tax exists if the transferor, at the time of the transfer, either
knew or should have known that the transferee would be unwilling or unable to
pay taxes due on its share of the taxable income of the REMIC, (i.e., the
transferor has "improper knowledge"). Under the REMIC Regulations, a transferor
is presumed not to have such improper knowledge if (i) the transferor conducted,
at the time of the transfer, a reasonable investigation of the financial
condition of the transferee and, as a result of the investigation, the
transferor found that the transferee had historically paid its debts as they
came due and found no significant evidence to indicate that the transferee would
not continue to pay its debts as they come due and (ii) the transferee
represents to the transferor that it understands that, as the holder of a
noneconomic residual interest, it may incur tax liabilities in excess of any
cash flows generated by the interest and that it intends to pay the taxes
associated with holding the residual interest as they become due. A similar
limitation exists with respect to transfers of certain residual interests to
foreign investors. See "Federal Income Tax Consequences -- REMIC Securities --
Taxation of Certain Foreign Holders of REMIC Securities -- Residual Securities"
herein.
Ownership of Residual Interests by Disqualified Organizations
The Code contains three sanctions that are designed to prevent or
discourage the direct or indirect ownership of a REMIC residual interest (such
as a Residual Security) by the United States, any state or political subdivision
thereof, any foreign government, any international organization, any agency or
instrumentality of any of the foregoing, any tax-exempt organization (other than
a farmers' cooperative described in section 521 of the Code) that is not subject
to the tax on UBTI, or any rural electrical or telephone cooperative (each a
"Disqualified Organization"). A corporation is not treated as an instrumentality
of the United States or any state or political subdivision thereof if all of its
activities are subject to tax and, with the exception of Freddie Mac, a majority
of its board of directors is not selected by such governmental unit.
First, the REMIC status of any REMIC created after March 31, 1988 is
dependent upon the presence of reasonable arrangements designed to prevent a
Disqualified Organization from acquiring record ownership of a residual
interest. Residual interests in Series REMICs (including Residual Securities)
are not offered for sale to Disqualified Organizations. Furthermore, (i)
residual interests in Series REMICs will be registered as to both principal and
any stated interest with the Trustee (or its agent) and transfer of a residual
interest may be effected only (A) by surrender of the old residual interest
instrument and reissuance by the Trustee of a new residual interest instrument
to the new holder or (B) through a book entry system maintained by the Trustee,
(ii) the applicable Trust
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Agreement will prohibit the ownership of residual interests by Disqualified
Organizations, and (iii) each residual interest instrument will contain a legend
providing notice of that prohibition. Consequently, each Series REMIC should be
considered to have made reasonable arrangements designed to prevent the
ownership of residual interests by Disqualified Organizations.
Second, the Code imposes a one-time tax on the transferor of a residual
interest (including a Residual Security or an interest therein) to a
Disqualified Organization. The one-time tax equals the product of (i) the
present value of the total anticipated excess inclusions with respect to the
transferred residual interest for periods after the transfer and (ii) the
highest marginal federal income tax rate applicable to corporations. Under the
REMIC Regulations, the anticipated excess inclusions with respect to a
transferred residual interest must be based on (i) both actual prior prepayment
experience and the prepayment assumptions used in pricing the related REMIC's
interests and (ii) any required or permitted clean up calls or required
qualified liquidation provided for in the REMIC's organizational documents. The
present value of anticipated excess inclusions is determined using a discount
rate equal to the applicable federal rate that would apply to a debt instrument
that was issued on the date the Disqualified Organization acquired the residual
interest and whose term ends on the close of the last quarter in which excess
inclusions are expected to accrue with respect to the residual interest. Where a
transferee is acting as an agent for a Disqualified Organization, the transferee
is subject to the one-time tax. Upon the request of such transferee or the
transferor, the REMIC must furnish to the requesting party and to the Service
information sufficient to permit the computation of the present value of the
anticipated excess inclusions. For that purpose, the term "agent" includes a
broker, nominee, or other middleman. The transferor of a residual interest
(including a Residual Security or interest therein) will not be liable for the
one-time tax if the transferee furnishes to the transferor an affidavit that
states, under penalties of perjury, that the transferee is not a Disqualified
Organization, and, as of the time of the transfer, the transferor does not have
actual knowledge that such affidavit is false. The one-time tax must be paid by
the later of March 24, 1993 and April 15th of the year following the calendar
year in which the residual interest is transferred to a Disqualified
Organization. The one-time tax may be waived by the Secretary of the Treasury
if, upon discovery that a transfer is subject to the one-time tax, the
Disqualified Organization promptly disposes of the residual interest and the
transferor pays such amounts as the Secretary may require.
Third, the Code imposes an annual tax on any pass-through entity (i.e.,
RIC, REIT, common trust fund, partnership, trust, estate or cooperative
described in Code section 1381) that owns a direct or indirect interest in a
residual interest (including a Residual Security), if record ownership of an
interest in the pass-through entity is held by one or more Disqualified
Organizations. The tax imposed equals the highest corporate rate multiplied by
the share of any excess inclusion income of the pass-through entity for the
taxable year that is allocable to the interests in the pass-through entity held
by Disqualified Organizations. The same tax applies to a nominee who acquires an
interest in a residual interest (including a Residual Security) on behalf of a
Disqualified Organization. For example, a broker that holds an interest in a
Residual Security in "street name" for a Disqualified Organization is subject to
the tax. The tax due must be paid by the later of March 24, 1993 and the
fifteenth day of the fourth month following the close of the taxable year of the
pass-through entity in which the Disqualified Organization is a record holder.
Any such tax imposed on a pass-through entity would be deductible against that
entity's ordinary income in determining the amount of its required
distributions. In addition, dividends paid by a RIC or a REIT are not considered
preferential dividends within the meaning of Section 562(c) of the Code solely
because the RIC or REIT allocates such tax expense only to the shares held by
Disqualified Organizations. A pass-through entity will not be liable for the
annual tax if the record holder of the interest in the pass-through entity
furnishes to the pass-through entity an affidavit that states, under penalties
of perjury, that the record holder is not a Disqualified Organization, and the
pass-through entity does not have actual knowledge that such affidavit is false.
The Code and the REMIC Regulations also require that reasonable
arrangements be made with respect to each REMIC to enable the REMIC to provide
the Treasury and the transferor with information necessary for the application
of the one-time tax described above. Consequently, the applicable Trust
Agreement will provide for an affiliate to perform such information services as
may be required for the application of the one-time tax. If a Residual
Securityholder transfers an interest in a Residual Security in violation of the
relevant transfer restrictions and triggers the information requirement, the
affiliate may charge such Residual Securityholder a reasonable fee for providing
the information.
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Special Considerations for Certain Types of Investors
Dealers in Securities. Residual Securityholders that are dealers in
securities should be aware that under Treasury regulations (the "Mark-to-Market
Regulations") relating to the requirement under section 475 of the Code that
dealers in securities use mark-to-market accounting for federal income tax
purposes, dealers in securities are not permitted to mark to market any REMIC
residual interests acquired on or after January 4, 1995. Prospective purchasers
of Residual Securities should consult with their tax advisors regarding the
possible application of the Mark-to-Market Regulations.
Tax-Exempt Entities. Any excess inclusion income with respect to a
Residual Security held by a tax-exempt entity, including a qualified
profit-sharing, pension, or other employee benefit plan, will be treated as
UBTI. Although the legislative history and statutory provisions imply otherwise,
the Treasury conceivably could take the position that, under pre-existing Code
provisions, substantially all income on a Residual Security (including
non-excess inclusion income) is to be treated as UBTI. See "Federal Income Tax
Consequences -- REMIC Securities -- Taxation of Residual Securityholders."
Individuals and Pass-Through Entities. A Residual Securityholder who is
an individual, trust, or estate will be able to deduct its allocable share of
the fees or expenses relating to servicing the assets assigned to a Trust or
administering the Series REMIC under Section 212 of the Code only to the extent
that the amount of such fees or expenses, when combined with the
Securityholder's other miscellaneous itemized deductions for the taxable year,
exceeds 2% of the holder's adjusted gross income. That same limitation will
apply to individuals, trusts, or estates that hold Residual Securities
indirectly through a grantor trust, a partnership, an S corporation, a common
trust fund, a REMIC, or a nonpublicly offered RIC. A nonpublicly offered RIC is
a RIC other than one whose shares are (i) continuously offered pursuant to a
public offering, (ii) regularly traded on an established securities market, or
(iii) held by no fewer than 500 persons at all times during the taxable year. In
addition, that limitation will apply to individuals, trusts, or estates that
hold Residual Securities through any other person (i) that is not generally
subject to federal income tax and (ii) the character of whose income may affect
the character of the income generated by that person for its owners or
beneficiaries. In addition, Code Section 68 provides that the amount of itemized
deductions otherwise allowable for the taxable year for an individual whose
adjusted gross income exceeds the applicable amount ($100,000, or $50,000 in the
case of a separate return by a married individual within the meaning of Code
Section 7703 for taxable year 1991 and adjusted for inflation each year
thereafter) will be reduced by the lesser of (i) 3% of the excess of adjusted
gross income over the applicable amount, or (ii) 80% of the amount of itemized
deductions otherwise allowable for such taxable year. In some cases, the amount
of additional income that would be recognized as a result of the foregoing
limitations by a Residual Securityholder who is an individual, trust, or estate
could be substantial. Non-corporate holders of REMIC Residual Securities also
should be aware that miscellaneous itemized deductions, including allocable
investment expenses attributable to a REMIC, are not deductible for purposes of
the AMT. Finally, persons holding an interest in a Residual Security indirectly
through an interest in a RIC, common trust fund or one of certain corporations
doing business as a cooperative generally will recognize a share of any excess
inclusion allocable to that Residual Security.
Employee Benefit Plans. See "Federal Income Tax Consequences --
Residual Securities -- Special Considerations for Certain Types of Investors --
Tax-exempt entities" and "ERISA Considerations."
REITs and RICs. If the Residual Securityholder is a REIT and the REMIC
generates excess inclusion income, a portion of REIT dividends will be treated
as excess inclusion income for the REIT's shareholders, in a manner to be
provided by regulations. Thus, shareholders in a REIT that invests in Residual
Securities could face unfavorable treatment of a portion of their REIT dividend
income for purposes of (i) using current deductions or NOL carryovers or
carrybacks, (ii) UBTI in the case of tax-exempt shareholders, and (iii)
withholding tax in the case of foreign shareholders (see "Federal Income Tax
Consequences -- Residual Securities -- Special Considerations for Certain Types
of Investors -- Foreign Residual Securityholders" below). Moreover, because
Residual Securityholders may recognize phantom income (see "Federal Income Tax
Consequences -- REMIC Securities -- Taxation of Residual Securityholders"), a
REIT contemplating an investment in Residual Securities should consider
carefully the effect of any phantom income upon its ability to meet its income
distribution
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requirements under the Code. The same rules regarding excess inclusion will
apply to a Residual Securityholder that is a RIC, common trust fund, or one of
certain corporations doing business as a cooperative.
A Residual Security held by a REIT will be treated as a real estate
asset for purposes of the REIT qualification requirements in the same proportion
that the REMIC's assets would be treated as real estate assets if held directly
by the REIT, and interest income derived from such Residual Security will be
treated as qualifying interest income for REIT purposes ("Qualifying REIT
Interest") to the same extent. If 95% or more of a REMIC's assets qualify as
real estate assets for REIT purposes, 100% of that REMIC's regular and residual
interests (including Residual Securities) will be treated as real estate assets
for REIT purposes, and all of the income derived from such interests will be
treated as Qualifying REIT Interest. The REMIC Regulations provide that payments
of principal and interest on Mortgage Loans that are reinvested pending
distribution to the holders of the REMIC Securities constitute real estate
assets for REIT purposes. Two REMICs that are part of a tiered structure will be
treated as one REMIC for purposes of determining the percentage of assets of
each REMIC that constitutes real estate assets. It is expected that at least 95
percent of the assets of a Series REMIC will be real estate assets throughout
the REMIC's life. The amount treated as a real estate asset in the case of a
Residual Security apparently is limited to the REIT's adjusted basis in the
Security. REITs should be aware that 100% of the interest income derived by a
REIT from a residual interest in such REMIC may not be treated as Qualifying
REIT Interest if the REMIC holds Mortgage Loans that provide for interest that
is contingent on mortgagor profits or property appreciation.
Significant uncertainty exists with respect to the treatment of a
Residual Security for purposes of the various asset composition requirements
applicable to RICs. A Residual Security should be treated as a "security," but
probably will not be considered a "government security" for purposes of section
851(b)(4) of the Code. Moreover, it is unclear whether a Residual Security will
be treated as a "voting security" under that Code section. Finally, because the
REMIC will be treated as the "issuer" of the Residual Security for purposes of
that section, a RIC would be unable to invest more than 25% of the value of its
total assets in Residual Securities.
Partnerships. Partners in a partnership that acquires a Residual
Security generally must take into account their allocable share of any income,
including excess inclusion income, that is produced by the Residual Security.
The partnership itself is not subject to tax on income from the Residual
Security other than excess inclusion income that is allocable to partnership
interests owned by Disqualified Organizations.
Foreign Residual Securityholders. Certain adverse tax consequences may
be associated with the holding of certain Residual Securities by a foreign
person or with the transfer of such Securities to or from a foreign person. See
"Federal Income Tax Consequences -- REMIC Securities -- Taxation of Certain
Foreign Holders of REMIC Securities -- Residual Securities" herein.
Thrift Institutions, banks, and certain other financial institutions.
Residual Securities will be treated as qualifying assets for Thrift Institutions
in the same proportion that the assets of the REMIC would be so treated.
However, if 95% or more of the assets of a given Series REMIC are qualifying
assets for Thrift Institutions, 100% of that REMIC's regular and residual
interests (including Residual Securities) would be treated as qualifying assets.
In addition, the REMIC Regulations provide that payments of principal and
interest on Mortgage Loans that are reinvested pending their distribution to the
holders of the REMIC Securities will be treated as qualifying assets for Thrift
Institutions. Moreover, two REMICs that are part of a tiered structure will be
treated as one REMIC for purposes of determining the percentage of assets of
each REMIC that constitutes qualifying assets for Thrift Institution purposes.
It is expected that at least 95% of the assets of any Series REMIC will be
qualifying assets for Thrift Institutions throughout the REMIC's life. The
amount of a Residual Security treated as a qualifying asset for Thrift
Institutions, however, cannot exceed the holder's adjusted basis in that
Residual Security.
Generally, gain or loss arising from the sale or exchange of Residual
Securities held by certain financial institutions will give rise to ordinary
income or loss, regardless of the length of the holding period for the Residual
Securities. Those financial institutions include banks, mutual savings banks,
cooperative banks, domestic building and loan institutions, savings and loan
institutions, and similar institutions.
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Disposition of Residual Securities
A Residual Securityholder will recognize gain or loss on the
disposition of his Residual Security equal to the difference between the amount
of proceeds (or the fair market value of any property) received and his adjusted
basis in the Residual Security. If the holder has held the Residual Security for
more than the applicable holding period, such gain or loss generally will be
characterized as long-term capital gain or loss. In the case of banks, thrifts,
and certain other financial institutions, however, gain or loss on the
disposition of a Residual Security will be treated as ordinary gain or loss,
regardless of the length of the holding period. See "Federal Income Tax
Consequences -- REMIC Securities -- Special Considerations for Certain Types of
Investors."
A special version of the wash sale rules will apply to dispositions of
Residual Securities. Under that version, losses on dispositions of Residual
Securities generally will be disallowed where, within six months before or after
the disposition, the seller of such Securities acquires any residual interest in
a REMIC or any interest in a taxable mortgage pool. Regulations providing for
appropriate exceptions to the application of the wash sale rules have been
authorized, but have not yet been promulgated.
Liquidation of the REMIC
A REMIC may liquidate without the imposition of entity-level tax only
in a qualified liquidation. A liquidation is considered qualified if the REMIC
(i) adopts a plan of complete liquidation, (ii) sells all of its non-cash assets
within 90 days of the date on which it adopts the plan, and (iii) distributes in
liquidation all sale proceeds plus its cash (other than amounts retained to meet
claims against it) to Securityholders within the 90-day period. Under the REMIC
Regulations, a plan of liquidation need not be in any special form. Furthermore,
if a REMIC specifies the first day in the 90-day liquidation period in a
statement attached to its final tax return, the REMIC will be considered to have
adopted a plan of liquidation on that date.
Treatment by the REMIC of Original Issue Discount, Market Discount, and
Amortizable Premium
Original Issue Discount. Generally, the REMIC's deductions for original
issue discount expense on its REMIC Regular Securities will be determined in the
same manner as for determining the original issue discount income of the holders
of such Securities, as described in "Federal Income Tax Consequences -- REMIC
Securities -- Original Issue Discount" above, without regard to the de minimis
rule described therein.
Market Discount. In general, the REMIC will have market discount income
with respect to its qualified mortgages if the basis of the REMIC in such
mortgages is less than the adjusted issue prices of such mortgages. The REMIC's
aggregate initial basis in its qualified mortgages (and any other assets
transferred to the REMIC on the startup day) equals the aggregate of the issue
prices of the regular and residual interests in the REMIC. That basis is
allocated among the REMIC's qualified mortgages based on their relative fair
market values. Any market discount that accrues on the REMIC's qualified
mortgages will be recognized currently as an item of REMIC ordinary income. The
amount of market discount income to be recognized in any period is determined in
a manner generally similar to that used in the determination of original issue
discount, as if the qualified mortgages had been issued (i) on the date they
were acquired by the REMIC and (ii) for a price equal to the REMIC's initial
basis in the qualified mortgages. The Pricing Prepayment Assumptions are used to
compute the yield to maturity of the REMIC's qualified mortgages.
Premium. Generally, if the basis of the REMIC in its qualified
mortgages exceeds the unpaid principal balances of those mortgages the REMIC
will be considered to have acquired such mortgages at a premium equal to the
amount of such excess. As stated above, the REMIC's initial basis in its
qualified mortgages equals the aggregate of the issue prices of the regular and
residual interests in the REMIC. As described above under "Federal Income Tax
Consequences -- REMIC Securities -- Amortizable Premium," a REMIC that holds a
qualified mortgage as a capital asset generally may elect under Code Section 171
to amortize premium on such mortgage under a constant interest method, to the
extent such mortgages were originated, or treated as originated, after September
27, 1985. The legislative history to the 1986 Act indicates that, while the
deduction for amortization
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of premium will not be subject to the limitations on miscellaneous itemized
deductions of individuals, it will be treated as interest expense for purposes
of other provisions in the 1986 Act limiting the deductibility of interest for
non-corporate taxpayers. Because substantially all of the mortgagors on the
mortgage loans that comprise or underlie the qualified mortgages are expected to
be individuals, Section 171 will not be available for the amortization of
premium on such mortgage loans to the extent they were originated on or prior to
September 27, 1985. Such premium may be amortizable under more general
provisions and principles of federal income tax law in accordance with a
reasonable method regularly employed by the holder of such mortgage loans. The
allocation of such premium pro rata among principal payments should be
considered a reasonable method; however, the Service may argue that such premium
should be allocated in a different manner, such as allocating such premium
entirely to the final payment of principal.
REMIC-Level Taxes
Income from certain transactions by the REMIC, called prohibited
transactions, will not be part of the calculation of the REMIC's income or loss
that is includable in the federal income tax returns of Residual
Securityholders, but rather will be taxed directly to the REMIC at a 100% rate.
In addition, net income from one prohibited transaction may not be offset by
losses from other prohibited transactions. Prohibited transactions generally
include: (i) the disposition of qualified mortgages other than pursuant to (a)
the repurchase of a defective mortgage, (b) the substitution for a defective
mortgage within two years of the closing date, (c) a substitution for any
qualified mortgage within three months of the closing date, (d) the foreclosure,
default, or imminent default of a qualified mortgage, (e) the bankruptcy or
insolvency of the REMIC, (f) the sale of a convertible mortgage loan upon its
conversion for an amount equal to the mortgage loan's current principal balance
plus accrued but unpaid interest (and provided that certain other requirements
are met) or (g) a qualified liquidation of the REMIC; (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 by the REMIC;
and (iv) the receipt of gain from disposition of cash-flow investments other
than pursuant to a qualified liquidation of the REMIC. A disposition of a
qualified mortgage or cash flow investment will not give rise to a prohibited
transaction, however, if the disposition was (i) required to prevent default on
a regular interest resulting from a default on one or more of the REMIC's
qualified mortgages or (ii) made to facilitate a clean-up call. The REMIC
Regulations define a clean-up call as the redemption of a class of regular
interests when, by reason of prior payments with respect to those interests, the
administrative costs associated with servicing the class outweigh the benefits
of maintaining the class. Under those regulations, the redemption of a class of
regular interests with an outstanding principal balance of no more than 10% of
the original principal balance qualifies as a clean-up call. The REMIC
Regulations also provide that the modification of a mortgage loan generally will
not be treated as a disposition of that loan if it is occasioned by a default or
a reasonably foreseeable default, an assumption of the mortgage loan, the waiver
of a due-on-sale or encumbrance clause, or the conversion of an interest rate by
a mortgagor pursuant to the terms of a convertible adjustable rate mortgage
loan.
In addition, a REMIC generally will be taxed at a 100% rate on any
contribution to the REMIC after the closing date unless such contribution is a
cash contribution that (i) takes place within the three-month period beginning
on the closing date, (ii) is made to facilitate a clean-up call (as described in
the preceding paragraph) or a qualified liquidation (as defined in "Federal
Income Tax Consequences -- REMIC Securities -- Liquidation of the REMIC" above),
(iii) is a payment in the nature of a guarantee, (iv) constitutes a contribution
by the holder of the Residual Securities in the REMIC to a qualified reserve
fund, or (v) is otherwise permitted by Treasury regulations yet to be issued.
The structure and operation of Series REMICs generally will be designed to avoid
the imposition of both the 100% tax on contributions and the 100% tax on
prohibited transactions.
To the extent that a REMIC derives certain types of income from
foreclosure property (generally, income relating to dealer activities of the
REMIC), it will be taxed on such income at the highest corporate income tax
rate. It is not anticipated that any Series REMIC will receive significant
amounts of such income, although the relevant law is unclear.
The organizational documents governing the REMIC Regular and Residual
Securities will be designed to prevent the imposition of the foregoing taxes on
the related Series REMIC in any material amounts. If any of the
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foregoing taxes is imposed on a Series REMIC, the Trustee will seek to place the
burden thereof on the person whose action or inaction gave rise to such taxes.
To the extent that the Trustee is unsuccessful in doing so, the burden of such
taxes will be borne by any outstanding subordinated Class of Securities before
it is borne by a more senior Class of Securities.
REMIC Qualification
The Trust underlying a Series (or one or more designated pools of
assets held by the Trust) will qualify under the Code as a REMIC in which the
REMIC Regular Securities and Residual Securities will constitute the "regular
interests" and "residual interests," respectively, if a REMIC election is in
effect and certain tests concerning (i) the composition of the REMIC's assets
and (ii) the nature of the Securityholders' interests in the REMIC are met on a
continuing basis.
Asset Composition
In order for a Trust (or one or more designated pools of assets held by
a Trust) to be eligible for REMIC status, substantially all of the assets of the
Trust (or the designated pool) must consist of "qualified mortgages" and
"permitted investments" as of the close of the third month beginning after the
closing date and at all times thereafter (the "Asset Qualification Test"). A
REMIC will be deemed to satisfy the Asset Qualification Test if no more than a
de minimis amount of its assets (i.e., assets with an aggregate adjusted basis
that is less than 1 percent of the aggregate adjusted basis of all the REMIC's
assets) are assets other than qualified mortgages and permitted investments. A
qualified mortgage is any obligation that is principally secured by an interest
in real property, including a regular interest in another REMIC, that is either
transferred to the REMIC on the closing date or purchased by the REMIC pursuant
to a fixed price contract within a three-month period thereafter. A qualified
mortgage also includes a qualified replacement mortgage, which is any property
that would have been treated as a qualified mortgage if it were transferred to
the REMIC on the closing date and that is received either in exchange for a
defective mortgage within a two-year period beginning on the closing date or in
exchange for any qualified mortgage within a three-month period beginning on
that date. The Assets of each Series REMIC will be treated as qualified
mortgages.
Permitted investments include cash flow investments, qualified reserve
assets, and foreclosure property. Cash flow investments are investments of
amounts received with respect to qualified mortgages for a temporary period (not
to exceed thirteen months) before distribution to holders of regular or residual
interests in the REMIC. Qualified reserve assets are intangible investment
assets (other than REMIC residual interests) that are part of a reasonably
required reserve (a "Qualified Reserve Fund") maintained by the REMIC to provide
for full payment of expenses of the REMIC or amounts due on the regular
interests in the event of defaults or delinquencies on qualified mortgages,
lower than expected returns on cash-flow investments, or interest shortfalls on
qualified mortgages caused by prepayments of those mortgages. A Qualified
Reserve Fund will be disqualified if more than 30% of the gross income from the
assets in such fund for the year is derived from the sale of property held for
less than three months, unless such sale was required to prevent a default on
the regular interests caused by a default on one or more qualified mortgages. To
the extent that the amount in a Qualified Reserve Fund exceeds a reasonably
required amount, it must be reduced "promptly and appropriately". Foreclosure
property generally is property acquired by the REMIC in connection with the
default or imminent default of a qualified mortgage. Property so acquired by the
REMIC, however, will not be qualifying foreclosure property if the foreclosure
was anticipated at the time that the related qualified mortgage was transferred
to the REMIC. Furthermore, foreclosure property may not be held for more than
three taxable years after the taxable year of acquisition, unless it is
established to the satisfaction of the Secretary of the Treasury that an
extension of the three-year period is necessary for the orderly liquidation of
the foreclosure property. The Secretary of the Treasury may grant an extension,
but any such extension shall not extend the grace period beyond the date which
is six years after the date such foreclosure property is acquired.
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Investors' Interests
In addition to the foregoing asset qualification requirements, the
various interests in a REMIC also must meet certain requirements. All of the
interests in a REMIC must be issued on the closing date (or within a specified
10-day period) and belong to either of the following: (i) one or more classes of
regular interests or (ii) a single class of residual interests on which
distributions are made pro rata. In the case of Series that include Residual
Securities, the residual interest will be represented by the Residual
Securities.
If the interest payable on any REMIC regular interest is
disproportionately high relative to the specified principal amount of the
interest, that interest may be treated, in whole or in part, as a second
residual interest, which could result in the disqualification of the REMIC.
Under the REMIC Regulations, interest payments (or similar amounts) are
considered disproportionately high if the issue price of the REMIC regular
interest exceeds 125% of the specified principal amount of the regular interest.
Under the REMIC Regulations, however, interest payable at a disproportionately
high rate will not cause a REMIC Regular Security to be recharacterized as a
residual interest if interest payments on the Security consist of a specified
portion of the interest payments on qualified mortgages and such portion does
not vary during the period that the Security is outstanding. None of the REMIC
Regular Securities, will have an issue price that exceeds 125% of their
respective specified principal amounts unless interest payments on those
Securities consist of a specified nonvarying portion of the interest payments on
one or more of the REMIC's qualified mortgages.
A REMIC interest qualifies as a regular interest if (i) it is issued on
the startup day with fixed terms, (ii) it is designated as a regular interest,
(iii) it entitles its holder to a specified principal amount, and (iv) if it
pays interest, such interest either (a) constitutes a specified nonvarying
portion of the interest on one or more of the REMIC's qualified mortgages, (b)
is payable at a fixed rate with respect to the principal amount of the regular
interest, or (c) to the extent permitted under the REMIC Regulations, is payable
at a variable rate with respect to such principal amount. Pursuant to the REMIC
Regulations, the following rates are permissible variable rates for REMIC
regular interests: (i) a qualified floating rate set at a current value as
described in "Federal Income Tax Consequences -- REMIC Securities -- Original
Issue Discount -- Variable Rate Securities" herein, without regard to the rules
in the OID Regulations limiting the use of Caps, Floors, and Governors with
respect to such a rate, (ii) a rate equal to the highest, lowest, or average of
two or more qualified floating rates (e.g., a rate based on the average cost of
funds of one or more financial institutions), or (iii) a rate equal to the
weighted average of the interest rates on some or all of the qualified mortgages
held by the REMIC provided, however, that the qualified mortgages taken into
account in determining the weighted average rate bear interest at a fixed rate
or a rate that would be a permissible variable rate for a REMIC regular interest
as described in this sentence. Under the REMIC Regulations, the presence of a
ceiling or floor on the interest payable on a variable rate interest will not
prevent such interest from qualifying as a regular interest. In addition, a
qualifying variable rate may be expressed as a multiple of, or a constant number
of basis points more or less than, one of the permissible types of variable
rates described above. Finally, a limitation on the amount of interest to be
paid on a variable rate regular interest based on the total amount available for
distribution is permissible, provided that it is not designed to avoid the
restrictions on qualifying variable rates. The REMIC Regulations also provide
that the specified principal amount of a REMIC regular interest may be zero if
the interest associated with such regular interest constitutes a specified
nonvarying portion of the interest on one or more of the REMIC's qualified
mortgages.
The Code requires that certain arrangements be made with respect to all
REMICs. Those arrangements, which are intended to prevent acquisitions of REMIC
residual interests (including REMIC Residual Securities) by certain
organizations that are not subject to federal income tax, are described in
"Federal Income Tax Consequences -- REMIC Securities -- Taxation of Residual
Securityholders -- Ownership of Residual Interests by Disqualified
Organizations." Series REMICs will be structured to provide for such
arrangements.
Consequences of Disqualification
If a Series REMIC fails to comply with one or more of the Code's
ongoing requirements for REMIC status during any taxable year, the Code provides
that its REMIC status may be lost for that year and thereafter. If
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REMIC status is lost, the treatment of the former REMIC and the interests
therein for federal income tax purposes is uncertain. The former REMIC might be
entitled to treatment as a grantor trust under Subpart E, Part 1 of Subchapter J
of the Code or as a partnership, in which case no entity-level tax would be
imposed on the former REMIC. Alternatively, the REMIC Regular Securities may
continue to be treated as debt instruments for federal income tax purposes, but
the arrangement could be treated as a Taxable Mortgage Pool, as described in
"Federal Income Tax Consequences -- REMIC Securities -- Taxable Mortgage Pools"
below. If a Series REMIC were treated as a Taxable Mortgage Pool, any residual
income of the REMIC (i.e., interest and discount income from the Mortgage Loans
less interest and original issue discount expense allocable to the REMIC Regular
Securities and any administrative expenses of the REMIC) would be subject to
corporate income tax at the Taxable Mortgage Pool level. On the other hand, the
arrangement could be treated under Treasury regulations as a separate
association taxable as a corporation and the REMIC Regular Securities would be
treated as stock interests therein, rather than debt instruments. In that case,
none of the payments made with respect to the REMIC Regular Securities would be
deductible by the former REMIC. In the latter two cases, the Residual Securities
also would be treated as stock interests in such Taxable Mortgage Pool or
association, respectively. The Code authorizes the Treasury to issue regulations
that address situations where a failure to meet the requirements for REMIC
status occurs inadvertently and in good faith. Such regulations have not yet
been issued. The conference report accompanying the 1986 Act indicates that
disqualification relief may be accompanied by sanctions, such as the imposition
of a corporate tax on all or a portion of the REMIC's income for the period of
time in which the requirements for REMIC status are not satisfied.
Taxable Mortgage Pools
Corporate income tax can be imposed on the net income of certain
entities issuing non-REMIC debt obligations secured by real estate mortgages
("Taxable Mortgage Pools"). Any entity other than a REMIC, a FASIT or a REIT
will be considered to be a Taxable Mortgage Pool if (i) substantially all of
the assets of the entity consist of debt obligations and more than 50% of such
obligations consist of real estate mortgages, (ii) such entity is the obligor
under debt obligations with two or more maturities, and (iii) under the terms
of the debt obligations on which the entity is the obligor, payments on such
obligations bear a relationship to payment on the obligations held by the
entity. Furthermore, a group of assets held by an entity can be treated as a
separate Taxable Mortgage Pool if the assets are expected to produce
significant cash flow that will support one or more of the entity's issues of
debt obligations. The Depositor generally will structure offerings of non-REMIC
Bonds to avoid the application of the Taxable Mortgage Pool rules.
Taxation of Certain Foreign Holders of REMIC Securities
REMIC Regular Securities
Interest, including original issue discount, paid on a REMIC Regular
Security to a nonresident alien individual, foreign corporation, or other
non-United States person ("Foreign Person") generally will be treated as
"portfolio interest" and, therefore, will not be subject to any United States
withholding tax, provided that (i) such interest is not effectively connected
with a trade or business in the United States of the Securityholder, and (ii)
the Trustee (or other person who would otherwise be required to withhold tax) is
provided with appropriate certification that the beneficial owner of the
Security is a Foreign Person ("Foreign Person Certification"). If Foreign Person
Certification is not provided, interest (including original issue discount) paid
on such a Security may be subject to either a 30 percent withholding tax or 31
percent backup withholding. See "Federal Income Tax Consequences -- REMIC
Securities -- Backup Withholding."
Residual Securities
Amounts paid to Residual Securityholders who are Foreign Persons are
treated as interest for purposes of the 30 percent (or lower treaty rate) United
States withholding tax. Under temporary Treasury Regulations, non-excess
inclusion income received by Residual Securityholders who are Foreign Persons
generally qualifies as "portfolio interest" exempt from the 30 percent
withholding tax only to the extent that (i) the assets of the Trust
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REMIC are Mortgage Certificates that are issued in registered form and (ii) the
Mortgage Loans underlying the Mortgage Certificates were originated after July
18, 1984. Because Mortgage Loans are not issued in registered form, amounts
received by Residual Securityholders who are Foreign Persons will not be exempt
from the 30 percent withholding tax to the extent such amounts relate to
Mortgage Loans held directly (rather than indirectly through Mortgage
Certificates) by the related REMIC. If the portfolio interest exemption is
unavailable, such amounts generally will be subject to United States withholding
tax when paid or otherwise distributed (or when the Residual Security is
disposed of) under rules similar to those for withholding on debt instruments
that have original issue discount. However, the Code grants the Treasury
authority to issue regulations requiring that those amounts be taken into
account earlier than otherwise provided where necessary to prevent avoidance of
tax (i.e., where the Residual Securities, as a Class, do not have significant
value). Further, a Residual Securityholder will not be entitled to any exemption
from the 30 percent withholding tax or a reduced treaty rate on excess inclusion
income.
Under the REMIC Regulations, a transfer of a Residual Security that has
"tax avoidance potential" will be disregarded for federal income tax purposes if
the transferee is a Foreign Person. A Residual Security is deemed to have tax
avoidance potential unless, at the time of the transfer, the transferor
reasonably expects that, for each accrual of excess inclusion, the REMIC will
distribute to the transferee an amount that will equal at least 30% of the
excess inclusion, and that each such amount will be distributed no later than
the close of the calendar year following the calendar year of accrual (the "30%
Test"). A transferor of a Residual Security to a Foreign Person will be presumed
to have had a reasonable expectation that the Residual Security satisfies the
30% Test if that test would be satisfied for all Mortgage Loan prepayment rates
between 50% and 200% of the Pricing Prepayment Assumption. See "Federal Income
Tax Consequences -- REMIC Securities -- Original Issue Discount," above. If a
Foreign Person transfers a Residual Security to a United States person and the
transfer, if respected, would permit avoidance of withholding tax on accrued
excess inclusion income, the transfer will be disregarded for federal income tax
purposes and distributions with respect to the Residual Security will continue
to be subject to 30% withholding as though the Foreign Person still owned the
Residual Security. Investors who are Foreign Persons should consult their own
tax advisors regarding the specific tax consequences to them of owning and
disposing of a Residual Security.
Backup Withholding
Under federal income tax law, a Securityholder may be subject to
"backup withholding" under certain circumstances. Backup withholding may apply
to a Securityholder who is a United States person if the Securityholder, among
other things, (i) fails to furnish his social security number or other taxpayer
identification number ("TIN") to the Trustee, (ii) furnishes the Trustee an
incorrect TIN, (iii) fails to report properly interest and dividends, or (iv)
under certain circumstances, fails to provide the Trustee or the
Securityholder's securities broker with a certified statement, signed under
penalties of perjury, that the TIN provided to the Trustee is correct and that
the Securityholder is not subject to backup withholding. Backup withholding may
apply, under certain circumstances, to a Securityholder who is a foreign person
if the Securityholder fails to provide the Trustee or the Securityholder's
securities broker with a Foreign Person Certification. Backup withholding
applies to "reportable payments," which include interest payments and principal
payments to the extent of accrued original issue discount, as well as
distributions of proceeds from the sale of REMIC Regular Securities or REMIC
Residual Securities. The backup withholding rate is 31% for payments made on or
after January 1, 1993. Backup withholding, however, does not apply to payments
on a Security made to certain exempt recipients, such as tax-exempt
organizations, and to certain Foreign Persons. Securityholders should consult
their tax advisors for additional information concerning the potential
application of backup withholding to payments received by them with respect to a
Security.
Reporting and Tax Administration
REMIC Regular Securities
Reports will be made at least annually to holders of record of REMIC
Regular Securities (other than those with respect to whom reporting is not
required) and to the Internal Revenue Service as may be required by statute,
regulation, or administrative ruling with respect to (i) interest paid or
accrued on the Securities, (ii) original issue
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discount, if any, accrued on the Securities, and (iii) information necessary to
compute the accrual of any market discount or the amortization of any premium on
the Securities.
Residual Securities
For purposes of federal income tax reporting and administration, a
Series REMIC generally will be treated as a partnership, and the related
Residual Securityholders as its partners. A Series REMIC will file an annual
return on Form 1066 and will be responsible for providing information to
Residual Securityholders sufficient to enable them to report properly their
shares of the REMIC's taxable income or loss, although it is anticipated that
such information actually will be supplied by the Trustee or the Master
Servicer. The REMIC Regulations require reports to be made by a REMIC to its
Residual Securityholders each calendar quarter in order to permit such
Securityholders to compute their taxable income accurately. A person that holds
a Residual Security as a nominee for another person is required to furnish those
quarterly reports to the person for whom it is a nominee within 30 days of
receiving such reports. A REMIC is required to file all such quarterly reports
for a taxable year with the Service as an attachment to the REMIC's income tax
return for that year. As required by the Code, a Series REMIC's taxable year
will be the calendar year.
Residual Securityholders should be aware that their responsibilities as
holders of the residual interest in a REMIC, including the duty to account for
their shares of the REMIC's income or loss on their returns, continue for the
life of the REMIC, even after the principal and interest on their Residual
Securities have been paid in full.
Under the REMIC Regulations, a Residual Securityholder must be
designated as the REMIC's tax matters person ("TMP"). The TMP generally has
responsibility for overseeing and providing notice to the other Residual
Securityholders of certain administrative and judicial proceedings regarding the
REMIC's tax affairs, although other holders of the Residual Securities of the
same Series would be able to participate in such proceedings in appropriate
circumstances. If indicated in the related Prospectus Supplement, the Depositor,
Master Servicer or an affiliate thereof either will acquire a portion of the
residual interest in each Series REMIC in order to permit it to be designated as
TMP for the REMIC or will obtain from the Residual Securityholders an
irrevocable appointment to perform the functions of the REMIC's TMP and will
prepare and file the REMIC's federal and state income tax and information
returns.
Treasury regulations provide that a Holder of a Residual Security is
not required to treat items on its return consistently with their treatment on
the REMIC's return if a Holder owns 100% of the Residual Securities for the
entire calendar year. Otherwise, each Holder of a Residual Security is required
to treat items on its returns consistently with their treatment on the REMIC's
return, unless the Holder of a Residual Security either files a statement
identifying the inconsistency or establishes that the inconsistency resulted
from incorrect information received from the REMIC. The Service may assess a
deficiency resulting from a failure to comply with the consistency requirement
without instituting an administrative proceeding at the REMIC level. A Series
REMIC typically will not register as a tax shelter pursuant to Code section 6111
because it generally will not have a net loss for any of the first five taxable
years of its existence. Any person that holds a Residual Security as a nominee
for another person may be required to furnish the REMIC, in a manner to be
provided in Treasury regulations, with the name and address of such person and
other specified information.
NON-REMIC CERTIFICATES
Treatment of the Trust Fund for Federal Income Tax Purposes
In the case of Series of Mortgage Pass-Through Certificates with
respect to which no REMIC election is made ("Non-REMIC Certificates"), the Trust
Fund will be classified as a grantor trust under Subpart E, Part I of subchapter
J of the Code and not as an association taxable as a corporation. For federal
income tax purposes, the owner of a Non-REMIC Certificate will be treated as the
beneficial owner of an appropriate portion of the principal and interest
payments (according to the characteristics of the Certificate in question) to be
received on the Assets assigned to a Trust Fund for federal income tax purposes.
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Treatment of the Non-REMIC Certificates for Federal Income Tax Purposes
Generally
The types of Non-REMIC Certificates offered in a Series may include:
(i) securities evidencing ownership interests only in the interest payments on
the Assets assigned to a Trust Fund, net of certain fees, ("IO Securities");
(ii) securities evidencing ownership interests in the principal, but not the
interest, payments on the Assets ("PO Securities"); (iii) securities evidencing
ownership interests in differing percentages of both the interest payments and
the principal payments on the Assets ("Ratio Securities"); and (iv) securities
evidencing ownership in equal percentages of the principal and interest payments
on the Assets ("Pass-Through Securities"). The federal income tax treatment of
Non-REMIC Securities other than Pass-Through Securities ("Strip Securities")
will be determined in part by Section 1286 of the Code. Little administrative
guidance has been issued under that section and, thus, many aspects of its
operation are unclear, particularly the interaction between that section and the
rules pertaining to discount and premium. Hence, significant uncertainty exists
with respect to the federal income tax treatment of the Strip Securities, and
potential investors should consult their own tax advisors concerning such
treatment.
Several Code Sections provide beneficial treatment to certain taxpayers
that invest in certain types of mortgage assets. For purposes of those Code
Sections, Pass-Through Securities will be characterized with reference to the
Assets in the Trust, but it is not clear whether the Strip Securities will be so
characterized. The Service could take the position that the character of the
Assets is not attributable to the Strip Securities for purposes of those
Sections. However, because the Strip Securities represent sole ownership rights
in the principal and interest payments on the Assets, the Strip Securities, like
the Pass-Through Securities, should be considered to represent "real estate
assets" within the meaning of Section 856(c)(5)(A) of the Code, and "loans
secured by an interest in real property" within the meaning of Section
7701(a)(19)(C)(v) of the Code, and interest income attributable to the
Securities should be considered to represent "interest on obligations secured by
mortgages on real property" within the meaning of Section 856(c)(3)(B) of the
Code, to the extent that the Trust assets would qualify for such treatment.
One or more Classes of Certificates may be subordinated to one or more
other Classes of Certificates of the same Series. In general, such subordination
should not affect the federal income tax treatment of either the Subordinated or
Senior Certificates. However, to the extent indicated in the relevant Prospectus
Supplement, holders of the Subordinated Certificates will be allocated losses
that otherwise would have been borne by the holders of the more senior
Certificates. Holders of the Subordinated Certificates should be able to
recognize any such losses no later than the taxable year in which they become
Realized Losses. Employee benefit plans subject to ERISA should consult their
own tax advisors before purchasing any Subordinated Security. See "ERISA
Considerations" herein and in the Prospectus Supplement.
Treatment of Pass-Through Securities
The holder of a Pass-Through Security generally will be treated as
owning a pro rata undivided interest in each of the Assets of the Trust Fund.
Accordingly, each Pass-Through Securityholder will be required to include in
income its pro rata share of the entire income from the Trust assets, including
interest and discount income, if any. Such Securityholder generally will be able
to deduct from its income its pro rata share of the administrative fees and
expenses incurred with respect to the Trust assets (provided that such fees and
expenses represent reasonable compensation for the services rendered). An
individual, trust, or estate that holds a Pass-Through Security directly or
through a pass-through entity will be entitled to deduct such fees and expenses
under Section 212 only to the extent that the amount of the fees and expenses,
when combined with its other miscellaneous itemized deductions for the taxable
year in question, exceeds 2% of its adjusted gross income. In addition, Code
Section 68 provides that the amount of itemized deductions otherwise allowable
for the taxable year for an individual whose adjusted gross income exceeds the
applicable amount ($100,000, or $50,000 in the case of a separate return by a
married individual within the meaning of Code Section 7703 for taxable year 1991
and adjusted for inflation each year thereafter) will be reduced by the lesser
of (i) 3% of the excess of adjusted gross income over the applicable amount, and
(ii) 80% of the amount of itemized deductions otherwise allowable for such
taxable year. Non-corporate holders of Pass-Through Securities also should be
aware that miscellaneous itemized deductions, including allocable investment
expenses attributable to such REMIC, are not deductible for purposes of the AMT.
Each Pass-Through Securityholder generally will determine its net income or loss
with respect to the Trust in accordance with its own method of accounting,
although income arising from original issue discount must be taken
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into account under the accrual method even though the Securityholder otherwise
would use the cash receipts and disbursements method.
The Code provisions concerning original issue discount, market
discount, and amortizable premium will apply to the Trust assets. The rules
regarding discount and premium that are applicable to Non-REMIC Certificates
generally are the same as those that apply to REMIC Regular Securities. See the
discussions under "Federal Income Tax Consequences -- REMIC Securities --
Original Issue Discount -- Variable Rate Securities" and "Federal Income Tax
Consequences -- REMIC Securities -- Market Discount" and " -- Amortizable
Premium" above.
For instruments to which it applies, Code Section 1272(a)(6) requires
the use of an income tax accounting methodology that utilizes (i) a single
constant yield to maturity and (ii) the Pricing Prepayment Assumptions. Unlike
in the case of REMIC Regular Securities, Code Section 1272(a)(6) technically
does not apply to Non-REMIC Securities. Although the Treasury has authority to
apply that Section to securities such as the Non-REMIC Securities, it has not
yet done so. Nonetheless, unless and until administrative guidance to the
contrary is released, the Tax Administrator intends to account for the Non-REMIC
Certificates as though Section 1272(a)(6) applied to them. Thus, the Tax
Administrator will account for a Class of Non-REMIC Certificates in the same
manner as it would account for a Class of REMIC Regular Securities with the same
terms. There can be no assurance, however, that the Service ultimately will
sanction the Tax Administrator's position.
It is anticipated that most or all of the Assets securing any Series
will be subject to the original issue discount, market discount, and amortizable
premium rules. Although most mortgage loans nominally are issued at their
original principal amounts, original issue discount could arise from the payment
of points or certain other origination charges by the Borrower if the discount
attributable to such payments exceeds the de minimis amount. If the Trust
contains Assets purchased for a price below its outstanding principal amount,
Pass-Through Securityholders generally will be required to take into account
original issue discount not previously accrued to the prior holder of such
Assets. Moreover, if such Assets were purchased for less than their adjusted
issue prices, Pass-Through Securityholders generally will be required to take
into account market discount, unless the amount of such market discount is de
minimis under the market discount rules. Finally, Pass-Through Securityholders
generally may elect to amortize any premium paid for Assets over their
outstanding principal amounts. For a more complete elaboration of the rules
pertaining to original issue discount, market discount, and acquisition premium,
see the discussion under "Federal Income Tax Consequences -- REMIC Securities --
Tax Treatment of REMIC Regular Securities."
Treatment of Strip Securities
Many aspects of the federal income tax treatment of the Strip
Securities are uncertain. The discussion below describes the treatment that
Counsel believes is appropriate, but there can be no assurance that the Service
will not take a contrary position. Potential investors, therefore, should
consult their own tax advisors with respect to the federal income tax treatment
of the Strip Securities.
Under Section 1286 of the Code, the separation of ownership of the
right to receive some or all of the interest payments on an obligation from
ownership of the right to receive some or all of the principal payments on such
obligation results in the creation of "stripped coupons" with respect to the
separated rights to interest payments and "stripped bonds" with respect to the
principal and any unseparated interest payments associated with that principal.
The issuance of IO or PO Securities effects a separation of the ownership of the
interest and principal payments on some or all of the Assets in the Trust. In
addition, the issuance of Ratio Securities effectively separates and reallocates
the proportionate ownership of the interest and principal payments on the
Assets. Therefore, Strip Securities will be subject to Section 1286.
For federal income tax accounting purposes, section 1286 treats a
stripped bond or a stripped coupon as a new debt instrument issued (i) on the
date that the stripped interest is purchased and (ii) at a price equal to its
purchase price or, if more than one stripped interest is purchased, the share of
the purchase price allocable to such stripped interest. Each stripped bond or
coupon generally will have original issue discount equal to the excess of
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its stated redemption price at maturity (or, in the case of a stripped coupon,
the amount payable on the due date of such coupon) over its issue price.
Treasury regulations under Section 1286 (the "Stripping Regulations"), however,
provide that the original issue discount on a stripped bond or stripped coupon
is zero if the amount of the original issue discount would be de minimis under
rules generally applicable to debt instruments. For purposes of the
determination whether such amount would be de minimis, (i) the number of
complete years to maturity is measured from the date the stripped bond or
stripped coupon is purchased, (ii) an aggregation approach similar to the
Aggregation Rule (as described in "Federal Income Tax Consequences -- REMIC
Securities -- Original Issue Discount" above) may be applied, and (iii)
unstripped coupons may be treated as stated interest with respect to the related
bonds and, therefore, may be excluded from stated redemption price at maturity
in appropriate circumstances. In addition, the Stripping Regulations provide
that, in certain circumstances, the excess of a stripped bond's stated
redemption price at maturity over its issue price is treated as market discount,
rather than as original issue discount. See "Federal Income Tax Consequences --
Non-REMIC Certificates -- Treatment of Strip Securities -- Determination of
Income With Respect to Strip Securities."
The application of Section 1286 to the Strip Securities is not entirely
clear under current law. That section could be interpreted as causing: (i) in
the case of an IO Security, each interest payment due on the Assets to be
treated as a separate debt instrument; (ii) in the case of a Ratio Security
entitled to a disproportionately high share of principal, each excess principal
amount (i.e., the portion of each principal payment on such assets that exceeds
the amount to which the Ratio Securityholder would have been entitled if he had
held an undivided interest in the Assets) to be treated as a separate debt
instrument; and (iii) in the case of a Ratio Security entitled to a
disproportionately high share of interest, each excess interest amount to be
treated as a separate debt instrument. In addition, Section 1286 requires the
purchase price of a Strip Security to be allocated among each of the rights to
payment on the Assets to which the Securityholder is entitled that are treated
as separate debt instruments. Despite the foregoing, it may be appropriate to
treat stripped coupons and stripped bonds issued to the same holder in
connection with the same transaction as a single debt instrument, depending on
the facts and circumstances surrounding the issuance. Facts and circumstances
considered relevant for this purpose should include the likelihood of the debt
instruments trading as a unit and the difficulty of allocating the purchase
price of the unit among the individual payments. Strip Securities are designed
to trade as whole investment units and, to the extent that any Underwriter
develops a secondary market for the Strip Securities, it anticipates that the
Strip Securities would trade in such market as whole units. In addition, because
no market exists for individual payments on Assets, the proper allocation of the
Security's purchase price to each separate payment on the Assets in the Trust
would be difficult and burdensome to determine. Based on those facts and
circumstances, it appears that all payments of principal and interest to which
the holder of a Strip Security is entitled should be treated as a single
installment obligation. Although the OID Regulations do not refer directly to
debt instruments that are governed by Section 1286 of the Code, the application
of the OID Regulations to such instruments is consistent with the overall
statutory and regulatory scheme. Therefore, the Tax Administrator intends to
treat each Strip Security as a single debt instrument for income tax accounting
purposes.
Determination of Income With Respect to Strip Securities
For purposes of determining the amount of income on a Strip Security
that accrues in any period, the rules described above under "Federal Income Tax
Consequences -- REMIC Securities -- Original Issue Discount -- Variable Rate
Securities," " -- Interested Weighted Securities and Non-VRDI Securities," and
"-- Anti-Abuse Rule" and "Federal Income Tax Consequences -- REMIC Securities --
Market Discount" and " -- Amortizable Premium" will apply. PO Securities, and
certain Classes of Ratio Securities, will be issued at a price that is less than
their stated principal amount and thus generally will be issued with original
issue discount. A Strip Security that would meet the definition of an Interest
Weighted Security or a Weighted Average Security if it were a REMIC Regular
Security is subject to the same tax accounting considerations applicable to the
REMIC Regular Security to which it corresponds. Thus, as described in "Federal
Income Tax Consequences -- REMIC Securities -- Original Issue Discount --
Interest Weighted Securities and Non-VRDI Securities" above, certain aspects of
the tax accounting treatment of such a Strip Security are unclear. Unless and
until the Service provides administrative guidance to the contrary, the Tax
Administrator will account for such a Strip Security in the manner
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described for the corresponding REMIC Regular Security. See "Federal Income Tax
Consequences -- REMIC Securities -- Original Issue Discount -- Interest Weighted
Securities and Non-VRDI Securities" above.
If a PO Security or a Ratio Security that is not considered a
Contingent Payment Obligation (an "Ordinary Ratio Security") subsequently is
sold, the purchaser apparently would be required to treat the difference between
the purchase price and the stated redemption price at maturity as original issue
discount. The holders of such securities generally will be required to include
such original issue discount in income as described in "Federal Income Tax
Consequences -- REMIC Securities -- Original Issue Discount" above. PO
Securities and Ordinary Ratio Securities issued at a price less than their
stated principal amount will be treated as issued with market discount rather
than with original issue discount if, after the most recent disposition of the
related Security, either (i) the amount of original issue discount on the
Security is considered to be de minimis under the Stripping Regulations or (ii)
the annual stated rate of interest payable on the Security is no more than one
percent lower than the annual stated rate of interest payable on the Mortgage
Loan from which the Security was stripped. The holders of such Securities
generally would be required to include market discount in income in the manner
described above in "Federal Income Tax Consequences -- REMIC Securities --
Market Discount." Some Classes of Ordinary Ratio Securities may be issued at
prices that exceed their stated principal amounts. Subject to the discussion of
Superpremium Securities in "Federal Income Tax Consequences -- REMIC Securities
- -- Original Issue Discount," holders of such Ordinary Ratio Securities generally
will be able to amortize that premium as described in "Federal Income Tax
Consequences -- REMIC Securities -- Amortizable Premium."
Purchase of Complementary Classes of Strip Securities
Strip Securities of certain Classes of the same Series ("Complementary
Securities"), when held in combination, may provide an aggregate economic effect
equivalent to that of a Pass-Through Security based upon the same Assets in the
Trust. When an investor purchases Complementary Securities, it appears that, for
federal income tax purposes, each Security should be treated separately and
should be subject to the rules described above. The Service could assert,
however, that Complementary Securities held in combination should be treated as
a single pass-through type instrument, with the result that the rules governing
stripped bonds and stripped coupons under Section 1286 of the Code would not be
applied. Consequently, investors who acquire Complementary Securities should
consult their own tax advisors as to the proper treatment of such Securities.
Possible Alternative Characterizations
The Service could assert that the Strip Securities should be
characterized for tax purposes in a manner different from that described above.
For example, the Service could contend that each Ratio Security whose interest
rate is higher than the net interest rate distributed from the Trust Fund taking
into account all of the Securities of that Series (the "Net Series Rate") is to
be treated as being composed of two securities: (i) a Pass-Through Security of
the same principal amount as the Ratio Security but generating interest at the
Net Series Rate; and (ii) an IO Security representing the excess of the rate on
the Ratio Security over the Net Series Rate. Similarly, a Ratio Security whose
interest rate is lower than the Net Series Rate could be treated as composed of
a Pass-Through Security with an interest rate equal to the Net Series Rate and a
PO Security. Alternatively, the Service could interpret Section 1286 to require
that each individual interest payment with respect to an IO Security or a Ratio
Security be treated as a separate debt instrument for original issue discount
purposes. The Service also might challenge the manner in which original issue
discount is calculated, contending that (i) the stated maturity should be used
to calculate yield on the Non-REMIC Certificates, (ii) the Contingent Payment
Regulations should not apply to the IO Securities, or (iii) the Contingent
Payment Regulations should apply to the Ordinary Ratio Securities. Given the
variety of alternative treatments of the Non-REMIC Certificates and the
different federal income tax consequences that could result from each
alternative, a potential investor is urged to consult its own tax advisor
regarding the proper treatment of the Non-REMIC Securities for federal income
tax purposes.
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Limitations on Deductions With Respect to Strip Securities
The holder of a Strip Security will be treated as owning an interest in
each of the Assets of the related Trust and will recognize an appropriate share
of the income and expenses associated with those Assets. Accordingly, an
individual, trust, or estate that holds a Strip Security directly or through a
pass-through entity will be subject to the same limitations on deductions with
respect to such Security as are applicable to holders of Pass-Through
Securities. See "Federal Income Tax Consequences -- Non-REMIC Certificates --
Treatment of Pass-Through Securities" above.
Sale of a Non-REMIC Certificate
A sale of a Non-REMIC Certificate prior to its maturity will result in
gain or loss equal to the difference, if any, between the amount received and
the holder's adjusted basis in such Certificate. The rules for computing the
adjusted basis of a Non-REMIC Certificate are the same as in the case of a REMIC
Regular Security. See "Federal Income Tax Consequences -- REMIC Securities --
Gain or Loss on Disposition." Gain or loss from the sale or other disposition of
a Non-REMIC Certificate generally will be capital gain or loss to a
Certificateholder if the Certificate is held as a "capital asset" within the
meaning of Section 1221 of the Code, and will be long-term or short-term
depending on whether the Certificate has been held for the longterm capital gain
holding period (currently, more than twelve months). Ordinary income treatment,
however, will apply to the extent mandated by the original issue discount and
market discount rules or if the Certificateholder is a financial institution
described in Section 582 of the Code. See "Federal Income Tax Consequences --
REMIC Securities -- Gain or Loss on Disposition."
Taxation of Certain Foreign Holders of Non-REMIC Certificates
Interest, including original issue discount, paid on a Non-REMIC
Certificate to a Foreign Person generally is treated as "portfolio interest"
and, therefore, is not subject to any United States tax, provided that (i) such
interest is not effectively connected with a trade or business in the United
States of the Securityholder, and (ii) the Trustee (or other person who would
otherwise be required to withhold tax) is provided with Foreign Person
Certification. If Foreign Person Certification is not provided, interest
(including original issue discount) paid on a Non-REMIC Certificate may be
subject to either a 30 percent withholding tax or 31 percent backup withholding.
In the case of certain Series, portfolio interest treatment will not be
available for interest paid with respect to certain classes of Non-REMIC
Certificates. Interest on debt instruments issued on or before July 18, 1984
does not qualify as "portfolio interest" and, therefore, is subject to United
States withholding tax at a 30 percent rate (or lower treaty rate, if
applicable). IO Securities and PO Securities generally are treated, and Ratio
Securities generally should be treated, as having been issued when they are sold
to an investor. In the case of Pass-Through Securities, however, the issuance
date of the Security is determined by the issuance date of the mortgage loans
underlying the Trust. Thus, to the extent that the interest received by a holder
of a Pass-Through Security is attributable to mortgage loans issued on or before
July 18, 1984, such interest will be subject to the 30 percent withholding tax.
Moreover, to the extent that a Ratio Security is characterized as a pass-through
type security and the underlying mortgage loans were issued on or before July
18, 1984, interest generated by the Security may be subject to the withholding
tax. See "Federal Income Tax Consequences -- Non-REMIC Certificates -- Possible
Alternative Characterizations." Although recently enacted tax legislation denies
portfolio interest treatment to certain types of contingent interest, that
legislation generally applies only to interest based on the income, profits, or
property values of the debtor. Accordingly, it is not anticipated that such
legislation will apply to deny portfolio interest to Certificateholders who are
Foreign Persons. However, because the scope of the new legislation is not
entirely clear, investors who are Foreign Persons should consult their own tax
advisors regarding the potential application of the legislation before
purchasing a Certificate.
Backup Withholding
The application of backup withholding to Non-REMIC Certificates
generally is the same as in the case of REMIC Securities. See "Federal Income
Tax Consequences -- REMIC Securities -- Backup Withholding."
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Reporting and Tax Administration
For purposes of reporting and tax administration, the holders of
Non-REMIC Certificates will be treated in the same fashion as the holders of
REMIC Regular Securities. See "Federal Income Tax Consequences -- REMIC
Securities -- Reporting and Tax Administration" above.
NON-REMIC COLLATERALIZED MORTGAGE BONDS
For each Series of Non-REMIC Collateralized Mortgage Bonds, Counsel to
the Depositor has advised the Depositor that, based upon the facts as they
exist, in Counsel's opinion, the Bonds will be treated for federal income tax
purposes as indebtedness, and not as an ownership interest in the Assets or an
equity interest in a separate association taxable as a corporation. However,
there are no regulations, published rulings or judicial decisions involving the
characterization for federal income tax purposes of securities with terms
substantially the same as the Bonds. Accordingly, although that opinion will be
based on existing law, there can be no assurance that the law will not change or
that contrary positions will not be taken by the Internal Revenue Service (the
"Service"). If the Service were to make and prevail upon the contention that the
Bonds did not constitute indebtedness for federal income tax purposes, the Bonds
could be treated as equity interests in an association taxable as a corporation,
which would result in the imposition of a federal income tax at the entity
level. The imposition of such a tax could result in a delay or shortfall in
payments on the Bonds.
Because in Counsel's opinion, the Bonds will be treated as evidence of
indebtedness for federal income tax purposes and not as ownership interests in
the Assets, Securityholders should be aware that (i) Bonds held by a domestic
building and loan association will not constitute qualifying assets for such
building and loan association; (ii) Bonds held by a REIT will not constitute
"real estate assets" or "government securities" within the meaning of Code
Section 856(c)(5)(A); and (iii) income derived from the Bonds will not 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).
Bonds held by a regulated investment company (a "RIC") will not constitute
"government securities" within the meaning of Code Section 851(b)(4)(A)(i).
Payments received by Bondholders on the Bonds generally should be
accorded the same tax treatment under the Code as payments received on other
taxable corporate bonds. Original issue discount will accrue on the Bonds and
will be taxable to Bondholders in advance of receipt of the cash attributable to
such accruals in the same manner in which such original issue discount accrues
on REMIC Regular Securities. See "Federal Income Tax Consequences -- REMIC
Securities -- Original Issue Discount" above. The Trustee will report annually
to the Service and to Bondholders of record with respect to accruals of original
issue discount on the Bonds. The rules regarding market discount and premium
that are applicable to Non-REMIC Bonds generally are the same as those that
apply to REMIC Regular Securities. See the discussions under "Federal Income Tax
Consequences -- REMIC Securities -- Original Issue Discount -- Variable Rate
Securities" and "Federal Income Tax Consequences -- REMIC Securities -- Market
Discount" and " -- Amortizable Premium" above.
Sale of a Non-REMIC Bond
A sale of a Non-REMIC Bond prior to its maturity will result in gain or
loss equal to the difference, if any, between the amount received and the
holder's adjusted basis in such Bond. The rules for computing the adjusted basis
of a Non-REMIC Bond are the same as in the case of a REMIC Regular Security. See
"Federal Income Tax Consequences -- REMIC Securities -- Gain or Loss on
Disposition."
Taxation of Certain Foreign Holders of Non-REMIC Bonds
Interest, including original issue discount, paid on a Non-REMIC Bond
to a Foreign Person generally is treated as "portfolio interest" and, therefore,
is not subject to any United States tax, provided that (i) such interest is not
effectively connected with a trade or business in the United States of the
Bondholder, and (ii) the Trustee (or other person who would otherwise be
required to withhold tax) is provided with Foreign Person Certification. If
Foreign Person Certification is not provided, interest (including original
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issue discount) paid on a Non-REMIC Bond may be subject to either a 30 percent
withholding tax or 31 percent backup withholding. Interest (including original
issue discount) paid on Bonds to Bondholders who are Foreign Persons will not be
subject to withholding if such interest is effectively connected with a United
States business conducted by the Bondholder. Such interest (including original
issue discount) will, however, generally be subject to the regular United States
income tax.
Backup Withholding
The application of backup withholding to Non-REMIC Bonds generally is
the same as in the case of REMIC Securities. See "Federal Income Tax
Consequences -- REMIC Securities -- Backup Withholding."
Reporting and Tax Administration
For purposes of reporting and tax administration, the holders of
Non-REMIC Bonds will be treated in the same fashion as the holders of REMIC
Regular Securities. See "Federal Income Tax Consequences -- REMIC Securities --
Reporting and Tax Administration" above.
PARTNERSHIP TRUST FUNDS
Classification of Partnership Trust Funds
With respect to each Series of Partnership Certificates or Partnership
Bonds, Hunton & Williams is of the opinion that the Trust Fund will not be a
taxable mortgage pool or an association (or publicly traded partnership) taxable
as a corporation for federal income tax purposes. This opinion generally will be
based on the assumption that the terms of the related Agreement and related
documents will be complied with and on counsel's conclusion that the nature of
the income of the Trust Fund will except it from the rule that certain publicly
traded partnerships are taxable as corporations.
Characterization of Investments in Partnership Certificates and
Partnership Bonds
For federal income tax purposes, (i) Partnership Certificates and
Partnership Bonds held by a thrift institution taxed as a domestic building and
loan association will not constitute "loans ... secured by an interest in real
property which is ... residential real property" within the meaning of Code
Section 7701(a)(19)(C)(v), (ii) interest on Partnership Bonds held by a real
estate investment trust will not be treated as "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), (iii) Partnership Bonds held by a real
estate investment trust will not constitute "real estate assets" within the
meaning of Code Section 856(c)(5)(A), and (iv) (A) interest on Partnership
Certificates held by a real estate investment trust will qualify as "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), and (B) Partnership
Certificates will constitute "real estate assets" within the meaning of Code
section 856(c)(5)(A), in each case based on the real estate investments trust's
proportionate interest in the assets of the Partnership Trust Fund, determined
based on capital accounts.
Taxation of Partnership Bondholders
Treatment of the Partnership Bonds as Indebtedness
The Depositor will agree, and the Bondholders will agree by their
purchase of Partnership Bonds, to treat the Partnership Bonds as debt for
federal income tax purposes. No regulations, published rulings, or judicial
decisions exist that discuss the characterization for federal income tax
purposes of securities with terms substantially the same as the Partnership
Bonds. However, with respect to each Series of Partnership Bonds, Hunton &
Williams is of the opinion that the Partnership Bonds will be classified as
indebtedness for federal income tax purposes. The discussion below assumes this
characterization of the Partnership Bonds is correct.
If, contrary to the opinion of counsel, the IRS successfully asserted
that the Partnership Bonds were not debt for federal income tax purposes, the
Partnership Bonds might be treated as equity interests in the Partnership
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Trust Fund. In that event, the timing and amount of income allocable to holders
of such Partnership Bonds may be different than as described in the following
paragraph. In addition, if the Partnership Bonds are publicly offered or
otherwise readily tradeable, the Partnership Trust Fund could be treated as a
publicly traded partnership taxable as a corporation for federal income tax
purposes.
Partnership Bonds generally will be subject to the same rules of
taxation as Regular Securities issued by a REMIC, as described above, except
that (i) income reportable on Partnership Bonds is not required to be reported
under the accrual method unless the holder otherwise uses the accrual method and
(ii) the special rule treating a portion of the gain on sale or exchange of a
Regular Security as ordinary income is inapplicable to Partnership Bonds. See
"Federal Income Tax Consequences -- REMIC Securities Gain or Loss on
Disposition."
Taxation of Owners of Partnership Certificates
Treatment of the Partnership Trust Fund as a Partnership
If so specified in the applicable Prospectus Supplement, the Depositor
will agree, and the Partnership Bondholders and Certificateholders will agree by
their purchase of Partnership Certificates or Partnership Bonds to treat the
Partnership Trust Fund as a partnership for purposes of federal and state income
tax, franchise tax and any other tax measured in whole or in part by income,
with the assets of the partnership being the assets held by the Partnership
Trust Fund, the partners of the partnership being the holders of the Partnership
Certificates (including the Depositor), and the Partnership Bonds (if any) being
debt of the partnership. However, the proper characterization of the arrangement
involving the Partnership Trust Fund, the Partnership Certificates, the
Partnership Bonds, and the Depositor is not clear, because there is no authority
on transactions closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
if one or more of the classes of Partnership Certificates have certain features
characteristic of debt, the Partnership Certificates might be considered debt of
the Depositor of the Partnership Trust Fund. Any such characterization would not
result in materially adverse tax consequences to Certificateholders as compared
to the consequences from treatment of the Partnership Certificates as equity in
a partnership, described below. The following discussion assumes that the
Partnership Certificates represent equity interests in a partnership.
Partnership Taxation
As a partnership, the Partnership Trust Fund will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Partnership Trust Fund. It is anticipated
that the Partnership Trust Fund's income will consist primarily of interest
earned on the Trust Fund's assets (including appropriate adjustments for market
discount, original issue discount and bond premium) and any gain upon collection
or disposition of Trust Fund's assets. The Partnership Trust Fund's deductions
will consist primarily of interest accruing with respect to the Partnership
Bonds, servicing and other fees, and losses or deductions upon collection or
disposition of Partnership Bonds.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Agreement and related documents). The Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Partnership Trust Fund for each Due Period equal to the sum of (i) the interest
that accrues on the Partnership Certificates in accordance with their terms for
such Due Period, including interest accruing at the applicable pass-through rate
for such Due Period and interest on amounts previously due on the Partnership
Certificates but not yet distributed; (ii) any Partnership Trust Fund income
attributable to discount on the Trust Fund's assets that corresponds to any
excess of the principal amount of the Partnership Certificates over their
initial issue price; and (iii) any other amounts of income payable to the
Certificateholders for such Due Period. Such allocation will be reduced by any
amortization by the Partnership Trust Fund of premium on the Trust Fund's assets
that corresponds to any excess of the issue price of the Partnership
Certificates over their principal amount. All remaining taxable income of the
Partnership Trust Fund
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will be allocated to the Depositor. Based on the economic arrangement of the
parties, this approach for allocating Partnership Trust Fund income should be
permissible under applicable Treasury regulations, although no assurance can be
given that the IRS would not require a greater amount of income to be allocated
to Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire pass-through rate
plus the other items described above even through the Trust Fund might not have
sufficient cash to make current cash distributions of such amount. Thus, cash
basis holders will in effect be required to report income from the Partnership
Certificates on the accrual basis and Certificateholders may become liable for
taxes on Partnership Trust Fund income even if they have not received cash from
the Partnership Trust Fund to pay such taxes.
Part or all of the taxable income allocated to a Certificateholder that
is a pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) may constitute "unrelated business
taxable income" generally taxable to such a holder under the Code.
A share of expenses of the Partnership Trust Fund (including fees of
the Master Servicer but not interest expense) allocable to an individual, estate
or trust Certificateholder would be miscellaneous itemized deductions subject to
the limitations described above under "Federal Income Tax Consequences --
Non-REMIC Certificates -- Treatment of Pass-Through Securities." Accordingly,
such deductions might be disallowed to the individual in whole or in part and
might result in such holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to such holder over the life of the
Partnership Trust Fund.
Discount income or premium amortization with respect to the Trust
Fund's assets would be calculated in a manner similar to the description above
under "Federal Income Tax Consequences -- Non-REMIC Certificates -- Treatment of
Pass-Through Securities" and "-- Premium and Discount." Notwithstanding such
description, it is intended that the Partnership Trust Fund will make all tax
calculations relating to income and allocations to Certificateholders on an
aggregate basis with respect to the Trust Fund's assets rather than on an
asset-by-asset basis. If the IRS were to require that such calculations be made
separately for each asset, the Partnership Trust Fund might be required to incur
additional expense, but it is believed that there would not be a material
adverse effect on Certificateholders.
Discount and Premium
Unless indicated otherwise in the applicable Prospectus Supplement, it
is not anticipated that the Trust Fund's assets will have been issued with
original issue discount and, therefore, the Partnership Trust Fund should not
have original issue discount income. However, the purchase price paid by the
Partnership Trust Fund for the assets may be greater or less than the remaining
principal balance of the assets at the time of the purchase. If so, assets will
have been acquired at a premium or discount, as the case may be. See "Federal
Income Tax Consequences -- Non-REMIC Certificates -- Treatment of Pass-Through
Securities." (As indicated above, the Partnership Trust Fund will make this
calculation on an aggregate basis, but might be required to recompute it on a
Mortgage Loan-by-Mortgage Loan basis).
If the Partnership Trust Fund acquires assets at a market discount or
premium, the Partnership Trust Fund will elect to include any such discount in
income currently as it accrues over the life of the assets or to offset any such
premium against interest income on the assets. As indicated above, a portion of
such market discount income or premium deduction may be allocated to
Certificateholders.
Section 708 Termination
Under Section 708 of the Code, the Partnership Trust Fund will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Partnership Trust Fund are sold or
exchanged within a 12-month period. If such a termination occurs, it would cause
a deemed contribution of the assets of a Partnership Trust Fund (the "old
partnership") to a new Partnership Trust Fund (the "new partnership") in
exchange for interests in the new partnership. Such interests would be deemed
distributed to the partners of the old
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partnership in liquidation thereof, which would not constitute a sale or
exchange. The Partnership Trust Fund will not comply with certain technical
requirements that might apply when such a constructive termination occurs. As a
result, the Partnership Trust Fund may be subject to certain tax penalties and
may incur additional expenses if it is required to comply with those
requirements. Furthermore, the Partnership Trust Fund might not be able to
comply due to lack of data.
Disposition of Partnership Certificates
Generally, capital gain or loss will be recognized on a sale of
Partnership Certificates in an amount equal to the difference between the amount
realized and the seller's tax basis in the Partnership Certificates sold. A
Certificateholder's tax basis in a Partnership Certificate will generally equal
the holder's cost increased by the holder's share of Partnership Trust Fund
income (includible in income) and decreased by any distributions received with
respect to such Partnership Certificate. In addition, both the tax basis in the
Partnership Certificates and the amount realized on a sale of a Partnership
Certificate would include the holder's share of the Partnership Bonds and other
liabilities of the Partnership Trust Fund. A holder acquiring Partnership
Certificates at different prices may be required to maintain a single aggregate
adjusted tax basis in such Partnership Certificates, and, upon sale or other
disposition of some of the Partnership Certificates, allocate a portion of such
aggregate tax basis to the Partnership Certificates sold (rather than
maintaining a separate tax basis in each Partnership Certificate for purposes of
computing gain or loss on a sale of that Partnership Certificate).
Any gain on the sale of a Partnership Certificate attributable to the
holder's share of unrecognized accrued market discount on the Trust Fund assets
would generally be treated as ordinary income to the holder and would give rise
to special tax reporting requirements. The Partnership Trust Fund does not
expect to have any other assets that would give rise to such special reporting
considerations. Thus, to avoid those special reporting requirements, it is
anticipated that a Partnership Trust Fund will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Partnership Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Partnership Certificates.
Allocations Between Transferors and Transferees
In general, the Partnership Trust Fund's taxable income and losses will
be determined each Due Period and the tax items for a particular Due Period will
be apportioned among the Certificateholders in proportion to the principal
amount of Partnership Certificates owned by them as of the close of the last day
of such Due Period. As a result, a holder purchasing Partnership Certificates
may be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the accrual transaction.
The use of such a Due Period convention may not be permitted by
existing regulations. If a Due Period convention is not allowed (or only applies
to transfers of less than all of the partner's interest), taxable income or
losses of the Partnership Trust Fund might be reallocated among the
Certificateholders. The Depositor will be authorized to revise the Partnership
Trust Fund's method of allocation between transferors and transferees to conform
to a method permitted by future regulations.
Section 731 Distributions
In the case of any distribution to a Certificateholder, no gain will be
recognized to that Certificateholder to the extent that the amount of any money
distributed with respect to such Certificate does not exceed the adjusted basis
of such Certificateholder's interest in the Certificates. To the extent that the
amount of money distributed exceeds such Certificateholder's adjusted basis,
gain will be currently recognized. In the case of any distribution to a
Certificateholder, no loss will be recognized except upon a distribution in
liquidation of a Certificateholder's interest. Any gain or loss recognized by a
Certificateholder will be capital gain or loss.
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Section 754 Election
In the event that a Certificateholder sells its Partnership
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Partnership Certificates than the selling
Certificateholder had. The tax basis of the Partnership Trust Fund's assets
would not be adjusted to reflect that higher (or lower) basis unless the
Partnership Trust Fund were to file an election under Section 754 of the Code.
In order to avoid the administrative complexities that would be involved in
keeping accurate accounting records, as well as potentially onerous information
reporting requirements, the Partnership Trust Fund will not make such an
election. As a result, Certificateholders might be allocated a greater or lesser
amount of Partnership Trust Fund income than would be appropriate based on their
own purchase price for Partnership Certificates.
Administrative Matters
The Trustee is required to keep or have kept complete and accurate
books of the Partnership Trust Fund. Such books will be maintained for financial
reporting and tax purposes on an accrual basis and the fiscal year of the
Partnership Trust Fund will be the calendar year. The Trustee will file a
partnership information return (IRS Form 1065) with the IRS for each taxable
year of the Partnership Trust Fund and will report each Certificateholder's
allocable share of items of Partnership Trust Fund income and expense to holders
and the IRS on Schedule K-1. The Trustee will provide for Schedule K-1
information to nominees that fail to provide the Partnership Trust Fund with the
information statement described below and such nominees will be required to
forward such information to the beneficial owners of the Partnership
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Partnership Trust Fund or be subject to
penalties unless the holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Partnership
Certificates as a nominee at any time during a calendar year is required to
furnish the Partnership Trust Fund with a statement containing certain
information on the nominee, the beneficial owners and the Partnership
Certificates so held. Such information includes (i) the name, address and
taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and identification number of such person, (y)
whether such person is a United States person, a tax-exempt entity or a foreign
government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Partnership Certificates that were held, brought or sold on behalf of such
person throughout the year. In addition, brokers and financial institutions that
hold Partnership Certificates through a nominee are required to furnish directly
to the Trustee information as to themselves and their ownership of Partnership
Certificates. A clearing agency registered under Section 17A of the Exchange Act
is not required to furnish any such information statement to the Partnership
Trust Fund. The information referred to above for any calendar year must be
furnished to the Partnership Trust Fund on or before the following January 31.
Nominees, brokers and financial institutions that fail to provide the
Partnership Trust Fund with the information described above may be subject to
penalties.
The Depositor will be designated as the tax matters partner in the
Pooling and Servicing Agreement and, as such, will be responsible for
representing the Certificateholders in any dispute with the IRS. The Code
provides for administrative examination of a partnership as if the partnership
were a separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire until three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Partnership Trust Fund by the appropriate taxing
authorities could result in an adjustment of the returns of the
Certificateholders, and, under certain circumstances, a Certificateholder may be
precluded from separately litigating a proposed adjustment to the items of the
Partnership Trust Fund. An adjustment could also result in an audit of a
Certificateholder's returns and adjustments of items not related to the income
and losses of the Partnership Trust Fund.
Tax Consequences to Foreign Certificateholders
It is not clear whether the Partnership Trust Fund would be considered
to be engaged in a trade or business in the United States for purposes of
federal withholding taxes with respect to Non-U.S. Persons, because there is
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no clear authority dealing with that issue under facts substantially similar to
those described herein. Although it is not expected that the Partnership Trust
Fund would be engaged in a trade or business in the United States for such
purposes, the Partnership Trust Fund will withhold as if it were so engaged in
order to protect the Partnership Trust Fund from possible adverse consequences
of a failure to withhold. The Partnership Trust Fund expects to withhold on the
portion of its taxable income that is allocable to Certificateholders who are
Non-U.S. Persons pursuant to Section 1446 of the Code, as if such income were
effectively connected to a U.S. trade or business, at a rate of 35% for Non-U.S.
Persons that are taxable as corporations and 39.6% for all other foreign
holders. Amounts withheld will be deemed distributed to the Non-U.S. Persons
Certificateholders. Subsequent adoption of Treasury regulations or the issuance
of other administrative pronouncements may require the Partnership Trust Fund to
change its withholding procedures. In determining a holder's withholding status,
the Partnership Trust Fund may rely on IRS Form W-8, IRS Form W-9 or the
holder's certification of nonforeign status signed under penalties of perjury.
Each Non-U.S. Person holder might be required to file a U.S. individual
or corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the Partnership Trust Fund's income. Each
Non-U.S. Person holder must obtain a taxpayer identification number from the IRS
and submit that number to the Partnership Trust Fund on Form W-8 in order to
assure appropriate crediting of the taxes withheld. A Non-U.S. Person holder
generally would be entitled to file with the IRS a claim for refund with respect
to taxes withheld by the Partnership Trust Fund, taking the position that no
taxes were due because the Partnership Trust Fund was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificateholder who is a Non-U.S. Person generally will be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Partnership Trust Fund. If these interest payments are
properly characterized as guaranteed payments, then the interest will not be
considered "portfolio interest." As a result, Certificateholders who are
Non-U.S. Persons will be subject to United States federal income tax and
withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant
to an applicable treaty. In such case, a Non-U.S. Person holder would only be
entitled to claim a refund for that portion of the taxes in excess of the taxes
that should be withheld with respect to the guaranteed payments.
Backup Withholding
Distributions made on the Partnership Certificates and proceeds from
the sale of the Partnership Certificates will be subject to a "backup"
withholding tax of 31% if, in general, the Certificateholder fails to comply
with certain identification procedures, unless the holder is an exempt recipient
under applicable provisions of the Code.
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DUE TO THE COMPLEXITY OF THE FEDERAL INCOME TAX RULES APPLICABLE TO
SECURITYHOLDERS AND THE CONSIDERABLE UNCERTAINTY THAT EXISTS WITH RESPECT TO
MANY ASPECTS OF THOSE RULES, POTENTIAL INVESTORS SHOULD CONSULT THEIR OWN TAX
ADVISORS REGARDING THE TAX TREATMENT OF THE ACQUISITION, OWNERSHIP, AND
DISPOSITION OF THE SECURITIES.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in
"Federal Income Tax Consequences," potential investors should consider the state
income tax consequences of the acquisition, ownership, and disposition of the
Securities. State income tax law may differ substantially from the corresponding
federal law, and this discussion does not purport to describe any aspect of the
income tax laws of any state. Therefore, potential investors should consult
their own tax advisors with respect to the various state tax consequences of an
investment in the Securities.
ERISA CONSIDERATIONS
In considering an investment in a Security of the assets of an employee
benefit plan, a fiduciary should consider, among other things, (i) the purposes,
requirements, and liquidity needs of such plan; (ii) the definition of plan
assets under the Employee Retirement Income Security Act of 1974 ("ERISA"), and
the U.S. Department of Labor ("DOL") regulations regarding the definition of
plan assets; (iii) whether the investment satisfies the diversification
requirements of Section 404(a)(1)(C) of ERISA; and (iv) whether the investment
is prudent, considering the nature of an investment in a Security and the fact
that no market in which such fiduciary can sell or otherwise dispose of
Securities is expected to arise. The prudence of a particular investment must be
determined by the responsible fiduciary (usually the trustee or investment
manager) with respect to each employee benefit plan taking into account all of
the facts and circumstances of the investment.
Section 403 of ERISA requires that all plan assets be held in trust.
However, under regulations that became effective on June 17, 1982, even if the
underlying assets of an issuer of securities are deemed to be plan assets of an
employee benefit plan investing in the Securities, the "holding in trust"
requirement of Section 403 of ERISA will be satisfied if the Securities are held
in trust on behalf of the plan.
Section 406 of ERISA and Section 4975 of the Code prohibit certain
transactions that involve (i) an employee benefit plan subject to ERISA or
Section 4975 of the Code, including individual retirement accounts and certain
Keogh Plans (each a "Plan") and any party in interest or disqualified person
with respect to the Plan, and (ii) plan assets. Regulations of the DOL set forth
in 29 C.F.R. 2510.3-101 (the "Plan Asset Regulations") define "plan assets" to
include not only securities (such as the Securities) held by a Plan but also the
underlying assets of the issuer of any equity securities, unless one or more
exceptions specified in the regulations are satisfied. Thus, under the Plan
Asset Regulations, a Plan that acquires a Security could be treated for ERISA
purposes as having acquired a direct interest in some or all of the assets in
the Trust. Such treatment could cause certain transactions with respect to such
assets to be deemed prohibited transactions under ERISA and, in addition, could
result in a finding of an improper delegation by the plan fiduciary of its duty
to manage plan assets. The Plan Asset Regulations will not apply, however, if
(i) the security is registered under the Exchange Act, is freely transferrable
and is part of a class of securities that is held by more than 100 unrelated
investors (the "publicly offered exception") or (ii) immediately after the most
recent acquisition of an equity interest, benefit plan investors do not own 25%
or more of the value of any class of equity interests in the trust (the
"insignificant participation exception"). Prior to purchasing a Security, a Plan
should consult with its counsel to determine whether the publicly offered
exception, the insignificant participation exception, or any other exception to
the Plan Asset Regulations would apply to the purchase of the Security.
The DOL has issued several exemptions from certain of the prohibited
transaction rules of ERISA and the related excise tax provisions of Section 4975
of the Code. Those exemptions include, but are not limited to: (a)
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Prohibited Transaction Class Exemption ("PTCE") 95-60, regarding investments by
insurance company general accounts; (b) PTCE 91-38, regarding investments by
bank collective investment funds; (c) PTCE 90-1, regarding investments by
insurance company pooled separate accounts; (d) PTCE 83-1, regarding
acquisitions by Plans of interests in mortgage pools; and (e) various
underwriter exemptions. Before purchasing any Securities, a Plan subject to the
fiduciary responsibility provisions of ERISA or described in Section 4975(e)(1)
of the Code should consult with its counsel to determine whether the conditions
of any exemption would be met. A purchaser of Securities should be aware,
however, that certain of the exemptions do not apply to the purchase, sale, and
holding of subordinated securities. Moreover, a purchaser of Securities also
should be aware that even if the conditions specified in one or more exemptions
are met, the scope of the relief provided by an exemption might not cover all
acts that might be construed as prohibited transactions.
Because the purchase or holding of Securities may result in unfavorable
consequences for a Plan or its fiduciaries under the Plan Asset Regulations or
the prohibited transaction provisions of ERISA or the Code, certain classes of
Securities will not be offered for sale to, and are not transferable to, any
benefit plan investor unless such benefit plan investor provides the Depositor
with a "Benefit Plan Opinion." A Benefit Plan Opinion is an opinion of Counsel
satisfactory to the Depositor (and upon which the Depositor, Trustee, TMP, and
their respective counsel are authorized to rely) that the ownership of a
Security of such class (A) will not be treated as a prohibited transaction under
Sections 406 and 407 of ERISA or Section 4975 of the Code and (B) either (i)
will not cause any of the assets in the Trust (or in the case of a REMIC Series,
the REMIC's assets) to be regarded as plan assets for purposes of the Plan Asset
Regulation or (ii) will not give rise to any fiduciary duty under ERISA on the
part of the Depositor, the Trustee, the Master Servicer or the TMP. The
Prospectus Supplement for an affected Series will indicate which classes of
Securities are restricted in their availability to benefit plan investors.
In considering the possible application of the Plan Asset Regulations,
potential Plan investors should be aware that, with respect to certain Series
and under certain circumstances, the Depositor may have a right to redeem the
Securities of such Series, at its option. In such cases, the Depositor's purpose
for the retention of such a redemption right is to enable the Depositor to
terminate its administration obligations with respect to the Securities in the
event such obligations become unprofitable. The Depositor undertakes no
obligation to consider the interests of Securityholders in deciding whether to
exercise any redemption right.
As described in "Federal Income Tax Consequences," an investment in a
Security may produce unrelated business taxable income for tax-exempt employee
benefit plans. Potential investors also should be aware that ERISA requires that
the assets of a Plan be valued at their fair market value as of the close of the
plan year. Neither the Depositor nor the Underwriters currently intend to
provide valuations to Securityholders. Plans contemplating the acquisition of
Securities should consult their legal advisors with respect to the ERISA, Code,
and other consequences of an investment in the Securities.
ANY PLAN FIDUCIARY CONSIDERING WHETHER TO PURCHASE A SECURITY ON BEHALF
OF A PLAN SHOULD CONSULT WITH ITS COUNSEL REGARDING THE APPLICABILITY OF THE
FIDUCIARY RESPONSIBILITY AND PROHIBITED TRANSACTION PROVISIONS OF ERISA AND THE
CODE TO SUCH INVESTMENT.
THE SALE OF SECURITIES TO A PLAN IS IN NO RESPECT A REPRESENTATION BY
THE DEPOSITOR OR ANY UNDERWRITER 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.
LEGAL INVESTMENT
The Prospectus Supplement will specify which, if any, of the Classes of
Offered Securities will constitute "mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA"). If so, Offered
Securities designated as qualifying as "mortgage related securities" will
continue to qualify as such for so long as they are rated in one of the two
highest categories by at least one nationally recognized statistical rating
agency. Classes of Offered Securities that qualify as "mortgage related
securities" under
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SMMEA will be legal investments for persons, trusts, corporations, partnerships,
associations, business trusts and business entities (including depository
institutions, life insurance companies and pension funds) created pursuant to or
existing under the laws of the United States or of any state whose authorized
investments are subject to state regulation to the same extent as, under
applicable law, obligations issued by or guaranteed as to principal and interest
by the United States or any agency or instrumentality thereof constitute legal
investments for any such entities. Certain states have enacted legislation
specifically limiting, to varying degrees, the legal investment authority of
such entities with respect to "mortgage related securities," in most cases
requiring investors to rely solely upon existing state law and not SMMEA. In any
case in which any such legislation is applicable, the Offered Securities will
constitute legal investments for entities subject to such legislation only to
the extent provided in such state legislation.
SMMEA also amended the legal investment authority of
federally-chartered depository institutions as follows: federal savings and loan
associations and federal savings banks may invest in, sell or otherwise deal in
"mortgage-related securities" without limitation as to the percentage of their
assets represented thereby; federal credit unions may invest in "mortgage
related securities"; and national banks may purchase "mortgage related
securities" for their own account without regard to the limitations generally
applicable to investment securities set forth in 12 U.S.C. Section 24 (Seventh),
subject in each case to such regulations as the applicable federal regulatory
authority may prescribe.
The Federal Financial Institutions Examination Council, The Federal
Deposit Insurance Corporation, the Office of Thrift Supervision, the Office of
the Comptroller of the Currency and the National Credit Union Administration
have proposed or adopted guidelines regarding investment in various types of
mortgage-backed securities. In addition, certain state regulators have taken
positions that may prohibit regulated institutions subject to their jurisdiction
from holding securities representing residual interests, including securities
previously purchased. There may be other restrictions on the ability of certain
investors, including depository institutions, either to purchase Offered
Securities or to purchase Offered Securities representing more than a specified
percentage of the investor's assets. Investors should consult their own legal
advisors in determining whether and to what extent any particular Offered
Securities constitute legal investments for such investors.
Offered Securities that do not constitute "mortgage related securities"
under SMMEA will require registration, qualification or an exemption under
applicable state securities laws, and all Offered Securities will require
registration, qualification or an exemption under applicable state securities
laws in those states that have enacted legislation overriding SMMEA's provisions
preempting state "blue sky" laws. In addition, such Offered Securities may not
be "legal investments" to the same extent as "mortgage related securities" under
SMMEA. The appropriate characterization under various legal investment
restrictions of the Classes of Offered Securities that do not qualify as
"mortgage related securities" under SMMEA and thus the ability of investors
subject to these restrictions to purchase such Classes of Offered Securities,
may be subject to significant interpretive uncertainties. All investors whose
investment authority is subject to legal restrictions should consult their own
legal advisors to determine whether, and to what extent, the Classes of Offered
Securities that do not qualify as "mortgage related securities" will constitute
legal investments for them.
PLAN OF DISTRIBUTION
The Depositor may sell the Offered Securities either directly or
through one or more Underwriters, underwriting syndicates or designated agents.
The Depositor also may sell the Offered Securities to an affiliate, and such
affiliate may sell the Security, from time to time, either directly or through
one or more Underwriters, underwriting syndicates or through designated agents.
The Prospectus Supplement with respect to each Series of Offered Securities will
set forth the terms of the offering of such Series of Securities and each Class
within such Series, including the name or names of any Underwriter(s), the
proceeds to and their intended use by the Depositor, and either the initial
public offering price, the discounts and commissions to any Underwriter(s) and
any discounts or concessions allowed or reallowed to certain dealers, or the
method by which the price at which the related Underwriter(s) will sell the
Offered Securities will be determined.
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The Offered Securities may be acquired by Underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The obligations of any
Underwriters will be subject to certain conditions precedent, and such
Underwriters will be severally obligated to purchase all the Offered Securities
of a Series offered pursuant to the related Prospectus Supplement, if any are
purchased. If Offered Securities of a Series are offered otherwise than through
Underwriters, the related Prospectus Supplement will contain information
regarding the nature of such offering and any agreements to be entered into
between the Depositor and purchasers of the Offered Securities of such Series.
The place and time of delivery for the Offered Securities of a Series
in respect of which this Prospectus is delivered will be set forth in the
related Prospectus Supplement.
The Securities issued pursuant to this Registration Statement of which
this Prospectus is a part may be reregistered and distributed when such
Securities are reacquired by the Depositor or an affiliate of the Depositor and
deposited as part of a new Trust Fund.
LEGAL MATTERS
Certain legal matters in connection with the Offered Securities,
including the material federal income tax consequences, will be passed upon for
the Depositor by Hunton & Williams, Richmond, Virginia.
EXPERTS
The balance sheet of Union Planters Mortgage Financial Corp. as of
December 31, 1997 included in this Prospectus has been so included in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
FINANCIAL INFORMATION
A separate Trust Fund will be formed with respect to each Series of
Securities and no Trust Fund will engage in any business activities or have any
assets or obligations prior to the issuance of the related Series of Securities.
Accordingly, no financial statements with respect to any Trust Fund will be
included in this Prospectus or in the related Prospectus Supplement.
RATINGS
It is a condition to the issuance of the Securities of each Series
offered hereby and by the Prospectus Supplement that they shall have been rated
in one of the two highest rating categories by the nationally recognized
statistical rating organization or organizations specified in the related
Prospectus Supplement.
Ratings on Securities address the likelihood of receipt by
Securityholders of all distributions on the underlying Assets. These ratings
address the structural, legal and issuer-related aspects associated with such
Securities, the nature of the underlying Assets and the credit quality of the
credit enhancer or guarantor, if any. Ratings on Securities do not represent any
assessment of the likelihood of principal prepayments by obligors or of the
degree by which such prepayments might differ from those originally anticipated.
As a result, certificateholders might suffer a lower than anticipated yield,
and, in addition, holders of stripped pass-through certificates in extreme cases
might fail to recoup their underlying investments.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each security rating should be evaluated
independently of any other security rating.
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GLOSSARY
"Accretion Directed" means a Class of Securities that receives
principal payments from the interest from specified Accrual Classes. An
Accretion Directed Class also may receive principal payments from principal paid
on the underlying Assets or other Trust Assets for the related Series.
"Accrual Securities" means Securities that accrete the amount of
accrued interest otherwise distributable on such Securities, which amount will
be added as principal to the Security Principal Balance of such Securities on
each applicable Distribution Date. Such accretion may continue until some
specified event has occurred or until such Accrual Securities are retired.
"Accrued Security Interest" means, with respect to each Class of
Securities, interest accrued for a specified period on the outstanding Security
Balance thereof immediately prior to the related Distribution Date, at the
applicable Pass-Through Rate or Interest Rate, as the case may be, reduced as
described in the Prospectus Supplement.
"Advance" means payments made by the Master Servicer as part of its
servicing function that in its good faith judgment it deems recoverable with
respect to (i) delinquent scheduled payments on Mortgage Loans, and (ii)
delinquent payments of taxes, insurance premiums and escrowed items, as well as
liquidation-related expenses with respect to Mortgage Loans, each of which are
reimbursable generally from subsequent recoveries in respect of such Mortgage
Loans.
"Agency Securities" means mortgage related securities issued or
guaranteed by the United States, agencies or instrumentalities thereof or
agencies created thereby.
"Aggregation Rule" means two or more debt instruments issued in
connection with the same transaction or related transactions (determined based
on all the facts and circumstances) generally are treated as a single debt
instrument for federal income tax accounting purposes if issued by a single
issuer to a single holder.
"Agreements" means Pooling and Servicing Agreements, Trust Agreements,
Servicing Agreements and Indentures, as the case may be.
"All OID Election" means to include in gross income all stated
interest, original issue discount, de minimis original issue discount, market
discount, and de minimis market discount that accrues on a REMIC Regular
Security (reduced by any acquisition premium or amortizable premium under the
constant yield method used to account for original issue discount.
"AMT" means alternative minimum tax.
"ARM Loans" means Mortgage Loans providing for periodic adjustments to
the Mortgage Rate thereon to equal the sum (which may be rounded) of a Gross
Margin and an Index.
"Assets" means, with respect to any Series of Securities, any
combination of Mortgage Loans, MBS and/or Agency Securities.
"Asset Rate" means, with respect to any Asset, either the related
Mortgage Rate or the stated rate of interest payable under the terms of the
related MBS or Agency Security.
"Asset Seller" means Union Planters Bank, N.A., a national banking
association, or another party that transfers the Assets of a Series to the
Depositor.
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"Available Distribution Amount" means the amount available for
distribution to the Securityholders on any Distribution Date, as further
described herein under "Description of the Offered Securities - Available
Distribution Amount".
"Balloon Mortgage Loans" are Mortgage Loans as to which only interest
is payable until maturity and Mortgage Loans that provide for amortization of
the principal amount over a certain period, although all remaining principal is
due at the end of a shorter period.
"Benefit Plan Opinion" means an opinion of counsel satisfactory to the
Depositor and the Master Servicer (and upon which the Depositor, the Master
Servicer, the Trustee, the TMP and their respective counsel are authorized to
rely) generally to the effect that the proposed transfer of a Security will not
(1) cause any of the Assets in the related Trust Fund to be regarded as "plan
assets" for purposes of the Plan Asset Regulations; (2) give rise to any
fiduciary duty under ERISA on the part of the Depositor, the Trustee, the Master
Servicer, or the TMP; or (3) be treated as, or result in, a prohibited
transaction under section 406 or section 407 of ERISA or section 4975 of the
Code.
"Bonds" means Collateralized Mortgage Bonds, issuable in Series.
"Book-Entry Securities" means a Class of Securities held in book-entry
form through a depository.
"Business Day" means any day that is not a Saturday, Sunday, holiday or
other day on which commercial banking institutions in the city and state in
which the Trustee's corporate trust office is located are authorized or
obligated by law or executive order to be closed.
"Buydown Mortgage Loans" means a Mortgage Loan as to which funds have
been provided to reduce the Borrower's Monthly Payments during the early period
of such Mortgage Loan.
"Buydown Period" means the early years of a Buydown Mortgage Loan
during which time the monthly payments made by the Mortgagor will be less than
the scheduled monthly payments thereon.
"Cap" means any restriction on a maximum stated interest rate on an
instrument.
"Cash Flow Agreement" means a guaranteed investment contract, currency
or interest rate exchange agreement, other similar financial assets, or any
combination thereof.
"Cede" means Cede & Co, DTC's nominee.
"Certificates" means any mortgage pass-through certificate issued
pursuant to an Agreement.
"Class" means any class of the Securities of a Series, as specified in
the related Prospectus Supplement.
"Closing Date" means the date of initial issuance with respect to a
Series of Securities.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange
Commission.
"Complementary Securities" means Strip Securities of certain Classes of
the same Series.
"Component Securities" means a Class of Securities that have different
principal and/or interest payment characteristics but together constitute a
single Class.
"Covered Trust" means a trust issuing a Series of Securities that is
covered by Credit Support that also covers another Series of Securities.
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"CPR" means Constant Prepayment Rate prepayment model.
"Credit Support" means letters of credit, insurance policies,
guarantees, reserve funds or other similar types of credit enhancement with
respect to any Security, or any combination thereof.
"Crime Control Act" means the Comprehensive Crime Control Act of 1984,
as amended.
"Cut-off Date" means the date specified in the Prospectus Supplement,
after which payments of interest and principal due on the Assets will accrue and
be payable to holders of the Securities.
"Deemed Principal Payments" means payments from a debt instrument's
stated redemption price at maturity that equal the sum of all payments provided
by the instrument other than qualified stated interest.
"Definitive Securities" means Securities issued in fully registered,
certificated form.
"Depositor" means Union Planters Mortgage Finance Corp., a Delaware
corporation and a wholly-owned limited-purpose finance subsidiary of Union
Planters Bank, N.A., a national banking association.
"Disqualified Organization" means the United States, any state or
political subdivision thereof, any foreign government, any international
organization, any agency or instrumentality of any of the foregoing, any
tax-exempt organization (other than a farmers' cooperative described in section
521 of the Code) that is not subject to the tax on UBTI, or any rural electrical
or telephone cooperative.
"Distribution Date" means, in the case of Certificates, that date each
month, commencing on the date specified in the Prospectus Supplement, on which
the Available Distribution Amount will be paid to Securityholders. In the case
of a Series of Notes, the related Prospectus Supplement and Agreement will
define this term as the "Payment Date."
"DOL" means the United States Department of Labor.
"DTC" means The Depository Trust Company.
"Due Period" means (unless a different period is specified in the
related Prospectus Supplement), with respect to any Distribution Date, the
period commencing on the second day of the month in which the immediately
preceding Distribution Date occurs, or the day after the Cut-off Date in the
case of the first Due Period, and will end on the first day of the month of the
related Distribution Date.
"Eligible Account" means, as to any Series, an account which is
maintained (1) at a depository institution organized under the laws of the
United States or any state, the deposits of which are insured to the full extent
permitted by law by the Federal Deposit Insurance Corporation (the "FDIC"),
whose commercial paper or long-term unsecured debt has a rating, as specified in
the related Agreement, sufficient to support the ratings requested on the
Securities of the related Series, and which institution is subject to
examination by federal or state authorities, (2) in the corporate trust
department of the Trustee or (3) at an institution otherwise acceptable to each
applicable Rating Agency.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fannie Mae" means Fannie Mae, (formerly known as FNMA) a federally
chartered and privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, as amended, or any successor
thereto.
"Fannie Mae Certificate" means guaranteed mortgage pass-through
certificates representing fractional undivided interests in pools of mortgage
loans formed by Fannie Mae.
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"FASIT" means a Financial Asset Securitization Investment Trust, as
more fully described in the Code.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHA" means the Federal Housing Administration.
"FHA Insurance Policies" means insurance policies that cover Mortgage
Loans insured by HUD and administered by FHA.
"FHA Loans" means Mortgage Loans insured by FHA Insurance Policies.
"First Distribution Period" means the interval between the issue date
of a Current Interest Security and the first Distribution Date.
"Fixed Rate" means a Class with a Pass-Through Rate or an Interest
Rate, as the case may be, that is fixed throughout the life of the Class.
"Floating Rate" means a Class with a Pass-Through Rate or an Interest
Rate, as the case may be, that resets periodically based upon a designated index
and that varies directly with changes in such index.
"Floor" means a restriction or restrictions on the minimum stated
interest rate of an instrument.
"Foreign Person" means any nonresident alien individual, foreign
corporation, or other non-United States person.
"Foreign Person Certification" means appropriate documentation,
provided to the person required to withhold tax, proving that the beneficial
owner of a Security is a Foreign Person.
"Freddie Mac" means Freddie Mac (formerly known as the Federal Home
Loan Mortgage Corporation) or any successor thereto.
"Freddie Mac Act" means Title III of the Emergency Home Finance Act of
1970, as amended.
"Freddie Mac Certificate" means a certificate issued by the Freddie Mac
representing an undivided interest in a pool of mortgage loans that may consist
of first lien conventional loans, FHA Loans or VA Loans.
"GNMA" means the Government National Mortgage Association.
"GNMA Certificate" means certificates, guaranteed as to the timely
payment of principal and interest by GNMA, issued by GNMA that represent an
interest in a pool of FHA Loans or VA Loans.
"GNMA Issuer" means a mortgage banking company or other financial
concern that issued GNMA Certificates.
"Housing Act" means the National Housing Act of 1934, as amended.
"HUD" means the United States Department of Housing and Urban
Development.
"Indenture" means the indenture between the Depositor and the trustee
named in the related Prospectus Supplement, pursuant to which a Series of Bonds
is issued.
"Index" means, with respect to any adjustable rate Asset, the index
specified in the related debt instrument that is added to the related gross
margin on each related interest adjustment date to determine the new
Pass-Through Rate or Interest Rate, as the case may be, for such adjustable rate
asset.
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"Indirect Participants" means organizations which have indirect access
to a clearing agency, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly.
"Insurance Proceeds" means the proceeds paid by any insurer pursuant to
an insurance policy covering a Mortgaged Property securing a Mortgage Loan, net
of expenses.
"Interest Accrual Period" means the period in which interest on
Securities of a Series accrues, as detailed in the related Prospectus
Supplement.
"Interest Only" means a Class that receives some or all of the interest
payments made on the underlying Assets or other assets of the Trust Fund and
little or no principal.
"Interest Rate" means the applicable fixed, variable or adjustable
coupon rate, specified in the Indenture for a Class of Bonds.
"L/C Bank" means a bank or financial institution which issues one or
more letters of credit to cover deficiencies in amounts otherwise payable on
Securities.
"Liquidated Asset" means a defaulted Asset as to which all amounts that
the Master Servicer expects to recover through the date of disposition of the
related property have been received.
"Liquidation Proceeds" means all amounts received and retained in
connection with the liquidation of defaulted Mortgage Loans, by foreclosure or
otherwise.
"Liquidity Facility" means a fund or account with respect to any Series
of Securities used by the Trustee to make any required distributions of
principal or interest on the Securities of the Series to the extent funds are
not otherwise available.
"Loan-to-Value Ratio" means the ratio (expressed as a percentage), the
numerator of which is the then outstanding principal balance of the Mortgage
Loan and the denominator of which is the Value of the related Mortgaged
Property.
"Lock-out Date" means the date that a Lock-out Period expires.
"Lock-out Period" means, as to any prepayment on Mortgage Loans, the
period during which no prepayments can be made.
"Mark-to-Market Regulations" means Treasury regulations under section
475 of the Code relating to dealers in securities.
"Master Servicer" means Union Planters Bank, N.A., a national banking
association and a wholly-owned subsidiary of Union Planters Corporation, a
Tennessee corporation its successors or assigns, or any other entity identified
as the "Master Servicer" in any Prospectus Supplement.
"MBS" means mortgage pass-through certificates or other mortgage-backed
securities evidencing interests in or secured by Mortgage Loans that (a) have
been previously offered and distributed to the public pursuant to an effective
registration statement; or (b) have been previously purchased in a transaction
not involving any public offering from an entity that is not an affiliate of the
issuer of such securities at the time of sale (nor an affiliate thereof at any
time during the three preceding months); provided, a period of two years has
elapsed since the later of the date the securities were acquired from the issuer
or an affiliate thereof.
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"MBS Agreement" means a pooling and servicing agreement, a trust
agreement, an indenture or similar agreement pursuant to which MBS were issued.
"MBS Issuer" means the issuer of MBS included in a Trust Fund.
"MBS Servicer" means the servicer of MBS included in a Trust Fund.
"MBS Trustee" means the trustee or a custodian under an MBS Agreement.
"Mortgage Loans" means one- to four-family first lien residential
mortgage loans, and includes both mortgage loans held directly by a Trust Fund
and mortgage loans included in underlying MBS or Agency Securities.
"Mortgage Notes" means promissory notes related to a Mortgage Loan and
secured by mortgages or deeds of trust creating a lien on the Mortgaged
Properties.
"Mortgage Rate" means the stated rate of interest payable under the
terms of a related Mortgage Note.
"Mortgaged Property" means the real property directly securing a
Mortgage Note.
"Mortgage" means the mortgage or deed of trust creating a lien on the
related Mortgaged Property.
"Mortgagor" means the obligor on a Mortgage Note.
"Non-Performing Mortgage Loan" means a FHA Loan or a VA Loan with
respect to a Series of Securities that, as of any date of determination, has
more than twelve scheduled monthly payments of principal and interest past due
under the terms of the related Mortgage Note.
"Nonrecoverable Advance" means any portion of an advance made by the
Master Servicer (or such other entity), which in the good faith judgment of the
Master Servicer, ultimately is not recoverable from Related Proceeds, or if
applicable, ultimately is not recoverable from collections on unrelated Assets
otherwise distributable on Subordinate Securities.
"Notional Amount Securities" means Securities having no Security
Principal Balance and bearing interest on the related notional amount. The
notional amount is used for purposes of the determination of interest
distributions.
"Notional Principal Amount" means a fictional Security Principal
Balance that may be assigned to a Security or a Class of Securities that is to
be used solely for purposes of determining the amount of interest distributions
and certain other rights and obligations of the holder(s) of such Securities or
Class and does not represent any beneficial interest in principal payments on
the Assets in the related Trust Fund.
"Offered Securities" means the Securities offered pursuant to this
Prospectus and a related Prospectus Supplement.
"OID" means original issue discount, which is the excess, if any, of a
Security's stated redemption price at maturity over its issue price.
"OID Regulations" means final regulations governing the accrual of
original issue discount on debt instruments that were issued by the Treasury on
January 27, 1994, but that do not address directly the treatment of instruments
that are subject to Code Section 1272(a)(6).
"Ordinary Ratio Security" means a PO Security or a Ratio Security that
is not considered a Contingent Payment Obligation.
127
<PAGE> 138
"Originator" means, with respect to each Mortgage Loan, the person,
other than the Depositor, that originated such Mortgage Loan.
"Partial Accrual" means a Class of Securities that accretes a portion
of the amount of accrued interest thereon, which amount will be added to the
Security Principal Balance of such Class on each applicable Distribution Date,
with the remainder of such accrued interest to be distributed currently as
interest on such Class.
"Participants" means the participating organizations that utilize the
services of DTC, including securities brokers and dealers, banks and trust
companies and clearing corporations and may include certain other organizations.
"Pass-Through Rate" means the applicable fixed, variable or adjustable
coupon rates, specified in the Agreement for a Series of Certificates.
"Payment Date" means, in the case of a Series of Bonds, that date each
month, commencing on the date specified in the Prospectus Supplement, on which
the Available Distribution Amount will be paid to Securityholders. In the case
of a Series of Certificates, the related Prospectus Supplement and Agreement
will define this term as the "Distribution Date."
"Percentage Interest" means, with respect to a Security to which an
initial principal amount is assigned as of the Closing Date, the portion of the
Class of which such Security is a part evidenced by such Security, expressed as
a percentage, the numerator of which is the denomination represented by such
Security and the denominator of which is the initial Security Principal Balance
of such Class. With respect to a Security to which an initial Security Principal
Balance is not assigned as of the Closing Date, the portion of the Class of
which such Security is a part evidenced by such Security, expressed as a
percentage stated on the face of such Security.
"Permitted Investments" means United States government securities and
other investment grade obligations specified in the related Agreement.
"Plan" means an employee benefit plan subject to ERISA or Section 4975
of the Code, including individual retirement accounts and certain Keogh Plans.
"Plan Asset Regulations" means Regulations of the DOL set forth in 29
C.F.R. 2510.3-101.
"Planned Principal Class" or "PAC" means a Class that is designed to
receive principal payments using a predetermined principal balance schedule
derived by assuming two constant prepayment rates for the underlying Assets.
These two rates are the endpoints for the "structuring range" for the Planned
Principal Class. The Planned Principal Classes in any Series of Securities may
be subdivided into different categories (e.g., Primary Planned Principal
Classes, Secondary Planned Principal Classes and so forth) having different
effective structuring ranges and different principal payment priorities. The
structuring range for the Secondary Planned Principal Class of a Series of
Securities will be narrower than that for the Primary Planned Principal Class of
such Series.
"PO Securities" means securities evidencing ownership interests in the
principal, but not the interest, payments on the Assets.
"Pooling and Servicing Agreement" means an agreement among the
Depositor, the master servicer named therein and the Trustee pursuant to which
Certificates are issued in Series.
"Pre-Funded Amount" means the amount initially deposited into a
Pre-Funding Account for a Series.
"Pre-Funding Account" means an account established for the purpose of
enabling a Trust Fund to purchase additional Assets after the Cut-off Date
during the applicable Pre-Funding Period, as described herein under "Description
of the Trust Funds -- Pre-Funding".
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<PAGE> 139
"Pre-Funding Period" means any period specified as such in a Prospectus
Supplement, during which the related Trust Fund may acquire additional Assets
using funds on deposit in a related Pre-Funding Account, as described herein
under "Description of the Trust Funds -- Pre-Funding".
"Pre-Issuance Accrued Interest Rule" means, with respect to a Rate
Bubble Security, the formula used to calculate such Security's issue price as
defined in the Prospectus Supplement.
"Prepayment Interest Shortfall" means, for any month and any Asset, the
amount by which the amount of interest due on such Asset for such month exceeds
the amount of interest collected or advanced in respect of such Asset.
"Prepayment Premium" means a premium or a yield maintenance penalty in
connection with a prepayment.
"Principal Balance" means, with respect to any Asset, the principal
balance thereof.
"Pricing Prepayment Assumptions" means the amount of OID required to be
included in a REMIC Regular Securityholder's income in any taxable year,
computed in accordance with Section 1272(a)(6) of the Code.
"Principal Only" means a Class that does not bear interest and is
entitled to receive only distributions in respect of principal.
"PTCE" means Prohibited Transaction Class Exemption.
"Purchase Price" means, with respect to any Asset, the sum of the
unpaid principal balance thereof, plus unpaid accrued interest thereon at the
Asset Rate from the date as to which interest was last paid to the due date in
the Due Period in which the relevant purchase is to occur, plus certain
servicing expenses that are reimbursable to the Master Servicer.
"Rate Bubble Security" means a Security whereby the First Distribution
Period is shorter than the interval between subsequent Distribution Dates, thus
making the effective rate of interest payable on the Security during the First
Distribution Period higher than the stated rate of interest based on a full
accrual period.
"Ratio Securities" means securities evidencing ownership interests in
differing percentages of both the interest payments and the principal payments
on the Assets.
"Record Date" means, for any Distribution Date, the date on which the
identities of the Securityholders entitled to distributions on the related
Securities on such Distribution Date are fixed, which shall be the last day of
the preceding calendar month, or an alternative date specified in the related
Prospectus Supplement.
"Refinance Loans" means loans made to refinance existing loans.
"Reinstated Mortgage Loan" means a FHA Loan or a VA Loan with respect
to a Series of Securities, that, as of any date of determination has had more
than three scheduled payments of principal and interest past due under the terms
of the related Mortgage Note one or more times during the term of the related
Mortgage Loan, but at the related Cut-off Date for the Series is current in
payment.
"REIT" means a real estate investment trust, as defined in the Code.
"Related Proceeds" means, with respect to any Asset in respect of which
an Advance has been or is to be made, future collections in respect of such
Asset (including collections of or from Insurance Proceeds or Liquidation
Proceeds relating to such Asset).
"Relief Act" means the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.
129
<PAGE> 140
"REMIC Regulations" means final regulations under the REMIC provisions
of the Code that have been issued by the Treasury.
"REO Property" means a Mortgaged Property acquired by the Master
Servicer on behalf of a Trust Fund pursuant to a foreclosure or other similar
proceeding in respect of a related Mortgage Loan.
"REO Extension" means an extension of time to sell REO property, as
granted by the Internal Revenue Service to the Trustee (or other entity) on
behalf of the Securityholders with respect to Mortgaged Property.
"REO Tax" means a tax on "net income from foreclosure property," within
the meaning of Section 857(b)(4)(B) of the Code or a tax on "prohibited
transactions" under Section 860F of the Code.
"Retained Interest" means a specified portion of interest payable on a
Security that is deducted from Mortgagor payments and is not made a part of the
related Trust Fund.
"RIC" means regulated investment company.
"RICO" means the Racketeer Influenced and Corrupt Organizations.
"Scheduled Principal Class" means a Class that is designed to receive
principal payments using a predetermined Security Principal Balance schedule but
is not designated as a Planned Principal Class or Targeted Principal Class. In
many cases, the schedule is derived by assuming two constant prepayment rates
for the underlying Assets. These two rates are the endpoints for the
"structuring range" for the Scheduled Principal Class.
"Securities" means Certificates and Bonds.
"Security Account" means, with respect to any Series, one or more
separate accounts for the collection of payments on the related Assets.
"Security Balance" means the stated principal amount of a Class of
Offered Securities.
"Security Owners" means Investors that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Book-Entry Securities.
"Security Principal Balance" means the outstanding principal balance of
a Security or Class of Securities.
"Securityholder" means a holder of a Security.
"Senior Securities" means any Class of Securities entitled to
preferential rights to distributions and that provides for the accrual of
interest thereon based on fixed, variable or adjustable rates.
"Sequential Pay" means classes that receive principal payments in a
prescribed sequence, that do not have predetermined Security Principal Balance
schedules and that under all circumstances receive payments of principal
continuously from the first Distribution Date on which they receive principal
until they are retired. A single Class that receives principal payments before
or after all other classes in the same Series of Securities may be identified as
a Sequential Pay Class.
"Series" means a series of Securities offered pursuant to this
Prospectus and a Prospectus Supplement hereto.
"Series REMIC" means, with respect to a particular Series, an election
to treat the Trust Fund or one or more segregated pools of Trust Assets as a
REMIC.
"Service" means the Internal Revenue Service.
130
<PAGE> 141
"Servicing Standard" means collection procedures followed by a Master
Servicer or Sub-Servicer to make reasonable efforts to collect all scheduled
payments due under the Mortgage Loans.
"SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984, as
amended.
"SPA" means the Standard Prepayment Assumption prepayment model.
"Strip" means a Class that receives a constant proportion, or "strip,"
of the principal payments on the underlying Trust Assets.
"Strip Securities" means the federal income tax treatment of Non-REMIC
Securities other than Pass-Through Securities, as defined in Section 1286 of the
Code.
"Stripped Interest Securities" means any Class of Securities entitled
to interest distributions, with disproportionately low, nominal or no principal
distributions.
"Stripped Principal Securities" means any Class of Securities entitled
to principal distributions, with disproportionately low, nominal or no interest
distributions.
"Stripping Regulations" means Treasury regulations under Section 1286,
as amended.
"Sub-Performing Mortgage Loan" means a FHA Loan or a VA Loan with
respect to a Series of Securities, that, as of any date of determination has
more than three but less than twelve scheduled payments of principal and
interest past due under the terms of the related Mortgage Note.
"Sub-Servicer" means a third-party servicer who is delegated its
servicing obligations by a Master Servicer.
"Sub-Servicing Agreement" means an agreement between a Master Servicer
and a Sub-Servicer.
"Subordinate Securities" means any Class of Securities as to which the
right to receive distributions with respect to the Assets is subordinate to the
rights of holders of Senior Securities.
"Superpremium Securities" means Securities that provide for a
relatively small amount of principal and for interest that can be expressed as
qualified stated interest at a very high fixed rate with respect to that
principal.
"Support Class" or "Companion Class" means a Class that receives
principal payments on any Distribution Date only if scheduled payments have been
made on specified Planned Principal Classes, Targeted Principal Classes and/or
Scheduled Principal Classes.
"Targeted Principal Class" or "TAC" means a Class that is designed to
receive principal payments using a predetermined Security Principal Balance
schedule derived by assuming a single constant prepayment rate for the
underlying Assets.
"Tax Administrator" means the Master Servicer or other person
responsible for computing the amount of original issue discount to be reported
to a REMIC Regular Securityholder each taxable year.
"Taxable Mortgage Pools" means any entity other than a REMIC or a REIT
if (i) substantially all of the assets of the entity consist of debt obligations
and more than 50% of such obligations consist of "real estate mortgages" (which
term, for purposes of this definition, includes Mortgage Loans), (ii) such
entity is the obligor under debt obligations with two or more maturities, and
(iii) under the terms of the debt obligations on which the entity is the
obligor, payments on such obligations bear a relationship to payment on the
obligations held by the entity.
131
<PAGE> 142
"TIN" means taxpayer identification number.
"Title V" means Title V of the Depository Institutions Deregulation and
Monetary Control Act of 1980, enacted in March 1980.
"Title VIII" means Title VIII of the Garn-St Germain Act.
"TMP" means the holder of a residual interest in a REMIC that is
designated as the tax matters person of such REMIC.
"Trust Agreement" means an Agreement pursuant to which a Series of
Certificates are issued, and the Assets of which may include MBS and/or Agency
Securities but not Mortgage Loans.
"Trust Assets" means, with respect to any Series, Assets, Collection
Accounts, Credit Support, Liquidity Facilities, Cash Flow Agreements and
Pre-Funding Accounts.
"Trust Fund" means a trust created pursuant to the terms of a related
Agreement that issues a Series of Securities.
"Trustee" means the bank, trust company or other fiduciary named in the
related Prospectus Supplement for each Series of Securities as the trustee under
the Agreement pursuant to which such Series is issued.
"UCC" means the Uniform Commercial Code.
"Underlying MBS" means any mortgage participation interests,
pass-through certificates or other asset-backed certificates in which an MBS
evidences an interest or which secure an MBS.
"Underwriter" means any firm that underwrites the purchase of the
Securities of a Series.
"VA" means the United States Department of Veterans Affairs.
"VA Guaranty" means the obligation of VA to guarantee a VA Loan, up to
a maximum dollar amount, in the event of a default by the Mortgagor.
"VA Loan" means a Mortgage Loan that is guaranteed by the VA.
"VA No-Bid" means, with respect to any VA Loan, the option of the VA,
without regard to the VA Guaranty, to make full payment to a mortgagee of the
unsatisfied indebtedness on a VA Loan upon its assignment to the VA.
"VA Vendee Mortgage Trust Certificates" means mortgage certificates
issued and guaranteed by the United States Department of Veterans Affairs
pursuant to its Vendee Mortgage Trust program.
"Variable Rate" means a Class with an interest rate that resets
periodically and is calculated by reference to the rate or rates of interest
applicable to specified assets or instruments (e.g., the Mortgage Rates borne by
the underlying Mortgage Loans).
"Variable Rate Security" means a REMIC Regular Security that pays
interest at a variable rate.
"VRDI" means a "variable rate debt instrument" as defined in section
1.1275-5 of the OID Regulations.
"VRDI Security" means a variable rate Security that qualifies as a VRDI
under the OID Regulations.
"WAM" means weighted average maturity.
132
<PAGE> 143
"Warrantying Party" means the person making certain representations and
warranties as of a specified date with respect to the Assets.
"Weighted Average Securities" means Securities of certain Series that
provide for interest based on a weighted average of the interest rates on some
or all of the Assets or regular interests in a second REMIC held subject to the
related Agreement.
133
<PAGE> 144
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 without the delivery of a final prospectus supplement
and prospectus. This prospectus supplement and the accompanying prospectus
shall not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
SUBJECT TO COMPLETION DATED , 199
--------- --
PROSPECTUS SUPPLEMENT
(To Prospectus dated March [ ], 1998)
$----------------
UNION PLANTERS MORTGAGE FINANCE CORP.
Depositor
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 199_-_
The Union Planters Mortgage Finance Corp. Series 199_-_ Mortgage
Pass-Through Certificates (the "Certificates") will consist of ____ Classes of
Certificates, designated as the Class __ Certificates, the Class __
Certificates, the Class __ Certificates and the Class __ Certificates (the
______ Certificates, collectively, the "Offered Certificates the Class __
Certificates and the Class __ Certificates, collectively, the "Senior
Certificates and the ______ Certificates, collectively, the "Subordinate
Certificates"). It is a condition of the issuance of the Offered Certificates
that they be rated [not lower than] "_______________" by _________________. The
Class __ Certificates will evidence approximately an initial ___% undivided
interest in the Trust Fund, the Class __ Certificates will evidence
approximately an initial ___% undivided interest in the Trust Fund and the Class
__ Certificates will evidence approximately an initial ___% undivided interest
in the Trust Fund. Only the Offered Certificates are being offered hereby.
The Certificates will represent in the aggregate the entire beneficial
interest in a trust fund (the "Trust Fund") to be established by Union Planters
Mortgage Finance Corp. (the "Depositor"). The Trust Fund will consist primarily
of [a pool (the "Asset Pool") of [conventional], [fixed rate] [adjustable rate]
[FHA insured] [VA guaranteed] mortgage loans, with terms to maturity of not more
than ___ years (the "Mortgage Loans"), secured by first liens on one-to
four-family residential properties,] [mortgage pass-through certificates,
mortgage-backed securities evidencing interests therein or secured thereby (the
"MBS"),] [and] [certain direct obligations of the United States, agencies
thereof or agencies created thereby (the "Agency Securities", together with the
Mortgage Loans, MBS, and certain other assets of the Trust Fund, the "Assets")].
The Assets were originated or acquired by ___________ (the "Asset Seller") and
will be sold to the Depositor on or prior to the date of initial issuance of the
Certificates.
THE YIELD TO INVESTORS IN THE [INTEREST ONLY] [PRINCIPAL ONLY]
CERTIFICATES WILL BE EXTREMELY SENSITIVE TO THE TIMING AND AMOUNT OF PRINCIPAL
PREPAYMENTS ON THE ASSET POOL, AND HOLDERS OF THE [INTEREST ONLY] CERTIFICATES
MAY FAIL TO RECOVER FULLY THEIR INITIAL INVESTMENT. SEE "RISK FACTORS" AND
"CERTAIN YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS" HEREIN.
THE RIGHTS OF THE HOLDERS OF THE CLASS __ CERTIFICATES AND THE CLASS
__ CERTIFICATES TO DISTRIBUTIONS OF PRINCIPAL AND INTEREST WILL BE
SUBORDINATED TO THE RIGHTS OF THE HOLDERS OF CLASS __ CERTIFICATES.
Prospective investors in the Offered Certificates should consider,
among other things, the material risks set forth under the caption "Risk
Factors" herein on page __ and in the Prospectus on page 10.
THESE CERTIFICATES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
-----------
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE
CERTIFICATES. THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF
THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THE CERTIFICATES NOR THE ASSETS ARE INSURED OR GUARANTEED BY
ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE DEPOSITOR, THE MASTER
SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES[, EXCEPT TO THE LIMITED EXTENT
DESCRIBED HEREIN].
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 145
----------------
<TABLE>
<CAPTION>
Proceeds to
Mortgage Pass- Initial Principal Price to Public Underwriting Depositor (1)(2)
Through Amount (1) Discount
Certificates
<S> <C> <C> <C> <C>
Class __ $ % % %
Class __ $ % % %
Class __ $ % % %
Class __ $ % % %
</TABLE>
(1) Per Certificate, plus accrued interest, if any, at the applicable
Pass-Through Rate from __________ 1, 19__.
(2) Before deducting expenses payable by the Depositor, estimated to be
$___________.
[An election will be made to treat the Trust Fund as a ["real estate
mortgage investment conduit" (a "REMIC")]["financial asset securitization
investment trust (a "FASIT")] for federal income tax purposes. [The Offered
Certificates will constitute ["regular interests"] in the [REMIC] [FASIT].] See
"Federal Income Tax Consequences" in the Prospectus.]
The yield to maturity on the Offered Certificates will depend on the
rate and timing of principal payments (including prepayments, defaults and
liquidations) on the Assets. See "Risk Factors" herein and "Risk Factors --
Prepayment timing and frequency may adversely affect yield of Securityholders"
and "Yield Considerations" in the Prospectus. As further described herein,
losses on the Assets will be allocated to the Subordinate Certificates prior to
allocation to the Class __ or Class __ Certificates. See "Description of the
Certificates -- Distributions -- Priority" herein.
[The Offered Certificates offered hereby will be purchased by the
Underwriter from the Depositor and will be offered by the Underwriter from time
to time to the public in negotiated transactions or otherwise at varying prices
to be determined at the time of sale. Proceeds to the Depositor from the sale of
the Offered Certificates will be ___% of the initial aggregate Security
Principal Balance thereof as of ____________ 1, 199_ (the "Cut-off Date") plus
accrued interest from the Cut-off Date, before deducting expenses payable by the
Depositor, estimated to be
$ .]
-------------
The Offered Certificates are offered subject to prior sale, when, as
and if accepted by the Underwriter, and subject to approval of certain legal
matters by __________, counsel for the Underwriter. It is expected that delivery
of the Offered Certificates [in book-entry form] [in registered, certified form]
will be made on or about ___________, 199_, [through the facilities of The
Depository Trust Company] [at the offices of the Underwriter, New York, New
York] against payment therefor in immediately available funds.
[UNDERWRITER]
, 199
- -------------
ii
<PAGE> 146
[Certain of the Assets continue to be in an initial fixed interest rate
period and have not experienced the first adjustment to their respective Asset
Rates.] The characteristics of the Assets are more fully described herein under
"Description of the Assets."
Distributions on the Offered Certificates will be made, to the extent of
the Available Distribution Amount, on the __the day of each [month] or, if any
such day is not a Business Day, on the next succeeding Business Day, beginning
in __________ (each, a "Distribution Date"). [As more fully described herein,
distributions allocable to interest, if any, on the Offered Certificates on each
Distribution Date will be based on the [applicable] [then-applicable variable]
pass-through rate (the "Pass-Through Rate") and the aggregate principal balance
(the "Security Principal Balance")] [notional balance (the "Notional Balance")
of such Class outstanding immediately prior to such Distribution Date. [The
Pass-Through Rate applicable to the Offered Certificates from time to time will
equal the [sum of __% and the applicable Index (as defined herein) subject to
certain limitations] [weighted average of the Class __ Remittance Rates (as
defined herein) on the Assets. The Pass-Through Rate for the Offered
Certificates on the first Distribution Date will be _% per annum and is expected
to change thereafter [because the weighted average of the Class __ Remittance
Rates is expected to change for succeeding Distribution Dates.] Distributions in
respect of principal, if any, of the Offered Certificates will be made as
described herein under "Description of the Certificates -- Distributions --
Priority" and "--Calculations of Principal".]
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT CONSTITUTE PART
OF A SEPARATE SERIES OF CERTIFICATES ISSUED BY THE DEPOSITOR AND ARE BEING
OFFERED PURSUANT TO ITS PROSPECTUS DATED MARCH [ ], 1998, OF WHICH THIS
PROSPECTUS SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS PROSPECTUS
SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT INFORMATION REGARDING THIS
OFFERING WHICH IS NOT CONTAINED HEREIN, AND PROSPECTIVE INVESTORS ARE URGED TO
READ THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN FULL. SALES OF THE OFFERED
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
Approximately __% of the Mortgage Loans are subject to higher than
customary mortgage loan credit risk because they have been underwritten in
accordance with standards applicable to "non-conforming credits" and do not
satisfy Fannie Mae or Freddie Mac underwriting guidelines. See "Risk
Factors--Underwriting standards for certain Mortgage Loans may be less stringent
and increase the potential for deliquencies" herein and in the Prospectus.
[The yield to investors in the [Interest Only][High-Yield] Certificates
will be [extremely] sensitive to the rate and timing of principal payments
(including prepayments, repurchases, defaults and liquidations) in the Assets
which may fluctuate significantly over time. An [extremely] rapid rate of
principal payments on the Assets could result in the failure of investors in the
[Interest Only][High-Yield] Certificates to recover their initial investments.]
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Prospectus Supplement
<S> <C>
Summary.................................................................... S-
Risk Factors............................................................... S-
Description of the Assets.................................................. S-
Description of the Certificates............................................ S-
Certain Yield, Payment and Maturity Considerations......................... S-
The Depositor.............................................................. S-
Pooling and Servicing Agreement............................................ S-
The Trustee................................................................ S-
Use of Proceeds............................................................ S-
Underwriting............................................................... S-
ERISA Considerations....................................................... S-
Legal Investment........................................................... S-
Legal Matters.............................................................. S-
Ratings.................................................................... S-
Prospectus
Prospectus Supplement......................................................
Available Information......................................................
Summary of Prospectus......................................................
</TABLE>
iii
<PAGE> 147
<TABLE>
<S> <C>
Risk Factors...............................................................
Description of the Trust Funds.............................................
Yield Considerations.......................................................
The Depositor..............................................................
Description of the Offered Securities......................................
Description of the Agreements..............................................
Description of Credit Support..............................................
Insurance Policies on the Mortgage Loans...................................
Certain Legal Aspects of Mortgage Loans....................................
Use of Proceeds............................................................
Federal Income Tax Consequences............................................
State Tax Considerations...................................................
ERISA Considerations.......................................................
Legal Investment...........................................................
Plan of Distribution.......................................................
Legal Matters..............................................................
Experts....................................................................
Financial Information......................................................
Ratings....................................................................
Glossary...................................................................
</TABLE>
------------------
UNTIL NINETY DAYS FROM THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL
DEALERS EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY REQUIREMENT IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus Supplement and the accompanying Prospectus in connection with the
offer contained in this Prospectus Supplement and the accompanying Prospectus,
and, if given, such information or representations must not be relied upon as
having been authorized by the Depositor or the Underwriter. This Prospectus
Supplement and the accompanying Prospectus shall not constitute an offer to sell
or a solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. The delivery of this Prospectus Supplement
and the accompanying Prospectus at any time does not imply that the information
herein is correct as of any time subsequent to the date hereof.
There will be no application to list the Offered Certificates on any
exchange, although the Underwriter intends to make a secondary market in the
Offered Certificates, it has no obligation to do so. There is currently no
secondary market for the Offered Certificates and there can be no assurance that
a secondary market for the Offered Certificates will develop, or if it does
develop, that it will continue to exist or provide sufficient liquidity.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
OFFERED CERTIFICATES. FOR A DESCRIPTION OF THESE ACTIVITIES. SEE "UNDERWRITING"
HEREIN.
iv
<PAGE> 148
[The Class __ Certificateholders will have the benefit of a [PARTICULAR
ITEM OF CREDIT SUPPORT] provided by [PROVIDER]. The ____________ will [not] be
available to support other Classes of Offered Certificates. See "Description of
the Certificates - Credit Support" herein.]
The Depositor may sell from time to time under this Prospectus
Supplement and the Prospectus and other related prospectus supplements up to
$______________ in aggregate principal amount of Securities, issuable in Series.
As of the date of this Prospectus Supplement, the Depositor has publicly sold or
committed to sell $___________ in aggregate principal amount of Securities,
including the Offered Certificates.
----------------------
[The Depositor has filed with the Securities and Exchange Commission
certain materials relating to the Assets and the Offered Certificates on Form
8-K. Such materials have been prepared by the Underwriter for certain
prospective investors, and the information included in such materials is subject
to, and superseded by, the information set forth in this Prospectus Supplement.]
v
<PAGE> 149
SUMMARY
The following summary of material information is qualified in its
entirety by reference to the detailed information appearing elsewhere in this
Prospectus Supplement and in the accompanying Prospectus. Certain capitalized
terms used in this Summary are defined elsewhere in this Prospectus Supplement
or in the Glossary in the Prospectus.
<TABLE>
<S> <C>
Title of Certificates............................................ Mortgage Pass-Through Certificates, Series
199_-_, (the "Certificates").
Depositor........................................................ Union Planters Mortgage Finance Corp., a
Delaware corporation and a direct, wholly-owned
subsidiary of Union Planters Bank, N.A. See
"The Depositor" in the Prospectus.
Risk Factors..................................................... An investment in the Certificates involves various
risks, and prospective investors should consider
carefully the matters discussed under "Risk Factors"
herein and in the Prospectus prior to making an
investment in the Certificates.
Master Servicer.................................................. [Union Planters Bank N.A., a national banking
association and wholly-owned subsidiary of
Union Planters Corporation]. See "Pooling
and Servicing Agreement -- The Master
Servicer" herein.
[Sub-Servicers................................................... _______________, a ________________]
Trustee.......................................................... _____________, a ____________________.
Cut-off Date..................................................... ____________ 1, 199_.
Closing Date..................................................... ______________ __, 199_.
Distribution Dates............................................... Distributions on the Certificates will be made by
the Trustee, to the extent of the Available
Distribution Amount, on the __ day of each
[month] or, if any such __ day is not a Business
Day, then on the next succeeding Business Day,
beginning in ________ 19__ (each, a
"Distribution Date"), to the holders of record as
of the close of business on the [last Business Day
of the month preceding the month] of each such
distribution (each, a "Record Date").
Notwithstanding the above, the final distribution
on any Certificate will be made after due notice
by the Trustee of the pendency of such
distribution and only upon presentation and
surrender of such Certificates at the location to
be specified in such notice.
[Registration of the Certificates................................ The Class __ Certificates will be represented by
one or more global certificates registered in the
</TABLE>
<PAGE> 150
<TABLE>
<S> <C>
name of Cede & Co., as nominee of The
Depository Trust Company ("DTC"). No
person acquiring an interest in the
Class __ Certificates (any such person,
a "Class __ Certificate Owner") will be
entitled to receive a Certificate of
such class in fully registered,
certificated form (a "Definitive Class
___ Certificate"), except under the
limited circumstances described in the
Prospectus under "Description of the
Offered Securities -- Book-Entry
Registration." Instead, DTC will effect
payments and transfers in respect of the
Class __ Certificates by means of its
electronic record-keeping services,
acting through certain participating
organizations ("Participants"). This may
result in certain delays in receipt of
payments by an investor and may restrict
an investor's ability to pledge its
securities. Unless and until Definitive
Class __ Certificates are issued, all
references herein to the rights of
holders of a Class __ Certificate are to
the rights of Class __ Certificate
Owners of such class as they may be
exercised through DTC and its
Participants, except as otherwise
specified herein. See "Description of
the Certificates -- General" herein and
"Description of the Offered Securities
-- Book-Entry Registration" in the
Prospectus.]
Denominations................... The Class __ Certificates will be
issuable [on the book-entry records of
DTC and its Participants] [in
registered, certificated form] in
denominations of $_______ and integral
multiples of $_____________ in excess
thereof[, with one Certificate of such
Class evidencing an additional amount
equal to the remainder of the Security
Principal Balance thereof].
Assets.......................... The Trust Fund will consist of
[[conventional], [fixed rate]
[adjustable rate] Mortgage Loans secured
by first liens on one- to four-family
residential properties (the "Mortgaged
Properties") located in __ different
states,] [mortgage pass-through
certificates, mortgage-backed securities
evidencing interests therein or secured
thereby (the "MBS"),] [and] [certain
direct obligations of the United States,
agencies thereof or agencies created
thereby (the "Agency Securities",
together with the Mortgage Loans, MBS,
and certain other assets of the Trust
Fund, the
</TABLE>
S-2
<PAGE> 151
<TABLE>
<S> <C>
"Assets")]. [The Assets will have an
aggregate Principal Balance as of the
Cut-off Date of $_________ and
individual Principal Balances at
origination of at least $______________
but not more than $__________, with an
average Principal Balance at origination
of approximately $_________. The Assets
will have terms to maturity from the
date of origination or modification of
not more than ____ years, and a weighted
average remaining term to maturity of
approximately _____ months as of the
Cut-off Date. The Assets will bear
interest at Asset Rates of at least
_____% per annum but not more than
_____% per annum, with a weighted
average Asset Rate of approximately
____% per annum as of the Cut-off Date.
The Assets will be acquired by the
Depositor on or before the Closing Date.
In connection with its acquisition of
the Assets, the Depositor will be
assigned (and will in turn assign to the
Trustee for the benefit of the holders
of the Certificates) certain rights in
respect of representations and
warranties described herein that were
made by the Asset Seller.]
[_____ of the Assets, representing
_____% of the Assets by aggregate
Principal Balance as of the Cut-off
Date, provide for scheduled payments of
principal and/or interest ("Payments")
to be due on the _____ day of each
month; the remainder of the Assets
provide for Payments to be due on
[identify day or days] of each month
(the date in any month on which a
Payment on an Asset is first due, the
"Due Date"). [The rate per annum at
which interest accrues on each Asset is
subject to adjustment on specified Due
Dates (each such date, an "Interest Rate
Adjustment Date") by adding a fixed
percentage amount (a "Gross Margin") to
the value of the then-applicable Index
(as described below) subject, in the
case of substantially all of the Assets,
to limitations on the periodic
adjustment of the related Asset Rate,
and to maximum and minimum lifetime
Asset Rates, as described herein. ___ of
the Assets, representing ___% of the
Assets by aggregate Principal Balance as
of the Cut-off Date, provide for
Interest Rate Adjustment Dates to occur
[monthly]; the remainder of the Assets
provide for adjustments to the Asset
Rate to occur quarterly, semi-
</TABLE>
S-3
<PAGE> 152
annually or annually. [Each of the
Assets provides for an initial fixed
interest rate period;] of the Assets,
representing _____% of the Assets by
aggregate Principal Balance as of the
Cut-off Date, have not yet experienced
their first Interest Rate Adjustment
Date. The latest initial Interest Rate
Adjustment Date for any Asset is
scheduled to occur on ________.]]
[The amount of the Payment on each Asset
is also subject to adjustment on
specified Due Dates (each such date, a
"Payment Adjustment Date") to an amount
that would amortize the outstanding
Principal Balance of the Asset over its
then remaining amortization schedule and
pay interest at the applicable Asset
Rate, subject, in the case of several
Assets, to payment caps, which limit the
amount by which the Payment may adjust
on any Payment Adjustment Date as
described herein. _______ of the Assets,
representing __% of the Assets (by
aggregate Principal Balance as of the
Cut-off Date, provide for Payment
Adjustment Dates to occur annually,
while the remainder of the Assets
provide for adjustments of the Payment
to occur monthly, quarterly or
semi-annually.]
[__ Assets, representing ____% of the
Assets by aggregate Principal Balance as
of the Cut-off Date, provide for monthly
payments of principal based on
amortization schedules significantly
longer than the remaining term of such
Assets, thereby leaving substantial
outstanding principal amounts due and
payable (each such payment, a "Balloon
Payment") on their respective maturity
dates, unless prepaid prior thereto.]
Approximately ___% of the Mortgage Loans
are expected to have been underwritten
generally in accordance with
underwriting standards for
"non-conforming credits," which provide
for Mortgagors whose creditworthiness
and repayment ability do not satisfy the
underwriting guidelines of Fannie Mae
and Freddie Mac. See "Risk
Factors--Underwriting standards for
certain Mortgage Loans may be less
stringent and increase the potential for
delinquencies" herein and in the
Prospectus.
[Assets included in the Trust Fund may
be one or more months delinquent with
regard to payment of principal and
interest at the time of their deposit
into the Trust Fund.] [The FHA Loans and
VA Loans contain [(i) __ Mortgage Loans,
representing ____% of the Assets by
aggregate Principal Balance as of the
Cut-off Date, that, as of the Cut-off
Date, have more than 12 scheduled
payments of principal and interest past
due under the terms of the related
Mortgage Note (each, a "Non-Performing
Mortgage Loan"), (ii)] __ Mortgage
Loans, representing ____% of the Assets
by aggregate
S-4
<PAGE> 153
Principal Balance as of the Cut-off
Date, that, as of the Cut-off Date, have
more than three but less than 12
scheduled payments of principal and
interest past due under the terms of the
related Mortgage Note (each, a
"Sub-Performing Mortgage Loan"), and
[(iii]) __ Mortgage Loans, representing
____% of the Assets by aggregate
Principal Balance as of the Cut-off
Date, that have had more than three
scheduled payments of principal and
interest past due under the terms of the
related Mortgage Note one or more times
during the term of the related Mortgage
Loan, but at the related Cut-off Date
for the Series is current in payment
(each, a "Reinstated Mortgage Loan").]
The Assets with respect to any Series
may be guaranteed or insured with
respect to payment of interest and/or
principal by the United States, agencies
or instrumentalities thereof or created
thereby, state or local governments,
agencies or instrumentalities, or
private insurance providers.
[Title and issuer of underlying MBS and
Agency Securities, amount deposited or
pledged, amount originally issued,
maturity date, interest rate,
[redemption provisions], description of
other material terms.]
For a further description of the Assets,
see "Description of the Assets" herein.
[Indices.......................... As of any Interest Rate Adjustment Date,
the applicable Index used to determine
the Asset Rate on each Asset will be the
____________. See "Description of the
Assets -- Indices" herein.]
[Conversion of Mortgage Loans..... Approximately __% of the Assets (by
aggregate Principal Balance as of the
Cut-off Date) (the "Convertible Mortgage
Loans") provide that, at the option of
the related Mortgagors, the adjustable
interest rate on such Mortgage Loans may
be converted to a fixed interest rate,
provided that certain conditions have
been satisfied. Upon notification from a
Mortgagor of such Mortgagor's intent to
convert from an adjustable interest rate
to a fixed interest rate, and prior to
the conversion of any such Mortgage
Loan, the related Warrantying Party
S-5
<PAGE> 154
(as defined herein) will be obligated to
purchase the Converting Mortgage Loan
(as defined herein) at the Conversion
Price (as defined herein). [In the event
of a failure by a Sub-Servicer to
purchase a "Converting Mortgage Loan"],
the Master Servicer is required to use
its best efforts to purchase such
Converted Mortgage Loan (as defined
herein) from the Trust Fund at the
Conversion Price during the one-month
period following the date of
conversion.] [In the event that neither
the related Warrantying Party nor the
Master Servicer purchases a Converted
Mortgage Loan, the Trust Fund will
thereafter include both fixed-rate and
adjustable-rate Mortgage Loans.] See
"Certain Yield, Prepayment and Maturity
Considerations" herein.]
The Offered Certificates.......... The Offered Certificates will be issued
pursuant to a Pooling and Servicing
Agreement, dated as of the Cut-off Date,
among the Depositor, the Master Servicer
and the Trustee, which incorporates by
reference the Depositors Standard Terms
to Pooling and Servicing Agreement
(_________ 1997 Edition) (the "Pooling
and Servicing Agreement"). The Class __
Certificates have an initial Security
Principal Balance of $_______ (the
initial "Class __ Security Principal
Balance"), representing an initial
interest of approximately ___% in the
Trust Fund, the Class __ Certificates
have an initial Security Principal
Balance of $_______ (the initial "Class
__ Security Principal Balance"),
representing an initial interest of
approximately ___% in the Trust Fund and
the Class __ Certificates have an
initial Security Principal Balance of
$_______ (the initial "Class __ Security
Principal Balance"), representing an
initial interest of approximately ___%
in the Trust Fund. [The Class __
Certificates will not have a Security
Principal Balance.]
Distributions on the Offered
Certificates will be made on the ____
day of each [month] or, if such day is
not a Business Day, on the succeeding
Business Day, beginning on ____________
__, 199_ (each, a "Distribution Date").
Distributions on each Distribution Date
will be made by check or wire transfer
of immediately available funds, as
provided in the
S-6
<PAGE> 155
Pooling and Servicing Agreement, to the
Offered Certificateholders of record as
of the [last Business Day of the month
preceding the month] of such
Distribution Date (each, a "Record
Date"), except that the final
distribution on the Offered Certificates
will be made only upon presentation and
surrender of the Certificates at the
office or agency specified in the
Pooling and Servicing Agreement. [As
more specifically described herein, the
Security Principal Balance of each Class
of Certificates will be adjusted from
time to time on each Distribution Date.
As further described herein, interest
shall accrue on the Offered Certificates
at the Pass-Through Rate thereon.
Pass-Through Rate on the
Offered Certificates............ [The Pass-Through Rate on the Offered
Certificates [other than the [Interest
Only][High-Yield] Certificates] is
fixed and is set forth on the cover
hereof.] [The Pass-Through Rate on the
Offered Certificates [other than the
[Interest Only][High-Yield]
Certificates] will be equal to the
weighted average of the Remittance Rates
in effect from time to time. The
Remittance Rate in effect for any date
of determination [is equal to the excess
of the Asset Rates on the Assets over
__% per annum] [The Class __
Certificates will not be entitled to
distributions of interest and will not
have a Pass-Through Rate.] [The
[Interest Only][High-Yield] Certificates
will be entitled to receive interest at
a per annum rate equal to [the
difference, if any, between the weighted
average of the Remittance Rates and the
weighted average of the Pass-Through
Rates on the Class __ and the Class __
Certificates][specify alternative
formula][Describe any other method used
to calculate the Pass-Through Rate.][The
Pass- Through Rate on the Offered
Certificates will be computed on the
basis of a 360 day year consisting of 12
months of 30 days each.] [The
Pass-Through Rate on the Offered
Certificates will be calculated on the
basis of the actual number of days in
each Interest Accrual Period divided by
360.]
Distributions
on the Offered Certificates..... Distributions on a Class of Certificates
will be allocated among the Certificates
of such Class in
S-7
<PAGE> 156
proportion to their respective
Percentage Interests.
As more fully described herein under
"Description of the Certificates -
Distributions", distributions of
principal and interest to
Certificateholders generally will be
applied first to the distribution of
interest and interest shortfalls, second
to the distribution of any unpaid
principal and third, if any principal is
due, to the distribution of principal,
in each case to the related Class or
Classes of Certificates.
Advances.......................... The Master Servicer is obligated as part
of its servicing responsibilities to
make certain advances that in its good
faith judgment it deems recoverable with
respect to delinquent scheduled payments
on Assets. [The Master Servicer also is
obligated to advance delinquent payments
of taxes, insurance premiums and
escrowed items, as well as
liquidation-related expenses with
respect to Assets.] Neither the
Depositor nor any of its affiliates has
any responsibility to make such
advances. Advances made by a Master
Servicer are reimbursable generally from
subsequent recoveries in respect of such
Assets. [The Trustee is obligated to
make any such Advance if the Master
Servicer fails in its obligation to do
so, to the extent provided in the
Pooling and Servicing Agreement. See
"Description of the Certificates -
Advances" herein and "Description of the
Offered Securities -- Advances in
Respect of Delinquencies" in the
Prospectus.
Subordination .................... The rights of holders of the Subordinate
Certificates to receive distributions of
amounts collected on the Assets will be
subordinate, to the extent described
herein, to the rights of holders of the
Senior Certificates. This subordination
is intended to enhance the likelihood of
receipt by the holders of the Senior
Certificates of the full amount of the
Distributable Certificate Interest and
the [ultimate receipt of principal equal
to the initial Security Principal
Balance]. The protection afforded to the
holders of the Senior Certificates by
means of the subordination, to the
extent provided herein, will be
accomplished by the application of the
Available Distribution Amount to the
S-8
<PAGE> 157
Senior Certificates prior to the
application thereof to the Subordinate
Certificates. See "Description of the
Certificates -- Subordination" herein.
Optional Termination.............. Pursuant to the terms of the Pooling and
Servicing Agreement, the Master Servicer
may purchase all of the Assets, and
thereby effect termination of the Trust
Fund and early retirement of the then
outstanding Certificates, on any
Distribution Date on which the aggregate
Principal Balance of the Assets
remaining in the Trust Fund is less than
__% of the aggregate Principal Balance
of such Assets as of the Cut-off Date.
[The Master Servicer may also purchase
any Class of Certificates on any
Distribution Date on which the Security
Principal Balance of such Class is less
than ___% of the original balance
thereof.] See "Pooling and Servicing
Agreement -- Termination" herein and
"Description of the Offered Certificates
-- Termination" in the Prospectus.
Credit Support.................... [Disclose Credit Support, if any.]
Liquidity Facility................ [Disclose Liquidity Facility, if any.]
Federal Income Tax
Consequences.................... [An election will be made to treat the
Trust Fund as a [real estate mortgage
investment conduit ("REMIC")] for
federal income tax purposes. Upon the
issuance of the Certificates, Hunton &
Williams, counsel to the Depositor, is
of the opinion that, assuming compliance
with all provisions of the Pooling and
Servicing Agreement, for federal income
tax purposes, the Trust Fund will
qualify as a [REMIC under Sections 860A
through 860G of] the Internal Revenue
Code of 1986 (the "Code").
For federal income tax purposes, the
Offered Certificates will be the
"regular interests" in the REMIC and
will be treated as debt instruments of
the REMIC.
S-9
<PAGE> 158
[Because the Offered Certificates will
be considered REMIC regular interests,
they will be taxable debt obligations
under the Code, and interest paid or
accrued on such Certificates, including
original issue discount, will be taxable
to the holders of such Certificates in
accordance with the accrual method of
accounting, regardless of such
Certificateholder's usual method of
accounting.] [The [IO Certificates]
[High-Yield Certificates] will be
treated as [Interest-Weighted
Securities] [High-Yield Interests], and
therefore will be treated as issued with
original issue discount as described in
"Federal Income Tax Consequences ---
[REMIC Securities --- Interest Weighted
Securities and Non-VRDI Securities] in
the Prospectus.]
The Class __ Certificates will [not] be
treated as having been issued with
original issue discount for federal
income tax purposes. The prepayment
assumption that will be used for
purposes of computing the accrual of
original issue discount, market discount
and premium, if any, for federal income
tax purposes will be equal to a
[constant prepayment rate ("CPR")]
[standard prepayment assumption ("SPA")]
of ____%. However, no representation is
made
S-10
<PAGE> 159
that the Assets will prepay at that rate
or at any other rate.]
For federal income tax purposes, the
Offered Certificates generally will be
treated as "regular interests in a
[REMIC]" for domestic building and loan
associations and "real estate assets"
for real estate investment trusts
("REITs"), subject to the limitations
described in "Federal Income Tax
Consequences" in the Prospectus.
Similarly, interest on the Offered
Certificates will be considered
"interest on obligations secured by
mortgages on real property" for REITs,
subject to the limitations described in
"Federal Income Tax Consequences" in the
Prospectus.
For further information regarding the
federal income tax consequences of
investing in the Certificates, see
"Federal Income Tax Consequences" in the
Prospectus.
ERISA Considerations.............. Fiduciaries of employee benefit plans
and certain other retirement plans and
arrangements, including individual
retirement accounts and annuities, Keogh
plans, and collective investment funds
in which such plans, accounts, annuities
or arrangements are invested, that are
subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), or corresponding provisions
of the Code (any of the foregoing, a
"Plan"), persons acting on behalf of a
Plan, or persons using the assets of a
Plan ("Plan Investors") should consult
with their own counsel to determine
whether the purchase or holding of the
Offered Certificates could give rise to
a transaction that is prohibited either
under ERISA or the Code. Certain
prohibited transaction exemptions may be
applicable to the purchase and holding
of the Class __ and Class __
Certificates as described herein.
Nevertheless, any Plan Investor
contemplating an investment in Offered
Certificates should note that the duties
and obligations of the Trustee, the
Servicer, and the Master Servicer are
expressly limited to those set forth in
the [Agreement], and such specified
duties and obligations may not comport
with or satisfy the provisions of ERISA
setting forth the fiduciary duties of
Plan fiduciaries.
S-11
<PAGE> 160
BECAUSE THE SUBORDINATE CERTIFICATES ARE
SUBORDINATED SECURITIES, THEY WILL NOT
SATISFY THE REQUIREMENTS OF CERTAIN
PROHIBITED TRANSACTION EXEMPTIONS. AS A
RESULT, THE PURCHASE OR HOLDING OF ANY
SUBORDINATE CERTIFICATES BY A PLAN
INVESTOR MAY CONSTITUTE A NON-EXEMPT
PROHIBITED TRANSACTION OR RESULT IN THE
IMPOSITION OF EXCISE TAXES OR CIVIL
PENALTIES. [ACCORDINGLY, NONE OF THE
OFFERED SUBORDINATE CERTIFICATES ARE
OFFERED FOR SALE OR ARE TRANSFERABLE TO
A PLAN INVESTOR][ACCORDINGLY, EACH
PURCHASER OF ANY SUBORDINATE
CERTIFICATE, BY VIRTUE OF SUCH
PURCHASER'S RECEIPT OF SUCH CERTIFICATE,
WILL BE DEEMED TO HAVE REPRESENTED
[EITHER (I)] THAT IT IS NOT A PLAN
INVESTOR [OR (II) THAT AN EXEMPTION FROM
THE PROHIBITED TRANSACTION PROVISIONS OF
ERISA AND THE CODE APPLY TO SUCH
PURCHASE],] UNLESS SUCH PURCHASER
PROVIDES THE MASTER SERVICER AND THE
TRUSTEE WITH A BENEFIT PLAN OPINION (AS
DEFINED IN "ERISA CONSIDERATIONS"
HEREIN). SEE "ERISA CONSIDERATIONS"
HEREIN AND IN THE PROSPECTUS.
Rating............................ It is a condition to the issuance of the
Offered Certificates that each Class of
the Offered Certificates receive the
ratings specified for such Class on the
cover page hereof. A security rating is
not a recommendation to buy, sell or
hold securities and may be subject to
revision or withdrawal at any time by
the assigning rating organization. A
security rating does not represent any
assessment of the likelihood of
principal prepayments on the Assets or
of the degree to which the rate of such
prepayments might differ from those
originally anticipated. Also, a security
rating does not represent any assessment
of the yield to maturity that investors
may experience.
The Depositor has not requested a rating
of the Offered Certificates from any
rating agency other than ______________
[and __________________]. However, there
can be no assurance as to whether any
other rating agency will rate the
Offered Certificates, or if one does,
what rating would be assigned by such
rating agency.
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<PAGE> 161
Legal Investment ................. The Class __ and Class __ Certificates
will constitute "mortgage related
securities" for purposes of the
Secondary Mortgage Market Enhancement
Act of 1984 ("SMMEA") for so long as
they are rated in one of the two highest
rating categories by one or more
nationally recognized statistical rating
organizations. Accordingly, the Class __
and Class __ Certificates will be legal
investments for certain entities to the
extent provided in SMMEA, subject to
state laws overriding SMMEA. A number of
states have enacted legislation
overriding the legal investment
provisions of SMMEA. See "Legal
Investment" herein and in the
Prospectus.
The Depositor makes no representations
as to the proper characterization of any
Class of the Offered Certificates for
legal investment or other purposes, or
as to the legality of investment by
particular investors in any Class of the
Offered Certificates under applicable
legal investment restrictions. These
uncertainties may adversely affect the
liquidity of any Class of Offered
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 to
what extent the Offered Certificates are
subject to investment, capital or other
restrictions. See "Legal Investment"
herein and in the Prospectus.
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<PAGE> 162
RISK FACTORS
Prospective investors should consider, among other things, the
following factors, which represent the principal factors that make an offering
of Certificates speculative or high risk.
The Weighted Average Life of The Offered Certificates Is Uncertain. The
rate and timing of principal payments on the Offered Certificates will depend,
among other things, on the rate and timing of principal payments (including
prepayments, defaults, liquidations and purchases of Assets due to a breach of
representation and warranty) on the Assets. The rate at which principal
prepayments occur on the Assets will be affected by a variety of factors,
including, without limitation, the terms of the Assets, the level of prevailing
interest rates, the availability of mortgage credit and economic, geographic,
tax, legal and other factors. In general, however, if prevailing interest rates
fall significantly below the Asset Rates on the Assets, such Assets are likely
to be the subject of higher principal prepayments than if prevailing rates
remain at or above the rates borne by such Assets. [The rate of principal
payments on the Offered Certificates will correspond to the rate of principal
payments on the Assets and is likely to be affected by the Lock-out Periods and
Prepayment Premium provisions applicable to the Assets and by the extent to
which the Master Servicer is able to enforce such provisions. Assets 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.] [As is the case with
mortgage-backed securities generally, the Offered Certificates are subject to
substantial inherent cashflow uncertainties because the Mortgage Loans may be
prepaid at any time.]
See "Description of the Certificates -- Distributions -- Priority" and
"Certain Yield, Prepayment and Maturity Considerations" herein and "Yield
Considerations" in the Prospectus.
The Yield of the Offered Certificates will be Affected by Circumstances
beyond the Depositor's Control. The yield to maturity on the Offered
Certificates will depend, among other things, on the rate and timing of
principal payments (including prepayments, defaults, liquidations and purchases
of Assets due to a breach of representation and warranty) on the Assets and the
allocation thereof to reduce the Security Principal Balance of such Classes.
[The yield to maturity on the Class __ Certificates will also depend on changes
in the applicable Index and the effect of any maximum lifetime Asset Rate,
minimum lifetime Asset Rate, Payment Cap and Periodic Rate Cap, as applicable.]
The yield to investors on the Class __ Certificates will be adversely affected
by any allocation thereto of Prepayment Interest Shortfalls on the Assets, which
are expected to result from the distribution of interest only to the date of
prepayment (rather than a full month's interest) in connection with prepayments
in full, and the lack of any distribution of interest on the amount of any
partial prepayments.
In general, if a Certificate is purchased at a premium and principal
distributions thereon generally occur at a rate faster than anticipated at the
time of purchase, the investor's actual yield to maturity will be lower than
that assumed at the time of purchase. Conversely, if a Certificate is purchased
at a discount and principal distributions thereon generally occur at a rate
slower than that assumed at the time of purchase, the investor's actual yield to
maturity will be lower than assumed at the time of purchase.
[Because [certain of] the Assets are adjustable rate instruments, the
Asset Rates and periodic payments can be expected to increase in a rising
interest rate environment, perhaps without a corresponding increase in the
related Mortgagors' income. In such event, the Mortgagor's ability to make
payments may be impaired, and a Mortgagor payment default would be more likely
to occur.]
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Certificateholders Subject to Loss if Rate of Delinquencies and Amount
of Realized Losses Exceed Certain Levels. The geographic dispersion of the
Assets, which is heavily concentrated in [DISCLOSE MAJOR GEOGRAPHIC
CONCENTRATIONS BY STATE], is set forth herein under "Description of the Assets".
Sufficiently high defaults and realized losses on the Assets will have the
effect of reducing, and could eliminate, the protection against losses afforded
the Senior Certificates by the subordination of the Subordinate Certificates. If
such protection is eliminated, the Senior Certificateholders will bear the risk
of losses on the Assets. Sufficiently high delinquencies and liquidation losses
on the Assets will have the effect of reducing, and could eliminate, the
protection against loss afforded the Senior Certificates by the subordination of
the Subordinate Certificates.
Certificateholders Must Look Solely to The Trust Fund for Distributions
of Principal and Interest. The Certificates will not represent an interest in or
obligation of the Depositor or the Master Servicer. The Certificates will not be
insured or guaranteed by any government agency or instrumentality, by the
Underwriter or the Depositor. The Certificates will be payable only from amounts
collected with respect to the Assets.
UNDERWRITING STANDARDS FOR CERTAIN MORTGAGE LOANS MAY BE LESS STRINGENT
AND INCREASE THE POTENTIAL FOR DELINQUENCIES. Approximately __% of the Mortgage
Loans were underwritten in accordance with underwriting standards intended to
provide single-family mortgage loans for non-conforming credits. A Mortgage
Loan made to a "non-conforming credit" means a mortgage loan that is ineligible
for purchase by Fannie Mae or Freddie Mac due to Mortgagor credit
characteristics that do not meet the Fannie Mae or Freddie Mac underwriting
guidelines, including a loan made to a Mortgagor whose creditworthiness and
repayment ability do not satisfy such Fannie Mae or FREDDIE MAC underwriting
guidelines and a Mortgagor who may have a record of major derogatory credit
items such as credit write-offs, outstanding judgments and prior bankruptcies.
ACCORDINGLY, SUCH MORTGAGE LOANS ARE LIKELY TO EXPERIENCE RATES OF DELINQUENCY
AND FORECLOSURE THAT ARE HIGHER, AND MAY BE SUBSTANTIALLY HIGHER, THAN MORTGAGE
LOANS ORIGINATED IN ACCORDANCE WITH FANNIE MAE OR FREDDIE MAC UNDERWRITING
GUIDELINES. AS A RESULT, LOSSES ON SUCH MORTGAGE LOANS MAY BE HIGHER THAN
LOSSES ON MORTGAGE LOANS ORIGINATED IN ACCORDANCE WITH SUCH GUIDELINES.
The primary considerations in underwriting a Mortgage Loan are the
assessment of the creditworthiness of the mortgagor, the value of the Mortgaged
Property and the adequacy of such property as collateral in relation to the
amount of the Mortgage Loan. Because such Mortgagors are less creditworthy than
Mortgagors who meet Fannie Mae or Freddie Mac underwriting criteria,
delinquencies and foreclosures may be more prevalent with respect to such
Mortgage Loans than with respect to Mortgage Loans originated in accordance with
Fannie Mae or Freddie Mac underwriting guidelines. Therefore, changes in the
values of the Mortgaged Properties may have a greater effect on the loss
experience of such Mortgage Loans than on Mortgage Loans originated in
accordance with the Fannie Mae or Freddie Mac underwriting guidelines. No
assurance can be given that the values of the Mortgaged Properties have remained
or will remain at the levels in effect on the dates of origination of the
related Mortgage Loans. If the values of the Mortgaged Properties decline after
the U.C. dates of origination, then the rate and severity of losses on such
Mortgage Loans may increase and such increase may be substantial.
[[Non-Performing Mortgage Loans,] Sub-Performing Mortgage Loans and
Reinstated Mortgage Loans Create Risks That Securityholders May Not Recover
Their Initial Investment And May Adversely Affect Yield. The Assets include
[Non- Performing Mortgage Loans,] Sub-Performing Mortgage Loans and Reinstated
Mortgage Loans. Repayment of the principal amount of the Offered Securities is
dependent, in large part, upon the ability of the Master Servicer to cause such
Mortgage Loans to become or remain current in payment, to sell or foreclose upon
such Mortgage Loans or to acquire title to the Mortgaged Properties by other
means and to liquidate the related REO Properties. There can be no assurance as
to whether the Master Servicer will be successful in such efforts or as to the
timing thereof. The ability of the Master Servicer to sell an REO Property will
depend upon its ability to find a willing purchaser at a price acceptable to the
Master Servicer, subject to certain guidelines. In addition, certain rights of
redemption in various states may limit or prevent the Master Servicer from
selling an REO Property at what would otherwise be an appropriate time for sale.
All [Non-Performing Mortgage Loans,] Sub-Performing Mortgage Loans and
Reinstated Mortgage Loans are insured by a governmental agency. There is no
obligation on the part of the Depositor, the Master Servicer or any other person
to repurchase or replace any Mortgage Loan
Certain Mortgage Loans may be non-recourse loans or loans for which
recourse may be restricted or unenforceable, or as to which recourse may be had
only against the specific Mortgaged Property and such other assets, if any, as
have been pledged to secure the related Mortgage Loan. With respect to those
Mortgage Loans that provide for recourse against the Mortgagor and his assets
generally, there can be no assurance that such recourse will ensure a recovery
in respect of a defaulted Mortgage Loan greater than the liquidation value, if
any, of the related Mortgaged Property. The ability of the Master Servicer to
liquidate any Mortgaged Property or REO Property, and the liquidation value
thereof, may be adversely affected by risks generally incident to interests in
real property, including changes or weakness in general or local economic
conditions, declines in real estate values, the volume of other similar
properties for sale, adverse changes in interest rates, real estate and personal
property tax rates, energy costs and other expenses, environmental concerns,
acts of God, and other factors that are beyond the Master Servicer's control.]
[ [Interest Only] and [Principal Only] Certificates Are Subject to
Enhanced Prepayment Risks. Faster mortgage prepayment rates, which are
generally associated with a declining interest rate environment, will have the
effect of reducing the weighted average life of each Class of Certificates and
increasing the reinvestment risk associated with the inability to achieve
comparable yields on the available investment alternatives in such reduced
interest rate environment. As a consequence, the price of mortgage-related
securities that are sold at a premium, such as the [Interest Only Certificates],
will be negatively affected by faster than anticipated prepayment rates.
Conversely, slower mortgage prepayment rates, which are generally associated
with an increasing interest rate environment or declining real estate values,
will have the effect of increasing the weighted average life of each Class of
Certificates and decreasing the amount of funds available to a holder of
Certificates to reinvest in higher yielding investment alternatives. As a
consequence, the price of mortgage-related securities that are sold at a
discount, such as the [Principal Only Certificates], will be negatively affected
by slower than anticipated prepayment rates. See "Certain Yield, Prepayment and
Maturity Considerations" herein.]
Credit Risk from Subordination of the Subordinate Certificates to the
Senior Certificates. Payments of principal and interest on the Assets will be
available to make distributions on the Subordinate Certificates only after
required distributions have been made on the Senior Certificates. Further, all
realized losses on the Assets generally will be allocated to the Subordinate
Certificates prior to being allocated to the Senior Certificates. Realized
losses on the Assets in excess of the available Credit Support will adversely
affect the yield on the Certificates.
The Master Servicer's Ability to Realize on Assets May Be Limited by
Applicable State Law. A variety of factors may limit the Master Servicer's
ability to repossess or foreclose on and liquidate the Mortgaged Properties
securing the
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Assets or may limit the amount realized upon any such liquidation to less than
the amount due under the related Asset. See "Certain Legal Aspects of Mortgage
Loans" in the Prospectus.
[The following two paragraphs will be included in the event any of the Mortgage
Loans are acquired from the Resolution Trust Corporation:]
[Troubled Mortgage Loan Originators Create Risks to Certificateholders.
[Certain][The] Mortgage Loans were originated or purchased by the [Originating
Institutions], each of which is subject to an RTC receivership. It is possible
that the financial difficulties experienced by the [Originating Institutions]
may have adversely affected either or both of (i) the standards and procedures
pursuant to which the Mortgage Loans were originated or purchased by such
[Originating Institutions] and (ii) the manner in which such Mortgage Loans have
been serviced prior to assumption of servicing responsibilities by the Master
Servicer. The Mortgage Loans will be acquired by the Depositor on or before the
Closing Date from the Asset Seller, which acquired the Mortgage Loans from the
RTC in its capacity as receiver of each of the associations pursuant to a
certain mortgage loan sale agreement, dated ______, 199_ (as amended, the "Loan
Sale Agreement"). Pursuant to the Loan Sale Agreement, the RTC as receiver of
the [Originating Institutions], has made certain representations and warranties
regarding the Mortgage Loans and is obligated to cure such breaches or
repurchase those Mortgage Loans as to which there is a breach of such
representations and warranties. The RTC repurchase price for the Mortgage Loans
is par plus accrued interest at the related Mortgage Rate[,except in the case of
Mortgage Loans as to which a repurchase for a breach of the representation and
warranty relating to certain environmental matters would be accomplished at a
price that initially is discounted but increases to par over approximately __
years]. The RTC, acting in its corporate capacity, has guaranteed such
obligations of the RTC, acting in its capacity as receiver. The agreement
pursuant to which such guarantee was made by the RTC is hereinafter referred to
as the "Guarantee Agreement".]
[Limited Information is Available with respect to Certain Mortgage
Loans. The information set forth in this Prospectus Supplement with respect to
the Mortgage Loans is derived from books and records of the [Originating
Institutions], as well as a limited review of the credit and legal files
relating to the Mortgage Loans. Accordingly, available information does not
permit the Depositor to determine fully the origination, credit appraisal and
underwriting practices of the originators of the Mortgage Loans. Furthermore, it
is possible that this Prospectus Supplement does not contain material
information regarding the Mortgage Loans that would have been disclosed if the
structure and personnel of the [Originating Institutions] had not been affected
by such institutions having been placed in receivership. While the Depositor has
undertaken a limited review of the records and files related to the Mortgage
Loans in connection with the issuance of the Offered Certificates, the Mortgage
Loans have not been "re-underwritten" or subjected to the type of review that
would typically be made in respect of a newly originated mortgage loan.]
Certificates Issued in Book-Entry Form May Create Liquidity Risks to
Certificateholders. Issuance of the Offered Certificates in book-entry form may
reduce the liquidity of such Certificates in the secondary trading market
because investors may be unwilling to purchase Certificates for which they
cannot obtain physical securities. See "Description of the Certificates --
Book-Entry Registration" herein.
Because transactions in the Bonds can be effected only through DTC,
participating organizations, indirect participants and certain banks, the
ability of a Certificateholder to pledge a Certificate to persons or entities
that do not participate in the DTC system or otherwise to take actions in
respect of such Certificates, may be limited due to lack of a physical security
representing the Certificates. See "Description of the Certificates --
Book-Entry Registration" herein.
Certificateholders may experience some delay in their receipt of
distributions of interest and principal on the Certificates because such
distributions will be forwarded by the Trustee to DTC and DTC will credit such
distributions to the accounts of its Participants (as defined herein) which will
thereafter credit them to the accounts of Certificateholders
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either directly or indirectly through indirect participants. See "Description of
the Certificates -- Book-Entry Registration" herein.
DESCRIPTION OF THE ASSETS
GENERAL
The Trust Fund will consist primarily of [___ [conventional], [fixed
interest] [adjustable interest] rate Mortgage Loans with an aggregate Principal
Balance as of the Cut-off Date, after deducting payments of principal due on
such date, of $____________,] [mortgage pass-through certificates,
mortgage-backed securities evidencing interests therein or secured thereby that
have been previously (a) offered and distributed to the public pursuant to an
effective registration statement or (b) purchased in a transaction not involving
any public offering from an entity that is not an affiliate of the issuer of
such securities at the time of sale (nor an affiliate thereof at any time during
the three preceding months); provided, a period of two years has elapsed since
the later of the date the securities were acquired from the issuer or an
affiliate thereof (the "MBS"),] [certain direct obligations of the United
States, agencies thereof or agencies created thereby (the "Agency Securities",
together with the Mortgage Loans, MBS, and certain other assets of the Trust
Fund, the "Assets"))].
[MORTGAGE LOANS
Each Mortgage Loan is evidenced by a promissory note (a "Mortgage Note")
and secured by a mortgage, deed of trust or other similar security instrument (a
"Mortgage") creating a first lien on a one-to four-family residential property
(a "Mortgaged Property"). The Mortgaged Properties consist of [description of
one-to four-family residential properties]. [Because no evaluation of any
mortgagor's financial condition has been conducted, investors should consider
all of the Mortgage Loans to be non-recourse loans so that, in the event of
mortgagor default, recourse may be had only against the specific property and
such limited other assets as have been pledged to secure a Mortgage Loan, and
not against the mortgagor's other assets.] All percentages of the Mortgage Loans
described herein are approximate percentages (except as otherwise indicated) by
aggregate Principal Balance as of the Cut-off Date.]
[The Mortgage Loans to be included in the Trust Fund will have been
originated or acquired by ________________ (the "Asset Seller") and will comply
with the underwriting criteria described herein. The Depositor will purchase the
Mortgage Loans to be included in the Mortgage Pool on or before the Closing Date
from the Asset Seller pursuant to an agreement (the "Seller's Agreement"), to be
dated as of _____, 199_ between the Asset Seller and the Depositor. The
Depositor will cause the Mortgage Loans to be assigned to _______________, as
Trustee, pursuant to the Pooling and Servicing Agreement. The Master Servicer
will service the Mortgage Loans pursuant to the Pooling and Servicing Agreement.
Under the Seller's Agreement, the Asset Seller will make certain
representations, warranties and covenants to the Depositor relating to, among
other things, the due execution and enforceability of the Seller's Agreement and
certain characteristics of the Mortgage Loans, and will be obligated to
repurchase or substitute for any Mortgage Loans as to which there exists
deficient documentation or an uncured material breach of any such
representation, warranty or covenant. Under the Pooling and Servicing Agreement
the Depositor will assign all its right, title and interest in such
representations, warranties and covenants (including the Asset Seller's
repurchase or substitution obligation) to the Trustee for the Trust Fund. 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 Asset Seller is selling the Mortgage Loans without recourse and,
accordingly, in such capacity, will have no obligations with respect to the
Offered Certificates other than pursuant to such representations, warranties,
covenants and repurchase obligations. See "Description of the Agreements --
Representations and Warranties; Repurchases" in the Prospectus.]
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[Particular Non-conforming credit disclosure]
FHA LOANS AND VA LOANS
Certain of the Mortgage Loans are subject to FHA insurance as described
herein (the "FHA Loans") and certain of the Mortgage Loans are subject to a VA
guarantee as described herein (the "VA Loans"). All FHA Loans and VA Loans must
conform to HUD (as defined herein) or VA origination guidelines, as the case may
be, at the time of origination. The FHA Loans will be insured by the Federal
Housing Administration ("FHA") of the United States Department of Housing and
Urban Development ("HUD") as authorized under the National Housing Act of 1934,
as amended (the "National Housing Act"), and the United States Housing Act of
1937, as amended (the "United States Housing Act"). No FHA Loan may have an
interest rate or original principal amount exceeding the applicable FHA limits
at the time of origination of such FHA Loan.
The VA Loans will be partially guaranteed by the VA under the
Servicemen's Readjustment Act of 1944, as amended. The Servicemen's Readjustment
Act of 1944, as amended, permits a veteran (or in certain instances the spouse
of a veteran) to obtain a mortgage loan guarantee by VA covering mortgage
financing of the purchase of a one-to-four family dwelling unit at interest
rates permitted by VA. The program has no mortgage loan limits, requires no down
payment from the purchaser and permits the guarantee of mortgage loans of up to
30 years' duration. However, no VA Loan will have an original principal amount
greater than five times the amount of the related guarantee.
Insurance premiums for FHA Loans are collected by the Master Servicer
and are paid to the FHA. The regulations governing FHA-insured single-family
mortgage insurance programs generally provide that insurance benefits are
payable upon foreclosure (or other acquisition of possession) and conveyance of
the mortgaged premises to HUD. With respect to a defaulted FHA Loan, the Master
Servicer may be limited in its ability to initiate foreclosure proceedings.
Historically, pursuant to an assignment program (the "Assignment Program"), HUD
in certain circumstances offered qualified borrowers who had defaulted on an FHA
loan an opportunity to avoid foreclosure and retain their homes. Under the
Assignment Program, the FHA serviced FHA-insured mortgage loans that had
defaulted and been assigned to HUD under the Assignment Program. In addition,
HUD gave forbearance, for a period of no longer than 36 months, to mortgagors
who had demonstrated a temporary inability to make full payments due to
circumstances beyond the mortgagor's control such as a reduction in income or
increase in expenses. The Assignment Program was terminated and replaced with
mandatory loss mitigation procedures in April 1996 whereby servicers of
defaulted FHA-insured loans must choose from a variety of tools to cure a
default prior to filing an FHA insurance claim.
HUD has the option, in most cases, to pay insurance claims in cash or
in debentures issued by HUD. Presently, claims for most programs are being paid
in cash and, for the most part, claims have not been paid in debentures since
1965. HUD debentures issued in satisfaction of FHA insurance claims bear
interest at the applicable HUD debenture interest rate.
The amount of insurance benefits generally paid by the FHA is equal to
the entire unpaid principal amount of the defaulted FHA Loan, adjusted to
reimburse the Master Servicer for certain costs and expenses and to deduct
certain amounts received or retained by the Master Servicer after default. When
entitlement to insurance benefits results from foreclosure (or other acquisition
of possession) and conveyance to HUD, the Master Servicer is generally
compensated for no more than two-thirds of its foreclosure costs and attorneys'
fees (which costs are evaluated based upon Fannie Mae guidelines (which are
state specific)), and is compensated for accrued and unpaid mortgage interest
for a limited period prior to the institution of foreclosure or other
acquisition in general only to the extent it was allowed pursuant to a
forbearance plan approved by HUD. Provided the regulations are complied with,
the Master Servicer receiving cash benefits will generally be entitled to the
debenture interest which would have been earned, as of the date the cash payment
is received, had the benefits been paid in debentures. Except where unpaid
mortgage interest is recoverable pursuant to an approved forbearance plan, such
debenture interest is generally payable from a date 30 days after the
mortgagor's first uncorrected failure to perform any obligation or make any
payment due under the mortgage loan, which results in no recovery of interest
accrued during the first two months of delinquency.
Under certain circumstances, as set forth in the regulations, HUD is
authorized to request or require the Master Servicer to pursue a deficiency
judgment against any defaulting Mortgagor. In this regard, HUD may request or
require the Master Servicer (as the case may be under the regulations) to pursue
a deficiency judgment in connection with the foreclosure. Under neither case
would the Master Servicer be responsible for collecting on the judgment.
Further, in all cases, HUD may reimburse the Master Servicer for all additional
costs of seeking the judgment.
As of the date hereof, the maximum guarantees that may be issued by VA
under a VA Loan are generally (a) as to loans with an original principal amount
of $45,000 or less, 50% of such loan, (b) as to loans with an original principal
amount of greater than $45,000, but not more than $56,250, $22,500; (c) as to
loans with an original principal amount of more than $56,250, but not more than
$144,000, the lesser of $36,000 or 40% of the loan, and (d) as to loans with an
original principal amount of more than $144,000 (for owner-occupied,
single-family home or condominium unit), the lesser of $50,750 or 25% of the
loan. The liability on the guaranty is reduced or increased pro rata with any
reduction or increase in the amount of indebtedness, but in no event will the
amount payable on the guaranty exceed the amount of the original guaranty. The
VA may, at its option and without regard to the guaranty, make full payment to a
mortgage holder of unsatisfied indebtedness on a mortgage upon its assignment to
the VA.
With respect to a defaulted VA Loan, the Master Servicer is, absent
exceptional circumstances, authorized to announce its intention to foreclose
only when the default has continued for three months. However, notwithstanding
the foregoing, the regulations require the Master Servicer to take immediate
action if it determines that the property to be foreclosed upon has been
abandoned by the debtor or has been or may be subject to extraordinary waste or
if there exist conditions justifying the appointment of a receiver for the
property. Generally, a claim for the guaranty is submitted after liquidation of
the mortgaged property.
The amount payable under the guaranty will be the percentage of the VA
Loan originally guaranteed applied to the indebtedness outstanding as of the
applicable date of computation specified in the VA regulations. Payments under
the guaranty will be equal to the unpaid principal amount of the VA Loan,
interest accrued on the unpaid balance thereof to the appropriate date of
computation and limited expenses of the Master Servicer, but in each case only
to the extent that such amounts have not been recovered through liquidation of
the Mortgaged Property. The amount payable under the guaranty may in no event
exceed the amount of the original guaranty. See "Description of the Trust
Funds - Mortgage Loans", " -- The VA Loan Program" and " -- The FHA Loan
Program" in the Prospectus.
[MBS
[Provide title and issuer of underlying MBS, amount deposited or
pledged, amount originally issued, maturity date, interest rate, redemption
provisions, together with description of other material terms.]
[Description of principal and interest distributions on the MBS.]
[Description of advances by the servicer of the assets underlying the
[MBS.]
[Description of effect on the MBS of allocation of losses on the
underlying assets.]
As to each series of MBS included in the Trust Fund, the various
classes of certificates from such series [(including classes not in the Trust
Fund but from the same series as classes that are in the Trust Fund] are listed,
together with the related pass-through rates and certain other information
applicable thereto].
[AGENCY SECURITIES
[Provide title and issuer of underlying Agency Securities, amount
deposited or pledged, amount originally issued, maturity date, interest rate,
redemption provisions, together with description of other material terms.]
[Description of principal and interest distributions on the Agency
Securities.]
[Description of advances by the servicer of the assets underlying the
Agency Securities.]
[Description of effect on the Agency Securities of allocation of losses
on the underlying Assets.]
As to each series of Agency Securities included in the Trust Fund, the
various classes of certificates from such series [(including classes not in the
Trust Fund but from the same series as classes that are in the Trust Fund] are
listed, together with the related pass-through rates and certain other
information applicable thereto].
[CONVERTIBLE MORTGAGE LOANS
____% of the Mortgage Loans ("Convertible Mortgage Loans") provide
that, at the option of the related Mortgagors, the adjustable interest rate on
such Mortgage Loans may be converted to a fixed interest rate. The first month
in which any of the Mortgage Loans may convert is ____________, and the last
month in which any of the Mortgage Loans may convert is _____________. Upon
conversion, the Mortgage Rate will be converted to a fixed interest rate
determined in accordance with the formula set forth in the related Mortgage Note
which formula is intended to result in a Mortgage Rate which is not less than
the then current market interest rate (subject to applicable usury laws). After
such conversion, the monthly payments of principal and interest will be adjusted
to provide for full amortization over the remaining term to scheduled maturity.
Upon notification from a Mortgagor of such Mortgagor's intent to convert from an
adjustable interest rate to a fixed interest rate and prior to the conversion of
any such Mortgage Loan (a "Converting Mortgage Loan"), the related Warrantying
Party will be obligated to purchase the Converting Mortgage Loan at a price
equal to the outstanding Principal Balance thereof plus accrued interest thereon
net of any subservicing fees (the "Conversion Price"). In the event of a failure
by a Warrantying Party to purchase a converting Mortgage Loan, the
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Master Servicer is required to use its best efforts to purchase such Mortgage
Loan following its conversion (a "Converted Mortgage Loan") during the one-month
period following the date of conversion at the Conversion Price.
In the event that the related Warrantying Party fails to purchase a
Converting Mortgage Loan and the Master Servicer does not purchase a Converted
Mortgage Loan, neither the Depositor nor any of its affiliates nor any other
entity is obligated to purchase or arrange for the purchase of any Converted
Mortgage Loan. Any such Converted Mortgage Loan will remain in the Mortgage Pool
as a fixed-rate Mortgage Loan and will result in the Mortgage Pool's having both
fixed rate and adjustable rate Mortgage Loans. See "Certain Yield and Prepayment
Considerations" herein.
Following the purchase of any Converted Mortgage Loan as described
above, the purchaser will be entitled to receive an assignment from the Trustee
of such Mortgage Loan and the purchaser will thereafter own such Mortgage Loan
free of any further obligation to the Trustee or the Certificateholders with
respect thereto.]
[INDICES
As of any Payment Adjustment Date, the Index applicable to the
determination of the related Asset Rate will be a per annum rate equal to
______________, as most recently available as of the date days prior to the
Payment Adjustment Date (each, an "Index"). In the event that the Index is no
longer available, an index reasonably acceptable to the Trustee that is based on
comparable information will be selected by the Master Servicer.
Each Index is currently calculated based on information reported in
___________. Listed below are the weekly average yields on actively traded
______________ as reported in ____________ on the date that would have been
applicable to mortgage loans having the following adjustment dates for the
indicated years. Such average yields may fluctuate significantly from week to
week as well as over longer periods and may not increase or decrease in a
constant pattern from period to period. The following does not purport to be
representative of future average yields. No assurance can be given as to the
average yields on such _______________ on any Payment Adjustment Date or during
the life of any Asset.]
[Index]
<TABLE>
<CAPTION>
Adjustment Date 1992 1993 1994 1995 1996 1997
- --------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
January......................
February ....................
March........................
April........................
May..........................
June.........................
July.........................
August.......................
September....................
October......................
November.....................
December.....................
</TABLE>
CERTAIN CHARACTERISTICS OF THE ASSETS
[Approximately ___% of the Assets have Due Dates that occur on the ___
day of each month; approximately ___% of the Assets have Due Dates that occur on
the ___ day of each month; approximately _____% of the Assets have Due
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<PAGE> 168
Dates that occur on the ___ day of each month; and the remainder of the Assets
have Due Dates that occur on the fifteenth day of each month.]
[As of the Cut-off Date, the Assets had the following characteristics:
(i) Asset Rates ranging from _____% per annum to _______% per annum; (ii) a
weighted average Asset Rate of ______% per annum; (iii) Gross Margins ranging
from ____ basis points to ______ basis points; (iv) a weighted average Gross
Margin of ____ basis points; (v) Principal Balances ranging from $_______ to
$______; (vi) an average Principal Balance of $_________; (vii) original terms
to scheduled maturity ranging from _____ months to _________ months; (viii) a
weighted average original term to scheduled maturity of _____ months; (ix)
remaining terms to scheduled maturity ranging from ____ months to _____ months;
(x) a weighted average remaining term to scheduled maturity of ________ months;
(xi) Cut-off Date Loan-to-Value ("LTV") Ratios ranging from ______% to
________%; (xii) a weighted average Cut-off Date LTV Ratio of _____%; (xiii) as
to the _______% of the Assets to which such characteristic applies, (A) minimum
lifetime Asset Rates ranging from ____% per annum to ______ % per annum and (B)
a weighted average minimum lifetime Asset Rate of _______% per annum; and (xiv)
as to the__________% of Assets to which such characteristic applies and for
which it may be currently calculated, (A) maximum lifetime Asset Rate ranging
from _______% per annum to ________% per annum and (B) a weighted average
maximum lifetime Asset Rate of _________% per annum.]
[___% of the Mortgage Loans provide for Balloon Payments on their
respective maturity dates. Loans providing for Balloon Payments involve a
greater degree of risk than self-amortizing loans. See "Risk Factors -- Assets
with balloon payment provisions present particular risks to Securityholders" in
the Prospectus.]
[The Mortgage Loans contain [(i) __ Mortgage Loans, representing ____%
of the Assets by aggregate Principal Balance as of the Cut-off Date, that, as of
the Cut-off Date, have more than 12 scheduled payments of principal and interest
past due under the terms of the related Mortgage Note (each, a "Non-Performing
Mortgage Loan"), (ii)] __ Mortgage Loans, representing ____% of the Assets by
aggregate Principal Balance as of the Cut-off Date, that, as of the Cut-off
Date, have more than three but less than 12 scheduled payments of principal and
interest past due under the terms of the related Mortgage Note (each, a
"Sub-Performing Mortgage Loan"), and [(iii)] __ Mortgage Loans, representing
____% of the Assets by aggregate Principal Balance as of the Cut-off Date, that
have had more than three scheduled payments of principal and interest past due
under the terms of the related Mortgage Note one or more times during the term
of the related Mortgage Loan, but at the related Cut-off Date for the Series is
current in payment (each, a "Reinstated Mortgage Loan").]
[The Asset Rate on each Asset is subject to adjustment on each Interest
Rate Adjustment Date by adding the related Gross Margin to the value of the
Index as most recently announced a specified number of days prior to such
Interest Rate Adjustment Date, subject, in the case of substantially all of the
Assets, to minimum and maximum lifetime Asset Rates, with ranges specified
below. The Asset Rates on the Assets generally are adjusted monthly; however,
certain of the Assets provide for Interest Rate Adjustment Dates to occur
quarterly (___% of the Assets), semi-annually ( % of the Assets) or annually
(____% of the Assets). Each of the Assets provided for an initial fixed interest
rate period; Assets, representing ___% of the Assets, have not experienced their
first Interest Rate Adjustment Dates. The latest initial Interest Rate
Adjustment Date for any Asset is to occur in .]
[Subject to the Payment Caps described below, the amount of the Payment
on each Asset adjusts periodically on each Payment Adjustment Date to an amount
that would fully amortize the Principal Balance of the Asset over its then
remaining amortization schedule and pay interest at the Asset Rate in effect
during the one month period preceding such Payment Adjustment Date.
Approximately __% of the Assets provide that an adjustment of the amount of the
Payment on a Payment Adjustment Date may not result in a Payment that increases
by more than ___% (nor, in some cases, decreases by more than ____%) of the
amount of the Payment in effect immediately prior to such Payment Adjustment
Date (each such provision, a "Payment Cap").
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<PAGE> 169
[No Mortgage Loan currently prohibits principal prepayments; however,
certain of the Mortgage Loans impose fees or penalties ("Prepayment Premiums")
in connection with full or partial prepayments. Although Prepayment Premiums are
payable to the Master Servicer as additional servicing compensation, the Master
Servicer may waive the payment of any Prepayment Premium only in connection with
a principal prepayment that is proposed to be made during the three month period
prior to the scheduled maturity of the related Mortgage Loan, or under certain
other limited circumstances.]
The following table sets forth the range of Asset Rates on the Assets
as of the Cut-off Date:
Asset Rates as of the Cut-off Date
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Percent Principal Principal
Number of by Balance as of Balance as of
Asset Rate Assets Number the Cut-off Date the Cut-off Date
- ---------- -------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
======= ====== =========== ======
Weighted Average
Asset Rate:
</TABLE>
Note: Percentage totals may not add due to rounding.
S-21
<PAGE> 170
The following table sets forth the types of Mortgaged Properties
securing the Mortgage Loans:
Property Type
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Number of Percent of Principal Principal
Mortgage Assets by Balance as of Balance as of
Type Loans Number the Cut-off Date the Cut-off Date
- ---- ------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Note: Percentage totals may not add due to rounding.
[The following table sets forth the range of Gross Margins for the Assets:]
[Gross Margins]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Percent Principal Principal
Number of by Balance as of Balance as of
Asset Rate Assets Number the Cut-off Date the Cut-off Date
- ---------- -------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Weighted Average
Gross Margin:
Note: Percentage totals may not add due to rounding.
S-22
<PAGE> 171
[The following table sets forth the frequency of adjustments to the
Asset Rates on the Assets as of the Cut-off Date:]
[Frequency of Adjustments to Asset Rates]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Percent Principal Principal
Number of by Balance as of Balance as of
Frequency(A) Assets Number the Cut-off Date the Cut-off Date
- ------------- -------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Weighted Average
Frequency of
Adjustments to
Asset Rate:
Note: Percentage totals may not add due to rounding.
(A) _______ or ___% of Assets have not experienced their first Interest Rate
Adjustment Date.
[The following table sets forth the frequency of adjustments to the
Payments on the Assets as of the Cut-off Date:]
[Frequency of Adjustments to Payments]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Percent Principal Principal
Number of by Balance as of Balance as of
Frequency (A) Assets Number the Cut-off Date the Cut-off Date
- ------------- -------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Weighted Average
Frequency of
Adjustments to
Payments:
Note: Percentage totals may not add due to rounding.
S-23
<PAGE> 172
[The following table sets forth the range of maximum lifetime Asset
Rates for the Assets:]
[Maximum Lifetime Asset Rates]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Maximum Percent Principal Principal
Lifetime Number of by Balance as of Balance as of
Asset Rate Assets Number the Cut-off Date the Cut-off Date
---------- -------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Weighted Average
Maximum Lifetime
Asset Rate:
Note: Percentage totals may not add due to rounding.
(A) Represents Assets without a lifetime rate cap.
(B) The lifetime rate caps for these Assets are based upon the Index as
determined at a future point in time plus a fixed percentage. Therefore,
the rate is not determinable as of the Cut-off Date.
(C) This calculation does not include the ____ Assets without a lifetime
rate cap or the Assets with lifetime rate caps which are currently not
determinable.
[The following table sets forth the range of minimum lifetime
Asset Rates on the Assets:]
[Minimum Lifetime Asset Rates]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Minimum Percent Principal Principal
Lifetime Number of by Balance as of Balance as of
Asset Rate Assets Number the Cut-off Date the Cut-off Date
---------- -------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Weighted Average
Minimum Lifetime
Asset Rate:
Note: Percentage totals may not add due to rounding.
S-24
<PAGE> 173
(A) Represents Assets without interest rate floors.
(B) This calculation does not include the Assets without interest rate floors.
The following table sets forth the range of Principal Balances of the
Assets as of the Cut-off Date:
Principal Balances as of the Cut-off Date
<TABLE>
<CAPTION>
Percent by
Principal Aggregate Aggregate
Balance Percent Principal Principal
as of the Number of by Balance as of Balance as of
Cut-off Date Assets Number the Cut-off Date the Cut-off Date
------------ ------ ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Average Principal Balance
as of the
Cut-off Date:
Note: Percentage totals may not add due to rounding.
The following tables set forth the original and remaining terms to
maturity (in months) of the Assets:
Original Term to Maturity in Months
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Original Percent Principal Principal
Term in Number of by Balance as of Balance as of
Months Assets Number the Cut-off Date the Cut-off Date
------- -------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Weighted Average
Original Term to Maturity:
Note: Percentage totals may not add due to rounding.
S-25
<PAGE> 174
The following tables set forth the purpose for which the Mortgage Loan
was originated, [the type of program under which it was originated and the
occupancy type].
Mortgage Loan Purpose
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Remaining Number of Percent of Principal Principal
Term in Mortgage Assets by Balance as of Balance as of
Months Loans Number the Cut-off Date the Cut-off Date
------ ----- ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Weighted Average
Original Term to Maturity:
Note: Percentage totals may not add due to rounding.
[Mortgage Loan Documentation Program]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Remaining Number of Percent of Principal Principal
Term in Mortgage Assets by Balance as of Balance as of
Months Loans Number the Cut-off Date the Cut-off Date
------ ----- ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Weighted Average
Original Term to Maturity:
Note: Percentage totals may not add due to rounding.
S-26
<PAGE> 175
Mortgage Loan Occupancy Type
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Remaining Number of Percent of Principal Principal
Term in Mortgage Assets by Balance as of Balance as of
Months Loans Number the Cut-off Date the Cut-off Date
------ ----- ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Weighted Average
Original Term to Maturity:
Note: Percentage totals may not add due to rounding.
Remaining Term to Maturity in Months
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Remaining Percent Principal Principal
Term in Number of by Balance as of Balance as of
Months Assets Number the Cut-off Date the Cut-off Date
------ ------ ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Weighted Average Remaining
Term to Maturity:
Note: Percentage totals may not add due to rounding.
S-27
<PAGE> 176
The following tables set forth the respective years in which the Assets
were originated and are scheduled to mature:
Year of Origination
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Percent Principal Principal
Number of by Balance as of Balance as of
Year Assets Number the Cut-off Date the Cut-off Date
---- ------ ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Note: Percentage totals may not add due to rounding.
Year of Scheduled Maturity
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Percent Principal Principal
Number of by Balance as of Balance as of
Year Assets Number the Cut-off Date the Cut-off Date
---- ------ ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Note: Percentage totals may not add due to rounding.
The following table sets forth the range of Original LTV Ratios of the
Mortgage Loans. An "Original LTV Ratio" is a fraction, expressed as a
percentage, the numerator of which is the Principal Balance of a Mortgage Loan
on the date of its origination, and the denominator of which is [in general] the
lesser of (i) the appraised value of the related Mortgaged Property as
determined by an appraisal thereof obtained in connection with the origination
of such Mortgage Loan and (ii) the sale price of such Mortgaged Property at the
time of such origination. There can be no assurance that the value (determined
through an appraisal or otherwise) of a Mortgaged Property determined after
origination of the related Mortgage Loan will be equal to or greater than the
value thereof (determined through an appraisal or otherwise) obtained in
connection with the origination. As a result, there can be no assurance that the
loan-to-value ratio for any Mortgage Loan determined at any time following
origination thereof will be lower than the Original LTV Ratio, notwithstanding
any positive amortization of such Mortgage Loan.
S-28
<PAGE> 177
Original LTV Ratios
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Number of Percent of Principal Principal
Original Mortgage Assets by Balance as of Balance as of
LTV Ratio Loans Number the Cut-off Date the Cut-off Date
--------- ----- ------ ---------------- ----------------
<S> <C> <C> <C>> <C>
Total 100.00% $ 100.00%
====== ====== =========== =======
</TABLE>
Weighted Average Original
LTV Ratio:
Note: Percentage totals may not add due to rounding.
The Mortgage Loans are secured by Mortgaged Properties in different ___
states. The table below sets forth the states in which the Mortgaged Properties
are located:
Geographic Distribution
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Number of Percent of Principal Principal
Mortgage Assets by Balance as of Balance as of
State Loans Number the Cut-off Date the Cut-off Date
----- ----- ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Note: Percentage totals may not add due to rounding.
[regional breakdown to be provided as appropriate]
No more than ___% of the Mortgage Loans will be secured by Mortgaged
Properties located in any one zip code.
[___% of the Mortgage Loans provide that upon any principal prepayment
of a Mortgage Loan, whether made voluntarily or involuntarily, the related
Mortgagor will be required to pay a prepayment premium or yield maintenance
Penalty (a "Prepayment Premium") in the amount set forth in the following
table.]
S-29
<PAGE> 178
[Mortgage Loan Prepayment Premiums]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Number of Percent of Principal Principal
Prepayment Mortgage Assets by Balance as of Balance as of
Premium Loans Number the Cut-off Date the Cut-off Date
------- ----- ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Note: Percentage totals may not add due to rounding.
[FHA Loans]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Number of Percent of Principal Principal
Mortgage Assets by Balance as of Balance as of
FHA Loans Loans Number the Cut-off Date the Cut-off Date
--------- ------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Note: Percentage totals may not add due to rounding.
[VA Loans]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Number of Percent of Principal Principal
Mortgage Assets by Balance as of Balance as of
VA Loans Loans Number the Cut-off Date the Cut-off Date
-------- ------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Note: Percentage totals may not add due to rounding.
S-30
<PAGE> 179
[Non-Performing Mortgage Loans]
<TABLE>
<CAPTION>
Non- Percent by
Performing Aggregate Aggregate
Mortgage Number of Percent of Principal Principal
-------- Mortgage Assets by Balance as of Balance as of
Loans Loans Number the Cut-off Date the Cut-off Date
----- ----- ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Note: Percentage totals may not add due to rounding.
[Sub-Performing Mortgage Loans]
<TABLE>
<CAPTION>
Sub- Percent by
Performing Aggregate Aggregate
Mortgage Number of Percent of Principal Principal
-------- Mortgage Assets by Balance as of Balance as of
Loans Loans Number the Cut-off Date the Cut-off Date
----- ----- ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Note: Percentage totals may not add due to rounding.
[Reinstated Mortgage Loans]
<TABLE>
<CAPTION>
Percent by
Reinstated Aggregate Aggregate
Mortgage Number of Percent of Principal Principal
-------- Mortgage Assets by Balance as of Balance as of
Loans Loans Number the Cut-off Date the Cut-off Date
----- ----- ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
====== ====== =========== ======
</TABLE>
Note: Percentage totals may not add due to rounding.
S-31
<PAGE> 180
UNDERWRITING STANDARDS
All of the Mortgage Loans were originated or acquired by _______,
generally in accordance with the underwriting criteria described herein.
[Description of underwriting standards.]
[CERTAIN CHARACTERISTICS OF MBS]
[Particular textual and table disclosure for all MBS collateral]
[CERTAIN CHARACTERISTICS OF THE AGENCY SECURITIES]
[Particular textual and table disclosure for all Agency Securities
collateral]
ADDITIONAL INFORMATION
The description in this Prospectus Supplement of the Assets is based
upon the Trust Fund as expected to be constituted at the close of business on
the Cut-off Date, as adjusted for the scheduled principal payments due on or
before such date. Prior to the issuance of the Offered Certificates, an Asset
may be removed from the Trust Fund as a result of incomplete documentation or
otherwise, if the Depositor deems such removal necessary or appropriate and may
be prepaid at any time. A limited number of other assets may be included in the
Trust Fund prior to the issuance of the Offered Certificates unless including
such assets would materially alter the characteristics of the Trust Fund as
described herein. The Depositor believes that the information set forth herein
will be representative of the characteristics of the Trust Fund as it will be
constituted at the time the Offered Certificates are issued.
A Current Report on Form 8-K will be available to purchasers of the
Offered Certificates and will be filed, together with Exhibits, with the
Securities and Exchange Commission within fifteen days after the initial
issuance of the Offered Certificates. In the event Assets are removed from or
added to the Trust Fund as set forth in the preceding paragraph, such removal or
addition will be noted on a Form 8-K.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of ____ Classes to be designated as the Class __
Certificates, the Class __ Certificates, the Class __ Certificates and the Class
__ Certificates. The Class __ Certificates (the "Subordinate Certificates") will
be subordinate to the Class __ Certificates and the Class __ Certificates (the
"Senior Certificates"), as described herein. The Offered Certificates will be
issued in [book-entry][fully registered, certificated] form only. The Offered
Certificates will be issued in denominations of $_______ and integral multiples
of $_____________ in excess thereof[, with one Certificate of each Class
evidencing an additional amount equal to the remainder of the Security Principal
Balance thereof]. The Offered Certificates will be freely transferrable and
exchangeable at the corporate trust office of the Trustee.
The Certificates represent in the aggregate the entire beneficial
ownership interest in a Trust Fund consisting of: (i) [the Mortgage Loans] [the
MBS] [the Agency Securities] and all payments under and proceeds in respect
thereof received after the Cut-off Date (exclusive of payments of principal and
interest due on or before the Cut-off Date); (ii) any Mortgaged Property
acquired on behalf of the Trust Fund through foreclosure or deed in lieu of
foreclosure (upon
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<PAGE> 181
acquisition, "REO Property"); (iii) such funds or assets as from time to time
are deposited in the Certificate Account and any account established in
connection with REO Property (the "REO Account"); and (iv) the rights of the
mortgagee under all insurance policies with respect to the Mortgage Loans. Only
the Class __ Certificates, the Class __ Certificates and the Class __
Certificates (together, the "Offered Certificates") are offered hereby.
The Class __ Certificates will have an initial [Security Principal
Balance] [Notional Balance of] $__________. The Class __ Certificates represent
___% of the aggregate Principal Balance of the Assets as of the Cut-off Date.
The Class __ Certificates will have an initial Security Principal Balance of
$__________, representing ___% of the aggregate Principal Balance of the Assets
as of the Cut-off Date. The Class __ Certificates will have an initial Security
Principal Balance of $__________, representing ___% of the aggregate Principal
Balance of the Assets as of the Cut-off Date. The initial Security Principal
Balance of the Class __ Certificates will be [zero]. The Security Principal
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 Assets. The
respective Security Principal Balances of the Class __, Class __, Class __ and
Class ___ Certificates (respectively, the "Class __ Balance", "Class __
Balance", "Class __ Balance" and "Class __ Balance") will in each case be
reduced by amounts actually distributed on such Class that are allocable to
principal. [The Security Principal Balance of the Class __ Certificates (the
"Class __ Balance") will at any time equal the aggregate Principal Balance of
the Assets minus the sum of the Class __ Balance, Class __ Balance and Class __
Balance.] The Principal Balance of any Asset at any date of determination will
equal (a) the Cut-off Date Balance of such Asset, minus (b) the sum of (i) the
principal portion of each Payment due on such Asset after the Cut-off Date, to
the extent received from the Mortgagor or advanced by the Master Servicer and
distributed to holders of the Certificates before such date of determination,
(ii) all principal prepayments and other unscheduled collections of principal
received with respect to such Asset, to the extent distributed to holders of the
Certificates before such date of determination, and (iii) any reduction in the
outstanding Principal Balance of such Asset resulting out of a bankruptcy
proceeding for the related Mortgagor.
[None of the Class __ Certificates are offered hereby.]
[BOOK-ENTRY REGISTRATION
If so provided in the related Prospectus Supplement, one or more Classes
of the Offered Certificates will be issued as Book-Entry securities (the
"Book-Entry Securities"), and each such Class will be represented by one or more
single Certificates registered in the name of a nominee for DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code ("UCC") and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for its participating organizations ("Participants") and facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in their accounts, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system also is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Investors that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
Book-Entry Securities may do so only through Participants and Indirect
Participants. In addition, such investors ("Security Owners") will receive all
distributions on the Book-Entry Securities through DTC and its Participants.
Under a book-entry format, Security Owners will receive payments after the
related Payment Date because, while payments are required to be forwarded to
Cede, on each such date, DTC will forward such payments to its Participants
which thereafter will be required to forward them to Indirect Participants or
Security Owners. The only "Securityholder" (as such term is used in the Pooling
and Servicing Agreement) will be Cede, as nominee of DTC, and
S-33
<PAGE> 182
the Security Owners will not be recognized by the Trustee as Securityholders
under the Pooling and Servicing Agreement. Security Owners will be permitted to
exercise the rights of Securityholders under the Pooling and Servicing Agreement
only indirectly through the Participants who in turn will exercise their rights
through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Book-Entry Securities
and is required to receive and transmit distributions of principal of and
interest on the Book-Entry Securities. Participants and Indirect Participants
with which Security Owners have accounts with respect to the Book-Entry
Securities similarly are required to make book-entry transfers and receive and
transmit such payments on behalf of their respective Security Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Security
Owner to pledge its interest in the Book-Entry Securities to persons or entities
that do not participate in the DTC system, or otherwise take actions in respect
of its interest in the Book-Entry Securities, may be limited due to the lack of
a physical certificate evidencing such interest.
DTC has advised the Depositor that it will take any action permitted to
be taken by the holders of the Book-Entry Securities under the Pooling and
Servicing Agreement only at the direction of one or more Participants to whose
account with DTC interests in the Book-Entry Securities are credited.
Offered Certificates initially issued in book-entry form will be issued
in fully registered, certificated form to Security Owners or their nominees
("Definitive Securities"), rather than to DTC or its nominee only if (i) the
Depositor advises the Trustee in writing that DTC is no longer willing or able
to properly discharge its responsibilities as depository with respect to the
Offered Certificates and the Depositor is unable to locate a qualified successor
or (ii) the Depositor, at its option, elects to terminate the book-entry system
through DTC.
Upon the occurrence of either of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Securities for the Security Owners. Upon
surrender by DTC of the certificate or certificates representing the Book-Entry
Securities, together with instructions for re-registration, the Trustee will
issue (or cause to be issued) to the Security Owners identified in such
instructions the Definitive Securities to which they are entitled, and
thereafter the Trustee will recognize the holders of such Definitive Securities
as Certificateholders under the Pooling and Servicing Agreement.
None of the Depositor, the Master Servicer, any Sub-Servicer, the
Trustee, or any of their affiliates will have any responsibility for any aspect
of the records relating to or payments made on account of beneficial ownership
interests of the Book-Entry Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.]
Distributions
Method, Timing and Amount. Distributions on the Certificates will be
made on the ____ day of each month or, if such ____ day is not a Business Day,
then on the next succeeding Business Day, commencing in ____________________
199_ (each, a "Distribution Date"). All distributions (other than the final
distribution on any Certificate) will be made by the [Master Servicer][Trustee]
to the persons in whose names the Certificates are registered at the close of
business on each Record Date, which will be the [last Business Day of the month]
preceding the month in which the related Distribution Date occurs. Such
distributions will be made 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 will have provided
the [Master Servicer][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 initial principal amount
S-34
<PAGE> 183
of which is at least $__________, or otherwise by check mailed to such
Certificateholder. The final distribution on any Certificate will be made in
like manner, but only upon presentment or surrender 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 Class __ Certificate is equal to the
initial denomination thereof as of the Closing Date, divided by the initial
Security Principal Balance for such Class. The aggregate distribution to be made
on the Certificates on any Distribution Date shall equal the Available
Distribution Amount.
The "Available Distribution Amount" for any Distribution Date is an
amount equal to (a) the sum of (i) the amount on deposit in the Certificate
Account as of the close of business on the related Determination Date, (ii) the
aggregate amount of any Advances made by the Master Servicer in respect of such
Distribution Date and (iii) the aggregate amount deposited by the Master
Servicer in the Certificate Account in respect of such Distribution Date in
connection with Prepayment Interest Shortfalls incurred during the related Due
Period, net of (b) the portion of the amount described in clause (a)(i) hereof
that represents (i) Payments due on a Due Date subsequent to the end of the
related Due Period, (ii) any voluntary principal prepayments and other
unscheduled recoveries on the Assets received after the end of the related Due
Period or (iii) any amounts payable or reimbursable therefrom to any person.
Priority. On each Distribution Date the Available Distribution Amount
will be distributed in the following amounts in the following order of priority:
(1) to the holders of the Class __ Certificates, the amount of all
Distributable Certificate Interest in respect of the Class __
Certificates for such Distribution Date, and, to the extent not
previously distributed, for all preceding Distribution Dates;
(2) to the holders of the Class __ Certificates, the amount of all
Distributable Certificate Interest in respect of the Class __
Certificates for such Distribution Date, and, to the extent not
previously distributed, for all preceding Distribution Dates;
(3) to the holders of the Class __ Certificates, the amount, not to
exceed the Class __ Security Principal Balance outstanding
immediately prior to such Distribution Date, equal to the sum of
the then Class __ Scheduled Principal Distribution Percentage of
(A) the Scheduled Principal Distribution Amount for such
Distribution Date and (B) the Unscheduled Principal Distribution
Amount for such Distribution Date;
(4) to the holders of the Class __ Certificates, the amount, not to
exceed the Class __ Security Principal Balance outstanding
immediately prior to such Distribution Date, equal to the sum of
the then Class __ Scheduled Principal Distribution Percentage of
(A) the Scheduled Principal Distribution Amount for such
Distribution Date and (B) the Unscheduled Principal Distribution
Amount for such Distribution Date;
(5) to the holders of the Subordinate Certificates, the amount of all
Distributable Certificate Interest in respect of the Subordinate
Certificates for such Distribution Date, and, to the extent not
previously distributed, for all preceding Distribution Dates;
(6) to the holders of the Subordinate Certificates, the amount, not
to exceed the Subordinate Security Principal Balance outstanding
immediately prior to such Distribution Date, equal to the sum of
the then Class __ Scheduled Principal Distribution Percentage of
(A) the Scheduled Principal Distribution Amount for such
Distribution Date and (B) the Unscheduled Principal Distribution
Amount for such Distribution Date;
(7) [Liquidity Facility, if any];
S-35
<PAGE> 184
(8) [Credit Support, if any];
(9) [Interest Only Security, if any]; and
(10) any remainder to the holders of the Class __ Certificates.
Calculations of Interest. The "Distributable Certificate Interest" in
respect of any Class of Certificates for any Distribution Date represents that
portion of the Accrued Certificate Interest in respect of such Class of
Certificates for such Distribution Date that is net of such Class' pro-rata
share of the aggregate portion of any Prepayment Interest Shortfalls resulting
from voluntary principal prepayments on the Assets during the related Due Period
[that are not covered by the application of servicing compensation of the Master
Servicer for the related Due Period (such uncovered aggregate portion, as to
such Distribution Date,] the "Net Aggregate Prepayment Interest Shortfall").
The "Accrued Certificate Interest" in respect of each Class of
Certificates for any Distribution Date is equal to thirty days' interest accrued
during the related Interest Accrual Period at the Pass-Through Rate applicable
to such Class of Certificates for such Distribution Date accrued on the related
Security Principal Balance outstanding immediately prior to such Distribution
Date. The Pass-Through Rate applicable to the Class __ Certificates for any
Distribution Date [is fixed and is set forth on the cover hereof] [will equal
the weighted average of the Class __ Remittance Rates in effect for the Assets
as of the commencement of the related Due Period (as to such Distribution Date,
the "Weighted Average Class __ Remittance Rate"). The "Class __ Remittance Rate"
in effect for any Asset as of any date of determination (a) prior to its first
Interest Rate Adjustment Date, is equal to the related Asset Rate then in effect
minus basis points and (b) from and after its first Interest Rate Adjustment
Date, is equal to the related Asset Rate then in effect minus the excess of the
related Gross Margin over basis points. The "Interest Accrual Period" for the
Certificates is the calendar month preceding the month in which the Distribution
Date occurs.] [is equal to the excess of the Asset Rate thereon over ____% per
annum.]
The portion of Net Aggregate Prepayment Interest Shortfall for any
Distribution Date that will be allocated to the Class __ Certificates on such
Distribution Date will be equal to the then applicable Class __ Interest
Allocation Percentage. The "Class __ Interest Allocation Percentage" for any
Distribution Date will equal a fraction, expressed as a percentage, the
numerator of which is equal to the product of (a) the Class __ Balance [(net of
any Uncovered Portion thereof)] outstanding immediately prior to such
Distribution Date, multiplied by (b) the Pass-Through Rate for the Class __
Certificates for such Distribution Date, and the denominator of which is the
product of (x) the aggregate Principal Balance of the Assets outstanding
immediately prior to such Distribution Date, multiplied by (y) the Weighted
Average Net Asset Rate for such Distribution Date. The "Net Asset Rate" in
effect for any Asset as of any date of determination is equal to the related
Asset Rate then in effect minus basis points. [The "Uncovered Portion" of the
Class __ Balance, as of any date of determination, is the portion thereof
representing the excess, if any, of (a) the Class __ Balance then outstanding,
over (b) the aggregate Principal Balance of the Assets then outstanding.]
[The Pass-Through Rate on the Offered Certificates will be computed on
the basis of a 360 day year consisting of 12 months of 30 days each.] [The
Pass-Through Rate on the Offered Certificates will be calculated on the basis of
the actual number of days in each Interest Accrual Period divided by 360.]
[The Class __ Certificates will not be entitled to distributions of
interest and will not have a Pass-Through Rate.]
Calculations of Principal. The "Scheduled Principal Distribution
Amount" for any Distribution Date is equal to the aggregate of the principal
portions of all Payments, including Balloon Payments, due during or, if and to
the extent not previously received or advanced and distributed to
Certificateholders on a preceding Distribution Date, prior to the related Due
Period, in each case to the extent paid by the related mortgagor or advanced by
the Master Servicer and included in the Available Distribution Amount for such
Distribution Date. The principal portion of any Advances in
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<PAGE> 185
respect of a Assets delinquent as to its Balloon Payment will constitute
advances in respect of the principal portion of such Balloon Payment.
The "Unscheduled Principal Distribution Amount" for any Distribution
Date is equal to the sum of: (a) all voluntary principal prepayments received on
the Assets during the related Due Period; and (b) the excess, if any, of (i) all
unscheduled recoveries received on the Assets during the related Due Period,
whether in the form of liquidation proceeds, condemnation proceeds, insurance
proceeds or amounts paid in connection with the purchase of an Asset out of the
Trust Fund, exclusive in each case of any portion thereof payable or
reimbursable to the Master Servicer in connection with the related Asset, over
(ii) the respective portions of the net amounts described in the immediately
preceding clause (i) needed to cover interest (at the applicable Net Asset Rate
in effect from time to time) on the related Asset from the date to which
interest was previously paid or advanced through the Due Date for such Asset in
the related Due Period.
[The "Class __ Scheduled Principal Distribution Percentage" for any
Distribution Date will equal the lesser of (a) 100% and (b) a fraction,
expressed as a percentage, the numerator of which is the Class __ Security
Principal Balance outstanding immediately prior to such Distribution Date, and
the denominator of which is the lesser of (i) the sum of the Class __ Balance,
the Class __ Balance and the Class __ Balance and (ii) the aggregate Principal
Balance of the Assets, in either case outstanding immediately prior to such
Distribution Date. The "Class __ Scheduled Principal Distribution Percentage"
for any Distribution Date will equal (a) if the Security Principal Balance of
the Class __ Certificates has been reduced to zero, 100%, (b) otherwise, the
lesser of (i) 100% and (ii) a fraction, expressed as a percentage, the numerator
of which is the Class __ Security Principal Balance outstanding immediately
prior to such Distribution Date, and the denominator of which is the lesser of
(1) the sum of the Class __ Balance, the Class __ Balance and the Class __
Balance and (2) the aggregate Principal Balance of the Assets, in either case
outstanding immediately prior to such Distribution Date. The "Class __ Scheduled
Principal Distribution Percentage" for any Distribution Date will equal (a)
prior to _____, 20__, 0%, (b) if the Security Principal Balance of the Class __
Certificates and the Class __ Certificates have been reduced to zero, 100%, and
(c) at any other time, the lesser of (i) 100% and (ii) a fraction, expressed as
a percentage, the numerator of which is the Class __ Security Principal Balance
outstanding immediately prior to such Distribution Date, and the denominator of
which is the lesser of (1) the sum of the Class __ Balance, the Class __ Balance
and the Class __ Balance and (2) the aggregate Principal Balance of the Assets,
in either case outstanding immediately prior to such Distribution Date.]
SUBORDINATION
In order to maximize the likelihood of distribution in full of the
Class __ Interest Distribution Amount and the Class __ Interest Distribution
Amount, and the Class __ Scheduled Principal Distribution Amount and the Class
__ Scheduled Principal Distribution Amount, on each Distribution Date, holders
of the Senior Certificates have a right to distributions of the Available
Distribution Amount that is prior to the rights of the holders of the
Subordinate Certificates, to the extent necessary to satisfy the Class __
Interest Distribution Amount and Class __ Interest Distribution Amount, and the
Class __ Scheduled Principal Distribution Amount and the Class __ Scheduled
Principal Distribution Amount.
[The principal portion of any Realized Losses will be allocated first
in reduction of the Subordinate Certificates [in the order specified here] and
then to the Senior Certificates [in the order specified here]. Any losses
realized on an Asset that is finally liquidated equal to the excess of the
Principal Balance of such Asset remaining, if any, plus interest thereon
through the last day of the month in which such Asset was finally liquidated,
after application of all amounts received (net of amounts reimbursable to the
Master Servicer or any Sub-Servicer for Advances and expenses, including
attorneys' fees) towards interest and principal owing on the Asset, is referred
to herein as a "Realized Loss."]
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<PAGE> 186
ADVANCES
On or prior to the Business Day immediately preceding each Distribution
Date, the Master Servicer will either (1) deposit from its own funds the related
Advance into the Certificate Account; (2) cause appropriate entries to be made
in the records of the Certificate Account that funds in the Certificate Account
that are not part of the Available Distribution Amount for the related
Distribution Date have been used to make the Advance; (3) if the Certificate
Account is maintained by the Trustee, instruct the Trustee to use investment
earnings on the Certificate Account to defray the Master Servicer's Advance
obligation; or (4) make (or cause to be made) the aggregate Advance through any
combination of the methods described in clauses (1), (2) and (3) above. Any
funds held for future distribution and used in accordance with clause (2) above
must be restored by the Master Servicer from its own funds or from early
payments collected on the Assets when they become part of a future Available
Distribution Amount. The aggregate Advance for a Distribution Date is the sum of
delinquent scheduled Payments due in the related Due Period, exclusive of all
Nonrecoverable Advances.
Advances are intended to maintain a regular flow of scheduled interest
and principal payments to Certificateholders rather than to guarantee or insure
against losses.
[The Master Servicer will also be obligated to make Advances to the
extent the Master Servicer deems such Advances recoverable out of Liquidation
Proceeds or from collections on the related Asset, in respect of Liquidation
Expenses and certain taxes and insurance premiums not paid by a Mortgagor on a
timely basis.
The Master Servicer will reimburse itself for Advances out of
collections of the late payments in respect of which such Advances were made. In
addition, upon the determination that a Nonrecoverable Advance has been made in
respect of an Asset or upon an Asset becoming a Liquidated Asset, the Master
Servicer will reimburse itself out of funds in the Certificate Account for
unreimbursed amounts advanced by it in respect of such Asset.]
CREDIT SUPPORT
[Disclose particular Credit Support, if any]
LIQUIDITY FACILITIES
[Disclose particular Liquidity Facilities, if any]
CERTAIN YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
The yield to maturity on the Offered Certificates will be affected by
the rate of principal payments on the Assets including, for this purpose,
prepayments, which may include amounts received by virtue of repurchase,
condemnation, insurance or foreclosure. The yield to maturity on the Offered
Certificates will also be affected by the level of any Index. The rate of
principal payments on the Offered Certificates will correspond to the rate of
principal payments (including prepayments) on the related Assets.
[Description of factors affecting yield, prepayment and maturity of the
Assets and Class __ Certificates depending upon characteristics of the Assets.]
WEIGHTED AVERAGE LIFE OF THE OFFERED CERTIFICATES
Weighted average life refers to the average amount of time from the date
of issuance of a security until each dollar of principal of such security will
be repaid to the investor. The weighted average life of the Offered Certificates
will be influenced by the rate at which principal payments (including scheduled
payments, principal prepayments and payments
S-38
<PAGE> 187
made pursuant to any applicable policies of insurance) on the Assets are made.
Principal payments on the Assets may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayment" includes prepayments and
liquidations due to a default or other dispositions of the Assets).
The table of Percent of initial Security Principal Balance Outstanding
for the Offered Certificates at the respective percentages of [CPR] [SPA] set
forth below indicates the weighted average life of such Certificates and sets
forth the percentage of the initial principal amount of such Certificates that
would be outstanding after each of the dates shown at the indicated percentages
of [CPR][SPA]. The table has been prepared on the basis of the following
assumptions regarding the characteristics of the Assets: (i) an outstanding
Principal Balance of $_________, a remaining amortization term of ___ months and
a term to balloon of ___ months: (ii) an interest rate equal to ____% per annum
until the Due Date and thereafter an interest rate equal to % per annum (at an
assumed Index of ____%) and Payments that would fully amortize the remaining
balance of the Asset over its remaining amortization term; (iii) the Assets
prepay at the indicated percentage of [CPR][SPA]; (iv) the maturity date of each
of the Balloon Mortgage Loans is not extended; (v) distributions on the Offered
Certificates are received in cash, on the 25th day of each month, commencing
in_____________; (vi) no defaults or delinquencies in, or modifications, waivers
or amendments respecting, the payment by the mortgagors of principal and
interest on the Assets occur; (vii) the initial Security Principal Balance of
the Offered Certificates is $________; (viii) prepayments represent payment in
full of individual Assets and are received on the respective Due Dates and
include 30 days' interest thereon; (ix) there are no repurchases of Assets due
to breaches of any representation and warranty or otherwise; (x) the Offered
Certificates are purchased on ________; (xi) the Servicing Fee is ____% per
annum; and (xii) the Index on each Interest Rate Adjustment Date is ________%
per annum.
Based on the foregoing assumptions, the table indicates the weighted
average life of the Offered Certificates and sets forth the percentages of the
initial Security Principal Balance of the Offered Certificates that would be
outstanding after the Distribution Date in ___________ of each of the years
indicated, at various percentages of [CPR][SPA]. Neither [CPR][SPA] nor any
other prepayment model or assumption purports to be a historical description of
prepayment experience or a prediction of the anticipated rate of prepayment of
any pool of mortgage loans, including the Assets included in the Trust Fund.
Variations in the actual prepayment experience and the balance of the Assets
that prepay may increase or decrease the percentage of initial Security
Principal Balance (and weighted average life) shown in the following table. Such
variations may occur even if the average prepayment experience of all such
Assets is the same as any of the specified assumptions.
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<PAGE> 188
Percent of Initial Class [ ] Security Principal Balance Outstanding
at the Following Percentages of [CPR][SPA]
Distribution Date
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Initial Percent................. ___% __% __% __% __% __%
____________ 25, 19__...........
____________ 25, 19__...........
____________ 25, 19__...........
____________ 25, 19__...........
____________ 25, 19__...........
____________ 25, 19__...........
____________ 25, 19__...........
____________ 25, 20__...........
____________ 25, 20__...........
____________ 25, 20__...........
____________ 25, 20__...........
Weighted Average Life
(Years) ( . . . . . . . .
</TABLE>
The weighted average life of the Class [ ] Certificates is determined by
(i) multiplying the amount of each distribution of principal by the
number of years from the date of issuance to the related Distribution
Date, (ii) adding the results and (iii) dividing the sum by the total
principal distributions on such class of Certificates.
[Class [ ] Yield Consideration]
[Will describe assumption for various scenarios showing sensitivity of
certain classes to prepayment and default risks and set forth resulting yield.]
[Include yield table and bold disclosure with respect to any Interest Only or
Principal Only Certificates.]
[THE CREDIT SUPPORT ISSUER, if any]
[Description of Credit Support Issuer]
[THE LIQUIDITY FACILITY ISSUER, if any]
[Description of Liquidity Facility Issuer]
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<PAGE> 189
THE DEPOSITOR
Union Planters Mortgage Finance Corp. (the "Depositor") was incorporated
in the State of Delaware on September 5, 1997. As of the date hereof, the
Depositor is a direct, wholly-owned limited purpose finance subsidiary of Union
Planters Bank, N.A., a national banking association. Neither Union Planters
Bank, N.A. nor the Depositor, nor any affiliate of the foregoing, has guaranteed
or is otherwise obligated with respect to the Bonds. The principal executive
offices of the Depositor are located at 7130 Goodlett Farms Parkway, Cordova,
Tennessee 38018 (Telephone: (901) 580-6000). See "The Depositor" in the
Prospectus.
POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of ____________ 1, 199_ (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Master Servicer and the Trustee,
which incorporates by reference the Depositor's Standard Terms to Pooling and
Servicing Agreement (_________ 1997 Edition).
Reference is made to the Prospectus for important information in
addition to that set forth herein regarding the terms and conditions of the
Pooling and Servicing Agreement and the Offered Certificates. The Depositor will
provide to a prospective or actual Certificateholder, without charge, upon
written request, a copy (without exhibits) of the Pooling and Servicing
Agreement. Requests should be addressed to Union Planters Mortgage Finance
Corp., 7130 Goodlett Farms Parkway, Cordova, Tennessee 38018, Attention:
President.
ASSIGNMENT OF THE MORTGAGE LOANS
On or prior to the Closing Date, the Depositor will assign or cause to
be assigned the Assets, without recourse, to the Trustee for the benefit of the
Certificateholders. Prior to the Closing Date, the Depositor will, as to each
Mortgage Loan, deliver to the Trustee (or the custodian hereinafter referred
to), among other things, the following documents (collectively, as to such
Mortgage Loan, the "Mortgage File"): (i) the original or, if accompanied by a
"lost note" affidavit, a copy of the Mortgage Note, duly endorsed, which
transferred such Mortgage Loan, without recourse, in blank or to the order of
Trustee; (ii) the original Mortgage or a certified copy thereof, and any
intervening assignments thereof, or certified copies of such intervening
assignments, in each case with evidence of recording thereon; (iii) an
assignment of the Mortgage, duly executed, which transferred such Mortgage Loan,
in blank or to the order of the Trustee, in recordable form; (iv) assignments of
any related assignment of leases, rents and profits and any related security
agreement (if, in either case, such item is a document separate from the
Mortgage), which transferred such Mortgage Loan, in blank or to the order of the
Trustee; (v) originals or certified copies of all assumption, modification and
substitution agreements in those instances where the terms or provisions of the
Mortgage or Mortgage Note have been modified or the Mortgage or Mortgage Note
has been assumed; and (vi) the originals or certificates of a lender's title
insurance policy issued on the date of the origination of such Mortgage Loan or,
with respect to each Mortgage Loan not covered by a lender's title insurance
policy, an attorney's opinion of title given by an attorney licensed to practice
law in the jurisdiction where the Mortgaged Property is located. The Pooling and
Servicing Agreement will require the Depositor promptly (and in any event within
120 days of the Closing Date) to cause each assignment of the Mortgage described
in clause (iii) above to be submitted for recording in the real property records
of the jurisdiction in which the related Mortgaged Property is located. Any such
assignment delivered in blank will be completed to the order of the Trustee
prior to recording. The Pooling and Servicing Agreement will also require the
Depositor to cause the endorsements on the Mortgage Notes delivered in blank to
be completed to the order of the Trustee. [Delivery of MBS and Agency
Securities, if applicable.]
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<PAGE> 190
THE MASTER SERVICER
General. [Union Planters Bank, N.A., a national banking association,
will act as Master Servicer (in such capacity, the "Master Servicer") for the
Certificates pursuant to the Pooling and Servicing Agreement. The Master
Servicer, a wholly-owned banking subsidiary of Union Planters Corporation, is
engaged, among other things, in the mortgage banking business and, as such,
originates, purchases, sells and services mortgage loans.]
The executive offices of the Master Servicer are located at
_______________, telephone number (__)__________.
Delinquency and Foreclosure Experience. The following tables set forth
certain information concerning the delinquency experience (including pending
foreclosures) on one- to four- family residential mortgage loans included in the
Master Servicer's servicing portfolio (which includes mortgage loans that are
subserviced by others). The indicated periods of delinquency are based on the
number of days past due on a contractual basis. No mortgage loan is considered
delinquent for these purposes until 31 days past due on a contractual basis.
<TABLE>
<CAPTION>
As of December 31, 19 As of December 31, 19 As of , 19
---------------------- ---------------------- ----------
By Dollar By Dollar By Dollar
By No. of Amount of By No. of Amount of By No. of Amount of
Loans Loans Loans Loans Loans Loans --
----- ----- ----- ----- ----- -----
(Dollar Amount in Thousands)
<S> <C> <C> <C> <C> <C>
Total Portfolio ________ ________ $______ ________ $________
$________
Period of
Delinquency
31 to 59 days ( %) ( %) ( %)
60 to 89 days ( %) ( %) ( %)
90 days or more ( %) _________ ( %) ________ ( %) _________
________ _______ _________
Total Delinquent ________ $________ _______ $_______ _________
Loans $ ________
Percent of Portfolio % % % % %
%
Foreclosures
pending (1)
Percent of Portfolio % % % % %
%
Foreclosures
Percent of Portfolio % % % % %
%
</TABLE>
- --------------------
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<PAGE> 191
(1) Includes bankruptcies which preclude foreclosure.
There can be no assurance that the delinquency and foreclosure
experience of the Assets comprising the Trust Fund will correspond to the
delinquency and foreclosure experience of the Master Servicer's mortgage
portfolio set forth in the foregoing tables. The aggregate delinquency and
foreclosure experience on the Assets comprising the Trust Fund will depend on
the results obtained over the life of the Trust Fund.
LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
At or for At or for
the ____ the ____
Months Months
Ended Ended
At December 31, [31], [31],
- ------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1996 1997
----- ---- ---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Number of Mater Servicer-
Serviced Mortgage Loans (1)
Average Number of
Master Servicer-Serviced
Mortgage Loans During
Period ...................
Number of Master Servicer-
Serviced Mortgage Loans
Foreclosed ................
Maser Servicer-Serviced
Mortgage Loans
Foreclosed as a
Percentage of Total
Master Servicer-Serviced
Contacts (2) ..............
Master Servicer-Serviced
Mortgage Loans
Foreclosed as a
Percentage of Average
Number of Master Servicer-
Serviced Mortgage Loans ...
Average Outstanding
Principal Balance
of Mortgage Loans (3) .....
Net Losses from Mortgage Loan
Foreclosures(4):
Total dollars (3) .........
As a Percentage of Average
Principal Balance of
Mortgage Loans(3)(5) .....
</TABLE>
- ------------------
(1) As of period end.
(2) Total Master Servicer-serviced mortgage loans forclosed during the
applicable period expressed as a percentage of the number of Master
Servicer-serviced mortgage loans at the end of the applicable period.
(3) Includes mortgage loans originated by Master Servicer and serviced by
Master Servicer or others.
(4) Net losses represent the amounts charged by the Master Servicer against
its loss reserves for the periods indicated. Such amounts include
estimaes of net losses with respect to certain foreclosures. Charges to
the loss reserves in respect of a foreclosed mortgage loan generally are
made before the foreclosed mortgage loan becomes liquidated. The length
of the accrual period for the amount of accrued and upaid interest
included in the calculation of the net loss varies depending upon the
period in which the loss was charged and whether the mortgage loan was
owned by an entity other than the Master Servicer.
(5) Total net losses incurred on liquidated mortgage loans during the
applicable period expressed as a percentage of the average principal
balance of all mortgage loans at the end of the applicable period.
(6) Annualized.
[NOTE THAT DATA PRESENTED IN THE FOREGOING TABLES IN ANY PROSPECTUS
SUPPLEMENT WILL BE AS OF A DATE NO MORE THAN 135 DAYS PRIOR TO THE DATE OF SUCH
PROSPECTUS SUPPLEMENT.]
The data presented in the foregoing tables are for illustrative
purposes only, and there is no assurance that the delinquency and loan loss
experience of Mortgage Loans in comprising the Trust Assets will be similar to
that set forth above. The delinquency and loan loss experience of mortgage
loans historically has been sharply affected by downturns in regional or local
economic conditions. For instance, such a downturn was experienced in areas
dependent on the oil and gas industry in the 1980s, causing increased level of
delinquencies and loan losses on mortgage loans in affected areas. Regional
and local economic conditions are often volatile, and no predictions can be
made regarding their effects on future economic losses upon mortage loan
losses. Information regarding the geographic location, at origination, of the
Mortgaged Properties is set forth under "Description of the Assets" herein.
In particular, the foregoing data generally represents the Master
Servicer's experience servicing mortgage loans underwritten pursuant to
particular underwriting standards, which may differ from the underwriting
standards used to originate the Mortgage Loans. Further, this data reflect the
Master Servicer's experience servicing mortgage loans during certain historic
economic conditions that may not reflect future conditions. Accordingly, the
performance of the Mortgage Loans and the Master Servicer's servicing
experience with respect thereto may differ materially from the historical
servicing data presented therein.
CERTIFICATE ACCOUNT
The Master Servicer is required to deposit on a daily basis all amounts
received with respect to the Assets of the Trust Fund, net of its servicing
compensation, into a separate Certificate Account maintained with ____________.
Interest or other income earned on funds in the Certificate Account will be paid
to the Master Servicer as additional servicing compensation. See "Description of
the Trust Funds -- Assets" and "Description of the Agreements -- Security
Account and Other Collection Accounts" in the Prospectus.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
[Disclose Servicing Standard]
The principal compensation to be paid to the Master Servicer in respect
of its master servicing activities will be the Servicing Fee. The Servicing Fee
will be payable monthly only from amounts received in respect of interest on
each Asset, will accrue at the Servicing Fee Rate and will be computed on the
basis of the same principal amount and for the same period respecting which any
related interest payment on such Asset is computed. The Servicing Fee Rate [with
respect to each Asset equals % per annum] [equals the weighted average of the
excesses of the Asset Rates over the respective Net Asset Rates].
As additional servicing compensation, the Master Servicer is entitled to
retain all assumption fees, prepayment penalties and late payment charges, to
the extent collected from mortgagors, together with any interest or other income
earned on funds held in the Certificate Account and any escrow accounts. The
Servicing Standard requires the Master Servicer to, among other things,
diligently service and administer the Assets on behalf of the Trustee and in the
best interests of the Certificateholders, but without regard to the Master
Servicer's right to receive such additional servicing compensation. The Master
Servicer is obligated to pay certain ongoing expenses associated with the Trust
Fund and incurred by the Master Servicer in connection with its responsibilities
under the Pooling and Servicing Agreement. See "Description of the Agreements --
Retained Interest; Servicing Compensation and Payment of Expenses" in the
Prospectus for information regarding other possible compensation payable to the
Master Servicer and for information regarding expenses payable by the Master
Servicer [and "Certain Federal Income Tax Consequences" herein regarding certain
taxes payable by the Master Servicer].
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date the Master Servicer shall furnish to each
Certificateholder, to the Depositor, to the Trustee and to the Rating Agency a
statement setting forth certain information with respect to the Assets and the
Certificates required pursuant to the Pooling and Servicing Agreement. In
addition, within a reasonable period of time after each calendar year, the
Master Servicer shall furnish to each person who at any time during such
calendar year was the holder of a Certificate a statement containing certain
information with respect to the Certificates required pursuant to the Pooling
and Servicing Agreement, aggregated for such calendar year or portion thereof
during which such person was a Certificateholder. See "Description of the
Offered Securities -- Reports to Securityholders in the Prospectus.
S-43
<PAGE> 192
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement, the
Voting Rights shall be allocated among the Classes of Certificateholders in
proportion to the respective Security Principal Balances of their Certificates
[(net, in the case of the Class __, Class __ and Class __ Certificates, of any
Uncovered Portion of the related Security Principal Balance)]. Voting Rights
allocated to a class of Certificateholders shall be allocated among such
Certificateholders in proportion to the Percentage Interests evidenced by their
respective Certificates.
TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate following the earliest of (i) the final payment or other liquidation
of the last Asset or REO Property subject thereto, and (ii) the purchase of all
of the assets of the Trust Fund by the Master Servicer. Written notice of
termination of the Pooling and Servicing Agreement will be given to each
Certificateholder, and the final distribution will be made only upon surrender
and cancellation of the Certificates at the office of the Certificate Registrar
specified in such notice of termination.
Any such purchase by the Master Servicer of all the Assets and other
assets in the Trust Fund is required to be made at a price equal to the greater
of (1) the aggregate fair market value of all the Assets and REO Properties then
included in the Trust Fund, as mutually determined by the Master Servicer and
the Trustee, and (2) the excess of (a) the sum of (i) the aggregate Purchase
Price of all the Assets then included in the Trust Fund and (ii) the fair market
value of all REO Properties then included in the Trust Fund, as determined by an
appraiser mutually agreed upon by the Master Servicer and the Trustee, over (b)
the aggregate of amounts payable or reimbursable to the Master Servicer under
the Pooling and Servicing Agreement. Such purchase will effect early retirement
of the then outstanding Offered Certificates, but the right of the Master
Servicer to effect such termination is subject to the requirement that the
aggregate Principal Balance of the Assets then in the Trust Fund is less than
__% of the aggregate Principal Balance of the Assets as of the Cut-off Date. [In
addition, the Master Servicer may at its option purchase any Class or Classes of
Offered Certificates with a Security Principal Balance less than __% of the
original balance thereof at a price equal to such Security Principal Balance
plus accrued interest through _________.]
THE TRUSTEE
_______________ is the Trustee under the Pooling and Servicing
Agreement. The mailing address of the Trustee is _________________, Attention:
Corporate Trust Department.
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of
the Certificates will be used to purchase the Assets simultaneously and to pay
other expenses connected with pooling the Assets and issuing the Certificates.
UNDERWRITING
The Depositor has entered into an underwriting agreement dated ________
__, 19__ (the "Underwriting Agreement") with _________________ (the
"Underwriter"). Subject to the terms and conditions set forth in the
Underwriting Agreement, the Depositor has agreed to sell to the Underwriter and
the Underwriter has agreed to purchase the Offered Certificates set forth below
opposite its name.
<TABLE>
<CAPTION>
Class __ Class __ Class __
<S> <C> <C> <C>
[Underwriter] $__________ $__________ $________
</TABLE>
S-44
<PAGE> 193
The Underwriting Agreement provides that the obligations of the
Underwriter are subject to certain conditions precedent and that the Underwriter
will be obligated to purchase all of the Offered Certificates if any of the
Offered Certificates are purchased.
The Depositor has been advised that the Underwriter proposes to offer
the Offered Certificates to the public initially at the respective public
offering prices set forth on the cover page of this Prospectus Supplement, and
to certain dealers at such prices less a concession not in excess of the amount
set forth below for each Class. The Underwriter and such dealers may allow a
discount not in excess of the amount set forth below for each Class to certain
other dealers. After the initial public offering of the Offered Certificates,
the public offering prices and concessions and discounts to dealers may be
changed by the Underwriter.
<TABLE>
<CAPTION>
Concession Discount
(Percent of (Percent of
Principal Amount) Principal Amount)
<S> <C> <C>
Class __ _____% _____%
Class __ _____% _____%
Class __ _____% _____%
</TABLE>
The Underwriter and any dealers that participate with the Underwriter in
the distribution of the Offered Certificates may be deemed to be underwriters,
and any discounts, concessions or commissions received by them, and any profit
on the resale of the Offered Certificates purchased by them, may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933, as
amended (the "Act").
The Depositor has agreed to indemnify the Underwriter against certain
civil liabilities, including liabilities under the Act, to the extent and under
the circumstances set forth in the Underwriting Agreement.
[Until the distribution of the Offered Certificates is completed, rules
of the Securities and Exchange Commission may limit the ability of the
Underwriters and certain selling group members to bid for and purchase the
Offered Certificates. As an exception to these rules, the Underwriters are
permitted to engage in certain transactions that stabilize the price of the
Offered Certificates. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Offered Certificates.
In general, purchases of a security for the purpose of stabilization
could cause the price of the security to be higher than it might be in the
absence of such purchases.
Neither the Depositor or any of its affiliates nor any of the
Underwriters makes any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Offered Certificates. In addition, neither the Depositor nor any of
its affiliates nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.]
S-45
<PAGE> 194
ERISA CONSIDERATIONS
Fiduciaries of employee benefit plans and certain other retirement
plans and arrangements, including individual retirement accounts and annuities,
Keogh plans, and collective investment funds in which such plans, accounts,
annuities or arrangements are invested (collectively, "Plans"), that are subject
to ERISA or corresponding provisions of the Code should carefully review with
their legal advisors whether the purchase or holding of any Certificates could
result in unfavorable consequences for the Plan or its fiduciaries under the
Plan Asset Regulations (as defined in the Prospectus) or the prohibited
transaction rules of ERISA or the Code. Prospective investors should be aware
that, although certain exceptions from the application of the Plan Asset
Regulations and the prohibited transaction rules exist, there can be no
assurance that any such exception will apply with respect to the acquisition of
a Certificate. See "ERISA Considerations" in the Prospectus.
Sections 406 and 407 of ERISA and Section 4975 of the Code prohibit
certain transactions that involve (1) a Plan that is subject to ERISA and any
party in interest or disqualified person with respect to the Plan and (2) plan
assets. The Plan Asset Regulations define "plan assets" to include not only
securities (such as the Certificates) held by a Plan but also the underlying
assets of the issuer of any equity securities (the "Look-Through Rule"), unless
one or more exceptions specified in the regulations are satisfied. The Offered
Certificates are treated as equity securities for purposes of the Plan Asset
Regulations. Nonetheless, the Look-Through Rule will not apply to the Offered
Certificates as long as one or more of the exceptions specified in the Plan
Asset Regulations are satisfied. One exception to the Look-Through Rule will
apply if the security is registered under the Securities Exchange Act of 1934,
as amended, is freely transferable and is part of a class of securities that is
held by more than 100 unrelated investors (the "Publicly Offered Exception").
Another exception will apply if, immediately after the most recent acquisition
of an equity interest, "benefit plan investors," within the meaning of the Plan
Asset Regulations, do not own 25% or more of the value of any class of equity
interests in the related trust (the "Insignificant Participation Exception").
Based on the information available to the Underwriters at the time of the
printing of the Prospectus, there can be no assurance that either the Publicly
Offered Exception or the Insignificant Participation Exception will apply to
either the initial or subsequent purchases of the Offered Certificates.
[The U.S. Department of Labor has granted an administrative exemption
to the Underwriter (Prohibited Transaction Exemption __-___; Exemption
Application No. ______, __ Fed. Reg.______ (19__))(referred to herein as the
"Exemption") from certain of the prohibited transaction rules of ERISA and the
related excise tax provisions of Section 4975 of the Code with respect to the
initial purchase, the holding and the subsequent resale by Plans of certificates
in pass-through trusts that consist of certain receivables, loans, and other
obligations and that meet the conditions and requirements of the Exemption. The
receivables covered by the Exemption include assets such as the Assets.
Among the general conditions that must be satisfied for the Exemption
to apply are the following:
(1) the acquisition of the certificates by a Plan is on terms
(including the price for the certificates) that are at least as
favorable to the Plan as they would be in an arm's-length transaction
with an unrelated party;
(2) the rights and interests evidenced by the certificates
acquired by the Plan are not subordinate to the rights and interests
evidenced by other certificates of the related trust;
(3) the certificates acquired by the Plan have received a
rating at the time of such acquisition that is in one of the three
highest generic rating categories from either Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), Fitch
Investors Service, L.P. ("Fitch"), Moody's Investors Service, Inc.
("Moody's") or Duff & Phelps Inc. ("D&P");
(4) the trustee of the related trust must not be an affiliate
of any other member of the Restricted Group (as defined below);
S-46
<PAGE> 195
(5) the sum of all payments made to and retained by the
Underwriter in connection with the distribution of the certificates
represents not more than reasonable compensation for underwriting the
certificates;
(6) the sum of all payments made to and retained by the
Depositor pursuant to the assignment of the loans to the trust
represents not more than the fair market value of such loans; and
(7) the sum of all payments made to and retained by the Master
Servicer represents not more than reasonable compensation for such
person's services under any servicing agreement and reimbursement of
the Master Servicer's reasonable expenses in connection therewith.
The Exemption defines the term "reasonable compensation" by reference to DOL
Regulation Sec 2550.408c-2, 29 C.F.R. Sec. 2550.480c-2, which states that
whether compensation is reasonable depends upon the particular facts and
circumstances of each case. Each fiduciary of a Plan considering the purchase
of an Offered Certificate should satisfy itself that all amounts paid to or
retained by the Underwriters, the Depositor and the Master Servicer of the
Assets represent reasonable compensation for purposes of the Exemption. In
addition, it is a condition of the Exemption that the Plan investing in the
certificates is an "accredited investor" as defined in Rule 501(a)(1) of
Regulation D of the Securities and Exchange Commission under the Securities Act
of 1933, as amended. Furthermore, in order for its certificates to qualify
under the Exemption, a trust must meet the following requirements: (a) the
corpus of the trust must consist solely of assets of the type that have been
included in other investment pools; (b) certificates in such other investment
pools must have been rated in one of the three highest rating categories of
S&P, Moody's, D&P or Fitch for at least one year prior to the Plan's
acquisition of certificates; and (c) certificates evidencing interests in such
other investment pools must have been purchased by investors other than Plans
for at least one year prior to any Plan's acquisition of certificates.
The Exemption does not apply to Plans sponsored by the Depositor, the
Underwriter, the Trustee, the Master Servicer and any obligor with respect to
Assets included in the Trust constituting more than five percent of the
aggregate unamortized principal balance of the assets in the trust, or any
affiliate of such parties (the "Restricted Group"). Moreover, the Exemption
provides certain Plan fiduciaries relief from certain self-dealing/conflict of
interest prohibited transactions only if, among other requirements, (a) in the
case of an acquisition in connection with the initial issuance of certificates,
at least 50% of each class of certificates in which Plans have invested is
acquired by persons independent of the Restricted Group and at least 50% of the
aggregate interest in the trust is acquired by persons independent of the
Restricted Group; (b) such fiduciary (or its affiliate) is an obligor with
respect to five percent or less of the fair market value of the obligations
contained in the trust; (c) the Plan's investment in certificates of any class
does not exceed 25% of all of the certificates of that class outstanding at the
time of the acquisition; and (d) immediately after the acquisition, no more than
25% of the assets of the Plan with respect to which such person is a fiduciary
is invested in certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity.]
[The Exemption may apply to the acquisition and holding of the Class __
and Class __ Certificates by Plans provided that all conditions of the Exemption
are met. Prospective investors should be aware, however, that even if the
conditions specified in the Exemption are met, the scope of the relief provided
by the Exemption might not cover all acts that might be construed as prohibited
transactions. In addition, one or more alternative exemptions may be available
with respect to certain prohibited transactions to which the Exemption is not
applicable, depending in part upon the Class of Certificate to be acquired, the
type of Plan fiduciary that is making the decision to acquire such Certificate
and the circumstances under which such decision is made, including, but not
limited to, (a) PTCE 91-38, regarding investments by bank collective investment
funds; (b) PTCE 90-1, regarding investments by insurance company pooled separate
accounts; or (c) PTCE 83-1, regarding acquisitions by Plans of interests in
mortgage pools. Before purchasing Class __ or Class __ Certificates, a Plan
subject to the fiduciary responsibility provisions of ERISA or described in
Section 4975(e)(1) of the Code should consult with its counsel to determine
whether the conditions of the Exemption or any other exemptions would be met. A
purchaser of Class __ or Class __ Certificates should be aware, however, that
even if the conditions specified in one or more exemptions are met, the scope of
the relief provided by an exemption might not cover all acts that might be
construed as prohibited transactions. In addition, any Plan Investor
contemplating an investment
S-47
<PAGE> 196
in the Senior Certificates should note that the duties and obligations of the
Trustee and the Master Servicer are limited to those expressly set forth in the
Pooling and Servicing Agreement, and such specified duties and obligations may
not comport with or satisfy the provisions of ERISA setting forth the fiduciary
duties of Plan fiduciaries.]
[BECAUSE THE SUBORDINATE CERTIFICATES ARE SUBORDINATED SECURITIES, THEY
WILL NOT SATISFY THE REQUIREMENTS OF CERTAIN PROHIBITED TRANSACTION EXEMPTIONS.
AS A RESULT, THE PURCHASE OR HOLDING OF ANY SUBORDINATE CERTIFICATES BY A PLAN
INVESTOR MAY CONSTITUTE A NON-EXEMPT PROHIBITED TRANSACTION OR RESULT IN THE
IMPOSITION OF EXCISE TAXES OR CIVIL PENALTIES. [ACCORDINGLY, NONE OF THE OFFERED
SUBORDINATE CERTIFICATES ARE OFFERED FOR SALE OR ARE TRANSFERABLE TO A PLAN
INVESTOR][ACCORDINGLY, EACH PURCHASER OF ANY SUBORDINATE CERTIFICATE, BY VIRTUE
OF SUCH PURCHASER'S RECEIPT OF SUCH CERTIFICATE, WILL BE DEEMED TO HAVE
REPRESENTED [EITHER (I)] THAT IT IS NOT A PLAN INVESTOR [OR (II) THAT AN
EXEMPTION FROM THE PROHIBITED TRANSACTION PROVISIONS OF ERISA AND THE CODE APPLY
TO SUCH PURCHASE],] UNLESS SUCH PURCHASER PROVIDES THE MASTER SERVICER AND THE
TRUSTEE WITH A BENEFIT PLAN OPINION.]
LEGAL INVESTMENT
The Class __ and Class __ Certificates will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984 ("SMMEA") for so long as they are rated in one of the two highest rating
categories by one or more nationally recognized statistical rating
organizations. As such, the Class __ and Class __ Certificates will be legal
investments for certain entities to the extent provided in SMMEA, subject to
state laws overriding SMMEA. A number of states have enacted legislation
overriding the legal investment provisions of SMMEA. See "Legal Investment" in
the Prospectus.
The appropriate characterization of the Subordinate Certificates under
various legal investment restrictions, and thus the ability of investors subject
to such restrictions to purchase such Certificates, is subject to significant
interpretative uncertainties.
Any financial institution that is subject to the jurisdiction of the
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, the Office of Thrift
Supervision, the National Credit Union Administration, any state insurance
commission, or any other federal or state agencies with similar authority should
review any applicable rules, guidelines and regulations prior to purchasing any
Certificates. Financial institutions should review and consider the
applicability of the Federal Financial Institutions Examination Counsel
Supervisory Policy Statement on the Selection of Securities Dealers and
Unsuitable Investment Practices (to the extent adopted by their respective
federal regulators), which, among other things, sets forth guidelines for
investing in certain types of mortgage related securities and prohibits
investment in certain "high-risk" mortgage securities.
The Depositor makes no representations as to the proper characterization
of any Class of the Offered Certificates for legal investment or other purposes,
or as to the legality of investment by particular investors in any Class of the
Offered Certificates under applicable legal investment restrictions. The
uncertainties may adversely affect the liquidity of any Class of Offered
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 Offered
Certificates constitute legal investments under SMMEA or are subject to
investment, capital or other restrictions. See "Legal Investment" in the
Prospectus.
S-48
<PAGE> 197
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Hunton &
Williams, Richmond, Virginia, and for the Underwriter by ____________, New York,
New York. The material federal income tax consequences of the Offered
Certificates have been passed upon for the Depositor by Hunton & Williams.
RATING
It is a condition to their issuance that each Class of Offered
Certificates obtain the ratings specified on the cover page hereof from the
Rating Agencies specified on the cover page hereof.
[INSERT LANGUAGE DESCRIBING EACH APPLICABLE RATING CATEGORY]
The ratings on asset-backed pass-through certificates address the
likelihood of the receipt by certificateholders of all distributions on the
underlying assets to which they are entitled. Rating opinions address the
structural, legal and issuer-related aspects associated with the securities,
including the nature of the underlying assets. Ratings on pass-through
certificates do not represent any assessment of the likelihood that principal
prepayments will be made by borrowers with respect to the underlying assets or
of the degree to which the rate of such prepayments might differ from that
originally anticipated. As a result, the ratings do not address the possibility
that holders of the Offered Certificates might suffer a lower than anticipated
yield in the event of rapid prepayments of the Assets or in the event that the
Trust is terminated prior to the latest final scheduled Distribution Date for
the Certificates. In addition, the ratings of the Offered Certificates do not
address the possibility that, in the event of the bankruptcy of the Depositor,
the issuance and sale of the Offered Certificates might be recharacterized as a
financing and that, as a result of such recharacterization, distributions on the
Offered Certificates may be delayed or altered.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each security rating should be evaluated
independently of any other security rating.
The Depositor will request _______________ and ________________ to rate
the Offered Certificates. There can be no assurance as to whether any rating
agency not requested to rate the Offered Certificates will nonetheless issue a
rating and, if so, what such rating would be. A rating assigned to the Offered
Certificates by a rating agency that has not been requested by the Depositor to
do so may be lower than the rating assigned by a Rating Agency pursuant to the
Depositor's request.
S-49
<PAGE> 198
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 without the delivery of a final prospectus supplement
and prospectus. This prospectus supplement and the accompanying prospectus
shall not constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of these securities in any State in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED , 199
----------- --
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH [ ], 1998)
$-------------
UNION PLANTERS MORTGAGE FINANCE CORP.
COLLATERALIZED MORTGAGE BONDS, SERIES 199_-_
Union Planters Mortgage Finance Corp. (the "Depositor") will issue
$___________ aggregate principal amount of Collateralized Mortgage Bonds,
Series 199_-_, designated as the Class __ Bonds, the Class __ Bonds and the
Class __ Bonds (collectively, the "Bonds"). The Bonds will be issued pursuant
to an indenture dated as of ______________ 1, 199_ (the "Indenture") between
the Depositor and ___________, as Trustee (the "Trustee"). [Trust Agreement,
Owner Trustee if Owner Trust structure]
The Trust Fund will consist of certain [adjustable rate] [fixed rate]
first lien residential loans made or to be made in the future (the "Mortgage
Loans") secured by first deeds of trust or mortgages on one- to four-family
residential properties, the collections in respect of such Mortgage Loans,
mortgage-backed securities evidencing interests in or secured by Mortgage Loans
("MBS"), and/or mortgage-related securities issued or guaranteed by the United
States, agencies or instrumentalities thereof or agencies created thereby (the
"Agency Securities") or a combination of Mortgage Loans, MBS and/or Agency
Securities (collectively, the "Assets"). [The Bonds will represent indebtedness
of the [Depositor][Trust Fund].] [Credit Support, if any.]
Payments of principal of and interest on the Bonds will be made on the
_________ day of each month or, if such date is not a Business Day, then on the
succeeding Business Day (each a "Payment Date"), commencing on ________, 199_
to the extent described herein. Interest will accrue on the Class __ and Class
__ Bonds at a rate (the "Interest Rate") equal to ___% per annum from the
Closing Date to the first Payment Date and at [a floating rate equal to [Index]
(as defined herein) plus ___% per annum, subject to a cap of __% per annum]
[___% per annum] thereafter.
THE YIELD TO INVESTORS IN THE [INTEREST ONLY] [PRINCIPAL ONLY] BONDS WILL
BE EXTREMELY SENSITIVE TO THE TIMING AND AMOUNT OF PRINCIPAL PREPAYMENTS ON THE
ASSET POOL, AND HOLDERS OF THE [INTEREST ONLY] BONDS MAY FAIL TO RECOVER FULLY
THEIR INITIAL INVESTMENT. SEE "RISK FACTORS" AND "CERTAIN YIELD, PREPAYMENT AND
MATURITY CONSIDERATIONS" HEREIN.
THE RIGHTS OF THE HOLDERS OF THE CLASS __ BONDS AND THE CLASS __ BONDS TO
PAYMENTS OF PRINCIPAL AND INTEREST WILL BE SUBORDINATED TO THE RIGHTS OF THE
HOLDERS OF THE CLASS __ BONDS.
Prospective investors in the Bonds should consider, among other things, the
material risks set forth under the caption "Risk Factors" herein on page __ and
in the Prospectus on page 10.
THESE BONDS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------
It is a condition to the issuance of the Bonds that [Rating Agencies] rate
(i) the Class __ Bonds at least "___," (ii) the Class __ Bonds at least "__,"
and (iii) the Class __ Bonds at least "___."
<PAGE> 199
<TABLE>
<CAPTION>
Collaterialized Original Class Weighted Stated
Mortgage Principal Interest Average Life at Maturity
Bonds Amount (1) Rate Pricing Speed Date
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class __ years
Class __ years
Class __ years
</TABLE>
- ---------------------
(1) Subject to a permitted variance of plus or minus 5% for each Class,
depending on the Mortgage Loans actually pledged to secure the Bonds.
The Bonds offered hereby will be purchased by ____________________ [and ]
([collectively,] the "Underwriter") from the Depositor and will, in each case,
be offered by the Underwriter from time to time to the public in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. The aggregate proceeds to the Depositor from the sale of the Bonds are
expected to be $_____________ before deducting expenses payable by the
Depositor in the amount of $_______.
The Bonds are offered subject to prior sale and subject to the
Underwriter's right to reject orders in whole or in part. [It is expected that
the Bonds will be delivered in book-entry form through the facilities of the
Depository Trust Company on or about _______, 199_.]
--------------------
Each Series of Bonds offered hereby constitute part of a separate Series
of Securities being offered by Union Planters Mortgage Finance Corp. from time
to time pursuant to its Prospectus dated September __, 1997. This Prospectus
Supplement does not contain complete information about the offering of the
Bonds. Additional information is contained in the Prospectus and investors are
urged to read both this Prospectus Supplement and the Prospectus in full. Sales
of the Bonds may not be consummated unless the purchaser has received both this
Prospectus Supplement and the Prospectus.
--------------------
[UNDERWRITER]
_______________, 199_
S-3
<PAGE> 200
THE BONDS OFFERED BY THIS PROSPECTUS SUPPLEMENT CONSTITUTE PART OF A
SEPARATE SERIES OF BONDS ISSUED BY THE DEPOSITOR AND ARE BEING OFFERED PURSUANT
TO ITS PROSPECTUS DATED MARCH __, 1998, OF WHICH THIS PROSPECTUS SUPPLEMENT
IS A PART AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS
CONTAINS IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED
HEREIN, AND PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS
PROSPECTUS SUPPLEMENT IN FULL. SALES OF THE BONDS MAY NOT BE CONSUMMATED UNLESS
THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
- Approximately __% of the Mortgage Loans are subject to higher than
customary mortgage loan credit risk because they have been underwritten in
accordance with standards applicable to "non-conforming credits" and do not
satisfy Fannie Mae or Freddie Mac underwriting guidelines. See "Risk Factors --
Underwriting standards for certain Mortgage Loans may be less stringent and
increase the potential for delinquencies" herein and in the Prospectus.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT
<S> <C>
Summary..........................................................................................................S-
Risk Factors.....................................................................................................S-
Description of the Assets........................................................................................S-
Description of the Servicing Agreement...........................................................................S-
Description of the Bonds.........................................................................................S-
Certain Yield, Prepayment and Maturity
Considerations.................................................................................................S-
The Depositor....................................................................................................S-
The Indenture....................................................................................................S-
The Trustee......................................................................................................S-
Use of Proceeds..................................................................................................S-
Underwriting ...............................................................................................S-
ERISA Considerations.............................................................................................S-
Legal Investment.................................................................................................S-
Legal Matters....................................................................................................S-
Rating...........................................................................................................S-
PROSPECTUS
Prospectus Supplement..............................................................................................
Available Information..............................................................................................
Summary of Prospectus ........................................................................................
Risk Factors.......................................................................................................
Description of the Trust Funds.....................................................................................
Yield Considerations...............................................................................................
The Depositor......................................................................................................
Description of the Offered Securities..............................................................................
Description of the Agreements......................................................................................
Description of Credit Support......................................................................................
Insurance Policies on the Mortgage Loans...........................................................................
Certain Legal Aspects of Mortgage Loans............................................................................
Use of Proceeds .................................................................................................
Federal Income Tax Consequences....................................................................................
State Tax Considerations...........................................................................................
ERISA Considerations...............................................................................................
Legal Investment...................................................................................................
Plan of Distribution...............................................................................................
</TABLE>
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<TABLE>
<S> <C>
Legal Matters......................................................................................................
Experts............................................................................................................
Financial Information..............................................................................................
Ratings............................................................................................................
Glossary...........................................................................................................
</TABLE>
----------------------
UNTIL NINETY DAYS FROM THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED BONDS, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus Supplement and the accompanying Prospectus in connection with the
offer contained in this Prospectus Supplement and the accompanying Prospectus,
and, if given, such information or representations must not be relied upon as
having been authorized by the Depositor or the Underwriter. This Prospectus
Supplement and the accompanying Prospectus shall not constitute an offer to
sell or a solicitation of an offer to buy any of the securities offered hereby
in any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. The delivery of this Prospectus Supplement
and the accompanying Prospectus at any time does not imply that the information
herein is correct as of any time subsequent to the date hereof.
There will be no application to list the Bonds on any exchange, although
the Underwriter intends to make a secondary market in the Bonds, it has no
obligation to do so. There is currently no secondary market for the Bonds and
there can be no assurance that a secondary market for the Bonds will develop,
or if it does develop, that it will continue to exist or provide sufficient
liquidity.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE BONDS. FOR A
DESCRIPTION OF THESE ACTIVITIES. SEE "UNDERWRITING" HEREIN.
[The Class __ Bondholders will have the benefit of a [PARTICULAR ITEM OF
CREDIT SUPPORT] provided by [PROVIDER]. The ____________ will [not] be
available to support other Classes of Bonds. See "Description of the Bonds -
Credit Support" herein.]
The Depositor may sell from time to time under this Prospectus Supplement
and the Prospectus and other related prospectus supplements up to
$______________ in aggregate principal amount of Securities, issuable in
Series. As of the date of this Prospectus Supplement, the Depositor has
publicly sold or committed to sell $___________ in aggregate principal amount
of Securities, including the Bonds.
----------------------
[The Depositor has filed with the Securities and Exchange Commission
certain materials relating to the Assets and the Bonds on Form 8-K. Such
materials have been prepared by the Underwriter for certain prospective
investors, and the information included in such materials is subject to, and
superseded by, the information set forth in this Prospectus Supplement.]
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SUMMARY
The following summary of material information is qualified in its
entirety by reference to the detailed information appearing elsewhere in this
Prospectus Supplement and in the accompanying Prospectus. Certain capitalized
terms used in this Summary are defined elsewhere in this Prospectus Supplement
or in Glossary in the Prospectus.
Depositor............................. Union Planters Mortgage Finance Corp., a
Delaware corporation (the "Depositor"),
a direct, wholly-owned finance
subsidiary of Union Planters Bank, N.A.,
a national banking association. The
principal executive offices of the
Depositor are located at 7130 Goodlett
Farms Parkway, Cordova, Tennessee 38018.
See "The Depositor" herein and in the
Prospectus.
Securities Offered..................... Collateralized Mortgage Bonds, Series
199_-_ (the "Bonds"). Each Bond
represents the right to receive payments
of interest at the Interest Rate
described below, payable [monthly], and
payments of principal at such time and
to the extent provided herein.
<TABLE>
<CAPTION>
Interest Original
Rate Principal Amount
----------------------------------
<S> <C> <C>
Class __ Bonds
Class __ Bonds
Class __ Bonds
</TABLE>
Risk Factors........................... An investment in the Bonds involves
various risks, and prospective
investors should consider carefully the
matters discussed under "Risk Factors"
herein and in the Prospectus prior to
making an investment in the Bonds.
Master Servicer........................ [Union Planters Bank, N.A., a national
banking association] (the "Master
Servicer"). The Master Servicer will
service the Assets pursuant to a
Servicing Agreement dated _________1,
199_ between the Depositor and the
Master Servicer (the "Servicing
Agreement").
Indenture.............................. The Bonds will be issued pursuant to an
indenture dated as of __________ 1, 199_
(the "Indenture") between the Depositor
and the Trustee.
[Trust Agreement....................... The [Owner Notes] will be issued
pursuant to a Trust Agreement dated as
of __________ 1, 199_ (the "Trust
Agreement") between ____________ and the
Owner Trustee.]
Trustee................................ ___________________ (in such capacity,
the "Trustee").
[Owner Trustee......................... ___________________ (in such capacity,
the "Owner Trustee").]
The Assets............................. The Trust Fund securing the Bonds will
include: a pool of [adjustable] [fixed]
rate first lien residential loans (the
"Mortgage Loans"), and secured primarily
by first [deeds of trust] [mortgages] on
one- to four-family residential
properties (the "Mortgaged Properties");
the collections in respect of the
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Mortgage Loans received after the
Cut-Off Date; property securing the
Mortgag Loans that has been acquired by
foreclosure or deed in lieu of
foreclosure; [Credit Support, if
any][Liquidity Facilities, if any]; a
pledge of the Depositor's rights under
the Purchase Agreement; rights under
certain hazard insurance policies
covering the Mortgaged Properties;
[other mortgage-backed securities
evidencing interests in or secured by
Mortgage Loans ("MBS")], [and/or
mortgage-related securities issued or
guaranteed by the United States,
agencies or instrumentalities thereof or
agencies created thereby (the "Agency
Securities")][or a combination of
Mortgage Loans, MBS and/or Agency
Securities] (collectively, the
"Assets").
The Trust Fund will include the unpaid
principal balance of each Asset as of
the Cut-Off Date (the "Cut-Off Date
Principal Balance") [plus any additions
thereto as a result of new advances made
pursuant to the applicable Loan
Agreement (the "Additional Balances")
during the life of the Trust Fund]. With
respect to any date, the "Pool Balance"
will be equal to the aggregate of the
principal balances of all Assets as of
such date. The "Principal Balance" of an
Asset (other than a Liquidated Asset) on
any day is equal to its Cut-Off Date
Principal Balance[, plus (i) any
Additional Balances in respect of such
Assets], minus [(ii)] all collections
credited against the Principal Balance
of such Asset in accordance with the
related Loan Agreement prior to such
day. The Principal Balance of a
Liquidated Asset after the final
recovery of related Liquidation Proceeds
shall be zero.
[The Assets will have an aggregate
principal balance as of the Cut-off Date
of $_________ and individual principal
balances at origination of at least
$______________ but not more than
$__________, with an average principal
balance at origination of approximately
$_________. The Assets will have terms
to maturity from the date of origination
or modification of not more than ____
years, and a weighted average remaining
term to maturity of approximately _____
months as of the Cut-off Date. The
Assets will bear interest at Asset Rates
of at least _____% per annum but not
more than _____% per annum, with a
weighted average Asset Rate of
approximately ____% per annum as of the
Cut-off Date. The Assets will be
acquired by the Depositor on or before
the Closing Date [Pre-Funding, if any].
In connection with its acquisition of
the Assets, the Depositor will be
assigned (and will in turn assign to the
Trustee for the benefit of the holders
of the Bonds) certain rights in respect
of representations and warranties
described herein that were made by the
Asset Seller.]
[_____ of the Assets, representing
_____% of the Assets by aggregate
principal balance as of the Cut-off
Date, provide for scheduled payments of
principal and/or interest ("Payments")
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<PAGE> 204
to be due on the _____ day of [each
month]; the remainder of the Assets
provide for Payments to be due on
[identify day or days] of [each month]
(the date in [any month] on which a
Payment on an Asset Loan is first due,
the "Due Date"). [The rate per annum at
which interest accrues on each Asset is
subject to adjustment on specified Due
Dates (each such date, an "Interest Rate
Adjustment Date") by adding a fixed
percentage amount (a "Gross Margin") to
the value of the then-applicable Index
(as described below) subject, in the
case of substantially all of the Assets,
to limitations on the periodic
adjustment of the related Asset Rate,
and to maximum and minimum lifetime
Asset Rates, as described herein. ___ of
the Assets, representing ___% of the
Assets by aggregate principal balance as
of the Cut-off Date, provide for
Interest Rate Adjustment Dates to occur
[monthly]; the remainder of the Assets
provide for adjustments to the Asset
Rate to occur quarterly, semi-annually
or annually. [Each of the Assets
provides for an initial fixed interest
rate period;] of the Assets,
representing _____% of the Assets by
aggregate principal balance as of the
Cut-off Date, have not yet experienced
their first Interest Rate Adjustment
Date. The latest initial Interest Rate
Adjustment Date for any Asset is
scheduled to occur on ________.]]
[The amount of the Payment on each Asset
is also subject to adjustment on
specified Due Dates (each such date, a
"Payment Adjustment Date") to an amount
that would amortize the outstanding
principal balance of the Assets over its
then remaining amortization schedule and
pay interest at the applicable Asset
Rate, subject, in the case of several
Assets, to payment caps, which limit the
amount by which the Payment may adjust
on any Payment Adjustment Date as
described herein. _______ of the Assets,
representing __% of the Assets (by
aggregate principal balance as of the
Cut-off Date, provide for Payment
Adjustment Dates to occur annually,
while the remainder of the Assets
provide for adjustments of the Payment
to occur monthly, quarterly or
semi-annually.]
[__ Assets, representing ____% of the
Assets by aggregate principal balance as
of the Cut-off Date, provide for monthly
payments of principal based on
amortization schedules significantly
longer than the remaining term of such
Assets, thereby leaving substantial
outstanding principal amounts due and
payable (each such payment, a "Balloon
Payment") on their respective maturity
dates, unless prepaid prior thereto.]
Approximately __% of the Mortgage Loans
are expected to have been underwritten
generally in accordance with
underwriting standards for
"non-conforming credits," which provide
for Mortgagors whose creditworthiness
and repayment ability do not satisfy the
underwriting guidelines of Fannie Mae
and Freddie Mac. See "Risk Factors --
Underwriting standards for certain
Mortgage Loans may be less stringent and
increase the potential for
delinquencies" herein and in the
Prospectus.
[Assets included in the Trust Fund may
be one or more months delinquent with
regard to payment of principal and
interest at the time of their deposit
into the Trust Fund.] [The Mortgage
Loans contain (i) __ Mortgage Loans,
representing ____% of the Assets by
aggregate principal balance as of the
S-8
<PAGE> 205
Cut-off Date, that, as of the Cut-off
Date, have more than 12 scheduled
payments of principal and interest past
due under the terms of the related
Mortgage Note (each, a "Non-Performing
Mortgage Loan"), (ii) __ Mortgage Loans,
representing ____% of the Assets by
aggregate principal balance as of the
Cut-off Date, that, as of the Cut-off
Date, have more than three but less than
twelve 12 scheduled payments of
principal and interest past due under
the terms of the related Mortgage Note
(each, a "Sub-Performing Mortgage
Loan"), and (iii) __ Mortgage Loans,
representing ____% of the Assets by
aggregate principal balance as of the
Cut-off Date, that have had more than
three scheduled payments of principal
and interest past due under the terms of
the related Mortgage Note one or more
times during the term of the related
Mortgage Loan, but at the related
Cut-off Date for the Series is current
in payment (each, a "Reinstated Mortgage
Loan").]
The Assets with respect to any Series
may be guaranteed or insured with
respect to payment of interest and/or
principal by the United States, agencies
or instrumentalities thereof or created
thereby, state or local governments,
agencies or instrumentalities, or
private insurance providers. [Disclose
particular insurance providers]
[Title and issuer of underlying MBS and
Agency Securities, if any, including
amount deposited or pledged, amount
originally issued, maturity date,
interest rate, [redemption provisions],
description of other material terms.]
For a further description of the Assets,
see "Description of the Assets" herein.
[The Indices........................... As of any Interest Rate Adjustment
Date, the Index used to determine the
Asset Rate on [each][identify certain]
Asset will be the ____________. See
"Description of the Assets -- The
Indices" herein.]
[Conversion of Mortgage Loans.......... Approximately __% of the Mortgage
Loans (by aggregate principal balance as
of the Cut-off Date) (the "Convertible
Mortgage Loans") provide that, at the
option of the related Mortgagors, the
adjustable interest rate on such
Mortgage Loans may be converted to a
fixed interest rate, provided that
certain conditions have been satisfied.
Upon notification from a Mortgagor of
such Mortgagor's intent to convert from
an adjustable interest rate to a fixed
interest rate, and prior to the
conversion of any such Mortgage Loan,
the related Warrantying Party (as
defined herein) will be obligated to
purchase the Converting Mortgage Loan
(as defined herein) at the Conversion
Price (as defined herein). [In the event
of a failure by a Sub-Servicer to
purchase a "Converting Mortgage Loan"],
the Master Servicer is required to use
its
S-9
<PAGE> 206
best efforts to purchase such Converted
Mortgage Loan (as defined herein) from
the Trust Fund at the Conversion Price
during the one-month period following
the date of conversion.] In the event
that neither the related Warrantying
Party nor the Master Servicer purchases
a Converting or Converted Mortgage Loan,
the Trust Fund will thereafter include
both fixed-rate and adjustable-rate
Mortgage Loans. See "Certain Yield and
Prepayment Considerations" herein.]
Collections............................ All collections on the Assets will be
allocated by the Master Servicer in
accordance with the Loan Agreements
between amounts collected in respect of
interest ("Interest Collections") and
amounts collected in respect of
principal ("Principal Collections" and
collectively with Interest Collections,
the "Collections"). The Master Servicer
will generally deposit Collections
distributable to the Bondholders in an
account established for such purpose
under the Servicing Agreement (the
"Collection Account"). See "Description
of the Bonds -- Payments on Assets;
Deposits to Collection Account" herein.
Description of the Bonds
A. Principal Payments
on the Bonds................ On each Payment Date, the Principal
Distribution Amount will be applied, to
the extent of the Available Distribution
Amount, to pay principal on the Bonds
until they are paid in full. The
allocation of the Principal Distribution
Amount for each Payment Date to each
Class of Bonds is described herein under
"Description of the Bonds -
Distributions." Principal payments to a
Class will be made to the Holders of the
Bonds of such Class pro rata in the
proportion that the aggregate
outstanding Security Principal Balance
of each Bond of such Class bears to the
aggregate outstanding Security Principal
Balance of all Bonds of such Class. See
"Description of the Bonds" herein.
[Payments of principal to the Holders of
the Subordinate Bonds on any Payment
Date are subordinate to and will be made
only after the payment in full of (i)
all interest and principal due on the
Senior Bonds and (ii) all interest due
on the Subordinate Bonds.]
As to any Payment Date, the "Due Period"
is the calendar month preceding the
month of such Payment Date.
"Liquidation Loss Amount" means with
respect to any Liquidated Asset, the
unrecovered Principal Balance thereof at
the end of the related Due Period in
which such Asset became liquidated after
giving effect to the Net Liquidation
Proceeds in connection therewith.
B. Interest Payments on
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<PAGE> 207
the Bonds and
Interest Rate............... Interest will accrue on the unpaid
Security Principal Balance of the Bonds
at the per annum rate (the "Interest
Rate") equal to ___% per annum from the
Closing Date to the first Payment Date
and thereafter interest will accrue on
the Bonds from and including the
preceding Payment Date to but excluding
such current Payment Date (each, an
"Interest Accrual Period") at [a
floating rate equal to [Index] plus
___%, subject to a cap of __% per annum]
[___%]. [Interest will be computed on
the basis of a 360 day year consisting
of 12 months of 30 days each.] [Interest
will be calculated on the basis of the
actual number of days in each Interest
Accrual Period divided by 360.] A
failure to pay interest on any Bonds on
any Payment Date that continues for five
days constitutes an Event of Default
under the Indenture. See "Description of
the Bonds -- Interest" herein.
C. Payment Date.................. The ____ day of each month or, if such
day is not a Business Day, the next
succeeding Business Day, commencing with
_______, 199_.
D. Record Date................... The Record Date for each Payment Date
is [the last Business Day of the month
preceding the month in which the related
Payment Date occurs ](each, a "Record
Date"). See "Description of the Bonds"
herein.
E. Final Scheduled
Payment Dates............... To the extent not previously paid, the
Security Principal Balance of the Bonds
will be due on the Payment Date in
_______, 20__. Failure to pay the full
Security Principal Balance of Bonds on
or before the applicable final scheduled
payment dates constitutes an Event of
Default under the Indenture.
F. Form and Registration......... The Bonds will initially be delivered
in book-entry form ("Book-Entry Bonds").
Holders of the Bonds may elect to hold
their interests through The Depository
Trust Company ("DTC"). Transfers within
DTC will be in accordance with the usual
rules and operating procedures of the
relevant system. So long as the Bonds
are Book-Entry Bonds, such Bonds will be
evidenced by one or more securities
registered in the name of Cede & Co.
("Cede"), as the nominee of DTC. The
Bonds will initially be registered in
the name of Cede. The interests of such
Holders will be represented by book
entries on the records of DTC and
participating members thereof. No Holder
of a Bond will be entitled to receive a
definitive note representing such
person's interest, except in the event
that Bonds in fully registered,
certificated form ("Definitive Bonds")
are issued under the limited
circumstances described in "Description
of the Offered Securities" in the
Prospectus. All references in this
Prospectus Supplement to Bonds reflect
the rights of Holders
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<PAGE> 208
of such Bonds only as such rights may be
exercised through DTC and its
participating organizations for so long
as such Bonds are held by DTC.
G. Denominations................. The Bonds will be issued [on the book-
entry records of DTC and its
Participants] [in registered, certified
form] in minimum denominations of
$_______ and integral multiples of
$_____ in excess thereof[, with one Bond
of such class evidencing an additional
amount equal to the remainder of the
Bond Balance thereof].
Servicing.............................. The Master Servicer will be responsible
for servicing, managing and making
collections on the Assets. On the
________ Business Day, but no later than
the ________ calendar day, of each month
(the "Determination Date"), the Master
Servicer will calculate, and instruct
the Trustee regarding, the amounts to be
paid, as described herein, with respect
to the related Due Period to the
Holders. See "Description of the Bonds"
herein. The Master Servicer will receive
a monthly servicing fee in the amount of
____% per annum (the "Servicing Fee
Rate"), of the related Pool Balance and
certain other amounts, as servicing
compensation from the Trust Fund. See
"Servicing of Assets -- Servicing
Compensation and Payment of Expenses"
herein. In certain limited
circumstances, the Master Servicer may
resign or be removed, in which event
either the Trustee or a third-party
servicer will be appointed as successor
Master Servicer. See "Servicing of the
Loans --Certain Matters Regarding the
Master Servicer" and "Description of the
Agreements -- Events of Default" and "--
Rights Upon Event of Default" in the
Prospectus.
[Advances.............................. The Master Servicer is obligated as
part of its servicing responsibilities
to make certain advances that in its
good faith judgment it deems recoverable
with respect to delinquent scheduled
payments on Assets. [The Master Servicer
also is obligated to advance delinquent
payments of taxes, insurance premiums
and escrowed items, as well as
liquidation-related expenses with
respect to Assets.] Neither the
Depositor nor any of its affiliates has
any responsibility to make such
advances. Advances made by a Master
Servicer are reimbursable generally from
subsequent recoveries in respect of such
Assets. [The Trustee is obligated to
make any such Advance if the Master
Servicer fails in its obligation to do
so, to the extent provided in the
Pooling and Servicing Agreement. See
"Description of the Bonds - Advances"
herein and "Description of the Offered
Certificates - Advances in Respect of
Delinquencies" in the Prospectus.]
Optional Termination................... The Depositor may, at its option,
redeem a Class or Classes of Bonds in
whole, but not in part, on any Payment
Date (i) on or after _________________,
or (ii) on the date on which,
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<PAGE> 209
after taking into account payments of
principal to be made on such Payment
Date, the aggregate outstanding
principal balance of the Bonds is less
than _____% of the initial aggregate
Security Principal Balance of the Bonds.
Such redemption will be paid in cash at
a price equal to 100% of the aggregate
outstanding Security Principal Balance
of the Class of Bonds so redeemed, plus
accrued and unpaid interest through the
day preceding the final Payment Date. At
the option of the Depositor, an optional
redemption of a Class of Bonds can be
effected without retiring such Class of
Bonds so that the Depositor has the
ability to own or resell such Class of
Bonds. Upon redemption and retirement of
all of the Bonds, the Assets securing
those Bonds may be released from the
lien of the Indenture. See "Description
of the Bonds -- Optional Termination"
herein and "Description of the Offered
Securities -- Termination" in the
Prospectus.
Credit Support......................... [Disclose Credit Support, if any.]
Liquidity Facility..................... [Disclose Liquidity Facility, if any.]
Federal Income Tax
Consequences......................... Based on the facts as they currently
exist, Hunton & Williams, tax counsel
to the Depositor, is of the opinion
that the Bonds will be taxable debt
obligations under the Internal Revenue
Code of 1986, as amended (the "Code")
and interest paid or accrued thereon,
including any original issue discount,
will be taxable to Bondholders. No
election will be made to treat the
Depositor, the Trust Fund, the Assets,
or the arrangement by which the Bonds
are issued as a real estate mortgage
investment conduit or a financial asset
securitization investment trust.
Interest income (including original
issue discount and market discount) will
accrue on the Bonds as described in
"Federal Income Tax Consequences" in the
Prospectus. The Bonds may be issued with
original issue discount for federal
income tax purposes. See "Federal Income
Tax Consequences --- Original Issue
Discount" in the Prospectus. In
determining the rate of accrual of
original issue discount and market
discount, if any, on the Bonds,
Bondholders should use a prepayment
assumption of [ %] [CPR] [SPA]. No
representation is made, however, as to
the rate at which prepayments on the
Assets actually will occur.
Legal Investment....................... The Class __ and Class __ Bonds will
constitute "mortgage related securities"
for purposes of the Secondary Mortgage
Market Enhancement Act of 1984 ("SMMEA")
for so long as they are rated in one of
the two highest rating categories by one
or more nationally recognized
statistical rating organizations.
Accordingly, the Class __ and Class __
Bonds will be legal investments for
certain entities to the extent provided
in SMMEA, subject to state laws
overriding SMMEA. A number of states
have enacted legislation
S-13
<PAGE> 210
overriding the legal investment
provisions of SMMEA. See "Legal
Investment" herein and in the
Prospectus.
The Depositor makes no representations
as to the proper characterization of any
Class of the Bonds for legal investment
or other purposes, or as to the legality
of investment by particular investors in
any Class under applicable legal
investment restrictions. These
uncertainties may adversely affect the
liquidity of any Class. 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 to
what extent the Bonds are subject to
investment, capital or other
restrictions. See "Legal Investment"
herein and in the Prospectus.
ERISA Considerations................... It is anticipated that the Bonds will
be treated as debt for state law
purposes. Accordingly, a purchaser
subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), should not be treated as
having acquired a direct interest in the
Assets by reason of its purchase of a
Bond. However, fiduciaries of employee
benefit plans and certain other
retirement plans and arrangements,
including individual retirement accounts
and annuities, Keogh plans, and
collective investment funds in which
such plans, accounts, annuities or
arrangements are invested, that are
subject to ERISA, or corresponding
provisions of the Code ("Plans") should
review carefully with their legal
advisors whether the purchase or holding
of the Bonds still could give rise to a
transaction that is prohibited under
ERISA or the Code. Certain prohibited
transaction exemptions may be applicable
to certain Classes of the Bonds as
described herein. See "ERISA
Considerations" herein and in the
Prospectus.
Rating................................. It is a condition to the issuance of
the Bonds that each Class of Bonds
receive the ratings specified for such
Class on the cover page hereof. A
security rating is not a recommendation
to buy, sell or hold securities and may
be subject to revision or withdrawal at
any time by the assigning rating
organization. A security rating does not
represent any assessment of the
likelihood of principal prepayments on
the Assets or of the degree to which the
rate of such prepayments might differ
from those originally anticipated. Also,
a
S-14
<PAGE> 211
security rating does not represent any
assessment of the yield to maturity that
investors may experience.
The Depositor has not requested a rating
of the Bonds from any rating agency
other than _________________ [and
__________________]. However, there can
be no assurance as to whether any other
rating agency will rate the Bonds, or if
one does, what rating would be assigned
by such rating agency.
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<PAGE> 212
RISK FACTORS
Prospective investors should consider, among other things, the following,
which represent the principal factors that make an offering of Bonds
speculative or high risk:
Bondholders Have Recourse Only to Trust Assets Pledged to Secure the
Bonds. The Bonds will not be insured or guaranteed by any governmental entity
or by the Depositor, the Master Servicer, the Trustee or any affiliate of the
foregoing or by any other person. The Bondholders will have no recourse to the
Depositor in the event of a default on the Bonds, and each Bondholder will be
deemed to have agreed by the acceptance of its Bond not to file a bankruptcy
petition or commence similar proceedings in respect of the Depositor. The Trust
Assets pledged to secure the Bonds will be the only source for payments on the
Bonds.
The Weighted Average Life of The Bonds Is Uncertain. The rate and timing
of principal payments on the Bonds will depend, among other things, on the rate
and timing of principal payments (including prepayments, defaults, liquidations
and purchases of Assets due to a breach of representation and warranty) on the
Assets. The rate at which principal prepayments occur on the Assets will be
affected by a variety of factors, including, without limitation, the terms of
the Assets, the level of prevailing interest rates, the availability of
mortgage credit and economic, geographic, tax, legal and other factors. In
general, however, if prevailing interest rates fall significantly below the
Asset Rates on the Assets, such Assets are likely to be the subject of higher
principal prepayments than if prevailing rates remain at or above the rates
borne by such Assets. [The rate of principal payments on the Bonds will
correspond to the rate of principal payments on the Assets and is likely to be
affected by the Lock-out Periods and Prepayment Premium provisions applicable
to the Assets and by the extent to which the Master Servicer is able to enforce
such provisions. Assets 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.] [As is the case with mortgage-backed securities generally, the Bonds
are subject to substantial inherent cashflow uncertainties because the Mortgage
Loans may be prepaid at any time.]
The Yield of the Bonds will be Affected by Circumstances beyond the
Depositor's Control. The yield to maturity on the Bonds will depend, among
other things, on the rate and timing of principal payments (including
prepayments, defaults, liquidations and purchases of Assets due to a breach of
representation and warranty) on the Assets and the allocation thereof to reduce
the Security Principal Balance of such Classes. [The yield to maturity on the
Class __ Bonds will also depend on changes in the applicable Index and the
effect of any maximum lifetime Asset Rate, minimum lifetime Asset Rate, Payment
Cap and Periodic Rate Cap, as applicable.] The yield to investors on the Class
__ Bonds will be adversely affected by any allocation thereto of Prepayment
Interest Shortfalls on the Assets, which are expected to result from the
distribution of interest only to the date of prepayment (rather than a full
month's interest) in connection with prepayments in full, and the lack of any
distribution of interest on the amount of any partial prepayments.
In general, if a Bond is purchased at a premium and principal
distributions thereon generally occur at a rate faster than anticipated at the
time of purchase, the investor's actual yield to maturity will be lower than
that assumed at the time of purchase. Conversely, if a Bond is purchased at a
discount and principal distributions thereon generally occur at a rate slower
than that assumed at the time of purchase, the investor's actual yield to
maturity will be lower than assumed at the time of purchase.
[Because [certain of] the Assets are adjustable rate instruments, the
Asset Rates and periodic payments can be expected to increase in a rising
interest rate environment, perhaps without a corresponding increase in the
related Mortgagors' income. In such event, the Mortgagor's ability to make
payments may be impaired, and a Mortgagor payment default would be more likely
to occur.]
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UNDERWRITING STANDARDS FOR CERTAIN MORTGAGE LOANS MAY BE LESS STRINGENT AND
INCREASE THE POTENTIAL FOR DELINQUENCIES. Approximately ___% of the Mortgage
Loans were underwritten in accordance with underwriting standards intended to
provide single-family mortgage loans for non-conforming credits. A Mortgage
Loan made to a "non-conforming credit" means a mortgage loan that is ineligible
for purchase by Fannie Mae or Freddie Mac due to Mortgagor credit
characteristics that do not meet the Fannie Mae or Freddie Mac underwriting
guidelines, including a loan made to a Mortgagor whose creditworthiness and
repayment ability do not satisfy such Fannie Mae or FREDDIE MAC underwriting
guidelines and a Mortgagor who may have a record of major derogatory credit
items such as credit write-offs, outstanding judgements and prior bankruptcies.
ACCORDINGLY, SUCH MORTGAGE LOANS ARE LIKELY TO EXPERIENCE RATES OF DELINQUENCY
AND FORECLOSURE THAT ARE HIGHER, AND MAY BE SUBSTANTIALLY HIGHER, THAN MORTGAGE
LOANS ORIGINATED IN ACCORDANCE WITH FANNIE MAE OR FREDDIE MAC UNDERWRITING
GUIDELINES. AS A RESULT, LOSSES ON SUCH MORTGAGE LOANS MAY BE HIGHER THAN
LOSSES ON MORTGAGE LOANS ORIGINATED IN ACCORDANCE WITH SUCH GUIDELINES.
The primary considerations in underwriting a Mortgage Loan are the
assessment of the creditworthiness of the mortgagor, the value of the Mortgaged
Property and the adequacy of such property as collateral in relation to the
amount of the Mortgage Loan. Because such Mortgagors are less creditworthy than
Mortgagors who meet Fannie Mae or Freddie Mac underwriting criteria,
delinquencies and foreclosures may be more prevalent with respect to such
Mortgage Loans than with respect to Mortgage Loans originated in accordance with
Fannie Mae or Freddie Mac underwriting guidelines. Therefore, changes in the
values of the Mortgaged Properties may have a greater effect on the loss
experience of such Mortgage Loans than on Mortgage Loans originated in
accordance with the Fannie Mae or Freddie Mac underwriting guidelines. No
assurance can be given that the values of the Mortgaged Properties have remained
or will remain at the levels in effect on the dates of origination of the
related Mortgage Loans. If the values of the Mortgaged Properties decline after
the dates of origination, then the rate and severity of losses on such Mortgage
Loans may increase and such increase may be substantial.
[Non-Performing Mortgage Loans, Sub-Performing Mortgage Loans and
Reinstated Mortgage Loans Create Risks That Bondholders May Not Recover Their
Initial Investment And May Adversely Affect Yield. The Assets include
Non-Performing Mortgage Loans, Sub-Performing Mortgage Loans and Reinstated
Mortgage Loans. Repayment of the principal amount of the Offered Securities is
dependent, in large part, upon the ability of the Master Servicer to cause such
Mortgage Loans to become or remain current in payment, to sell or foreclose upon
such Mortgage Loans or to acquire title to the Mortgaged Properties by other
means and to liquidate the related REO Properties. There can be no assurance as
to whether the Master Servicer will be successful in such efforts or as to the
timing thereof. The ability of the Master Servicer to sell an REO Property will
depend upon its ability to find a willing purchaser at a price acceptable to the
Master Servicer, subject to certain guidelines. In addition, certain rights of
redemption in various states may limit or prevent the Master Servicer from
selling an REO Property at what would otherwise be an appropriate time for sale.
All Non-Performing Mortgage Loans, Sub-Performing Mortgage Loans and
Reinstated Mortgage Loans are insured by a governmental agency. There is no
obligation on the part of the Depositor, the Master Servicer or any other person
to repurchase or replace any Mortgage Loan.
Certain Mortgage Loans may be non-recourse loans or loans for which
recourse may be restricted or unenforceable, or as to which recourse may be had
only against the specific Mortgaged Property and such other assets, if any, as
have been pledged to secure the related Mortgage Loan. With respect to those
Mortgage Loans that provide for recourse against the Mortgagor and his assets
generally, there can be no assurance that such recourse will ensure a recovery
in respect of a defaulted Mortgage Loan greater than the liquidation value, if
any, of the related Mortgaged Property. The ability of the Master Servicer to
liquidate any Mortgaged Property or REO Property, and the liquidation value
thereof, may be adversely affected by risks generally incident to interests in
real property, including changes or weakness in general or local economic
conditions, declines in real estate values, the volume of other similar
properties for sale, adverse changes in interest rates, real estate and personal
property tax rates, energy costs and other expenses, environmental concerns,
acts of God, and other factors that are beyond the Master Servicer's control.]
[Interest Only] and [Principal Only] Bonds Are Subject to Enhanced
Prepayment Risks. Faster mortgage prepayment rates, which are generally
associated with a declining interest rate environment, will have the effect of
reducing the weighted average life of each Class of Bonds and increasing the
reinvestment risk associated with the inability to achieve comparable yields on
the available investment alternatives in such reduced interest rate environment.
As a consequence, the price of mortgage-related securities that are sold at a
premium, such as the [Interest Only Bonds], will be negatively affected by
faster than anticipated prepayment rates. Conversely, slower mortgage
prepayment rates, which are generally associated with an increasing interest
rate environment or declining real estate values, will have the effect of
increasing the weighted average life of each Class of Bonds and decreasing the
amount of funds available to a holder of Bonds to reinvest in higher yielding
investment alternatives. As a consequence, the price of mortgage-related
securities that are sold at a discount, such as the [Principal Only Bonds], will
be negatively affected by slower than anticipated prepayment rates. See
"Certain Yield, Prepayment and Maturity Considerations" herein.]
[Credit Risk from Subordination of the Subordinate Bonds to the Senior
Bonds. Payments of principal of and interest on the Assets will be available to
make distributions on the Subordinate Bonds only after required distributions
have been made on the Senior Bonds. Further, all realized losses on the Assets
generally will be allocated to the Subordinate Bonds prior to being allocated to
the Senior Bonds. Realized losses on the Assets in excess of the available
Credit Support will adversely affect the yield on the Bonds.]
The Master Servicer's Ability to Realize on Assets May Be Limited by
Applicable State Law. A variety of factors may limit the Master Servicer's
ability to repossess or foreclose on and liquidate the Mortgaged Properties
securing the Assets or may limit the amount realized upon any such liquidation
to less than the amount due under the related Asset. See "Certain Legal Aspects
of Mortgage Loans" in the Prospectus.
[The following two paragraphs will be included in the event any of the
Mortgage Loans are acquired from the Resolution Trust Corporation:]
[Troubled Mortgage Loan Originators Create Risks to Bondholders.
[Certain][The] Mortgage Loans were originated or purchased by the [Originating
Institutions], each of which is subject to an RTC receivership. It is possible
that the financial difficulties experienced by the [Originating Institutions]
may have adversely affected either or both of (i) the standards and procedures
pursuant to which the Mortgage Loans were originated or purchased by such
[Originating Institutions] and (ii) the manner in which such Mortgage Loans have
been serviced prior to assumption of servicing responsibilities by the Master
Servicer. The Mortgage Loans will be acquired by the Depositor on or before the
Closing Date from the Asset Seller, which acquired the Mortgage Loans from the
RTC in its capacity as receiver of each of the associations pursuant to a
certain mortgage loan sale agreement, dated ______, 199_ (as amended, the "Loan
Sale Agreement"). Pursuant to the Loan Sale Agreement, the RTC as receiver of
the [Originating Institutions], has made certain
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representations and warranties regarding the Mortgage Loans and is obligated to
cure such breaches or repurchase those Mortgage Loans as to which there is a
breach of such representations and warranties. The RTC repurchase price for the
Mortgage Loans is par plus accrued interest at the related Mortgage
Rate[,except in the case of Mortgage Loans as to which a repurchase for a
breach of the representation and warranty relating to certain environmental
matters would be accomplished at a price that initially is discounted but
increases to par over approximately __ years]. The RTC, acting in its corporate
capacity, has guaranteed such obligations of the RTC, acting in its capacity as
receiver. The agreement pursuant to which such guarantee was made by the RTC is
hereinafter referred to as the "Guarantee Agreement".]
[Limited Information is Available with respect to Certain Mortgage Loans.
The information set forth in this Prospectus Supplement with respect to the
Mortgage Loans is derived from books and records of the [Originating
Institutions], as well as a limited review of the credit and legal files
relating to the Mortgage Loans. Accordingly, available information does not
permit the Depositor to determine fully the origination, credit appraisal and
underwriting practices of the originators of the Mortgage Loans. Furthermore,
it is possible that this Prospectus Supplement does not contain material
information regarding the Mortgage Loans that would have been disclosed if the
structure and personnel of the [Originating Institutions] had not been affected
by such institutions having been placed in receivership. While the Depositor
has undertaken a limited review of the records and files related to the
Mortgage Loans in connection with the issuance of the Bonds, the Mortgage Loans
have not been "re-underwritten" or subjected to the type of review that would
typically be made in respect of a newly originated mortgage loan.]
[Concentration of Mortgage Loans May Create Risks to Bondholders.
Approximately ___% of the Mortgage Loans are secured by properties located in
the State of ____________. Accordingly, for a large percentage of the Mortgage
Loans, a Mortgagor's ability to make mortgage payments and residential housing
prices are more dependent on the local economy in ______________. As a
consequence, Losses on the Mortgage Loans may exceed those that might be
incurred were the pool of Mortgage Loans more geographically dispersed.]
Bonds Issued in Book-Entry Form May Create Liquidity Risks to Bondholders.
Issuance of the Bonds in book-entry form may reduce the liquidity of such Bonds
in the secondary trading market because investors may be unwilling to purchase
Bonds for which they cannot obtain physical securities. See "Description of the
Bonds --Book-Entry Registration" herein.
Because transactions in the Bonds can be effected only through DTC,
participating organizations, indirect participants and certain banks, the
ability of a Bondholder to pledge a Bond to persons or entities that do not
participate in the DTC system or otherwise to take actions in respect of such
Bonds, may be limited due to lack of a physical security representing the
Bonds. See "Description of the Bonds--Book-Entry Registration" herein.
Bondholders may experience some delay in their receipt of distributions of
interest and principal on the Bonds because such distributions will be
forwarded by the Trustee to DTC and DTC will credit such distributions to the
accounts of its Participants (as defined herein) which will thereafter credit
them to the accounts of Bondholders either directly or indirectly through
indirect participants. See "Description of the Bonds -- Book-Entry
Registration" herein.
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DESCRIPTION OF THE ASSETS
GENERAL
The Trust Fund will consist primarily of [___ [conventional], [fixed
interest] [adjustable interest] rate Mortgage Loans with an aggregate Principal
Balance as of the Cut-off Date, after deducting payments of principal due on
such date, of $____________,] [mortgage pass-through certificates,
mortgage-backed securities evidencing interests therein or secured thereby that
have been previously (a) offered and distributed to the public pursuant to an
effective registration statement or (b) purchased in a transaction not involving
any public offering from an entity that is not an affiliate of the issuer of
such securities at the time of sale (nor an affiliate thereof at any time during
the three preceding months); provided, a period of two years has elapsed since
the later of the date the securities were acquired from the issuer or an
affiliate thereof (the "MBS"),] [and] [certain direct obligations of the United
States, agencies thereof or agencies created thereby (the "Agency Securities",
and Mortgage Loans, MBS and/or Agency Securities collectively referred to herein
as the "Assets")].
[MORTGAGE LOANS
Each Mortgage Loan is evidenced by a promissory note (a "Mortgage Note")
and secured by a mortgage, deed of trust or other similar security instrument
(a "Mortgage" creating a first lien on a one- to four-family residential
property (a "Mortgaged Property"). The Mortgaged Properties consist of
[description of one- to four-family residential properties]. [Because no
evaluation of any Mortgagor's financial condition has been conducted, investors
should consider all of the Mortgage Loans to be non-recourse loans so that, in
the event of mortgagor default, recourse may be had only against the specific
property and such limited other assets as have been pledged to secure a
Mortgage Loan, and not against the mortgagor's other assets.] All percentages
of the Assets described herein are approximate percentages (except as otherwise
indicated) by aggregate Principal Balance as of the Cut-off Date.]
[The Mortgage Loans to be included in the Trust Fund will have been
originated or acquired by ________________ (the "Asset Seller") and will comply
with the underwriting criteria described herein. The Depositor will purchase
the Mortgage Loans to be included in the Trust Fund on or before the Closing
Date from the Asset Seller pursuant to a seller's agreement (the "Seller's
Agreement"), to be dated as of ____________ 1, 199_ between the Asset Seller
and the Depositor.
Under the Seller's Agreement, the Asset Seller will make certain
representations, warranties and covenants to the Depositor relating to, among
other things, the due execution and enforceability of the Seller's Agreement
and certain characteristics of the Mortgage Loans, and will be obligated to
repurchase or substitute for any Mortgage Loan as to which there exists
deficient documentation or an uncured material breach of any such
representation, warranty or covenant. Under the Indenture, the Depositor will
pledge all its right, title and interest in such representations, warranties
and covenants (including ____________________'s repurchase or substitution
obligation) to the Trustee for the Trust Fund. 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]. _____________, as seller of
the Assets 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 such representations, warranties,
covenants and repurchase obligations. See "Description of the Agreements --
Representations and Warranties; Repurchases" in the Prospectus.]
[Particular Non-conforming credit disclosure]
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FHA LOANS AND VA LOANS
Certain of the Mortgage Loans are subject to FHA insurance as described
herein (the "FHA Loans") and certain of the Mortgage Loans are subject to a VA
guarantee as described herein (the "VA Loans"). All FHA Loans and VA Loans must
conform to HUD (as defined herein) or VA origination guidelines, as the case may
be, at the time of origination. The FHA Loans will be insured by the Federal
Housing Administration ("FHA") of the United States Department of Housing and
Urban Development ("HUD") as authorized under the National Housing Act of 1934,
as amended (the "National Housing Act"), and the United States Housing Act of
1937, as amended (the "United States Housing Act"). No FHA Loan may have an
interest rate or original principal amount exceeding the applicable FHA limits
at the time of origination of such FHA Loan.
The VA Loans will be partially guaranteed by the VA under the
Servicemen's Readjustment Act of 1944, as amended. The Servicemen's Readjustment
Act of 1944, as amended, permits a veteran (or in certain instances the spouse
of a veteran) to obtain a mortgage loan guarantee by VA covering mortgage
financing of the purchase of a one-to-four family dwelling unit at interest
rates permitted by VA. The program has no mortgage loan limits, requires no down
payment from the purchaser and permits the guarantee of mortgage loans of up to
30 years' duration. However, no VA Loan will have an original principal amount
greater than five times the amount of the related guarantee.
Insurance premiums for FHA Loans are collected by the Master Servicer
and are paid to the FHA. The regulations governing FHA-insured single-family
mortgage insurance programs generally provide that insurance benefits are
payable upon foreclosure (or other acquisition of possession) and conveyance of
the mortgaged premises to HUD. With respect to a defaulted FHA Loan, the Master
Servicer may be limited in its ability to initiate foreclosure proceedings.
Historically, pursuant to an assignment program (the "Assignment Program"), HUD
in certain circumstances offered qualified borrowers who had defaulted on an FHA
loan an opportunity to avoid foreclosure and retain their homes. Under the
Assignment Program, the FHA serviced FHA-insured mortgage loans that had
defaulted and been assigned to HUD under the Assignment Program. In addition,
HUD gave forbearance, for a period of no longer than 36 months, to mortgagors
who had demonstrated a temporary inability to make full payments due to
circumstances beyond the mortgagor's control such as a reduction in income or
increase in expenses. The Assignment Program was terminated and replaced with
mandatory loss mitigation procedures in April 1996 whereby servicers of
defaulted FHA-insured loans must choose from a variety of tools to cure a
default prior to filing an FHA insurance claim.
HUD has the option, in most cases, to pay insurance claims in cash or
in debentures issued by HUD. Presently, claims for most programs are being paid
in cash and, for the most part, claims have not been paid in debentures since
1965. HUD debentures issued in satisfaction of FHA insurance claims bear
interest at the applicable HUD debenture interest rate.
The amount of insurance benefits generally paid by the FHA is equal to
the entire unpaid principal amount of the defaulted FHA Loan, adjusted to
reimburse the Master Servicer for certain costs and expenses and to deduct
certain amounts received or retained by the Master Servicer after default. When
entitlement to insurance benefits results from foreclosure (or other acquisition
of possession) and conveyance to HUD, the Master Servicer is generally
compensated for no more than two-thirds of its foreclosure costs and attorneys'
fees (which costs are evaluated based upon Fannie Mae guidelines (which are
state specific)), and is compensated for accrued and unpaid mortgage interest
for a limited period prior to the institution of foreclosure or other
acquisition in general only to the extent it was allowed pursuant to a
forbearance plan approved by HUD. Provided the regulations are complied with,
the Master Servicer receiving cash benefits will generally be entitled to the
debenture interest which would have been earned, as of the date the cash payment
is received, had the benefits been paid in debentures. Except where unpaid
mortgage interest is recoverable pursuant to an approved forbearance plan, such
debenture interest is generally payable from a date 30 days after the
mortgagor's first uncorrected failure to perform any obligation or make any
payment due under the mortgage loan, which results in no recovery of interest
accrued during the first two months of delinquency.
Under certain circumstances, as set forth in the regulations, HUD is
authorized to request or require the Master Servicer to pursue a deficiency
judgment against any defaulting Mortgagor. In this regard, HUD may request or
require the Master Servicer (as the case may be under the regulations) to pursue
a deficiency judgment in connection with the foreclosure. Under neither case
would the Master Servicer be responsible for collecting on the judgment.
Further, in all cases, HUD may reimburse the Master Servicer for all additional
costs of seeking the judgment.
As of the date hereof, the maximum guarantees that may be issued by VA
under a VA Loan are generally (a) as to loans with an original principal amount
of $45,000 or less, 50% of such loan, (b) as to loans with an original principal
amount of greater than $45,000, but not more than $56,250, $22,500; (c) as to
loans with an original principal amount of more than $56,250, but not more than
$144,000, the lesser of $36,000 or 40% of the loan, and (d) as to loans with an
original principal amount of more than $144,000 (for owner-occupied,
single-family home or condominium unit), the lesser of $50,750 or 25% of the
loan. The liability on the guaranty is reduced or increased pro rata with any
reduction or increase in the amount of indebtedness, but in no event will the
amount payable on the guaranty exceed the amount of the original guaranty. The
VA may, at its option and without regard to the guaranty, make full payment to a
mortgage holder of unsatisfied indebtedness on a mortgage upon its assignment to
the VA.
With respect to a defaulted VA Loan, the Master Servicer is, absent
exceptional circumstances, authorized to announce its intention to foreclose
only when the default has continued for three months. However, notwithstanding
the foregoing, the regulations require the Master Servicer to take immediate
action if it determines that the property to be foreclosed upon has been
abandoned by the debtor or has been or may be subject to extraordinary waste or
if there exist conditions justifying the appointment of a receiver for the
property. Generally, a claim for the guaranty is submitted after liquidation of
the mortgaged property.
The amount payable under the guaranty will be the percentage of the VA
Loan originally guaranteed applied to the indebtedness outstanding as of the
applicable date of computation specified in the VA regulations. Payments under
the guaranty will be equal to the unpaid principal amount of the VA Loan,
interest accrued on the unpaid balance thereof to the appropriate date of
computation and limited expenses of the Master Servicer, but in each case only
to the extent that such amounts have not been recovered through liquidation of
the Mortgaged Property. The amount payable under the guaranty may in no event
exceed the amount of the original guaranty. See "Description of the Trust
Funds - Mortgage Loans", " -- The VA Loan Program" and " -- The FHA Loan
Program" in the Prospectus.]
[THE MBS
[Title and issuer of underlying securities, amount deposited or pledged,
amount originally issued, maturity date, interest rate, [redemption
provisions], together with description of other material terms.]
[Description of principal and interest distributions on the MBS.]
[Description of advances by the servicer of the mortgage loans underlying
the MBS.]
[Description of effect on the MBS of allocation of losses on the
underlying mortgage loans.]
As to each series of MBS included in the Trust Fund, the various classes
of certificates from such series [(including classes not in the Trust Fund but
from the same series as classes that are in the Trust Fund] are listed,
together with the related pass-through rates and certain other information
applicable thereto].
[AGENCY SECURITIES
[Provide title and issuer of underlying Agency Securities, amount
deposited or pledged, amount originally issued, maturity date, interest rate,
redemption provisions, together with description of other material terms.]
[Description of principal and interest distributions on the Agency
Securities.]
[Description of advances by the servicer of the assets underlying the
Agency Securities.]
[Description of effect on the Agency Securities of allocation of losses on
the underlying Assets.]
As to each series of Agency Securities included in the Trust Fund, the
various classes of certificates from such series [(including classes not in the
Trust Fund but from the same series as classes that are in the Trust Fund] are
listed, together with the related pass-through rates and certain other
information applicable thereto].
[CONVERTIBLE MORTGAGE LOANS
____% of the Mortgage Loans ("Convertible Mortgage Loans") provide that,
at the option of the related Mortgagors, the adjustable interest rate on such
Mortgage Loans may be converted to a fixed interest rate. The first month in
which any of the Mortgage Loans may convert is ____________, and the last month
in which any of the Mortgage Loans may convert is _____________. Upon
conversion, the Mortgage Rate will be converted to a fixed interest rate
determined in accordance with the formula set forth in the related Mortgage
Note which formula is intended to result in a Mortgage Rate which is not less
than the then current market interest rate (subject to applicable usury laws).
After such conversion, the monthly payments of principal and interest will be
adjusted to provide for full amortization over the remaining term to scheduled
maturity. Upon notification from a Mortgagor of such Mortgagor's intent to
convert from an adjustable interest rate to a fixed interest rate and prior to
the conversion of any such Mortgage Loan (a "Converting Mortgage Loan"), the
related Warrantying Party will be obligated to purchase the Converting Mortgage
Loan at a price equal to the outstanding Principal Balance thereof plus accrued
interest thereon net of any subservicing fees (the "Conversion Price"). In the
event of a failure by a Warrantying Party to purchase a converting Mortgage
Loan, the Master Servicer is required to use its best efforts to purchase such
Mortgage
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Loan following its conversion (a "Converted Mortgage Loan") during the
one-month period following the date of conversion at the Conversion Price.
In the event that the related Warrantying Party fails to purchase a
Converting Mortgage Loan and the Master Servicer does not purchase a Converted
Mortgage Loan, neither the Depositor nor any of its affiliates nor any other
entity is obligated to purchase or arrange for the purchase of any Converted
Mortgage Loan. Any such Converted Mortgage Loan will remain in the Trust Fund
as a fixed-rate Mortgage Loan and will result in the Trust Fund's having both
fixed rate and adjustable rate Mortgage Loans. See "Certain Yield, Prepayment
and Maturity Considerations" herein.
Following the purchase of any Converted Mortgage Loan as described above,
the purchaser will be entitled to receive an assignment from the Trustee of
such Mortgage Loan and the purchaser will thereafter own such Mortgage Loan
free of any further obligation to the Trustee or the Bondholders with respect
thereto.]
[THE INDICES
As of any Payment Adjustment Date, the Index applicable to the
determination of the related Asset Rate will be a per annum rate equal to
______________, as most recently available as of the date days prior to the
Payment Adjustment Date (the "Index"). Such average yields reflect the yields
for the week prior to that week in which the information is reported. In the
event that the Index is no longer available, an index reasonably acceptable to
the Trustee that is based on comparable information will be selected by the
Master Servicer.
The Index is currently calculated based on information reported in
___________. Listed below are the weekly average yields on actively traded
______________ as reported in ____________ on the date that would have been
applicable to mortgage loans having the following adjustment dates for the
indicated years. Such average yields may fluctuate significantly from week to
week as well as over longer periods and may not increase or decrease in a
constant pattern from period to period. The following does not purport to be
representative of future average yields. No assurance can be given as to the
average yields on such _______________ on any Payment Adjustment Date or during
the life of any Asset.]
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<TABLE>
<CAPTION>
[Index]
Adjustment Date 1992 1993 1994 1995 1996 1997
- --------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
January.................
February ...............
March...................
April...................
May.....................
June....................
July....................
August..................
September...............
October.................
November................
December................
</TABLE>
CERTAIN CHARACTERISTICS OF THE ASSETS
[Approximately ___% of the Assets have Due Dates that occur on the ___ day
of each month; approximately ___% of the Assets have Due Dates that occur on
the ___ day of each month; approximately _____% of the Assets have Due Dates
that occur on the ___ day of each month; and the remainder of the Assets have
Due Dates that occur on the fifteenth day of each month.]
[As of the Cut-off Date, the Assets had the following characteristics: (i)
Asset Rates ranging from _____% per annum to _______% per annum; (ii) a
weighted average Asset Rate of ______% per annum; (iii) Gross Margins ranging
from ____ basis points to ______ basis points; (iv) a weighted average Gross
Margin of ____ basis points; (v) Principal Balances ranging from $_______ to
$______; (vi) an average Principal Balance of $_________; (vii) original terms
to scheduled maturity ranging from _____ months to _________ months; (viii) a
weighted average original term to scheduled maturity of _____ months; (ix)
remaining terms to scheduled maturity ranging from ____ months to _____ months;
(x) a weighted average remaining term to scheduled maturity of ________ months;
(xi) Cut-off Date Loan-to-Value ("LTV") Ratios ranging from ______% to
________%; (xii) a weighted average Cut-off Date LTV Ratio of _____%; (xiii) as
to the _______% of the Assets to which such characteristic applies, (A) minimum
lifetime Asset Rates ranging from ____% per annum to ______ % per annum and (B)
a weighted average minimum lifetime Asset Rate of _______% per annum; and (xiv)
as to the__________% of Assets to which such characteristic applies and for
which it may be currently calculated, (A) maximum lifetime Asset Rate ranging
from _______% per annum to ________% per annum and (B) a weighted average
maximum lifetime Asset Rate of _________% per annum.]
[___% of the Mortgage Loans provide for Balloon Payments on their
respective maturity dates. Loans providing for Balloon Payments involve a
greater degree of risk than self-amortizing loans. See "Risk Factors -- Assets
with balloon payment provisions present particular risks to Bondholders" in the
Prospectus.]
[The Mortgage Loans contain (i) __ Mortgage Loans, representing ____% of
the Assets by aggregate Principal Balance as of the Cut-off Date, that, as of
the Cut-off Date, have more than 12 scheduled payments of principal and
interest past due under the terms of the related Mortgage Note (each, a
"Non-Performing Mortgage Loan"), (ii) __ Mortgage Loans, representing ____% of
the Assets by aggregate Principal Balance as of the Cut-off Date, that, as of
the Cut-off Date, have more than three but less than 12 scheduled payments of
principal and interest past due under the terms of the related Mortgage Note
(each, a "Sub-Performing Mortgage Loan"), and (iii) __ Mortgage Loans,
representing ____% of the Assets by aggregate Principal Balance as of the
Cut-off Date, that have had more than three scheduled payments of principal and
interest
S-22
<PAGE> 219
past due under the terms of the related Mortgage Note one or more times during
the term of the related Mortgage Loan, but at the related Cut-off Date for the
Series is current in payment (each, a "Reinstated Mortgage Loan").]
[The Asset Rate on each Asset is subject to adjustment on each Interest
Rate Adjustment Date by adding the related Gross Margin to the value of the
Index (described below) as most recently announced a specified number of days
prior to such Interest Rate Adjustment Date, subject, in the case of
substantially all of the Assets, to minimum and maximum lifetime Asset Rates,
with ranges specified below. The Asset Rates on the Assets generally are
adjusted monthly; however, certain of the Assets provide for Interest Rate
Adjustment Dates to occur quarterly (___% of the Assets), semi-annually (% of
the Assets) or annually (____% of the Assets). Each of the Assets provided for
an initial fixed interest rate period; Assets, representing ___% of the Assets,
have not experienced their first Interest Rate Adjustment Dates. The latest
initial Interest Rate Adjustment Date for any Asset is to occur in .]
[Subject to the Payment Caps described below, the amount of the Payment on
each Asset adjusts periodically on each Payment Adjustment Date to an amount
that would fully amortize the Principal Balance of the Asset over its then
remaining amortization schedule and pay interest at the Asset Rate in effect
during the one month period preceding such Payment Adjustment Date.
Approximately __% of the Assets provide that an adjustment of the amount of the
Payment on a Payment Adjustment Date may not result in a Payment that increases
by more than ___% (nor, in some cases, decreases by more than ____%) of the
amount of the Payment in effect immediately prior to such Payment Adjustment
Date (each such provision, a "Payment Cap").
[No Mortgage Loan currently prohibits principal prepayments; however,
certain of the Mortgage Loans impose fees or penalties ("Prepayment Premiums")
in connection with full or partial prepayments. Although Prepayment Premiums
are payable to the Master Servicer as additional servicing compensation, the
Master Servicer may waive the payment of any Prepayment Premium only in
connection with a principal prepayment that is proposed to be made during the
three month period prior to the scheduled maturity of the related Mortgage
Loan, or under certain other limited circumstances.]
The following table sets forth the range of Asset Rates on the Assets as
of the Cut-off Date:
Asset Rates as of the Cut-off Date
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Percent Principal Principal
Number of by Balance as of Balance as of
Asset Rate Assets Number the Cut-off Date the Cut-off Date
- ---------- --------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Weighted Average
Asset Rate:
Note: Percentage totals may not add due to rounding.
S-23
<PAGE> 220
The following table sets forth the types of Mortgaged Properties securing
the Mortgage Loans:
Property Type
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Number of Percent Principal Principal
Mortgage by Balance as of Balance as of
Type Loans Number the Cut-off Date the Cut-off Date
- ---- --------- ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Note: Percentage totals may not add due to rounding.
[The following table sets forth the range of Gross Margins for the
Assets:]
S-24
<PAGE> 221
[Gross Margins]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Percent Principal Principal
Number of by Balance as of Balance as of
Asset Rate Assets Number the Cut-off Date the Cut-off Date
- ---------- --------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Weighted Average
Gross Margin:
Note: Percentage totals may not add due to rounding.
[The following table sets forth the frequency of adjustments to the
Asset Rates on the Assets as of the Cut-off Date:]
[Frequency of Adjustments to Asset Rates]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Percent Principal Principal
Number of by Balance as of Balance as of
Frequency(A) Assets Number the Cut-off Date the Cut-off Date
- ------------ --------- --------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================= ======
</TABLE>
Weighted Average
Frequency of
Adjustments to
Asset Rate:
Note: Percentage totals may not add due to rounding.
(A) _______ or ___% of Assets have not experienced their first Interest Rate
Adjustment Date.
[The following table sets forth the frequency of adjustments to the
Payments on the Assets as of the Cut-off Date:]
S-25
<PAGE> 222
[Frequency of Adjustments to Payments]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Percent Principal Principal
Frequency Number of by Balance as of Balance as of
(A) Assets Number the Cut-off Date the Cut-off Date
- ---------- --------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Weighted Average
Frequency of
Adjustments to
Payments:
Note: Percentage totals may not add due to rounding.
[The following table sets forth the range of maximum lifetime Asset Rates
for the Assets:]
[Maximum Lifetime Asset Rates]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Maximum Percent Principal Principal
Lifetime Number of by Balance as of Balance as of
Asset Rate Assets Number the Cut-off Date the Cut-off Date
---------- --------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Weighted Average
Maximum Lifetime
Asset Rate:
Note: Percentage totals may not add due to rounding.
(A) Represents Assets without a lifetime rate cap.
(B) The lifetime rate caps for these Assets are based upon the Index as
determined at a future point in time plus a fixed percentage. Therefore,
the rate is not determinable as of the Cut-off Date.
(C) This calculation does not include the ____ Assets without a lifetime rate
cap or the Assets with lifetime rate caps which are currently not
determinable.
[The following table sets forth the range of minimum lifetime Asset Rates
on the Assets:]
S-26
<PAGE> 223
[Minimum Lifetime Asset Rates]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Minimum Percent Principal Principal
Lifetime Number of by Balance as of Balance as of
Asset Rate Assets Number the Cut-off Date the Cut-off Date
---------- --------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Weighted Average
Minimum Lifetime
Asset Rate:
Note: Percentage totals may not add due to rounding.
(A) Represents Assets without interest rate floors.
(B) This calculation does not include the Assets without interest rate floors.
The following table sets forth the range of Principal Balances of the
Assets as of the Cut-off Date:
Principal Balances as of the Cut-off Date
<TABLE>
<CAPTION>
Percent by
Principal Aggregate Aggregate
Balance Percent Principal Principal
as of the Number of by Balance as of Balance as of
Cut-off Date Assets Number the Cut-off Date the Cut-off Date
------------ --------- ------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Average Principal Balance
as of the
Cut-off Date:
Note: Percentage totals may not add due to rounding.
The following tables set forth the original and remaining terms to
maturity (in months) of the Assets:
S-27
<PAGE> 224
Mortgage Loan Purpose
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Remaining Number of Percent of Principal Principal
Term in Mortgage Assets by Balance as of Balance as of
Months Loans Number the Cut-off Date the Cut-off Date
---------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========== ====== ================ ======
</TABLE>
Weighted Average
Original Term to Maturity:
Note: Percentage totals may not add due to rounding.
The following tables set forth the purpose for which each Mortgage Loan
was originated, [the type of program under which it was originated and the
occupancy type].
Original Term to Maturity in Months
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Original Percent Principal Principal
Term in Number of by Balance as of Balance as of
Months Assets Number the Cut-off Date the Cut-off Date
------- -------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Weighted Average
Original Term to Maturity:
Note: Percentage totals may not add due to rounding.
S-28
<PAGE> 225
[Mortgage Loan Documentation Program]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Remaining Number of Percent of Principal Principal
Term in Mortgage Assets by Balance as of Balance as of
Months Loans Number the Cut-off Date the Cut-off Date
---------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Weighted Average
Original Term to Maturity:
Note: Percentage totals may not add due to rounding.
Mortgage Loan Occupancy Type
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Remaining Number of Percent of Principal Principal
Term in Mortgage Assets by Balance as of Balance as of
Months Loans Number the Cut-off Date the Cut-off Date
---------- --------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Weighted Average
Original Term to Maturity:
Note: Percentage totals may not add due to rounding.
S-29
<PAGE> 226
Remaining Term to Maturity in Months
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Remaining Percent Principal Principal
Term in Number of by Balance as of Balance as of
Months Assets Number the Cut-off Date the Cut-off Date
---------- --------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Weighted Average Remaining
Term to Maturity:
Note: Percentage totals may not add due to rounding.
The following tables set forth the respective years in which the Assets
were originated and are scheduled to mature:
Year of Origination
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Percent Principal Principal
Number of by Balance as of Balance as of
Year Assets Number the Cut-off Date the Cut-off Date
---------- --------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
======== ====== ================ ======
</TABLE>
Note: Percentage totals may not add due to rounding.
S-30
<PAGE> 227
Year of Scheduled Maturity
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Percent Principal Principal
Number of by Balance as of Balance as of
Year Assets Number the Cut-off Date the Cut-off Date
---------- --------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Note: Percentage totals may not add due to rounding.
The following table sets forth the range of Original LTV Ratios of the
Mortgage Loans. An "Original LTV Ratio" is a fraction, expressed as a
percentage, the numerator of which is the Principal Balance of a Mortgage Loan
on the date of its origination, and the denominator of which is [in general]
the lesser of (i) the appraised value of the related Mortgaged Property as
determined by an appraisal thereof obtained in connection with the origination
of such Mortgage Loan and (ii) the sale price of such Mortgaged Property at the
time of such origination. There can be no assurance that the value (determined
through an appraisal or otherwise) of a Mortgaged Property determined after
origination of the related Mortgage Loan will be equal to or greater than the
value thereof (determined through an appraisal or otherwise) obtained in
connection with the origination. As a result, there can be no assurance that
the loan-to-value ratio for any Mortgage Loan determined at any time following
origination thereof will be lower than the Original LTV Ratio, notwithstanding
any positive amortization of such Mortgage Loan.
Original LTV Ratios
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Number of Percent of Principal Principal
Original Mortgage Assets by Balance as of Balance as of
LTV Ratio Loans Number the Cut-off Date the Cut-off Date
--------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Weighted Average Original
LTV Ratio:
Note: Percentage totals may not add due to rounding.
The Mortgage Loans are secured by Mortgaged Properties in ________
different states. The table below sets forth the states in which the Mortgaged
Properties are located:
S-31
<PAGE> 228
Geographic Distribution
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Number of Percent of Principal Principal
Mortgage Assets by Balance as of Balance as of
State Loans Number the Cut-off Date the Cut-off Date
---------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Note: Percentage totals may not add due to rounding.
[regional breakdown to be provided as appropriate]
No more than ___% of the Mortgage Loans will be secured by Mortgaged
Properties located in any one zip code.
[___% of the Mortgage Loans provide that upon any principal prepayment of
a Mortgage Loan, whether made voluntarily or involuntarily, the related
Mortgagor will be required to pay a prepayment premium or yield maintenance
Penalty (a "Prepayment Premium") in the amount set forth in the following
table.]
[Mortgage Loan Prepayment Premiums]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Number of Percent of Principal Principal
Prepayment Mortgage Assets by Balance as of Balance as of
Premium Loans Number the Cut-off Date the Cut-off Date
---------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Note: Percentage totals may not add due to rounding.
S-32
<PAGE> 229
[FHA Loans]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Number of Percent of Principal Principal
Mortgage Assets by Balance as of Balance as of
FHA Loans Loans Number the Cut-off Date the Cut-off Date
--------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Note: Percentage totals may not add due to rounding.
[VA Loans]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Number of Percent of Principal Principal
Mortgage Assets by Balance as of Balance as of
VA Loans Loans Number the Cut-off Date the Cut-off Date
-------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
======= ====== =============== ======
</TABLE>
Note: Percentage totals may not add due to rounding.
[Non-Performing Mortgage Loans]
<TABLE>
<CAPTION>
Percent by
Non- Aggregate Aggregate
Performing Number of Percent of Principal Principal
Mortgage Mortgage Assets by Balance as of Balance as of
Loans Loans Number the Cut-off Date the Cut-off Date
---------- ---------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Note: Percentage totals may not add due to rounding.
S-33
<PAGE> 230
[Sub-Performing Mortgage Loans]
<TABLE>
<CAPTION>
Percent by
Sub- Aggregate Aggregate
Performing Number of Percent of Principal Principal
Mortgage Mortgage Assets by Balance as of Balance as of
Loans Loans Number the Cut-off Date the Cut-off Date
---------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Note: Percentage totals may not add due to rounding.
[Reinstated Mortgage Loans]
<TABLE>
<CAPTION>
Percent by
Aggregate Aggregate
Reinstated Number of Percent of Principal Principal
Mortgage Mortgage Assets by Balance as of Balance as of
Loans Loans Number the Cut-off Date the Cut-off Date
---------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Note: Percentage totals may not add due to rounding.
UNDERWRITING STANDARDS
All of the Mortgage Loans were originated or acquired by _______,
generally in accordance with the underwriting criteria described herein.
[Description of underwriting standards.]
[CERTAIN CHARACTERISTICS OF MBS]
[Particular textual and table disclosure for all MBS collateral]
[CERTAIN CHARACTERISTICS OF THE AGENCY SECURITIES]
[Particular textual and table disclosure for all Agency Securities
collateral]
ADDITIONAL INFORMATION
The description in this Prospectus Supplement of the Assets and the
Mortgaged Properties is based upon the Trust Fund as expected to be constituted
at the close of business on the Cut-off Date, as adjusted for the scheduled
principal payments due on or before such date. Prior to the issuance of the
Bonds, an Asset may
S-34
<PAGE> 231
be removed from the Trust Fund as a result of incomplete documentation or
otherwise, if the Depositor deems such removal necessary or appropriate and may
be prepaid at any time. A limited number of other assets may be included in the
Trust Fund prior to the issuance of the Bonds unless including such assets
would materially alter the characteristics of the Trust Fund as described
herein. The Depositor believes that the information set forth herein will be
representative of the characteristics of the Trust Fund as it will be
constituted at the time the Bonds are issued, although the range of Asset Rates
and maturities and certain other characteristics of the Assets in the Trust
Fund may vary.
A Current Report on Form 8-K will be available to purchasers of the Bonds
and will be filed, together with Exhibits, with the Securities and Exchange
Commission within fifteen days after the initial issuance of the Bonds. In the
event Assets are removed from or added to the Trust Fund as set forth in the
preceding paragraph, such removal or addition will be noted on a Form 8-K.
DESCRIPTION OF THE SERVICING AGREEMENT
SERVICING OF ASSETS
[Union Planters Bank, N.A., a national banking association, will act as
Master Servicer (in such capacity, the "Master Servicer") for the Bonds
pursuant to the Servicing Agreement. The Master Servicer, a wholly-owned
banking subsidiary of Union Planters Corporation, is engaged, among other
things, in the mortgage banking business and, as such, originates, purchases,
sells and services mortgage loans.]
The executive offices of the Master Servicer are located at _____________,
telephone number(__)__________.
The Master Servicer will be responsible for servicing the Assets, in
accordance with the Master Servicer's policies and procedures and in accordance
with the terms of the Servicing Agreement. See "Description of the Agreements
- -- Collection and Other Servicing Procedures" in the Prospectus.
The Master Servicer shall establish and maintain on behalf of the Trustee
an account (the "Collection Account") for the benefit of the Bondholders. The
Collection Account will be an Eligible Account. Subject to the investment
provision described in the following paragraphs, upon receipt by the Master
Servicer of amounts in respect of the Assets (excluding amounts representing
administrative charges, annual fees, taxes, assessments, credit insurance
charges, insurance proceeds to be applied to the restoration or repair of a
Mortgaged Property or similar items), the Master Servicer will deposit such
amounts in the Collection Account. Amounts so deposited may be invested in
Eligible Investments maturing no later than one Business Day prior to the date
on which the amount on deposit therein is required to be deposited in the
Payment Account or on such Payment Date. Not later than the fifth Business Day
prior to each Payment Date (the "Determination Date"), the Master Servicer will
notify the Trustee of the amount of such deposit to be included in funds
available for the related Payment Date.
The Trustee will establish one or more accounts (the "Payment Account")
into which will be deposited amounts withdrawn from the Collection Account for
distribution to Bondholders on a Payment Date. The Payment Account will be an
Eligible Account. Amounts on deposit therein will be invested in Eligible
Investments maturing on or before the Business Day prior to the related Payment
Date.
Eligible Investments are specified in the Servicing Agreement and are
limited to investments which meet the criteria of the Rating Agencies from time
to time as being consistent with their then current ratings of the Bonds.
THE MASTER SERVICER
Delinquency and Foreclosure Experience. The following tables set forth
certain information concerning the delinquency experience (including pending
foreclosures) on one- to four- family residential mortgage loans included in
the Master Servicer's servicing portfolio (which includes mortgage loans that
are subserviced by others). The
S-35
<PAGE> 232
indicated periods of delinquency are based on the number of days past due on a
contractual basis. No mortgage loan is considered delinquent for these purposes
until 31 days past due on a contractual basis.
<TABLE>
<CAPTION>
As of December 31, 19 As of December 31, 19 As of , 19
---------------------- ---------------------- ----------
By Dollar By Dollar By Dollar
By No. of Amount of By No. of Amount of By No. of Amount of
Loans Loans Loans Loans Loans Loans
--------- --------- --------- --------- --------- --------
(Dollar Amount in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total Portfolio $ $
------- $ -------- -------- -------- --------
Period of -------
Delinquency
31 to 59 days ( %) ( %) ( %)
60 to 89 days ( %) ( %) ( %)
90 days or more ( %) ( %) ( %)
------- -------- -------- -------- -------- --------
Total Delinquent $ $
Loans ------- ------- -------- ------ -------- $
--------
Percent of Portfolio % % % % %
%
Foreclosures
pending (1)
Percent of Portfolio % % % % %
%
Foreclosures
Percent of Portfolio % % % % %
%
</TABLE>
- --------------------
(1) Includes bankruptcies which preclude foreclosure.
There can be no assurance that the delinquency and foreclosure experience
of the Assets comprising the Trust Fund will correspond to the delinquency and
foreclosure experience of the Master Servicer's mortgage portfolio set forth in
the foregoing tables. The aggregate delinquency and foreclosure experience on
the Assets comprising the Trust Fund will depend on the results obtained over
the life of the Trust Fund.
LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
At or for At or for
the ____ the ____
Months Months
Ended Ended
At December 31, [31], [31],
- -------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1996 1997
----- ---- ---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Number of Mater Servicer-
Serviced Mortgage Loans (1)
Average Number of
Master Servicer-Serviced
Mortgage Loans During
Period ...................
Number of Master Servicer-
Serviced Mortgage Loans
Foreclosed ................
Maser Servicer-Serviced
Mortgage Loans
Foreclosed as a
Percentage of Total
Master Servicer-Serviced
Contacts (2) ..............
Master Servicer-Serviced
Mortgage Loans
Foreclosed as a
Percentage of Average
Number of Master Servicer-
Serviced Mortgage Loans ...
Average Outstanding
Principal Balance
of Mortgage Loans (3) .....
Net Losses from Mortgage Loan
Foreclosures(4):
Total dollars (3) .........
As a Percentage of Average
Principal Balance of
Mortgage Loans(3)(5) .....
</TABLE>
- ------------------
(1) As of period end.
(2) Total Master Servicer-serviced mortgage loans forclosed during the
applicable period expressed as a percentage of the number of Master
Servicer-serviced mortgage loans at the end of the applicable period.
(3) Includes mortgage loans originated by Master Servicer and serviced by
Master Servicer or others.
(4) Net losses represent the amounts charged by the Master Servicer against
its loss reserves for the periods indicated. Such amounts include
estimaes of net losses with respect to certain foreclosures. Charges to
the loss reserves in respect of a foreclosed mortgage loan generally are
made before the foreclosed mortgage loan becomes liquidated. The length
of the accrual period for the amount of accrued and upaid interest
included in the calculation of the net loss varies depending upon the
period in which the loss was charged and whether the mortgage loan was
owned by an entity other than the Master Servicer.
(5) Total net losses incurred on liquidated mortgage loans during the
applicable period expressed as a percentage of the average principal
balance of all mortgage loans at the end of the applicable period.
(6) Annualized.
[NOTE THAT DATA PRESENTED IN THE FOREGOING TABLES IN ANY PROSPECTUS
SUPPLEMENT WILL BE AS OF A DATE NO MORE THAN 135 DAYS PRIOR TO THE DATE OF
SUCH PROSPECTUS SUPPLEMENT.]
The data presented in the foregoing tables are for illustrative purposes
only, and there is no assurance that the delinquency and loan loss experience of
Mortgage Loans in comprising the Trust Assets will be similar to that set forth
above. The delinquency and loan loss experience of mortgage loans historically
has been sharply affected by downturns in regional or local economic conditions.
For instance, such a downturn was experienced in areas dependent on the oil and
gas industry in the 1980s, causing increased level of delinquencies and loan
losses on mortgage loans in affected areas. Regional and local economic
conditions are often volatile, and no predictions can be made regarding their
effects on future economic losses upon mortage loan losses. Information
regarding the geographic location, at origination, of the Mortgaged Properties
is set forth under "Description of the Assets" herein.
In particular, the foregoing data generally represents the Master
Servicer's experience servicing mortgage loans underwritten pursuant to
particular underwriting standards, which may differ from the underwriting
standards used to originate the Mortgage Loans. Further, this data reflect the
Master Servicer's experience servicing mortgage loans during certain historic
economic conditions that may not reflect future conditions. Accordingly, the
performance of the Mortgage Loans and the Master Servicer's servicing experience
with respect thereto may differ materially from the historical servicing data
presented therein.
[HAZARD INSURANCE
The Servicing Agreement provides that the Master Servicer maintain certain
hazard insurance on the Mortgaged Properties relating to the Mortgage Loans.
The Servicing Agreement also requires the Master Servicer to maintain for any
Mortgaged Property relating to a Mortgage Loan acquired upon foreclosure of a
Mortgage Loan, or by deed in lieu of such foreclosure, hazard insurance with
extended coverage in an amount equal to the lesser of (a) the maximum insurable
value of such Mortgaged Property or (b) the outstanding balance of such
Mortgage Loan plus the outstanding balance on any mortgage loan senior to such
Mortgage Loan at the time of foreclosure or deed in lieu of foreclosure, plus
accrued interest and the Servicer's good faith estimate of the related
liquidation expenses to be incurred in connection therewith. The Servicing
Agreement provides that the Master Servicer may satisfy its
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obligation to cause hazard policies to be maintained by maintaining a blanket
policy insuring against losses on such Mortgaged Properties. If such blanket
policy contains a deductible clause, the Master Servicer will be obligated to
deposit in the Collection Account the sums which would have been deposited
therein but for such clause. The Master Servicer will initially satisfy these
requirements by maintaining a blanket policy. As set forth above, all amounts
collected by the Master Servicer (net of any reimbursements to the Master
Servicer) under any hazard policy (except for amounts to be applied to the
restoration or repair of the Mortgaged Property) will ultimately be deposited
in the Collection Account.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements on the property by fire,
lightning, explosion, smoke, windstorm and hail, and the like, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies relating to the Mortgage Loans will be underwritten by
different insurers and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by state laws and most of such
policies typically do not cover any physical damage resulting from the
following: war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and
mudflows), nuclear reactions, wet or dry rot, vermin, rodents, insects or
domestic animals, theft and, in certain cases vandalism. The foregoing list is
merely indicative of certain kinds of uninsured risks and is not intended to be
all-inclusive or an exact description of the insurance policies relating to the
Mortgaged Properties.]
[REALIZATION UPON DEFAULTED MORTGAGE LOANS
The Master Servicer will foreclose upon or otherwise comparably convert to
ownership Mortgaged Properties securing such of the Mortgage Loans as come into
default when in accordance with applicable servicing procedures under the
Servicing Agreement, no satisfactory arrangements can be made for the
collection of delinquent payments. In connection with such foreclosure or other
conversion, the Servicer will follow such practices as it deems necessary or
advisable and as are in keeping with its general subordinate mortgage servicing
activities, provided the Master Servicer will not be required to expend its own
funds in connection with foreclosure or other conversion, correction of default
on a related senior mortgage loan or restoration of any property unless, in its
sole judgment, such foreclosure, correction or restoration will increase net
Liquidation Proceeds. The Master Servicer will be reimbursed out of Liquidation
Proceeds for advances of its own funds as liquidation expenses before any Net
Liquidation Proceeds are distributed to Bondholders. "Net Liquidation Proceeds"
with respect to a Mortgage Loan is the amount received upon liquidation of such
Mortgage Loan reduced by related expenses, up to the unpaid Principal Balance
of the Mortgage Loan plus accrued and unpaid interest thereon.]
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
With respect to each Due Period, other than the first Due Period, the
Master Servicer will receive from interest collections in respect of the
Mortgage Loan a portion of such interest collections as a monthly Servicing Fee
in the amount equal to ___% per annum ("Servicing Fee Rate") on the aggregate
Principal Balances of the Mortgage Loans as of the first day of each such Due
Period. All assumption fees, late payment charges and other fees and charges,
to the extent collected from borrowers, will be retained by the Master Servicer
as additional servicing compensation.
The Master Servicer will pay certain ongoing expenses associated with the
Trust Fund and incurred by it in connection with its responsibilities under the
Servicing Agreement, including, without limitation, payment of the fees and
disbursements of the Trustee, any custodian appointed by the Trustee, and any
paying agent. In addition, the Master Servicer will be entitled to
reimbursement for certain expenses incurred by it in connection with defaulted
Mortgage Loans and in connection with the restoration of Mortgaged Properties,
such right of reimbursement being prior to the rights of Bondholders to receive
any related Net Liquidation Proceeds
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DESCRIPTION OF THE BONDS
GENERAL
The Bonds will be issued pursuant to the Indenture, and will consist of
____ Classes to be designated as the Class __ Bonds, the Class __ Bonds, the
Class __ Bonds and the Class __ Bonds. [The Class __ Bonds (the "Subordinate
Bonds") will be subordinate to the Class __ Bonds and the Class __ Bonds (the
"Senior Bonds"), as described herein.] The following summaries describe certain
provisions of the Bonds and the Indenture. The summaries do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
the provisions of the applicable agreement. The Bonds will be issued in
[book-entry][fully registered, certificated] form only. The Bonds will be
issued denominations of $_______ and integral multiples of $_____ in excess
thereof[, with one Bond of such class evidencing an additional amount equal to
the remainder of the Security Principal Balance thereof]. The Bonds will be
freely transferrable and exchangeable at the corporate trust office of the
Trustee.
The Bonds [are non-recourse obligations of the Depositor and] are secured
by the Trust Fund, which consists of: (i) [the Mortgage Loans] [the MBS] [the
Agency Securities] and all payments under and proceeds in respect thereof
received after the Cut-off Date (exclusive of payments of principal and
interest due on or before the Cut-off Date); (ii) any Mortgaged Property
acquired on behalf of the Trust Fund through foreclosure or deed in lieu of
foreclosure (upon acquisition, "REO Property"); (iii) such funds or assets as
from time to time are deposited in the Payment Account and any account
established in connection with REO Property (the "REO Account"); and (iv) the
rights of the mortgagee under all insurance policies with respect to the
Mortgage Loans. Only the Class __ Bonds, the Class __ Bonds and the Class __
Bonds (together, the "Offered Bonds") are offered hereby.
The Class __ Bonds will have an initial [Security Principal Balance]
[Notional Balance of] $__________, the Class __ Bonds will have an initial
Security Principal Balance of $__________, and the Class __ Bonds will have an
initial Security Principal Balance of $__________. [The initial Security
Principal Balance of the Class __ Bonds will be zero]. The Security Principal
Balance of any Class of Bonds outstanding at any time represents the maximum
amount which the holders thereof are entitled to receive as payments allocable
to principal from the Assets. The respective Security Principal Balances of the
Class __, Class __, Class __ and Class ___ Bonds (respectively, the "Class __
Balance", "Class __ Balance", "Class __ Balance" and "Class __ Balance") will
in each case be (i) reduced by amounts actually paid on such Class that are
allocable to principal and [(ii) increased by amounts allocated to such Class
in respect of negative amortization on the Assets [Describe Notional Balance.]]
[The Security Principal Balance of the Class __ Bonds (the "Class __ Balance")
will at any time equal the aggregate Principal Balance of the Assets minus the
sum of the Class __ Balance, Class __ Balance and Class __ Balance.] The
Principal Balance of any Asset at any date of determination will equal (a) the
Cut-off Date Balance of such Asset, plus [(b) any negative amortization added
to the Principal Balance of such Asset on any Due Date after the Cut-off Date
to and including the Due Date in the Due Period for the most recently preceding
Payment Date], minus (c) the sum of (i) the principal portion of each Payment
due on such Asset after the Cut-off Date, to the extent received from the
Mortgagor or advanced by the Master Servicer and paid to holders of the Bonds
before such date of determination, (ii) all principal prepayments and other
unscheduled collections of principal received with respect to such Asset, to
the extent distributed to holders of the Bonds before such date of
determination, and (iii) any reduction in the outstanding Principal Balance of
such Asset resulting out of a bankruptcy proceeding for the related Mortgagor.
[None of the Class __ Bonds are offered hereby.]
[BOOK-ENTRY REGISTRATION
If so provided in the related Prospectus Supplement, one or more Classes
of the Bonds will be issued as Book- Entry securities (the "Book-Entry
Securities"), and each such Class will be represented by one or more single
Bonds registered in the name of a nominee for DTC.
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DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code ("UCC") and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for its participating organizations ("Participants") and facilitate the
clearance and settlement of securities transactions between Participants
through electronic book-entry changes in their accounts, thereby eliminating
the need for physical movement of certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations and may
include certain other organizations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Investors that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
Book-Entry Securities may do so only through Participants and Indirect
Participants. In addition, such investors ("Security Owners") will receive all
distributions on the Book-Entry Securities through DTC and its Participants.
Under a book-entry format, Security Owners will receive payments after the
related Payment Date because, while payments are required to be forwarded to
Cede, on each such date, DTC will forward such payments to its Participants
which thereafter will be required to forward them to Indirect Participants or
Security Owners. The only "Securityholder" (as such term is used in the
Agreement) will be Cede, as nominee of DTC, and the Security Owners will not be
recognized by the Trustee as Bondholders under the Agreement. Security Owners
will be permitted to exercise the rights of Bondholders under the Agreement
only indirectly through the Participants who in turn will exercise their rights
through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Book-Entry Securities and is
required to receive and transmit distributions of principal of and interest on
the Book-Entry Securities. Participants and Indirect Participants with which
Security Owners have accounts with respect to the Book-Entry Securities
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective Security Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Security
Owner to pledge its interest in the Book-Entry Securities to persons or
entities that do not participate in the DTC system, or otherwise take actions
in respect of its interest in the Book-Entry Securities, may be limited due to
the lack of a physical certificate evidencing such interest.
DTC has advised the Depositor that it will take any action permitted to be
taken by the holders of the Book-Entry Securities under the Agreement only at
the direction of one or more Participants to whose account with DTC interests
in the Book-Entry Securities are credited.
Bonds initially issued in book-entry form will be issued in fully
registered, certificated form to Security Owners or their nominees ("Definitive
Securities"), rather than to DTC or its nominee only if (i) the Depositor
advises the Trustee in writing that DTC is no longer willing or able to
properly discharge its responsibilities as depository with respect to the Bonds
and the Depositor is unable to locate a qualified successor or (ii) the
Depositor, at its option, elects to terminate the book-entry system through
DTC.
Upon the occurrence of either of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Securities for the Security Owners. Upon
surrender by DTC of the certificate or certificates representing the Book-Entry
Securities, together with instructions for re-registration, the Trustee will
issue (or cause to be issued) to the Security Owners identified in such
instructions the Definitive Securities to which they are entitled, and
thereafter the Trustee will recognize the holders of such Definitive Securities
as Bondholders under the Agreement.
None of the Depositor, the Master Servicer, any Sub-Servicer, the Trustee,
or any of their affiliates will have any responsibility for any aspect of the
records relating to or payments made on account of beneficial ownership
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interests of the Book-Entry Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.]
PAYMENTS OF PRINCIPAL AND INTEREST
PAYMENT DATES
The Payment Dates for the Bonds will be the __th day of each month (or, if
such day is not a Business Day, then the next succeeding Business Day),
commencing _______________________.
AVAILABLE DISTRIBUTION AMOUNT
Payments of interest on and principal of the Bonds on each Payment Date
will be made by the Trustee from the "Available Distribution Amount," which
will generally equal (A) the sum of the following:
(i) all payments of interest and principal with respect to
the Assets and any REO Property (including Liquidation
Proceeds and Insurance Proceeds) collected during the
related Due Period and deposited in the Collection
Account;
(ii) any Advance by the Master Servicer; and
(iii) any Payments due during, but collected prior to, the
related Due Period;
less (B) the sum of the following:
(i) all amounts due the Master Servicer as the Servicing
Fee [(out of which will be paid the fees and expenses
of the Trustee)], including late charges, assumption
fees, prepayment premiums and similar charges and
fees;
(ii) any Payments collected but due on a date subsequent to
the related Due Period;
(iii) all amounts required to reimburse the Master Servicer
for any Advances on an Asset upon the Liquidation or
modification of such Asset; and
(iv) all amounts required to reimburse the Master Servicer
for any Non-recoverable Advances.
On each Payment Date, the Available Distribution Amount will be paid by or
on behalf of the Trustee in the order of priority described under "- Priority
of Payments" below. All payments or allocations with respect to a Class of
Bonds will be made pro rata within such Class on the basis of the outstanding
Security Principal Balance of such Class.
INTEREST PAYMENTS
Interest will accrue on the unpaid Security Principal Balance of the Bonds
at the per annum rate (the "Interest Rate") equal to __% per annum [from the
Closing Date to the first Payment Date and thereafter interest will accrue on
the Bonds from and including the preceding Payment Date to but excluding such
current Payment Date (each, an "Interest Accrual Period") at [a floating rate
equal to [Index] plus __%, subject to a cap of __% per annum] [__%]]. [Interest
will be computed on the basis of a 360 day year consisting of 12 months of 30
days each.] [Interest will be calculated on the basis of the actual number of
days in each Interest Accrual Period divided by 360.] A failure to pay interest
on any Bonds on any Payment Date that continues for five days constitutes an
Event of Default under the Indenture.
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PRINCIPAL PAYMENTS
"Principal Distribution Amount" means, with respect to a Payment Date for
a Series of Bonds, the amount, if any, by which (i) the aggregate value of the
Assets as of the most recent Payment Date (or, in regard to the first Payment
Date, the Closing Date) exceeds (ii) the aggregate value of the Assets as of
the current Payment Date, less the amount of any losses incurred in the related
Due Period. The value of each Asset (or REO Property to the extent of a
foreclosure of a Mortgage Loan) will be equal to its Principal Balance.
On each Payment Date the Principal Distribution Amount will be applied, to
the extent of the Available Distribution Amount, to pay principal first on the
Class __ Bonds until they are paid in full, second to pay principal on the
Class __ Bonds until they are paid in full, and finally to pay principal on the
Class __ Bonds until they are paid in full.
Principal payments on the Bonds will be made on each Payment Date as
described below until the Bonds are paid in full. Principal payments allocated
to a Class of Bonds will be paid to the holders of the Bonds of such Class pro
rata in the proportion that the outstanding Security Principal Balance of each
Bond of such Class bears to the aggregate outstanding Security Principal
Balance of all Bonds of such Class.
PRIORITY OF PAYMENTS
On each Payment Date, unless the Bonds have been declared due and payable
following an Event of Default or there is an optional redemption of all of the
Bonds, the Available Distribution Amount will be applied for the following
purposes and in the following order of priority, in each case to the extent of
the remaining funds:
(i) to pay to the holders of the Class __ Bonds all unpaid
interest accrued in respect of the Class __ Bonds for such
Payment Date, and, to the extent not previously
distributed, for all preceding Payment Dates;
(ii) to pay to the holders of the Class __ Bonds, the Principal
Distribution Amount in reduction of the Security Principal
Balance of the Class __ Bonds, until reduced to zero;
(iii) to pay to the holders of the Class __ Bonds all unpaid
interest accrued in respect of the Class __ Bonds for such
Payment Date, and, to the extent not previously
distributed, for all preceding Payment Dates;
(iv) to pay to the holders of the Class __ Bonds (after the
Class __ Bonds have been paid in full), the Principal
Distribution Amount in reduction of the Security Principal
Balance of the Class __ Bonds, until reduced to zero;
(v) to pay to the holders of the Class __ Bonds all unpaid
interest accrued in respect of the Class __ Bonds for such
Payment Date, and, to the extent not previously
distributed, for all preceding Payment Dates;
(vi) to pay to the holders of the Class __ Bonds (after the
Class __ Bonds have been paid in full), the Principal
Distribution Amount in reduction of the Security Principal
Balance of the Class __ Bonds, until reduced to zero;
(vii) to pay to the Depositor or its designee, any portion of
the Available Distribution Amount remaining.
In the event the Bonds have been declared due and payable following an
Event of Default, the Available Distribution Amount will be applied to pay
accrued and unpaid interest on and the outstanding Security Principal Balance
of the Class __ Bonds, the Class __ Bonds, the Class __ Bonds, and the
Depositor, in that order.
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As to any Payment Date, the "Due Period" is the calendar month preceding
the month of such Payment Date.
"Liquidation Loss Amount" means with respect to any Liquidated Asset, the
unrecovered Principal Balance thereof at the end of the Due Period in which
such Asset became a Liquidated Asset after giving effect to the Net Liquidation
Proceeds in connection therewith.
LOSSES; SUBORDINATION
For any Payment Date, the amount of the Available Distribution Amount will
be dependent in part upon whether any losses have been incurred by the Trust
Fund during the most recent Due Period. Losses will be caused by (i) any
realized losses on a defaulted Mortgage Loan, and (ii) any reduction by a
bankruptcy court of either the unpaid Principal Balance or Asset Rate of a
Mortgage Loan subject to a bankruptcy proceeding.
The Class __ Bonds are senior to the Class __ Bonds, which are senior to
the Class __ Bonds. The subordination of the Class __ and Class __ Bonds to the
Class __ Bonds is designed to enhance the likelihood of timely receipt by the
Class __ Bondholders of the full amount of interest and principal due to them
and to decrease the likelihood that the Class __ Bondholders will experience
any loss of principal or interest caused by losses. The right of the Class __
Bondholders to receive distributions of interest and principal is expressly
subordinate to the rights of the Class __ Bondholders to receive distributions
of interest and principal. This subordination is designed to enhance the
likelihood of timely receipt by the Class __ Bondholders of the full amount of
interest and principal due to them and to decrease the likelihood that the
Class __ Bondholders will experience any loss of principal or interest caused
by losses. The credit enhancement afforded to the Class __ Bondholders by the
subordination of the Class __ and Class __ Bonds will be accomplished by (i)
the priority of the different Classes to receive the Available Distribution
Amount on any Payment Date prior to any distributions to Holders of a less
senior Class or the Depositor and (ii) the priority afforded the different
Classes on liquidations of the Trust Fund following an Event of Default.
[ADVANCES
On or prior to the Business Day immediately preceding each Payment Date,
the Master Servicer will either (1) deposit from its own funds the related
Advance into the Payment Account; (2) cause appropriate entries to be made in
the records of the Payment Account that such funds have been used to make the
Advance; (3) if the Payment Account is maintained by the Trustee, instruct the
Trustee to use investment earnings on the Payment Account to defray the Master
Servicer's Advance obligation; or (4) make (or cause to be made) the aggregate
Advance through any combination of the methods described in clauses (1), (2)
and (3) above. Any funds held for future payment and used in accordance with
clause (2) above must be restored by the Master Servicer from its own funds or
from early payments collected on the Assets. The aggregate Advance for a
Payment Date is the sum of delinquent scheduled Payments due in the related Due
Period, exclusive of all Nonrecoverable Advances.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to Bondholders rather than to guarantee or insure against
losses.
[The Master Servicer will also be obligated to make Advances to the extent
the Master Servicer deems such Advances recoverable out of Liquidation Proceeds
or from collections on the related Asset, in respect of Liquidation Expenses
and certain taxes and insurance premiums not paid by a Mortgagor on a timely
basis.
The Master Servicer will reimburse itself for Advances out of collections
of the late payments in respect of which such Advances were made. In addition,
upon the determination that a Nonrecoverable Advance has been made in respect
of an Asset or upon an Asset becoming a Liquidated Asset, the Master Servicer
will reimburse itself out of funds in the Payment Account for unreimbursed
amounts advanced by it in respect of such Asset.]
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OPTIONAL TERMINATION
The Depositor may, at its option, redeem any Class of Bonds in whole but
not in part, on any Payment Date (i) on or after ____________________, or (ii)
on which, after taking into account payments of principal to be made on such
Payment Date, the aggregate outstanding Security Principal Balance of the Bonds
is less than ____% of the initial aggregate Security Principal Balance of the
Bonds. Any redemption will be at a price equal to 100% of the aggregate
outstanding Security Principal Balance of the Class of Bonds so redeemed, plus
accrued and unpaid interest through the day preceding the final Payment Date
and such price will be payable solely in cash. At the option of the Depositor,
an optional redemption of a Class of Bonds can be effected without retiring
such Class of Bonds so that the Depositor has the ability to own or resell such
Bonds. Upon redemption and retirement of the Bonds, the Assets securing those
Bonds may be released from the lien of the Indenture. See "Description of the
Offered Securities -- Termination" in the Prospectus.
Any redemption of a Class of Bonds would have an adverse effect on the
yield of such Class, because such redemption would have the same effect as a
prepayment in full of the Assets. As a result of any such redemption, investors
in such Bonds might not fully recoup their initial investment.
CREDIT SUPPORT
[Disclose particular Credit Support, if any]
LIQUIDITY FACILITIES
[Disclose particular Liquidity Facilities, if any]
CERTAIN YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
The yield to maturity on the Bonds will be affected by the rate of
principal payments on the Assets including, for this purpose, prepayments,
which may include amounts received by virtue of repurchase, condemnation,
insurance or foreclosure. The yield to maturity on the Bonds will also be
affected by the level of the Index. The rate of principal payments on the Bonds
will correspond to the rate of principal payments (including prepayments) on
the related Assets.
[Description of factors affecting yield, prepayment and maturity of the
Assets and Bonds depending upon characteristics of the Assets.]
WEIGHTED AVERAGE LIFE OF THE BONDS
Weighted average life refers to the average amount of time from the date
of issuance of a security until each dollar of principal of such security will
be repaid to the investor. The weighted average life of the Class [ ] Bonds
will be influenced by the rate at which principal payments (including scheduled
payments, principal prepayments and payments made pursuant to any applicable
policies of insurance) on the Assets are made. Principal payments on the Assets
may be in the form of scheduled amortization or prepayments (for this purpose,
the term "prepayment" includes prepayments and liquidations due to a default or
other dispositions of the Assets).
The table of Percent of Initial Bond Balance Outstanding for the Bonds at
the respective percentages of [CPR] [SPA] set forth below indicates the
weighted average life of such Bonds and sets forth the percentage of the
initial principal amount of such Bonds that would be outstanding after each of
the dates shown at the indicated percentages of [CPR][SPA]. The table has been
prepared on the basis of the following assumptions regarding the
characteristics of the Assets: (i) an outstanding Principal Balance of
$_________, a remaining amortization term of ___ months and a term to balloon
of ___ months: (ii) an interest rate equal to ____% per annum until the Due
Date and thereafter an interest rate equal to % per annum (at an assumed Index
of ____%) and Payments that would fully amortize the remaining balance of the
Asset over its remaining amortization term; (iii) the Assets
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prepay at the indicated percentage of [CPR][SPA]; (iv) the maturity date of
each of the Balloon Mortgage Loans is not extended; (v) distributions on the
Class [ ] Bonds are received in cash, on the 25th day of each month, commencing
in_____________; (vi) no defaults or delinquencies in, or modifications,
waivers or amendments respecting, the payment by the Mortgagors of principal
and interest on the Assets occur; (vii) the initial Bond Balance of the Class [
] Bonds is $________; (viii) prepayments represent payment in full of
individual Assets and are received on the respective Due Dates and include 30
days' interest thereon; (ix) there are no repurchases of Assets due to breaches
of any representation and warranty or otherwise; (x) the Class [ ] Bonds are
purchased on ________; (xi) the Servicing Fee is ____% per annum; and (xii) the
Index on each Interest Rate Adjustment Date is ________% per annum.
Based on the foregoing assumptions, the table indicates the weighted
average life of the Class [ ] Bonds and sets forth the percentages of the
initial Bond Balance of the Class [ ] Bonds that would be outstanding after the
Payment Date in ___________ of each of the years indicated, at various
percentages of [CPR][SPA]. Neither [CPR][SPA] nor any other prepayment model or
assumption purports to be a historical description of prepayment experience or
a prediction of the anticipated rate of prepayment of any pool of mortgage
assets, including the Asset included in the Trust Fund. Variations in the
actual prepayment experience and the balance of the Assets that prepay may
increase or decrease the percentage of initial Bond Balance (and weighted
average life) shown in the following table. Such variations may occur even if
the average prepayment experience of all such Assets is the same as any of the
specified assumptions.
Percent of Initial Bond Balance Outstanding
at the Following Percentages of [CPR][SPA]
<TABLE>
<CAPTION>
Payment Date
<S> <C> <C> <C> <C> <C> <C>
Initial Percent........................ ___% __% __% __% __% __%
____________ __, 19__..................
____________ __, 19__..................
____________ __, 20__..................
____________ __, 20__..................
____________ __, 20__..................
____________ __, 20__..................
____________ __, 20__..................
____________ __, 20__..................
____________ __, 20__..................
____________ __, 20__..................
____________ __, 20__..................
</TABLE>
Weighted Average Life
(Years) (+). . . . . . . . . . . .
+ The weighted average life of the Bonds is determined by (i) multiplying
the amount of each distribution of principal by the number of years from
the date of issuance to the related Payment Date, (ii) adding the results
and (iii) dividing the sum by the total principal distributions on such
Class of Bonds.
[Yield Consideration]
[Will describe assumption for various scenarios showing sensitivity of
certain classes to prepayment and default risks and set forth resulting yield.]
[Include yield table and bold disclosure with respect to any Interest Only or
Principal Only Bonds.]
[THE CREDIT SUPPORT ISSUER, IF ANY]
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[Description of Credit Support Issuer]
[THE LIQUIDITY FACILITY ISSUER, IF ANY]
[Description of Liquidity Facility Issuer]
THE DEPOSITOR
Union Planters Mortgage Finance Corp. (the "Depositor") was incorporated in
the State of Delaware on September 5, 1997. As of the date hereof, the Depositor
is a direct, wholly-owned limited purpose finance subsidiary of Union Planters
Bank, N.A., a national banking association. Neither Union Planters Bank, N.A.,
nor the Depositor, nor any affiliate of the foregoing, has guaranteed or is
otherwise obligated with respect to the Bonds. The principal executive offices
of the Depositor are located at 7130 Goodlett Farms Parkway, Cordova, Tennessee
38018 (Telephone: (901) 580-6000). See "The Depositor" in the Prospectus.
THE INDENTURE
The following summary describes certain terms of the Indenture. The
summary does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the provisions of the Indenture. Whenever particular
sections or defined terms of the Indenture are referred to, such sections or
defined terms are thereby incorporated herein by reference. See "Description of
the Bonds" herein for a summary of certain additional terms of the Indenture.
REPORTS TO BONDHOLDERS
The Trustee will mail to each Bondholder, at such Bondholder's request, at
its address listed on the Bond Register maintained with the Trustee a report
setting forth certain amounts relating to the Bonds.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
With respect to the Bonds, "Events of Default" under the Indenture will
consist of: (i) a default for five days or more in the payment of any interest
on any Bond; (ii) a default in the payment of the principal of or any
installment of the principal of any Bond when the same becomes due and payable;
(iii) a default in the observance or performance of any covenant or agreement
of the Depositor made in the Indenture and the continuation of any such default
for a period of 30 days after notice thereof is given to the Depositor by the
Trustee or to the Depositor and the Trustee by the holders of at least 25% in
principal amount of the Bonds then outstanding; (iv) any representation or
warranty made by the Depositor in the Indenture or in any certificate delivered
pursuant thereto or in connection therewith having been incorrect in a material
respect as of the time made, and such breach not having been cured within 30
days after notice thereof is given to the Depositor by the Trustee or to the
Depositor and the Trustee by the holders of at least 25% in principal amount of
Bonds then outstanding; or (v) certain events of bankruptcy, insolvency,
receivership or liquidation of the Depositor. [The amount of principal required
to be paid to Bondholders under the Indenture will generally be limited to
amounts available to be deposited in the Collection Account. Therefore, the
failure to pay principal on the Bonds generally will not result in the
occurrence of an Event of Default until the final scheduled Payment Date for
such Bonds.] If there is an Event of Default with respect to a Bond due to late
payment or nonpayment of interest due on a Bond, additional interest will
accrue on such unpaid interest at the interest rate on the Bond (to the extent
lawful) until such interest is paid. Such additional interest on unpaid
interest shall be due at the time such interest is paid. If there is an Event
of Default due to late payment or nonpayment of principal on a Bond, interest
will continue to accrue on such principal at the interest rate on the Bond
until such principal is paid. If an Event of Default should occur and be
continuing with respect to the Bonds, the Trustee or holders of a majority in
principal amount of Bonds then outstanding may declare the principal of such
Bonds to be immediately due and payable. Such declaration may, under certain
circumstances, be rescinded by the holders of a majority in principal amount of
the Bonds then outstanding. If the Bonds are due and payable following an Event
of Default with respect thereto, the Trustee may institute proceedings to
collect amounts due or foreclose on the Depositor's property or exercise
remedies as a secured party. If an Event of Default occurs and
S-45
<PAGE> 242
is continuing with respect to the Bonds, the Trustee will be under no
obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the holders of the Bonds, if the Trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with such
request. Subject to the provisions for indemnification and certain limitations
contained in the Indenture, the holders of a majority in principal amount of
the outstanding Bonds will have the right to direct the time, method and place
of conducting any proceeding or any remedy available to the Trustee, and the
holders of a majority in principal amount of the Bonds then outstanding may, in
certain cases, waive any default with respect thereto, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the Indenture that cannot be modified without the waiver or
consent of all the holders of the outstanding Bonds. No holder of a Bond will
have the right to institute any proceeding with respect to the Indenture,
unless (i) such holder previously has given the Trustee written notice of a
continuing Event of Default, (ii) the holders of not less than 25% in principal
amount of the outstanding Bonds have made written request to the Trustee to
institute such proceeding in its own name as Trustee, (iii) such holder or
holders have offered the Trustee reasonable indemnity, (iv) the Trustee has for
60 days failed to institute such proceeding and (v) no direction inconsistent
with such written request has been given to the Trustee during the 60-day
period by the holders of a majority in principal amount of the Bonds. In
addition, the Trustee and the Bondholders, by accepting the Bonds, will
covenant that they will not at any time institute against the Depositor any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law. With respect to the Depositor, neither the Trustee,
in its individual capacity, nor any of its owners, beneficiaries, agents,
officers, directors, employees, affiliates, successors or assigns will, in the
absence of an express agreement to the contrary, be personally liable for the
payment of the principal of or interest on the Bonds or for the agreements of
the Depositor contained in the Indenture.
CERTAIN COVENANTS
The Indenture will provide that the Depositor may not consolidate with or
merge into any other entity, unless (i) the entity formed by or surviving such
consolidation or merger is organized under the laws of the United States, any
state or the District of Columbia, (ii) such entity expressly assumes the
Depositor's obligation to make due and punctual payments upon the Bonds and the
performance or observance of any agreement and covenant of the Depositor under
the Indenture, (iii) no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation, (iv) the Depositor has been
advised that the ratings of the Bonds then in effect would not be reduced or
withdrawn by any Rating Agency as a result of such merger or consolidation and
(v) the Depositor has received an opinion of counsel to the effect that such
consolidation or merger would have no material adverse tax consequence to the
Depositor or to any Bondholder. The Depositor will not, among other things, (i)
except as expressly permitted by the Indenture, sell, transfer, exchange or
otherwise dispose of any of the assets of the Depositor, (ii) claim any credit
on or make any deduction from the principal and interest payable in respect of
the Bonds (other than amounts withheld under the Code or applicable state law)
or assert any claim against any present or former holder of Bonds because of
the payment of taxes levied or assessed upon the Depositor, (iii) dissolve or
liquidate in whole or in part, (iv) permit the validity or effectiveness of the
Indenture to be impaired or permit any person to be released from any covenants
or obligations with respect to the Bonds under the Indenture except as may be
expressly permitted thereby or (v) permit any lien, charge excise, claim,
security interest, mortgage or other encumbrance to be created on or extent to
or otherwise arise upon or burden the assets of the Depositor or any part
thereof, or any interest therein or the proceeds thereof. The Depositor will
not incur, assume or guarantee any indebtedness other than indebtedness
incurred pursuant to the Bonds and the Indenture.
TRUSTEE'S ANNUAL REPORT
The Trustee will be required to mail each year to all Bondholders a report
relating to any change in its eligibility and qualification to continue as
Trustee under the Indenture, any amounts advanced by it under the Indenture,
the amount, interest rate and maturity date of any indebtedness owing by the
Trust Fund to the Trustee in its individual capacity, any change in the
property and funds physically held by the Trustee as such and any action taken
by it that materially affects the Bonds and that has not been previously
reported, but if no such changes have occurred, then no report shall be
required.
S-46
<PAGE> 243
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture will be discharged with respect to the collateral securing
the Bonds upon the delivery to the Trustee for cancellation of all the Bonds
or, with certain limitations, upon deposit with the Trustee of funds sufficient
for the payment in full of all the Bonds.
MODIFICATION OF INDENTURE
With the consent of the holders of a majority of the outstanding Bonds,
the Depositor and the Trustee may execute a supplemental indenture to add
provisions to, change in any manner or eliminate any provisions of, the
Indenture, or modify (except as provided below) in any manner the rights of the
Bondholders. Without the consent of the holder of each outstanding Bonds
affected thereby, however, no supplemental indenture will: (i) change the due
date of any installment of principal of or interest on any Bond or reduce the
principal amount thereof, the interest rate specified thereon or the redemption
price with respect thereto or change any place of payment where or the coin or
currency in which any Bond or any interest thereon is payable; (ii) impair the
right to institute suit for the enforcement of certain provisions of the
Indenture regarding payment; (iii) reduce the percentage of the aggregate
amount of the outstanding Bonds, the consent of the holders of which is
required for any supplemental indenture or the consent of the holders of which
is required for any waiver of compliance with certain provisions of the
Indenture or of certain defaults thereunder and their consequences as provided
for in the Indenture; (iv) modify or alter the provisions of the Indenture
regarding the voting of Bonds held by the Depositor or an affiliate thereof;
(v) decrease the percentage of the aggregate principal amount of Bonds required
to amend the sections of the Indenture which specify the applicable percentage
of aggregate principal amount of the Bonds necessary to amend the Indenture or
certain other related agreements; or (vi) permit the creation of any lien
ranking prior to or on a parity with the lien of the Indenture with respect to
any of the collateral for the Bonds or, except as otherwise permitted or
contemplated in the Indenture, terminate the lien of the Indenture on any such
collateral or deprive the holder of any Bond of the security afforded by the
lien of the Indenture. The Depositor and the Trustee may also enter into
supplemental indentures, without obtaining the consent of the Bondholders, for
the purpose of, among other things, adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of modifying in
any manner the rights of the Bondholders; provided that such action will not
materially and adversely affect the interest of any Bondholder.
VOTING RIGHTS
At all times, the voting rights of Bondholders under the Indenture will be
allocated among the Bonds pro rata in accordance with their outstanding
Security Principal Balances.
CERTAIN MATTERS REGARDING THE TRUSTEE AND THE DEPOSITOR
Neither the Depositor, the Trustee nor any director, officer or employee
of the Depositor or the Trustee will be under any liability to the Trust Fund
or the related Bondholders for any action taken or for refraining from the
taking of any action in good faith pursuant to the Indenture or for errors in
judgment; provided, however, that none of the Trustee, the Depositor and any
director, officer or employee thereof will be protected against any liability
which would otherwise be imposed by reason of willful malfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties under the Indenture. Subject to certain limitations set
forth in the Indenture, the Trustee and any director, officer, employee or
agent of the Trustee shall be indemnified by the Trust Fund and held harmless
against any loss, liability or expense incurred in connection with
investigating, preparing to defend or defending any legal action, commenced or
threatened, relating to the Indenture other than any loss, liability or expense
incurred by reason of willful malfeasance, bad faith or gross negligence in the
performance of its duties under such Indenture or by reason of reckless
disregard of its obligations and duties under the Indenture. Any such
indemnification by the Trust Fund will reduce the amount payable to the
Bondholders. All persons into which the Trustee may be merged or with which it
may be consolidated or any person resulting from such merger or consolidation
shall be the successor of the Trustee under the Indenture.
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<PAGE> 244
REPORTS TO HOLDERS
Concurrently with each payment to the Bondholders of the Bonds, the Master
Servicer will forward to the Trustee for mailing to such Bondholder a statement
setting forth other items:
(i) the amount of interest included in such payment and the
related Interest Rate;
(ii) the amount, if any, of overdue accrued interest
included in such payment (and the amount of interest thereon);
(iii) the amount, if any, of the remaining overdue
accrued interest after giving effect to such payment;
(iv) the amount, if any, of principal included in such
payment;
(v) the amount, if any, of the reimbursement of
previous Liquidation Loss Amounts included in such payment;
(vi) the amount, if any, of the aggregate unreimbursed
Liquidation Loss Amounts after giving effect to such distribution;
(vii) the Servicing Fee for such Payment Date;
(viii) the Pool Balance as of the end of the preceding
Due Period;
(ix) the number and aggregate Principal Balances of
the Assets as to which the minimum monthly payment is
delinquent for 30-59 days, 60-89 days and 90 or more days,
respectively, as of the end of the preceding Due Period;
and
(x) the book value of any real estate which is
acquired by the Trust Fund through foreclosure or grant of deed in
lieu of foreclosure.
In the case of information furnished pursuant to clauses (iii), (iv) and
(v) above, the amounts shall be expressed as a dollar amount per Bond with a
$1,000 denomination.
Within 60 days after the end of each calendar year, the Master Servicer
will be required to forward to the Trustee a statement containing the
information set forth in clauses (iii) and (viii) above aggregated for such
calendar year.
[THE TRUST AGREEMENT]
[Disclosure of Trust Agreement if Owner Trust Structure]
THE TRUSTEE
_______________ is the Trustee under the Indenture. The mailing address of
the Trustee is _________________, Attention: Corporate Trust Department.
[THE OWNER TRUSTEE]
[Disclosure of Owner Trustee if Owner Trust Structure]
S-48
<PAGE> 245
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of the
Bonds will be used to purchase the Assets simultaneously and to pay other
expenses connected with acquiring the Assets and issuing the Bonds.
UNDERWRITING
The Depositor has entered into an underwriting agreement dated ________
__, 19__ (the "Underwriting Agreement") with _________________ (the
"Underwriter"). Subject to the terms and conditions set forth in the
Underwriting Agreement, the Depositor has agreed to sell to the Underwriter and
the Underwriter has agreed to purchase the Bonds set forth below opposite its
name.
<TABLE>
<CAPTION>
Class __ Class __ Class __
<S> <C> <C> <C>
[Underwriter] $__________ $__________ $________
- ----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriter are subject to certain conditions precedent and that the
Underwriter will be obligated to purchase all of the Bonds if any of the Bonds
are purchased.
The Depositor has been advised that the Underwriter proposes to offer the
Bonds to the public initially at the respective public offering prices set
forth on the cover page of this Prospectus Supplement, and to certain dealers
at such prices less a concession not in excess of the amount set forth below
for each Class. The Underwriter and such dealers may allow a discount not in
excess of the amount set forth below for each Class to certain other dealers.
After the initial public offering of the Bonds, the public offering prices and
concessions and discounts to dealers may be changed by the Underwriter.
<TABLE>
<CAPTION>
Concession Discount
(Percent of (Percent of
Principal Amount) Principal Amount)
<S> <C> <C>
Class __ _____% _____%
Class __ _____% _____%
Class __ _____% _____%
</TABLE>
The Underwriter and any dealers that participate with the Underwriter in
the distribution of the Bonds may be deemed to be underwriters, and any
discounts, concessions or commissions received by them, and any profit on the
resale of the Bonds purchased by them, may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933, as amended (the
"Act").
The Depositor has agreed to indemnify the Underwriter against certain
civil liabilities, including liabilities under the Act, to the extent and under
the circumstances set forth in the Underwriting Agreement.
[Until the distribution of the Bonds is completed, rules of the Securities
and Exchange Commission may limit the ability of the Underwriter and certain
selling group members to bid for and purchase the Bonds. As an exception to
these rules, the Underwriter are permitted to engage in certain transactions
that stabilize the price of the Bonds. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Bonds.
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<PAGE> 246
In general, purchases of a security for the purpose of stabilization could
cause the price of the security to be higher than it might be in the absence of
such purchases.
Neither the Depositor or any of its affiliates nor the Underwriter makes
any representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Bonds. In
addition, neither the Depositor nor any of its affiliates nor the Underwriter
makes any representation that the Underwriter will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.]
ERISA CONSIDERATIONS
Fiduciaries of employee benefit plans and certain other retirement plans
and arrangements, including individual retirement accounts and annuities, Keogh
plans, and collective investment funds in which such plans, accounts, annuities
or arrangements are invested (collectively, "Plans"), that are subject to
ERISA, or corresponding provisions of the Code should carefully review with
their legal advisors whether the purchase or holding of any Bonds could result
in unfavorable consequences for the Plan or its fiduciaries under the Plan
Asset Regulations (as defined in the Prospectus) or the prohibited transaction
rules of ERISA or the Code. Prospective investors should be aware that,
although certain exceptions from the application of the Plan Asset Regulations
and the prohibited transaction rules exist, there can be no assurance that any
such exception will apply with respect to the acquisition of a Bond. See "ERISA
Considerations" in the Prospectus.
The Depositor believes that the Bonds should be treated as debt
obligations without substantial equity features for purposes of the Plan Asset
Regulations of ERISA. Accordingly, a Plan that acquires a Bond should not be
treated as having acquired a direct interest in the Assets. There can be no
complete assurance, however, that all Classes of the Bonds will be treated as
debt for ERISA purposes. If a Class of Bonds is treated as equity for purposes
of ERISA, the purchaser could be treated as having acquired a direct interest
in the Assets securing the Bonds. In that event, the purchase, holding, or
resale of a Bond could result in a transaction that is prohibited under ERISA
or the Code. Furthermore, regardless of whether the Bonds are treated as equity
for purposes of ERISA, the acquisition or holding of the Bonds by or on behalf
of a Plan still could be considered to give rise to a prohibited transaction if
the Depositor, the Trustee, the Underwriter, the Master Servicer, the Servicers
or any of their respective affiliates is or becomes a party in interest or a
disqualified person with respect to such Plan. Nevertheless, one or more
exemptions may be available with respect to certain prohibited transaction
rules of ERISA that might apply in connection with the initial purchase,
holding and resale of the Bonds, depending in part upon the type of Plan
fiduciary making the decision to acquire Bonds and the circumstances under
which such decision is made. Those exemptions include, but are not limited to:
(i) Prohibited Transaction Class Exemption ("PTCE") 95-60, regarding
investments by insurance company general accounts; (ii) PTCE 91-38, regarding
investments by bank collective investment funds; (iii) PTCE 90-1, regarding
investments by insurance company pooled separate accounts; or (iv) PTCE 84-14,
regarding transactions negotiated by professional asset managers. Before
purchasing Bonds, a Plan subject to the fiduciary responsibility provisions of
ERISA or described in Section 4975(e) (and not exempt under Section 4975(g)) of
the Code should consult with its counsel to determine whether the conditions of
any exemption would be met. A purchaser of a Bond should be aware, however,
that even if the conditions specified in one or more exemptions are met, the
scope of the relief provided by an exemption might not cover all acts that
might be construed as prohibited transactions. See "ERISA Considerations" in
the Prospectus.
LEGAL INVESTMENT
The Class __ and Class __ Bonds will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984 ("SMMEA") for so long as they are rated in one of the two highest rating
categories by one or more nationally recognized statistical rating
organizations. As such, the Class __ and Class __ Bonds will be legal
investments for certain entities to the extent provided in SMMEA, subject to
state laws overriding SMMEA. A number of states have enacted legislation
overriding the legal investment provisions of SMMEA. See "Legal Investment" in
the Prospectus.
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<PAGE> 247
[The appropriate characterization of the Subordinate Bonds under various
legal investment restrictions, and thus the ability of investors subject to
such restrictions to purchase such Bonds, is subject to significant
interpretative uncertainties.]
Any financial institution that is subject to the jurisdiction of the
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, the Office of Thrift
Supervision, the National Credit Union Administration, any state insurance
commission, or any other federal or state agencies with similar authority
should review any applicable rules, guidelines and regulations prior to
purchasing any Bonds. Financial institutions should review and consider the
applicability of the Federal Financial Institutions Examination Counsel
Supervisory Policy Statement on the Selection of Securities Dealers and
Unsuitable Investment Practices (to the extent adopted by their respective
federal regulators), which, among other things, sets forth guidelines for
investing in certain types of mortgage related securities and prohibits
investment in certain "high-risk" mortgage securities.
The Depositor makes no representations as to the proper characterization
of any Class of the Bonds for legal investment or other purposes, or as to the
legality of investment by particular investors in any Class of the Bonds under
applicable legal investment restrictions. The uncertainties may adversely
affect the liquidity of any Class of Bonds. 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 Bonds constitute legal investments under SMMEA or are subject to
investment, capital or other restrictions. See "Legal Investment" in the
Prospectus.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Hunton &
Williams, Richmond, Virginia, and for the Underwriter by ____________, New
York, New York. The material federal income tax consequences of the Bonds have
been passed upon for the Depositor by Hunton & Williams.
RATING
It is a condition to their issuance that each Class of Bonds obtain the
ratings specified on the cover page hereof from the Rating Agencies specified
on the cover page hereof.
[INSERT LANGUAGE DESCRIBING EACH APPLICABLE RATING CATEGORY]
The ratings on asset-backed pass-through certificates address the
likelihood of the receipt by certificateholders of all payments on the
underlying assets to which they are entitled. Rating opinions address the
structural, legal and issuer-related aspects associated with the securities,
including the nature of the underlying assets. Ratings on pass-through
certificates do not represent any assessment of the likelihood that principal
prepayments will be made by borrowers with respect to the underlying assets or
of the degree to which the rate of such prepayments might differ from that
originally anticipated. As a result, the ratings do not address the possibility
that holders of the Bonds might suffer a lower than anticipated yield in the
event of rapid prepayments of the Assets or in the event that the Trust Fund is
terminated prior to the latest final scheduled Payment Date for the Bonds. In
addition, the ratings of the Bonds do not address the possibility that, in the
event of the bankruptcy of the Depositor, the issuance and sale of the Bonds
might be recharacterized as a financing and that, as a result of such
recharacterization, payments on the Bonds may be delayed or altered.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning
rating organization. Each security rating should be evaluated independently of
any other security rating.
S-51
<PAGE> 248
The Depositor will request _______________ and ________________ to rate
the Bonds. There can be no assurance as to whether any rating agency not
requested to rate the Bonds will nonetheless issue a rating and, if so, what
such rating would be. A rating assigned to the Bonds by a rating agency that
has not been requested by the Depositor to do so may be lower than the rating
assigned by a Rating Agency pursuant to the Depositor's request.
S-52
<PAGE> 249
<PAGE> 250
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with
the offering of $100,000,000 of the Mortgage Pass-Through Certificates and
Collateralized Mortgage Bonds being registered under this Registration
Statement, other than underwriting discounts and commission:
<TABLE>
<S> <C>
SEC Registration Fee................................... $ 29,500.00
Blue Sky Fees and Expenses............................. 7,000.00
Printing and Engraving Expenses........................ 60,000.00
Legal Fees and Expenses................................ 45,000.00
Trustee Fees and Expenses.............................. 25,000.00
Rating Agency Fees..................................... 80,000.00
Miscellaneous.......................................... 8,500.00
===========
TOTAL................................... $255,000.00
</TABLE>
ITEM 32. SALES TO SPECIAL PARTIES.
Not applicable.
ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES.
On September 5, 1997, the Registrant sold 1,000 shares of its common stock
to Union Planters Bank, N. A. for a cash price of $10,000 pursuant to a stock
subscription agreement dated the date thereof. Such shares were not registered
under the Securities Act of 1933, as amended, in reliance upon the exemption
therefrom provided under Section 4(2) of that Act.
ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant is incorporated under the laws of Delaware. Section 145 of
the Delaware General Corporation Law provides that a Delaware corporation may
indemnify any persons, including officers and directors, who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation, by reason of the
fact that such person was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise). The indemnity may include expenses (including
attorneys' fees), judgements, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, for criminal proceedings, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify officers and directors
in an action by or in the right of the corporation under the same conditions,
except that no indemnification is permitted without judicial approval if the
officer or director is adjudged to be liable to the corporation. Where an
officer or director is successful on the merits or otherwise in the defense of
any action referred to above, the corporation must indemnify him against the
expense which such officer or director actually and reasonably incurred.
The Certificate of Incorporation and Bylaws of the Registrant provide, in
effect, that, subject to certain limited exceptions, such corporation will
indemnify its officers and directors to the extent permitted by the Delaware
General Corporation Law.
II - 1
<PAGE> 251
The Company, either directly or through its direct or indirect parents,
maintains a directors' and officers' insurance policy.
Pursuant to the form of Underwriting Agreement, the Underwriters will
agree, subject to certain conditions, to indemnify the Company, its directors,
certain of its officers and any person who "controls" the Company, within the
meaning of the Securities Act of 1933, as amended, against certain liabilities.
ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
Not applicable.
ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Audited Balance Sheet as of December 31, 1997, including Report of
Independent Accountants (included in Prospectus).
(b) Exhibits
<TABLE>
<S> <C>
1.1 Underwriting Agreement Standard Provisions, together with Form of Underwriting Agreement
3.1 Certificate of Incorporation of Registrant
3.2 Bylaws of Registrant
4.1 Standard Terms to Pooling and Servicing Agreement
4.2 Form of Indenture between Registrant and Trustee
4.3 Form of Trust Agreement
4.4 Form of Deposit Trust Agreement
5.1 Opinion of Hunton & Williams*
8.1 Tax Opinion of Hunton & Williams
23.1 Consent of Hunton & Williams (included in Exhibits 5.1 and 8.1)
23.2 Consent of Price Waterhouse LLP
24.1 Power of Attorney*
99.1 Form of Sales Agreement between the Registrant, as Purchaser, and Seller
99.2 Form of Servicing Agreement
</TABLE>
- ----------------------------
* Previously filed.
ITEM 37. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the Registration
Statement;
II - 2
<PAGE> 252
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change of such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in the post-effective
amendment by those paragraphs is contained in periodic reports filed
by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are included by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II - 3
<PAGE> 253
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 (including, without limitation, the security rating requirements at
time of sale) for filing on Form S-11 and has duly caused this Pre-Effective
Amendmend No. 1 to the Registrant's Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cordova,
State of Tennessee, on March 20, 1998.
UNION PLANTERS MORTGAGE
FINANCE CORP.
(Registrant)
By: /s/ Joel R. Katz*
--------------------------------
Name: Joel R. Katz
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to the Registrant's Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Joel R. Katz* Director and President March 20, 1998
- ------------------------------------- (Principal Executive Officer)
Joel R. Katz
/s/ James K. Plunkett Director, Secretary and Vice March 20, 1998
- ------------------------------------- President (Principal Financial Officer
James K. Plunkett and Principal Accounting Officer)
/s/ Leslie M. Stratton* Director March 20, 1998
- -------------------------------------
Leslie M. Stratton
Director
- -------------------------------------
John E. Gnuschke, Ph.D
</TABLE>
*By: /s/ James K. Plunkett
-------------------------------------
Attorney-in-Fact, pursuant
to a Power of Attorney
II - 4
<PAGE> 1
EXHIBIT 1.1
UNION PLANTERS MORTGAGE FINANCE CORP.
[MORTGAGE PASS-THROUGH CERTIFICATES]
[COLLATERALIZED MORTGAGE BONDS]
UNDERWRITING AGREEMENT
__________ __, 199_
[Lead Underwriter]
[Names of Other Co-Managers]
c/o [Lead Underwriter]
[Address]
Ladies and Gentlemen:
Union Planters Mortgage Finance Corp., a Delaware corporation (the
"Company") proposes to sell to you (the "Underwriters"), the [Mortgage
Pass-Through Certificates][Collateralized Mortgage Bonds] of the series and
classes, and in the respective original principal or notional, as the case may
be, amounts or percentage interests, set forth in Schedule I hereto (the
"Offered Securities"), evidencing ownership interests in a trust consisting of
[describe assets] to be acquired by the Company (the "Assets") and related
property (collectively, the "Trust Fund"). The Assets will be acquired by the
Company on the Closing Date (as defined herein) from the seller (the "Seller")
specified in the Prospectus Supplement (as defined herein) pursuant to a
purchase agreement (the "Asset Purchase Agreement") dated the date hereof. The
Assets will be of the type and will have the characteristics described in the
Prospectus Supplement, subject to the variances, ranges, minimums and maximums
set forth in the Prospectus Supplement, and will have the aggregate principal
balance set forth in the Prospectus Supplement, subject to an upward or downward
variance in principal balance, not to exceed the percentage set forth in the
Prospectus Supplement.
The Offered Securities, together with the other classes of
[certificates][bonds] of the series specified on Schedule II hereto (the
"Private Securities," and collectively with the Offered Securities, the
"Securities") are to be issued under a [pooling and servicing agreement (the
"Pooling and Servicing Agreement")][trust agreement (the "Trust Agreement") and
indenture (the "Indenture"), as applicable], dated as of the Cut-Off Date (as
defined in the Prospectus Supplement), among the [describe applicable parties].
The Offered Securities of each class will be issued in the minimum denominations
and will have
<PAGE> 2
the terms set forth in the Prospectus Supplement. Capitalized terms used but not
otherwise defined herein shall have the respective meanings ascribed thereto in
the [Pooling and Servicing Agreement][Trust Agreement][Indenture].
1. Representations and Warranties. The Company represents
and warrants to and agrees with each of the Underwriters that:
(i) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (No. 333-______)
on Form S-11 for the registration under the Securities Act of 1933, as
amended (the "Act"), of Mortgage Pass-Through Certificates and
Collateralized Mortgage Bonds (issuable in series), including the
Securities, which registration statement has become effective, and a
copy of which, as amended to the date hereof, has heretofore been
delivered to you. The Company proposes to file with the Commission
pursuant to Rule 424(b) under the rules and regulations of the
Commission under the Act (the "1933 Act Regulations") a supplement
dated ______________ (the "Prospectus Supplement"), to the prospectus
dated ________________ (the "Basic Prospectus"), relating to the
Offered Securities and the method of distribution thereof. Such
registration statement (No. 333-______) including exhibits thereto and
any information incorporated therein by reference including
"Computational Materials" and "ABS Term Sheets" (collectively, the
"Computational Materials and ABS Term Sheets") as defined in the
No-Action Letter of May 20, 1994 issued by the Commission to Kidder,
Peabody Acceptance Corporation I, Kidder, Peabody & Co. Incorporated
and Kidder Structured Asset Corporation, the No-Action Letter of May
27, 1994 issued by the Commission to the Public Securities Association
and the No-Action Letter of March 9, 1995 issued by the Commission to
the Public Securities Association (the "SEC No-Action Letters"), as
amended at the date hereof, is hereinafter called the "Registration
Statement"; and the Basic Prospectus and the Prospectus Supplement and
any information incorporated therein by reference including
Computational Materials and ABS Terms Sheets, together with any
amendment thereof or supplement thereto authorized by the Company on or
prior to the Closing Date for use in connection with the offering of
the Securities, are hereinafter called the "Prospectus". Any
preliminary form of the Prospectus Supplement which has heretofore been
filed pursuant to Rule 424, or prior to the effective date of the
Registration Statement pursuant to Rule 402(a), or 424(a) is
hereinafter called a "Preliminary Prospectus Supplement."
(ii) The Registration Statement has become effective; no
stop order suspending the effectiveness of the Registration Statement
is in effect, and no proceedings for such purpose are pending or, to
the Company's knowledge, threatened by
2
<PAGE> 3
the Commission.
(iii) The Registration Statement and the Prospectus, as of the date
of the Prospectus Supplement, conform, and the Registration Statement
as of the effective date (the "Effective Date") and the Prospectus, as
of its date, each as revised, amended or supplemented and filed with
the Commission prior to the termination of the offering of the Offered
Securities, complied in all material respects to the requirements of
the Act and the 1933 Act Regulations, and the Registration Statement,
as of the Effective Date, did not, and as of the Closing Date, will
not, contain any untrue statement of a material fact or and did not and
will not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and the
Prospectus, as of the date of the Prospectus Supplement did not, and as
of the Closing Date, will not contain any untrue statement of a
material fact and did not and will not omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to
the information contained in the Prospectus or any revision or
amendment thereof or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company by any
Underwriter through __________________ specifically for use in
connection with the preparation of the Prospectus or any revision or
amendment thereof or supplement thereto, and any information in any
Computational Materials or ABS Term Sheets required to be provided by
any Underwriter to the Company pursuant to Section 4.2, except to the
extent that such information constitutes Pool Information. As used
herein, "Pool Information means information with respect to the assumed
characteristics of the Assets and administrative and servicing fees.
The Company acknowledges that the Underwriter Information constitutes
the only information furnished in writing by you or on your behalf for
use in connection with the preparation of the Registration Statement or
the Prospectus Supplement.
(iv) At or prior to the Closing Date, the direction by the Company
to the Trustee to execute, authenticate and deliver the Offered
Securities will have been duly authorized by the Company, and the
Offered Securities, when executed and authenticated in accordance with
the [Pooling and Servicing Agreement][Indenture or Trust Agreement, as
applicable], and delivered to and paid for by the Underwriters in
accordance with the terms of this Agreement will be duly and validly
issued and outstanding and entitled to the benefits of such Agreement.
[Each Security of the classes indicated to be "mortgage related
securities" under the heading "___________________" in the Prospectus
Supplement will,
3
<PAGE> 4
when issued, be a "mortgage related security" as such term is defined
in Section 3(a)(41) of the Exchange Act.]
(v) This Agreement has been duly authorized, executed and
delivered by the Company. At or prior to the Closing Date, the
[Pooling and Servicing Agreement][Indenture and Trust Agreement] and
Asset Purchase Agreement will have been duly authorized, executed and
delivered by the Company and will conform in all material respects to
the descriptions thereof contained in the Prospectus and, assuming the
valid execution and delivery thereof by the other parties thereto, the
[Pooling and Servicing Agreement][Indenture and Trust Agreement, as
applicable] and the Asset Purchase Agreement will constitute a legal,
valid and binding agreement of the Company enforceable in accordance
with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting creditors'
rights generally, by general principles of equity and by the effect of
the exercise by the Trustee of certain remedial provisions, including
waivers, against the Assets.
(vi) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with corporate power and authority to own its properties
and conduct its business as described in the Prospectus and to enter
into and perform its obligations under the [Pooling and Servicing
Agreement][the Trust Agreement, the Indenture or the Asset Purchase
Agreement, as applicable] and this Agreement.
(vii) Each preliminary prospectus filed as part of the Registration
Statement as originally filed or as a part of any amendment thereto, or
filed pursuant to Rule 424 or Rule 462 under the Act, complied as to
form, when so filed, in all material respects with the Act and the
rules and regulations of the Commission thereunder.
(viii) Neither the execution and delivery by the Company of, nor the
performance by the Company of its obligations under, this Agreement,
the [Pooling and Servicing Agreement][Indenture or Trust Agreement] or
the Asset Purchase Agreement will contravene any provision of
applicable law or the certificate of incorporation or by-laws of the
Company or any agreement or other instrument binding upon the Company
that is material to the Company or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company
or any subsidiary, and no consent, approval, authorization or order of,
or qualification with, any governmental body or agency is required for
the performance by the Company of its obligations under this Agreement,
the [Pooling and Servicing Agreement][Indenture or Trust Agreement] or
the Asset Purchase Agreement, except such as may be required by the
4
<PAGE> 5
securities or "blue sky" laws of the various states in connection with
the offer and sale of the Offered Securities.
(ix) There are no legal or governmental proceedings pending or
threatened to which the Company is a party or to which any of the
properties of the Company are subject that are required to be described
in the Registration Statement or the Prospectus and that are not so
described, nor are there any statutes, regulations, contracts or other
documents required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.
(x) At the time of execution and delivery of the [Pooling and
Servicing Agreement][Indenture][Trust Agreement] and the Asset Purchase
Agreement, (1) the Company will own the Assets being transferred to the
Trust Fund pursuant thereto, free and clear of any lien, mortgage,
pledge, charge, encumbrance, adverse claim or other security interest
(collectively, "Liens"), except to the extent permitted in the related
agreement, and will not have assigned to any person other than the
Trust Fund any of its right, title or interest in the Assets, (2) the
Company will have the power and authority to transfer the Assets to the
Trust Fund and to transfer the Offered Securities to you, (3) upon
execution and delivery to the Trustee of the [Pooling and Servicing
Agreement][Indenture and Trust Agreement] and the Asset Purchase
Agreement, and delivery of the Securities to the Company, the Trust
Fund will own the Assets free of Liens other than Liens permitted by
the related agreement or created or granted by you and (4) upon payment
and delivery of the Offered Securities to you, you will acquire
ownership of the Offered Securities, free of Liens other than Liens
permitted by the related agreement or created or granted by you.
(xi) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of this Agreement,
the [Pooling and Servicing Agreement][Indenture and Trust Agreement]
and Asset Purchase Agreement and the Securities have been or will be
paid by the Company at or prior to the Closing Date.
(xii) There has not occurred any material adverse change, or
any development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company, since ____________.
(xiii) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such
5
<PAGE> 6
terms are defined in the Investment Company Act of 1940, as amended.
2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, the respective actual or notional, as the case may
be, amounts or percentage interests set forth in Schedule I hereto in the
respective classes of Offered Securities at the respective purchase price for
each such class set forth therein.
3. Delivery and Payment. The Offered Securities shall be delivered at
the office, on the date and at the time specified in, Schedule II attached
hereto, which place, date and time may be changed by agreement between the
Underwriters and the Company (such date and time of delivery of and payment for
such Offered Securities being hereinafter referred to as the "Closing Date").
Delivery of the [Class __] Securities (which [Class __] Securities shall also be
referred to herein as the "DTC Registered Securities") shall be made to you
through The Depository Trust Company ("DTC") and delivery of the [Class __]
Securities (collectively, the "Definitive Securities") shall be made in
registered, certified form, in each case against payment by you of the purchase
prices thereof to or upon the order of the Company by wire transfer in
immediately available funds. The Definitive Securities shall be registered in
such names and in such denominations as you may request not less than two
business days in advance of the Closing Date. The Company agrees to have the
Definitive Securities available for inspection, checking and packaging by you in
New York, New York not later than 1:00 p.m., New York City time, on the business
day prior to the Closing Date.
4. Offering by Underwriters.
4.1 It is understood that the several Underwriters propose to offer the
Offered Securities for sale to the public as set forth in the Prospectus and
that you will not offer, sell or otherwise distribute the Offered Securities
(except for the sale thereof in exempt transactions) in any state in which the
Offered Securities are not exempt from registration under "blue sky" or state
securities laws (except where the Offered Securities will have been qualified
for offering and sale at your direction under such "blue sky" or state
securities laws).
4.2 It is understood that each Underwriter may prepare and provide to
prospective investors certain Computational Materials and ABS Term Sheets in
connection with the offering of the Offered Securities, subject to the following
conditions:
(a) All Computational Materials and ABS Term Sheets provided by an
Underwriter to prospective investors that are
6
<PAGE> 7
required to be filed pursuant to the SEC No-Action Letters shall bear a legend
on each page including the following statement:
"THE INFORMATION CONTAINED HEREIN HAS BEEN PROVIDED BY [UNDERWRITER].
NEITHER THE ISSUER OF THE SECURITIES NOR ANY OF ITS AFFILIATES MAKES
ANY REPRESENTATION AS TO THE ACCURACY OR COMPLETENESS OF THE
INFORMATION HEREIN. THE INFORMATION HEREIN IS PRELIMINARY, AND WILL BE
SUPERSEDED BY THE APPLICABLE PROSPECTUS SUPPLEMENT AND BY ANY OTHER
INFORMATION SUBSEQUENTLY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION."
In the case of Collateral Term Sheets (as defined in the SEC No- Action
Letters), such legend shall also include the following statement:
"THE INFORMATION CONTAINED HEREIN WILL BE SUPERSEDED BY THE DESCRIPTION
OF THE MORTGAGE POOL CONTAINED IN THE PROSPECTUS SUPPLEMENT RELATING TO
THE SECURITIES AND SUPERSEDES ALL INFORMATION CONTAINED IN ANY
COLLATERAL TERM SHEETS RELATING TO THE MORTGAGE POOL PREVIOUSLY
PROVIDED BY [UNDERWRITER]."
Notwithstanding the foregoing, this subsection (a) will be satisfied if all
Computational Materials and ABS Term Sheets referred to therein bear a legend in
a form previously approved in writing by the Company.
(b) Any [Computational Material and] ABS Term Sheets are subject to the
review by and approval of the Company prior to their distribution to any
prospective investors and a copy of such [Computational Material and] ABS Term
Sheets as are delivered to prospective investors shall, in addition to the
foregoing delivery requirements, be delivered to the Company simultaneously with
delivery to prospective investors.
(c) Each Underwriter shall provide to the Company, for filing on Form
8-K as provided in Section 5(h), copies (in such format as required by the
Company) of all Computational Materials and ABS Term Sheets prepared by it that
are required to be filed with the Commission pursuant to the SEC No-Action
Letters. An Underwriter may provide copies of the foregoing in a consolidated or
aggregate form that includes all information required to be filed. All
Computational Materials and ABS Term Sheets described in this Section 4.2(c)
must be provided to the Company not later than 10:00 a.m. New York time one
business day before filing thereof is required pursuant to the terms of this
Agreement. Each Underwriter severally agrees that it will not provide to any
investor or prospective investor in the Offered Securities any Computational
Materials or ABS Term Sheets on or after the day on which Computational
Materials and ABS Term Sheets are required to be provided to the Company
pursuant to this Section 4.2(c) (other than copies of Computational Materials or
ABS Term Sheets
7
<PAGE> 8
previously submitted to the Company in accordance with this Section 4.2(c) for
filing pursuant to Section 5(h)), unless such Computational Materials or ABS
Term Sheets are preceded or accompanied by the delivery of a Prospectus to such
investor or prospective investor.
(d) All information included in the Computational Materials and ABS
Term Sheets shall be generated based on substantially the same methodology and
assumptions that are used to generate the information in the Prospectus
Supplement as set forth therein; provided, however, that the Computational
Materials and ABS Term Sheets may include information based on alternative
methodologies or assumptions if specified therein. If any Computational
Materials or ABS Term Sheets that are required to be filed were based on
assumptions with respect to the Assets that are incorrect, that differ from the
final Pool Information in any material respect or on Security structuring terms
that were revised in any material respect prior to the printing of the
Prospectus, the Underwriter responsible therefor shall prepare revised
Computational Materials or ABS Term Sheets, as the case may be, based on the
final Pool Information and structuring assumptions, circulate such revised
Computational Materials and ABS Term Sheets to all recipients of the preliminary
versions thereof that indicated orally to such Underwriter they would purchase
all or any portion of the Securities, and include such revised Computational
Materials and ABS Term Sheets (marked, "as revised") in the materials delivered
to the Company pursuant to Section 4.2(c).
(e) The Company shall not be obligated to file any Computational
Materials or ABS Term Sheets that (i) in the reasonable determination of the
Company [and the respective Underwriter] are not required to be filed pursuant
to the SEC No- Action Letters or (ii) have been determined to contain any
material error or omission, provided that, at the request of the respective
Underwriter, the Company will file Computational Materials or ABS Term Sheets
that contain a material error or omission if clearly marked "superseded by
materials dated ________" and accompanied by corrected Computational Materials
or ABS Term Sheets that are marked "material previously dated _________, as
corrected". In the event that at any time when a prospectus relating to the
Offered Securities is required to be delivered under the Act, any Computational
Materials or ABS Term Sheets are determined, in the reasonable judgment of the
Company or the respective Underwriter, to contain a material error or omission,
such Underwriter shall prepare a corrected version of such Computational
Materials or ABS Term Sheets, shall circulate such corrected version of such
Computational Materials and ABS Term Sheets to all recipients of the prior
versions thereof that either indicated orally to such Underwriter they would
purchase all or any portion of the Offered Securities, or actually purchased all
or any portion thereof, and shall deliver copies of such corrected Computational
Materials and ABS Term Sheets
8
<PAGE> 9
(marked, "as corrected") to the Company for filing with the Commission in a
subsequent Form 8-K submission (subject to the Company's obtaining an
accountant's comfort letter in respect of such corrected Computational Materials
and ABS Term Sheets, which shall be at the expense of such Underwriter) provided
that if any such letter is required to be revised solely because of a change in
the Pool Information, any additional expenses for letter resulting from the
change in Pool Information shall be paid by the Company.
(f) If the Underwriter does not provide any Computational Materials and
ABS Term Sheets to the Company pursuant to Section 4.2(c), such Underwriter
shall be deemed to have represented, as of the Closing Date, that it did not
provide any prospective investors with any information in written or electronic
form in connection with the offering of the Offered Securities that is required
to be filed with the Commission in accordance with the SEC No-Action Letters,
and such Underwriter shall provide the Company with a certification to that
effect on the Closing Date.
4.3 Each Underwriter severally represents and warrants and agrees with the
Company that as of the date hereof and as of the Closing Date that: (i) the
Computational Materials and ABS Term Sheets furnished by it to the Company
pursuant to Section 4.2(c) constitute (either in original, aggregate or
consolidated form) all of the materials furnished to prospective investors by
such Underwriter prior to the time of delivery thereof to the Company that are
required to be filed with the Commission with respect to the Offered Securities
in accordance with the SEC No-Action Letters, and such Computational Materials
and ABS Term Sheets comply with the requirements of the SEC No-Action Letters;
(ii) on the date any such Computational Materials and ABS Term Sheets with
respect to such Securities (or any written or electronic materials furnished to
prospective investors on which the Computational Materials and ABS Term Sheets
are based) were last furnished to each prospective investor and on the date of
delivery thereof to the Company pursuant to Section 4.2(c) and on the related
Closing Date, such Computational Materials and ABS Term Sheets (or materials)
were accurate in all material respects when read in conjunction with the
Prospectus (taking into account the assumptions explicitly set forth in the
Computational Materials, except to the extent of any errors therein that are
caused by errors in the Pool Information; (iii) each Underwriter has not and
will not represent to potential investors that any Computational Materials and
ABS Term Sheets were prepared or disseminated on behalf of the Company; and (iv)
all Computational Materials and ABS Term Sheets (or underlying materials
distributed to prospective investors by it on which the Computational Materials
and ABS Term Sheets were based) contained and will contain the legend in the
form set forth in Section 4.2(a) (or in such other form previously approved in
writing by the Company).
9
<PAGE> 10
Notwithstanding the foregoing, neither Underwriter makes any
representation or warranty as to whether any Computational Materials or ABS Term
Sheets (or any written or electronic materials furnished to prospective
investors on which the Computational Materials or ABS Term Sheets are based)
included or will include any inaccurate statement resulting directly from any
error contained in the Pool Information.
5. Agreements. The Company agrees with each Underwriter that:
(a) Before amending or supplementing the Registration Statement or the
Prospectus with respect to the Securities, the Company will furnish you with a
copy of each such proposed amendment or supplement and will not file any such
proposed amendment or supplement to which any Underwriter reasonably objects.
(b) The Company will cause the Prospectus Supplement to be transmitted
to the Commission for filing pursuant to Rule 424 under the Act by means
reasonably calculated to result in filing with the Commission pursuant to said
rule and, if necessary, within 15 days of the Closing Date, will transmit for
filing by means reasonably calculated to result in filing with the Commission a
report on Form 8-K for purposes of filing the Pooling and Servicing Agreement,
and will promptly advise each Underwriter when the Prospectus Supplement has
been so filed.
(c) Prior to the termination of the offering of the Offered Securities,
the Company will promptly advise each Underwriter (i) when any amendment to the
Registration Statement has become effective or any revision of or supplement to
the Prospectus has been so filed (unless such amendment, revision or supplement
does not relate to the Securities), (ii) of any request by the Commission for
any amendment of the Registration Statement or the Prospectus or for any
additional information (unless such request for additional information does not
relate to the Securities), (iii) of any written notification received by the
Company of the suspension of qualification of the Offered Securities, for sale
in any jurisdiction or the initiation of threatening of any proceeding for such
purpose and (iv) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the institution or to the
knowledge of the Company, the threatening of any proceeding for that purpose.
The Company will use its best efforts to prevent the issuance of any such stop
order and, if issued, to obtain as soon as possible the withdrawal thereof.
Except as otherwise provided in Section 5(d), the Company will not file prior to
the termination of such offering any amendment to the Registration Statement or
any revision of or supplement to the Prospectus (other than any such amendment,
revision or supplement which does not relate to the Securities) which shall be
disapproved by the Underwriters after reasonable notice and review of such
filing.
10
<PAGE> 11
(d) If at any time when a prospectus relating to the Offered Securities
is required to be delivered under the Act (i) any event occurs as a result of
which the Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein in the light of the circumstances under which they were
made not misleading, or (ii) it shall be necessary to revise, amend or
supplement the Prospectus to comply with the Act or the rules and regulations of
the Commission thereunder, the Company promptly will notify each Underwriter and
will, upon the request of any Underwriter, or may, after consultation with each
Underwriter, prepare and file with the Commission a revision, amendment or
supplement which will correct such statement or omission or effect such
compliance, and furnish without charge to each Underwriter as many copies as
such Underwriter may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such statement
or omission or effect such compliance.
(e) The Company will furnish to each Underwriter and counsel to each
Underwriter, without charge, conformed copies of the Registration Statement
(including exhibits thereto) and, so long as delivery of a prospectus relating
to the Offered Securities is required under the Act, as many copies of the
Prospectus, any documents incorporated by reference therein and any revisions or
amendments thereof or supplements thereto as may be reasonably requested.
(f) The Company will endeavor to arrange for the qualification of the
Securities for sale under the laws of such jurisdictions as you may reasonably
designate and will maintain such qualification in effect so long as required for
the initial distribution of the Securities; provided, however, that the Company
shall not be required to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action that would subject it to general or
unlimited service of process in any jurisdiction where it is not so subject.
(g) Whether or not the transactions contemplated in the Pooling and
Servicing Agreement were consummated or this Agreement is terminated, the
Company shall pay or cause to be paid all expenses incident to the performance
of its obligations under this Agreement, including: (i) the fees, disbursements
and expenses of the Company's counsel in connection with the registration and
delivery of the Offered Securities under the Act and all other fees or expenses
in connection with the preparation and filing of the Registration Statement, any
preliminary prospectus, the Prospectus and amendments and supplements to any of
the foregoing, including all printing costs associated therewith, and the
mailing and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer
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<PAGE> 12
and delivery of the Offered Securities to the Underwriters, including any
transfer or other taxes payable thereon, (iii) the cost of printing or producing
any "blue sky" memorandum in connection with the offer and sale of the Offered
Securities under state securities laws and all expenses in connection with the
qualification of the Offered Securities for offer and sale under state
securities laws as provided in Section 5(f), including filing fees and the
reasonable fees and disbursements of counsel for the Underwriters in connection
with such qualification and in connection with the "blue sky" memorandum, (vi)
all filing fees and disbursements of counsel for the Underwriters incurred in
connection with any review and qualification of the offering by the National
Association of Securities Dealers, Inc., (v) the cost of printing the Offered
Securities, (vi) the costs and charges of any transfer agent, registrar or
depositary, and (vii) all other costs and expenses incident to the performance
of the obligations of the Company hereunder for which provision is not otherwise
made in this Section.
(h) So long as any Offered Securities are outstanding, upon request of
any Underwriter, the Company will, or will cause the [Master Servicer] to,
furnish to such Underwriter, as soon as available, a copy of (i) the annual
statement of compliance delivered by the [Master Servicer] to the Trustee under
the [Pooling and Servicing Agreement], (ii) the annual independent public
accountants' servicing report furnished to the Trustee pursuant to the [Pooling
and Servicing Agreement], (iii) each report of the Company regarding the Offered
Securities filed with the Commission under the Exchange Act or mailed to the
holders of the Offered Securities and (iv) from time to time, such other
information concerning the Offered Securities which may be furnished by the
Company or the [Master Servicer] without undue expense and without violation of
applicable law.
(i) The Company shall file the Computational Materials and ABS Term
Sheets (if any) provided to it by an Underwriter under Section 4.2(c) with the
Commission pursuant to a Current Report on Form 8-K by 10:00 a.m. on the morning
the Prospectus is delivered to such Underwriter or, the case of any Collateral
Term Sheet required to be filed prior to such date, by 10:00 a.m. on the second
business day following the first day on which such Collateral Term Sheet has
been sent to a prospective investor; provided, however, that prior to such
filing of the Computational Materials and ABS Term Sheets (other than any
Collateral Term Sheets that are not based on the Pool Information) by the
Company, such Underwriter must comply with its obligations pursuant to Section
4.2 and the Company must receive a letter from ______________________, certified
public accountants, satisfactory in form and substance to the Company and its
counsel, to the effect that such accountants have performed certain specified
procedures, all of which have been agreed to by the Company, as a result of
which they determined that all
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<PAGE> 13
information that is included in the Computational Materials and ABS Term Sheets
(if any) provided by the Underwriters to the Company for filing on Form 8-K, as
provided in Section 4.2 and this Section 5(i), is accurate except as to such
matters that are not deemed by the Company to be material. The foregoing letter
shall be at the sole expense of the Company. The Company shall file any
corrected Computational Materials or ABS Term Sheets described in Section 4.2(e)
as soon as practicable following receipt thereof.
6. Conditions to the Obligations of Underwriters. The obligation of
each Underwriter to purchase the Offered Securities to be purchased by it shall
be subject to the accuracy in all material respects of the representations and
warranties on the part of the Company contained herein as of the date hereof and
as of the Closing Date, to the accuracy of the statements of the Company made in
any officer's certificate pursuant to the provisions hereof, to the performance
in all material respects by the Company of its obligations hereunder and to the
following additional conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement shall be in effect, and no proceedings for that purpose shall be
pending or, to the knowledge of the Company, threatened, and the Prospectus
Supplement shall have been filed or transmitted for filing by means reasonably
calculated to result in a filing with the Commission pursuant to Rule 424 under
the Act.
(b) The Company shall have furnished to the Underwriters a certificate,
dated the Closing Date, of the Company, signed by a vice president of the
Company, to the effect that the signer of such certificate has carefully
examined the Registration Statement, the Prospectus, this Agreement [the Pooling
and Servicing Agreement, the Indenture or the Trust Agreement, as applicable]
and that:
(i) The representations and warranties of the Company in this
Agreement [the Pooling and Servicing Agreement, the Indenture and the
Trust Agreement] are true and correct in all material respect on and
as of the Closing Date with the same effect as if made on the Closing
Date, and the Company has complied with all agreements and satisfied
all the conditions on its part to be performed or satisfied at or
prior to the Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that
purpose have been instituted and are pending or, to his knowledge,
have been threatened as of the Closing Date;
(iii) Nothing has come to the attention of such person that would
lead him to believe that the Prospectus (other than
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<PAGE> 14
any Computational Materials or ABS Term Sheets incorporated therein by
reference) contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and
(iv) Since ___________, there has been no material adverse change
(not in the ordinary course of business) in connection with the
Company.
(c) The Company shall have furnished or caused to have been
furnished to the Underwriters a certificate, dated the Closing Date, of the
Seller, signed by a vice president or an assistant vice president of the Seller,
to the effect that the signer of such certificate has carefully examined the
Prospectus and nothing has come to the attention of such person that would lead
him to believe that the Prospectus contains any untrue statement of a material
fact with respect to the Seller or the Assets or omits to state any material
fact with respect to the Seller or the Assets necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) The Company shall have furnished to you and opinion, dated
the Closing Date, of __________________. counsel to the Company, substantially
to the effect that:
[(i) The Registration Statement and any amendments thereto
have become effective under the Act; to the best knowledge of such
counsel, no stop order suspending the effectiveness of the Registration
Statement has been issued and not withdrawn, no proceedings for that
purpose have been instituted or threatened and not terminated; and the
Registration Statement, the Prospectus and each amendment or supplement
thereto, as of their respective effective or issue dates (other than
the financial and statistical information contained therein as to which
such counsel need express no opinion), complied as to form in all
material respects with the applicable requirements of the Act and the
rules and regulations of the Commission thereunder;
(ii) To the best knowledge of such counsel, there are not material
contracts, indentures or other documents of a character required to be
described or referred to in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto;
(iii) The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of
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<PAGE> 15
the State of Delaware [and is duly qualified to do business in, and is
in good standing as a foreign corporation under the laws of, the State
of New York].
(iv) This Agreement has been duly authorized, executed
and delivered by the Company.
(v) Each of the [Pooling and Servicing Agreement][Indenture,
Trust Agreement] and the Asset Purchase Agreement has been duly
authorized, executed and delivered by the Company and, assuming the due
authorization, execution and delivery by other parties thereto,
constitutes a valid, legal and binding agreement of the Company, is
enforceable against the Company in accordance with its terms, subject
as to enforceability to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally,
to general principals of equity regardless of whether enforcement is
sought in a proceeding in equity or at law and to the effect of the
exercise by the Trustee of certain remedial provisions, including
waivers, against the Assets;
(vi) The Offered Securities have been duly authorized and, assuming
authentication and delivery in the manner contemplated in the [Pooling
and Servicing Agreement][Indenture][Trust Agreement], and upon delivery
by the Company of the Offered Securities to be purchased by the
Underwriters and payment by the Underwriters of the purchase price
therefor in the manner contemplated by this Agreement, the Offered
Securities will be (A) validly issued and outstanding and entitled to
the benefits of the [Pooling and Servicing Agreement][Indenture][Trust
Agreement] and (B) free and clear of any lien, pledge, encumbrance or
other security interest other than one permitted by the [Pooling and
Servicing Agreement][Indenture][Trust Agreement] or created or granted
by any Underwriter;
(vii) To the best knowledge of such counsel, no consent, approval,
authorization or order of any New York, Delaware or federal
governmental agency or body or any New York, Delaware or federal court
is required for the consummation by the Company of the transactions
contemplated by the terms of this Agreement, the [Pooling and
Servicing Agreement][Indenture][Trust Agreement] or the Asset Purchase
Agreement, except such as may be required under the "blue sky" or
state securities laws of any jurisdiction in connection with the
offering, sale or acquisition of the Offered Securities, any
recordations of the assignment of the Assets to the Trustee (to the
extent such recordations are required pursuant to the [Pooling and
Servicing Agreement] [Trust Agreement]) that have not yet been
completed and such other approvals as have been obtained;
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<PAGE> 16
(viii) The sale of the Offered Securities to be purchased by the
Underwriters pursuant to this Agreement and the consummation of any of
the transactions contemplated by the terms of the [Pooling and
Servicing Agreement][Indenture][Trust Agreement], Asset Purchase
Agreement or this Agreement do not conflict with or result in
a breach or violation of any material term or provision of, or
constitute a default under, the certificate of incorporation of the
Company, or to the best knowledge of such counsel, any indenture or
other agreement or instrument to which the Company is a party or by
which it is bound, or any New York, Delaware or federal statute or
regulation applicable to the Company or an order of any New York,
Delaware or federal court, regulatory body, administrative agency or
governmental body having jurisdiction over the Company;
(ix) The Offered Securities, the Asset Purchase Agreement and the
[Pooling and Servicing Agreement][Indenture][Trust Agreement] conform
to the descriptions thereof contained in the Prospectus;
(x) The statements in the Prospectus Supplement, as the case
may be, under the headings "Federal Income Tax Consequences" and "ERISA
Considerations," to the extent that they constitute matters of New York
or federal law or legal conclusions with respect thereto, have been
reviewed by such counsel and are correct in all material respects;
(xi) [The Securities indicated under the heading "Summary of
Terms--Legal Investment" in the Prospectus Supplement to be "mortgage
related securities" will be mortgage related securities, as defined in
Section 3(a)(41) of the Exchange Act, so long as such Securities are
rated in one of the two highest rating categories by at least one
nationally recognized statistical rating organization;] [and]
(xii) The [Pooling and Servicing Agreement][Indenture]
[Trust Agreement] is not required to be qualified under the Trust
Indenture Act of 1939, as amended, and the Trust Fund created by the
[Pooling and Servicing Agreement][Trust Agreement] is not required to
be registered under the Investment Company Act of 1940, as amended[.]
[; and]
[(xiii) The Trust Fund as described in the Prospectus Supplement and
the Pooling and Servicing Agreement will qualify as a "real estate
mortgage investment conduit" ("REMIC") within the meaning of Section
860D of the Internal Revenue Code of 1986, as amended (the "Code"),
assuming: (i) an election is made to treat the Trust Fund as a REMIC,
(ii) compliance with the Pooling and Servicing Agreement and (iii)
compliance with changes in the law, including any amendments to the
Code or applicable Treasury regulations thereunder.]
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<PAGE> 17
Such counsel shall also state that nothing has come to its attention
that would lead such counsel to believe that the Registration Statement, at the
time it became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus, as of the
date of the Prospectus Supplement, and on the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; it being
understood that such counsel need express no view as to (i) financial and
statistical information contained therein or (ii) any description in the
Prospectus of any third party providing credit enhancement to the Securities.
Such opinion may express its reliance as to factual matters on the
representations and warranties made by, and on certificates or other documents
furnished by officers of, the parties to this Agreement and the [Pooling and
Servicing Agreement][Indenture][Trust Agreement]. Such opinion may assume the
due authorization, execution and delivery of the instruments and documents
referred to therein by the parties thereto other than the Company or its
affiliates. Such opinion may be qualified as an opinion only on the corporate
laws of the State of Delaware, the laws of the State of New York and the federal
law of the United States. To the extent that such counsel relies upon the
opinion of other counsel in rendering any portion of its opinion, the opinion of
such other counsel shall be attached to and delivered with the opinion of such
counsel that is delivered to the Underwriters.
(e) Each party providing credit enhancement to the Securities shall
have furnished to the Underwriters an opinion, dated the Closing Date, of its
counsel, with respect to the Registration Statement and the Prospectus, and such
other related matters, in the form previously agreed to by such provider and the
Underwriters.
(f) The Underwriters shall have received from their counsel such
opinion or opinions, dated the Closing Date, with respect to the issuance and
sale of the Offered Securities, the Registration Statement and the Prospectus,
and such other related matters as you may reasonably require.
(g) You shall have received from ___________________, certified public
accountants, (a) a letter dated the date hereof and satisfactory in form and
substance to you and your counsel, to the effect that they have performed
certain specified procedures, all of which have been agreed to by you, as a
result of which they determined that certain information of an accounting,
financial or statistical nature set forth in the
17
<PAGE> 18
Prospectus Supplement under the captions "Description of the Assets",
"Description of the Securities" and "Yield and Maturity Considerations" agrees
with the records of the Company and the Seller excluding any questions of
legal interpretation and (b) the letter prepared pursuant to Section 5(i).
(h) Subsequent to the date hereof, there shall not have occurred any
change, or any development involving a prospective change, in or affecting the
business or properties of the Seller which in your reasonable judgment
materially impairs the investment quality of the Offered Securities so as to
make it impractical or inadvisable to proceed with the public offering or the
delivery of the Offered Securities as contemplated by the Prospectus.
(i) The Offered Securities shall be rated not lower than the required
ratings set forth under the heading "Ratings" in the Prospectus Supplement, such
ratings shall not have been rescinded and no public announcement shall have been
made that any such required rating of the Offered Securities has been placed
under review (otherwise than for possible upgrading).
(j) The Underwriters shall have received copies of any opinions of
counsel to the Company supplied to the rating organizations relating to certain
matters with respect to the Securities. Any such opinions shall be dated the
Closing Date and addressed to the Underwriters or accompanied by reliance
letters addressed to the Underwriters.
(k) All Classes of Securities being publicly offered by the
Underwriters shall have been issued and paid for pursuant to the terms of this
Agreement.
(l) The Trustee shall have furnished to the Underwriters an opinion
dated the Closing Date, of counsel to the Trustee (who may be an employee of the
Trustee), substantially to the effect that:
(i) The Trustee has full corporate power and authority to
execute and deliver the [Pooling and Servicing
Agreement][Indenture][Trust Agreement] and to perform its obligations
thereunder and to execute, countersign and deliver the Securities.
(ii) The [Pooling and Servicing Agreement][Indenture][Trust
Agreement] has been duly authorized, executed and delivered by the
Trustee.
(iii) The [Pooling and Servicing Agreement][Indenture][Trust
Agreement] is a legal, valid and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium,
receivership, conservatorship
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<PAGE> 19
and similar laws affecting the rights of creditors generally, and
subject, as to enforceability, to general principles of equity,
regardless of whether such enforcement is considered in a proceeding at
law or equity.
Such opinion may express its reliance as to factual matters on the
representations and warranties made by, and on certificates or other documents
furnished by officers of, the parties to the [Pooling and Servicing
Agreement][Indenture][Trust Agreement]. Such opinion may assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Trustee or its affiliates. Such
opinion may be qualified as an opinion only on the laws of the State of New York
and federal law of the United States. To the extent that such counsel relies
upon the opinion of other counsel in rendering any portion of its opinion, the
opinion of such other counsel shall be attached to and delivered with the
opinion of such counsel that is delivered to the Underwriters.
(m) The Seller shall have sold the Assets to the Company pursuant to
the Asset Purchase Agreement.
(n) The Company shall have furnished to the Underwriters such further
information, certificates and documents as the Underwriters may reasonably have
requested, and all proceedings in connection with the transactions contemplated
by this Agreement and all documents incident hereto shall be in all material
respects reasonably satisfactory in form and substance to the Underwriters and
their counsel.
(o) Since ________, there shall have been no material adverse change
(not in the ordinary course of business) in the judgment of each Underwriter in
the condition of the Company that makes it, in the judgment of such Underwriter,
impractible to market the Securities on the terms and in the manner contemplated
by the Prospectus.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
this Agreement and all obligations of an Underwriter hereunder may be canceled
at, or at any time prior to, the Closing Date by such Underwriter. Notice of
such cancellation shall be given to the Company in writing, or by telephone or
telegraph confirmed in writing.
7. Indemnification and Contribution. The Company [and
________________] agree, jointly and severally, to indemnify and hold harmless
each of the Underwriters and each person, if any, who controls either such
Underwriter within the meaning of either Section 15 of the Act or Section 20 of
the Securities Exchange Act of 1934 (the "Exchange Act"), from and against any
and all losses, claims, damages and liabilities, joint or several, to
19
<PAGE> 20
which they or any of them may become subject under the Act, the Exchange Act, or
other Federal or State Statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) were caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement as originally filed or in
any amendment thereof or other filing incorporated by reference therein,
including Computational Materials and ABS Term Sheets, or in any preliminary
prospectus or the Prospectus or incorporated by reference therein, including
Computational Materials and ABS Term Sheets (if used within the period mentioned
in Section 5(a) and as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated therein,
in light of the circumstances under which they were made, not misleading, except
insofar as such losses, claims, damages or liabilities were caused by any such
untrue statement or omission or alleged untrue statement or omission made
therein based upon and in conformity with (i) the information furnished in
writing to the Company by any Underwriter through ________________ specifically
for use in connection with the preparation of the Registration Statement, any
preliminary prospectus or the Prospectus or any revision or amendment thereof or
supplement thereto and (ii) any information in any Computational Materials or
ABS Term Sheets required to be provided by any Underwriter to the Company
pursuant to Section 4.2, except to the extent such material misstatement or
omission is based upon the Pool Information. Such indemnity with respect to any
Corrected Statement (as defined below) in such Prospectus (or supplement
thereto) shall not inure to the benefit of the Underwriters (or any person
controlling either of the Underwriters) from whom the person asserting any loss,
claim, damage or liability purchased the Offered Securities that are the subject
thereof if such person did not receive a copy of the supplement to such
Prospectus at or prior to the confirmation of the sale of such Securities and
the untrue statement or omission of material fact contained in such Prospectus
(or supplement thereto) was corrected (a "Corrected Statement") in such other
supplement and such supplement was furnished by the Company to the Underwriters
prior to the delivery of such confirmation.
Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company and its directors and officers who sign the
Registration Statement and any person controlling the Company within the meaning
of either Section 15 of the Act or Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity from the Company to the Underwriters, but only
with reference to (i) information relating to the Underwriters furnished in
writing to the Company by any Underwriter specifically for use in connection
with the preparation of the Registration Statement, any preliminary prospectus
or the Prospectus or any revision or amendment thereof
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<PAGE> 21
or supplement thereto and (ii) any Computational Materials, the ABS Term Sheets
or the Collateral Term Sheets, as applicable, except to the extent of any errors
in the Computational Materials or ABS Term Sheets that are caused by errors in
the Pool Information.
In case any proceeding (including any governmental investigation) shall
be instituted involving any person in respect of which indemnity may be sought
pursuant to either of the two preceding paragraphs, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by _________________ in the case of parties indemnified
pursuant to the first paragraph of this Section 7 and by the Company in the case
of parties indemnified pursuant to the second paragraph of this Section 7. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time any indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the third sentence of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the
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<PAGE> 22
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claim that are the subject matter of
such proceeding.
To the extent the indemnification provided for in this Section 7 is
unavailable to an indemnified party under the first or second paragraph of this
Section 7 or is insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand, and by the several
Underwriters on the other, from the offering of the Offered Securities or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company on the one hand, and of the several Underwriters on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand,
and any Underwriter on the other, in connection with the offering of the Offered
Securities shall be deemed to be in the same respective proportions that the
total net proceeds from the offering of the Offered Securities (before deducting
expenses) received by the Company and the total underwriting discounts and
commissions received by each of the Underwriters in respect thereof
respectively, bear to the aggregate public offering price of the Offered
Securities. The relative fault of the Company on the one hand, and of any
Underwriter on the other, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by an Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Each Underwriter's obligation to contribute pursuant to
this Section 7 is several in proportion to the respective principal amounts of
Offered Securities it has purchased hereunder, and not joint.
The Company [and _____________] and the several Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take
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<PAGE> 23
account of the considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which [the total
underwriting discounts and commissions received by such Underwriter in
connection with the Offered Securities underwritten and distributed to the
public by such Underwriter] [the total price at which the Offered Securities
underwritten by it and distributed to the public were offered to the public]
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of any such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
The indemnity and contribution agreements contained in this Section 7
and the representations and warranties of the Company in this Agreement shall
remain operative and in full force and effect regardless of (i) any termination
of this Agreement, (ii) any investigation made by or on behalf of the
Underwriters or any person controlling either of the Underwriters or by on
behalf of the Company, its directors or officers or any person controlling the
Company and (iii) acceptance of any payment for any of the Offered Securities.
8. Termination. This Agreement shall be subject to termination in
__________________'s absolute discretion, by notice given to the Company, if (a)
after the execution and delivery of this Agreement and prior to the Closing Date
(i) trading generally shall have been suspended or materially limited on or by,
as the case may be, any of the New York Stock Exchange, the American Stock
Exchange, the National Association of Securities Dealers, Inc., the Chicago
Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board
of Trade, (ii) trading of any securities of the Company shall have been
suspended on any exchange or in any over-the-counter market, (iii) a general
moratorium on commercial banking activities in New York shall have been declared
by either Federal or New York State authorities, or (iv) there shall have
occurred any outbreak or escalation of hostilities or any change in financial
markets or any calamity or crisis that, in the judgment of the Underwriters, is
material and adverse and such event singly or together with any other such
event, makes it, in the judgment of
23
<PAGE> 24
the Underwriters, impracticable to market the Offered Securities on the terms
and in the manner contemplated in the Prospectus or (b) if the sale of the
Securities provided for herein is not consummated because of any failure or
refusal on the apart of the Company to comply with the terms or to fulfill any
of the conditions of this Agreement, or if for any reason the Company shall be
unable to perform its obligations under this Agreement. If you terminate this
Agreement in accordance with this Section 8 or because of any failure or refusal
on the part of the Company to comply with the terms or to fulfill any of the
conditions of this Agreement, the Company will reimburse you for all reasonable
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been reasonably incurred by the Underwriters in connection with
the proposed purchase and sale of the Securities.
9. Default by an Underwriter. If any one or more of the Underwriters
shall fail to purchase and pay for any of the Offered Securities agreed to be
purchased by such Underwriter or Underwriters hereunder and such failure to
purchase shall constitute a default in the performance of its or their
obligations under this Agreement, the remaining Underwriters shall be obligated
severally to take up and pay for (in the respective proportions which the
aggregate principal amount of all the Offered Security of the various Classes
set forth opposite the name of all the remaining Underwriters) the Offered
Securities that the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate principal
amount of Offered Securities which the defaulting Underwriter or Underwriters
agreed but failed to purchase shall exceed 10% of the aggregate principal amount
of all of the Offered Securities set forth in the Prospectus Supplement, the
remaining Underwriters shall have the right to purchase all, but shall not be
under any obligation to purchase any, of the Offered Securities, and if such
nondefaulting Underwriters do no purchase all the Offered Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the nondefaulting Underwriters shall determine in order that
required changes in the Registration Statement and the Prospectus or in any
other documents or arrangements may be effected. Nothing contained in this
Agreement shall relieve any defaulting Underwriter of its liability, if any, to
the Company and to any nondefaulting Underwriter for damages occasioned by its
defaulting hereunder.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of the failure or refusal on the part of the Company to comply
with the terms or fulfill any of the conditions of this Agreement, or if for any
reason the Company shall reimburse the Underwriters or such Underwriters as have
so
24
<PAGE> 25
terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering of the Offered Securities.
10. Representations and Indemnities to Survive. The respective
indemnity and contribution agreements and the representations, warranties and
other statements of the Company, its officers and the Underwriters set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any termination of this Agreement, any investigation made by or on
behalf of any Underwriter or the Company or any of the officers, directors or
controlling persons referred to in Section 7 and delivery of and payment for the
Offered Securities.
11. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and the
officers, directors and controlling persons referred to in Section 7, and no
other person will have any right or obligation hereunder.
12. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
13. Applicable Law. This Agreement will be governed by and
construed in accordance with the internal laws of the State of New York.
14. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.
15. Notices. All communications hereunder shall be in writing
and effective only on receipt and, if sent to an Underwriter, shall be
delivered to the address specified on the signature page hereof; or if sent to
the Company, shall be delivered to ________________________, attention of
General Counsel.
16. Miscellaneous. Time shall be of the essence of this Agreement.
This Agreement supersedes all prior or contemporaneous agreements and
understandings relating to the subject matter hereof. Neither this Agreement
nor any term hereof may be change, waived, discharged or terminated except by a
writing signed by the party against whom enforcement of such change, waiver,
discharge or termination is sought.
25
<PAGE> 26
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the undersigned a counterpart hereof,
whereupon this Agreement and your acceptance shall represent a binding agreement
by and among the Company and each Underwriter.
Very truly yours,
UNION PLANTERS MORTGAGE FINANCE CORP.
By:___________________________
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted.
Accepted, ___________, 199__
[ ]
[NAMES OF OTHER CO-MANAGERS]
Acting severally on behalf of themselves
and the several Underwriters
named in Schedule I hereto.
By
By:________________________
Name:
Title:
26
<PAGE> 27
SCHEDULE I
I-1
<PAGE> 28
SCHEDULE II
II-1
<PAGE> 1
CERTIFICATE OF INCORPORATION EXHIBIT 3.1
OF
UNION PLANTERS MORTGAGE FINANCE CORP.
Article FIRST: The name of the corporation (the "Corporation") is:
UNION PLANTERS MORTGAGE FINANCE CORP.
Article SECOND: The address of the registered office of the Corporation
in the State of Delaware is The Corporation Trust Company, 1209 Orange Street,
in the City of Wilmington, County of New Castle. The name of its registered
agent at that address is The Corporation Trust Company.
Article THIRD: For all purposes of this Certificate of Incorporation,
the following terms have the meanings assigned to them in this Article THIRD and
such definitions extend to the plural as well as the singular forms of the
defined terms.
"Affiliate" means any Person directly or indirectly
controlling or controlled by or under direct or indirect common control
with any holder of common stock of the Corporation.
"Independent Director" means a Person (i) who, except in his
or her capacity as a director and/or officer of the Corporation, is not
an employee, director or officer, or a former employee, director or
officer, of Union Planters Corporation or any Affiliate; provided,
however, that such person may have formerly served as an Independent
Director of an Affiliate of Union Planters Corporation, (ii) who is not
a direct, indirect or beneficial holder of 5% or more of the
outstanding stock or any other equity interest in Union Planters
Corporation or any Affiliate, (iii) who is not a spouse, parent, child,
grandchild or sibling of any individual encompassed within clause (i)
or clause (ii) above, (iv) who is not a trustee in bankruptcy of Union
Planters Corporation or any Affiliate, and (v) who has not received,
and was not a member or employee of a firm or business that received,
in any year within the five years immediately preceding or any years
during such person's incumbency as a director or officer of the
Corporation, fees or other income from Union Planters Corporation or
any Affiliate in the aggregate in excess of 10% of the gross income,
for any applicable year, of such person, firm or business (not
including any fees received by such person for his or her service as a
Director or officer of the Corporation).
"Person" means any individual, corporation, association,
company, limited liability company, joint-stock company, business
trust, partnership, joint venture, unincorporated organization or
government or any agency or political subdivision thereof.
<PAGE> 2
Article FOURTH: The purposes for which the Corporation is formed are
limited solely as follows:
(a) To purchase or otherwise acquire, own, hold, pledge,
finance, transfer, assign and otherwise deal in or with mortgage loans,
mortgage-backed securities, mortgage collateralized obligations, other
interests in real estate, United States government securities and
securities of any agency or instrumentality of the United States, and
any combination of the foregoing, including, but not limited to, (1)
mortgage loans secured by senior or subordinate liens on residential
property, (2) participation interests in mortgage loans, (3)
pass-through, mortgage-backed certificates as to which the Fannie Mae
guarantees the timely payment of interest at the pass-through rate and
the timely payment of principal, (4) pass-through, mortgage-backed
certificates as to which the Federal Home Loan Mortgage Corporation
guarantees timely payment at the participation certificate rate and the
ultimate collection of all principal, (5) pass-through, mortgage-backed
certificates as to which the Government National Mortgage Association
guarantees timely payment of principal installments and interest fixed
on the certificate, (6) pass-through, mortgage-backed certificates as
to which the United States Department of Veterans Affairs guarantees
the timely payment of interest at the pass-through rate and the timely
payment of principal, (7) regular or residual interests in real estates
mortgage investment conduits or regular or ownership interests in
financial assets securitization investment trusts, (8) any other
mortgage pass-through certificates or mortgage-collateralized
obligations, (9) entitlements to payments on or other interests in such
mortgage loans, certificates, or obligations (collectively, "Mortgage
Collateral"), and (10) other securities issued or guaranteed by the
United States government or any agency, subdivision or instrumentality
thereof ("Government Securities").
(b) To (1) issue and sell from time to time one or more series
of certificates, bonds, notes or other securities and to incur other
indebtedness, including the issuance and sale of certificates
representing interests in trusts established by the Corporation
(collectively the "Securities"), which Securities shall (A) represent
interests in or be secured by the Mortgage Collateral, Government
Securities or other assets pledged or sold to secure payment of such
Securities (together with the Mortgage Collateral and Government
Securities, the "Collateral"), (B) be nonrecourse to the Corporation
and its assets other than the Collateral and (C) not constitute a claim
against the Corporation to the extent that funds produced by the
Collateral are insufficient to allow full and/or timely payments or
distributions to be made on such Securities or to allow full and/or
timely payment of principal and interest thereon in accordance with the
terms thereof and (2) incur, assume or guaranty indebtedness to the
extent not prohibited under paragraph (b) of Article FIFTH below;
(c) To (1) acquire, own, hold, sell, transfer, assign, pledge,
finance, refinance and otherwise deal in or with Securities, (2)
acquire, own, hold, sell, transfer, assign, pledge, finance, refinance
and otherwise deal in or with Collateral,
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<PAGE> 3
and (3) acquire, own, hold, sell, transfer, assign, pledge and
otherwise deal in or with any or all of the ownership interests in
trusts established by the Corporation or other entities, institutions
or individuals.
(d) To use the proceeds of the sale of the Securities to
purchase or otherwise acquire Collateral or to loan the proceeds of the
sale of the Securities to entities that may or may not be affiliated
with the Corporation or to make dividend payments to the extent
permitted by law;
(e) To invest cash balances, from time to time, as provided in
any trust agreement, pooling and servicing agreement, indenture or
similar document to which the Corporation may be a party in connection
with the issuance of the Securities; and
(f) Subject to the limitations contained in Article FIFTH of
this Certificate of Incorporation, to engage in any activity and to
exercise any power that is incidental to or that renders convenient the
accomplishment of any or all of the foregoing and that is permitted to
corporations under the laws of the State of Delaware and that is not
required to be set forth specifically in this Certificate of
Incorporation.
Article FIFTH: Notwithstanding any other provision in this Certificate
of Incorporation and any provision of law that otherwise so empowers the
Corporation, until such time as all indebtedness of the Corporation evidenced by
Securities shall be indefeasibly paid in full and all liens and security
interests securing such indebtedness shall be indefeasibly released and
discharged, the Corporation shall not perform any act in contravention of any of
the following clauses of this Article FIFTH without the express prior written
unanimous consent of the Board of Directors, including each Independent
Director; provided, however, the Corporation shall not perform any act in
contravention of any of the following clauses of this Article FIFTH if such act
would cause a reduction or withdrawal of any credit rating assigned by any
nationally recognized statistical rating organization to any Security at the
request of the Corporation:
(a) The Corporation shall not engage in any business or
activity other than as authorized in Article FOURTH hereof.
(b) The Corporation shall not incur, assume or guaranty any
indebtedness except for (1) such indebtedness as (A) may be incurred by
the Corporation in connection with the issuance of the Securities and
(B) provides for recourse solely to the Collateral pledged to secure
such indebtedness or to entities other than the Corporation, and (2)
indebtedness that by its terms (A) is subordinated to indebtedness of
the Corporation evidenced by Securities and (B) provides that the
holder thereof may not cause the filing of a petition in bankruptcy or
take any similar action against the Corporation until at least 91 days
after every indebtedness of the Corporation evidenced by the Securities
is indefeasibly paid in full.
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<PAGE> 4
(c) The Corporation shall not consolidate or merge with or
into any other entity or convey or transfer its properties and assets
substantially as an entirety to any entity, unless:
(1) the entity (if other than the Corporation) formed
in or surviving such consolidation or merger or that acquires
by conveyance or transfer the properties and assets of the
Corporation substantially as an entirety (A) shall be
organized and existing under the laws of the United States of
America or any state or the District of Columbia, and (B)
shall expressly assume the obligations, if any, of the
Corporation under, by amendment or supplement to any
indentures, trust agreements or pooling and servicing
agreements (collectively, the "Indentures") pursuant to which
the Securities that are then outstanding may have been issued
by the Corporation or by trusts established by the
Corporation, which amendments and/or supplements must be
executed and delivered to the appropriate trustees under such
Indentures (the "Trustees"), in form satisfactory to such
Trustees;
(2) immediately after giving effect to such
transaction, no default or event of default under the
Indentures shall have occurred and be continuing;
(3) the Corporation shall have delivered to the
Trustees an officers' certificate and an opinion of counsel
each stating that such consolidation, merger, conveyance or
transfer and such supplemental indentures are not prohibited
under the terms of the Indentures and that all conditions
precedent provided for in the Indentures relating to such
transaction have been complied with; and
(4) the Corporation shall have received written
confirmation from each rating agency that has rated any of the
outstanding Securities at the request of the Corporation that
such consolidation, merger, conveyance or transfer will not
adversely affect such rating agency's ratings of the
outstanding Securities;
provided, however, that the provisions of Article FIFTH shall not limit
the ability of the Corporation to sell the Collateral securing an
outstanding series of Securities, subject to the lien in favor of such
Securities, to a limited-purpose trust, limited liability company,
partnership or corporation.
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<PAGE> 5
Upon any consolidation or merger with respect to the
Corporation, or any conveyance or transfer of the properties and assets
of the Corporation substantially as an entirety as provided above, the
entity formed by or surviving such consolidation or merger (if other
than the Corporation) or the entity to which such conveyance or
transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Corporation under the Indentures
with the same effect as if such entity had been an original party to
each such Indenture. In the event of any such conveyance or transfer,
the Corporation may be dissolved, wound-up and liquidated at any time
thereafter, and the Corporation thereafter shall be released from its
liabilities and its obligations under the Indentures.
(d) The Corporation shall not amend, alter, change or repeal
any provision contained in Article THIRD, FOURTH, FIFTH, SIXTH, TENTH,
ELEVENTH OR THIRTEENTH of this Certificate of Incorporation.
(e) The Corporation shall not issue any additional Securities
if such issuance would result in the downgrading or withdrawal of any
ratings assigned to the outstanding Securities by any
nationally-recognized statistical rating organization that rated such
outstanding Securities at the request of the Corporation.
(f) For so long as any Securities issued by the Corporation
are outstanding, the Corporation shall not dissolve or liquidate in
whole or in part except in connection with a merger, consolidation or
sale of assets as provided in this Article FIFTH.
(g) The Corporation shall not engage in transactions with
Affiliates except on a commercially reasonable basis.
(h) For so long as any Securities issued by the Corporation
are outstanding, the Corporation shall not take any action that is
reasonably likely to cause the Corporation to become insolvent in
either the balance-sheet or equity sense.
Article SIXTH: Notwithstanding any other provision in this Certificate
of Incorporation and any provision of law that otherwise so empowers the
Corporation, until such time as all indebtedness of the Corporation evidenced by
Securities shall be indefeasibly paid in full and all liens and security
interests securing such indebtedness shall be indefeasibly released and
discharged, for so long as any Securities issued either by the Corporation are
outstanding, the Corporation shall not, without the express prior written
unanimous consent of the Board of Directors, including each Independent
Director, file a voluntary or involuntary petition for relief under any chapter
of the United States Bankruptcy Code, 11 U.S.C. Sections 101-1330, institute
proceedings for the Corporation to be adjudicated bankrupt or insolvent, or
consent to the institution of bankruptcy or insolvency proceedings against the
Corporation, or file a petition or consent to a petition seeking reorganization
or relief under any applicable federal or state law relating to bankruptcy or
insolvency, or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other
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<PAGE> 6
similar official) of the Corporation, or a substantial part of the property of
the Corporation, or make any assignment for the benefit of creditors for itself,
or, except as required by law, admit in writing it's inability to pay its debts
generally as they become due, or take any corporate action in furtherance of any
such action.
Article SEVENTH: The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, par
value $0.01 per share.
Article EIGHTH: The name and mailing address of the Sole Incorporator
is as follows:
Name Mailing Address
---- ---------------
David B. Rich, III, Esquire Hunton & Williams
951 East Byrd Street
Richmond Virginia 23219
Article NINTH: The following provisions are inserted for the management
of the business and the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the Corporation,
its Directors and holders of its capital stock:
(a) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors of the
Corporation.
(b) The Directors of the Corporation shall have concurrent
power with the common stockholders to make, alter, amend, change, add
to or repeal the By-Laws of the Corporation.
(c) The number of Directors of the Corporation shall be as
from time to time fixed by, or set in the manner provided in, the
By-Laws of the Corporation. Election of Directors need not be by
written ballot unless the By-Laws so provide. The number of Directors
constituting the initial Board of Directors shall be three (3), and the
names and addresses of the persons who are to serve as the initial
Directors are as follows:
Name Address
---- -------
Joel R. Katz, Esquire 7130 Goodlett Farms Parkway
Cordova, Tennessee 38018
Mr. James K. Plunkett 7130 Goodlett Farms Parkway
Cordova, Tennessee 38018
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<PAGE> 7
Mr. Leslie M. Stratton 7593 Fairway Forest Drive North
Cordova, Tennessee 38018
(d) No Director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (1) for any breach of the
Director's duty of loyalty to the Corporation or its stockholders, (2)
for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (3) pursuant to Section 174
of the Delaware General Corporation Law, relating to dividends, stock
purchases and redemptions, or (4) for any transaction from which the
Director derived an improper personal benefit. Any repeal or
modification of this Article NINTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a
Director of the Corporation existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such
repeal or modification.
(e) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the Directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the Delaware General Corporation Law, this
Certificate of Incorporation, and any By-Laws adopted by the
stockholders or the Board of Directors; provided, however, that no
By-Laws hereafter adopted by the stockholders or the Board of Directors
shall invalidate any prior act of the Directors which would have been
valid if such By-Laws had not been adopted. The Corporation's Board of
Directors will duly authorize all of the Corporation's actions.
Article TENTH: Notwithstanding any other provision in this Certificate
of Incorporation and any other provision of law to the contrary, until such time
as all indebtedness of the Corporation evidenced by Securities shall be
indefeasibly paid in full and all liens and security interests securing such
indebtedness shall be indefeasibly released and discharged, the Corporation at
all times shall:
(a) maintain its books, records and bank accounts separate and
apart from those of all other Persons;
(b) not commingle any of its assets with those of any other
Person;
(c) pay the salaries of its own employees, if any, and
maintain a sufficient number of employees in light of its contemplated
business operations
(d) pay its own liabilities out of its own funds;
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<PAGE> 8
(e) maintain financial statements separate and apart from
those of all other Persons;
(f) observe all corporate formalities, organizational
formalities and other applicable or customary formalities;
(g) not guarantee or become obligated for the debts of any
other Person except as provided in Article FIFTH or hold out its credit
as being available to satisfy the obligations of any other Person;
(h) not pledge its assets for the benefit of any other Person
or make any loans or advances to any other Person;
(i) not acquire the direct obligations of, or securities
issued by, its shareholders or any Affiliate;
(j) allocate fairly and reasonably any overhead for expenses
that are shared with an Affiliate, including paying for the office
space and services performed by any employee of any Affiliate;
(k) use stationery, invoices and checks bearing its own name;
(l) conduct business in its own name, promptly correct any
known misunderstandings regarding its separate identity, and not
identify itself as a division of any other Person;
(m) maintain adequate capital in light of its contemplated
business operations;
(n) maintain arm's length relationships with all Affiliates
and enter into transactions with Affiliates only on commercial
reasonable bases; and
(o) not have any employees other than employees necessary to
perform authorized activities.
Article ELEVENTH: The Board of Directors of the Corporation shall
include at least one Independent Director at all times when any Securities are
outstanding. When voting on matters subject to the vote of the Board of
Directors, notwithstanding that the Corporation is not then insolvent in either
the equity or balance-sheet sense, the Independent Director shall take into
account the interests of the creditors of the Corporation, including, but not
limited to, the interests of all holders of Securities rated by any nationally
recognized statistical ratings organization that has rated the Securities at the
request of the Corporation.
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<PAGE> 9
Article TWELFTH: Meetings of stockholders may be held within or without
the State of Delaware, as the By-Laws may provide. The books of the Corporation
may be kept (subject to any provision contained in the Delaware General
Corporation Law) outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the By-Laws of the
Corporation.
Article THIRTEENTH: The Corporation is to have perpetual existence.
Article FOURTEENTH: The Corporation shall indemnify, to the full extent
permitted by the Delaware General Corporation Law, as amended from time to time,
all persons who may be indemnified pursuant thereto. As part of such
indemnification, the Corporation shall advance the expenses of such indemnified
persons to the full extent permitted by the Delaware General Corporation Law, as
amended from time to time. Notwithstanding any other provision in this Article
FOURTEENTH, (a) the Corporation's indemnification and advance obligations shall
be fully subordinate to all indebtedness of the Corporation evidenced by
Securities and (b) none of the Corporation's indemnification and advance
obligations shall constitute a "claim" against the Corporation within the
meaning of 11 U.S.C. Section 101(5) until all indebtedness of the Corporation
evidenced by Securities is indefeasibly paid in full.
The Corporation and any Affiliate may purchase and maintain insurance
on behalf of any Person who is or was a director or officer of the Corporation
against any liability asserted against such Person and incurred by such Person
in any such capacity, or arising out of such Person's status as such, regardless
of whether the Corporation would have the power to indemnify such Person against
such liability under the provisions of this Article or applicable law.
Article FIFTEENTH: Except as provided in Articles FIFTH and SIXTH, the
Corporation reserves the right to amend, alter, change or repeal any provision
contained in this Certificate of Incorporation in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
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<PAGE> 10
IN WITNESS WHEREOF, I, THE UNDERSIGNED, being the sole incorporator of
the Corporation hereinbefore named, do hereby declare and certify that the
Corporation has duly authorized this Certificate of Incorporation and the facts
herein stated are true, and accordingly have hereunto set my hand as of this 5th
day of September, 1997.
By: /s/ David B. Rich, III
--------------------------------
Sole Incorporator
David B. Rich, III
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<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
UNION PLANTERS MORTGAGE FINANCE CORP.
* * * *
ARTICLE I
OFFICES
Union Planters Mortgage Finance Corp. (the "Corporation") may
have offices at such places both within and without the State of Delaware as
the Board of Directors may from time to time determine or as the business of
the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place. All meetings of the stockholders for the
election of directors and for any other purpose or purposes shall be held
either within or without the State of Delaware, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice.
Section 2. Date of Annual Meeting. The annual meeting of
stockholders shall be held on the date and at the time fixed, from time to
time, by the Board of Directors, provided that the first annual meeting shall
be held on a date within thirteen months after the organization of the
Corporation, and each successive annual meeting shall be held on a date within
thirteen months after the date of the preceding annual meeting, at which they
shall elect by a plurality vote a Board of Directors, and transact such other
business as may properly be brought before the meeting. If the day so
designated shall be a legal holiday, then such meeting shall be held on the
first business day thereafter that is not a legal holiday. A failure to hold an
annual meeting of stockholders at the designated time or to elect a sufficient
number of directors to conduct the business of the Corporation shall not affect
otherwise valid corporate acts or work a forfeiture or dissolution of the
Corporation except as may be otherwise specifically provided in the Delaware
General Corporation Law.
Section 3. Notice of Annual Meeting. Subject to Article IV
hereof, written or printed notice stating the place, day and hour of any
meeting of stockholders and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
(10) nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the President, the Secretary,
or the officers or persons calling the meeting, to each stockholder of record
entitled to vote at the meeting.
Section 4. Call of Special Meeting. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed by
statute or by the certificate of incorporation, may be called by the President
or, in his absence, the Secretary, and shall be called by the President or
Secretary at the request in writing of a majority of the Board of Directors, or
at the request in writing of stockholders owning a majority in amount of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting.
Section 5. Notice of Special Meeting. Subject to Article IV
hereof, written notice of a special meeting of stockholders, stating the time,
place and object thereof, shall be given to each stockholder entitled to vote
<PAGE> 2
thereat, at least three days before the date fixed for the meeting. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
Section 6. Quorum. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the Corporation's certificate of incorporation. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted that might have been transacted at
the meeting as originally called.
When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the Delaware
General Corporation Law or of the Corporation's certificate of incorporation, a
different vote is required in which case such express provision shall govern
and control the decision of such question.
Section 7. Stockholder List. The officer who has charge of
the stock ledger of the Corporation shall prepare and make, at least ten days
before every election of directors, a complete list of the stockholders
entitled to vote at said election, arranged in alphabetical order, showing the
address of and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, during ordinary
business hours, for a period of at least ten days prior to the election, at a
place within the city, town or village where the election is to be held (which
place shall be specified in the notice of the meeting), and the list shall be
produced and kept at the time and place of the election during the whole time
thereof, and shall be subject to the inspection of any stockholder who may be
present.
Section 8. Voting. At every meeting of the stockholders, each
stockholder shall be entitled to one vote in person or by proxy for each share
of the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three years from its date, unless the proxy provides
for a longer period. Except where the transfer books of the Corporation have
been closed or a date has been fixed as a record date for the determination of
its stockholders entitled to vote, no share of stock shall be voted on at any
election for directors which has been transferred on the books of the
Corporation within twenty days preceding such election of directors.
Section 9. Proxies. At a meeting of the shareholders, every
shareholder having the right to vote will be entitled to vote in person, or by
proxy appointed by an instrument in writing signed by the shareholder or by his
duly authorized attorney in fact, bearing a date not more than eleven (11)
months prior to the meeting unless the instrument provides for a longer period.
All proxies shall be filed with the Secretary of the Corporation prior to or at
the meeting.
Section 10. Stockholder Action Without Meetings. Any action
required by the Delaware General Corporation Law, the certificate of
incorporation of the Corporation or these Bylaws to be taken, or any action
that may be taken, at any annual or special meeting of stockholders may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders
of outstanding stock having not less than the minimum number of votes that
would have been necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
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DIRECTORS
Section 1. Functions. The business of the Corporation shall
be managed by its Board of Directors, which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Corporation's certificate of incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
Section 2. Qualification and Number. The number of directors
may be fixed from time to time by action of the stockholders or of the
directors, with a minimum of 1 and a maximum of 15; but if the number is not so
fixed, the number shall be 3. The directors shall be elected at annual meetings
of the stockholders, except as provided in Section 4 of this Article, and each
director elected shall hold office until his successor is elected and
qualified. A director need not be a stockholder or a citizen or resident of the
United States or the State of Delaware.
Section 3. Place of Meeting. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 4. Election, Term and Vacancies. The first meeting of
each newly elected Board of Directors shall be held at such time and place as
shall be fixed by the vote of the stockholders at the annual meeting and
provision of notice of such meeting to the newly elected directors shall not be
necessary in order legally to constitute the meeting, provided a quorum shall
be present. In the event of the failure of the stockholders to fix the time or
place of such first meeting of the newly elected Board of Directors, or in the
event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced.
Section 5. Call of Special Meeting. Special meetings of the
Board may be called by the President or, in his absence, the Secretary, on two
days' notice to each director; special meetings shall be called by the
President or Secretary in like manner and on like notice on the written request
of two or more directors.
Section 6. Notice; Actual or Constructive Waiver. No notice
shall be required for regular meetings for which the time and place have been
fixed by these Bylaws or by Board action taken at, or prior to, the immediately
preceding meeting of the Board.
Notice of the time and place of each special meeting of the
Board of Directors shall be sent to each director by mail, telegraph, wireless
telegraph, radio, cable, telex, facsimile or other method of electronic
communication then generally accepted for business use, or messenger, or any
combination thereof, addressed to such director at his address as it appears on
the records of the Corporation, or telephoned or delivered to him personally,
at least two days before the meeting, or, if the person calling the meeting is
the President, and the notice is given by one of the methods specified above
other than mail, such shorter period as the person calling the meeting may deem
appropriate in the circumstances.
Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time for the meeting stated therein. Attendance of any
director at a meeting shall constitute a waiver of notice of such meeting,
except when he attends a meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened.
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Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the directors need be specified in any
written waiver of notice, except as otherwise provided in these Bylaws.
Section 7. Quorum and Action. At all meetings of the Board a
majority of the directors then in office shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by
the Corporation's certificate of incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Removal of Directors. Except as may otherwise be
provided by the Delaware General Corporation Law, any director or the entire
Board of Directors may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors.
Section 9. Written Consent. Unless otherwise restricted by
the Corporation's certificate of incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting, if prior to such
action a written consent thereto is signed by all members of the Board or of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or of such committee.
Section 10. Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of two or more of the directors of the
Corporation, which, to the extent provided in the resolution, shall have and
may exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation, with the exception of any authority
the delegation of which is prohibited by Section 141 of the Delaware General
Corporation Law, and may authorize the affixation of the Corporation's seal to
all papers that may require such affixation. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Directors when required.
Section 11. Electronic Communication. Any member or members
of the Board of Directors or of any committee thereof may participate in a
meeting of the Board, or such committee, as the case may be, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other at the same time.
Section 12. Compensation. The Corporation may pay the
directors their expenses, if any, for attendance at each meeting of the Board
of Directors, and a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
ARTICLE IV
WAIVER OF NOTICE
Whenever any notice is required to be given under the
provisions of any statute or of the Corporation's certificate of incorporation
or of these Bylaws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent to the receipt by such person or persons of
such notice.
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ARTICLE V
OFFICERS
Section 1. Officers. The officers of the Corporation shall be
chosen by the Board of Directors and shall include a President and a Secretary.
The President may also appoint a Treasurer, one or more Vice Presidents and one
or more Assistant Secretaries and Assistant Treasurers. Two or more offices may
be held by the same person.
Section 2. Appointment of Officers. The Board of Directors at
its first meeting after each annual meeting of stockholders shall choose a
President from among the directors, and shall choose a Secretary, who need not
be a member of the Board.
Section 3. Appointment of Additional Officers and Agents. The
President may appoint such other officers and agents as he shall deem
necessary. Such other officers and agents shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the President.
Section 4. Salaries. The salaries, if any, of all officers
and agents of the Corporation shall be fixed by the Board of Directors.
Section 5. Term of Office. The officers of the Corporation
shall hold office until their successors are chosen and qualify. Any officer
elected or appointed by the Board of Directors may be removed at any time by
the affirmative vote of a majority of the Board of Directors. Any officer may
resign at any time by giving written notice thereof to the President or to the
Board of Directors. Any such resignation will take effect as of the date. The
acceptance of such resignation shall not be necessary to make it effective. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors.
Section 6. President. The President shall be the chief
executive officer of the Corporation, shall preside at all meetings of the
stockholders and the Board of Directors, shall have general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect.
The President shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Corporation, except where
otherwise required or permitted by law to be signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation.
Section 7. Vice President. The Vice President, or if there
shall be more than one, the Vice Presidents in the order determined by the
Board of Directors, shall, in the absence or disability of the President,
perform the duties and exercise the powers of the President and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
Section 8. Secretary and Assistant Secretaries. The Secretary
shall attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of the Corporation
and of the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. He shall give,
or cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or President, under whose supervision
he shall be. He shall have custody of the corporate seal of the Corporation and
he, or an Assistant Secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by his
signature or by the signature of such Assistant
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Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors, shall,
in the absence or disability of the Secretary, perform the duties and exercise
the powers of the Secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 9. Treasurer and Assistant Treasurers. The Treasurer
shall have the custody of the corporate funds and securities and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors.
The Treasurer shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation.
Section 10. Action of President to Make Certain Appointments.
The President shall, in addition to the powers and responsibilities included
within Section 6 of this Article V, also have the power from time to time, by
action in writing, to appoint employees of the Corporation who have
responsibility for the performance and supervision of certain special functions
as may be assigned to them from time to time in the corporation, and who may
have or include the title of "Vice President"; and to appoint Assistant
Secretaries and Assistant Treasurers. Any employee so appointed may have other
duties and other titles, subject to limitations prescribed by applicable law.
Any such employee so appointed shall perform in the particular capacity at the
will of the Board of Directors or the President; and he shall not be deemed, by
virtue of such appointment, to be an officer of the Corporation.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Execution of Stock Certificates. Every holder of
stock in the Corporation shall be entitled to have a certificate, signed by, or
in the name of the Corporation by, the President or a Vice President and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation, certifying the number of shares owned by him in the
Corporation.
Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent or (2) by a transfer clerk acting on behalf of the
Corporation and registrar, the signature of any such President, Vice President,
Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be affixed
to the certificate by facsimile. In case any officer or officers who have
signed, or whose facsimile signature or signatures have been used on, any such
certificate or certificates shall cease to hold the office or offices indicated
by their signatures, whether because of death, resignation or otherwise, before
such certificate or certificates have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
Corporation.
Section 2. Lost Certificates. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the delivery to the Board of
Directors of an affidavit of the person claiming the certificate of stock to
have been lost, stolen or destroyed certifying to such loss, theft or
destruction. When authorizing the
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issue of any new certificate in lieu of a certificate alleged to have been
lost, stolen or destroyed, the Board of Directors may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal representative, to give to the
Corporation a bond in such sum as the Board of Directors may require as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
Section 3. Transfer of Stock. Upon surrender to the
Corporation or to the transfer agent for the Corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succession or
assignment, it shall be the duty of the Corporation to issue a new certificate
registered in the name of the designated transferee, successor or assignee, and
to record the transfer in the Corporation's stock ownership records.
Section 4. Record Dates. The Board of Directors is authorized
to fix a time in accordance with the provisions of the Delaware General
Corporation Law as the record date for determining the stockholders entitled to
notice of or to vote at any meeting of stockholders or adjournment thereof, to
consent or dissent in writing for any corporate action without a meeting, to
receive payment of any dividend or other distribution or allotment of any
rights or to exercise any rights in respect of any change, conversion or
exchange of stock, or for any other lawful action; provided, that if as to any
particular determination no such record date is so fixed by the Board of
Directors, the record date for such determination shall be the date prescribed
by the Delaware General Corporation Law for that purpose.
Section 5. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such shares on the part of any other person, regardless
of whether it shall have received actual or other notice thereof, except as
otherwise provided by the laws of the State of Delaware.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Corporation's certificate of
incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting, pursuant to law. Dividends may be paid in cash, in
property, or in shares of the Corporation's capital stock, subject to the
provisions of the Corporation's certificate of incorporation.
Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for such other
purpose as the Board of Directors shall deem conducive to the interests of the
Corporation, and the Board of Directors may modify or abolish any such reserve
in the manner in which it was created.
Section 2. Fiscal Year. The fiscal year of the Corporation
shall be the calendar year, unless otherwise fixed by resolution of the Board
of Directors.
Section 3. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
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ARTICLE VIII
AMENDMENTS
These Bylaws may be altered or repealed at any regular
meeting of the stockholders or of the Board of Directors or at any special
meeting of the stockholders or of the Board of Directors if notice of such
alteration or repeal be contained in the notice of such special meeting.
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EXHIBIT 4.1
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STANDARD TERMS
TO
POOLING AND SERVICING AGREEMENT
--------------------------------------------------------------
UNION PLANTERS MORTGAGE FINANCE CORP.
PASS-THROUGH CERTIFICATES
JANUARY 1998 EDITION
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.01. Definitions............................................................................... 1
Section 1.02. Interest Calculations..................................................................... 21
ARTICLE II
THE ASSETS
Section 2.01. Assignment of Assets...................................................................... 22
Section 2.02. The Mortgage Loans........................................................................ 22
Section 2.03. Representations and Warranties of the Trustee............................................. 25
Section 2.04. Representations and Warranties as to Assets............................................... 25
Section 2.05. Purchase or Substitution of Certain Assets................................................ 25
ARTICLE III
ADMINISTRATION OF TRUSTS AND SERVICING OF THE ASSETS
Section 3.01. The Master Servicer....................................................................... 29
Section 3.02. Maintenance of Records; Inspection of Asset Files......................................... 29
Section 3.03. Collection of Payments on Assets; Servicing Delinquent Accounts........................... 30
Section 3.04. Advances.................................................................................. 31
Section 3.05. Servicing Account......................................................................... 31
Section 3.06. Certificate Account....................................................................... 32
Section 3.07. Withdrawals From Certificate Account; Remittance Amounts.................................. 32
Section 3.08. Realization upon Defaulted Assets......................................................... 33
Section 3.09. Title, Conservation, and Disposition of REO Property...................................... 34
Section 3.10. Full Prepayments and Liquidations; Trustee to Cooperate; Release of Mortgage Files........ 36
Section 3.11. Due-on-Sale Clauses and Assumption Agreements............................................. 37
Section 3.12. Annual Accountants' Certificate; Annual Statement as to Compliance........................ 38
Section 3.13. Servicing Fees............................................................................ 38
Section 3.14. Late Charges; Prepayment Fees or Other Charges............................................ 39
Section 3.15. Maintenance of Standard Hazard Insurance, Primary Mortgage Insurance, and Errors
and Omissions Coverage.................................................................... 39
ARTICLE IV
REMITTANCE AND REPORTING TO CERTIFICATEHOLDERS
Section 4.01. Remittance Reports........................................................................ 42
Section 4.02. Distribution Account...................................................................... 43
Section 4.03. Allocation of Available Distribution Amount............................................... 43
Section 4.04. Compliance with Withholding Requirements.................................................. 44
Section 4.05. Reports of Security Principal Balances to the Clearing Agency............................. 44
Section 4.06. Preparation of Regulatory Reports......................................................... 45
</TABLE>
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<TABLE>
<CAPTION>
PAGE
ARTICLE V
THE POOLING INTERESTS AND THE CERTIFICATES
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Section 5.01. Pooling REMIC Interests................................................................... 46
Section 5.02. The Certificates.......................................................................... 46
Section 5.03. Book-Entry Certificates................................................................... 46
Section 5.04. Registration of Transfer and Exchange of Certificates..................................... 47
Section 5.05. Restrictions on Transfer.................................................................. 48
Section 5.06. Accrual of Interest on the Certificates................................................... 49
Section 5.07. Mutilated, Destroyed, Lost or Stolen Certificates......................................... 49
Section 5.08. Persons Deemed Owners..................................................................... 50
Section 5.09. Appointment of Paying Agent............................................................... 50
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
Section 6.01. Liability of the Depositor and the Master Servicer........................................ 50
Section 6.02. The Depositor's Representations and Warranties............................................ 50
Section 6.03. Representations, Warranties and Covenants of the Master Servicer.......................... 52
Section 6.04. Corporate Existence....................................................................... 53
Section 6.05. Limitation on Liability of the Depositor, the Master Servicer and Others.................. 53
Section 6.06. Master Servicer Resignation............................................................... 54
Section 6.07. Assignment or Delegation of Duties by the Master Servicer and the Depositor............... 54
Section 6.08. The Depositor and Master Servicer May Own Certificates.................................... 54
Section 6.09. Protection of Trust Estate................................................................ 54
Section 6.10. Performance of Obligations................................................................ 55
ARTICLE VII
EVENT OF DEFAULT; TERMINATION OF SERVICING ARRANGEMENTS
Section 7.01. Events of Default......................................................................... 55
Section 7.02. Trustee to Act; Appointment of Successor.................................................. 57
Section 7.03. Notifications to Master Servicer and to Certificateholders................................ 58
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.01. Duties of Trustee......................................................................... 58
Section 8.02. Certain Matters Affecting the Trustee..................................................... 60
Section 8.03. Trustee Not Liable for Certificates or Assets............................................. 61
Section 8.04. Trustee May Own Certificates.............................................................. 61
Section 8.05. Trustee's Fees and Expenses............................................................... 61
Section 8.06. Eligibility Requirements for Trustee...................................................... 62
Section 8.07. Resignation and Removal of the Trustee.................................................... 62
</TABLE>
(ii)
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<TABLE>
<S> <C> <C>
Section 8.08. Successor Trustee......................................................................... 63
Section 8.09. Merger or Consolidation of Trustee........................................................ 63
Section 8.10. Appointment of Co-Trustee or Separate Trustee............................................. 64
Section 8.11. Appointment of Custodians................................................................. 64
Section 8.12. Trustee May Enforce Claims Without Possession of Certificates............................. 65
ARTICLE IX
TERMINATION
Section 9.01. Termination Upon Repurchase or Liquidation of All Assets.................................. 65
Section 9.02. Additional Termination Requirements....................................................... 66
ARTICLE X
REMIC TAX PROVISIONS
Section 10.01. REMIC Administration...................................................................... 67
Section 10.02. Prohibited Activities..................................................................... 68
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendments................................................................................ 70
Section 11.02. Recordation of Agreement; Counterparts.................................................... 70
Section 11.03. Limitation on Rights of Certificateholders................................................ 71
Section 11.04. Notices................................................................................... 71
Section 11.05. Severability of Provisions................................................................ 72
Section 11.06. Sale of Assets............................................................................ 72
Section 11.07. Notice to Rating Agency................................................................... 72
</TABLE>
TABLE OF EXHIBITS
Exhibit 1-A Form of Initial Certification
Exhibit 1-B Form of Final Certification
Exhibit 2 Form of Recordation Report
Exhibit 3 Form of Request for Release
Exhibit 4 Form of Rule 144A Agreement
Exhibit 5 Form of Transferee Agreement
Exhibit 6 Form of Benefit Plan Affidavit
Exhibit 7 Form of Residual Transferee Agreement
Exhibit 8 Form of Supplemental Pooling and Servicing Agreement
(iii)
<PAGE> 5
RECITALS
UNION PLANTERS MORTGAGE FINANCE CORP., a Delaware corporation (the
"Depositor"), ___________________________, a [banking association or
corporation] (the "Master Servicer") and _________________________________, a
[banking association or corporation] as trustee (the "Trustee") have entered
into a Pooling and Servicing Agreement that provides for the issuance of
mortgage pass-through securities (the "Certificates") that in the aggregate
evidence the entire interest in a pool consisting of mortgage loans secured by
first liens on one- to four-family residential real properties (the "Mortgage
Loans," and, together with certain other assets, the "Assets") and other
property owned by the Trust (the "Trust") created by such Pooling and Servicing
Agreement. These Standard Terms are a part of, and are incorporated by
reference into, such Pooling and Servicing Agreement.
STANDARD PROVISIONS
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties made in the Pooling and Servicing Agreement and
as hereinafter set forth, the Depositor, the Master Servicer and the Trustee
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS.
Except as otherwise specified herein or in a Pooling and Servicing
Agreement or as the context may otherwise require, whenever used in these
Standard Terms, the following words and phrases shall have the meanings
assigned to them in this Article. Unless otherwise specified, all calculations
described herein shall be made on the basis of a 360-day year consisting of
twelve 30-day months.
"Accrual Date": With respect to any Series or Class of Certificates,
the date upon which interest begins accruing on the Certificates of such Series
or Class, which shall be specified in the related Pooling and Servicing
Agreement.
"Adjustable Rate Asset": An "adjustable rate" Mortgage Loan, the Asset
Rate of which is subject to periodic adjustment in accordance with the terms of
the related Mortgage Note.
"Advance": Any Servicing Advance or P&I Advance.
"Affiliate": As 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.
"Application for Relief": As defined in Section 4.06 hereof.
"Asset": A Mortgage Loan, or other asset if specified in the related
Series Agreement.
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"Asset Documents": Mortgage Loan Documents, and other asset documents
if specified in the related Series Agreement.
"Asset File": With respect to any Asset, the related Trustee Mortgage
Loan File.
"Asset Rate": As to any Asset, the Mortgage Rate.
"Asset Schedule": For any Series, the list or lists attached to the
related Pooling and Servicing Agreement consisting of the related Mortgage Loan
Schedule.
"Assignment": A document effecting the transfer of all the rights of a
secured party under a Mortgage to a transferee, in recordable form for the
jurisdiction in which the related Mortgaged Property is located.
"Available Distribution Amount": For each Distribution Date for a
Series of Certificates, the amount on deposit in the related Distribution
Account at the commencement of business on such Distribution Date, less the
amounts distributable from the Distribution Account in accordance with clauses
(1) through (4) of Section 4.03(a) hereof.
"Basis Limit Amount": With respect to any Converted Loan purchased
from a REMIC, an amount equal to the REMIC's adjusted federal income tax basis
in such Converted Loan as of the date on which the purchase occurs as set forth
in a certificate of an Officer of the Master Servicer, which certificate shall
be delivered to the Trustee in connection with any purchase of a Converted Loan
from a REMIC.
"Beneficial Owner": With respect to a Book-Entry Certificate, the
Person who is registered as owner of that Certificate in the books of the
Clearing Agency for that Certificate or in the books of a Person maintaining an
account with such Clearing Agency.
"Benefit Plan Affidavit": An affidavit substantially in the form of
Exhibit 6 hereto.
"Benefit Plan Opinion": An Opinion of Counsel to the effect that a
proposed transfer of a Certificate will not (a) cause any of the assets of the
Trust to be regarded as "plan assets" for purposes of the Plan Asset
Regulations, (b) give rise to any fiduciary duty under ERISA on the part of the
Depositor, the Master Servicer, the Trustee or the Trust's Tax Matters Person,
if any, or (c) be treated as, or result in, a "prohibited transaction" under
section 406 or section 407 of ERISA or under section 4975 of the Code. The cost
of obtaining a Benefit Plan Opinion shall not be borne by the Depositor, the
Master Servicer or the Trustee.
"Board of Directors": The Board of Directors of [Seller] the Master
Servicer or any committee of that Board duly authorized to act on behalf of
that Board with respect to any matters arising hereunder.
"Book-Entry Certificates": The Classes of Certificates of a Series, if
any, classified as such in the related Pooling and Servicing Agreement.
"Business Day": Any day that is not a Saturday, Sunday, holiday or
other day on which commercial banking institutions in the city and state in
which the Trustee's Corporate Trust Office is located are authorized or
obligated by law or executive order to be closed.
"Certificate Account": An account established pursuant to and
described in Section 3.06 hereof. The Certificate Account will be an asset of
the Trust but not an asset of any related REMIC. Solely for federal income tax
purposes, the Master Servicer will be the owner of the Certificate Account and,
thus, any income earned by the Certificate Account, or any amounts transferred
by any related REMIC to the Certificate Account, shall be treated as income
earned by, or amounts distributed to, the Master Servicer.
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"Certificate Principal Balance": With respect to each Certificate or
Class of Certificates, on any date of determination, the outstanding principal
amount, if any, of such Certificate(s) immediately prior to the most recently
preceding Distribution Date (or in the case of a date of determination on or
before the first Distribution Date, an amount equal to the initial principal
amount of such Certificate(s) as of the Closing Date) net of the amounts, if
any, applied on such preceding Distribution Date to reduce the principal amount
of such Certificate(s) in accordance with Section 4.03 hereof.
"Certificate Register" and "Certificate Registrar": The respective
meanings specified for such terms in Section 5.04 hereof.
"Certificateholder" or "Holder": With respect to any Certificate, the
Person in whose name such Certificate is registered in the Certificate
Register.
"Certificates": The certificates authorized by, executed and delivered
under, and issued pursuant to any Pooling and Servicing Agreement.
"Class": With respect to any Series, the classification of different
types of the Certificates within such Series as set forth in the related
Pooling and Servicing Agreement.
"Clearing Agency": The Depository Trust Company, or any successor
organization or any other organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended, and
the regulations of the Securities and Exchange Commission thereunder.
"Clearing Agency Participant": A broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency
effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date": With respect to any Series, the date specified as the
"Closing Date" in the related Pooling and Servicing Agreement.
"Code": The Internal Revenue Code of 1986, as amended.
"Collection Period": With respect to each Distribution Date for a
Series, the period commencing on the second day of the calendar month preceding
the month in which such Distribution Date occurs and ending at the close of
business on the first day of the calendar month in which such Distribution Date
occurs.
"Commission": The Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, as
amended.
"Depositor" Union Planters Mortgage Finance Corp., a Delaware
corporation wholly-owned by Union Planters National Bank.
"Converted Loan": An Adjustable Rate Asset with respect to which the
Obligor has complied with the applicable requirements of the related Mortgage
Note to convert the related Asset Rate to a fixed rate of interest, and as to
which the Master Servicer has processed such conversion.
"Corporate Trust Office": The principal corporate trust office of the
Trustee at which at any particular time its corporate trust business under a
Pooling and Servicing Agreement shall be administered.
"Credit Insurer": An insurer under any Primary Mortgage Insurance
Policy or pool insurance policy for a Series.
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"Custodian": For any Series, the Trustee or an agent of the trustee
identified in the related Pooling and Servicing Agreement, which agent shall
hold all or part of the Trustee Mortgage Loan Files for some or all of the
related Mortgage Loans.
"Cut-off Date": With respect to any Series, the date or dates (a)
after which all Monthly Payments due in respect of the Assets sold to the Trust
(net of Servicing Fees relating to such Assets) and (b) on and after which all
Principal Prepayments, Net Liquidation Proceeds and Repurchase Prices received
in respect of such Assets, are to be transmitted to the Certificate Account for
the benefit of the Holders of the Certificates. The Cut-off Date for a Series
shall be specified in the related Pooling and Servicing Agreement.
"Cut-off Date Principal Balance": As to any Asset, the original
principal amount of such Asset, minus the principal portion of all Monthly
Payments due on such Asset on or before the Cut-off Date and minus all other
payments applied to reduce such original principal amount before the Cut-off
Date.
"Default": Any occurrence that is, or that with notice or the lapse of
time or both would become, an Event of Default.
"Defect Discovery Date": With respect to an Asset, the date on which
either the Trustee or the Master Servicer first discovers a Qualification
Defect affecting the Asset.
"Depositor": Union Planters Mortgage Finance Corp., a Delaware
corporation, and its permitted successors and assigns.
"Directly Operate": With respect to any REO Property, the furnishing
or rendering of services to the tenants thereof, the management or operation of
such REO Property, the holding of such REO Property primarily for sale to
customers, the performance of any construction work thereon or any use of such
REO Property in a trade or business conducted by the Trust, in each case other
than through an Independent Contractor; provided, however, that the Master
Servicer on behalf of the Trustee shall not be considered to Directly Operate
an REO Property solely because the Master Servicer on behalf of the Trustee
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.
"Disqualified Organization": Either (a) the United States, (b) any
state or political subdivision thereof, (c) any foreign government, (d) any
international organization, (e) any agency or instrumentality of any of the
foregoing, (f) any organization (other than a cooperative described in section
521 of the Code) that is exempt from federal income taxation (including
taxation under the unrelated business taxable income provisions of the Code),
(g) any rural telephone or electrical service cooperative described in section
1381(a)(2)(C) of the Code, or (h) any other entity identified as a disqualified
organization by legislation enacted or administrative pronouncement in effect
as of the date of the most recent transfer of the related Residual Certificate.
A corporation will not be treated as an instrumentality of the United States or
any state or political subdivision thereof if all of its activities are subject
to tax and, with the exception of the Federal Home Loan Mortgage Corporation, a
majority of its board of directors is not selected by such governmental unit.
"Distribution Account": As defined in Section 4.02 hereof.
"Distribution Date": Unless otherwise specified in the Pooling and
Servicing Agreement, the 15th day of any month, or the next Business Day after
such 15th day if such 15th day is not a Business Day, commencing in the month
following the Closing Date and ending on the date on which the Trust is
terminated.
"Due Date": With respect to any Asset, the date on which a Monthly
Payment is due on such Asset from the Obligor thereunder (without regard to any
grace period).
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"Due Date Interest Shortfall": For any Asset that is prepaid in full
or liquidated on other than a Due Date for such Asset, the difference between
(a) the amount of interest that would have accrued on such Asset through the
day preceding the Due Date next following the date of such prepayment or
liquidation had the Asset not been prepaid in full or liquidated (net of any
other administrative fees payable out of such interest had it accrued and been
paid) and (b) the amount of interest that actually accrued on such Asset prior
to the prepayment in full or liquidation thereof (net of an allocable portion
of any other administrative fees payable from interest payments on such Asset
in respect of the related Collection Period).
"Early Payment": As to any Asset and any Due Date on which the
principal and interest payments on such Asset made with respect to such Due
Date (not including any late fees) exceed the sum of the scheduled Monthly
Payment for such Asset and Due Date plus any unpaid Monthly Payments for
previous Due Dates, if the related Obligor has not sent written notice to the
Master Servicer with such payment asking that the amount by which such payment
exceeds the Monthly Payment then due be treated as a Principal Prepayment and
the Master Servicer is unable to determine the Obligor's intended treatment of
such excess payment, the Early Payment shall be the amount by which (1)
payments of principal and interest on such Asset made with respect to such Due
Date exceed (2) the scheduled Monthly Payment for such Asset on such Due Date
plus any unpaid Monthly Payments for previous Due Dates, but only to the extent
that the amount of such excess is an integral multiple of the amount of the
scheduled Monthly Payment for such Due Date. To the extent that the amount of
such excess exceeds an integral multiple of such scheduled Monthly Payment, the
excess shall be deemed to be a Principal Prepayment of such Asset.
"Eligible Account": (1) An account or accounts maintained with a
Qualified Bank, (2) any trust account maintained in the corporate trust
department of a financial institution subject to governmental regulatory
authorities or (3) a non-trust account maintained with the Trustee, so long as
the Trustee's commercial paper or short-term unsecured debt obligations are
rated by each Rating Agency in its highest applicable rating category (without
regard to "plus" or "minus" modifiers of such rating category); provided that
the Master Servicer shall move any funds in such account to another account
which is an Eligible Account pursuant to clause (1) or (2) of this definition
within five days after any downgrading of the Trustee's commercial paper or
short-term unsecured debt obligations below each Rating Agency's highest
applicable rating category (without regard to "plus" or "minus" modifiers of
such rating category) and shall not deposit funds into any account that is an
Eligible Account pursuant to this clause (3) if such deposit would cause the
amount on deposit in such account to exceed 20% of the aggregate unpaid
principal balance of the Certificates. Eligible Accounts may bear interest.
"Eligible Investments": Any one or more of the following obligations
or securities:
(a) direct obligations of, and obligations fully
guaranteed by, the United States of America;
(b) demand and time deposits in, negotiable certificates
of deposit of, bankers' acceptances issued by, or federal funds sold
by, any Qualified Bank;
(c) commercial paper of any Person other than the
Depositor, the Seller or any Affiliate of the Depositor or the Seller
rated in the Rating Agency's highest applicable rating category;
(d) repurchase agreements fully collateralized by
possession of obligations of the type specified in clause (a) above;
provided, however, that investments in such repurchase agreements
shall mature within three days of the acquisition thereof and;
provided further, that such agreements shall be entered into with a
Qualified Bank;
(e) money market accounts or money market funds rated in
one of the three highest rating categories of the Rating Agency for
money market funds; or
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(f) money market accounts or money market mutual funds
investing primarily in obligations of the United States government,
and further investing exclusively in debt obligations, provided,
however, that such money market accounts or money market mutual funds
shall be rated in a rating category sufficient to support the initial
ratings assigned to a related Series of Certificates.
The foregoing notwithstanding, Eligible Investments that are acquired with
funds in the Certificate Account, the Distribution Account or any Reserve Fund
shall include only such obligations or securities that mature on or before the
Business Day immediately preceding the next Distribution Date. The Trustee may
not sell or convert an Eligible Investment if such sale or conversion would
result in a loss on the investment. In no event shall an instrument be an
Eligible Investment if such instrument evidences (1) a right to receive only
interest payments with respect to the obligations underlying such instrument or
(2) both principal and interest payments derived from obligations underlying
such instrument, if the interest and principal payments with respect to such
instrument provide a yield to maturity at the date of investment of greater
than 120% of the yield to maturity at par of such underlying obligations.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Restricted Certificates": With respect to any Series, any
Certificates of a Class that are subordinated to the Certificates of any other
Class of such Series, and are designated as "ERISA Restricted Certificates" in
the related Series Agreement.
"Event of Default": As defined in Section 7.01 hereof.
"FHA": The Federal Housing Administration.
"FHA Asset": An Asset that is insured by the FHA.
"FHA Insurance": As to any FHA Asset, FHA's agreement to reimburse the
owner of such Asset for the amount of any losses incurred upon the liquidation
of such Asset.
"Fannie Mae": Fannie Mae (formerly the Federal National Mortgage
Association), or any successor in interest.
"Final Certification": A certification as to the completeness of each
Trustee Mortgage Loan File substantially in the form of Exhibit 1-B hereto
provided by the Trustee (or the Custodian) on or before the first anniversary
of the Closing Date pursuant to Section 2.02(c)(2) hereof.
"Final Scheduled Distribution Date": With respect to any Class of any
Series, the date specified as such in the related Pooling and Servicing
Agreement.
"Fraud Loss": A loss incurred on a Mortgage Loan resulting from a
Credit Insurer's failure to pay a claim with respect to such Mortgage Loan on
the grounds of fraud in connection with the origination of the Mortgage Loan or
on the grounds of fraud, dishonesty or misrepresentation in connection with the
application for any insurance obtained with respect to such Mortgage Loan.
"Freddie Mac": Freddie Mac (formerly the Federal Home Loan Mortgage
Corporation), or any successor in interest.
"Independent": When used with respect to any specified Person, another
Person who (a) is in fact independent of the Depositor, the Seller, the Master
Servicer, any obligor upon the Certificates or any Affiliate of
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the Depositor, the Seller or the Master Servicer or such obligor, (b) does not
have any direct financial interest or any material indirect financial interest
in the Depositor, the Seller or the Master Servicer or in any such obligor or
in an Affiliate of the Depositor, the Seller or the Master Servicer or such
obligor, and (c) is not connected with the Depositor, the Seller or the Master
Servicer or any such obligor as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions. Whenever it
is provided herein that any Independent Person's opinion or certificate shall
be furnished to the Trustee, such Person shall be appointed by the Depositor,
the Seller or the Master Servicer in the exercise of reasonable care by the
Depositor, the Seller or the Master Servicer, as the case may be, and approved
by the Trustee, and such opinion or certificate shall state that the Person
executing the same has read this definition and that such Person is independent
within the meaning thereof.
"Independent Contractor": Either (a) any Person (other than the Master
Servicer) that would be an "independent contractor" with respect to the Trust
within the meaning of Section 856(d)(3) of the Code if the Trust were a real
estate investment trust (except that, in applying that Section, more than 35%
of the outstanding principal balance of any Class shall be deemed to be more
than 35% of the certificates of beneficial interest of the Trust), so long as
the Trust does not receive or derive any income from such Person, the
relationship between such Person and the Trust is at arm's length and such
Person is not an employee of the REMIC, the Trustee or the Master Servicer, all
within the meaning of Treasury Regulation Section 1.856-4(b)(5), or (b) any
other Person (including the Master Servicer) upon receipt by the Trustee of an
Opinion of Counsel, the expense of which shall constitute a Servicing Advance
if borne by the Master Servicer, 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.
"Initial Certification": A certification as to the completeness of
each Trustee Mortgage Loan File substantially in the form of Exhibit 1-A hereto
provided by the Trustee (or the Custodian) on the Closing Date pursuant to
Section 2.02(c)(1) hereof.
"Initial Value": As defined in Section 3.15(b) hereof.
"Insurance Policy": Any insurance policy covering any Asset (and the
related Mortgaged Property), including, without limitation, any Standard Hazard
Insurance Policy or Primary Mortgage Insurance Policy or FHA Insurance or VA
Guaranty.
"Insurance Proceeds": Amounts paid or payable (as the context
requires) under any Insurance Policy, to the extent such amounts are not
applied to the restoration or repair of the Mortgaged Property in respect of
which such amounts were paid.
"Insured Expenses": Expenses incurred by the Master Servicer in
connection with a Mortgage Loan under which the Obligor is in default, which
expenses are covered by a Standard Hazard Insurance Policy and are paid by an
insurer under any such policy.
"Interest Accrual Period": With respect to each Distribution Date (i)
for any Class of Certificates paying interest at a variable rate, the period
commencing on the 15th day of the preceding month through the 14th day of the
month in which such Distribution Date occurs (except that the first Interest
Accrual Period for such Class of Certificates will be the period from the
related Closing Date through the 14th day of the month in which such
Distribution Date occurs) and (ii) for all other Classes of Certificate, the
calendar month preceding the month in which the Distribution Date occurs.
Interest on any Class of Certificates paying interest at a variable rate will
be calculated on the basis of a 360-day year and the actual number of days
elapsed in the applicable Interest Accrual
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Period. Interest on all other Classes of Certificates will be computed on the
basis of a 360-day year consisting of twelve 30-day months.
"Issuing REMIC": If provided for in a Pooling and Servicing Agreement,
the REMIC composed primarily of Regular Interests in the Pooling REMIC,
together with the Distribution Account.
"Liquidated Loan": A defaulted Mortgage Loan as to which all amounts
that the Master Servicer expects to recover through the date of disposition of
the related Mortgaged Property have been received.
"Liquidation Expenses": All reasonable, out-of-pocket costs and
expenses (exclusive of the Master Servicer's overhead costs) incurred by the
Master Servicer in connection with liquidation of any Asset or disposition of
any related REO Property, including, but not limited to, the cost of all
notices sent in connection with such liquidation, costs and expenses incurred
in connection with preparation and recordation of assignments of Mortgages,
expenses, including reasonable attorney's fees, incurred in connection with the
commencement and pursuit of Proceedings against Obligors or guarantors or
sureties of Obligors or in the pursuit of foreclosure or other similar
remedies, expenses incurred in repossessing and refurbishing the related REO
Property for sale and sales commissions paid in connection with the resale of
the related REO Property.
"Liquidation Proceeds": Amounts received and retained in connection
with the liquidation of Liquidated Loans, whether through foreclosure on the
related Mortgaged Property or otherwise (including Insurance Proceeds collected
in connection with such liquidation).
"Master Servicer": ____________________, as master servicer of any of
the Assets under any Pooling and Servicing Agreement, and its permitted
successors and assigns thereunder.
"Master Servicer Mortgage Loan File": As to each Mortgage Loan, a file
maintained by the Master Servicer that contains (1) an original Standard Hazard
Insurance Policy (and flood insurance policy, if required pursuant to Section
3.15 hereof) relating to the underlying Mortgaged Property or a certificate of
insurance issued by the insurer or its agent indicating that a Standard Hazard
Insurance Policy (and a flood insurance policy, if required pursuant to Section
3.15 hereof) is in effect with respect to such Mortgaged Property, (2)
originals or copies of all documents submitted to a Mortgage Insurer for credit
and property underwriting approval, (3) the originals of all RESPA and
Regulation Z disclosure statements executed by the related Mortgagors, (4) the
appraisal report made in connection with the origination of the Mortgage Loan,
(5) the settlement statement for the purchase and/or refinancing of the
underlying Mortgaged Property by the related Mortgagor under the related
Mortgage Note and Mortgage, (6) the originals of any tax service contracts, (7)
documentation relating to any approvals by the Master Servicer of any
modifications of the original related Mortgage Loan Documents and any releases
of collateral supporting the related Mortgage Loan, together with copies of the
documentation effecting any such modifications or releases, (8) collection
notices or form notices sent to the related Mortgagor, (9) foreclosure
correspondence and legal notifications, if applicable, (10) water and
irrigation company stock certificates, if applicable, and (11) all other
documents relating to such Mortgage Loan which would customarily be maintained
in a mortgage loan file by the Master Servicer in order to service the mortgage
loan properly, as well as any other documents relating to such Mortgage Loan
(other than Mortgage Loan Documents) that come into the Master Servicer's
possession.
"Monthly Payment": With respect to any Asset, the scheduled monthly
payment of principal and interest thereon due in any month under the terms
thereof.
"Mortgage": A written instrument creating a valid first lien on
Mortgaged Property, in the form of a mortgage, deed of trust, deed to secure
debt or security deed, including any riders or addenda thereto.
"Mortgage Insurer": The insurance company or companies which issue any
Primary Mortgage Insurance Policies with respect to any Mortgage Loans.
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"Mortgage Loan": A mortgage loan secured by a first lien on a one- to
four-family residential real property (which may be the real estate to which a
manufactured home is deemed by the Seller to have become permanently affixed as
of the Cut-off Date for the related Series).
"Mortgage Loan Documents": With respect to each Mortgage Loan, the
following documents:
(a) the original Mortgage Note bearing a complete chain
of endorsements, if necessary, from the initial payee thereunder to
the Seller, with a further endorsement without recourse from the
Seller in blank or to the Trustee or its Custodian, in a form
specified in the related Sales Agreement, (or a copy or a duplicate
original Mortgage Note, together with an affidavit certifying that the
original thereof has been lost or destroyed) together with all related
riders and addenda and any related surety or guaranty agreement, power
of attorney and buydown agreement;
(b) the original recorded Mortgage (or a copy thereof
certified to be a true and correct reproduction of the original
thereof by the appropriate public recording office) with evidence of
recordation noted thereon or attached thereto, or, if the Mortgage is
in the process of being recorded, a photocopy of the Mortgage,
certified by an officer of the related Seller or the originator, the
related title insurance company, the related closing/settlement/escrow
agent or the related closing attorney to be a true and correct copy of
the Mortgage submitted for recordation;
(c) the original recorded assignment of the Mortgage
from the related Seller to the Trustee or its Custodian, in a form
specified in the related Sales Agreement (or a copy thereof certified
to be a true and correct reproduction of the original thereof by the
appropriate public recording office) with evidence of recordation
noted thereon or attached thereto, or, if the assignment is in the
process of being recorded, a photocopy of the assignment, certified by
an officer of the Seller to be a true and correct copy of the
assignment submitted for recordation;
(d) each original recorded intervening assignment of the
Mortgage as is necessary to show a complete chain of title from the
initial mortgagee (or beneficiary, in the case of a deed of trust) to
the related Seller (or a copy of each such assignment certified to be
a true and correct reproduction of the original thereof by the
appropriate public recording office) with evidence of recordation
noted thereon or attached thereto, or, if an assignment is in the
process of being recorded, a photocopy of the assignment, certified by
an officer of the Seller to be a true and correct copy of the
assignment submitted for recordation;
(e) an original Title Insurance Policy or, if such
policy has not yet been issued or is otherwise not available, (1) a
written commitment to issue such policy issued by the applicable title
insurance company and an officer's certificate of the related Seller
certifying that all of the requirements specified in such commitment
have been satisfied, (2) a preliminary title report if the related
Mortgaged Property is located in a state in which preliminary title
reports are acceptable evidence of title insurance or (3) a
certificate of an officer of the Seller certifying that a Title
Insurance Policy is in full force and effect as to the related
Mortgage and that such Title Insurance Policy is freely assignable to
and will inure to the benefit of the Trustee (subject to recordation
of the related Assignment of Mortgage);
(f) for each Mortgage Loan identified in the related
Agreement as having in place a Primary Mortgage Insurance Policy, a
Primary Mortgage Insurance Policy or a certificate of primary mortgage
insurance issued by the related Mortgage Insurer or its agent
indicating that such a policy is in effect as to such Mortgage Loan
or, if neither a policy nor a certificate of insurance from the
related Mortgage Insurer is available, a certificate of an officer of
the related Seller certifying that a Primary Mortgage Insurance Policy
is in effect as to such Mortgage Loan;
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(g) each related assumption agreement, modification,
written assurance or substitution agreement, if any; and
(h) proof of the maintenance of a Standard Hazard
Insurance Policy (and a flood insurance policy, if applicable) as to
the related Mortgaged Property.
"Mortgage Loan-to-Value Ratio": As to a Mortgage Loan, the ratio,
expressed as a percentage, borne by the principal amount of such Mortgage Loan
at the time of determination, to (a) the lesser of (1) the sales price of the
related Mortgaged Property (in the case of a purchase money mortgage loan where
the Mortgage Loan-to-Value Ratio is being determined as of origination), or (2)
the appraised value of the related Mortgaged Property, as shown in the
appraisal prepared in connection with the origination of such Mortgage Loan or
(b) the appraised value of the related Mortgaged Property, as shown in an
appraisal made within six months of the date of determination of the Mortgage
Loan-to-Value Ratio, where the Mortgage Loan-to-Value Ratio is being determined
later than origination.
"Mortgage Loan Schedule": For any Series, the list attached to the
related Pooling and Servicing Agreement identifying each Mortgage Loan assigned
thereunder, which list shall (a) identify each Mortgage Loan and (b) set forth
(or describe the method of determining) as to each such Mortgage loan (1) the
Cut-off Date Principal Balance thereof, (2) the amount of each Monthly Payment,
(3) the Mortgage Rate thereof, (4) the original term to maturity thereof, (5)
the date of origination thereof, (6) the original Mortgage Loan-to-Value Ratio
thereof, (7) the state in which the related Mortgaged Property is located, and
(8) any other information as may be reasonably requested by the Trustee prior
to the Closing Date.
"Mortgage Note": A manually executed written instrument evidencing a
Mortgagor's promise to repay a stated sum of money, plus interest, to the
holder of such instrument on or before a specific date according to a schedule
of principal and interest payments.
"Mortgage Rate": With respect to each Mortgage Loan, the interest rate
specified in the related Mortgage Note.
"Mortgaged Property": The mortgaged property securing a Mortgage Loan.
"Mortgagor": The obligor on a Mortgage Note.
"Net Insurance Proceeds": With respect to any Asset, Insurance
Proceeds received with respect thereto net of (a) any Insured Expenses incurred
in connection therewith, (b) all reasonable out-of-pocket expenses incurred by
the Master Servicer in connection with the collection of such Insurance
Proceeds and (c) the amount of any Advances made by the Master Servicer or any
other entity with respect to such Asset and not previously reimbursed to the
Master Servicer or such other entity as of the time of the Master Servicer's
receipt of such Insurance Proceeds. Amounts received by the Master Servicer as
Net Insurance Proceeds will be treated for accounting purposes as payments
received on Assets.
"Net Liquidation Proceeds": With respect to any Asset, the amount of
Liquidation Proceeds received with respect thereto (including any Net Insurance
Proceeds recovered in connection with the liquidation of the related Mortgaged
Property) net of the amount of any Liquidation Expenses incurred and not
previously reimbursed to the Master Servicer or such other entity as of the
time of the liquidation of such Asset. Amounts received by the Master Servicer
as Net Liquidation Proceeds will be treated for accounting purposes as payments
received on Assets.
"Net Rate": As to any Asset, the applicable Asset Rate minus the
Servicing Fee Rate.
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"New Lease": Any lease of REO Property entered into on behalf of the
Trust, including any lease renewed, modified or extended on behalf of the Trust
(if the Trustee, or the Master Servicer or its agent, has the right to
renegotiate the terms of such lease).
"Non-Recoverable Advance": As to any Advance that has not yet been
made, any portion of the amount of such prospective Advance which the Master
Servicer reasonably determines would not ultimately be recoverable from Related
Proceeds. As to any Advance that has been made by the Master Servicer, any
portion of the amount of such Advance that has subsequently been determined by
the Master Servicer to be not ultimately recoverable from Related Proceeds. In
determining whether an Advance is or would be a Non-Recoverable Advance, the
Master Servicer need not take into account the possibility that it might
recover any amounts as the result of a deficiency judgment against the related
Obligor.
"Non-U.S. Person": A foreign person within the meaning of Treasury
regulation Section 1.860G-3(a)(1) (i.e., a person other than (a) a citizen or
resident of the United States, (b) a corporation or partnership that is
organized under the laws of the United States or any jurisdiction thereof or
therein, or (c) an estate or trust that is subject to United States federal
income tax regardless of the source of its income) who would be subject to
United States income tax withholding pursuant to section 1441 or 1442 of the
Code on income derived from a Residual Interest.
"Obligor": The obligor under an Asset.
"Obligor Bankruptcy Loss": With respect to any Distribution Date as to
any Asset that was the subject of a Principal Cramdown during the preceding
Prepayment Period, the related Principal Cramdown Amount.
"Officer": With respect to any corporation, the Chairman of the Board
of Directors, the President, any Vice President or Assistant Vice President,
the Secretary, the Treasurer, or any Assistant Secretary or Assistant Treasurer
of such corporation (or, in the case of the Trustee, any trust officer
thereof); with respect to the Depositor, any Officer of the Depositor; with
respect to any partnership, the designated managing partner, if any, who has
been granted authority by the partnership agreement of such partnership to bind
the partnership by his or her signature, or, in any other case, any general
partner of the partnership; with respect to any bank or trust company acting as
trustee of an express trust or as custodian, any trust officer or authorized
officer thereof.
"Officer's Certificate": For any Person, a certificate that has been
signed on behalf of that Person by an Officer of that Person or any other
individual authorized to execute the certificate.
"Opinion of Counsel": A written opinion of counsel, which counsel is
satisfactory to the Master Servicer and the Trustee. Whenever an Opinion of
Counsel is required hereunder, the renderer of such Opinion may rely on other
Opinions of Counsel. Any Opinion of Counsel relating to tax matters must be an
opinion of Independent counsel.
"Outstanding": (a) With respect to the Certificates, as of any date of
determination, "Outstanding" refers to all Certificates theretofore executed
and delivered under the Pooling and Servicing Agreement except:
(1) Certificates theretofore canceled by the Certificate
Registrar or delivered to the Certificate Registrar for cancellation;
(2) Certificates or portions thereof for which money in
the amount necessary for the making of a final distribution on such
Certificates has been theretofore deposited with the Trustee or any
Paying Agent in trust for the Holders of such Certificates; provided,
that if such Certificates are to be retired because of termination of
the Trust at the option of the Master Servicer, notice of such
optional termination has been duly given pursuant to the Pooling and
Servicing Agreement;
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(3) Certificates in exchange for which other
Certificates have been executed and delivered pursuant to Section 5.04
hereof; and
(4) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued pursuant to
Section 5.07 hereof unless proof satisfactory to the Trustee has been
presented at or before the time that the determination of those
Certificates that are Outstanding is made that any such Certificates
are held by a holder in due course.
(b) With respect to the Assets as of any date, "Outstanding" refers to
Assets with unpaid principal balances greater than zero and that have not
previously been purchased or repurchased pursuant to Section 2.05 hereof or
become Liquidated Loans.
"P&I Advance": As defined in Section 3.04(a) hereof.
"Pass-Through Rate": With respect to any Class of Certificates, the
annual rate at which interest accrues on the Certificates of such Class, which
rate is specified or described for each Class in the related Pooling and
Servicing Agreement.
"Paying Agent": Any Person authorized by the Depositor and the Trustee
to distribute principal or interest on any Certificates on behalf of the
Trustee and appointed pursuant to Section 5.09 hereof.
"Percentage Interest": With respect to a Certificate to which an
initial principal amount is assigned as of the Closing Date, the portion of the
Class of which such Certificate is a part evidenced by such Certificate,
expressed as a percentage, the numerator of which is the denomination
represented by such Certificate and the denominator of which is the initial
Certificate Principal Balance of such Class. With respect to a Certificate to
which an initial principal balance is not assigned as of the Closing Date, the
portion of the Class of which such Certificate is a part evidenced by such
Certificate, expressed as a percentage stated on the face of such Certificate.
"Permitted Encumbrances": In respect of any Mortgaged Property:
(a) the lien of current real property taxes and
assessments not yet due and payable;
(b) covenants, conditions and restrictions, rights of
way, easements and other matters of public record as of the date
of recording acceptable to prudent mortgage lending institutions
generally and specifically referred to in the lender's title
insurance policy delivered to the related originator and referred
to or otherwise considered in the appraisal made for the
originator; and
(c) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of
the security intended to be provided by the Mortgage or the use,
enjoyment, value or marketability of the related Mortgaged
Property.
"Person": Any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"Plan": Any employee benefit plan or retirement arrangement, including
individual retirement accounts and annuities, Keogh plans and collective
investment funds in which such plans, accounts, annuities or arrangements are
invested, that are described in or subject to the Plan Asset Regulations, ERISA
or corresponding provisions of the Code.
"Plan Asset Regulations": The Department of Labor regulations set
forth in 29 C.F.R. ss. 2510.3-101.
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<PAGE> 17
"Plan Investor": A Plan, a Person acting on behalf of a Plan or a
Person using the assets of a Plan.
"Pool Scheduled Principal Balance": For any Series, on any
Distribution Date, the aggregate of the Scheduled Principal Balances,
immediately prior to the beginning of the related Collection Period, of the
related Assets that were Outstanding at the beginning of such Collection
Period, without giving effect to any Principal Prepayments, Net Liquidation
Proceeds or Repurchase Prices received (or Realized Losses incurred) on the day
preceding the beginning of such Collection Period, plus the aggregate of the
principal components of any Monthly Payments that were due at or prior to the
beginning of such Collection Period on such Assets, but which Monthly Payments
were not collected from a related Obligor or advanced by the Master Servicer
and which were not reflected in a corresponding reduction in the aggregate
Certificate Principal Balance of the related Certificates on the related
Distribution Date. The Pool Scheduled Principal Balance as of any date of
determination that is not a Distribution Date shall be the Pool Scheduled
Principal Balance for the next upcoming Distribution Date.
"Pooling and Servicing Agreement": A Pooling and Servicing Agreement
among the Depositor, the Master Servicer and a Trustee, relating to the
issuance of Certificates of a Series, which shall incorporate these Standard
Terms by reference.
"Pooling REMIC": If provided for in a Pooling and Servicing Agreement,
the REMIC consisting primarily of the related Assets.
"Pooling REMIC Regular Interest": A Regular Interest in a Pooling
REMIC.
"Prepayment Period": With respect to each Distribution Date, the
calendar month immediately preceding the calendar month in which such
Distribution Date occurs.
"Primary Mortgage Insurance": The insurance provided under any Primary
Mortgage Insurance Policy.
"Primary Mortgage Insurance Policy": A primary mortgage insurance
policy, if applicable, covering certain conventional Mortgage Loans for which
the initial Mortgage Loan-to-Value Ratios exceeded 80%.
"Principal Cramdown" means, as to any Asset, either (a) a decree by a
bankruptcy court to the effect that the portion of such Asset that is secured
by the underlying Mortgaged Property is less than its Unpaid Principal Balance
due to the fact that the value of such Mortgaged Property is less than such
Unpaid Principal Balance or (b) the permanent forgiveness by a bankruptcy court
of some or all of the Unpaid Principal Balance owed by the related Obligor.
"Principal Cramdown Amount" means, with respect to any Prepayment
Period as to any Asset that has been the subject of a Principal Cramdown, the
amount by which (a) the Unpaid Principal Balance of such Asset exceeds (b) as
applicable, depending upon the type of Principal Cramdown that was applied to
such Asset, either (1) the portion of such Unpaid Principal Balance that
remains secured by the related Mortgaged Property after taking the related
Principal Cramdown into account or (2) the Unpaid Principal Balance after
taking into account the permanent forgiveness of debt ordered by the bankruptcy
court in connection with the related Principal Cramdown.
"Principal Distribution Amount": For any Series, except as otherwise
defined in the related Pooling and Servicing Agreement, on any Distribution
Date other than the Distribution Date that is the Termination Date, the sum of
the following amounts: (a) the sum of the principal components of all Monthly
Payments scheduled to be made on the Due Date occurring during the related
Collection Period on the related Assets that were Outstanding at the opening of
business on such Due Date (regardless of whether such Monthly Payments were
received by the Master Servicer from the related Obligors), not including any
Monthly Payments due on Liquidated Loans or repurchased Assets; (b) the sum of
the amounts of all Principal Prepayments received by the Master Servicer on the
related Assets during the related Prepayment Period; (c) with respect to any
related Asset that became a Liquidated Loan during the related Prepayment
Period, the Scheduled Principal Balance thereof on the date of
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<PAGE> 18
liquidation thereof (determined without giving effect to such liquidation); and
(d) with respect to any related Asset that was purchased or repurchased by the
Master Servicer, the Seller or the Depositor pursuant to Section 2.05 hereof
during the related Prepayment Period, the Scheduled Principal Balance thereof
on the date of purchase or repurchase thereof (determined without giving effect
to such purchase or repurchase).
On the Distribution Date that is the Termination Date, the Pool
Scheduled Principal Balance for such Distribution Date.
"Principal Prepayment": With respect to any Asset, a payment
attributable to principal of such Asset, other than a scheduled principal
payment on such Asset, which may be received (a) from the related Obligor
together with a regular Monthly Payment, (b) from the related Obligor together
with an Early Payment, or (c) in the form of Net Insurance Proceeds received by
the Master Servicer otherwise than as a component of Liquidation Proceeds.
"Private Certificate": Any Class of Certificates of a Series
designated as such in the related Pooling and Servicing Agreement.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"Qualification Defect": With respect to an Asset, (a) a defective
document in the related Asset File, (b) the absence of a document in such Asset
File, or (c) the breach of any representation, warranty, or covenant with
respect to the Asset made by the Depositor, the Seller or the Master Servicer,
but only if, as a result of any of the foregoing, the affected Asset would
cease to qualify as a "qualified mortgage" for purposes of the REMIC
Provisions. With respect to a REMIC Regular Interest or a participation
certificate described in Code section 860G(a)(3), the failure to qualify as a
"qualified mortgage" for purposes of the REMIC Provisions.
"Qualified Bank": Any domestic bank not affiliated with the Seller or
the Depositor (1) having long-term unsecured debt obligations rated in one of
the two highest rating categories (without modifiers) of at least one Rating
Agency (and of any other Rating Agency, if such bank's long-term unsecured debt
obligations are rated by such additional Rating Agency) or short-term unsecured
debt obligations rated in at least one Rating Agency's highest applicable
rating category (and of any other Rating Agency's highest applicable rating
category if such bank's short-term unsecured debt obligations are rated by such
additional Rating Agency), (2) having commercial paper or short-term unsecured
debt obligations rated in at least one Rating Agency's highest applicable
rating category (and in any other Rating Agency's highest applicable rating
category if such bank's commercial paper or short-term unsecured debt
obligations are rated by such additional Rating Agency), or (3) that is
otherwise acceptable to each applicable Rating Agency.
"Qualified Institutional Buyer": Any "qualified institutional buyer"
as defined in clause (a)(1) of Rule 144A.
"Qualified Insurer": Any insurance company or surety or bonding
company licensed to do business and issue insurance in all relevant
jurisdictions (including, in the case of an insurer under a Standard Hazard
Insurance Policy, the jurisdiction in which each Mortgaged Property covered by
such policy is located).
"Qualified Substitute Asset": An Asset substituted by the Depositor or
the Seller for a Replaced Asset which must, on the date of such substitution,
(a) have an Unpaid Principal Balance not greater than (and not more than
$10,000 less than) the Unpaid Principal Balance of the Replaced Asset, (b) have
an Asset Rate not less than (and not more than one percentage point in excess
of) the Asset Rate of the Replaced Asset, (c) have a Net Rate equal to the Net
Rate of the Replaced Asset, (d) have a remaining term to maturity not greater
than (and not more than one year less than) that of the Replaced Asset, (e)
have a Mortgage Loan-to-Value Ratio as of the first day of the month in which
the substitution occurs equal to or less than the Mortgage Loan-to-Value Ratio
of the Replaced Asset as of such date (in each case, using the appraised value
at origination, and after taking into account the Monthly Payment due on such
date), and (f) comply with each representation and warranty set forth in
Section 2.04
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hereof and in the related Sales Agreement. In the event that more than one
Asset is substituted for a Replaced Asset, the amount described in clause (a)
hereof shall be determined on the basis of aggregate Unpaid Principal Balances,
the rates described in clauses (c) (i), (ii), and (iii) hereof shall be
determined on the basis of weighted average Asset Rates and Net Rates, as the
case may be, and the term described in clause (d) hereof shall be determined on
the basis of weighted average remaining terms to maturity, provided that no
Qualified Substitute Asset may have an original term to maturity beyond the
latest original term to maturity of any Asset assigned to the Trust on the
Closing Date. In the case of a Trust for which a REMIC election has been or
will be made, a Qualified Substitute Asset also shall satisfy the following
criteria as of the date of its substitution for a Replaced Asset: (A) the
Obligor shall not be 90 or more days delinquent in payment on the Qualified
Substitute Asset, (B) the Asset File for such Asset shall not contain any
material deficiencies in documentation, and shall include an executed Mortgage
Note, as applicable, and, if it is a Mortgage Loan, a recorded Mortgage; (C)
the Mortgage Loan-to-Value Ratio of the Asset must be 125% or less either (1)
on the date of origination of the Asset, or, if any of the terms of such Asset
were modified other than in connection with a default or imminent default on
such Asset, on the date of such modification, or (2) on the date of the
substitution, based on an appraisal conducted within the 60 day period prior to
the date of the substitution; (D) no property securing such Asset may be
subject to foreclosure, bankruptcy, or insolvency proceedings; and (E) such
Asset, if a Mortgage Loan, must be secured by a valid first lien on the related
Mortgaged Property.
"Rating Agency": As to any Series, any nationally recognized
statistical rating agency, or its successor, that on the Closing Date rated one
or more Classes of the Certificates of such Series at the request of the
Depositor. If such agency or a successor is no longer in existence, "Rating
Agency" shall be such nationally recognized statistical rating agency, or other
comparable Person, designated by the Depositor, notice of which designation
shall be given to the Trustee and the Master Servicer. References herein to any
rating category of a Rating Agency shall mean such rating category without
regard to any plus or minus or numerical designation.
"Realized Interest Loss": A shortfall in interest resulting from the
receipt of Liquidation Proceeds in respect of a Mortgage Loan in an amount that
is insufficient to pay accrued and unpaid interest thereon.
"Realized Loss": Either (a) with respect to any Liquidated Loan, (1)
the Unpaid Principal Balance of the Liquidated Loan, plus accrued and unpaid
interest on such Liquidated Loan, plus amounts reimbursable to the Master
Servicer for previously unreimbursed Servicing Advances, minus (2) Net
Liquidation Proceeds collected in respect of the Liquidated Loan or (b) with
respect to any Asset that has been the subject of a Principal Cramdown, an
Obligor Bankruptcy Loss with respect to such Asset.
"Record Date": With respect to each Distribution Date, the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Recordation Report": A report substantially in the form of Exhibit 2
hereto provided by the Trustee (or the Custodian) pursuant to Section
2.02(c)(5) hereof identifying those Mortgage Loans for which a Mortgage or an
Assignment remains unrecorded.
"Regular Certificate": A Certificate other than a Residual Certificate
and that is a Regular Interest in a REMIC or a combination of Regular Interests
in a REMIC.
"Regular Interests": Interests in a REMIC that are designated as
"regular interests" under the REMIC Provisions.
"Regulations": The regulations promulgated under the Code by the
Treasury.
"Related Proceeds": As defined in Section 3.04(c) hereof.
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"REMIC": A "real estate mortgage investment conduit," within the
meaning of the REMIC Provisions. As to a particular Trust, those assets of the
Trust as to which an election is to be made to be treated as a "real estate
mortgage investment conduit," within the meaning of section 860D of the Code. A
REMIC generally is an elective entity for federal income tax purposes that
consists of a fixed pool of qualifying assets in which investors hold multiple
classes of interests. In order to be treated as a REMIC, such pool will be
required to meet ongoing qualification requirements provided by the Code,
Regulations, and binding pronouncements of the Internal Revenue Service, as in
effect from time to time.
"REMIC Loan-to-Value Ratio": The quotient, expressed as a percentage,
obtained by dividing (a) the original unpaid principal balance of an Asset,
plus the full amount of any other indebtedness secured by the related Mortgaged
Property which is senior to, or pari passu with, such Asset by (b) the sale
price of the Mortgaged Property that secures such Asset. Alternatively, the
REMIC Loan-to-Value Ratio may be determined by dividing (a) the unpaid
principal balance of an Asset as of the Startup Day plus the full amount of any
other indebtedness secured by the related Mortgaged Property which is senior
to, or pari passu with, such Asset by (b) the fair market value of the
Mortgaged Property that secures such Asset on the Startup Day.
"REMIC Provisions": Provisions of the Code relating to real estate
mortgage investment conduits, which appear at sections 860A through 860G of the
Code, related Code provisions, and Regulations (whether in proposed, temporary
or final form), announcements and rulings thereunder, as the foregoing may be
in effect from time to time.
"Remittance Amount": With respect to any Remittance Date and related
Distribution Date, the sum of the following amounts:
(a) the Monthly Payment that was due on each Outstanding
Asset on the Due Date occurring in the related Collection Period and
that was received by the Master Servicer from the related Obligor;
(b) all amounts received during the related Collection Period
in respect of any Asset that was Outstanding at the beginning of the
related Collection Period representing late payments of principal and
interest due on such Asset prior to the Due Date occurring in the
related Collection Period, to the extent such amounts exceed
outstanding unreimbursed P&I Advances made by the Master Servicer with
respect to such Asset;
(c) each Principal Prepayment (whether full or partial) of
any Asset that was Outstanding at the beginning of the related
Prepayment Period received by the Master Servicer during the related
Prepayment Period;
(d) any amounts received by the Master Servicer during the
related Prepayment Period as Net Liquidation Proceeds with respect to
any Asset that was Outstanding at the beginning of the related
Prepayment Period (net of outstanding unreimbursed P&I Advances made
by the Master Servicer with respect to such Asset); and
(e) all amounts deposited into the Certificate Account during
the related Prepayment Period as a result of any purchase or
repurchase of any Asset pursuant to Section 2.05 hereof (net of
outstanding unreimbursed P&I Advances made by the Master Servicer with
respect to such Asset).
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"Remittance Date": The Business Day preceding each Distribution Date,
which is the date by which funds must be remitted by the Master Servicer from
the Certificate Account to the Distribution Account or, if the Certificate
Account is maintained by the Trustee, the date on which the Master Servicer is
to notify the Trustee of the related Remittance Amount, in either case pursuant
to Section 3.07(b) hereof.
"Remittance Report": As defined in Section 4.01 hereof.
"Rents From Real Property": With respect to any REO Property, gross
income of the character described in Code section 856(d) and Treasury
regulations thereunder.
"REO Property": A Mortgaged Property acquired by the Master Servicer
on behalf of the Certificateholders through foreclosure or deed-in-lieu of
foreclosure, as further described in Section 3.09 hereof.
"REO Property Disposition": The receipt by the Master Servicer of
Insurance Proceeds and other payments and recoveries (including Liquidation
Proceeds) which the Master Servicer recovers from the sale or other disposition
of an REO Property.
"Replaced Asset": An Asset replaced or to be replaced by a Qualified
Substitute Asset.
"Repurchase Price": With respect to any Asset to be purchased or
repurchased pursuant to Section 2.04 hereof, an amount equal to the Unpaid
Principal Balance of such Asset as of the close of business on the date of such
purchase or repurchase, together with all accrued and unpaid interest thereon
to the end of the Collection Period in which such purchase or repurchase
occurs.
"Repurchaser": Any Person that repurchases or purchases an Asset from
the Trust pursuant to Section 2.05 hereof.
"Request for Release": A release signed by an Officer of the Master
Servicer in the form attached hereto as Exhibit 3.
"Reserve Fund": Any fund designated as a "Reserve Fund" in a Pooling
and Servicing Agreement.
"Residual Certificate": Any one of the Classes of Certificates of a
Series designated as such in the related Pooling and Servicing Agreement.
"Residual Interest": An interest in a REMIC that is designated as a
"residual interest" under the REMIC Provisions.
"Residual Majority": At any time, the Holders of a majority (by
Percentage Interests) of the Residual Certificates.
"Residual Transferee Agreement": A certification and agreement
required to be executed and delivered by the prospective transferee of a
Residual Certificate pursuant to Section 5.05(c) hereof, which must be
substantially in the form of Exhibit 7 hereto.
"RESPA": The Real Estate Settlement Procedures Act of 1974, as
amended.
"Rule 144A": Rule 144A promulgated by the Securities and Exchange
Commission, as the same may be amended from time to time.
"Rule 144A Agreement": An agreement substantially in the form of
Exhibit 4 hereto.
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"Rule 144A Certificates": Any Class of Certificates of a Series
designated as such in the related Pooling and Servicing Agreement.
"Sales Agreement": A Sales Agreement pursuant to which the Seller
sells Mortgage Loans to the Depositor for inclusion in a Trust.
"Scheduled Principal Balance": As of any date of determination with
respect to any Mortgage Loan or REO Property, (a) the Cut-off Date Principal
Balance of such Mortgage Loan (or of the related Mortgage Loan, in the case of
a REO Property) minus (b) the sum of (1) the principal components of any
Monthly Payments due on such Mortgage Loan (or on the related Mortgage Loan, in
the case of a REO Property) after the related Cut-off Date and on or before
such date of determination (regardless of whether such Monthly Payments were
received from the related Obligor) plus (2) all principal prepayments received
by the Master Servicer on such Mortgage Loan (or on the related Mortgage Loan,
in the case of a REO Property) (including the principal portion of Net
Liquidation Proceeds and the principal portion of all amounts paid by the
Seller or another party to repurchase such Mortgage Loan) on or after the
Cut-off Date and on or prior to the end of the Prepayment Period preceding the
date of determination, plus (3) all Realized Losses incurred on such Mortgage
Loan (or the related Mortgage Loan, in the case of a REO Property) on or after
the Cut-off Date and on or prior to such date of determination.
"Securities Act": The Securities Act of 1933, as amended.
"Seller": As to any Asset included in the Trust Estate for a Series,
the entity that sold such Asset to the Depositor under a Sales Agreement, which
will be ____________________ unless otherwise specified in the related Pooling
and Servicing Agreement. For purposes of the definitions of "Mortgage Loan
Documents" herein, documents (including, without limitation, assignments and
endorsements) indicating assignment or endorsement to, or the existence of a
security interest in, a name that is a registered trade name of the Seller in
the relevant jurisdiction shall satisfy any requirement of these Standard Terms
that such documents reflect the name of the "Seller."
"Series": A separate Series of Certificates issued pursuant to a
Pooling and Servicing Agreement, which Series may, as provided therein, be
divided into two or more Classes.
"Servicing Account": As defined in Section 3.05 hereof.
"Servicing Advances": Advances required to be made by the Master
Servicer as described in Section 3.04(b) hereof, including, but not limited to,
advances for the payment of personal property taxes, real estate taxes and
premiums for Standard Hazard Insurance Policies.
"Servicing Fee": On each Distribution Date for each Asset, the product
obtained by multiplying (a) one-twelfth of the Servicing Fee Rate by (b) the
Scheduled Principal Balance of such Asset immediately prior to the preceding
Collection Period (without giving effect to any Principal Prepayments, Net
Liquidation Proceeds and Repurchase Prices received (or Realized Losses
incurred) on the day preceding the beginning of such Collection Period).
"Servicing Fee Rate": A per annum rate, to be specified in each
Pooling and Servicing Agreement.
"Shortfall": Due Date Interest Shortfall and Soldiers' and Sailors'
Shortfall.
"Soldiers' and Sailors' Shortfall": Interest losses on a Mortgage Loan
resulting from application of the Soldiers' and Sailors' Civil Relief Act of
1940.
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"Special Hazard Insurance Policy": An insurance policy covering a
Mortgage Loan against loss by reason of fire, lightning, explosion, smoke,
windstorm, hail, riot, strike and civil commotion.
"Special Hazard Loss": A loss incurred on a Mortgage Loan attributable
to physical damage to the related Mortgaged Property of a type which is not
covered by standard hazard insurance policies, excluding losses caused by war,
nuclear reaction, nuclear or atomic weapons, insurrection or normal wear and
tear.
"Special Tax Consent": The written consent of the Holder of a Residual
Certificate to any tax (or risk thereof) arising out of a proposed transaction
or activity that may be imposed upon such Holder or that may affect adversely
the value of such Holder's Residual Certificate.
"Special Tax Opinion": An Opinion of Counsel that a proposed
transaction or activity will not (a) affect adversely the status of the REMIC
as a REMIC or the related Regular Certificates as the regular interests
therein, (b) affect the timing or amount of distributions of interest or
principal on such Regular Certificates, or (c) result in the encumbrance of the
Assets by a tax lien.
"Standard Hazard Insurance Policy": With respect to each Asset, the
policy of fire and extended coverage insurance (and any federal flood
insurance, if applicable) required to be maintained for the related Mortgaged
Property, as provided herein, which may be a blanket mortgage impairment policy
maintained by the Servicer in accordance with the terms and conditions of the
Pooling and Servicing Agreement.
"Standard Terms": These Standard Terms to Pooling and Servicing
Agreement and all exhibits, schedules and appendices hereto, as amended and
supplemented from time to time.
"Startup Day": The Startup Day (within the meaning of Code section
860G(a)(9)) is the Closing Date.
"Tax Matters Person": The Person or Persons designated from time to
time hereunder to act as tax matters person (within the meaning of the REMIC
Provisions) of the REMIC.
"Terminating Purchase": The purchase of all Mortgage Loans and each
REO Property owned by a Trust pursuant to Section 9.01 hereof.
"Termination Account": An escrow account maintained by the Trustee
into which any Trust funds not distributed on the Distribution Date on which
the earlier of (a) a Terminating Purchase or (b) the final payment or other
liquidation of the last Asset remaining in the Trust or the disposition of the
last REO Property remaining in the Trust is made are deposited. The Termination
Account shall be an Eligible Account.
"Termination Date": Any Distribution Date fixed for termination of the
Trust pursuant to the provisions of Sections 9.01 and 9.02 hereof.
"Termination Price": With respect to any Terminating Purchase, the
greater of (1) the sum of (a) any Liquidation Expenses incurred by the Master
Servicer in respect of any Asset that has not yet been liquidated, (b) all
amounts required to be reimbursed or paid to the Master Servicer in respect of
previously unreimbursed Servicing Advances, plus (c) the sum of (i) 100% of the
aggregate of the Unpaid Principal Balance of each Asset remaining in the Trust
on the day of such purchase, plus accrued interest thereon at the related Asset
Rate through the end of the Interest Accrual Period relating to the Termination
Date, plus (ii) the lesser of (A) the aggregate of the Unpaid Principal
Balances of each Asset relating to any REO Property remaining in the Trust,
plus accrued interest thereon at the related Asset Rate through the end of the
Interest Accrual Period related to the Termination Date and (B) the current
appraised value of any such REO Property (net of Liquidation Expenses to be
incurred in connection with the disposition of such REO Property, estimated in
good faith by the Master Servicer), such appraisal to be conducted by an
appraiser mutually agreed upon by the Master Servicer and the Trustee, plus all
previously umreimbursed P&I Advances made in respect of such REO Property and
(2) the aggregate fair market
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value of all of the assets of the Trust (as determined by the Master Servicer
as of the close of business on the third Business Day preceding the date upon
which notice of any such purchase is furnished to Certificateholders pursuant
to Section 9.01(c) hereof), plus all previously unreimbursed P&I Advances made
with respect to the Assets. The fair market value of the assets of the Trust
shall be deemed to include accrued interest through the end of the Interest
Accrual Period related to the Termination Date at the applicable Asset Rate on
the unpaid principal balance of each Asset (including any Asset that became a
REO Property, which REO Property has not yet been disposed of by the Master
Servicer). The basis for any such valuation shall be furnished by the Master
Servicer to the Certificateholders upon request.
"Terminator": The Person making a Terminating Purchase or causing such
Terminating Purchase to be made.
"TIN": Taxpayer identification number.
"Title Insurance Policy": For any Mortgage Loan, an American Land
Title Association mortgagee's mortgage loan title policy form 1970, or other
form of mortgagee's title insurance acceptable to Fannie Mae or Freddie Mac for
the jurisdiction in which the subject property is located, including all riders
and endorsements thereto, insuring that the related Mortgage creates a valid
first lien on the underlying Mortgaged Property subject only to Permitted
Encumbrances.
"Transferee Agreement": An agreement substantially in the form of
Exhibit 5 hereto.
"Treasury": The United States Department of the Treasury.
"Trust": The trust created pursuant to the terms of a Pooling and
Servicing Agreement.
"Trust Estate": The segregated pool of assets sold and assigned to a
Trustee by the Depositor pursuant to the conveyance clause of any Pooling and
Servicing Agreement.
"Trustee": The bank or trust company identified as the trustee under
any Pooling and Servicing Agreement.
"Trustee Mortgage Loan File": As to each Mortgage Loan, a file
containing all of the related Mortgage Loan Documents.
"UCC": The Uniform Commercial Code as in effect in any relevant
jurisdiction.
"Unpaid Principal Balance": With respect to any Asset, the outstanding
principal balance payable by the related Obligor pursuant to the terms of such
Asset.
"U.S. Person": A Person other than a Non-U.S. Person.
"USAP": As defined in Section 3.12 hereof.
"VA": The United States Department of Veterans Affairs.
"VA Asset": An Asset guaranteed in whole or in part by the VA.
"VA Guaranty": As to any VA Asset, VA's full or partial guaranty of
payment of amounts due thereunder.
"Voting Rights": With respect to any Certificate, the portion of the
voting rights of all of the Certificates of the related Series which is
allocated to such Certificate. Unless otherwise provided in the related Pooling
and
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Servicing Agreement, (a) if any Class of Certificates does not have a
Certificate Principal Balance or has an initial Certificate Principal Balance
that is less than or equal to 1% of the aggregate Certificate Principal Balance
of all the Certificates of its Series, then 1% of the Voting Rights for such
Series shall be allocated to each such Class, and the balance of the Voting
Rights for such Series shall be allocated among the remaining Classes of
Certificates of such Series in proportion to their respective Certificate
Principal Balances following the most recent Distribution Date, and (b) if no
Class of Certificates of such Series has an initial Certificate Principal
Balance less than 1% of the aggregate Certificate Principal Balance of all
Certificates of such Series, then all of the Voting Rights for such Series
shall be allocated among all the Classes of Certificates of such Series in
proportion to their respective Certificate Principal Balances following the
most recent Distribution Date. Voting Rights allocated to each Class of
Certificates shall be allocated among the Certificates of such Class in
proportion to the respective Percentage Interests of the Holders thereof.
"Withholding Agent": The Trustee or its designated Paying Agent or
other Person who is liable to withhold federal income tax from a distribution
on a Residual Certificate under sections 1441 or 1442 of the Code and the
Regulations promulgated thereunder.
SECTION 1.02. INTEREST CALCULATIONS.
Unless otherwise specified, all calculations described herein shall be
made on the basis of a 360-day year consisting of twelve 30-day months.
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ARTICLE II
THE ASSETS
SECTION 2.01. ASSIGNMENT OF ASSETS.
Pursuant to a Pooling and Servicing Agreement, the Depositor has sold
to the Trustee without recourse all the right, title and interest of the
Depositor in and to the Assets identified in such Pooling and Servicing
Agreement, any and all rights, privileges and benefits accruing to the
Depositor under the Sales Agreement(s) with respect to such Assets (except any
rights of the Depositor to fees payable by the Seller under such Sales
Agreement and provided that the Depositor shall retain its rights to
indemnification from the Seller under such Sales Agreement, but shall also
convey rights to such indemnification to the Trustee as its assignee),
including the rights and remedies with respect to the enforcement of any and
all representations, warranties and covenants under such Sales Agreements and
assets included or to be included in the related Trust for the benefit of the
related Certificateholders as set forth in the conveyance clause of the related
Pooling and Servicing Agreement. Such assignment includes all of the
Depositor's rights to payments due with respect to the Assets after the Cut-off
Date.
SECTION 2.02. THE MORTGAGE LOANS.
(a) Custody of Trustee Mortgage Loan Files. In connection with
the transfer and assignment of the Mortgage Loans from the Depositor to the
Trustee, the Depositor shall deliver, or cause to be delivered, to the Trustee
or its Custodian on or before the Closing Date, a Trustee Mortgage Loan File
containing each of the documents listed in the definition thereof. If any
Mortgage or an Assignment of a Mortgage to the Trustee or any prior Assignment
is in the process of being recorded on the Closing Date, the Depositor shall
cause each such original recorded document or certified copy thereof, to be
delivered to the Trustee or its Custodian promptly following its recordation.
The Depositor shall also cause to be delivered to the Trustee any other
original Mortgage Loan Document to be included in the Trustee Mortgage Loan
File if a copy thereof initially was delivered.
In lieu of recording an Assignment of any Mortgage for any Mortgage
Loan, the Depositor may deliver or cause to be delivered to the Trustee or its
Custodian the Assignment of the Mortgage from the Seller to the Trustee in a
form suitable for recordation, together with an Opinion of Counsel to the
effect that recording is not required to protect the Trustee's right, title and
interest in and to the related Mortgage Loan or, in case a court should
recharacterize the sale of the Mortgage Loans as a financing, to perfect a
first priority security interest in favor of the Trustee in the related
Mortgage Loan. In the event that the Master Servicer receives notice that
recording is required to protect the right, title and interest of the Trustee
in and to any such Mortgage Loan for which recordation of an Assignment has not
previously been required, the Master Servicer shall promptly notify the Trustee
and the Trustee shall within five Business Days of its receipt of such notice
deliver, or cause to be delivered, each previously unrecorded Assignment to the
Master Servicer for recordation.
By its execution of the Pooling and Servicing Agreement for a Series,
the Trustee acknowledges and declares that it or the Custodian holds and will
hold or has agreed to hold all documents delivered to it from time to time with
respect to a Mortgage Loan underlying such Series and all other assets
delivered to it or its Custodian and that are included in the definition of
"Trust Estate" in the related Pooling and Servicing Agreement in trust for the
exclusive use and benefit of all present and future Certificateholders.
(b) Custody of Master Servicer Mortgage Loan Files. The Master
Servicer has in its possession a Master Servicer Mortgage Loan File for each
Mortgage Loan containing each of the documents listed in the definition
thereof. All such documents shall be held by the Master Servicer in trust for
the benefit of the Trustee on behalf of the Certificateholders.
(c) Review of Trustee Mortgage Loan Files.
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(1) Initial Certification. The Trustee shall, for the benefit of the
Certificateholders for any Series, review each related Trustee Mortgage Loan
File prior to the related Closing Date to ascertain that all documents required
to be included in the Trustee Mortgage Loan File are included therein, and
shall deliver to the Depositor and the Master Servicer on such Closing Date an
Initial Certification with respect to each underlying Mortgage Loan (except any
Mortgage Loan that has been liquidated or purchased from the related Trust
prior to such Closing Date) to the effect that, except as specifically noted on
a schedule of exceptions thereto, (A) all documents required to be contained in
the Trustee Mortgage Loan File are in its possession, (B) such documents have
been reviewed by it and appear regular on their face and relate to such
Mortgage Loan, and (C) based on its examination and only as to the foregoing
documents, the information set forth on the related Mortgage Loan Schedule
accurately reflects information set forth in the Trustee Mortgage Loan File.
It is understood that before making the Initial Certification for any
Series, the Trustee shall examine the related Mortgage Loan Documents to
confirm that:
(A) each Mortgage Note and Mortgage bears an original
signature or signatures purporting to be that of the Person or Persons
named as the maker and mortgagor/trustor or, if photocopies are
permitted, that such copies bear a reproduction of such signature or
signatures;
(B) except for the endorsement to the Trustee, neither
the Mortgage nor any Assignment, on the face or the reverse side(s)
thereof, contain evidence of any unsatisfied claims, liens, security
interests, encumbrances or restrictions on transfer;
(C) the principal amount of the indebtedness secured by
the related Mortgage is identical to the original principal amount of
the related Mortgage Note;
(D) the Assignment of the related Mortgage from the
Seller to the Trustee is in the form required pursuant to clause (c) of
the definition of Trustee Mortgage Loan File, and bears an original
signature of the Seller and any other necessary party (or signatures
purporting to be that of the Seller and any such other party) or, if
photocopies are permitted, that such copies bear a reproduction of such
signature or signatures;
(E) if intervening Assignments are included in the
Trustee Mortgage Loan File, each such intervening Assignment bears an
original signature of the related mortgagee and/or the assignee (and
any other necessary party) (or signatures purporting to be that of the
Seller and any such other party) or, if photocopies are permitted, that
such copies bear a reproduction of such signature or signatures;
(F) if either a Title Insurance Policy, a preliminary
title report or a written commitment to issue a Title Insurance Policy
is delivered, the address of the real property set forth in such
policy, report or written commitment is identical to the real property
address contained in the related Mortgage; and
(G) if any of a Title Insurance Policy, certificate of
title insurance or a written commitment to issue a Title Insurance
Policy is delivered, such policy, certificate or written commitment is
for an amount not less than the original principal amount of the
related Mortgage Note and such Title Insurance Policy insures that the
related Mortgage creates a first lien, senior in priority to all other
deeds of trust, mortgages, deeds to secure debt, financing statements
and security agreements and to any mechanics' liens, judgment liens or
writs of attachment (or if the Title Insurance Policy or certificate of
title insurance has not been issued, the written commitment
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for such insurance obligates the insurer to issue such policy
for an amount not less than the original principal amount of
the related Mortgage Note).
(2) Final Certification. Prior to the first anniversary date
of the Closing Date for a Series, the Trustee shall deliver to the
Depositor and the Master Servicer a Final Certification evidencing the
completeness of the Trustee Mortgage Loan File for each Mortgage Loan,
with any applicable exceptions noted on such Final Certification.
(3) Certifications Generally. In giving each of the Initial
Certification and the Final Certification with respect to a Series,
the Trustee shall be under no duty or obligation (A) to inspect,
review or examine any such documents, instruments, securities or other
papers to determine that they or the signatures thereon are genuine,
enforceable, or appropriate for the represented purpose or that they
have actually been recorded or that they are other than what they
purport to be on their face or (B) to determine whether any Trustee
Mortgage Loan File should include any assumption agreement,
modification agreement, written assurance or substitution agreement.
(4) Recordation Report. No later than the fifth Business Day
of each third month, commencing the fourth month following the month
in which the Closing Date for a Series occurs, the Trustee shall
deliver to the Master Servicer a Recordation Report for such Series,
dated as of the first day of such month, identifying those Mortgage
Loans underlying such Series for which it has not yet received (A) an
original recorded Mortgage or a copy thereof certified to be true and
correct by the public recording office in possession of such Mortgage
or (B) an original recorded Assignment of the Mortgage to the Trustee
and any required intervening Assignments or a copy thereof certified
to be a true and correct copy by the public recording office in
possession of such Assignment; provided, however, that the Trustee
shall not be required to provide a Recordation Report with respect to
the recordation of an Assignment for any Mortgage Loan for which there
has been delivered an Assignment in recordable form pursuant to
Section 2.02(a) hereof unless the Trustee has delivered such
Assignment to the Master Servicer for recordation, in which case, the
Trustee shall deliver a Recordation Report as to the status of such
Assignment in accordance with this paragraph commencing in the fourth
month following the delivery of such Assignment to the Master Servicer
for recordation.
(5) Custodians. In lieu of taking possession of the Trustee
Mortgage Loan Files and reviewing such files itself, the Trustee may,
in accordance with Section 8.11 hereof, appoint one or more Custodians
to hold the Trustee Mortgage Loan Files for a Series on its behalf and
to review them as provided in this Section 2.02. The Depositor shall,
upon notice of the appointment of a Custodian, deliver or cause to be
delivered all documents to the Custodian that would otherwise be
deliverable to the Trustee. In such event, the Trustee shall obtain
from each such Custodian, within the specified times, the Initial and
Final Certifications and the Recordation Reports with respect to those
Mortgage Loans held and reviewed by such Custodian and may deliver
such Certifications and Reports to the Depositor and the Master
Servicer in satisfaction of the Trustee's obligation to prepare such
Certification and Reports. The Trustee shall notify the Custodian of
any notices delivered to the Trustee with respect to those Trustee
Mortgage Loan Files.
(d) Recordation with Respect to Mortgage Loans. Notwithstanding
any provisions in these Standard Terms to the contrary, the Company shall cause
Assignments of Mortgages to the Trustee to be prepared and recorded with
respect to all Mortgages not later than one-hundred twenty (120) calendar days
following the Closing Date, which recordation shall be an expense of the
Company. For each Mortgage for which an Assignment of Mortgage is not duly and
timely recorded as provided above, the Company shall repurchase such Mortgage
pursuant to the provisions of 2.06 hereof. As evidence of recordation, the
Trustee shall be entitled to rely upon, among other things, (i) a certification
from a title insurance company, (ii) an Opinion of Counsel, (iii) a recorded
Assignment or (iv) a clerk's receipt as to the recordation of any or all of the
Assignments.
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SECTION 2.03. REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE.
As of the Closing Date, the Trustee represents and warrants that (1)
it acquired the Assets on behalf of the Trust from the Depositor in good faith,
for value, and without notice or knowledge of any adverse claim, lien, charge,
encumbrance or security interest (including, without limitation, federal tax
liens or liens arising under ERISA), (2) except as permitted in the related
Pooling and Servicing Agreement and these Standard Terms, it has not and will
not, in any capacity, assert any claim or interest in the Assets, and (3) it
has not encumbered or transferred its right, title or interest in the Assets.
The representation and warranty made in clause (1) above with respect to the
absence of any adverse claim, lien, charge, encumbrance or security interest is
made by the Trustee without any independent investigation and without recourse
or warranty, except that the Trustee believes such representation and warranty
to be true.
SECTION 2.04. REPRESENTATIONS AND WARRANTIES AS TO ASSETS.
The Depositor represents and warrants to the Trustee, effective as of
the Closing Date, that the following information is true and correct in all
material respects:
(a) The information pertaining to each Asset set forth in the
Asset Schedule was true and correct at the date or dates respecting which such
information was furnished.
(b) The Depositor is the owner of, or holder of a perfected first
priority security interest in, each Asset.
(c) The Depositor acquired its ownership of, or security interest
in, each such Asset in good faith without notice of any adverse claim.
(d) Except for the sale to the Trustee, the Depositor has not
assigned any interest or participation in each such Asset (or, if any such
interest or participation has been assigned, it has been released).
(e) The Depositor has full right to sell the Trust Estate to the
Trustee.
It is understood and agreed that the representations and warranties
set forth in this Section 2.04 shall survive delivery of the respective Trustee
Mortgage Loan Files to the Trustee or its Custodian and shall inure to the
benefit of the Trustee notwithstanding any restrictive or qualified endorsement
or assignment. Upon the discovery by the Depositor, the Master Servicer or the
Trustee of a breach of any of the foregoing representations and warranties, the
party discovering such breach shall give prompt written notice to the other
parties to the Pooling and Servicing Agreement. It is understood and agreed
that the obligations of the Depositor set forth in Section 2.05 to cure,
substitute for or repurchase an Asset constitute the sole remedies available to
the Certificateholders or to the Trustee on their behalf respecting a breach of
the representations and warranties contained in this Section 2.04. It is
further understood and agreed that the Depositor shall be deemed not to have
made the representations and warranties in this Section 2.04 with respect to,
and to the extent of, representations and warranties made, as to the matters
covered in this Section 2.04, by the Seller in the related Sales Agreement
assigned to the Trustee.
SECTION 2.05. PURCHASE OR SUBSTITUTION OF CERTAIN ASSETS.
(a) Breaches of Representations and Warranties and Incomplete or
Defective Asset Files.
(1) Seller Breach. Upon discovery or receipt of notice of any
defective document in an Asset File, or of any breach by the Seller of
any representation, warranty or covenant hereunder or under the Sales
Agreement, which defect or breach materially and adversely affects the
value of any Asset or the interest of the Trust therein (it being
understood that any such defect or breach shall be deemed to have
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materially and adversely affected the value of the related Asset or
the interest of the Trust therein if the Trust incurs a loss as a
result of such defect or breach), the Trustee shall promptly notify
the Master Servicer of such defect or breach and direct the Master
Servicer to request the Seller of such Asset to cure such defect or
breach. The Seller must cure such defect or breach, or purchase such
Asset from the Trustee on behalf of the Certificateholders, within 90
days after the date on which the Seller was notified of such defect or
breach. In lieu of purchasing any such Asset as provided above, if so
provided in the related Sales Agreement, the Seller may cause such
Asset to be removed from the Trust (in which case it shall become a
Replaced Asset) and substitute one or more Qualified Substitute Assets
in the manner and subject to the limitations set forth in Section
2.05(g) below. Notwithstanding the foregoing, however, if such breach
is a Qualification Defect and one or more REMIC elections have been
made with respect to the related Trust, such cure, purchase or
substitution must take place within 75 days of the Defect Discovery
Date. It is understood and agreed that enforcement of the obligation
of the Seller to cure or to purchase (or to substitute for) any Asset
as to which a material defect in a constituent document exists or as
to which such a breach has occurred and is continuing, in addition to
the obligation of the Seller to indemnify the Depositor and its
assignees (including the Trust) for any losses and damages incurred in
respect of any such breach or defect, shall constitute the sole remedy
respecting such defect or breach available to the Trustee on behalf of
the Certificateholders. The Master Servicer shall use its best efforts
to enforce the Seller's obligations under its Sales Agreement to
repurchase or substitute for Assets affected by breaches of the
Seller's representations and warranties contained in its Sales
Agreement, and to enforce the Seller's obligations to indemnify the
Trust (as the assignee of the Depositor under the Sales Agreement) for
any losses or damages it incurs as a result of breaches of the
Seller's representations and warranties contained in its Sales
Agreement.
(2) Master Servicer Breach. In addition to taking any action
required pursuant to Section 7.01 hereof, upon discovery or notice of
any breach by the Master Servicer of any representation, warranty or
covenant hereunder not covered by Section 2.05(a)(1) above which
materially and adversely affects the value of any Asset or the
interest of the Trust therein (it being understood that any such
defect or breach shall be deemed to have materially and adversely
affected the value of the related Asset or the interest of the Trust
therein if the Trust incurs a loss as a result of such defect or
breach), the Trustee promptly shall notify the Master Servicer of such
breach. Upon receipt of such notification, the Master Servicer shall
cure such breach or shall purchase such Asset from the Trustee within
90 days after the date on which the Master Servicer was notified of
such breach. Notwithstanding the foregoing, however, if such breach is
a Qualification Defect and one or more REMIC elections have been made
with respect to the related Trust, such cure or purchase must take
place within 75 days of the Defect Discovery Date.
In the event the Seller has breached a representation or
warranty under its Sales Agreement that is substantially identical to
a representation or warranty breached by the Master Servicer, the
Master Servicer shall first proceed against the Seller. If the Seller
does not within 60 days after notification of the breach, take steps
to cure such breach or purchase or substitute for the Mortgage Loan,
the Master Servicer shall cure such breach or purchase the Mortgage
Loan from the Trust as provided in this Section 2.05(a)(2).
(3) Depositor Breach. Within 90 days after the earlier of
discovery or receipt of notice by the Depositor of the breach of any
of its representations or warranties set forth in Section 2.04 above
with respect to any Asset, which breach materially and adversely
affects the value of the Asset or the interest of the Trust therein
(it being understood that any such breach shall be deemed to have
materially and adversely affected the value of the related Asset or
the interest of the Trust therein if the Trust incurs a loss as a
result of such defect or breach), the Depositor shall (i) cure such
breach in all material respects, (ii) purchase the Asset from the
Trustee, or (iii) remove such Asset from the Trust (in which case it
shall become a Replaced Asset) and substitute one or more Qualified
Substitute Assets in the manner and subject to the limitations set
forth in Section 2.05(g) below. Notwithstanding the foregoing,
however, if such
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breach is a Qualification Defect and one or more REMIC elections have
been made with respect to the related Trust, such cure, purchase or
substitution must take place within 75 days of the Defect Discovery
Date.
(b) Assignment Failure. If an Assignment to the Trustee of the
Seller's interest in a Mortgage securing a Mortgage Loan has not been recorded
within one year after the Closing Date for the related Series of Certificates
(or in the case of Mortgage Loans for which recordation of an Assignment was
initially waived but subsequently required pursuant to Section 2.02(a) hereof,
within one year after the Trustee's delivery of the Assignment to the Master
Servicer for recordation), the Master Servicer shall either (1) purchase the
related Mortgage Loan from the Trustee or (2) if there have been no defaults in
the Monthly Payments on such Mortgage Loan, deposit an amount equal to the
Repurchase Price therefor into an escrow account maintained by the Trustee
(which account shall not be an asset of the Trust or any REMIC), or shall
enforce the related Seller's obligation under its Sales Agreement to make such
purchase or deposit. Any such amounts deposited to an escrow account, plus any
earnings thereon, shall (A) be released to the Master Servicer or Seller, as
the case may be, upon receipt by the Trustee of satisfactory evidence that the
Assignment has been recorded in the name of the Trustee or (B) be applied to
purchase the related Mortgage Loan in the event that the Master Servicer
notifies the Trustee that there has been a default thereon. Any amounts in the
escrow account may be invested in Eligible Investments at the written direction
of the Master Servicer.
(c) Converted Loans. Upon receipt of written notice from the
Master Servicer of the conversion of any Adjustable Rate Asset to a Converted
Loan, the Trustee shall direct the Master Servicer to enforce the related
Seller's obligation set forth in its Sales Agreement to purchase such Converted
Loan from the Trustee, or the Master Servicer shall repurchase such Converted
Loan from the Trustee. In the event the Master Servicer or Seller defaults upon
its obligation to purchase any Converted Loan, and, in the case of a Seller
default, such default remains unremedied for a period of five Business Days
after written notice of such default shall have been given by the Master
Servicer to the Seller, then the Master Servicer shall use its best efforts to
cause such Converted Loan to be sold for settlement on the last day of any
month to any entity which the Master Servicer may in its sole discretion
select. The Master Servicer shall not cause a Converted Loan to be sold or
otherwise transferred to a Person other than the Master Servicer or Seller (or
other Person who has a pre-existing obligation to purchase such loan) unless
(i) upon such sale the Trust would receive a net amount at least equal to the
Repurchase Price of the Converted Loan and (ii) if the Repurchase Price of the
Converted Loan exceeds the related Basis Limit Amount, the Master Servicer
receives an Opinion of Counsel that such disposition of a Converted Loan will
not result in the imposition of a "prohibited transaction" tax (as such term is
defined in the Code) on any related REMIC or jeopardize its status as a REMIC.
Any such Converted Loan which is not purchased by the Master Servicer or the
Seller and which the Master Servicer is unable to sell as described in the
second preceding sentence shall remain in the Trust.
(d) Manner of Repurchase. Any Asset purchased pursuant to Section
2.04(a), (b), (c), (d) or (e) hereof shall be purchased at the Repurchase Price
for such Asset. The Seller, the Depositor or the Master Servicer, as
appropriate (any of the foregoing, a "Repurchaser"), shall deposit into the
Certificate Account, on the date of purchase, the Repurchase Price for each
Asset to be purchased. Upon such deposit and upon being provided by the
Repurchaser with appropriate instruments of transfer or assignment, the Trustee
shall execute and deliver such instruments of transfer or assignment, in each
case without recourse, as shall be necessary to vest in the Repurchaser any
Asset purchased hereunder, and the Trustee shall deliver to the Repurchaser any
Asset Documents relating to the repurchased Asset that are in the Trustee's
possession, whereupon the Trustee shall have no further responsibility with
regard to such Asset. Except as provided in this Section 2.05(f), if a
Repurchaser shall, in accordance with the foregoing, purchase any Asset
required by it to be purchased, neither the Trustee nor any Certificateholder
shall have any other remedy against such Repurchaser based on any
misrepresentation or breach of covenant or warranty of such Repurchaser with
respect to or resulting from any such Asset.
The Master Servicer will be responsible for determining the Repurchase
Price for any Asset (and the related Basis Limit Amount for any Converted Loan)
to be repurchased pursuant to this Section 2.05 and shall certify such amounts
to the Trustee at the time of any such purchase. If, for whatever reason, the
Master Servicer shall certify
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to the Trustee that there is a miscalculation of the amount to be paid to the
Trust, the Trustee shall from monies in the Distribution Account return any
overpayment that the Trust received as a result of such miscalculation to the
applicable Repurchaser upon the discovery of such overpayment, and the Master
Servicer shall collect from the applicable Repurchaser for payment to the
Trustee any underpayment that resulted from such miscalculation upon the
discovery of such underpayment. Recovery may be made either directly or by
set-off of all or any part of such underpayment against amounts owed by the
Trust to such Repurchaser.
Any Repurchaser shall indemnify and hold harmless the Trustee from and
against any and all losses or liabilities incurred by the Trustee (including
any such losses or liabilities arising from third-party claims) with respect to
or resulting from any repurchase hereunder.
(e) Manner of Substitution. Unless otherwise provided in the
Pooling and Servicing Agreement, the right to substitute a Qualified Substitute
Asset for any Replaced Asset that is an asset of the Trust shall be limited to
(1) in the case of substitutions pursuant to Section 2.05(a) or 2.05(c), the
two-year period beginning on the Closing Date and (2) in the case of any other
substitution, the three-month period beginning on the Closing Date.
As to any Replaced Asset for which the Depositor or the Seller
substitutes a Qualified Substitute Asset or Assets, the Depositor or the
Seller, as the case may be, shall effect such substitution by delivering to the
Trustee for such Qualified Substitute Asset or Assets a complete Trustee
Mortgage Loan File, together with an Officer's Certificate of the Depositor or
the Seller, as the case may be, to the effect that each such Qualified
Substitute Asset complies with the terms of the Pooling and Servicing
Agreement. Monthly Payments due with respect to Qualified Substitute Assets in
the month of substitution are not part of the Trust and will be retained by the
Depositor or the Seller, as the case may be. For the month of substitution,
distributions to Certificateholders will reflect the Monthly Payment due on
such Replaced Asset during the month in which the substitution occurs, and the
Depositor or the Seller, as the case may be, shall thereafter be entitled to
retain all amounts subsequently received in respect of such Replaced Asset. The
Master Servicer shall amend the Asset Schedule to reflect the removal of such
Replaced Asset from the terms of the Pooling and Servicing Agreement and the
substitution of the Qualified Substitute Asset or Assets. Upon such
substitution, such Qualified Substitute Asset or Assets shall be subject to the
terms of the Pooling and Servicing Agreement in all respects, including, in the
case of a substitution effected by the Seller, the representations and
warranties included in the related Sales Agreement, and in the case of a
substitution effected by the Depositor, the representations and warranties set
forth in Section 2.04 above, in each case as of the date of substitution. The
Trustee shall, within five Business Days of its receipt of the documents
referred to above, effect the reconveyance of such Replaced Asset to the
Depositor or the Seller, as the case may be, in accordance with the procedures
specified above.
For any month in which the Depositor or the Seller substitutes one or
more Qualified Substitute Assets for one or more Replaced Assets, the Master
Servicer will determine and notify the Trustee with respect to the amount (if
any) by which the aggregate Unpaid Principal Balance of all such Qualified
Substitute Assets as of the date of substitution is less than the aggregate
Unpaid Principal Balance of all such Replaced Assets (after application of
Monthly Payments due in the month of substitution) (the "Substitution
Shortfall"). On the date of such substitution, the Depositor or the Seller, as
the case may be, will deliver or cause to be delivered to the Trustee for
deposit from its own funds into the Distribution Account an amount equal to the
Substitution Shortfall.
(f) Qualification Defect. If any Person required to cure, purchase, or
substitute under Section 2.05(a) above for an Asset affected by a Qualification
Defect fails to perform within the time limit set forth in those subsections,
the Trustee shall dispose of such an Asset in such manner and for such price as
the Master Servicer advises the Trustee are appropriate, provided that the
removal of such Asset occurs no later than the 90th day from the Defect
Discovery Date. It is the express intent of the parties that an Asset affected
by a Qualification Defect be removed from the Trust before the 90th day from
the Defect Discovery Date so that the related REMIC or Pooling REMIC will
continue to qualify as a REMIC. Accordingly, the Trustee is not required to
sell an affected Asset for its fair market value nor shall the Trustee be
required to make up any shortfall resulting from the sale of such Asset. The
person failing to perform under Section 2.05(a) above shall be liable to the
Trust for (1) any
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difference between (A) the Unpaid Principal Balance plus accrued and unpaid
interest thereon at the applicable Asset Rate to the date of disposition and
(B) the net amount received by the Trustee from the disposition (after the
payment of related expenses), (2) interest on such difference at the Asset Rate
from the date of disposition to the date of payment and (3) any legal and other
expenses incurred by or on behalf of the Trust in seeking such payments. Except
where the Master Servicer is the person failing to perform, the Master Servicer
shall pursue the legal remedies of the Trust on the Trust's behalf and the
Trust shall reimburse the Master Servicer for any legal or other expenses of
the Master Servicer related to such pursuit not recovered from such person. If
the Master Servicer is the person failing to perform, the Trustee shall pursue
the Trust's legal remedies against the Master Servicer and the Trust shall
reimburse the Trustee for its related legal or other expenses.
(g) Notices. Any person required under this Section 2.05 to give
notice or to make a request of another person to give notice shall give such
notice or make such request promptly.
ARTICLE III
ADMINISTRATION OF TRUSTS AND SERVICING OF THE ASSETS
SECTION 3.01. THE MASTER SERVICER.
The Master Servicer agrees to service the Assets for and on behalf of
the Trustee and its successors and assigns, and otherwise to perform and carry
out the duties, responsibilities and obligations that are to be performed and
carried out by the Master Servicer under the Pooling and Servicing Agreement.
The Master Servicer shall service the Mortgage Loans (a) generally in
compliance with Fannie Mae standards (and, in the case of FHA Loans or VA
Loans, FHA and VA standards, respectively) and (b) in a manner that is
consistent with prudent residential mortgage loan servicing standards generally
accepted within the residential mortgage loan servicing industry. The manner in
which the Master Servicer services the Assets shall be consistent with the
manner in which the Master Servicer services all residential mortgage loans in
its servicing portfolio, except for any differences specifically required by
the Pooling and Servicing Agreement. The Master Servicer shall have full power
and authority consistent with the aforementioned standards, acting alone and/or
through agents and designees as permitted by Section 6.07 hereof, to do any and
all things it may deem necessary or desirable in connection with such servicing
and administration; provided, however, that to the extent the Master Servicer
is prohibited by any applicable rule, regulation, judicial or administrative
determination or other order applicable to it from carrying out any of its
obligations or duties provided for herein or in any document contemplated
herein, such failure shall not constitute a breach of this Agreement.
The Master Servicer may agree to modify, waive or amend any term of
any Mortgage Loan in a manner consistent with the servicing standard described
herein so long as the modification, waiver or amendment will not (i) affect the
amount or timing of any scheduled payments of principal or interest on the
Mortgage Loan or (ii) in its judgment, materially impair the security for the
Mortgage Loan or reduce the likelihood of timely payment of amounts due
thereon. The Master Servicer also may agree to any modification, waiver or
amendment that would so affect or impair the payments on, or the security for,
a Mortgage Loan if, (i) in its judgment, a material default on the Mortgage
Loan has occurred or a payment default is imminent and (ii) in its judgment,
such modification, waiver or amendment is reasonably likely to produce a
greater recovery on a present value basis than would liquidation. The Master
Servicer promptly shall notify the Trustee in the event of any modification,
waiver or amendment of any Mortgage Loan.
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SECTION 3.02. MAINTENANCE OF RECORDS; INSPECTION OF ASSET FILES.
(a) The Master Servicer shall retain all data relating directly
to or maintained in connection with the servicing of the Assets for any Series
at the address of the Master Servicer set forth in Section 11.04 hereof or at
such other place where the servicing offices of the Master Servicer are
located.
The Master Servicer shall permit the Trustee or any authorized agent
of the Trustee reasonable access, upon prior written notice to the Master
Servicer, during the Master Servicer's normal business hours, to the Asset
Files, the Master Servicer Mortgage Loan Files, and the Master Servicer's other
records, if any, relating to the Assets for any related Series. Any such
examination of such files or records will be conducted in a manner that does
not unreasonably interfere with the Master Servicer's normal operations or
customer or employee relations. Without otherwise limiting the scope of the
examination the Trustee may make, the Trustee or its authorized agents, using
generally accepted audit procedures, may in their discretion verify the status
of each Asset and review the records relating thereto for conformity to
Remittance Reports prepared pursuant to Article IV hereof and compliance with
the standards represented to exist as to each Asset in the Pooling and
Servicing Agreement.
(b) At all times during the term hereof, the Master Servicer
shall keep available a copy of the Asset Schedule at its principal executive
office for inspection by Certificateholders.
(c) On or before the date of the Master Servicer's delivery of
the Remittance Report to the Trustee in any month, the Master Servicer will,
upon the written request of the Trustee, provide to the Trustee a list of
outstanding Assets, setting forth the Scheduled Principal Balance of each such
Asset as of the preceding Distribution Date.
(d) Notwithstanding the provisions of this Section 3.02, the
Trustee shall at no time have any duty or obligation to examine any records of
the Master Servicer or to recalculate or otherwise verify the accuracy of any
certificate or report prepared by the Master Servicer, and no implied duty to do
so shall be asserted against the Trustee.
(e) On or before the Closing Date for a Series, the Master
Servicer shall deliver to the Trustee a list of Officers of the Master Servicer
(each a "Servicing Officer") involved in, or responsible for, the administration
and servicing of the Assets underlying such Series, which list shall be amended
from time to time as necessary by the Master Servicer by delivery of an amended
list of Servicing Officers to the Trustee.
SECTION 3.03. COLLECTION OF PAYMENTS ON ASSETS; SERVICING DELINQUENT
ACCOUNTS.
(a) Continuously from the Cut-off Date until the earliest to
occur of the following with respect to each Asset sold to the Trust in
connection with the issuance of the Certificates: (i) the principal and interest
on such Asset is paid in full, (ii) such Asset is foreclosed and the related
Mortgaged Property is liquidated pursuant to Section 3.08 hereof, (iii) all of
the proceeds of a liquidating claim under the Standard Hazard Insurance Policy
relating to such Asset have been deposited to the Certificate Account, or (iv)
the Liquidation Proceeds relating to such Asset have been deposited to the
Certificate Account, the Master Servicer will proceed diligently and in a manner
consistent with its standards for servicing Assets described in Section 3.01
above, to collect all payments due under each Asset when such payments become
due and payable and to apply such payments in accordance with Sections 3.05,
3.06 and 3.07 hereof.
(b) The Master Servicer shall have reasonable discretion to
extend appropriate relief to Obligors who encounter hardship and who are
cooperative and demonstrate proper regard for their obligations. The Master
Servicer may arrange with such an Obligor to extend the payment schedule for the
related Asset; provided, however, that any such extension must be made in
accordance with the Master Servicer's standards for servicing Assets described
in Section 3.01 above; and provided further, that no such extensions may be made
except to the extent
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(1) that the Master Servicer has determined, in its reasonable judgment, that
the Obligor is in default or that default is reasonably foreseeable with
respect to such Asset in the absence of such relief, (2) that the Due Date for
the final Monthly Payment on such Asset is not extended beyond the latest Final
Scheduled Distribution Date for the related Series and (3) that the grant of
such extension is otherwise permissible under Section 10.02 hereof and, if a
REMIC election has been made in connection with the Asset, the REMIC Provisions
as in effect at the time of such extension, as evidenced by an Opinion of
Counsel delivered by the Master Servicer to the Trustee. Where the Obligor is
in default on an Asset notwithstanding such relief and the Master Servicer has
exhausted all reasonable means of inducing the Obligor to pay on a timely
basis, the Master Servicer shall begin acceleration of the Assets in accordance
with its terms and applicable laws.
SECTION 3.04. ADVANCES.
(a) P&I Advances. If any Obligor fails to make its Monthly
Payment by the Remittance Date, the Master Servicer shall deposit such amount in
the Distribution Account on or before such Remittance Date, as a "P&I Advance,"
unless the Master Servicer, in its reasonable judgment, determines that any such
P&I Advance would be a Non-Recoverable Advance, or such Monthly Payment can be
offset by Early Payments, as provided in Section 3.07(c) hereof. In addition, if
the Certificate Account is maintained with the Trustee, the Master Servicer may
instruct the Trustee to use any investment earnings on such account to defray
its P&I Advance obligation, and the Trustee shall honor any such instructions
(including standing instructions).
(b) Servicing Advances. If any Obligor is in default in the
payment of premiums on its Standard Hazard Insurance Policy or Policies, the
Master Servicer may pay such premiums or taxes out of its own funds. If any
Obligor is in default in the payment of premiums on its Standard Hazard
Insurance Policy or Policies and coverage is not provided in respect of the
related Asset under a blanket policy maintained by the Master Servicer pursuant
to Section 3.15(a) below, or if any Obligor is in default in the payment of
personal property taxes or real estate taxes due in respect of its Mortgaged
Property, the Master Servicer shall pay such premiums or taxes out of its own
funds in a timely manner, as Servicing Advances, unless the Master Servicer, in
its reasonable judgment, determines that any such Servicing Advance would be a
Non-Recoverable Advance. In addition, the Master Servicer shall pay in a timely
manner, as Servicing Advances, any and all personal property taxes and real
estate taxes due in respect of any REO Property it holds on behalf of the Trust
and all premiums for any Standard Hazard Insurance Policy maintained for such
REO Property (except as similar coverage may be provided under a blanket policy
maintained by the Master Servicer pursuant to Section 3.15 below) unless the
Master Servicer, in its reasonable judgment, determines that any such Servicing
Advance would be a Non-Recoverable Advance.
(c) Recovery of Advances. The Master Servicer shall be entitled
to reimbursement for any Advances made by it in respect of any Asset out of late
collections from the related Obligor or from Insurance Proceeds, Liquidation
Proceeds or a Repurchase Price paid in respect of such Asset ("Related
Proceeds") and shall be entitled to reimburse itself for unreimbursed Advances
made that have become Non-Recoverable Advances in accordance with Section
3.07(a)(1) below.
(d) Non-Recoverable Advances. If the Master Servicer does not
make an Advance on the grounds that it is a Non-Recoverable Advance, or if an
Advance previously made by the Master Servicer is determined by the Master
Servicer to have become a Non-Recoverable Advance, then the Master Servicer
shall provide the Trustee with an Officer's Certificate stating this fact and
stating the basis upon which the Master Servicer determined that such Advance
would be or was a Non-Recoverable Advance. The Trustee shall not be responsible
for determining whether any such determination was reasonable.
SECTION 3.05. SERVICING ACCOUNT.
Within one Business Day after the Master Servicer's receipt of any
amounts collected on any Asset in its lock box maintained for the collection of
amounts payable under contracts serviced by it (including Net Liquidation
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Proceeds, Insurance Proceeds and Repurchase Prices in respect thereof), the
Master Servicer shall deposit such collections, or cause such collections to be
deposited, into a clearing account established by the Master Servicer (the
"Servicing Account"), which shall be an Eligible Account. The Master Servicer
may use the Servicing Account for collection of payments on Assets underlying
more than one Series and for assets that are not the subject of any transaction
covered by a Pooling and Servicing Agreement; provided, that in any such event,
the Master Servicer shall cause separate accounting and records to be
maintained within the Servicing Account with respect to the Assets underlying
each separate Series. Furthermore, the parties hereto agree that all amounts
deposited into the Servicing Account in respect of the Assets, other than
amounts payable to the Master Servicer as servicing compensation under the
Pooling and Servicing Agreement, are to be held in trust for the exclusive use
and benefit of the related Trust.
SECTION 3.06. CERTIFICATE ACCOUNT.
(a) On or before the Closing Date, the Trustee shall establish a
collection account or accounts (the "Certificate Account"), which must be an
Eligible Account. The Certificate Account is to be held by or for the benefit
of the Trustee on behalf of the Certificateholders, and shall be either in the
Trustee's name or designated in a manner that reflects the custodial nature of
the account and that all funds in such account are held for the benefit of the
Trustee. The Trustee may elect to use a single Certificate Account for more
than one Series of Certificates provided, that in any such event, the Master
Servicer shall cause separate accounting and records to be maintained within
the Certificate Account with respect to each separate Series.
(b) The Master Servicer shall deposit into the appropriate
Certificate Account on a daily basis, and in no event later than two Business
Days following deposit thereof to the Servicing Account after the Master
Servicer's collection thereof, all payments and collections received by it on
each Outstanding Asset on or after the effective date of the related Pooling and
Servicing Agreement (including Net Liquidation Proceeds, Insurance Proceeds and
Repurchase Prices in respect thereof), except amounts collected in respect of
Monthly Payments due on or prior to the Cut-off Date. On or prior to the Closing
Date, the Master Servicer shall deposit into the Certificate Account all
installments of principal and interest due on the Assets after the Cut-off Date
and received by the Master Servicer prior to the Closing Date, plus each
Principal Prepayment of any Asset (including any related payment of interest)
received by the Master Servicer on or after the Cut-off Date but prior to the
Closing Date.
(c) Amounts on deposit in the Certificate Account may be invested
at the direction of the Master Servicer in Eligible Investments, and earnings on
amounts deposited in such account shall be credited to the account of the Master
Servicer as servicing compensation in addition to the Servicing Fee and shall
offset P&I Advances due from the Master Servicer in respect of the Distribution
Date next succeeding the date on which such earnings were made or, in the
alternative at the Master Servicer's option, may be released to the Master
Servicer on such Distribution Date. The amount of any losses incurred in respect
of any such investments shall be deposited in the Certificate Account by the
Master Servicer out of its own funds immediately upon realization of any such
losses.
SECTION 3.07. WITHDRAWALS FROM CERTIFICATE ACCOUNT; REMITTANCE AMOUNTS.
(a) Withdrawals from Certificate Account. The Master Servicer may
withdraw funds on deposit in the Certificate Account for the following purposes:
(1) to reimburse itself for any Advances previously made
by the Master Servicer, which Advances remain unreimbursed to the
Master Servicer, out of Related Proceeds or, if such Advances have been
determined by the Master Servicer to have become Non-Recoverable
Advances, out of any funds on deposit in the Certificate Account;
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(2) to pay any Servicing Fees and other servicing
compensation provided for herein due to the Master Servicer; and
(3) to enable the Master Servicer to remit the
Remittance Amount to the Trustee on each Remittance Date, as described
in Section 3.07(b) below.
(b) Remittance Dates. On or prior to the Remittance Date for any
Distribution Date, the Master Servicer shall remit the Remittance Amount for
such Distribution Date to the Trustee, from and to the extent of the funds in
the Certificate Account, plus all required P&I Advances, by wire transfer or
otherwise, in immediately available funds, for deposit into the Distribution
Account. If the Certificate Account is maintained by the Trustee, on each
Remittance Date, the Master Servicer shall notify the Trustee as to the amount
of the related Remittance Amount and the amount of all required P&I Advances to
be covered by investment earnings on the Certificate Account, and the Trustee
shall transfer such amount from the Certificate Account to the Distribution
Account on the related Distribution Date. In such event, the Master Servicer
shall still remit any P&I Advances not covered by investment earnings on the
Certificate Account to the Trustee for deposit into the Distribution Account on
the Remittance Date.
Notwithstanding the foregoing, if a Terminating Purchase is to be made
on such Distribution Date, and the Master Servicer shall have received the
Termination Price or shall be the Terminator, the Master Servicer shall remit
the Termination Price rather than the Remittance Amount to the Trustee for
deposit into the Distribution Account.
(c) Treatment of Early Payments. Early Payments received by the
Master Servicer shall be retained in the Certificate Account and transferred to
the Distribution Account when and as if such Early Payments had otherwise been
received by the Master Servicer as scheduled payments under the Assets. However,
Early Payments on any Assets for a Series on deposit in the Certificate Account
that are not yet due to be passed through to Certificateholders on any
Distribution Date may be remitted to the Distribution Account to offset
delinquencies on other Assets for the same Series. If Early Payments on any
Asset are used to offset delinquencies on other Assets, subsequent late
recoveries of such delinquent amounts on such other Assets shall be treated by
the Master Servicer as a restoration of the Early Payments used to offset such
delinquent amounts and shall be deposited into the Certificate Account in
accordance with Section 3.06(a) hereof. The Master Servicer shall maintain
records with respect to its application of Early Payments.
SECTION 3.08. REALIZATION UPON DEFAULTED ASSETS.
(a) The Master Servicer shall repossess, foreclose upon or
otherwise comparably convert the ownership of any Mortgaged Property securing an
Asset that comes into and continues in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 3.03 hereof. In connection with such repossession, foreclosure or other
conversion, the Master Servicer shall follow such practices and procedures as it
shall deem necessary or advisable and as shall be normal and usual for
responsible holders of residential, one- to four-family mortgage loans and as
shall be in compliance with all applicable laws; provided, that such practices
and procedures shall be, in all circumstances, undertaken with a view toward
maximizing the amount of principal and interest recovered on the Assets.
(b) The Master Servicer may commence and prosecute any
Proceedings in respect of any Asset in default in its own name on behalf of the
Trustee or, if the Master Servicer deems it necessary, in the name of the
Trustee. If the Master Servicer elects to commence a Proceeding to enforce an
Asset, the act of commencement shall be deemed to entail an automatic assignment
of the Asset to the Master Servicer for purposes of collection only. If,
however, in any enforcement suit or legal proceeding in which the Master
Servicer seeks to collect payments due on any Asset, it is held that the Master
Servicer lacks standing to enforce an Asset (or otherwise is not permitted to
enforce an Asset) on the grounds that it is not a real party in interest or a
holder entitled to enforce
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the Asset, the Trustee, on behalf of the Certificateholders, shall take such
steps as the Master Servicer deems necessary to enforce the Asset, including
bringing suit in its name or in the names of the Certificateholders. Any such
action by the Trustee shall be taken at the Master Servicer's expense, but such
expenses (including, without limitation, attorneys' fees) shall be deemed
Liquidation Expenses which the Master Servicer shall have no obligation to
incur to the extent it makes a good faith determination that such Liquidation
Expenses will not be recoverable out of Liquidation Proceeds of the related
Asset.
(c) In seeking to enforce the Assets, the Master Servicer may
exercise any rights of recourse against guarantors or sureties of any Obligor's
obligations (or against any other third parties against whom any rights of
recourse exist in connection with any Asset).
(d) The Master Servicer's obligations under this Section are
subject to the proviso that, in the case of damage to a Mortgaged Property, the
Master Servicer shall not be required to expend its own funds in making
Liquidation Expenses to restore such property unless it shall determine, in its
reasonable judgment, (1) that such restoration will increase the proceeds of
liquidation of the related Asset, after reimbursement to the Master Servicer for
such expenses, and (2) that such Liquidation Expenses, if made, will be
recoverable out of Liquidation Proceeds of such Asset. If the Master Servicer
recovers any Insurance Proceeds or Liquidation Proceeds in respect of any Asset,
the Master Servicer may deduct the amount of any Insured Expenses and
unreimbursed Liquidation Expenses incurred by it in respect of such Asset from
such gross Insurance Proceeds and Liquidation Proceeds, respectively, prior to
deposit of such proceeds into the Certificate Account.
(e) Notwithstanding any of the foregoing, the Master Servicer
shall not repossess, foreclose upon or otherwise comparably convert the
ownership of any Mortgaged Property securing an Asset in cases where the Master
Servicer has actual knowledge that the Mortgaged Property is situated on a toxic
waste site as determined by the United States Environmental Protection Agency or
other comparable federal or state agency and where, in the good faith judgment
of the Master Servicer, the liabilities that would be imposed upon the Trust
with respect to such toxic waste site would exceed the Net Liquidation Proceeds
that could be realized upon liquidation of the related Asset. The Master
Servicer shall have no affirmative duty or obligation to determine whether any
Mortgaged Property is situated on a toxic waste site.
SECTION 3.09. TITLE, CONSERVATION, AND DISPOSITION OF REO PROPERTY.
(a) The Master Servicer shall maintain, protect, and insure any
REO Property acquired pursuant to Section 3.08 hereof, on behalf of the Trust,
in accordance with standard industry practice solely for the purpose of its
prompt disposition and sale and with a view toward maximizing the amount of
principal and interest recovered on the Assets. During any period in which the
Trust holds a REO Property, the Master Servicer shall not (1) lease the REO
Property, (2) authorize or permit any construction on the REO Property, other
than the completion of a building or improvement thereon, and then only if more
than 10% of the construction of such building or other improvement was completed
before default on the related Asset became imminent, all within the meaning of
section 856(e)(4)(B) of the Code, or (3) allow the REO Property to be used in
any trade or business conducted by the Trust. If one or more REMIC elections are
made with respect to the assets of the Trust, the Master Servicer shall use its
best efforts to dispose of such REO Property for its fair market value within 22
months after its acquisition by the Trust pursuant to the Master Servicer's
ordinary commercial practices. If the Master Servicer is unable to sell such REO
Property in the course of its ordinary commercial practices within that 22-month
period, the Master Servicer shall (a) purchase such REO Property at a price
equal to such REO Property's fair market value or (b) auction such REO Property
to the highest bidder in an auction reasonably designed to produce a fair price
(an "Auction") that takes place within one month after the end of the 22-month
period. If the Master Servicer and the Trustee either (1) receive an Opinion of
Counsel indicating that, under then-current law, the REMIC may hold REO Property
associated with a REMIC Asset for a period longer than two years without
threatening the REMIC status of any related REMIC or causing the imposition of a
tax upon any such REMIC or (2) the Master Servicer applies for and is granted an
extension of such 22-month period pursuant to Code sections 860G(a)(8) and
856(e)(3) (the applicable
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period provided pursuant to such Opinion of Counsel or such Code section being
referred to herein as an "Extended Holding Period"), upon the direction of the
Depositor or the Trustee, the Master Servicer shall continue to attempt to sell
such REO Property pursuant to its ordinary commercial practices until the date
two months prior to the expiration of the Extended Holding Period. If no REMIC
election has been made or is to be made with respect to the assets of the
Trust, the 22-month period for disposing of any REO Property as described in
the preceding two sentences shall be an eleven-month period. The Master
Servicer shall either sell any REO Property remaining after such date in an
Auction or purchase such REO Property (at the price set forth in this
paragraph) before the end of the Extended Holding Period. In the event of any
such sale of a REO Property, the Trustee shall, at the written request of the
Master Servicer and upon being supplied with appropriate forms therefor, within
five Business Days after its receipt of the proceeds of such sale or auction,
instruct the Master Servicer to release to the purchaser the related Master
Servicer Mortgage Loan File, and in any event the Trustee shall execute and
deliver such instruments of transfer or assignment, in each case without
recourse, as shall be necessary to vest in the auction purchaser title to the
REO Property, and shall deliver to such purchaser any Asset Documents relating
to such Asset that are in the Trustee's possession, whereupon the Trustee shall
have no further responsibility with regard to any related Master Servicer
Mortgage Loan File. Neither the Trustee nor the Master Servicer, acting on
behalf of the Trust, shall provide financing from such Trust to any purchaser
of a REO Property.
(b) In the event that title to any REO Property is acquired, the
deed or certificate of sale shall be issued to the Trustee for the benefit of
the Certificateholders. The Master Servicer shall, in accordance with Section
3.09(a), use its reasonable efforts to sell any REO Property as expeditiously as
possible, but in all events within the time period, and subject to the
conditions set forth in Section 3.09(a) hereof. Pursuant to its efforts to sell
such REO Property, the Master Servicer shall either itself or through an agent
selected by the Master Servicer protect and conserve such REO Property in the
same manner and to such extent as it customarily does in connection with its own
repossessed mortgaged properties (as applicable), incident to its conservation
and protection of the interests of the Certificateholders.
(c) The Master Servicer shall deposit all net funds collected and
received in connection with the operation of any REO Property in the applicable
Certificate Account no later than the second Business Day following receipt of
such funds.
(d) The Master Servicer, upon the final disposition of any REO
Property, shall be entitled to reimbursement of any related unreimbursed
Advances related to the Asset for such REO Property as well as any unpaid
Servicing Fees from Liquidation Proceeds received in connection with the final
disposition of such REO Property.
(e) The final disposition of any REO Property shall be carried
out by the Master Servicer at the REO Property's fair market value under the
circumstances existing at the time of disposition and upon such terms and
conditions as the Master Servicer shall deem necessary or advisable, and as are
in accordance with accepted servicing practices and in accordance with Section
3.09(a) above.
(f) The Liquidation Proceeds from the final disposition of any
REO Property shall be deposited into the Certificate Account promptly following
receipt of such Liquidation Proceeds and, subject to such withdrawals as may be
permitted by Section 3.07(a) above, shall be transferred to the Distribution
Account pursuant to Section 3.07(b) above.
(g) The Master Servicer shall prepare and file reports of
foreclosure and abandonment in accordance with section 6050J of the Code.
(h) Notwithstanding any other provision of this Agreement, the
Master Servicer, acting on behalf of the Trustee hereunder, shall not rent,
lease, or otherwise earn income or take any action on behalf of the Trust with
respect to any REO Property that might (i) cause such REO Property to fail to
qualify as "foreclosure property" within the meaning of section 860G(a)(8) of
the Code or (ii) result in the receipt by any related REMIC of any
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"income from non-permitted assets" within the meaning of section 860F(a)(2) of
the Code or any "net income from foreclosure property" within the meaning of
section 860G(c)(2) of the Code, both of which types of income are subject to
tax under the REMIC Provisions, unless the Trustee has received an Opinion of
Counsel at the Trust's expense (the costs of which shall be recoverable out of
the applicable Certificate Account), to the effect that, under the REMIC
Provisions and any relevant proposed legislation, any income generated for any
related REMIC by the REO Property would not result in the imposition of a tax
upon such REMIC.
Without limiting the generality of the foregoing, the Master
Servicer shall not:
(i) enter into, renew or extend any New Lease with
respect to any REO Property, 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 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 other Person (other
than an Independent Contractor) to Directly Operate, any REO Property
on any date more than 90 days after its acquisition date;
unless, in any such case, the Master Servicer has requested and received the
Opinion of Counsel described in the preceding sentence, in which case the
Master Servicer may take such actions as are specified in such Opinion of
Counsel.
(i) The Master Servicer shall not acquire any personal property
relating to any Asset pursuant to this Section 3.09 unless either:
(1) such personal property is incident to real property
(within the meaning of section 856(e)(1) of the Code) so acquired by
the Master Servicer; or
(2) the Master Servicer shall have requested and
received an Opinion of Counsel, at the expense of the Trust
(recoverable out of the Certificate Account), to the effect that the
holding of such personal property by the related REMIC will not cause
the imposition of a tax under the REMIC Provisions on any REMIC related
to the Trust or cause any such REMIC to fail to qualify as a REMIC at
any time that any Certificate is outstanding.
SECTION 3.10. FULL PREPAYMENTS AND LIQUIDATIONS; TRUSTEE TO COOPERATE;
RELEASE OF MORTGAGE FILES.
(a) Mortgage Loans. Upon the liquidation of any Mortgage Loan,
the Master Servicer shall remit the proceeds thereof to the related Certificate
Account in accordance with Sections 3.05 and 3.06 above and shall deliver to the
Trustee a Request for Release requesting that the Trustee execute such
instrument of release or satisfaction as is necessary to release the related
Mortgaged Property from the lien of the related Mortgage. The Trustee shall,
within five Business Days of its receipt of such a Request for Release, release,
or cause the Custodian to release, the related Trustee Mortgage Loan File to the
Master Servicer. No expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to a Certificate
Account or Distribution Account.
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From time to time and as appropriate for the servicing or foreclosure
of any Mortgage Loan, including but not limited to, collection under any Title
Insurance Policy, Primary Mortgage Insurance Policy, flood insurance policy or
Standard Hazard Insurance Policy or to effect a partial release of any
Mortgaged Property from the lien of the related Mortgage, the Master Servicer
shall deliver to the Trustee a Request for Release. The Trustee shall, within
five Business Days after its receipt of such Request for Release, release, or
cause the Custodian to release, the related Trustee Mortgage Loan File to the
Master Servicer. Any such Request for Release shall obligate the Master
Servicer to return each and every document previously requested from the
Trustee Mortgage Loan File to the Trustee by the twenty-first day following the
release thereof, unless (a) the Mortgage Loan has been liquidated and the
Liquidation Proceeds relating to the Mortgage Loan have been deposited in the
related Certificate Account or Distribution Account or the Trustee Mortgage
Loan File or such document has been delivered to an attorney, or to a public
trustee or other public official as required by law, for purposes of initiating
or pursuing legal action or other proceedings for the foreclosure of the
Mortgaged Property either judicially or non-judicially, and the Master Servicer
has delivered to the Trustee a certificate of the Master Servicer certifying as
to the name and address of the Person to which such Trustee Mortgage Loan File
or such document was delivered and the purpose or purposes of such delivery.
Upon receipt of an Officer's certificate of the Master Servicer 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 applicable Certificate Account or the Distribution Account have been
so deposited, or that such Mortgage Loan has become an REO Property, the
Request for Release shall be released by the Trustee to the Master Servicer.
(b) Trustee's Execution of Documents in connection with
Foreclosures. Upon written certification of the Master Servicer, the Trustee
shall execute and deliver to the Master Servicer court pleadings, requests for
trustee's sale or other documents 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 Obligor on a Mortgage Note or Mortgage or to obtain a
deficiency judgment, or to enforce any other remedies or rights provided by such
Mortgage 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 related
Mortgage, except for the termination of such a lien upon completion of the
foreclosure proceeding or trustee's sale.
SECTION 3.11. DUE-ON-SALE CLAUSES AND ASSUMPTION AGREEMENTS.
Upon learning of any conveyance or prospective conveyance of a
Mortgaged Property securing any Mortgage Loan, the Master Servicer may exercise
its rights, subject to state law, under any "due-on-sale" clause of the
Mortgage Note or Mortgage relating to such Mortgaged Property to demand
immediate payment in full of all amounts due under such Mortgage Loan. With
respect to Mortgage Loans, the Master Servicer will exercise such rights to the
extent, under the circumstances, and in the manner in which the Master Servicer
enforces such clauses with respect to other Mortgage Loans held in its
portfolio, but will not exercise such rights if prohibited by law from doing
so.
If the Master Servicer determines not to enforce a "due-on-sale"
clause with respect to an Asset, the Master Servicer will enter into an
assumption and/or modification agreement with the person to whom the Mortgaged
Property has been conveyed in a form that is customary or appropriate in the
Master Servicer's reasonable business judgment pursuant to which such person
becomes liable under the Asset and pursuant to which, to the extent permitted
by applicable law and deemed appropriate by the Master Servicer in its
reasonable judgment, the original Obligor remains liable on such Asset;
provided, that (a) the Master Servicer reasonably determines that permitting
such assumption by such person will not increase materially the risk of
nonpayment of amounts due under the related Asset, (b) such action is not
prohibited by law and will not affect adversely or jeopardize any coverage
under any Insurance Policy required to be maintained with respect to such Asset
pursuant to the Pooling and Servicing Agreement, (c) neither the Unpaid
Principal Balance nor the Asset Rate of the related Asset may be reduced and
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(d) if one or more REMIC elections have been made with respect to the assets of
the Trust, no other material term of the related Asset (including, without
limitation, the amortization schedule or any other term affecting the amount or
timing of payments on such Asset) may be modified without an Opinion of Counsel
to the effect that such modification will not be treated, under the REMIC
Provisions, as an acquisition of the modified Asset by the REMIC in exchange
for the unmodified Asset on the date the modification occurs. The Master
Servicer shall follow its customary underwriting procedures prior to entering
into any such assumption agreement, including, without limitation, a
satisfactory credit review of any Person assuming such Asset.
SECTION 3.12. ANNUAL ACCOUNTANTS' CERTIFICATE; ANNUAL STATEMENT AS TO
COMPLIANCE.
(a) The Master Servicer shall deliver to the Trustee, on or
before March 31 of each year, with respect to each Pooling and Servicing
Agreement that the Master Servicer entered into on or before the preceding
December 31, an Officer's Certificate signed by the President or any Vice
President of the Master Servicer, dated as of September 30 of the preceding
year, stating that (1) a review of the activities of the Master Servicer during
the preceding 12-month period (or since the Cut-off Date in the case of the
first such Officer's Certificate relating to any Trust) and of its performance
under the Pooling and Servicing Agreement has been made under such Officer's
supervision and (2) to the best of such Officer's knowledge, based on such
review, the Master Servicer has fulfilled all its obligations under the Pooling
and Servicing Agreement throughout such year, or, if there has been a default in
the fulfillment of any such obligation, specifying each such default known to
such Officer and the nature and status thereof. A copy of such certificate may
be obtained by any other Holder who makes a request in writing to the Trustee
addressed to the Corporate Trust Office.
(b) In addition, on or before March 31 of each year, the Master
Servicer, at its expense, shall cause a firm of Independent public accountants
which is a member of the American Institute of Certified Public Accountants to
furnish a statement to the Trustee and each applicable Rating Agency to the
effect that (1) such firm has audited the financial statements of the Master
Servicer for the Master Servicer's most recently ended fiscal year and issued
its report thereon; (2) such audit included tests of the records and documents
relating to mortgage loans serviced by the Master Servicer for others in
accordance with the requirements of the Uniform Single Attestation Program for
Mortgage Bankers, or any successor program promulgated by the accounting
profession ("USAP"); and (3) such other statements as are contemplated under
USAP, including, if called for under USAP, a statement as to whether the Master
Servicer's management's written assertion to such firm (which shall be attached
to the statement of such firm) that its servicing during the applicable fiscal
year complied with USAP's minimum servicing standards in all material respects
is fairly stated in all material respects. The audit tests referred to in
clause (2) of the preceding sentence shall be applied to mortgage loans
serviced under the Pooling and Servicing Agreement and/or, in the sole
discretion of such firm, mortgage loans serviced under pooling and servicing
agreements, trust agreements or indentures substantially similar to the Pooling
and Servicing Agreement (hereinafter referred to as "Pooling Agreements"). For
purposes of such statement, such firm may assume conclusively that all Pooling
Agreements under which the Master Servicer is the servicer of mortgage loans
for a trustee relating to certificates evidencing an interest in mortgage loans
are substantially similar to one another except for any such Pooling Agreement
which by its terms specifically states otherwise.
SECTION 3.13. SERVICING FEES.
As compensation for the services provided for a Series (including
servicing of the related Assets and administration of the related Trust) and
ordinary expenses incurred by the Master Servicer under the Pooling and
Servicing Agreement, on each Distribution Date the Master Servicer shall be
entitled to receive the Servicing Fee on each Asset from amounts collected on
such Asset. Except as otherwise expressly provided in the Pooling and Servicing
Agreement, the Master Servicer shall perform all of the obligations to be
performed by it under the Pooling and Servicing Agreement at its expense and
without cost or charge to the Trustee. The Servicing Fee relating to any Asset
shall be payable solely from the interest portion of each Monthly Payment or
other payment of or in respect of interest collected by the Master Servicer in
respect of such Asset, whether from the proceeds
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of any judgment, writ of attachment or levy against the related Obligor or its
assets, or from funds received by the Master Servicer in connection with any
Principal Prepayment in full, from Insurance Proceeds or Liquidation Proceeds
or in connection with any purchase or repurchase of an Asset; provided,
however, that the Servicing Fee with respect to an Asset in any month shall be
payable to the Master Servicer out of amounts paid by the related Obligor
toward the Monthly Payment due on such Asset during such month only if the
related Obligor has remitted the entire amount of such Monthly Payment. The
Master Servicer also shall be entitled to additional servicing compensation as
specified in Sections 3.06(c) and 3.14 hereof. Unless otherwise provided in the
Pooling and Servicing Agreement for a Series, the Master Servicer may retain
its Servicing Fee and any other servicing compensation provided for in such
Pooling and Servicing Agreement from gross interest collections on the related
Assets prior to depositing such collections into the related Certificate
Account.
SECTION 3.14. LATE CHARGES; PREPAYMENT FEES OR OTHER CHARGES.
To the extent permitted by law, the Pooling and Servicing Agreement
and the terms of any Asset, the Master Servicer may collect and retain as
additional compensation any late charges, extension fees or similar fees
provided for in the Asset.
To the extent reasonable and permitted by the terms of any Asset and
by law, the Master Servicer may collect from the Obligors, and retain as
additional compensation, prepayment fees, assumption fees or any fees imposed
in connection with the replacement by such Obligor of the related Standard
Hazard Insurance Policy.
Notwithstanding any other provisions of the Pooling and Servicing
Agreement, the Master Servicer shall not charge or impose upon any Obligor, nor
seek to charge or impose upon any Obligor, or assert a right to receive from
any Obligor, any fee, charge, premium or penalty that, if charged or collected,
would violate or contravene any law, including usury laws, or the terms of the
related Asset.
SECTION 3.15. MAINTENANCE OF STANDARD HAZARD INSURANCE, PRIMARY MORTGAGE
INSURANCE, AND ERRORS AND OMISSIONS COVERAGE.
(a) Standard Hazard Insurance. Except as otherwise provided in
this Section 3.15(a), the Master Servicer shall cause to be maintained with
respect to each Mortgage Loan and each REO Property one or more Standard Hazard
Insurance Policies that provide, at a minimum, the same coverage as that
provided by a standard form fire and extended coverage insurance policy that is
customary for residential real property and which shall include flood insurance
coverage issued by a Qualified Insurer, providing coverage in an amount at least
equal to the lesser of (1) the maximum insurable value of the related Mortgaged
Property or (2) the principal balance due from the Obligor under such Mortgage
Loan; provided, however, that in any event the amount of coverage provided by
each Standard Hazard Insurance Policy must be sufficient to avoid the
application of any co-insurance clause contained therein. As part of its
collection responsibilities, the Master Servicer shall proceed to collect the
premiums due on the Standard Hazard Insurance Policies from the Obligors in
accordance with the degree of skill and care that is customarily used for such
purpose in the residential mortgage loan servicing industry. Each Standard
Hazard Insurance Policy caused to be maintained by the Master Servicer shall
contain a standard loss payee clause in favor of the Master Servicer and its
successors and assigns. Any amounts received under any such policies shall be
deposited initially into the related Certificate Account and then deposited into
the related Distribution Account pursuant to Sections 3.06 and 3.07 hereof,
within the respective time frames specified in such Sections.
In lieu of causing individual Standard Hazard Insurance Policies to be
maintained with respect to each Mortgaged Property pursuant to subsection (a)
of this Section 3.15, the Master Servicer may maintain one or more blanket
insurance policies, each issued by a Qualified Insurer, covering losses on the
Obligors' interests in the Assets relating to such Mortgaged Properties
resulting from the absence or insufficiency of such individual Standard Hazard
Insurance Policies. The Master Servicer shall pay the premium for any such
policy on the basis described therein and shall pay any deductible amount with
respect to claims under such policy relating to the Assets covered
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thereby. All amounts collected by the Master Servicer under any such blanket
policy and any payments by the Master Servicer of deductible amounts
thereunder, in each case relating to an Asset covered thereby, shall be
deposited initially into the Certificate Account pursuant to Sections 3.05 and
3.06 hereof (within the respective time frames specified in such Sections),
after payment to (or retention by) the Master Servicer of all Insured Expenses
and Liquidation Expenses incurred by it with respect to the Mortgaged Property
to which such recovery relates, as well as the amount of any Advances made by
the Master Servicer with respect to the related Asset that have not been
reimbursed to the Master Servicer.
(b) Primary Mortgage Insurance. The Master Servicer must maintain
a Primary Mortgage Insurance Policy in full force and effect on each Mortgage
Loan, if any, which is identified in the related Sales Agreement as being
covered by a Primary Mortgage Insurance Policy. Any such Primary Mortgage
Insurance Policy must insure the portion of the Unpaid Principal Balance of the
related Mortgage Loan that exceeds 75% of the value of the related Mortgaged
Property (as set forth in the appraisal obtained in connection with origination
of the Mortgage Loan) (the Mortgaged Property's "Initial Value") unless such
Primary Mortgage Insurance coverage has been waived in writing by the Depositor
at the time it purchases the Mortgage Loan or such Primary Mortgage Insurance
is canceled under the circumstances described below. If a covered Mortgage Loan
provides for negative amortization or the potential for negative amortization,
the Primary Mortgage Insurance Policy must also insure any increase in the
Unpaid Principal Balance of the Mortgage Loan from the original principal
balance of the related Mortgage Note. In the event that the rating assigned by
any Rating Agency for any of the related Certificates to the claims-paying
ability of any related Mortgage Insurer is reduced subsequent to the issuance
of the related Certificates, the Master Servicer will use its best efforts to
replace each Primary Mortgage Insurance Policy issued by the downgraded
Mortgage Insurer with a new Primary Mortgage Insurance Policy issued by an
insurer whose claims-paying ability is acceptable to the Depositor. The premium
for any replacement policy shall not exceed the premium for any replaced
policy.
The Master Servicer may cancel the Primary Mortgage Insurance Policy
maintained with respect to any Mortgage Loan at the related Mortgagor's request
if the following conditions are met:
(1) The current Mortgage Loan-to-Value Ratio of the
mortgage Loan must be 80% or less. The current Mortgage Loan-to-Value
Ratio must be calculated by dividing the Unpaid Principal Balance of
the Mortgage Loan by the Initial Value of the related Mortgaged
Property;
(2) The Mortgage Loan may not have been 30 days or more
delinquent at any time within the preceding twelve months; and
(3) There nay not have been any other default under the
terms of the Mortgage Loan at any time during the preceding twelve
months.
The Master Servicer must take all steps necessary to ensure the
payment by each Mortgage Insurer of the maximum benefits available under the
terms of the related Primary Mortgage Insurance Policy. The Master Servicer
must work diligently with the Mortgage Insurer to determine whether such
insurer will settle a claim under a Primary Mortgage Insurance Policy by taking
title to the related Mortgaged Property or in some other manner. Upon receipt
of any proceeds of a Primary Mortgage Insurance Policy, the Master Servicer
must deposit such proceeds into the applicable Certificate Account in
accordance with Sections 3.05 and 3.06 above.
(c) Errors and Omissions Coverage; Fidelity Bond. The Master
Servicer shall keep in force throughout the term of the Pooling and Servicing
Agreement a policy or policies of insurance issued by a Qualified Insurer
covering errors and omissions in the performance of its obligations as Master
Servicer hereunder, including failure to maintain insurance as required by the
Pooling and Servicing Agreement, and a fidelity bond covering the Master
Servicer's performance under the Pooling and Servicing Agreement. Such policy or
policies and bond shall be in such form and amount as is generally customary
among Persons that service a portfolio of mortgage loans
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having an aggregate principal amount of $100 million or more and which Persons
are generally regarded as servicers acceptable to institutional investors.
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ARTICLE IV
REMITTANCE AND REPORTING TO CERTIFICATEHOLDERS
SECTION 4.01. REMITTANCE REPORTS.
On or before the third Business Day prior to each Distribution Date,
the Master Servicer shall prepare a statement containing the information
specified below as to such Distribution Date (a "Remittance Report") and
deliver such statement to the Trustee. The Trustee shall forward such report to
the Certificateholders on the related Distribution Date, by mail to the
addresses of such Certificateholders as listed in the Certificate Register on
the preceding Record Date. A Remittance Report for a Distribution Date for a
Series shall identify the following items:
(1) the aggregate amount of each of the following,
stated separately, with respect to the related Assets: (A) the amount
of all scheduled principal payments on the Assets relating to such
Distribution Date, (B) the principal components and interest components
of all Monthly Payments made by the Obligors on the Assets during the
related Collection Period, (C) Principal Prepayments (including related
Net Insurance Proceeds) received by the Master Servicer during the
related Prepayment Period, (D) Liquidation Proceeds (including related
Insurance Proceeds) and Net Liquidation Proceeds (including related Net
Insurance Proceeds) received during the related Prepayment Period, (E)
the amount of any Repurchase Price paid by the Depositor, the Seller or
the Master Servicer with respect to any of the Assets purchased by the
Depositor, the Seller or the Master Servicer pursuant to Section 2.05
hereof during the related Prepayment Period, (F) the aggregate number
of REO Properties in the Trust as of the end of the related Prepayment
Period and the aggregate of the unpaid principal balances of the
related Mortgage Loans, (G) the aggregate number and the aggregate
Unpaid Principal Balance of Outstanding Mortgage Loans that are (i)
delinquent one month (i.e., 30 to 59 days) as of the end of the related
Prepayment Period, (ii) delinquent two months (i.e., 60 to 89 days) as
of the end of the related Prepayment Period, (iii) delinquent three
months (i.e., 90 days or longer) as of the end of the related
Prepayment Period and (iv) as to which repossession, foreclosure or
other comparable proceedings have been commenced as of the end of the
related Prepayment Period, (H) the amount of Realized Losses incurred
on the Assets during the related Prepayment Period and on a cumulative
basis since the Cut-off Date (the latter expressed as a dollar amount
and as a percentage of the aggregate Cut-off Date Principal Balance)
(separately identifying any Obligor Bankruptcy Losses, Special Hazard
Losses and Fraud Losses, if they are separately allocated to the
related Certificates) and (I) the aggregate Scheduled Principal Balance
of the Mortgage Loans and the number of Outstanding Mortgage Loans at
the end of the related Collection Period;
(2) the amount of the Available Distribution Amount for
such Distribution Date;
(3) the amount of funds in the Distribution Account, if
any, to be allocated to pay Servicing Fees, to reimburse the Master
Servicer for Advances made, to reimburse the Depositor or the Master
Servicer for expenses pursuant to Section 6.05 hereof, and to refund
any overpayment of a Repurchase Price for an Asset pursuant to Section
2.05(f) hereof;
(4) the amount of the Servicing Fee for the related
Collection Period;
(5) the aggregate amount of P&I Advances required to be
made by the Master Servicer with respect to such Distribution Date,
together with a statement of the amount, if any, of such required P&I
Advances that the Master Servicer will not make in respect of such
Distribution Date and of any P&I Advances that will not be made
because they are Non-Recoverable Advances;
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(6) the aggregate deposits into the Certificate Account
relating to such Distribution Date and the aggregate withdrawals from
the Certificate Account for each category of withdrawal specified in
Section 3.07(a) hereof relating to such Distribution Date;
(7) in the case of a Trust (or designated assets
thereof) for which a REMIC election has been or will be made, any other
information required to be provided to Certificateholders by the REMIC
Provisions; and
(8) any items relating to a specific Series of
Certificates specified in the related Pooling and Servicing Agreement.
The Trustee shall maintain a telephone number which investors may call
to ascertain, on each Distribution Date, the Certificate Principal Balance of
each Class of Certificates and the then-current Pass-Through Rate applicable to
each such Class. Such number for any Series shall initially be as specified in
the Prospectus Supplement for such Series and may only be changed after the
Trustee notes the change in such number in writing on the Remittance Report it
sends to Certificateholders.
Within a reasonable period of time after the end of each calendar
year, the Trustee shall prepare and furnish a statement, from information
provided by the Master Servicer, containing the information concerning the
amount of distributions of interest and principal on the Regular Certificates
and the amount of distributions on the Residual Certificates, as well as any
other information as may be required by the Code or Regulations and that
customarily would be provided by a Trustee to Certificateholders in order to
enable such Certificateholders to prepare their federal income tax returns, to
each Person who at any time during the calendar year was a Certificateholder
that constituted a retail investor or other Certificateholder that requests
such statement, aggregated for such calendar year or portion thereof during
which such Person was a Certificateholder. Such obligation of the Trustee shall
be deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Trustee pursuant to any requirements of
the Code as from time to time are in force.
SECTION 4.02. DISTRIBUTION ACCOUNT.
The Trustee shall establish and maintain a Distribution Account for
the benefit of the Certificateholders and shall deposit therein funds received
with respect to the Remittance Amount for each Distribution Date immediately
upon receipt thereof from the Master Servicer in accordance with Section
3.07(b) hereof. The Distribution Account shall be an Eligible Account and shall
be either held in the Trustee's name or designated in a manner that reflects
the custodial nature of the account and that all funds in such account are held
in trust for the benefit of the Trustee.
The Master Servicer shall keep and maintain separate accounting, on an
Asset-by-Asset basis, for the purpose of justifying any payment to and from the
Distribution Account.
SECTION 4.03. ALLOCATION OF AVAILABLE DISTRIBUTION AMOUNT.
On each Distribution Date for a Series, the Trustee shall withdraw all
monies on deposit in the related Distribution Account in accordance with the
related Remittance Report and shall distribute such amounts in the following
order of priority:
(1) to pay the Master Servicer its monthly Servicing
Fee, to the extent not previously retained or withdrawn from the
Certificate Account by such Master Servicer;
(2) to reimburse the Master Servicer from any amounts on
deposit in the Distribution Account for any Advance previously made
which has become a Non-Recoverable Advance, or to reimburse the Master
Servicer for any other Advance out of Related Proceeds on deposit in
the Distribution Account, in
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either case to the extent not previously retained or withdrawn from the
Certificate Account by the Master Servicer;
(3) to reimburse the Depositor or the Master Servicer
for expenses incurred by or reimbursable to them pursuant to Section
6.05 hereof;
(4) to refund any overpayment of a Repurchase Price for
an Asset pursuant to Section 2.05(f) hereof; and
(5) to distribute to the Certificateholders (or, if more
than one REMIC election has been made with respect to the Trust, to
distribute to the holders of the Regular Interests and the Residual
Interest in the Pooling REMIC), the amount of the Available
Distribution Amount in accordance with the applicable Pooling and
Servicing Agreement.
SECTION 4.04. COMPLIANCE WITH WITHHOLDING REQUIREMENTS.
Notwithstanding any other provisions of the Pooling and Servicing
Agreement, the Trustee shall comply with all federal withholding requirements
respecting payments of interest or principal to the extent of accrued original
issue discount on Certificates to each Holder of such Certificates who (a) is
not a "United States person," within the meaning of Code section 7701(a)(30),
(b) fails to furnish its TIN to the Trustee, (c) furnishes the Trustee an
incorrect TIN, (d) fails to report properly interest and dividends, or (e)
under certain circumstances, fails to provide the Trustee or the
Certificateholder's securities broker with a certified statement, signed under
penalties of perjury, that the TIN provided by such Certificateholder to the
Trustee or such broker is correct and that the Certificateholder is not subject
to backup withholding. The consent of such a Certificateholder shall not be
required for such withholding. In the event the Trustee does withhold the
amount of any otherwise required distribution from interest payments on the
Assets (including principal payments to the extent of accrued original issue
discount) or P&I Advances thereof to any Certificateholder pursuant to federal
withholding requirements, the Trustee shall indicate with any payment to such
Certificateholders the amount withheld. In addition, if any United States
federal income tax is due at the time a Non-U.S. Person transfers a Residual
Certificate, the Trustee or other Withholding Agent may (1) withhold an amount
equal to the taxes due upon disposition of such Residual Certificate from
future distributions made with respect to such Residual Certificate to the
transferee thereof (after giving effect to the withholding of taxes imposed on
such transferee), and (2) pay the withheld amount to the Internal Revenue
Service unless satisfactory written evidence of payment by the transferor of
the taxes due has been provided to the Trustee or such Withholding Agent.
Moreover, the Trustee or other Withholding Agent may (1) hold distributions on
a Residual Certificate, without interest, pending determination of amounts to
be withheld, (2) withhold other amounts, if any, required to be withheld
pursuant to United States federal income tax law from distributions that
otherwise would be made to such transferee on each Residual Certificate that it
holds, and (3) pay to the Internal Revenue Service all such amounts withheld.
SECTION 4.05. REPORTS OF SECURITY PRINCIPAL BALANCES TO THE CLEARING AGENCY.
If and for so long as any Certificate is held by the Clearing Agency,
on the second Business Day before each Distribution Date, the Trustee shall
give oral notice to the Clearing Agency (and shall promptly thereafter confirm
in writing) the following: (a) the amount of interest and principal to be
distributed on the Certificates of such Class on the upcoming Distribution
Date, as reported in the related Remittance Report, (b) the Record Date for
such distribution, (c) the Distribution Date for such distribution and (d) the
aggregate Certificate Principal Balance of each Class of Certificates reported
pursuant to clause (10) of Section 4.01 hereof in such month.
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SECTION 4.06. PREPARATION OF REGULATORY REPORTS.
(a) Subject to the provisions of subsections (b) and (c) of this
Section 4.06, the Master Servicer shall prepare or cause to be prepared, on
behalf of the Trust, such supplementary and periodic information, documents and
reports (such information, documents or reports are referred to hereinafter as
"Periodic Reports") as may be required pursuant to Section 12(g) or Section
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
by the rules and regulations of the Commission thereunder or as a condition to
approval of any application for relief ("Application for Relief") hereinafter
referred to and, in connection therewith, shall prepare such applications and
requests for exemption and other relief from such provisions as it may deem
appropriate. The Master Servicer shall be deemed to certify as to each Periodic
Report that it conforms in all material respects to applicable reporting
requirements imposed by the Exchange Act or is otherwise in form and content
appropriate for filing with the Commission. The Master Servicer is hereby
authorized to and shall execute all such Periodic Reports or Applications for
Relief on the Trustee's behalf and file the same with the Commission and other
required filing offices, if any, on behalf of the Trust.
(b) Within 30 days after the beginning of the first fiscal year
of any Trust during which its obligation to file Periodic Reports pursuant to
the Exchange Act shall have been suspended, the Master Servicer shall prepare,
or cause to be prepared, a notice on Commission Form 15 ("Form 15") and is
hereby authorized to and shall execute such Form 15 on the related Trustee's
behalf; provided, however, that the Master Servicer shall be under no obligation
to prepare such notice if the number of Certificateholders exceeds 300. The
Master Servicer shall file any notice on Form 15 with the Commission in
accordance with the provisions of Rule 15d-6 under the Exchange Act.
(c) Notwithstanding any other provision of the Pooling and
Servicing Agreement, the Trustee has not assumed, and shall not by its
performance hereunder be deemed to have assumed, any of the duties or
obligations of the Depositor or any other Person with respect to (1) the
registration of the Certificates pursuant to the Securities Act, (2) the
issuance or sale of the Certificates, or (3) compliance with the provisions of
the Securities Act, the Exchange Act, or any applicable federal or state
securities or other laws including, without limitation, any requirement to
update the registration statement or prospectus relating to the Certificates in
order to render the same not materially misleading to investors.
(d) In connection with the Master Servicer's preparation of any
Form 15 or of any Periodic Report, the Trustee shall provide it with information
which it may reasonably request concerning the number and identity of the
Holders appearing on the Certificate Register maintained by the Certificate
Registrar, but the Trustee shall have no duty or obligation to provide
information which does not appear on the Certificate Register, including any
information concerning the ownership of Persons for whom a nominee is the Holder
of record.
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ARTICLE V
THE POOLING INTERESTS AND THE CERTIFICATES
SECTION 5.01. POOLING REMIC INTERESTS.
If an election has been made to treat certain assets of the Trust as a
Pooling REMIC, the Pooling and Servicing Agreement will set forth the terms of
the Regular Interests and Residual Interest of the Pooling REMIC. Unless
otherwise specified in the Pooling and Servicing Agreement, (a) the Pooling
REMIC Regular Interests will be "regular interests" for purposes of the REMIC
Provisions but will not constitute securities or certificates of interest in
the Trust; and (b) the Trustee will be the owner of any such Regular Interests,
which may not be transferred to any person other than a successor trustee
appointed pursuant to Section 8.08 hereof unless the party desiring the
transfer obtains a Special Tax Opinion.
SECTION 5.02. THE CERTIFICATES.
The Certificates shall be designated in the Pooling and Servicing
Agreement. The Certificates in the aggregate will represent the entire
beneficial ownership interest in the Trust Estate (or in the Issuing REMIC, if
any). On the Closing Date, unless otherwise specified in the related Pooling
and Servicing Agreement, the aggregate Certificate Principal Balance of the
Certificates will not be less than the aggregate Unpaid Principal Balance of
the underlying Assets as of the Cut-off Date, after application of principal
payments due on or before such date, whether or not received. The Certificates
will be substantially in the forms annexed to the Pooling and Servicing
Agreement. Unless otherwise provided in the Pooling and Servicing Agreement,
the Certificates of each Class will be issuable in registered form. Each
Certificate will share ratably in all rights of the related Class.
Upon original issue, the Certificates shall be executed and delivered
by the Trustee and the Trustee shall cause the Certificates to be authenticated
by the Certificate Registrar to or upon the order of the Depositor. The
Certificates shall be executed and attested by manual or facsimile signature on
behalf of the Trustee by an authorized Officer under its seal imprinted
thereon. Certificates bearing the manual or facsimile signatures of individuals
who were at any time the proper Officers of the Trustee shall bind the Trustee,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificates or did
not hold such offices at the date of such Certificates. No Certificate shall
represent entitlement to any benefit under the Pooling and Servicing Agreement
or be valid for any purpose, unless there appears on such Certificate a
certificate of authentication substantially in the form provided in the Pooling
and Servicing Agreement (in the forms of Certificates attached thereto as
Exhibits) executed by the Certificate Registrar by manual signature, and such
certificate of authentication 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 execution, except
that those Certificates delivered on the Closing Date may be dated the Accrual
Date.
SECTION 5.03. BOOK-ENTRY CERTIFICATES.
(a) The Book-Entry Certificates will be represented initially by one
or more certificates registered in the name of CEDE & Co., as nominee of the
Clearing Agency. The Depositor, the Master Servicer and the Trustee may for all
intents and purposes (including the making of payments on the Book-Entry
Certificates) deal with the Clearing Agency as the authorized representative of
the Beneficial Owners of the Book-Entry Certificates for as long as those
Certificates are registered in the name of the Clearing Agency. The rights of
Beneficial Owners of the Book-Entry Certificates shall be limited to those
established by law and agreements between such Beneficial Owners and the
Clearing Agency and Clearing Agency Participants. The Beneficial Owners of the
Book-Entry Certificates shall not be entitled to certificates for the
Book-Entry Certificates as to which they are the Beneficial Owners, except as
provided in subsection (c) below. Requests and directions from, and votes of,
the Clearing Agency, as Holder, shall not be deemed to be inconsistent if they
are made with respect to different Beneficial Owners. Without the
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consent of the Depositor, the Master Servicer and the Trustee, a Book-Entry
Certificate may not be transferred by the Clearing Agency except to another
Clearing Agency that agrees to hold the Book-Entry Certificate for the account
of the respective Clearing Agency Participants and Beneficial Owners.
(b) Neither the Depositor, the Master Servicer nor the Trustee will
have any liability for any aspect of the records relating to or payment made on
account of Beneficial Owners of the Book-Entry Certificates held by the
Clearing Agency, for monitoring or restricting any transfer of beneficial
ownership in a Book-Entry Certificate or for maintaining, supervising or
reviewing any records relating to such Beneficial Owners.
(c) The Book-Entry Certificates will be issued in fully-registered,
certificated form to Beneficial Owners of Book-Entry Certificates or their
nominees, rather than to the Clearing Agency or its nominee, only if (1) the
Depositor advises the Trustee in writing that the Clearing Agency is no longer
willing or able to discharge properly its responsibilities as depository with
respect to the Book-Entry Certificates and the Depositor is unable to locate a
qualified successor within 30 days or (2) the Depositor, at its option, elects
to terminate the book-entry system operating through the Clearing Agency. Upon
the occurrence of either such event, the Trustee shall notify the Clearing
Agency, which in turn will notify all Beneficial Owners of Book-Entry
Certificates through Clearing Agency Participants, of the availability of
certificated Certificates. Upon surrender by the Clearing Agency of the
certificates representing the Book-Entry Certificates and receipt of
instructions for re-registration, the Trustee will reissue the Book-Entry
Certificates as certificated Certificates to the Beneficial Owners identified
in writing by the Clearing Agency. Such certificated Certificates shall not
constitute Book-Entry Certificates. All reasonable costs associated with the
preparation and delivery of certificated Certificates shall be borne by the
Depositor.
SECTION 5.04. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
The Trustee shall cause to be kept at its Corporate Trust Office a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of Certificates and
of transfers and exchanges of Certificates as herein provided. The Trustee will
initially serve as Certificate Registrar for the purpose of registering
Certificates and transfers and exchanges of Certificates as herein provided.
If a Person other than the Trustee is appointed by the Trustee as
Certificate Registrar, such Person will give the Trustee prompt written notice
of the location, and any change in the location, of the Certificate Register,
and the Trustee shall have the right to inspect the Certificate Register at all
reasonable times and to obtain copies thereof, and the Trustee shall have the
right to rely upon a certificate executed on behalf of the Certificate
Registrar by an Officer thereof as to the names and addresses of the Holders of
the Certificates and the principal amounts and numbers of such Certificates.
Subject to Section 5.05 below, upon surrender for registration of
transfer of any Certificate at the Corporate Trust Office of the Trustee or at
any other office or agency of the Trustee maintained for such purpose, the
Trustee shall execute and the Certificate Registrar shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Certificates of the same Class of a like aggregate Percentage Interest.
At the option of the Certificateholders, each Certificate may be
exchanged for other Certificates of the same Class with the same and authorized
denominations and a like aggregate Percentage Interest, upon surrender of such
Certificate to be exchanged at any such office or agency. Whenever any
Certificates are so surrendered for exchange, the Trustee shall execute and
cause the Certificate Registrar to authenticate and deliver the Certificates
which the Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for transfer or exchange shall (if so
required by the Trustee) be duly endorsed by, or be accompanied by a written
instrument of transfer in the form satisfactory to the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing.
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No service charge to the Certificateholders shall be made for any
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
All Certificates surrendered for transfer and exchange shall be
destroyed by the Certificate Registrar.
The Trustee will (or will cause the Certificate Registrar to) provide
notice to the Trustee of each transfer of a Certificate, and will provide the
Trustee and Master Servicer with an updated copy of the Certificate Register on
January 1 and July 1 of each year (or at such other time as the Master Servicer
may request).
SECTION 5.05. RESTRICTIONS ON TRANSFER.
(a) Securities Law Compliance. No transfer of any Private
Certificate shall be made unless that transfer is made pursuant to an effective
registration statement under the Securities Act and effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. Any Holder
of a Private Certificate shall, and, by acceptance of such Certificate, does
agree to, indemnify the Depositor, the Trustee and the Master Servicer against
any liability that may result if any transfer of such Certificates by such
Holder is not exempt from registration under the Securities Act and all
applicable state securities laws or is not made in accordance with such federal
and state laws. Neither the Depositor, the Trustee nor the Master Servicer is
obligated to register or qualify any Private Certificate under the Securities
Act or any other securities law or to take any action not otherwise required
under these Standard Terms or the related Pooling and Servicing Agreement to
permit the transfer of such Certificates without such registration or
qualification. The Trustee shall not register any transfer of a Private
Certificate (other than a Residual Certificate) unless and until the prospective
transferee provides the Trustee with a Transferee Agreement or, if the
Certificate to be transferred is a Rule 144A Certificate, a Rule 144A Agreement
certifying to facts which, if true, would mean that the proposed transferee is a
Qualified Institutional Buyer, and unless and until the transfer otherwise
complies with the provisions of this Section 5.05. If a proposed transfer does
not involve a Rule 144A Certificate or the transferee's Rule 144A Agreement does
not certify to facts which, if true, would mean that the transferee is a
Qualified Institutional Buyer, (i) the Master Servicer and the Trustee shall
require that the transferor and transferee certify as to the factual basis for
the registration exemption(s) relied upon and (ii) if such transfer is made
within three years after the acquisition thereof by a non-Affiliate of the
Depositor from the Depositor or an Affiliate of the Depositor, the Master
Servicer or the Trustee may also may require an Opinion of Counsel that such
transfer may be made without registration or qualification under the Securities
Act and applicable state securities laws, which Opinion of Counsel shall not be
obtained at the expense of the Depositor, the Trustee or the Master Servicer.
Notwithstanding the foregoing, no Rule 144A Agreement, Transferee Agreement or
Opinion of Counsel shall be required in connection with the initial transfer of
the Private Certificates and no Opinion of Counsel shall be required in
connection with the transfer of the Private Certificates by a broker or dealer,
if such broker or dealer was the initial transferee.
The Depositor shall provide to any transferee Holder of a Rule 144A
Certificate and any prospective transferee designated by such Holder
information regarding the related Certificates and the related Assets and such
other information as shall be necessary to satisfy the condition to eligibility
set forth in Rule 144A(d)(4) for transfer of any such Certificate without
registration thereof under the Securities Act pursuant to the registration
exemption provided by Rule 144A, upon the request for such information by such
Holder.
(b) ERISA Compliance.
(1) Book-Entry Certificates. No transfer of all or any
portion of any Class of Book-Entry Certificates that are ERISA
Restricted Certificates shall be made to a transferee that is a Plan
Investor, and each Beneficial Owner of such a Certificate shall be
deemed to have represented, by virtue of its acquisition of such a
Certificate, that it is not a Plan Investor.
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(2) Certificated Certificates. No transfer of all or any
portion of any Class of Certificates that (A) are not Book-Entry
Certificates and (B) are ERISA Restricted Certificates shall be made
unless and until the prospective transferee provides the Trustee and
the Master Servicer with a properly completed and executed Benefit
Plan Affidavit, together with a Benefit Plan Opinion if required in
order to comply with such Affidavit. Notwithstanding anything else to
the contrary herein, any purported transfer of such a Certificate to
or on behalf of a Plan Investor without delivery of a Benefit Plan
Opinion shall be null and void.
(c) Residual Certificates. The Trustee shall not register any
transfer of a Residual Certificate (including any beneficial interest therein)
unless it shall have received the written consent of the Master Servicer. No
Residual Certificate may be transferred to a Disqualified Organization. The
Master Servicer will not consent to any proposed transfer or sale of a Residual
Certificate (1) to any investor that it knows is a Disqualified Organization or
(2) if the transfer involves less than an entire interest in a Residual
Certificate, unless (A) the interest transferred is an undivided interest or (B)
the transferor or the transferee provides the Master Servicer with an Opinion of
Counsel obtained at its own expense to the effect that the transfer will not
jeopardize the REMIC status of any REMIC consisting of assets of the Trust. The
Master Servicer's consent to any transfer is further conditioned upon the Master
Servicer's receipt from the proposed transferee of (x) a Residual Transferee
Agreement, (y) a Benefit Plan Affidavit, and (z) either (A) if the transferee is
a Non-U.S. Person, an affidavit of the proposed transferee in substantially the
form attached as Exhibit 7-A to Exhibit 7 hereto and a certificate of the
transferor stating whether the Residual Certificate has "tax avoidance
potential" as defined in Treasury Regulations Section 1.860G-3(a)(2), or (B) if
the transferee is a U.S. Person, an affidavit in substantially the form attached
as Exhibit 7-B to Exhibit 7 hereto. In addition, if a proposed transfer involves
a Private Certificate, the transfer shall be subject to the additional
restrictions set forth in Section 5.05(a) above. Notwithstanding the foregoing,
no Opinion of Counsel shall be required in connection with the initial transfer
of the Residual Certificates or their transfer by a broker or dealer, if such
broker or dealer was the initial transferee. Notwithstanding the fulfillment of
the prerequisites described above, the Master Servicer may withhold its consent
to, or the Trustee may refuse to recognize, a transfer of a Residual
Certificate, but only to the extent necessary to avoid a risk of
disqualification as a REMIC of a REMIC consisting of Trust assets or the
imposition of a tax upon a REMIC. Any attempted transfer in violation of the
foregoing restrictions shall be null and void and shall not be recognized by the
Trustee.
If a tax or a reporting cost is borne by a REMIC consisting of Trust
assets as a result of the transfer of a Residual Certificate or any beneficial
interest therein in violation of the restrictions set forth in this Section,
the transferor shall pay such tax or cost and, if such tax or cost is not so
paid, the Trustee, upon notification from the Master Servicer, shall pay such
tax or cost or may pay such tax or reporting cost with amounts that otherwise
would have been paid to the transferee of the Residual Certificate (or
beneficial interest therein). In that event, neither the transferee nor the
transferor shall have any right to seek repayment of such amounts from the
Depositor, the Trustee, the REMIC, the Master Servicer, or the other Holders of
any of the Certificates, and none of such parties shall have any liability for
payment of any such tax or reporting cost. In the event that a Residual
Certificate is transferred to a Disqualified Organization, the Master Servicer
shall make, or cause to be made, available the information necessary for the
computation of the excise tax imposed under section 860E(e) of the Code.
SECTION 5.06. ACCRUAL OF INTEREST ON THE CERTIFICATES.
Certificates entitled to receive interest in accordance with the
related Pooling and Servicing Agreement shall accrue interest at the applicable
Pass-Through Rates on the basis of a 360-day year consisting of twelve 30-day
months and on the assumption that each Interest Accrual Period consists of 30
days.
SECTION 5.07. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.
If (a) any mutilated Certificate is surrendered to the Trustee or the
Certificate Registrar, or the Trustee and the Certificate Registrar receive
evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and
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(b) there is delivered to the Trustee and the Certificate Registrar such
security or indemnity as may be required by them to save each of them harmless
(the unsecured agreement of an Institutional Holder being sufficient for such
purpose), then, in the absence of notice to the Trustee or the Certificate
Registrar that such Certificate has been acquired by a bona fide purchaser, the
Trustee shall execute and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of the same
Class, tenor and denomination or Percentage Interest. Upon the issuance of any
new Certificate under this Section, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other reasonable expenses (including the
fees and expenses of the Trustee and the Certificate Registrar) connected
therewith. Every new Certificate issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership in the Trust, as if
originally issued on the Closing Date, regardless of whether any destroyed,
lost or stolen Certificate in lieu of which such new Certificate was issued
shall be found at any time.
SECTION 5.08. PERSONS DEEMED OWNERS.
Prior to due presentment for registration of transfer of any
Certificate, the Master Servicer, the Trustee and any agent of the Master
Servicer or of the Trustee may treat the Person in whose name any Certificate
is registered on the Certificate Register as the owner of such Certificate for
the purpose of receiving distributions on such Certificate and for all other
purposes whatsoever (whether or not such Certificate is overdue), and neither
the Master Servicer, the Trustee nor any agent of the Master Servicer or the
Trustee shall be affected by notice to the contrary.
SECTION 5.09. APPOINTMENT OF PAYING AGENT.
The Trustee, at its own expense, may appoint a Paying Agent approved
by the Depositor for the purpose of making distributions to Certificateholders.
The Trustee shall cause such Paying Agent to execute and deliver to the Trustee
an instrument in which such Paying Agent shall agree with the Trustee that such
Paying Agent will hold all sums held by it for the payment to
Certificateholders in an Eligible Account in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. All funds remitted by the Trustee to any such Paying Agent
for the purpose of making distributions shall be paid to Certificateholders on
each Distribution Date and any amounts not so paid shall be returned on such
Distribution Date to the Trustee.
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.01. LIABILITY OF THE DEPOSITOR AND THE MASTER SERVICER.
The Depositor and the Master Servicer each shall be liable in
accordance with the terms of the Pooling and Servicing Agreement only to the
extent of the obligations specifically imposed by the Pooling and Servicing
Agreement and undertaken hereunder by the Depositor or the Master Servicer,
respectively.
SECTION 6.02. THE DEPOSITOR'S REPRESENTATIONS AND WARRANTIES.
The Depositor represents and warrants to the Trustee, as of the date
of a Pooling and Servicing Agreement and as of the related Closing Date, as
follows:
(a) The Depositor has been duly organized and is validly existing
as a limited liability company under the laws of the State of Delaware and is in
good standing under such laws, with full power and authority to own its
properties and conduct its business as now conducted by it and to enter into and
perform its obligations under the Pooling and Servicing Agreement, and has duly
qualified to do business and is in good standing under the laws
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of each jurisdiction wherein it conducts any material business or in which the
performance of its duties under the Pooling and Servicing Agreement would
require such qualification.
(b) The Depositor has all requisite corporate power and authority
to own its properties and to conduct any and all business required or
contemplated by the Pooling and Servicing Agreement to be conducted by the
Depositor and to perform the covenants and obligations to be performed by it
hereunder; the execution and delivery by the Depositor of the Pooling and
Servicing Agreement are within the corporate power of the Depositor and have
been duly authorized by all necessary action on the part of the Depositor; and
neither the execution and delivery of the Pooling and Servicing Agreement by the
Depositor, nor the consummation by the Depositor of the transactions herein
contemplated, nor compliance with the provisions hereof by the Depositor, will
(1) conflict with or result in a breach of, or will constitute a default under,
any of the provisions of the articles of organization or operating agreement of
the Depositor or any law, governmental rule or regulation, or any judgment,
decree or order binding on the Depositor or its properties, or any of the
provisions of any indenture, mortgage, deed of trust or other instrument to
which the Depositor is a party or by which it is bound or (2) result in the
creation or imposition of any lien, charge or encumbrance upon any of its
property pursuant to the terms of any such indenture, mortgage, deed of trust or
other instrument.
(c) The Pooling and Servicing Agreement and all other documents
and instruments required or contemplated hereby to be executed or delivered by
the Depositor under the Pooling and Servicing Agreement have been duly
authorized, executed and delivered by the Depositor and, assuming due
authorization, execution and delivery thereof by all other parties thereto,
constitute legal, valid and binding agreements enforceable against the Depositor
in accordance with their terms, subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency or other similar laws
affecting creditors' rights generally from time to time in effect and to general
principles of equity.
(d) No consent, approval, order or authorization of, or
registration, qualification or declaration with, any state, federal or other
governmental authority by the Depositor is required in connection with the
authorization, execution or delivery of the Pooling and Servicing Agreement or
the performance by the Depositor of the covenants and obligations to be
performed by it hereunder.
(e) As of the Closing Date, no Proceedings are pending or, to the
best of the Depositor's knowledge, threatened against the Depositor that would
prohibit its entering into the Pooling and Servicing Agreement or performing its
obligations under the Pooling and Servicing Agreement, including assisting in
the issuance of the Certificates.
(f) The Depositor has obtained or made all necessary consents,
approvals, waivers and notifications of stockholders, creditors, lessors and
other nongovernmental persons, in each case, in connection with the execution
and delivery of the Pooling and Servicing Agreement, and the consummation of
all the transactions herein contemplated.
(g) The Depositor does not believe, nor does it have any reason
or cause to believe, that it cannot perform its obligations under the Pooling
and Servicing Agreement.
Upon discovery by any of the Depositor, the Master Servicer or the
Trustee of a breach of any of the foregoing representations, warranties and
covenants that materially and adversely affects the interest of the
Certificateholders in any underlying Asset, the party discovering such breach
shall give prompt written notice thereof (but in no event later than two
Business Days following such discovery) to the other parties hereto.
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SECTION 6.03. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MASTER
SERVICER.
The Master Servicer hereby represents, warrants and covenants to the
Trustee, as of the date hereof and as of the Closing Date, as follows:
(a) The Master Servicer has been [duly incorporated/duly
organized] and is validly existing as a [corporation/national banking
association] under the laws of the [State of _______________ (or the
jurisdiction of its organization, if the Master Servicer is not ______)] [and is
in good standing under such laws], with full power and authority to own its
properties and conduct its business as now conducted by it and to enter into and
perform its obligations under the Pooling and Servicing Agreement, and has duly
qualified to do business as a foreign [corporation] [and is in good standing]
under the laws of each jurisdiction wherein it conducts any material business or
in which the performance of its duties under the Pooling and Servicing Agreement
would require such qualification, except where the failure so to qualify would
not have a material adverse effect on the performance of its obligations under
the Pooling and Servicing Agreement. The Master Servicer holds all material
licenses, certificates, franchises, and permits from all governmental
authorities necessary for the conduct of its business and will have received no
notice of proceedings relating to the revocation of any such license,
certificate or permit, that, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would affect materially and adversely
the conduct of the business, results of operations, net worth or condition
(financial or otherwise) of the Master Servicer.
(b) The Master Servicer has all requisite [corporate] power and
authority to own its properties and to conduct any and all business required or
contemplated by the Pooling and Servicing Agreement to be conducted by the
Master Servicer and to perform the covenants and obligations to be performed by
it hereunder; the execution and delivery by the Master Servicer of the Pooling
and Servicing Agreement are within the corporate power of the Master Servicer
and have been duly authorized by all necessary corporate action on the part of
the Master Servicer; and neither the execution and delivery of the Pooling and
Servicing Agreement by the Master Servicer, nor the consummation by the Master
Servicer of the transactions herein contemplated, nor compliance with the
provisions hereof by the Master Servicer, will (1) conflict with or result in a
breach of, or will constitute a default under, any of the provisions of the
articles of incorporation or by-laws of the Master Servicer or any law,
governmental rule or regulation, or any judgment, decree or order binding on
the Master Servicer or its properties, or any of the provisions of any
indenture, mortgage, deed of trust or other instrument to which the Master
Servicer is a party or by which it is bound or (2) result in the creation or
imposition of any lien, charge or encumbrance upon any of its property pursuant
to the terms of any such indenture, mortgage, deed of trust or other
instrument.
(c) The Pooling and Servicing Agreement and all other documents
and instruments required or contemplated hereby to be executed or delivered by
the Master Servicer under the Pooling and Servicing Agreement have been duly
authorized, executed and delivered by the Master Servicer and, assuming due
authorization, execution and delivery thereof by all other parties thereto,
constitute legal, valid and binding agreements enforceable against the Master
Servicer in accordance with their terms, subject, as to enforcement of remedies,
to applicable bankruptcy, reorganization, insolvency or other similar laws
affecting creditors' rights generally from time to time in effect and to general
principles of equity.
(d) No consent, approval, order or authorization of, or
registration, qualification or declaration with, any federal, state or other
governmental authority by the Master Servicer is required in connection with the
authorization, execution or delivery of the Pooling and Servicing Agreement or
the performance by the Master Servicer of the covenants and obligations to be
performed by it hereunder.
(e) No Proceedings are pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer that would
prohibit its entering into the Pooling and Servicing Agreement or performing
its obligations under the Pooling and Servicing Agreement, including assisting
in the issuance of the Certificates.
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(f) The Master Servicer maintains an errors and omissions policy
and fidelity bond that covers the Master Servicer's performance under the
Pooling and Servicing Agreement and such policy and bond are in full force and
effect.
(g) The Master Servicer has obtained or made all necessary
consents, approvals, waivers and notifications of stockholders, creditors,
lessors and other nongovernmental persons, in each case, in connection with the
execution and delivery of the Pooling and Servicing Agreement, and the
consummation of all the transactions herein contemplated.
(h) The Master Servicer does not believe, nor does it have any
reason or cause to believe, that it cannot perform its obligations under the
Pooling and Servicing Agreement.
Upon discovery by any of the Depositor, the Master Servicer or the
Trustee of a breach of any of the foregoing representations, warranties and
covenants that materially and adversely affects the interest of the
Certificateholders in any underlying Asset, the party discovering such breach
shall give prompt written notice thereof (but in no event later than two
Business Days following such discovery) to the other parties hereto.
SECTION 6.04. CORPORATE EXISTENCE.
Subject to the provisions of the following paragraph, the Depositor
and the Master Servicer each will keep in full effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction in which it is
incorporated and will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of the Pooling
and Servicing Agreement, any Certificates or any of the Assets included in the
Trust Estate, and to perform its duties under the Pooling and Servicing
Agreement.
Any Person (a) into which the Depositor or the Master Servicer may be
merged or consolidated, (b) that may result from any merger, conversion or
consolidation to which the Depositor or the Master Servicer shall be a party,
(c) that may succeed to the business of the Depositor or the Master Servicer,
or (d) to which the Depositor or the Master Servicer may transfer all of its
assets, shall be the successor to the Depositor or the Master Servicer
hereunder, respectively, without the execution or filing of any document or any
further act by any of the parties to the Pooling and Servicing Agreement,
anything herein to the contrary notwithstanding; provided, that any such
successor to the Master Servicer must agree in writing to be bound by each of
the Master Servicer's obligations hereunder and that each applicable Rating
Agency must deliver to the Trustee a letter to the effect that such
successorship shall not result in a downgrading of the rating initially
assigned by the Rating Agency to any Class of Certificates as to which the
Depositor has requested a rating from such Rating Agency.
SECTION 6.05. LIMITATION ON LIABILITY OF THE DEPOSITOR, THE MASTER SERVICER
AND OTHERS.
Neither the Depositor, the Master Servicer nor any of the directors,
officers, employees or agents of any of the Depositor or the Master Servicer
shall be under any liability to the Trust or the Certificateholders and all
such Persons shall be held harmless 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 this provision
shall not protect 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 misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Depositor, the Master Servicer and any of the directors,
officers, employees or agents of either the Depositor or the Master Servicer
may rely in good faith on any document of any kind which, prima facie, is
properly executed and submitted by any Person respecting any matters arising
hereunder. Neither the Depositor nor the Master 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 the Pooling and Servicing
Agreement and such action in its opinion does not involve it in any expense
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or liability, except as provided in Section 10.01(b) hereof; provided, however,
that the Depositor or the Master Servicer may each in its discretion undertake
any such action that it deems 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 Certificateholders thereunder if the
Certificateholders offer to the Depositor or the Master Servicer, as the case
may be, reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby.
SECTION 6.06. MASTER SERVICER RESIGNATION.
The Master Servicer shall not resign from the obligations and duties
imposed on it under the Pooling and Servicing Agreement, except (a) upon
appointment of a successor servicer and receipt by the Trustee of a letter from
each applicable Rating Agency that such a resignation and appointment will not,
in and of itself, result in a downgrading of any rated Certificates or (b) upon
determination by its Board of Directors that the performance of its duties
under the Pooling and Servicing Agreement is no longer permissible under
applicable law. Any such determination permitting the resignation of the Master
Servicer shall be evidenced by a resolution of its Board of Directors and an
Opinion of Counsel to such effect delivered to the Trustee. No such resignation
shall become effective until the Trustee or a successor servicer shall have
assumed the responsibilities and obligations of the Master Servicer in
accordance with Section 7.02 hereof.
SECTION 6.07. ASSIGNMENT OR DELEGATION OF DUTIES BY THE MASTER SERVICER AND
THE DEPOSITOR.
(a) The Master Servicer may at any time without notice or consent
delegate certain computational, data processing, collection and foreclosure
duties hereunder to any entity. No such delegation shall relieve the Master
Servicer in any respect of its responsibility with respect to such duties.
(b) Neither the Master Servicer nor the Depositor may assign the
Pooling and Servicing Agreement or any of its rights, power, duties or
obligations hereunder (except as provided in Section 6.07(a) above), provided
that the Master Servicer and the Depositor may assign the Pooling and Servicing
Agreement in connection with a consolidation, merger, conveyance, transfer or
lease made in compliance with Section 6.04 hereof.
(c) Except as provided in Sections 6.04 and 6.06 hereof, the
duties and obligations of the Master Servicer and the Depositor under the
Pooling and Servicing Agreement shall continue until the Pooling and Servicing
Agreement shall have been terminated as provided in Section 9.01 hereof, and
shall survive the exercise by the Trustee of any right or remedy under the
Pooling and Servicing Agreement, or the enforcement by the Trustee of any
provisions of the Pooling and Servicing Agreement.
SECTION 6.08. THE DEPOSITOR AND MASTER SERVICER MAY OWN CERTIFICATES.
The Depositor, the Master Servicer and any Affiliate of the foregoing
may in its individual or any other capacity become the owner or pledgee of
Certificates with the same rights as it would have if it were not the
Depositor, the Master Servicer or an Affiliate of the Depositor or the Master
Servicer.
SECTION 6.09. PROTECTION OF TRUST ESTATE.
Except as limited by Section 2.02(a) above, the Master Servicer will
execute and deliver from time to time all amendments to the Pooling and
Servicing Agreement and all financing statements, continuation statements,
instruments of further assurance and other instruments necessary or advisable
in order to, and will take such other action as the Trustee deems necessary or
advisable in order to:
(a) grant to the Trustee more effectively all or any portion of the
Trust Estate;
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(b) preserve and defend the Trust's title to the Trust Estate and the
rights therein of the Trustee and the Holders of Certificates against the
claims of all persons and parties;
(c) maintain or preserve the lien (and the priority thereof) created
by the Pooling and Servicing Agreement or to carry out more effectively the
purposes hereof (including the filing of continuation statements under the UCC
as necessary);
(d) perfect, publish notice of, or protect the validity of any grant
made or to be made pursuant to the Pooling and Servicing Agreement; or
(e) enforce any of the related Asset Documents.
The Depositor and the Master Servicer each hereby designates the Trustee its
agent and attorney-in-fact to execute any financing statement, continuation
statement or other instrument required pursuant to this Section 6.09; provided,
that the Trustee shall have no duty to determine whether the filing of any
financing statement shall be necessary or to file such statements except upon
written request of the Depositor or the Master Servicer. After execution of any
continuation statement or other instrument pursuant to this Section, the
Trustee shall deliver such instrument to the Master Servicer for filing.
Promptly after filing any such instrument or causing any such instrument to be
filed, the Master Servicer shall deliver an Officer's Certificate, signed by an
Officer of the Master Servicer, to the Trustee stating that such continuation
statement or other instrument has been filed.
The Master Servicer shall pay or cause to be paid, on behalf of the
Trust, any taxes levied on the account of the ownership by the Trust of the
related Assets.
SECTION 6.10. PERFORMANCE OF OBLIGATIONS.
The Master Servicer shall not take any action, and will use its best
efforts not to permit any action to be taken by others, that would release any
Person from any of such Person's covenants or obligations under any of the
related Asset Documents or under any instrument included in the Trust Estate,
or that would result in the amendment, hypothecation, subordination,
termination or discharge of, or impair the validity or effectiveness of, any of
the related Asset Documents or any such instrument, except as expressly
provided in the Pooling and Servicing Agreement or such Asset Documents or
other instrument or unless such action will not adversely affect the interests
of the Holders of the Certificates.
ARTICLE VII
EVENT OF DEFAULT; TERMINATION OF SERVICING ARRANGEMENTS
SECTION 7.01. EVENTS OF DEFAULT.
Any of the following acts or occurrences shall constitute an Event of
Default by the Master Servicer:
(a) any failure by the Master Servicer to remit funds in the
Certificate Account to the Distribution Account or to make a required P&I
Advance that is not deemed by the Master Servicer to be a Non-Recoverable
Advance, in either case as required by Section 3.07(b) hereof, and the
continuance of such failure unremedied for a period of five days after the date
upon which such deposit, payment or remittance was due;
(b) any failure on the part of the Master Servicer duly to
observe or perform in any material respect any of the covenants or agreements on
the part of the Master Servicer (other than covenants referred to in clause (a)
above) contained in the Certificates or in the Pooling and Servicing Agreement,
which failure continues
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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
Master Servicer by the Trustee or the Depositor, or to the Master Servicer, the
Depositor and the Trustee by the Holders of Certificates of a Series entitled
to at least 25% of the related Voting Rights;
(c) the issuance of 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 or appointing a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs,
against the Master Servicer, and the remaining of such decree or order in force
undischarged or unstayed for a period of 60 consecutive days;
(d) the Master Servicer's consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings of, or relating
to, the Master Servicer or of, or relating to, all or substantially all of the
property of the Master Servicer; or
(e) the Master Servicer's (1) admission in writing of its
inability to pay its debts generally as they become due, (2) filing of a
petition to take advantage of, or commence a voluntary case under, any
applicable insolvency or reorganization statute, (3) making of an assignment for
the benefit of its creditors, or (4) voluntarily suspending payment of its
obligations.
If an Event of Default concerning the Master Servicer shall occur
hereunder, then, and in each and every such case, so long as such Event of
Default shall not have been remedied or waived, the Trustee may, and at the
direction of the Holders of Certificates evidencing greater than 51% of the
Voting Rights, shall, by notice then given in writing to the Master Servicer,
terminate all of the rights and obligations of the Master Servicer as servicer.
On and after the receipt by the Master Servicer of any such written notice, all
authority and power of the Master Servicer hereunder, whether with respect to
the Certificates (except its rights as a Holder thereof) or the Assets or
otherwise, shall pass to and be vested in the Trustee pursuant to and under
this Section 7.01 (provided, however, that the Master Servicer shall continue
to be entitled to receive all amounts accrued and owing to it as Master
Servicer under the Pooling and Servicing Agreement on or prior to the
occurrence of a Event of Default specified in Section 7.01(a) above or, in the
case of any other Event of Default, on or prior to the date of such
termination); and, without limitation, the Trustee hereby is authorized and
empowered on behalf of the Master Servicer, as attorney-in-fact or otherwise,
to execute and deliver 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 Assets and related documents or otherwise.
The holders of Certificates representing at least 66 2/3% of the
Voting Rights allocated to the respective Classes of Certificates affected by
any Event of Default will be entitled to waive such Event of Default; provided,
however, that an Event of Default involving a failure to distribute a required
payment to Certificateholders described in clause (a) of this Section 7.01 may
be waived only by all of affected Certificateholders. Upon any such waiver of
an Event of Default, such Event of Default shall cease to exist and shall be
deemed to have been remedied for every purpose under this Agreement.
The Master Servicer shall cooperate with the Trustee in effecting the
termination of the responsibilities and rights of the Master Servicer
hereunder, including, without limitation, (1) transferring to the Trustee for
administration by it of all cash amounts that shall be held at the time by the
Master Servicer for deposit, shall have been deposited by the Master Servicer
into the Servicing Account, the Certificate Account or the Distribution
Account, or shall be received thereafter with respect to an Asset, and (2) the
prompt provision to the Trustee (in no event later than ten Business Days
subsequent to its receipt of such notice of termination) of all documents and
records, electronic and otherwise, reasonably requested by the Trustee or its
designee in order for the Trustee or its designee to assume and carry out the
duties and obligations that otherwise were to have been performed and
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carried out by the Master Servicer under the Pooling and Servicing Agreement
but for the termination of the Master Servicer.
Upon any termination of the Master Servicer pursuant to this Section,
the Trustee or its designee shall pay over to the Master Servicer that portion
of any future proceeds of the related Assets that, if it were acting hereunder
at such future time, it would be permitted to retain or withdraw from the
Certificate Account or Distribution Account in consideration of, or in
reimbursement for, previous services performed, or advances made, by it or for
other matters for which it is entitled to reimbursement pursuant hereto or to
the terms of the Pooling and Servicing Agreement. Prior to appointment of any
successor Master Servicer, the Trustee must notify the Rating Agency in writing
of the identity of such prospective successor.
SECTION 7.02. TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7.01 hereof or resigns pursuant to Section 6.06
hereof, the Trustee shall be the successor in all respects to the Master
Servicer in its capacity as servicer under the Pooling and Servicing Agreement
and in connection with the transactions provided for herein and shall be
subject to all the responsibilities, duties and liabilities placed on the
Master Servicer by the terms and provisions hereof. As compensation therefor,
the Trustee, except as provided in Section 7.01 hereof, shall be entitled to
such compensation (whether payable out of the Distribution Account or
otherwise) as the Master Servicer would have been entitled to receive hereunder
if no such notice of termination had been given, as well as all protections and
indemnification afforded the Master Servicer pursuant to Section 6.05 above.
Notwithstanding the above, the Trustee may, if it is unwilling or unable so to
act, it may or, at the written request of Certificateholders entitled to at
least 51% of the Voting Rights, it shall appoint, or petition a court of
competent jurisdiction to appoint, any established housing finance institution
having a net worth of not less than $15,000,000 and acceptable to each Rating
Agency, as the successor to the Master Servicer hereunder in the assumption of
all or any part of the responsibilities, duties or liabilities of the Master
Servicer hereunder. No appointment of a successor to the Master Servicer shall
be effective until the assumption by the successor of all future
responsibilities, duties and liabilities of the Master Servicer under the
Pooling and Servicing Agreement. Pending appointment of a successor to the
Master Servicer hereunder, unless the Trustee is prohibited by law from so
acting, the Trustee or an Affiliate of the Trustee shall act as Master Servicer
hereunder as provided above. Notwithstanding any of the foregoing, the
successor Master Servicer shall not be required to purchase any Assets from the
Trust pursuant to these Standard Terms except (i) under Section 2.05(a)(2)
hereof to the extent the obligation to repurchase arose out of a breach of a
representation, warranty or covenant by the successor Master Servicer and (ii)
under Section 2.05(b) hereof to the extent the Master Servicer's obligation to
effect remedial action as described in such Section arose after the successor
Master Servicer began serving as Master Servicer. It is understood that any
predecessor Master Servicer shall remain liable for any breaches of
representations, warranties and covenants that it committed while it was the
Master Servicer, and shall remain responsible for effecting remedial actions
described in Section 2.05(b) hereof (and for repurchasing Assets pursuant to
such Section 2.05(b)) to the extent the obligation to undertake such remedial
action arose while such predecessor Master Servicer was the Master Servicer
hereunder.
In connection with the appointment of a successor Master Servicer, the
Trustee may make such arrangements for the compensation of such successor
servicer out of payments on the related Assets as it and such successor shall
agree; provided, however, that no such compensation shall be in excess of that
permitted the Master Servicer under the terms of the Pooling and Servicing
Agreement. The Trustee and such successor servicer shall take such action,
consistent with the Pooling and Servicing Agreement, as shall be necessary to
effectuate any such succession.
Any successor to the Master Servicer shall maintain in force during
the term of its service as Master Servicer the policy or policies that the
Master Servicer is required to maintain pursuant to Section 3.15(c) hereof.
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Upon any Event of Default described hereunder, the Trustee, in
addition to the rights specified in this Section, shall have the right, in its
own name and as "Trustee," 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 of the Certificateholders, and enforce the rights and remedies of
the Certificateholders (including the institution and prosecution of all
judicial, administrative and other proceedings and the filings of proofs of
claim and debt in connection therewith). No remedy provided for by the Pooling
and Servicing 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 Event of Default. Amounts
payable to the Trustee to reimburse it for any expenses it incurs in connection
with any actions taken by it pursuant to this paragraph are intended to
constitute administrative expenses. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or vote for or accept or adopt
on behalf of any Certificateholder any plan of reorganization, arrangement,
adjustment or composition affecting the Certificates or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the claim of
any Certificateholder in any such Proceeding.
For the purposes of this Section 7.02 and Section 7.03 hereof, the
Trustee shall not be deemed to have knowledge of a Default or an Event of
Default hereunder unless an Officer of the Trustee having direct responsibility
for the administration of the Pooling and Servicing Agreement has actual
knowledge thereof or unless written notice of any Event of Default is received
by the Trustee and such notice references the Certificates or the Trust.
SECTION 7.03. NOTIFICATIONS TO MASTER SERVICER AND TO CERTIFICATEHOLDERS.
(a) Upon obtaining actual knowledge of any Default, the Trustee
shall promptly notify the Master Servicer and each Certificateholder (at their
respective addresses appearing in the Certificate Register) thereof.
(b) Upon any termination of, or appointment of a successor to,
the Master Servicer pursuant to Section 7.02 hereof, the Trustee shall give
prompt written notice thereof to the Certificateholders at their respective
addresses appearing in the Certificate Register.
(c) As soon as practicable after the Trustee's obtaining
knowledge of the occurrence of an Event of Default, the Trustee shall transmit
by certified mail to all Holders of the Certificates (at their respective
addresses appearing in the Certificate Register) notice of such Event of Default
or occurrence known to the Trustee, unless such Event of Default shall have been
cured or waived.
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. DUTIES OF TRUSTEE.
If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by the Pooling and
Servicing Agreement, and shall use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs. Prior to the occurrence of an Event of Default or
after all Events of Default which may have occurred have been cured or waived,
the Trustee shall exercise such of the rights and powers vested in it by the
Pooling and Servicing Agreement, and shall use the same degree of care and
skill in their exercise, as a corporate trustee would exercise or use under the
circumstances in the administration of a corporate trust agreement.
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The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that are specifically required to be furnished pursuant to any
provision of the Pooling and Servicing Agreement, shall examine them to
determine whether they conform to the requirements of the Pooling and Servicing
Agreement; provided, however, that the Trustee shall be under no duty to
recalculate, verify or recompute the information provided to it hereunder by
the Depositor or the Master Servicer. If any such instrument is found not to
conform to the requirements of the Pooling and Servicing 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 satisfaction, the Trustee will provide notice thereof to the related
Certificateholders.
No provision of the Pooling and Servicing Agreement shall be construed
to relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct; provided, however,
that:
(a) prior to the occurrence of an Event of Default with
respect to the Master Servicer of which the Trustee has notice or
knowledge, and after the curing or waiver of any such Event of
Default, the duties and obligations of the Trustee shall be determined
solely by the express provisions of the Pooling and Servicing
Agreement, the Trustee shall not be liable except for the performance
of such duties and obligations as are specifically set forth in the
Pooling and Servicing Agreement, no implied covenants or obligations
shall be read into the Pooling and Servicing Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee that conform to the
requirements of the Pooling and Servicing Agreement;
(b) the Trustee shall not be liable in its individual
capacity for any error of judgment made in good faith by an Officer of
the Trustee, unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts;
(c) the Trustee shall not be liable in its individual
capacity with respect to any action taken, suffered or omitted to be
taken by it in good faith in accordance with the direction of the
Holders of Certificates of a Series entitled to at least 25% of the
related Voting Rights 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 the
Pooling and Servicing Agreement;
(d) Any determination of negligence or bad faith of the
Trustee shall be made only upon a finding that there is clear and
convincing evidence (and not upon the mere preponderance of evidence)
thereof in a proceeding before a court of competent jurisdiction in
which the Trustee has had an opportunity to defend; and
(e) in no event shall the Trustee be held liable for the
actions or omissions of the Master Servicer or the Depositor
(excepting the Trustee's own actions as Master Servicer), and in
connection with any action or claim or recovery sought against the
Trustee based upon facts involving the acts or omissions of the Master
Servicer or the Depositor, or involving any allegation or claim of
liability or recovery against the Trustee by the Master Servicer or by
the Depositor, the Trustee shall not be held to a greater standard of
care than the Master Servicer or the Depositor would be held in such
situation.
Except as specifically required herein, the Trustee shall not be
required to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it, unless such risk or liability
relates to its ordinary services hereunder.
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SECTION 8.02. CERTAIN MATTERS AFFECTING THE TRUSTEE.
(a) Except as otherwise provided in Section 8.01 hereof:
(1) In the absence of bad faith, the Trustee may rely,
and shall be protected in acting or refraining from acting in reliance
upon, any resolution, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties. Further, the Trustee may accept a copy of the vote of the
Board of Directors of any party certified by its clerk or assistant
clerk or secretary or assistant secretary as conclusive evidence of the
authority of any person to act in accordance with such vote, and such
vote may be considered as in full force and effect until receipt by the
Trustee of written notice to the contrary.
(2) The Trustee may rely, in the absence of bad faith on
its part, upon a certificate of an Officer of the appropriate Person
whenever in the administration of the Pooling and Servicing Agreement
the Trustee shall deem it desirable that a matter be proved or
established (unless other evidence be prescribed herein specifically)
prior to taking, suffering or omitting any action hereunder.
(3) The Trustee may consult with counsel and the
written advice of such counsel or 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 written advice or Opinion of Counsel.
(4) The Trustee shall be under no obligation to exercise
any of the trusts or powers vested in it by the Pooling and Servicing
Agreement or to institute, conduct or defend any litigation hereunder
or in relation hereto at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of the Pooling and
Servicing Agreement, unless such Certificateholders shall have offered
to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities that may be incurred therein or thereby.
(5) 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 the Holders of Certificates of a
Series entitled to at least 25% of the related Voting Rights; 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, in the opinion of the Trustee, is not
assured to the Trustee by the security afforded to it by the terms of
the Pooling and Servicing Agreement, the Trustee may require indemnity
against such expense or liability as a condition to taking any such
action. The expense of every such examination shall be paid by the
Master Servicer or, if paid by the Trustee, shall be repaid by the
Master Servicer upon demand.
(6) The Trustee may execute any of the trusts or powers
under the Pooling and Servicing Agreement or perform any duties
hereunder either directly or by or through agents, attorneys or
co-trustees and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due
care by it under the Pooling and Servicing Agreement.
(7) Whenever the Trustee is authorized herein to require
acts or documents in addition to those required to be provided it in
respect of any matter, it shall be under no obligation to make any
determination as to whether such additional acts or documents should be
required unless obligated to do so under Section 8.01 hereof.
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(8) The Trustee shall not be deemed to have notice or
knowledge of any matter, including, without limitation, any Event of
Default, unless one of its Officers having direct responsibility for
the administration of the Pooling and Servicing Agreement has actual
knowledge or record thereof or unless written notice thereof is
received by the Trustee at the Corporate Trust Office and such notice
references the Certificates generally, the Depositor, the Trust or the
Pooling and Servicing Agreement.
(9) The Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and believed by
it to be authorized or within the discretion or rights or powers
conferred upon it by the Pooling and Servicing Agreement.
(10) The permissive right or authority of the Trustee to
take any action enumerated in the Pooling and Servicing Agreement shall
not be construed as a duty or obligation.
Certificateholders shall have rights to institute suits, actions or
proceedings in equity or at law upon or under or with respect to the Pooling
and Servicing Agreement only under the circumstances described in the third
paragraph of Section 11.03 hereof.
(b) All rights of action under the Pooling and Servicing
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 the Certificates, subject to the
provisions of the Pooling and Servicing Agreement.
SECTION 8.03. TRUSTEE NOT LIABLE FOR CERTIFICATES OR ASSETS.
The recitals contained in the Pooling and Servicing Agreement and in
the Certificates (other than the signature and countersignature of the Trustee
on the Certificates) shall be taken as the statements of the Depositor or the
Master Servicer and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations or warranties as to the
validity or sufficiency of the Pooling and Servicing Agreement or of the
Certificates (other than the signature and countersignature of the Trustee on
the Certificates) or of any underlying Asset or related document. The Trustee
shall not be accountable for the use or application by the Depositor of any of
the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Master Servicer in respect of the
underlying Assets or deposited in or withdrawn from the Servicing Account, the
Certificate Account or the Distribution Account other than any funds held by or
on behalf of the Trustee in accordance with the Pooling and Servicing
Agreement.
SECTION 8.04. TRUSTEE MAY OWN CERTIFICATES.
The Trustee, in its individual capacity or any other capacity, may
become the owner or pledgee of Certificates with the same rights it would have
if it were not Trustee.
SECTION 8.05. TRUSTEE'S FEES AND EXPENSES.
The Master Servicer shall pay to the Trustee from time to time,
pursuant to the Pooling and Servicing Agreement or a separate fee agreement,
reasonable compensation (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) for all services
rendered by it in the execution of the trusts created under the Pooling and
Servicing Agreement and in the exercise and performance of any of the powers
and duties hereunder of the Trustee, and shall reimburse the Trustee for all
reasonable expenses, disbursements and advances (other than any expenses
incurred by the Trustee in connection with its assumption of the obligations of
the Master Servicer pursuant to Section 7.02 hereof) incurred or made by the
Trustee in accordance with any of the provisions of the Pooling and Servicing
Agreement (including but not limited to the
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reasonable compensation and the expenses and disbursements of its counsel and
of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith. The
Trustee and any director, officer, employee or agent of the Trustee shall be
indemnified against any loss, liability or expense (including costs and
expenses of litigation, and of investigation, counsel fees, damages, judgments
and amounts paid in settlement), incurred in connection with the Trustee's (i)
enforcing its rights and remedies and protecting the interests, and enforcing
the rights and remedies, of the Certificateholders during the continuance of an
Event of Default, (ii) defending or prosecuting any legal action in respect of
this Agreement or the related Certificates, (iii) being the mortgagee of record
with respect to the Mortgage Loans in a Trust Fund and the owner of record with
respect to any Mortgaged Property acquired in respect thereof for the benefit
of Certificateholders, or (iv) acting or refraining from acting in good faith
at the direction of the holders of the Certificates entitled to not less than
25% of the Voting Rights for the related Series; provided, however, that such
indemnification will not extend to any loss, liability or expense that
constitutes a specific liability of the Trustee pursuant to this Agreement, or
to any loss, liability or expense incurred by reason of willful misfeasance,
bad faith or negligence on the part of the Trustee in the performance of its
obligations and duties hereunder, or by reason of its reckless disregard of
such obligations or duties, or as may arise from a breach of any
representation, warranty or covenant of the Trustee made herein. The
obligations under this Section 8.05 shall survive the resignation or removal of
the Trustee.
SECTION 8.06. ELIGIBILITY REQUIREMENTS FOR TRUSTEE.
The Trustee shall at all times be a corporation or national banking
association that is not an Affiliate of the Depositor or the Master Servicer,
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,
having a combined capital and surplus of at least $50,000,000 (or qualifying as
a Qualified Bank) and subject to supervision or examination by federal or state
regulatory authorities. If such 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 the purposes of this
Section the combined capital and surplus of such corporation or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. 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 hereof.
SECTION 8.07. RESIGNATION AND REMOVAL OF THE TRUSTEE.
The Trustee may at any time resign and be discharged from the trusts
created pursuant to the Pooling and Servicing Agreement by giving written
notice of such resignation to the Depositor, the Master Servicer and to all
related Certificateholders. Upon receiving such notice of resignation, the
Depositor shall promptly appoint a successor Trustee by written instrument, in
duplicate, which instrument shall be delivered to the resigning Trustee and to
the successor Trustee. A copy of such instrument shall be delivered to the
Certificateholders and to the Master Servicer by the Depositor. If no successor
Trustee shall have been so appointed and have accepted appointment within 30
days after the resigning Trustee's giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.06 hereof and shall fail to resign after
written request therefor by the Depositor, 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 thereof,
then the Depositor may remove the Trustee and appoint a successor Trustee by
written instrument, in duplicate, which instrument shall be delivered to the
Trustee so removed and to the successor Trustee. A copy of such instrument
shall be delivered to the Certificateholders and to the Master Servicer by the
Depositor.
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The Holders of Certificates entitled to at least 51% of the Voting
Rights may remove the Trustee at any time and appoint a successor Trustee by
written instrument or instruments, in triplicate, 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 Trustee so removed
and one complete set to the successor so appointed. A copy of such instrument
shall be delivered to the Certificateholders and to the Master Servicer by the
Depositor. If the Holders remove the Trustee otherwise than for reasonable
cause based upon the Trustee's failure to continue to meet the eligibility
requirements set forth in Section 8.06 above or the Trustee's failure to
perform its duties as described herein, then the Holders so removing the
Trustee shall bear any and all costs and expenses arising from such removal and
substitution.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee as
provided in Section 8.08 hereof.
SECTION 8.08. SUCCESSOR TRUSTEE.
Any successor Trustee appointed as provided in Section 8.07 hereof
shall execute, acknowledge and deliver to the Depositor, the Master Servicer
and to its predecessor Trustee an instrument accepting such appointment under
the Pooling and Servicing Agreement and thereupon the resignation or removal of
the predecessor Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become fully vested with all
the rights, powers, duties and obligations of its predecessor hereunder, with
the like effect as if originally named as Trustee herein. The predecessor
Trustee shall deliver to the successor Trustee all related Asset Documents and
related documents and statements held by it under the Pooling and Servicing
Agreement and the Depositor, the Master Servicer and the predecessor Trustee
shall execute and deliver such instruments and do such other things as
reasonably may 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 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 8.06 hereof.
Upon acceptance of appointment by a successor Trustee as provided in
this Section, the Depositor shall mail notice of the succession of such Trustee
under the Pooling and Servicing Agreement to all Holders of the Certificates at
their addresses as shown in the Certificate Register. If the Depositor fails to
mail such notice within ten 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.
SECTION 8.09. MERGER OR CONSOLIDATION OF TRUSTEE.
Any corporation or association into which the Trustee may be merged or
converted or with which it may be consolidated or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to the
business of the Trustee, shall be the successor of the Trustee under the
Pooling and Servicing Agreement provided such corporation or association shall
be eligible under the provisions of Section 8.06 hereof, 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. Prior to any such
merger, conversion or consolidation, the Trustee shall notify each applicable
Rating Agency in writing of the pendency of such merger, conversion or
consolidation.
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SECTION 8.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
For the purpose of meeting any legal requirements of any jurisdiction
in which any part of the Trust Estate or property securing the same may be
located at any time, the Depositor, the Master Servicer and the Trustee, acting
jointly, shall have the power and shall execute and deliver all instruments
necessary to appoint one or more Persons approved by the Trustee to act as
co-Trustee or co-Trustees, jointly with the Trustee, or separate Trustee or
Trustees, of all or any part of the Trust Estate, and to vest in such Person or
Persons, in such capacity, such title to the Trust Estate 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, the Master Servicer and the
Trustee may consider necessary or desirable. If the Depositor or the Master
Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, the Trustee alone shall have the power to
make such appointment. No co-Trustee or separate Trustee(s) hereunder shall be
required to meet the terms of eligibility as a successor Trustee under Section
8.06 hereof 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, 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 under the
Pooling and Servicing Agreement or as successor to the Master Servicer pursuant
to Section 7.02 hereof), 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 Estate or any portion
thereof in any such jurisdiction) shall be exercised and performed by such
separate Trustee or co-Trustee at the direction of the 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 the Pooling and
Servicing Agreement and the conditions of this Article VIII. 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 the Pooling and Servicing Agreement,
specifically including every provision of the Pooling and Servicing Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
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 the
Pooling and Servicing 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. APPOINTMENT OF CUSTODIANS. The Trustee may, with the
consent of the Master Servicer, appoint one or more Custodians to hold all or a
portion of the Trustee Mortgage Loan Files as agent for the Trustee, by
entering into a custodial agreement. The appointment of any Custodian may at
any time be terminated and a substitute Custodian appointed therefor by the
Trustee. The Trustee shall terminate the appointment of any Custodian and
appoint a substitute custodian upon the request of the Master Servicer to the
Trustee. Subject to this Article VIII, 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 or trust company subject to
supervision by federal or state authority, shall have combined capital and
surplus of at least $10,000,000 and shall be qualified to do business in the
jurisdiction in which it holds any Trustee Mortgage Loan File. Any such
Custodian may not be an affiliate of the Depositor or any Seller with respect
to the applicable Trust.
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SECTION 8.12. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
CERTIFICATES. All rights of action and claims under the Pooling and Servicing
Agreement or the Certificates may be prosecuted and enforced by the Trustee
without the possession of any of the Certificates or the production thereof in
any proceeding relating thereto and any such proceeding instituted by the
Trustee shall be brought in its own name or in its capacity as Trustee. Any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Certificateholders in respect of
which such judgment has been recovered.
ARTICLE IX
TERMINATION
SECTION 9.01. TERMINATION UPON REPURCHASE OR LIQUIDATION OF ALL ASSETS.
(a) The respective obligations and responsibilities of the
Depositor, the Master Servicer and the Trustee under the Pooling and Servicing
Agreement (other than the obligations of the Trustee to make distributions to
Certificateholders, to reimburse the Master Servicer for outstanding Advances,
to pay the Master Servicer accrued and previously unpaid Servicing Fees or to
provide tax information as provided in Section 4.01(a) hereof and other than the
obligations of the Master Servicer under Article X hereof) shall terminate upon
distribution to the Certificateholders of all amounts held by or on behalf of
the Trustee and required hereunder to be so distributed on the Distribution Date
coinciding with or following the earlier to occur of (1) a Terminating Purchase
for an amount equal to the Termination Price and (2) the final payment or other
liquidation (or any advance with respect thereto) of the last Asset remaining in
the Trust or the disposition of the last REO Property remaining in the Trust;
provided, however, that in no event shall the Trust created hereby continue
beyond the expiration of 21 years after the death of the last survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the Court of St. James's, living on the date hereof.
(b) Unless otherwise provided in the Pooling and Servicing
Agreement, the Master Servicer or the Holders of the majority of the Percentage
Interest in the Residual Certificates of a REMIC (or, in the case of a double
REMIC Series, the Pooling REMIC) (the "Residual Majority") may, at their
respective options, make, or cause a Person to make, a Terminating Purchase on
any Distribution Date on or after the earlier to occur of (1) the Master
Servicer's determination, based upon an Opinion of Counsel, that the REMIC
status of any REMIC related to the Trust has been lost or that a substantial
risk exists that such REMIC status will be lost for the then-current taxable
year, or (2) the Distribution Date on which, after taking into account
distributions of principal to be made on such Distribution Date, the sum of the
Certificate Principal Balances of the Certificates is less than 10% of the sum
of the original Certificate Principal Balances of the Certificates.
(c) The Master Servicer or the Residual Majority shall notify the
Trustee and the Certificate Registrar in writing of its election to make or to
cause a Terminating Purchase no later than the Distribution Date preceding the
Distribution Date on which the Certificates will be retired as a result of such
Terminating Purchase. The Master Servicer shall advise the Trustee and the
Certificate Registrar of the final payment or other liquidation of the last
Asset remaining in the Trust or the disposition of the last REO Property
remaining in the Trust at least two Business Days prior to the Remittance Date
in the month in which the Trust will terminate as a result thereof.
Notice of any termination of the Trust shall be given promptly by the
Trustee by letter sent to the Certificateholders by certified mail (1) in the
event such notice is given in connection with a Terminating Purchase, not
earlier than the fifth day of the month preceding the month of such termination
and not later than the first day of the month of such termination or (2)
otherwise not later than the Remittance Date preceding the final Distribution
Date, in each case specifying (A) the Distribution Date upon which the Trust
will terminate and that final payment of the Certificates will be made on such
Distribution Date and (B) the amount of any such final distribution. The
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Trustee shall give such notice to the Certificate Registrar at the time such
notice is given to Certificateholders. In the event such notice is given in
connection with a Terminating Purchase, the Terminator shall deliver to the
Trustee for deposit into the Distribution Account on the Business Day
immediately preceding the Distribution Date on which the Terminating Purchase
is to take place an amount in next day funds equal to the Termination Price.
Notwithstanding the foregoing, if the Terminator is the Master Servicer, the
Terminator, upon notice to the Trustee, shall be entitled to remit the
Termination Price net of amounts owed to the Terminator in respect of
unreimbursed outstanding Advances made by such Terminator or amounts required
to be reimbursed or paid to such Terminator hereunder.
(d) On the final Distribution Date, the Trustee shall distribute
to the Certificateholders as of the related Record Date the amount otherwise
distributable on the Certificates on such Distribution Date (if such final
Distribution Date is not the result of a Terminating Purchase).
Upon any termination of the Trust as the result of a Terminating
Purchase, the Trustee shall distribute the Termination Price as though it were
the amount on deposit in the Distribution Account in accordance with Section
4.03(a) hereof and in accordance with the related Pooling and Servicing
Agreement.
Following such final distribution, the Master Servicer and the Trustee
shall promptly release to the Terminator the related Asset Files or portions
thereof in their respective possessions for the remaining Assets, and REO
Properties, and the Trustee shall execute all assignments, endorsements and
other instruments necessary to effectuate transfer of such Asset Files to such
Terminator, whereupon the Trust shall terminate.
(e) In the event that all of the Certificateholders shall not
surrender their Certificates within six months after the date specified in the
above-mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates and receive
the final distribution with respect thereto, net of the cost of such second
notice. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the amounts otherwise payable on such
Certificates. Any funds payable to Certificateholders that are not distributed
on the final Distribution Date shall be deposited in a Termination Account, as
the case may be, each of which shall be an Eligible Account, to be held for the
benefit of Certificateholders not presenting and surrendering their
Certificates in the aforesaid manner, and shall be disposed of in accordance
with this Section.
SECTION 9.02. ADDITIONAL TERMINATION REQUIREMENTS.
(a) In the event of a Terminating Purchase as provided in Section
9.01 hereof, the Trust shall be terminated in accordance with the following
additional requirements, unless the Master Servicer, the Depositor, and the
Trustee receive (1) a Special Tax Opinion and (2) a Special Tax Consent from
each of the Holders of the Residual Certificates (unless the Special Tax Opinion
specifically provides that no REMIC-level tax will result from such Terminating
Purchase).
(1) Within 90 days prior to the time of the making of
the final payment on the Certificates, the Depositor on behalf of each
related REMIC shall adopt a plan of complete liquidation meeting the
requirements set forth in the REMIC Provisions for a qualified
liquidation (which plan may be adopted by the Trustee's attachment of a
statement specifying the first day of the 90-day liquidation period to
the REMIC's final federal income tax return) and the REMIC will sell
all of its assets (other than cash).
(2) At the time of the making of the final payment on
the Regular Certificates or the deposit to the Termination Account, the
Trustee shall distribute or credit, or cause to be distributed or
credited, pro rata, to the Holders of the Residual Certificates, all
remaining cash on hand relating to the REMIC after
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such final payment (other than cash retained to meet claims against
the Trust) and the REMIC shall terminate at that time.
(3) In no event may the final payment on the Regular
Certificates or the final distribution or credit to the Holders of the
Residual Certificates be made after the 90th day after the date on
which the plan of complete liquidation relating thereto is adopted. A
payment into the Termination Account with respect to any Certificate
pursuant to Section 9.01 hereof shall be deemed a final payment on, or
final distribution with respect to, such Certificate for the purposes
of this Section 9.02(a)(3).
(b) By their acceptance of Residual Certificates, the Holders
thereof agree (1) to authorize such action as may be necessary to adopt a plan
of complete liquidation of any related REMIC and (2) to take such action as may
be necessary to adopt a plan of complete liquidation of any related REMIC upon
the written request of the Master Servicer, which authorization shall be binding
upon all successor Holders of such Residual Certificates.
ARTICLE X
REMIC TAX PROVISIONS
SECTION 10.01. REMIC ADMINISTRATION.
Unless otherwise specified in the related Pooling and Servicing
Agreement, an election will be made to treat the Assets and the Distribution
Account underlying a Series as one or more REMICs under the Code. Each Holder
of a Residual Certificate in each REMIC shall, in its Residual Transferee
Agreement, designate the Master Servicer or an Affiliate of the Master
Servicer, as its agent, to act as the Tax Matters Person for such REMIC. The
Master Servicer agrees that it or one of its Affiliates will serve as such Tax
Matters Person for each REMIC, and also will perform various tax administration
functions for each REMIC, as its agent, as set forth in this Section 10.01.
(a) The Trustee shall elect (on behalf of each REMIC to be
created) to have the Trust (or designated assets thereof) treated as a REMIC on
Form 1066 or other appropriate federal tax or information return for the taxable
year ending on the last day of the calendar year in which the Certificates are
issued as well as on any corresponding state tax or information return necessary
to have such assets treated as a REMIC under relevant state law.
(b) The Master Servicer shall pay any and all tax related
expenses (not including taxes) of the Trust and each related REMIC, including
but not limited to any professional fees or expenses related to audits or any
administrative or judicial proceedings with respect to each such REMIC that
involve the Internal Revenue Service or state tax authorities or related to the
adoption of a plan of complete liquidation.
(c) The Master Servicer shall prepare any necessary forms for
election as well as all of the Trust's and each related REMIC's federal and
state tax and information returns. At the request of the Master Servicer, the
Trustee shall sign and file such returns on behalf of each such REMIC. The
expenses of preparing and filing such returns shall be borne by the Master
Servicer.
(d) The Master Servicer shall perform all reporting and other tax
compliance duties that are the responsibility of the Trust and the REMIC under
the REMIC Provisions or state or local tax law. Among its other duties, if
required by the REMIC Provisions, the Master Servicer, acting as agent of the
REMIC, shall provide (1) to the Treasury or to other governmental authorities
such information as is necessary for the application of any tax relating to the
transfer of a Residual Certificate to any Disqualified Organization and (2) to
the Trustee such information as is necessary for the Trustee to discharge its
obligations under the REMIC Provisions to report tax information to the
Certificateholders.
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(e) The Depositor, the Master Servicer, the Trustee (to the
extent the Trustee has been instructed by the Depositor or the Master Servicer),
and the Holders of Residual Certificates shall take any action or cause each
related REMIC to take any action necessary to create or maintain the status of
each such REMIC as a REMIC under the REMIC Provisions and shall assist each
other as necessary to create or maintain such status.
(f) The Depositor, the Master Servicer, the Trustee (to the
extent the Trustee has been instructed by the Depositor or the Master Servicer),
and the Holders of the Residual Certificates shall not take any action or fail
to take any action, or cause each related REMIC to take any action or fail to
take any action that, if taken or not taken, could endanger the status of each
such REMIC as a REMIC unless the Trustee and the Master Servicer have received
an Opinion of Counsel (at the expense of the party seeking to take or to omit to
take such action) to the effect that the contemplated action or failure to act
will not endanger such status.
(g) Any taxes that are imposed upon the Trust or any related
REMIC by federal or state (including local) governmental authorities (other than
taxes paid by a party pursuant to Section 10.02 hereof or as provided in the
following sentence) shall be allocated to the Certificates (including, for this
purpose, the regular interests in any Pooling REMIC) out of the Available
Distribution Amount before any distributions are made on the related
Certificates on the related Distribution Date. Any state or local taxes imposed
upon the Trust, any related REMIC or any related Certificateholder that would
not have been imposed on the Trust, such REMIC or such Certificateholder in the
absence of any legal or business connection between the Trustee and the state or
locality imposing such taxes (including any federal, state or local taxes
imposed on such Trust, such REMIC or such Certificateholder as a result of such
Trust, such REMIC or such Certificateholder being deemed to have received income
as a result of the Trustee's payment of state or local taxes) shall be paid by
the Trustee, and, notwithstanding anything to the contrary in these Standard
Terms, such taxes shall be deemed to be part of the Trustee's cost of doing
business and shall not be reimbursable to the Trustee.
(h) If the Master Servicer (or an Affiliate thereof) is unable
for any reason to fulfill its duties as Tax Matters Person, then the holder of
the largest Percentage Interest of the Residual Certificates, without
compensation, shall become the successor Tax Matters Person for each related
REMIC; provided, however, that in no event shall the Trustee be required to act
as Tax Matters Person (regardless of whether the Trustee is acting as successor
Master Servicer).
SECTION 10.02. PROHIBITED ACTIVITIES.
Except as otherwise provided elsewhere in the Pooling and Servicing
Agreement, neither the Depositor, the Master Servicer, the Holders of Residual
Certificates, nor the Trustee shall engage in, nor shall the Trustee permit,
any of the following transactions or activities unless it has received (1) a
Special Tax Opinion and (2) a Special Tax Consent from each of the Holders of
the Residual Certificates (unless the Special Tax Opinion specially provides
that no REMIC-level tax will result from the transaction or activity in
question):
(a) the sale or other disposition of, or substitution
for, any of the underlying Assets except pursuant to (1) a foreclosure
or default with respect to such an Asset, (2) a purchase or repurchase
pursuant to Section 2.05 hereof, (3) the bankruptcy or insolvency of
any related REMIC, or (4) the termination of any related REMIC pursuant
to Article IX hereof;
(b) the acquisition of any Assets for the Trust after
the related Closing Date except (1) during the three-month period
beginning on the Closing Date pursuant to a fixed-price contract in
effect on the Closing Date that has been reviewed and approved by tax
counsel acceptable to the Master Servicer or (2) a substitution in
accordance with Section 2.05 hereof;
(c) the sale or other disposition of any investment in
the Distribution Account at a gain;
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(d) the acceptance of any contribution to the Trust
except the following cash contributions: (1) a cash contribution
received during the three-month period beginning on the Closing Date;
(2) a cash contribution to facilitate a Terminating Purchase that is
made within the 90-day period beginning on the date on which a plan of
complete liquidation is adopted pursuant to Section 9.02(a)(1) hereof;
(3) a contribution to a Reserve Fund owned by a related REMIC that is
made pro rata by the Holders of the Residual Certificates; or (4) any
other contribution approved by the Master Servicer after consultation
with tax counsel;
(e) except in the case of an Asset that is in default,
or as to which, in the reasonable judgment of the Master Servicer,
default is reasonably foreseeable, neither the Trustee nor the Master
Servicer shall permit any modification of any material term of an Asset
(including, but not limited to, the interest rate, the principal
balance, the amortization schedule (except as provided in the Pooling
and Servicing Agreement), the remaining term to maturity, or any other
term affecting the amount or timing of payments on the Asset) unless
the Trustee and Master Servicer have received an Opinion of Counsel (at
the expense of the party seeking to modify the Asset) to the effect
that such modification would not be treated as giving rise to a new
debt instrument for REMIC purposes;
(f) any other transaction or activity that is not
contemplated by the Pooling and Servicing Agreement;
(g) the sale or other disposition of any asset held in a
Reserve Fund for a period of less than three months (a "Short-Term
Reserve Fund Investment") if such sale or disposition would cause 30%
or more of a related REMIC's income from all of its Reserve Funds for
the taxable year to consist of gain from the sale or disposition of
Short-Term Reserve Fund Investments; or
(h) the withdrawal of any amounts from any Reserve Fund
except (A) for the distribution pro rata to the Holders of the
Residual Certificates or (B) to provide for the payment of Trust
expenses or amounts payable on the Certificates in the event of
defaults or late payments on the related Assets or lower than expected
returns on funds held in the Distribution Account, as provided under
section 860G(a)(7) of the Code.
Any party causing the Trust to engage in any of the activities prohibited in
this Section shall be liable for the payment of any tax imposed on the Trust
pursuant to Code section 860F(a)(1) or 860G(d) as a result of the Trust
engaging in such activities.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.01. AMENDMENTS.
The Pooling and Servicing Agreement may be amended or supplemented
from time to time by the Depositor, the Master Servicer and the Trustee without
the consent of any of the Certificateholders (a) to cure any ambiguity herein,
(b) to correct or supplement any provisions herein that may be inconsistent
with any other provisions herein, (c) to modify, eliminate or add to any of its
provisions to such extent as shall be necessary or appropriate to maintain the
qualification of any related REMIC as a REMIC under the Code at all times that
any Certificates are outstanding or (d) to make any other provisions with
respect to matters or questions arising under the Pooling and Servicing
Agreement or matters arising with respect to the Trust that are not covered by
the Pooling and Servicing Agreement; provided, that such action shall not
affect adversely the interests of any Certificateholder, as evidenced by an
opinion of counsel independent from the Depositor, the Master Servicer and the
Trustee or a letter from each Rating Agency from whom the Depositor requested a
rating of any of the related Certificates stating that such action will not
result in a downgrading of the rating of any of the related Certificates rated
by such Rating Agency at the request of the Depositor. Promptly after the
execution of any such amendment, the Trustee shall furnish a copy of such
amendment to each Holder of Certificates.
The Pooling and Servicing Agreement also may be amended from time to
time by the Depositor, the Master Servicer and the Trustee with the consent of
the Holders entitled to at least a majority of the Voting Rights of each Class
of Certificates that would be affected by such amendment 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 of modifying in any manner
the rights of the Holders of the Certificates; provided, however, that no such
amendment shall (a) reduce in any manner the amount of, or delay the timing of,
payments received on Mortgage Loans that are required to be distributed on any
Certificate without the consent of the Holder of such Certificate, (b) affect
adversely in any material respect the interests of the Holders of any Class of
Certificates in a manner other than described in clause (a) of this paragraph,
without the consent of the Holders of Certificates of such Class evidencing at
least 662/3% of the Voting Rights with respect to such Class, or (c) reduce the
aforesaid percentage of Certificates the Holders of which are required to
consent to any such amendment, without the consent of such Holders of all
Certificates then outstanding.
It shall not be necessary for the consent of Certificateholders under
this Section 11.01 to approve the particular form of any proposed amendment,
but it shall be sufficient if such consent shall approve the substance thereof.
The manner of obtaining such consents and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
SECTION 11.02. RECORDATION OF AGREEMENT; COUNTERPARTS.
To the extent permitted by applicable law, the Pooling and Servicing
Agreement is subject to recordation in all appropriate public offices for real
property records in all the counties or other comparable jurisdictions in which
any or all of the Mortgaged Properties included in the Trust Estate and subject
to the related Mortgages are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the Master
Servicer and at its expense, but only upon direction of the Trustee accompanied
by an Opinion of Counsel to the effect that such recordation is necessary to
protect the interests of the Certificateholders. The Trustee shall not be
responsible for determining whether the Pooling and Servicing Agreement should
be recorded in any such office.
For the purpose of facilitating the recordation of the Pooling and
Servicing Agreement as herein provided and for other purposes, the Pooling and
Servicing Agreement may be executed simultaneously in any number of
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counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
SECTION 11.03. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.
The death or incapacity of any Certificateholder shall not operate to
terminate the Pooling and Servicing Agreement or the Trust, nor will such death
or incapacity 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, nor shall it 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, 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 the Pooling and Servicing Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any provision
of the Pooling and Servicing Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to the Pooling and
Servicing Agreement, unless such Holder previously shall have given to the
Trustee a written notice of default and of the continuance thereof, as
hereinbefore provided, and unless also the Holders of Certificates entitled to
at least 25% of the Voting Rights allocated to the Certificates shall have made
written request upon the Trustee to institute such action, suit or 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 15 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 shall have any right in any manner whatever
by virtue of any provision of the Pooling and Servicing 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 the Pooling and Servicing
Agreement, except in the manner herein provided and for the equal, ratable and
common benefit of all Holders of Certificates. 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 11.04. NOTICES.
All demands and notices under the Pooling and Servicing Agreement
shall be in writing and shall be deemed to have been duly given if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service, to (a) in the case of the Depositor, 7130 Goodlett Farms
Parkway, Cordova, Tennessee 38018, Attention: President, telecopy number (901)
580-6923, or such other address or telecopy number as may hereafter be
furnished to each party to the Pooling and Servicing Agreement in writing by
the Depositor, (b) in the case of ___ or the Master Servicer,________________
_______________________________, Attention: Treasurer, telecopy number (___)
___-____, or such other address or telecopy number as may subsequently be
furnished to each party to the Pooling and Servicing Agreement in writing by
the Master Servicer and (c) in the case of the Trustee, at its address set
forth in the Pooling and Servicing Agreement or such other address or telecopy
number as may subsequently be furnished to each party to the Pooling and
Servicing Agreement in writing by the Trustee. Any notice required or permitted
to be mailed to a Certificateholder shall be given by registered mail, postage
prepaid, or by express delivery service, at the address of such Holder as shown
in the Certificate Register. Any notice so mailed within the time prescribed in
the Pooling and Servicing Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice. A copy
of any notice required to be telecopied hereunder
-71-
<PAGE> 76
also shall be mailed to the appropriate party in the manner set forth above. A
copy of any notice given hereunder to any other party shall be delivered to the
Trustee.
SECTION 11.05. SEVERABILITY OF PROVISIONS.
If any one or more of the covenants, agreements, provisions or terms
of the Pooling and Servicing Agreement shall be held invalid for any reason
whatsoever, then such covenants, agreements, provisions or terms shall be
deemed severable from the remaining covenants, agreements, provisions or terms
of the Pooling and Servicing Agreement and shall in no way affect the validity
or enforceability of the other provisions of the Pooling and Servicing
Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 11.06. SALE OF ASSETS.
It is the express intent of the Depositor and the Trustee that the
conveyance of the Assets underlying a Series by the Depositor to the Trustee
pursuant to the related Pooling and Servicing Agreement be construed as a sale
of such Assets by the Depositor to the Trustee. It is, further, not the
intention of the Depositor or the Trustee that such conveyance be deemed a
pledge of such Assets 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, such Assets are held to continue to be property of the
Depositor, then (a) the Pooling and Servicing Agreement also shall be deemed to
be a security agreement within the meaning of Article 9 of the applicable UCC;
(b) the conveyance by the Depositor provided for in the Pooling and Servicing
Agreement shall be deemed to be a grant by the Depositor to the Trustee of a
security interest in all of the Depositor's right, title and interest in and to
the Assets and all amounts payable to the holders of the Assets 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, other than investment
earnings, from time to time held or invested in the related Certificate Account
or Distribution Account, whether in the form of cash, instruments, securities
or other property, and including without limitation all amounts from time to
time held or invested in any related Reserve Fund; (c) the possession by the
Trustee or its agent of items of property that 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 applicable UCC; 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. The Depositor and the Trustee (to the extent the Trustee
has been instructed by the Depositor or the Master Servicer) shall take, to the
extent consistent with the Pooling and Servicing Agreement, such actions as may
be necessary to ensure that, if the Pooling and Servicing Agreement were deemed
to create a security interest in the related Assets, 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 the
Pooling and Servicing Agreement.
SECTION 11.07. NOTICE TO RATING AGENCY.
(a) The Trustee shall use its best efforts promptly to provide
notice to each applicable Rating Agency and each Certificateholder with respect
to each of the following of which it has actual knowledge, except that no notice
specified below need be sent to any such Certificateholder or each applicable
Rating Agency if already sent pursuant to other provisions of the Pooling and
Servicing Agreement:
(1) any amendment to the Pooling and Servicing Agreement
or any agreement assigned to the Trust;
(2) the occurrence of any Event of Default involving the
Master Servicer that has not been cured or waived;
-72-
<PAGE> 77
(3) the resignation, termination or merger of the
Depositor, the Master Servicer or the Trustee;
(4) the purchase or repurchase or substitution of Assets
pursuant to Section 2.05 hereof;
(5) the final payment to the Certificateholders;
(6) any change in the location of the related
Certificate Account or the Distribution Account;
(7) any event that would result in the inability of the
Master Servicer to make Advances regarding the related Assets;
(8) any change in applicable law that would require an
assignment of a Mortgage, not previously recorded, to be recorded in
order to protect the right, title and interest of the Trustee in and
to the related Mortgaged Property or, in case a court should
recharacterize the sale of the related Asset as a financing, to
perfect a first priority security interest in favor of the Trustee in
the related Asset; or
(9) any change in the Depositor's or the Master
Servicer's name or place of business or the relocation of the Master
Servicer Mortgage Loan Files to a location outside the State of
________________ or the relocation of the Trustee Mortgage Loan Files
to a location outside of the state where they are originally held by
the Trustee or its Custodian.
(b) The Master Servicer shall promptly notify the Trustee of any
of the events listed in Section 11.07(a) hereof of which it has actual
knowledge. In addition, the Trustee shall furnish promptly to each Rating
Agency, at its address set forth in the Pooling and Servicing Agreement, copies
of the following:
(i) Each Remittance Report; and
(ii) Each Officer's Certificate supplied by the Master
Servicer to the Trustee and the Certificateholders pursuant to Section
3.12 hereof.
(c) Any notice pursuant to this Section 11.07 shall be in writing
and shall be deemed to have been duly given if personally delivered or mailed by
first class mail, postage prepaid or by express delivery service to each Rating
Agency at its address specified in the Pooling and Servicing Agreement.
-73-
<PAGE> 78
EXHIBIT 1-A
FORM OF INITIAL CERTIFICATION
[Date]
Union Planters Mortgage Finance Corp.
7130 Goodlett Farms Parkway
Cordova, Tennessee 38018
Attention: Secretary
[Master Servicer]
[Address]
[Address]
Attention: [________________]
Re: Pooling and Servicing Agreement, dated as of
_________ 1, 19___,
among Union Planters Mortgage Finance Corp.,
_____________, as Master Servicer,
and _______________, as Trustee,
Pass-Through Certificates, __________________
UPMFC Trust 19_____-_____.
Gentlemen:
In accordance with Section 2.02 of the Depositor's Standard Terms to
Pooling and Servicing Agreement (_____ 1997 Edition) (the "Standard Terms"),
which are incorporated by reference into the above-referenced Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that, as to
each Mortgage Loan listed in the Mortgage Loan Schedule to the Pooling and
Servicing Agreement (other than any Mortgage Loan paid in full or listed on the
attachment hereto) it, or a Custodian on its behalf, has reviewed the Trustee
Mortgage Loan File and has determined that, except as noted on the Schedule of
Exceptions attached hereto: (i) all documents required to be included in the
Trustee Mortgage Loan File (as set forth in the definition of "Trustee Mortgage
Loan File" in the Standard Terms) are in its possession or in the possession of
a Custodian on its behalf; (ii) such documents have been reviewed by it, or a
Custodian on its behalf, and appear regular on their face and relate to such
Mortgage Loan; and (iii) based on examination by it, or by a Custodian on its
behalf, and only as to such documents, the information set forth on the
Mortgage Loan Schedule to the Pooling and Servicing Agreement accurately
reflects the information set forth in the Trustee Mortgage Loan File. The
undersigned further certifies that the Trustee's review, or the review of its
Custodian, of each Trustee Mortgage Loan File included each of the procedures
listed in Section 2.02(c)(2) of the Standard Terms.
Except as described herein, neither the Trustee, nor any Custodian on
its behalf, has made an independent examination of any documents contained in
any Trustee Mortgage Loan File. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any
documents contained in any Trustee Mortgage Loan File for any of the Mortgage
Loans listed on the Mortgage Loan Schedule to the Pooling and Servicing
Agreement, (ii) the collectibility, insurability, effectiveness or suitability
of any such Mortgage Loan or (iii) whether any Trustee Mortgage Loan File
should include any assumption agreement, modification agreement, written
assurance or substitution agreement.
Exhibit 1-A - Page 1
<PAGE> 79
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement").
[TRUSTEE]
By:
---------------------------
Its:
--------------------------
Exhibit 1-A - Page 2
<PAGE> 80
EXHIBIT 1-B
FORM OF FINAL CERTIFICATION
[Date]
Union Planters Mortgage Finance Corp.
7130 Goodlett Farms Parkway
Cordova, Tennessee 38018
Attention: Secretary
[Master Servicer]
[Address]
[Address]
Attention: [________________]
Re: Pooling and Servicing Agreement, dated as of
_________ 1, 19___,
among Union Planters Mortgage Finance Corp.,
____________________________, as Master Servicer,
and _______________, as Trustee,
Pass-Through Certificates, __________________
UPMFC Trust 19_____-_____.
Gentlemen:
In accordance with Section 2.02 of the Depositor's Standard Terms to
Pooling and Servicing Agreement (_____ 1997 Edition) (the "Standard Terms"),
which are incorporated by reference into the above-referenced Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that, except
as noted on the Schedule of Exceptions attached hereto, for each Mortgage Loan
listed in the Mortgage Loan Schedule to the Pooling and Servicing Agreement
(other than any Mortgage Loan paid in full or listed on the attachment hereto)
it, or a Custodian on its behalf, has received a complete Trustee Mortgage Loan
File which includes each of the documents required to be included in the
Trustee Mortgage Loan File as set forth in the definition of "Trustee Mortgage
Loan File" in the Standard Terms.
Neither the Trustee nor any Custodian on its behalf has made an
independent examination of any documents contained in any Trustee Mortgage Loan
File beyond the review specifically required in the above captioned Pooling and
Servicing Agreement. The Trustee makes no representations as to: (i) the
validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in any Trustee Mortgage Loan File or any of the Mortgage
Loans listed on the Mortgage Loan Schedule, (ii) the collectibility,
insurability, effectiveness or suitability of any such Mortgage Loan or (iii)
whether any Trustee Mortgage Loan File should include any assumption agreement,
modification agreement, written assurance or substitution agreement.
Exhibit 1-B - Page 1
<PAGE> 81
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement").
[TRUSTEE]
By:
---------------------------
Its:
--------------------------
Exhibit 1-B - Page 2
<PAGE> 82
EXHIBIT 2
FORM OF RECORDATION REPORT
[Date]
[Master Servicer]
[Address]
[Address]
Attention: [________________]
Re: Pooling and Servicing Agreement, dated as of
_________ 1, 19___,
among Union Planters Mortgage Finance Corp.,
_______________________, as Master Servicer,
and _______________, as Trustee,
Pass-Through Certificates, __________________
UPMFC Trust 19_____-_____.
Gentlemen:
In accordance with Section 2.02 of the Depositor's Standard Terms to
Pooling and Servicing Agreement (_____ 1997 Edition) (the "Standard Terms"),
which are incorporated by reference into the above-referenced Pooling and
Servicing Agreement, the undersigned, as Trustee hereby notifies you, that as
of the date hereof with respect to the following Mortgage Loans it has not
received the indicated documents:
<TABLE>
<CAPTION>
MORTGAGE LOANS DOCUMENTS NOT RECEIVED
- -------------- ----------------------------------------------
<S> <C> <C>
ORIGINAL RECORDED
ORIGINAL RECORDED ASSIGNMENT OF
MORTGAGE MORTGAGE
OR CERTIFIED COPY OR CERTIFIED COPY
LOAN NUMBER THEREOF THEREOF*
- ----------- ------- --------
[TRUSTEE]
as Trustee
By:
---------------------------
Its:
--------------------------
</TABLE>
- --------------------------------
* Not required for Mortgage Loans for which the Depositor has waived
recordation of Assignments.
Exhibit 2 - Page 1
<PAGE> 83
EXHIBIT 3
REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT
TO: [Name and Address of Trustee or Custodian]
RE: Pooling and Servicing Agreement, dated as of __________ 1,
19__, among Union Planters Mortgage Finance Corp. (the
"Depositor"), ________________________, as Master Servicer,
and ____________________, as Trustee, which incorporates by
reference the Depositor's Standard Terms to Pooling and
Servicing Agreement (_____ 1997 Edition) (collectively, the
"Pooling and Servicing Agreement")
In connection with the administration of the Mortgage Loans held by
you as the Trustee or Custodian, we request the release and acknowledge
receipt, of the Trustee Mortgage Loan File [specify documents if only a partial
Trustee Mortgage Loan File is being released]) for the Mortgage Loan described
below, for the reason indicated.
Mortgagor's Name and Address & Zip Code:
Mortgage Loan Number:
Reason for Requesting Documents (check one)
___ 1. Mortgage Loan Paid in Full. (The Master Servicer hereby
certifies that all amounts received in connection therewith
have been deposited into the applicable Certificate Account as
provided in the Pooling and Servicing Agreement.)
___ 2. Mortgage Loan Liquidated by _________________. (The Master
Servicer hereby certifies that all proceeds of foreclosure,
insurance, condemnation or other liquidation have been finally
received.)
___ 3. Mortgage Loan in Foreclosure.
___ 4. Other (explain). _______________________________
If item 1 or 2 above is checked, and if all or part of the Trustee
Mortgage Loan File was previously released to us, please release to us our
previous request and receipt on file with you, as well as any additional
documents in your possession relating to the specified Mortgage Loan.
If item 3 or 4 above is checked, upon our return of all of the above
documents to you as the Trustee or Custodian, please acknowledge your receipt
by signing in the space indicated below, and returning this form.
Exhibit 3 - Page 1
<PAGE> 84
Capitalized terms used herein but not defined herein have the meanings
ascribed to them in the Pooling and Servicing Agreement.
[ ],
---------------------------
as Master Servicer
By:
--------------------------------
Name:
---------------------------
Title:
---------------------------
Date:
---------------------------
Acknowledgment of Documents returned to the Trustee or Custodian:
NAME OF TRUSTEE OR CUSTODIAN
By:
---------------------------------
Name:
---------------------------
Title:
---------------------------
Date:
---------------------------
Exhibit 3 - Page 2
<PAGE> 85
EXHIBIT 4
RULE 144A AGREEMENT--QIB CERTIFICATION
UNION PLANTERS MORTGAGE FINANCE CORP., SERIES 19__-_
PASS-THROUGH CERTIFICATES, CLASS ___
----------------
(DATE)
[Trustee]
[Address]
[Address]
Attention: [________________]
Union Planters Mortgage Finance Corp.
7130 Goodlett Farms Parkway
Cordova, Tennessee 38018
Attention: Secretary
[Master Servicer]
[Address]
[Address]
Attention: [________________]
Gentlemen:
In connection with the purchase on the date hereof of the captioned
securities (the "Purchased Certificates"), the undersigned (the "Transferee")
hereby certifies and covenants to the transferor, Union Planters Mortgage
Finance Corp. (the "Depositor"), the Master Servicer, the Trustee and the Trust
as follows:
1. The Transferee is a "qualified institutional buyer" as that
term is defined in Rule 144A ("Rule 144A") promulgated under the Securities Act
of 1933, as amended (the "1933 Act") and has completed the form of certification
to that effect attached hereto as Annex A1 (if the Transferee is not a
registered investment company) or Annex A2 (if the Transferee is a registered
investment company). The Transferee is aware that the sale to it is being made
in reliance on Rule 144A.
2. The Transferee understands that the Purchased Certificates
have not been registered under the 1933 Act or registered or qualified under any
state securities laws and that no transfer may be made unless the Purchased
Certificates are registered under the 1933 Act and under applicable state law or
unless an exemption from such registration is available. The Transferee further
understands that neither the Depositor, the Master Servicer, the Trustee nor the
Trust is under any obligation to register the Purchased Certificates or make an
exemption from such registration available.
3. The Transferee is acquiring the Purchased Certificates for
its own account or for the account of a "qualified institutional buyer" (as
defined in Rule 144A, a "QIB"), and understands that such Purchased Certificates
may be resold, pledged or transferred only (a) to a person reasonably believed
to be such a QIB that purchases for its own account or for the account of a QIB
to whom notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A, or (b) pursuant to another exemption from registration
under the 1933 Act
Exhibit 4 - Page 1
<PAGE> 86
and under applicable state securities laws. IN ADDITION, SUCH TRANSFER MAY BE
SUBJECT TO ADDITIONAL RESTRICTIONS, AS SET FORTH IN SECTION 5.05 OF THE
STANDARD TERMS TO THE POOLING AND SERVICING AGREEMENT (THE "STANDARD TERMS")
REFERRED TO BELOW. By its execution of this agreement, the Transferee agrees
that it will not resell, pledge or transfer any of the Purchased Certificates
to anyone otherwise than in strict compliance with Rule 144A, or pursuant to
another exemption from registration under the 1933 Act and all applicable state
securities laws, and in strict compliance with the transfer restrictions set
forth in Section 5.05 of the Standard Terms. The Transferee will not attempt to
transfer any or all of the Purchased Certificates pursuant to Rule 144A unless
the Transferee offers and sells such Certificates only to QIBs or to offerees
or purchasers that the Transferee and any person acting on behalf of the
Transferee reasonably believe (as described in paragraph (d)(l) of Rule 144A)
is a QIB.
4. The Transferee has been furnished with all information that
it requested regarding (a) the Purchased Certificates and distributions thereon
and (b) the Pooling and Servicing Agreement referred to below.
5. If applicable, the Transferee has complied, will comply in
all material respects with applicable regulatory guidelines relating to the
ownership of mortgage derivative products.
All capitalized terms used but not otherwise defined herein have the
respective meanings assigned thereto in the Pooling and Servicing Agreement,
dated as of _____________ 1, 19__, which incorporates by reference the Standard
Terms thereto (_____ 1997 Edition), among the Depositor, the Master Servicer
and ____________________, as Trustee, pursuant to which the Purchased
Certificates were issued.
IN WITNESS WHEREOF, the undersigned has caused this Rule 144A
Agreement to be executed by its duly authorized representative as of the day
and year first above written.
[TRANSFEREE]
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
Exhibit 4 - Page 2
<PAGE> 87
ANNEX A1 TO EXHIBIT 4
TRANSFEREES OTHER THAN REGISTERED INVESTMENT COMPANIES
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Transferee.
2. The Transferee is a "qualified institutional buyer" as that
term is defined in Rule 144A ("Rule 144A") promulgated under the Securities Act
of 1933, as amended (the "1933 Act"), because (a) the Transferee owned and/or
invested on a discretionary basis at least $____________ in securities [Note to
reviewer - the amount in the previous blank must be at least $100,000,000 unless
the Transferee is a dealer, in which case the amount filled in the previous
blank must be at least $10,000,000.] (except for the excluded securities
referred to in paragraph 3 below) as of _______________ [specify a date on or
since the end of the Transferee's most recently ended fiscal year] (such amount
being calculated in accordance with Rule 144A) and (b) the Transferee meets the
criteria listed in the category marked below.
_____ Corporation, etc. The Transferee is an organization described
in Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended, a corporation (other than a bank as defined in
Section 3(a)(2) of the 1933 Act or a savings and loan
association or other similar institution referenced in
Section 3(a)(5)(A) of the Act), a partnership, or a
Massachusetts or similar business trust.
_____ Bank. The Transferee (a) is a national bank or banking
institution as defined in Section 3(a)(2) of the 1933 Act and
is organized under the laws of a state, territory or the
District of Columbia. The business of the Transferee is
substantially confined to banking and is supervised by the
appropriate state or territorial banking commission or
similar official or is a foreign bank or equivalent
institution, and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial
statements as of a date not more than 16 months preceding the
date of this certification in the case of a U.S. bank, and
not more than 18 months preceding the date of this
certification in the case of a foreign bank or equivalent
institution, a copy of which financial statements is attached
hereto.
_____ Savings and Loan. The Transferee is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution referenced in
Section 3(a)(5)(A) of the 1933 Act. The Transferee is
supervised and examined by a state or federal authority
having supervisory authority over any such institutions or is
a foreign savings and loan association or equivalent
institution and has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial
statements as of a date not more than 16 months preceding the
date of this certification in the case of a U.S. savings and
loan association or similar institution, and not more than 18
months preceding the date of this certification in the case
of a foreign savings and loan association or equivalent
institution, a copy of which financial statements is attached
hereto.
_____ Broker-dealer. The Transferee is a dealer registered pursuant
to Section 15 of the Certificates Exchange Act of 1934, as
amended (the "1934 Act").
Exhibit 4 - Page 3
<PAGE> 88
_____ Insurance Company. The Transferee is an insurance company as
defined in Section 2(13) of the 1933 Act, whose primary and
predominant business activity is the writing of insurance or
the reinsuring of risks underwritten by insurance companies
and which is subject to supervision by the insurance
commissioner or a similar official or agency of a state,
territory or the District of Columbia.
_____ State or Local Plan. The Transferee is a plan established
and maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees.
_____ ERISA Plan. The Transferee is an employee benefit plan within
the meaning of Title I of the Employee Retirement Income
Certificate Act of 1974, as amended.
_____ Investment Adviser. The Transferee is an investment adviser
registered under the Investment Advisers Act of 1940, as
amended.
_____ Other. The Transferee qualifies as a "qualified institutional
buyer" as defined in Rule 144A on the basis of facts other
than those listed in any of the entries above. If this
response is marked, the Transferee must certify on additional
pages, to be attached to this certification, to facts that
satisfy the Master Servicer that the Transferee is a
"qualified institutional buyer" as defined in Rule 144A.
3. The term "securities" as used herein does not include (a)
securities of issuers that are affiliated with the Transferee, (b) securities
constituting the whole or part of an unsold allotment to or subscription by the
Transferee, if the Transferee is a dealer, (c) bank deposit notes and
certificates of deposit, (d) loan participations, (e) repurchase agreements,
(f) securities owned but subject to a repurchase agreement and (g) currency,
interest rate and commodity swaps.
4. For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Transferee, the
Transferee used the cost of such securities to the Transferee and did not
include any of the securities referred to in the preceding paragraph. Further,
in determining such aggregate amount, the Transferee may have included
securities owned by subsidiaries of the Transferee, but only if such
subsidiaries are consolidated with the Transferee in its financial statements
prepared in accordance with generally accepted accounting principles and if the
investments of such subsidiaries are managed under the Transferee's direction.
However, such securities were not included if the Transferee is a
majority-owned, consolidated subsidiary of another enterprise and the Transferee
is not itself a reporting company under the 1934 Act.
5. The Transferee acknowledges that it is familiar with Rule
144A and understands that the Transferor and other parties related to the
Purchased Certificates are relying and will continue to rely on the statements
made herein because one or more sales to the Transferee may be made in reliance
on Rule 144A.
6. Will the Transferee be purchasing ______ _____
the Purchased Certificates only YES NO
for the Transferee's own account?
If the answer to the foregoing question is "NO", the Transferee agrees
that, in connection with any purchase of securities sold to the Transferee for
the account of a third party (including any separate account) in reliance on
Rule 144A, the Transferee will only purchase for the account of a third party
that at the time is a "qualified institutional buyer" within the meaning of
Rule 144A. In addition, the Transferee agrees that the Transferee will not
purchase securities for a third party unless the Transferee has obtained a
current representation
Exhibit 4 - Page 4
<PAGE> 89
letter from such third party or taken other appropriate steps contemplated by
Rule 144A to conclude that such third party independently meets the definition
of "qualified institutional buyer" set forth in Rule 144A.
7. The Transferee will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Transferee's purchase of the Purchased
Certificates will constitute a reaffirmation of this certification as of the
date of such purchase. In addition, if the Transferee is a bank or savings and
loan as provided above, the Transferee agrees that it will furnish to such
parties updated annual financial statements promptly after they become
available.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
executed by its duly authorized representative this ____ day of ___________,
19____.
-----------------------------
Print Name of Transferee
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
Date:
----------------------------
Exhibit 4 - Page 5
<PAGE> 90
ANNEX A2 TO EXHIBIT 4
REGISTERED INVESTMENT COMPANIES
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the entity purchasing the
Purchased Certificates (the "Transferee") or, if the Transferee is part of a
Family of Investment Companies (as defined in paragraph 3 below), is an officer
of the related investment adviser (the "Adviser").
2. The Transferee is a "qualified institutional buyer" as that
term is defined in Rule 144A ("Rule 144A") promulgated under the Securities Act
of 1933, as amended (the "1933 Act"), because (a) the Transferee is an
investment company (a "Registered Investment Company") registered under the
Investment Company Act of 1940, as amended (the "1940 Act") and (b) as marked
below, the Transferee alone, or the Transferee's Family of Investment Companies,
owned at least $___________ [Note to reviewer - the amount in the previous blank
must be at least $100,000,000] in securities (other than the excluded securities
referred to in paragraph 4 below) as of ________________ [specify a date on or
since the end of the Transferee's most recently ended fiscal year]. For purposes
of determining the amount of securities owned by the Transferee or the
Transferee's Family of Investment Companies, the cost of such securities to the
Transferee or the Transferee's Family of Investment Companies was used.
_____ The Transferee owned $____________ in securities (other than the
excluded securities referred to in paragraph 4 below) as of the end of
the Transferee's most recent fiscal year (such amount being calculated
in accordance with Rule 144A).
_____ The Transferee is part of a Family of Investment Companies which owned
in the aggregate $____________ in securities (other than the excluded
securities referred to in paragraph 4 below) as of the end of the
Transferee's most recent fiscal year (such amount being calculated in
accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein
means two or more Registered Investment Companies except for a unit investment
trust whose assets consist solely of shares of one or more Registered Investment
Companies (provided that each series of a "series company," as defined in Rule
18f-2 under the 1940 Act, shall be deemed to be a separate investment company)
that have the same investment adviser (or, in the case of a unit investment
trust, the same depositor) or investment advisers (or depositors) that are
affiliated (by virtue of being majority-owned subsidiaries of the same parent or
because one investment adviser is a majority-owned subsidiary of the other).
4. The term "securities" as used herein does not include (a)
securities of issuers that are affiliated with the Transferee or are part of
the Transferee's Family of Investment Companies, (b) bank deposit notes and
certificates of deposit, (c) loan participations, (d) repurchase agreements,
(e) securities owned but subject to a repurchase agreement and (f) currency,
interest rate and commodity swaps.
5. The Transferee is familiar with Rule 144A and understands
that the parties to which this certification is being made are relying and will
continue to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.
Exhibit 4 - Page 6
<PAGE> 91
6. The undersigned will notify the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Transferee's purchase of the Purchased Certificates will
constitute a reaffirmation of this certification by the undersigned as of the
date of such purchase.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
executed by its duly authorized representative this ____ of ____________,
19____.
------------------------------------
Print Name of Transferee or
Adviser
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
IF AN ADVISER:
--------------------------------------------
Print Name of Transferee
Date:
----------------------------------
Exhibit 4 - Page 7
<PAGE> 92
EXHIBIT 5
FORM OF TRANSFEREE AGREEMENT
UNION PLANTERS MORTGAGE FINANCE CORP., SERIES 19___-___
PASS-THROUGH CERTIFICATES
CLASS __
------------------
[Name of Transferee]
------------------
(DATE)
[Trustee]
[Address]
[Address]
Attention: [________________]
Union Planters Mortgage Finance Corp.
7130 Goodlett Farms Parkway
Cordova, Tennessee 38018
Attention: Secretary
[Master Servicer]
[Address]
[Address]
Attention: [________________]
Re: Union Planters Mortgage Finance Corp., Series 19___-____
Pass-Through Certificates, Class __, representing a
[___% Percentage Interest][$ denomination]
Gentlemen:
The undersigned (the "Transferee") proposes to purchase all or some of
the Class __, Class __, Class __ and Class __ Certificates (the "Purchased
Certificates"), issued by the Trust established pursuant to a pooling and
servicing agreement, dated as of ____________ (the "Series Agreement"), among
Union Planters Mortgage Finance Corp. (the "Depositor"), ___________________,
as Master Servicer (the "Master Servicer") and _____________________________,
as Trustee, which incorporates by reference the Depositor's Standard Terms to
Pooling and Servicing Agreement (_____ 1997 Edition) (the "Standard Terms,"
and, collectively with the Series Agreement, the "Agreement"). In doing so the
Transferee hereby acknowledges and agrees as follows:
SECTION 1. DEFINITIONS. Each capitalized term used herein and not
otherwise defined herein shall have the meaning ascribed to it in the Agreement.
Exhibit 5 - Page 1
<PAGE> 93
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEREE. In
connection with the proposed transfer of the Purchased Certificates, the
Transferee represents and warrants to the Depositor, the Master Servicer, the
Trustee and the Trust as follows:
(a) The Transferee is purchasing the Purchased
Certificates for its own account as principal for investment purposes
and not with a view to the distribution of the Purchased Certificates,
in whole or in part, in violation of Section 5 of the Securities Act of
1933, as amended (the "Act").
(b) The Transferee has knowledge in financial and
business matters and is capable of evaluating the merits and risks of
an investment in the Purchased Certificates; the Transferee has sought
such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision; and the Transferee is able to
bear the economic risk of an investment in the Purchased Certificates
and can afford a complete loss of such investment.
(c) The Transferee confirms that the Depositor and the
Master Servicer have made available to the Transferee the opportunity
to ask questions of, and receive answers from, the Depositor and the
Master Servicer concerning the Depositor, the Master Servicer, the
Trust, the purchase by the Transferee of the Purchased Certificates and
all matters relating thereto, and to obtain additional information
relating thereto that the Depositor or the Master Servicer possesses or
can acquire without unreasonable effort or expense.
(d) The Transferee is an "accredited investor" as
defined in paragraph (1), (2), (3) or (7) of Rule 501(a) under the Act.
SECTION 3. COVENANTS OF THE TRANSFEREE. In consideration of the
proposed transfer, the Transferee covenants with each of the Depositor, the
Master Servicer, the Trustee and the Trust as follows:
(a) The Transferee will not make a public offering of
the Purchased Certificates, and will not reoffer or resell the
Purchased Certificates in a manner that would render the issuance and
sale of the Purchased Certificates, whether considered together with
the resale or otherwise, a violation of the Act or any state securities
or "Blue Sky" laws or require registration pursuant thereto.
(b) The Transferee agrees that, in its capacity as a
holder of the Purchased Certificates, it will assert no claim or
interest in the Assets by reason of owning the Purchased Certificates
other than with respect to amounts that may be properly and actually
payable to the Transferee pursuant to the terms of the Pooling and
Servicing Agreement and the Purchased Certificates.
(c) The Transferee hereby agrees to abide by the terms
of the Agreement that will be applicable to it as a Certificateholder,
including, without limitation, the indemnification provisions contained
in the second sentence of Section 5.05(a) of the Agreement.
(d) If applicable, the Transferee will comply in all
material respects with applicable regulatory guidelines relating to the
ownership of mortgage derivative products.
SECTION 4. TRANSFER OF PURCHASED CERTIFICATES.
(a) The Transferee understands that the Purchased Certificates
have not been registered under the Act or any state securities laws and that no
transfer may be made unless the Purchased Certificates are registered under the
Act and under applicable state law or unless an exemption from such registration
is available. If requested by the Master Servicer or the Trustee, the Transferee
and the Holder of Purchased Certificates who desires to effect this transfer
have certified to the Trustee, the Depositor and the Master Servicer as to the
factual basis for the
Exhibit 5 - Page 2
<PAGE> 94
registration or qualification exemption relied upon. The Transferee further
understands that neither the Depositor, the Master Servicer, the Trustee nor
the Trust is under any obligation to register the Purchased Certificates or
make an exemption from such registration available.
(b) In the event that the transfer is to be made within three
years of the date the Purchased Certificates were acquired by a non-Affiliate of
the Depositor from the Depositor or an Affiliate of the Depositor, the Master
Servicer or the Trustee may require an Opinion of Counsel (which shall not be an
expense of the Depositor, the Master Servicer or the Trustee) that such transfer
is not required to be registered under the Act or state securities laws.
(c) Any Certificateholder desiring to effect a transfer shall,
and does hereby agree to, indemnify the Depositor, the Master Servicer and the
Trustee against any liability that may result if the transfer is not exempt
under federal or applicable state securities laws.
(d) The transfer of the Purchased Certificates may be subject to
additional restrictions, as set forth in Section 5.05 of the Standard Terms of
the Pooling and Servicing Agreement, a copy of which is attached hereto as
Annex A.
All capitalized terms used but not otherwise defined herein have the
respective meanings assigned thereto in the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Transferee
Certification and Agreement to be validly executed by its duly authorized
representative this ____ day of ___________, 19__.
------------------------------------------,
-------------------------------------------
By:
----------------------------------------
Its:
---------------------------------------
Exhibit 5 - Page 3
<PAGE> 95
ANNEX A TO EXHIBIT 5
ATTACH COPY OF SECTION 5.05 OF THE
STANDARD TERMS TO POOLING AND SERVICING AGREEMENT
Exhibit 5 - Page 4
<PAGE> 96
EXHIBIT 6
BENEFIT PLAN AFFIDAVIT
Re: Union Planters Mortgage Finance Corp.,
UPMFC Trust 19__-__ (the "Trust")
Pass-Through Certificates, Class ___,
Class __ and Class __
)
) ss:
)
Under penalties of perjury, I, the undersigned, declare that, to the
best of my knowledge and belief, the following representations are true,
correct, and complete.
1. That I am a duly authorized officer of _____________________,
a _________ corporation (the "Purchaser"), whose taxpayer identification number
is __________, and on behalf of which I have the authority to make this
affidavit.
2. That the Purchaser is acquiring the Class ______ Certificates
("the Purchased Certificates"), each representing an interest in the Trust, for
certain assets of which one or more real estate mortgage investment conduit
("REMIC") elections are to be made under Section 860D of the Internal Revenue
Code of 1986, as amended (the "Code").
3. The Purchaser either:
(i) (A) is not a plan ("Plan") described in or subject to
the Department of Labor regulations set forth in 29 C.F.R. ss.
2510.3-101 (the "Plan Asset Regulations"), a person acting on behalf of
a Plan, or a person using the assets of a Plan and (B) either (I) is
not an insurance company or (II) is an insurance company, in which case
none of the funds used by the Purchaser in connection with its purchase
of the Purchased Certificates constitute plan assets as defined in the
Plan Asset Regulations ("Plan Assets") and its purchase of the
Purchased Certificates shall not result in the certificates issued by
or the assets of the Trust being deemed to be Plan Assets;
(ii) is an insurance company and (A) the Purchaser is
acquiring the Purchased Certificates with funds held in an "insurance
company general account" (as defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60"), as published in 60
Fed. Reg. 35925 (July 12, 1995)), (B) there is no Plan with respect to
which the amount of such general account's reserves and liabilities
for all contracts held by or on behalf of such Plan and all other
Plans maintained by the same employer, or its affiliates (as defined
in Section V(a)(1) of PTCE 95-60), or by the same employee
organization exceeds or will exceed 10% of the total of all reserves
and liabilities of such general account (as such amounts are
determined under Section I(a) of PTCE 95-60) at the date of
acquisition, (C) the purchase of the Purchased Certificates is not
part of an agreement, arrangement, or understanding designed to
benefit a party in interest, and (D) the conditions of Prohibited
Transaction Exemption __________ [INSERT SPECIFIC
Exhibit 6 - Page 1
<PAGE> 97
UNDERWRITER'S EXEMPTION OR PTE 83-1] (except for the conditions stated
in section II(A)(2) and (3) thereof) are met; or
(iii) has provided a "Benefit Plan Opinion," obtained at the
Purchaser's expense, satisfactory to the Depositor, the Master
Servicer, and the Trustee. A Benefit Plan Opinion is an opinion of
counsel to the effect that the proposed transfer will not (a) cause
the assets of the Trust to be regarded as Plan Assets, (b) give rise
to a fiduciary duty under the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), on the part of the Depositor, the
Master Servicer, or the Trustee, or (c) be treated as, or result in, a
prohibited transaction under Section 406 or 407 of ERISA or Section
4975 of the Code.
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Pooling and Servicing Agreement, dated
as of ____________ __, _______, which incorporates by reference the Standard
Terms thereto (_____ 1997 Edition), among the Depositor, the Master Servicer,
and ___________________, as Trustee.
Exhibit 6 - Page 2
<PAGE> 98
IN WITNESS WHEREOF, the Purchaser has caused this instrument to be
duly executed on its behalf, by its duly authorized officer this ____ day of
___________, 19__.
-----------------------------
[Name of Purchaser]
By:
------------------------------------
Its:
------------------------------------
Personally appeared before me ________________, known or proved to me
to be the same person who executed the foregoing instrument and to be a
_________________________ of the Purchaser, and acknowledged to me that he
executed the same as his or her free act and deed and as the free act and deed
of the Purchaser.
Subscribed and sworn before me
this ______ day of ___________, ____.
- -----------------------------------
Notary Public
My commission expires:______________________________.
Exhibit 6 - Page 3
<PAGE> 99
EXHIBIT 7
FORM OF RESIDUAL TRANSFEREE AGREEMENT
UNION PLANTERS MORTGAGE FINANCE CORP., SERIES 19__-_______
PASS-THROUGH CERTIFICATES,
CLASS __
RESIDUAL TRANSFEREE
-----------------
[Name of Transferee]
----------------
(DATE)
[Trustee]
[Address]
[Address]
Attention: [________________]
Union Planters Mortgage Finance Corp.
7130 Goodlett Farms Parkway
Cordova, Tennessee 38018
Attention: Secretary
[Master Servicer]
[Address]
[Address]
Attention: [________________]
Re: Union Planters Mortgage Finance Corp., Series 19__-____,
Pass-Through Certificates, Class __, representing a
[___% Percentage Interest] [$ denomination]
Gentlemen:
The undersigned (the "Transferee") proposes to purchase all or some of
the captioned Certificates (the "Residual Certificates"), issued by the Trust
established pursuant to a pooling and servicing agreement dated as of
__________________, 19____ (the "Series Agreement"), among Union Planters
Mortgage Finance Corp. (the "Depositor"), ________________________, as master
servicer (the "Master Servicer"), and _____________________________, as
Trustee, which incorporates by reference the Standard Terms thereto, _____ 1997
Edition (the "Standard Terms" and, collectively with the Series Agreement, the
"Agreement"). In doing so the Transferee hereby acknowledges and agrees as
follows:
SECTION 1. DEFINITIONS. Each capitalized term used herein and not
otherwise defined herein shall have the meaning ascribed to it in the Agreement.
Exhibit 7 - Page 1
<PAGE> 100
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEREE. In
connection with the proposed transfer of the Purchased Certificates, the
Transferee represents and warrants to the Depositor, the Master Servicer, the
Trustee and the Trust as follows:
(a) The Transferee has knowledge in financial and
business matters and is capable of evaluating the merits and risks of
an investment in the Residual Certificates; the Transferee has sought
such accounting, legal and tax advice as it has considered necessary to
make an informed decision; and the Transferee is able to bear the
economic risk of an investment in the Residual Certificates and can
afford a complete loss of such investment.
(b) The Transferee represents that (i) it understands
that each of the Residual Certificates represents for federal income
tax purposes a "residual interest" in a real estate mortgage investment
conduit (a "REMIC") and that, as the holder of the Residual
Certificates, it will be required to take into account, in determining
its taxable income, its pro rata share of the taxable income of the
REMIC, (ii) it understands that it may incur federal income tax
liabilities with respect to the Residual Certificates in excess of any
cash flows generated by the Residual Certificates and (iii) it has
historically paid its debts as they became due and has the financial
wherewithal and intends to continue to pay its debts as they come due
in the future, including any tax imposed on the income that it derives
from the Residual Certificates as such taxes become due.
*(c) The Transferee is acquiring the Residual
Certificates for its own account as principal and not with a view to
the resale or distribution thereof, in whole or in part, in violation
of Section 5 of the Securities Act of 1933, as amended (the "Act").
*(d) The Transferee confirms that the Depositor has made
available to the Transferee the opportunity to ask questions of, and
receive answers from, the Depositor concerning the Depositor, the
Trust, the purchase by the Transferee of the Residual Certificates and
all matters relating thereto, and to obtain additional information
relating thereto that the Depositor possesses or can acquire
unreasonable effort or expense.
SECTION 3. COVENANTS. The Transferee covenants:
*(a) The Transferee will not make a public offering of
the Residual Certificates, and will not reoffer or resell the Residual
Certificates in a manner that would render the issuance and sale of the
Residual Certificates whether considered together with the resale or
otherwise, a violation of the Act, or any state securities or "Blue
Sky" laws or require registration pursuant thereto.
(b) The Transferee agrees that, in its capacity as a
holder of the Residual Certificates, it will assert no claim or
interest in the Mortgage Loans by reason of owning the Residual
Certificates other than with respect to amounts that may be properly
and actually payable to the Transferee pursuant to the terms of the
Pooling and Servicing Agreement and the Certificates.
(c) If applicable, the Transferee will comply with
respect to the Residual Certificates in all material respects with
applicable regulatory guidelines relating to the ownership of mortgage
derivative products.
(d) Upon notice thereof, the Transferee agrees to any
future amendment to the provisions of the Pooling and Servicing
Agreement relating to the transfer of the Residual Certificates (or any
interest
- ----------------
*These representations and covenants are to be deleted if the Residual
Securities are not Private Securities.
Exhibit 7 - Page 2
<PAGE> 101
therein) that counsel to the Depositor or the Trust may deem necessary
to ensure that any such transfer will not result in the imposition of
any tax on the Trust.
(e) The Transferee hereby agrees that the Master
Servicer or an affiliate thereof will (i) supervise or engage in any
action necessary or advisable to preserve the status of the REMIC as a
REMIC, (ii) be, and perform the functions of, the REMIC's tax matters
person ("TMP"), and (iii) employ on a reasonable basis counsel,
accountants, and professional assistance to aid in the preparation of
tax returns or the performance of the above.
(f) The Transferee hereby agrees to cooperate with the
TMP and to take any action required of it by the REMIC Provisions in
order to create or maintain the REMIC status of the REMIC.
(g) The Transferee hereby agrees that it will not take
any action that could endanger the REMIC status of any related REMIC or
result in the imposition of tax on any such REMIC unless counsel for,
or acceptable to, the TMP has provided an opinion that such action will
not result in the loss of such REMIC status or the imposition of such
tax, as applicable.
SECTION 4. ADDITIONAL TRANSFER RESTRICTIONS.
(a) No transfer of the Residual Certificates shall be
made unless the Master Servicer has consented in writing to such
transfer. No Residual Certificate may be transferred to a Disqualified
Organization. The Master Servicer will not consent to any proposed
transfer (i) to any investor that it knows is a Disqualified
Organization or (ii) if the transfer involves less than an entire
interest in a Residual Certificate unless (A) the interest transferred
is an undivided interest or (B) the transferor or the transferee
provides the Master Servicer with an Opinion of Counsel obtained at its
own expense to the effect that the transfer will not jeopardize the
REMIC status of any related REMIC. The Master Servicer's consent to any
transfer is further conditioned the Master Servicer's receipt from the
proposed transferee of (x) a Residual Transferee Agreement, (y) a
Benefit Plan Affidavit, and (z) either (A) if the transferee is a
Non-U.S. Person, an affidavit of the proposed transferee in
substantially the form attached as Exhibit 7-A to Exhibit 7 to the
Standard Terms and a certificate of the transferor stating whether the
Class R Certificate has "tax avoidance potential" as defined in
Treasury Regulations Section 1.860G-3(a)(2), or (B) if the transferee
is a U.S. Person, an affidavit in substantially the form attached as
Exhibit 7-B to Exhibit 7 to the Standard Terms. In addition, if a
proposed transfer involves a Private Certificate, (1) the Master
Servicer or the Trustee shall require that the transferor and
transferee certify as to the factual basis for the registration or
qualification exemption(s) relied upon to exempt the transfer from
registration under the Act and all applicable state securities or "blue
sky" laws, and (2) if the transfer is to be made within three years
after the acquisition thereof by a non-Affiliate of the Depositor from
the Depositor or an Affiliate of the Depositor, the Master Servicer or
the Trustee also may require an Opinion of Counsel that such transfer
may be made without registration or qualification under the Act and
applicable state securities laws, which Opinion of Counsel shall not be
obtained at the expense of the Depositor, the Trustee or the Master
Servicer. Notwithstanding the foregoing, no Opinion of Counsel shall be
required in connection with the initial transfer of the Residual
Certificates or their transfer by a broker or dealer, if such broker or
dealer was the initial transferee. Notwithstanding the fulfillment of
the prerequisites described above, the Master Servicer may withhold its
consent to, or the Trustee may refuse to recognize, a transfer of a
Residual Certificate, but only to the extent necessary to avoid a risk
of disqualification of a related REMIC as a REMIC or the imposition of
a tax upon any such REMIC. Any attempted transfer in violation of the
foregoing restrictions shall be null and void and shall not be
recognized by the Trustee.
(b) If a tax or a reporting cost is borne by a related
REMIC as a result of the transfer of the Residual Certificates or any
beneficial interest therein, in violation of the restrictions
referenced herein, the Transferor shall pay such tax or cost and, if
such tax or costs are not so paid, the Trustee, upon
Exhibit 7 - Page 3
<PAGE> 102
notification from the Master Servicer, shall pay such tax or reporting
cost with amounts that otherwise would have been paid to the
transferee of such Residual Certificates. In that event, neither the
Transferee nor the transferor shall have any right to seek repayment
of such amounts from the Depositor, the Master Servicer, the Trustee,
the Trust, the REMIC or the holders of any other Certificates, and
none of such parties shall have any liability for payment of any such
tax or reporting cost. In the event that a Residual Certificate is
transferred to a Disqualified Organization, the Master Servicer shall
make, or cause to be made, available the information necessary for the
computation of the excise tax imposed under section 860E(e) of the
Code.
SECTION 5. ACKNOWLEDGMENTS.
(a) The Transferee acknowledges that, if the Residual
Certificates are Private Certificates, the Residual Certificates have
not been registered under the Act or registered or qualified under any
state securities laws and that no transfer may be made unless the
Purchased Certificates are registered under the Act and under
applicable state law or unless an exemption from such registration is
available. The Transferee further understands that neither the
Depositor, the Master Servicer nor the Trust is under any obligation
to register the Certificate or make an exemption from such
registration available.
(b) The Transferee acknowledges that if any United
States federal income tax is due at the time a Non-U.S. Person
transfers a Residual Certificate, the Trustee or its designated Paying
Agent or other person who is liable to withhold federal income tax from
a distribution on a Residual Certificate under sections 1441 and 1442
of the Code and the regulations thereunder (the "Withholding Agent")
may (i) withhold an amount equal to the taxes due upon disposition of
the Certificate from future distributions made with respect to the
Certificate to the transferee (after giving effect to the withholding
of taxes imposed on such transferee), and (ii) pay the withheld amount
to the Internal Revenue Service unless satisfactory written evidence of
payment of the taxes due by the transferor has been provided to the
Withholding Agent. Moreover, the Withholding Agent may (x) hold
distributions on a Certificate, without interest, pending determination
of amounts to be withheld, (y) withhold other amounts required to be
withheld pursuant to United States federal income tax law, if any, from
distributions that otherwise would be made to such transferee on each
Certificate it holds, and (z) pay to the Internal Revenue Service all
such amounts withheld.
(c) The Transferee acknowledges that the transfer of all
or part of the Residual Certificates that have "tax avoidance
potential" (as defined in Treasury Regulations section 1.860G-3(a)(2)
or any successor provision) to a Non-U.S. Person will be disregarded
for all federal income tax purposes.
(d) The Transferee acknowledges that the transfer of the
Residual Certificates to a U.S. Person will be disregarded for all
federal income tax purposes if a significant purpose of the transfer
is to impede the assessment or collection of the taxes and expenses
associated with the security within the meaning of Treasury regulation
section 1.860E-1(c)(1).
IN WITNESS WHEREOF, the undersigned has caused the Pooling and
Servicing Agreement be validly executed by its duly authorized representative
as of the day and year first above written.
------------------------------------
[Name of Transferee]
By:
-------------------------------
Its:
-------------------------------
Exhibit 7 - Page 4
<PAGE> 103
EXHIBIT 7-A
UNION PLANTERS MORTGAGE FINANCE CORP.
FOREIGN PERSON AFFIDAVIT
AND AFFIDAVIT PURSUANT TO SECTIONS
860D(A)(6)(A) AND 860E(E)(4)
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
Re: Union Planters Mortgage Finance Corp.
Series __________ Trust (the "Trust")
Pass-Through Certificates, Class __
STATE OF ___________ )
) ss.:
COUNTY OF __________ )
Under penalties of perjury, I, the undersigned, declare that to the
best of my knowledge and belief, the following representations are true,
correct, and complete:
1. I am a duly authorized officer of ___________________ (the
"Transferee"), and on behalf of which I have the authority to make this
affidavit.
2. The Transferee is acquiring all or a portion of the
securities (the "Residual Certificates"), which represent a residual interest in
one or more real estate mortgage investment conduits (each, a "REMIC") for which
elections are to be made under Section 860D of the Internal Revenue Code of
1986, as amended (the "Code").
3. The Transferee is a foreign person within the meaning of
Treasury Regulation Section 1.860G-3(a)(1) (i.e., a person other than (i) a
citizen or resident of the United States, (ii) a corporation or partnership that
is organized under the laws of the United States or any jurisdiction thereof or
therein, or (iii) an estate or trust that is subject to United States federal
income tax regardless of the source of its income) who would be subject to
United States income tax withholding pursuant to Section 1441 or 1442 of the
Code on income derived from the Residual Certificates (a "Non-U.S. Person").
4. The Transferee agrees that it will not hold the Residual
Certificates in connection with a trade or business in the United States, and
the Transferee understands that it will be subject to United States federal
income tax under sections 871 and 881 of the Code in accordance with section
860G of the Code and any Treasury regulations issued thereunder on "excess
inclusions" that accrue with respect to the Residual Certificates during the
period the Transferee holds the Residual Certificates.
5. The Transferee understands that the federal income tax on
excess inclusions with respect to the Residual Certificates may be withheld in
accordance with section 860G(b) of the Code from distributions that otherwise
would be made to the Transferee on the Residual Certificates and, to the extent
that such tax has not been imposed previously, that such tax may be imposed at
the time of disposition of any such Residual Certificate pursuant to section
860G(b) of the Code.
Exhibit 7-A - Page 1
<PAGE> 104
6. The Transferee agrees (i) to file a timely United States
federal income tax return for the year in which disposition of a Residual
Certificate it holds occurs (or earlier if required by law) and will pay any
United States federal income tax due at that time and (ii) if any tax is due at
that time, to provide satisfactory written evidence of payment to the Trustee or
its designated paying agent or other person who is liable to withhold federal
income tax from a distribution on the Residual Certificates under sections 1441
and 1442 of the Code and the regulations thereunder (the "Withholding Agent").
7. The Transferee understands that, until such written notice is
provided, the Withholding Agent may (i) withhold an amount equal to the taxes
due upon disposition of a Residual Certificates from future distributions made
with respect to the Residual Certificate to subsequent transferees (after
giving effect to the withholding of taxes imposed on such subsequent
transferees), and (ii) pay the withheld amount to the Internal Revenue Service.
8. The Transferee understands that (i) the Withholding Agent may
withhold other amounts required to be withheld pursuant to United States
federal income tax law, if any, from distributions that otherwise would be made
to such transferee on each Residual Certificates it holds and (ii) the
Withholding Agent may pay to the Internal Revenue Service amounts withheld on
behalf of any and all former holders of each Residual Certificate held by the
Transferee.
9. The Transferee understands that if it transfers a Residual
Certificate (or any interest therein) to a United States Person (including a
foreign person who is subject to net United States federal income taxation with
respect to such Residual Certificate), the Withholding Agent may disregard the
transfer for federal income tax purposes if the transfer would have the effect
of allowing the Transferee to avoid tax on accrued excess inclusions and may
continue to withhold tax from future distributions as though the Residual
Certificate were still held by the Transferee.
10. The Transferee understands that a transfer of a Residual
Certificate (or any interest therein) to a Non-U.S. Person (i.e., a foreign
person who is not subject to net United States federal income tax with respect
to such Residual Certificate) will not be recognized unless the Withholding
Agent has received from the transferee an affidavit in substantially the same
form as this affidavit containing these same agreements and representations.
11. The Transferee understands that distributions on a Residual
Certificate may be delayed, without interest, pending determination of amounts
to be withheld.
12. The Transferee is not a "Disqualified Organization" (as
defined below), and the Transferee is not acquiring a Residual Certificate for
the account of, or as agent or nominee of, or with a view to the transfer of
direct or indirect record or beneficial ownership to, a Disqualified
Organization. For the purposes hereof, a Disqualified Organization is any of the
following: (i) the United States, any State or political subdivision thereof,
any foreign government, any international organization, or any agency or
instrumentality of any of the foregoing; (ii) any organization (other than a
farmer's cooperative as defined in Section 521 of the Code) that is exempt from
federal income taxation (including taxation under the unrelated business taxable
income provisions of the Code); (iii) any rural telephone or electrical service
cooperative described in Section 1381(a)(2)(C) of the Code; or (iv) any other
entity so designated by Treasury rulings or regulations promulgated or otherwise
in effect as of the date hereof. In addition, a corporation will not be treated
as an instrumentality of the United States or of any state or political
subdivision thereof if all of its activities are subject to tax and, with the
exception of the Federal Home Loan Mortgage Corporation, a majority of its board
of directors is not selected by such governmental unit.
13. The Transferee agrees to consent to any amendment of the
Pooling and Servicing Agreement that shall be deemed necessary by the Depositor
(upon the advice of counsel to the Depositor) to constitute a reasonable
arrangement to ensure that no interest in a Residual Certificate will be owned
directly or indirectly by a Disqualified Organization.
Exhibit 7-A - Page 2
<PAGE> 105
14. The Transferee acknowledges that Section 860E(e) of the Code
would impose a substantial tax on the transferor or, in certain circumstances,
on an agent for the transferee, with respect to any transfer of any interest in
any Residual Certificate to a Disqualified Organization.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Pooling and Servicing Agreement, dated as of
_______________, 19__, which incorporates by reference the Standard Terms
thereto (_____ 1997 Edition), among the Depositor, the Master Servicer, and
____________________, as Trustee.
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
duly executed on its behalf, by its duly authorized officer as of the _______
day of _____________, 19__.
---------------------------------------------
[Name of Transferee]
By:
-----------------------------------------
Its:
-----------------------------------------
Personally appeared before me ___________________________, known or
proved to me to be the same person who executed the foregoing instrument and to
be a ______________________ of the Transferee, and acknowledged to me that he
or she executed the same as his or her free act and deed and as the free act
and deed of the Transferee.
Subscribed and sworn before me this ______ day of __________, 19__.
---------------------------------------------
Notary Public
My commission expires the _____ day of ________________, 19__.
Exhibit 7-A - Page 3
<PAGE> 106
EXHIBIT 7-B
UNION PLANTERS MORTGAGE FINANCE CORP.
AFFIDAVIT PURSUANT TO SECTIONS
860D(A)(6)(A) AND 860E(E)(4)
OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED
Re: Union Planters Mortgage Finance Corp.
Series ________ Trust (the "Trust")
Pass-Through Certificates, Class ___
STATE OF ___________________________ )
) ss.:
COUNTY OF _________________________ )
Under penalties of perjury, I, the undersigned declare that, to the
best of my knowledge and belief, the following representations are true,
correct and complete:
1. I am a duly authorized officer of ______________________ (the
"Transferee"), on behalf of which I have the authority to make this affidavit.
2. The Transferee is acquiring all or a portion of the
securities (the "Residual Certificates"), which represent a residual interest in
one or more real estate mortgage investment conduits (each, a "REMIC") for which
elections are to be made under Section 860D of the Internal Revenue Code of
1986, as amended (the "Code").
3. The Transferee either is (i) a citizen or resident of the
United States, (ii) a domestic partnership or corporation, (iii) an estate or
trust that is subject to United States federal income tax regardless of the
source of its income, or (iv) a foreign person who would be subject to United
States income taxation on a net basis on income derived from the Residual
Certificates (a "U.S. Person").
4. The Transferee is a not a "Disqualified Organization" (as
defined below), and the Transferee is not acquiring a Residual Certificate for
the account of, or as agent or nominee of, or with a view to the transfer of
direct or indirect record or beneficial ownership to, a Disqualified
Organization. For the purposes hereof, a Disqualified Organization is any of the
following: (i) the United States, any State or political subdivision thereof,
any foreign government, any international organization, or any agency or
instrumentality of any of the foregoing; (ii) any organization (other than a
farmer's cooperative as defined in Section 521 of the Code) that is exempt from
federal income taxation (including taxation under the unrelated business taxable
income provisions of the Code); (iii) any rural telephone or electrical service
cooperative described in ss. 1381(a)(2)(C) of the Code; or (iv) any other entity
so designated by Treasury rulings or regulations promulgated or otherwise in
effect as of the date hereof. In addition, a corporation will not be treated as
an instrumentality of the United States or of any state or political subdivision
thereof if all of its activities are subject to tax and, with the exception of
the Federal Home Loan Mortgage Corporation, a majority of its board of directors
is not selected by such governmental unit.
Exhibit 7-B - Page 1
<PAGE> 107
5. The Transferee agrees to consent to any amendment of the
Pooling and Servicing Agreement that shall be deemed necessary by the Issuer
(upon advice of counsel to the Issuer) to constitute a reasonable arrangement to
ensure that no interest in a Residual Certificate will be owned directly or
indirectly by a Disqualified Organization.
6. The Transferee acknowledges that Section 860E(e) of the Code
would impose a substantial tax on the transferor or, in certain circumstances,
on an agent for the transferee, with respect to any transfer of any interest in
any Residual Certificate to a Disqualified Organization.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Pooling and Servicing Agreement, dated as of
_______________, 19__, which incorporates by reference the Standard Terms
thereto (_____ 1997 Edition), among the Depositor, the Master Servicer, and
____________________, as Trustee.
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
duly executed on its behalf by its duly authorized officer this ____ day of
______, 19__.
------------------------------------------
[Name of Transferee]
By:
--------------------------------------
Its:
--------------------------------------
Personally appeared before me ___________________, known or proved to
me to be the same person who executed the foregoing instrument and to be a
_______________ of the Transferee, and acknowledged to me that he or she
executed the same as his or her free act and deed and as the free act and deed
of the Transferee.
Subscribed and sworn before me this ____ day of ________, 19__.
------------------------------------------
Notary Public
My commission expires the ____ day of ____________________, 19__.
Exhibit 7-B - Page 2
<PAGE> 108
EXHIBIT 8
======================================================
UNION PLANTERS MORTGAGE FINANCE CORP.,
[ ]
AND
[ ]
TRUSTEE
__________
SERIES 19__-__ POOLING AND SERVICING AGREEMENT
DATED AS OF ________ ___, 19___
__________
UNION PLANTERS MORTGAGE FINANCE CORP.,
PASS-THROUGH CERTIFICATES, SERIES 19___-___
======================================================
Exhibit 8 - Page 1
<PAGE> 109
THIS SERIES 19___-___ POOLING AND SERVICING AGREEMENT, dated as of
______________ 1, 19___, is made with respect to the formation of UPMFC Trust
19___-___ (the "Trust") among UNION PLANTERS MORTGAGE FINANCE CORP., a Delaware
corporation (the "Depositor"), ______________________, a _____________
corporation ("___" and, in its capacity as master servicer, the "Master
Servicer"), and [_______________________], a national banking association, as
trustee (the "Trustee"), under this Agreement and the Standard Terms to Pooling
and Servicing Agreement, _____ 1997 Edition (the "Standard Terms"), all the
provisions of which are incorporated herein as modified hereby and shall be a
part of this Agreement as if set forth herein in full (this Agreement with the
Standard Terms so incorporated, the "Pooling and Servicing Agreement").
Capitalized terms used and not otherwise defined herein shall have the
respective meanings given them in the Standard Terms.
PRELIMINARY STATEMENT
The Depositor has duly authorized the formation of the Trust to issue
a Series of Certificates with an aggregate initial principal amount of
$[___________], to be known as the Senior/Subordinated Pass-Through
Certificates, Series 19___-___ (the "Certificates"). The Certificates consist
of ___ Classes that in the aggregate evidence the entire beneficial ownership
interest in the Trust.
In accordance with Section 10.01 of the Standard Terms, the Trustee
will make an election to treat all of the assets of the Trust as [two] real
estate mortgage investment conduits (each, a "REMIC" and, individually, the
"Pooling REMIC" and the "Issuing REMIC") for federal income tax purposes. The
Pooling REMIC will consist of the Distribution Account and the Assets listed on
the Asset Schedule attached as Schedule I (as defined below) hereto. The
Issuing REMIC will consist of the [________] Subaccounts designated as provided
herein, the Class [_____] Liquidity Account and the Class [_______] Liquidity
Account. The "startup day" of each REMIC for purposes of the REMIC Provisions
is the Closing Date.
GRANTING CLAUSES
To provide for the distribution of the principal of and interest on
the Certificates in accordance with their terms, all of the sums distributable
under the Pooling and Servicing Agreement with respect to the Certificates and
the performance of the covenants contained in this Pooling and Servicing
Agreement, the Depositor hereby bargains, sells, conveys, assigns and transfers
to the Trustee, in trust and as provided in this Pooling and Servicing
Agreement, without recourse and for the exclusive benefit of the Holders of the
Certificates, all of the Depositor's right, title and interest in and to, and
any and all benefits accruing to the Depositor from, (a) the Assets listed in
Schedule I hereto, together with the related Asset Documents, and all payments
thereon and proceeds of the conversion, voluntary or involuntary, of the
foregoing, including, without limitation, all rights to receive all principal
and interest payments due on the Assets after the Cut-off Date, including such
scheduled payments received by the Depositor or Seller on or prior to the
Cut-off Date, and Principal Prepayments, Net Insurance Proceeds, Net
Liquidation Proceeds, Repurchase Prices and other unscheduled collections
received on the Assets on and after the Cut-off Date; (b) the security
interests in the Mortgaged Properties granted by the Obligors pursuant to the
related Assets; (c) all funds, other than investment earnings, relating to the
Assets on deposit in the Certificate Account or the Distribution Account for
the Certificates and all proceeds thereof, whether in the form of cash,
instruments, securities or other properties; (d) the Class _________ Liquidity
Account, the Class _______ Liquidity Account and all amounts on deposit in
each; (e) any and all rights, privileges and benefits accruing to the Depositor
under the Sales Agreement with respect to the Assets (provided that the
Depositor shall retain its rights to indemnification from the Seller under such
Sales Agreement, but also hereby conveys its rights to such indemnification to
the Trustee as its assignee), including the rights and remedies with respect to
the enforcement of any and all representations, warranties and covenants under
such Sales Agreement; and (f) proceeds of all the foregoing (including, but not
by way of limitation, all proceeds of any Standard Hazard Insurance Policy or
FHA Insurance, or any other insurance policy relating to any of the Assets,
cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, rights to payment of any and every
kind, and other
Exhibit 8 - Page 2
<PAGE> 110
forms of obligations and receivables that at any time constitute all or part or
are included in the proceeds of any of the foregoing) to make distributions on
the Certificates as specified herein (the items referred to in clauses (a)
through (f) above shall be collectively referred to herein as the "Trust
Estate").
The Trustee acknowledges the foregoing, accepts the trusts hereunder
in accordance with the provisions hereof and the Standard Terms and agrees to
perform the duties herein or therein required to the best of its ability to the
end that the interests of the Holders of the Certificates may be adequately and
effectively protected.
SECTION 1. STANDARD TERMS.
The Depositor, the Master Servicer and the Trustee acknowledge that
the Standard Terms prescribe certain obligations of the Depositor, the Master
Servicer and the Trustee with respect to the Certificates. The Depositor, the
Master Servicer and the Trustee agree to observe and perform such prescribed
duties, responsibilities and obligations, and acknowledge that, except to the
extent inconsistent with the provisions of this Pooling and Servicing
Agreement, the Standard Terms are and shall be a part of this Pooling and
Servicing Agreement to the same extent as if set forth herein in full.
SECTION 2. DEFINED TERMS.
With respect to the Certificates and in addition to or in replacement
for the definitions set forth in Section 1.01 of the Standard Terms, the
following definitions shall be assigned to the defined terms set forth below:
"Accrual Date": The Accrual Date (i) with respect to the Class
[LIBOR] Certificates shall be the Closing Date and (ii) with respect to all
other Classes of Certificates shall be __________ 1, 19___.
"Average Sixty-Day Delinquency Ratio": With respect to any
Distribution Date, the arithmetic average of the Sixty-Day Delinquency Ratios
for such Distribution Date and the two preceding Distribution Dates. The
"Sixty-Day Delinquency Ratio" for a Distribution Date is the percentage derived
from the fraction, the numerator of which is the aggregate Scheduled Principal
Balance (as of the end of the preceding Prepayment Period) of all Assets
(including Assets in respect of which the related Mortgage Property has been
repossessed or foreclosed upon but not yet disposed of) as to which a Monthly
Payment thereon is delinquent 60 days or more as of the end of the related
Collection Period, and the denominator of which is the Pool Scheduled Principal
Balance for such Distribution Date.
"Average Thirty-Day Delinquency Ratio": With respect to any
Distribution Date, the arithmetic average of the Thirty-Day Delinquency Ratios
for such Distribution Date and the two preceding Distribution Dates. The
"Thirty-Day Delinquency Ratio" for a Distribution Date is the percentage
derived from the fraction, the numerator of which is the aggregate Scheduled
Principal Balance (as of the end of the preceding Prepayment Period) of all
Assets (including Assets in respect of which the related Mortgage Property has
been repossessed or foreclosed upon but not yet disposed of) as to which a
Monthly Payment thereon is delinquent 30 days or more as of the end of the
related Collection Period, and the denominator of which is the Pool Scheduled
Principal Balance for such Distribution Date.
"Book-Entry Certificates": The Class A and Class B Certificates.
"Carryover Interest Amount": With respect to each Class of
Certificates, except the Class X Certificates and the Residual Certificates,
and each Distribution Date, all amounts that were distributable on such Class
as Interest Distribution Amounts on previous Distribution Dates that remain
unpaid, together with interest on each overdue Interest Distribution Amount
that comprises the Carryover Interest Amount at the Pass-Through Rate in effect
for such Class from time to time from the last day of the Interest Accrual
Period in which such overdue Interest Distribution Amount accrued through the
last day of the related Interest Accrual Period, to the extent not previously
distributed. With respect to each Subaccount on each Distribution Date, all
amounts that were allocable to such Subaccount as Priority Interest Amounts on
previous Distribution Dates that remain unpaid, together with interest on each
overdue Priority Interest Amount that comprises the Carryover Interest Amount
at the applicable
Exhibit 8 - Page 3
<PAGE> 111
Pass-Through Rate in effect for the Corresponding Certificates with respect to
such Subaccount from time to time from the last day of the Interest Accrual
Period in which such overdue Priority Interest Amount accrued through the last
day of the related Interest Accrual Period, to the extent not previously
distributed.
"Carryover Non-Priority Interest Amount": For any Subaccount, on any
Distribution Date, all amounts that were distributable on such Subaccount as
Non-Priority Interest Amounts on previous Distribution Dates that remain unpaid.
"Class A Certificates": The Class A-__ Certificates, Class A-__
Certificates, Class A-__ Certificates, Class A-__ Certificates, Class A-__
Certificates and Class A-__ Certificates.
"Class A Percentage": With respect to each Distribution Date,
generally the percentage derived from the fraction (which shall not be greater
than 1), the numerator of which is the aggregate Certificate Principal Balance
of the Class A Certificates immediately prior to such Distribution Date and the
denominator of which is the aggregate Certificate Principal Balance of all the
Certificates immediately prior to such Distribution Date. The "Class A
Principal Balance" and "Class B Principal Balance" will be based on the
Certificate Principal Balance of the Certificates.
"Class A-___ Liquidity Account": The fund established pursuant to
Section 6(a) hereof and to be applied specifically to the Class A-___
Certificates. The Class A-___ Liquidity Account shall be deemed to be a
"Reserve Fund" as such term is defined in the Standard Terms.
"Class A-__ Liquidity Account Draw Amount": On any Distribution Date,
the lesser of (i) the amount on deposit in the Class A-___ Liquidity Account,
and (ii) the aggregate amount of any Interest Distribution Amounts and
Carryover Interest Amounts due on the Class A-___ Certificates that are not
distributed out of the Available Distribution Amount for such Distribution
Date.
"Class A-___ Liquidity Account Required Amount": On any Distribution
Date, three months of interest at the Class A-___ Pass-Through Rate on the
Class A-___ Certificate Principal Balance after giving effect to principal
distributions on such Distribution Date.
"Class A Subaccounts": Any or all, as appropriate, of the Class
A-___, Class A-___, Class A-___, Class A-___, Class A-___ or Class A-___
Subaccounts.
"Class B Certificates": The Class B-___ Certificates and Class B-___
Certificates.
"Class B-__ Liquidity Account": The fund established pursuant to
Section 6(b) hereof and to be applied specifically to the Class B-__
Certificates. The Class B-__ Liquidity Account shall be deemed to be a "Reserve
Fund" as such term is defined in the Standard Terms.
"Class B-__ Liquidity Account Draw Amount": On any Distribution Date,
the lesser of (i) the amount on deposit in the Class B-__ Liquidity Account,
and (ii) the aggregate amount of any Interest Distribution Amounts and
Carryover Interest Amounts due on the Class B-__ Certificates that are not
distributed out of the Available Distribution Amount for such Distribution
Date.
"Class B-__ Liquidity Account Required Amount": On any Distribution
Date, three months of interest at the Class B-__ Pass-Through Rate on the Class
B-__ Certificate Principal Balance after giving effect to principal
distributions on such Distribution Date.
"Class B Cross-over Date": The later to occur of (a) the Distribution
Date occurring in _________ 20__ or (b) the first Distribution Date on which
the Class B Percentage equals or exceeds ____ times the initial Class B
Percentage.
Exhibit 8 - Page 4
<PAGE> 112
"Class B Percentage": With respect to each Distribution Date, the
difference between 100% and the Class A Percentage for such Distribution Date.
"Class B Principal Distribution Tests": With respect to each
Distribution Date: (a) the Average Sixty-Day Delinquency Ratio as of such
Distribution Date does not exceed 5%; (b) the Average Thirty-Day Delinquency
Ratio as of such Distribution Date does not exceed 7%; (c) the Cumulative
Realized Losses as of such Distribution Date do not exceed an amount equal to
the percentage set forth below of the initial aggregate Certificate Principal
Balance of all the Certificates:
Distribution Dates Percentage
_________ 20__ through ________ 20__ 7%
_________ 20__ through ________ 20__ 8%
_________ 20__ through and after 9%
; and (d) the Current Realized Loss Ratio as of such Distribution Date does not
exceed 2.75%.
"Class B Subaccounts": Any or all, as appropriate, of the Class B-___
or Class B-___ Subaccounts.
"Class R Certificates": The Class R Certificates, which comprise both
the Pooling REMIC Residual Interest and the Issuing REMIC Residual Interest.
"Class R-1 Certificates": Following the division of the Class R
Certificates into two separately transferable, certificated and fully
registered certificates in accordance with Section 9(b) hereof, the Class R-1
Certificates, which will represent the Issuing REMIC Residual Interest.
"Class R-2 Certificates": Following the division of the Class R
Certificates into two separately transferable, certificated and fully
registered certificates in accordance with Section 9(b) hereof, the Class R-2
Certificates, which will represent the Pooling REMIC Residual Interest.
"Class X Carryover Strip Amount": With respect to the Class X
Certificates on each Distribution Date, all amounts that were distributable on
such Class as Class X Strip Amounts on previous Distribution Dates that remain
unpaid.
"Class X Certificates": The Class X Certificates created pursuant to
Section 3 hereof.
"Class X Strip Amount": With respect to any Distribution Date, 30 days
interest on the aggregate Certificate Principal Balance of the Class A
Certificates and the Class B Certificates at a rate equal to the difference, if
any, between the Weighted Average Net Asset Rate and the weighted average of
the Pass-Through Rates on the Class A Certificates and the Class B
Certificates.
"Closing Date": _____________ ___, 19___.
"Corporate Trust Office": The address set forth hereinbelow under
"Trustee".
"Corresponding Certificates": For any Subaccount, the Class of
Certificates bearing the same letter and numerical designation as that borne by
such Subaccount.
"Corresponding Subaccount" For any Class of Certificates, the
Subaccount bearing the same letter and numerical designation as that borne by
such Class.
"Cumulative Realized Losses": With respect to any Distribution Date,
the aggregate Realized Losses incurred on the Assets during the period from the
Cut-off Date through the end of the related Prepayment Period.
Exhibit 8 - Page 5
<PAGE> 113
"Current Realized Loss Ratio": With respect to any Distribution Date,
the annualized percentage derived from the fraction, the numerator of which is
the sum of the aggregate Realized Losses for the three preceding Prepayment
Periods and the denominator of which is the arithmetic average of the Pool
Scheduled Principal Balances for such Distribution Date and the preceding two
Distribution Dates.
"Cut-off Date": _______________ 1, 19___.
"ERISA Restricted Certificates": The Class A-___, Class B-___,
Class B-___, Class X and Class R Certificates.
"Floating Rate Determination Date": For any Interest Accrual Period
for the Class [LIBOR] Certificates, the second London Banking Day prior to the
commencement of such Interest Accrual Period.
"Institutional Holder": An insurance company whose long-term debt is
rated at least A- by a Rating Agency, or an equivalent rating from any other
nationally recognized statistical rating organization.
"Interest Distribution Amount": On each Distribution Date, an amount
equal to interest accrued at the applicable Pass-Through Rate for the related
Interest Accrual Period on (i) in the case of the Senior Certificates or the
Senior Subaccounts, the Certificate Principal Balance of such Class or the
Subaccount Principal Balance of such Subaccount, respectively, immediately
prior to that Distribution Date and (ii) in the case of the Offered
Subordinated Certificates or the Corresponding Subaccounts, on the Certificate
Principal Balance of such Class or the Subaccount Principal Balance of such
Subaccount, respectively, immediately prior to that Distribution Date.
"Issuing REMIC": The Trust REMIC consisting of the Subaccounts, the
Class A-__ Liquidity Account and the Class B-___ Liquidity Account.
"Issuing REMIC Residual Interest": The residual interest (as defined in
Code section 860G(a)(2)) in the Issuing REMIC.
"London Banking Day": Any day on which commercial banks and foreign
exchange markets settle payments in London and New York City.
"Non-Priority Interest Amount": For any Subaccount, on any Distribution
Date, an amount equal to the positive difference, if any, between (i) the
related Interest Distribution Amount for such Subaccount and (ii) the elated
Priority Interest Amount for such Subaccount.
"Notional Principal Balance": The Notional Principal Balance of the
Class X Certificates on any date shall equal the sum of all of the Subaccount
Principal Balances on such date.
"Offered Subordinated Certificates": The Class A-___ and Class B
Certificates.
"Pass-Through Rate": With respect to each Class of Certificates
(except the Class X Certificates and the Residual Certificates) on any
Distribution Date, the per annum rate for such Class set forth in the table in
Section 3 hereof. With respect to any Subaccount on any Distribution Date, the
then applicable Weighted Average Net Asset Rate.
"Pooling REMIC": The Trust REMIC consisting of the Assets and the
Distribution Account.
"Pooling REMIC Residual Interest": The residual interest (as defined in
Code section 860G(a)(2)) in the Pooling REMIC.
Exhibit 8 - Page 6
<PAGE> 114
"Principal Distribution Shortfall Carryover Amount": With respect to
each Distribution Date and each Class of Certificates, an amount equal to all
Principal Distribution Amounts distributable on such Class from previous
Distribution Dates that have not yet been distributed on such Class of
Certificates. With respect to each Distribution Date and each Corresponding
Subaccount, an amount equal to all Principal Distribution Amounts distributable
on the Corresponding Certificates from previous Distribution Dates that have
not yet been distributed on such Corresponding Certificates.
"Priority Interest Amount": For any Subaccount, on any Distribution
Date, an amount equal to interest accrued at the applicable Pass-Through Rate
for the related Interest Accrual Period on the Corresponding ertificates.
"Private Certificates": The Class X Certificates and Residual
Certificates.
"Qualified Bidders": Firms and institutions that are engaged in the
business of buying and selling pools of mortgage loans.
"Rating Agency": Each of [Rating Agency], [Address], and [Rating
Agency], [Address].
"Regular Certificates": The Class A Certificates, Class B Certificates
and Class X Certificates.
"Residual Certificates": The Class R Certificates or, following the
division of the Class R Certificates into two separately transferable,
certificated and fully registered certificates in accordance with Section 9(b)
hereof, the Class R-1 Certificates and Class R-2 Certificates.
"Rule 144A Certificates": The Class X and Residual Certificates.
"Senior Certificates": The Class A-__, Class A-__, Class A-__, Class
A-__ and Class A-__ Certificates.
"Senior Subaccounts": The Class A-__, Class A-__, Class A-__, Class
A-__ and Class A-__ Subaccounts.
"Servicing Fee Rate": [____]% per annum.
"Subaccount": Each of the following eight subaccounts established
solely for purposes of the REMIC Provisions by the Trustee, which have the
Pass-Through Rates and initial Subaccount Principal Balances set forth
below:
INITIAL
PASS-THROUGH SUBACCOUNT
SUBACCOUNT RATE PRINCIPAL BALANCE
A-__ (1) $__________
A-__ (1) $__________
A-__ (1) $__________
A-__ (1) $__________
A-__ (1) $__________
A-__ (1) $__________
B-__ (1) $__________
B-__ (1) $__________
(1) The Pass-Through Rate on each Subaccount for any
Distribution Date shall be equal to the Weighted Average Net Asset
Rate.
The final scheduled Distribution Date for each Subaccount is the
____________ 20___ Distribution Date. For purposes of Treasury Regulation
ss.1.860G-1(a)(4), the latest possible maturity date for each of the
Subaccounts shall be the _________ 20____ Distribution Date.
Exhibit 8 - Page 7
<PAGE> 115
"Subaccount Principal Balance": With respect to each Subaccount, on
any date of determination, the amount identified as the "Initial Subaccount
Principal Balance" of such Subaccount in the definition of "Subaccount" above,
minus all amounts allocated to such Subaccount in reduction of its Subaccount
Principal Balance pursuant to Section 5(a) hereof.
"Subordinated Certificates": The Class A-___, Class B-___, Class B-___,
Class X and Residual Certificates.
"Trustee": [ ], not in its individual capacity but solely as Trustee
under this Pooling and Servicing Agreement, or any successor trustee appointed
as herein provided. Notices to the Trustee shall be sent to Corporate Trust
Department, [Address], Attn: UPMFC Trust 19___-___ (the "Corporate Trust
Office"), or its successor in interest.
"Trust REMIC": Each of the Pooling REMIC and the Issuing REMIC.
"Underwriters": ______________________________ (whose address is
_____________________________________), and ____________________ (whose address
is_______________________________).
"Weighted Average Net Asset Rate": With respect to any Distribution
Date, the weighted average of the Asset Rates applicable to the Monthly
Payments that were due during the related Collection Period on Assets that were
Outstanding at the beginning of the related Prepayment Period, less the
Servicing Fee Rate.
SECTION 3. CERTIFICATES.
The aggregate initial principal amount of Certificates that may be
executed and delivered under this Pooling and Servicing Agreement is limited to
$___________, except for Certificates executed and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Certificates pursuant
to Sections 5.04 or 5.07 of the Standard Terms. The Certificates shall be
issued in ten Classes having the designations, initial Certificate Principal
Balances, Pass-Through Rates and Final Scheduled Distribution Dates set forth
or described below:
<TABLE>
<CAPTION>
INITIAL FINAL
CERTIFICATE SCHEDULED
PRINCIPAL PASS THROUGH DISTRIBUTION
DESIGNATION BALANCE RATE DATE(7)
- ----------- ------ ------------ ------------
<S> <C> <C> <C>
A-__ $__________ (1) ________ 15, 20__
A-__ $__________ _____% ________ 15, 20__
A-__ $__________ _____% ________ 15, 20__
A-__ $__________ _____% ________ 15, 20__
A-__ $__________ _____% ________ 15, 20__
A-__ $__________ (2) ________ 15, 20__
B-__ $__________ (3) ________ 15, 20__
B-__ $__________ (4) ________ 15, 20__
X (5) (5) ________ 15, 20__
R (6) (6) ________ 15, 20__
</TABLE>
Exhibit 8 - Page 8
<PAGE> 116
(1) The Pass-Through Rate on the Class A-__ Certificates
for any Distribution Date shall be the per annum rate equal to the
lesser of One-Month LIBOR, as determined (except for the initial
Distribution Date) on the applicable Floating Rate Determination Date,
plus ______% or the Weighted Average Net Asset Rate. For the initial
Distribution Date, the Pass-Through Rate for the Class A-__
Certificates will be ______% per annum, and the initial Interest
Accrual Period for the Class A-__ Certificates commences on the Closing
Date and ends on _________ 14, 19___.
(2) The Pass-Through Rate on the Class A-___
Certificates for any Distribution Date shall be equal to the lesser of
(i) ______% per annum or (ii) the Weighted Average Net Asset Rate.
(3) The Pass-Through Rate on the Class B-__ Certificates
for any Distribution Date shall be equal to the lesser of (i) _____%
per annum or (ii) the Weighted Average Net Asset Rate.
(4) The Pass-Through Rate on the Class B-___
Certificates for any Distribution Date shall be equal to the lesser of
(i) _______% per annum or (ii) the Weighted Average Net Asset Rate.
(5) The Class X Certificates shall have no Certificate
Principal Balance and no Pass-Through Rate. The Class X Certificates
will represent the right to receive, on each Distribution Date, the
applicable Class X Strip Amount and any Class X Carryover Strip
Amount.
(6) The Class R Certificates shall have no Certificate
Principal Balance and no Pass-Through Rate, and shall represent the
residual interest in both the Pooling REMIC and the Issuing REMIC.
Following the division of the Class R Certificates into two separately
transferable, certificated and fully registered certificates in
accordance with Section 9(b) hereof, the Class R-1 and Class R-2
Certificates shall have no Certificate Principal Balances and no
Pass-Through Rates and shall represent the residual interest in the
Issuing REMIC and the Pooling REMIC, respectively.
(7) For purposes of Treasury Regulation ss.1.860G-1
(a)(4), the latest possible maturity date of each Class of Certificates
shall be the Final Scheduled Distribution Date.
SECTION 4. DENOMINATIONS.
The Book-Entry Certificates will be registered as one or more certificates
in the name of the Clearing Agency or its nominee. Beneficial interests in the
Book-Entry Certificates will be held by the Beneficial Owners through the
book-entry facilities of the Clearing Agency, in minimum denominations of
$[1,000] and integral multiples of $1 in excess thereof.
The Class X Certificates and the Residual Certificates will be issued
in certificated, fully registered form. The Class X Certificates and the
Residual Certificates will be issued in minimum Percentage Interests equal to
[1]%.
SECTION 5. DISTRIBUTIONS.
(a) On each Distribution Date, the Trustee (or the Paying Agent on
behalf of the Trustee) shall allocate the Available Distribution Amount to the
various Subaccounts, and, where applicable, ___, to the extent of the amount
thereof remaining after application pursuant to clauses (1) through (4) of
Section 4.03 of the Standard Terms, in the following manner and in the
following order of priority:
(i) First, concurrently, to each Senior Subaccount, (A)
first, its Priority Interest Amount for such Distribution Date, with
the Available Distribution Amount being allocated among the Senior
Subaccounts pro rata based on their respective Priority Interest
Amount, and (B) second, the related Carryover Interest Amount for such
Distribution Date, if any, allocated first to pay all interest accrued
and unpaid on overdue Priority Interest Amounts and then to pay such
overdue Priority Interest Amounts, in each case with the Available
Distribution Amount being allocated among the Senior Subaccounts pro
rata based on their respective Carryover Interest Amounts;
Exhibit 8 - Page 9
<PAGE> 117
(ii) Second, to the Class A-___ Subaccount, (A) first,
the related Priority Interest Amount for such Distribution Date, and
(B) second, any related Carryover Interest Amount for such Distribution
Date, allocated first to pay all interest accrued and unpaid on overdue
Priority Interest Amounts and then to pay such overdue Priority
Interest Amounts;
(iii) Third, to the Class B-__ Subaccount, (A) first, the
related Priority Interest Amount for such Distribution Date, and (B)
second, any related Carryover Interest Amount for such Distribution
Date, allocated first to pay all interest accrued and unpaid on
overdue Priority Interest Amounts and then to pay such overdue
Priority Interest Amounts;
(iv) Fourth, to the Class B-___ Subaccount, (A) first,
the related Priority Interest Amount for such Distribution Date, and
(B) second, any related Carryover Interest Amount for such Distribution
Date, allocated first to pay all interest accrued and unpaid on overdue
Priority Interest Amounts and then to pay such overdue Priority
Interest Amounts;
(v) Fifth, concurrently, to each Senior Subaccount, the
related Principal Distribution Shortfall Carryover Amount for the
Senior Subaccounts, if any, for such Distribution Date, allocated
among the Senior Subaccounts pro rata based on their respective
Subaccount Principal Balances;
(vi) Sixth, to the Senior Subaccounts, (A) if the Class B
Cross-over Date has not yet occurred or if the Class B Principal
Distribution Tests are not met for such Distribution Date, the
Principal Distribution Amount, or (B) if the Class B Cross-over Date
has occurred and the Class B Principal Distribution Tests are met for
such Distribution Date, the Class A Percentage of the Principal
Distribution Amount, in either case allocated in the following
sequential order:
(1) First, to the Class A-___ Subaccount in
reduction of the Subaccount Principal Balance of such
Subaccount, until it has been reduced to zero;
(2) Second, to the Class A-___ Subaccount in
reduction of the Subaccount Principal Balance of such
Subaccount, until it has been reduced to zero;
(3) Third, to the Class A-___ Subaccount in
reduction of the Subaccount Principal Balance of such
Subaccount, until it has been reduced to zero;
(4) Fourth, to the Class A-___ Subaccount in
reduction of the Subaccount Principal Balance of such
Subaccount, until it has been reduced to zero; and
(5) Fifth, to the Class A-___ Subaccount in
reduction of the Subaccount Principal Balance of such
Subaccount, until it has been reduced to zero;
provided, however, that on any Distribution Date on which the
Pool Scheduled Principal Balance is less than the aggregate
Subaccount Principal Balance of the Senior Subaccounts
immediately prior to such Distribution Date, the Principal
Distribution Amount or applicable percentage thereof will be
allocated among the Senior Subaccounts pro rata based upon
their respective Subaccount Principal Balances;
(vii) Seventh, to the Class A-___ Subaccount, the related
Principal Distribution Shortfall Carryover Amount for the Class A-___
Subaccount, if any, for such Distribution Date;
Exhibit 8 - Page 10
<PAGE> 118
(viii) Eighth, to the Class A-___ Subaccount, (A) if the
Class B Cross-over Date has not yet occurred or if the Class B
Distribution Tests are not met for such Distribution Date, the
Principal Distribution Amount, or (B) if the Class B Cross-over Date
has occurred and the Class B Distribution Tests are met for such
Distribution Date the Class A Percentage of the Principal Distribution
Amount (in the case of (A) or (B), less the portion thereof, if any,
distributable pursuant to clause (vi) above on such Distribution
Date);
(ix) Ninth, to the Class B-___ Subaccount, the related
Principal Distribution Shortfall Carryover Amount for the Class B-___
Subaccount, if any, for such Distribution Date;
(x) Tenth, to the Class B-___ Subaccount, (A) if the
Class B Cross-over Date has occurred and the Class B Principal
Distribution Tests are met for such Distribution Date, the Class B
Percentage of the Principal Distribution Amount; or (B) if the Class A
Principal Balance has been or is reduced to zero on or before such
Distribution Date, the entire Principal Distribution Amount (in the
case of (A) or (B), less the portion thereof, if any, distributable
pursuant to clauses (vi) or (viii) above);
(xi) Eleventh, to the Class B-___ Subaccount, the related
Principal Distribution Shortfall Carryover Amount for the Class B-___
Subaccount, if any, for such Distribution Date;
(xii) Twelfth, to the Class B-___ Subaccount, (A) if the
Class B Cross-over Date has occurred, the Class B Principal
Distribution Tests are met for such Distribution Date and the Class
B-___ Subaccount Principal Balance has been or is reduced to zero on
or before such Distribution Date, the Class B Percentage of the
Principal Distribution Amount or (B) if the Class A Principal Balance
has been or is reduced to zero on or before such Distribution Date and
the Class B-___ Subaccount Principal Balance has been or is reduced to
zero on or before such Distribution Date, the entire Principal
Distribution Amount (in the case of (A) or (B), less the portion
thereof, if any, distributable pursuant to clauses (vi), (viii) or (x)
above);
(xiii) Thirteenth, to each Subaccount, (i) first, its
Carryover Non-Priority Interest Amount for such Distribution Date and
(ii) second, its Non-Priority Interest Amount for such Distribution
Date, in each case with the Available Distribution Amount being
allocated among the Subaccounts pro rata based upon their respective
Subaccount Principal Balances; provided, however, that the aggregate
amount allocated pursuant to this clause (xiii) shall not exceed the
amounts deposited to the Class A-___ Liquidity Account and the Class
B-___ Liquidity Account pursuant to clause (xiii) of Section 5(b)
hereof;
(xiv) Fourteenth, if ___ is the Master Servicer, to the
Master Servicer in the following sequential order: (A) the Servicing
Fee with respect to such Distribution Date; and (B) any Servicing Fees
from previous Distribution Dates remaining unpaid;
(xv) Fifteenth, to each Subaccount, (i) first, to the
extent not allocated pursuant to clause (xiii) of this Section 5(a),
its Carryover Non-Priority Interest Amount for such Distribution Date
and (ii) second, to the extent not allocated pursuant to clause (xiii)
of this Section 5(a), its Non-Priority Interest Amount for such
Distribution Date, in each case with the Available Distribution Amount
being allocated among the Subaccounts pro rata based upon their
respective Subaccount Balances; and
(xvi) Sixteenth, any remainder to Holders of the Pooling
REMIC Residual Interest.
(b) On each Distribution Date, after all Subaccount allocations
have been made as described in Section 5(a) above, the Trustee (or the Paying
Agent on behalf of the Trustee) shall withdraw all amounts allocated to the
various Subaccounts, and shall distribute such amounts in the following manner
and in the following order of priority:
Exhibit 8 - Page 11
<PAGE> 119
(i) First, concurrently, to each Class of Senior
Certificates, (A) first, its Interest Distribution Amount for such
Distribution Date, with the Available Distribution Amount being
allocated among such Classes pro rata based on their respective
Interest Distribution Amounts, and (B) second, the related Carryover
Interest Amount, if any, for such Distribution Date allocated first to
pay all interest accrued and unpaid on overdue Interest Distribution
Amounts and then to pay such overdue Interest Distribution Amounts, in
each case with the Available Distribution Amount being allocated among
the Classes of Senior Certificates pro rata based on their respective
Carryover Interest Amounts;
(ii) Second, to the Class A-___ Certificates, (A) first,
the related Interest Distribution Amount for such Distribution Date,
and (B) second, any related Carryover Interest Amount for such
Distribution Date, allocated first to pay all interest accrued and
unpaid on overdue Interest Distribution Amounts and then to pay such
overdue Interest Distribution Amounts;
(iii) Third, to the Class B-___ Certificates, (A) first,
the related Interest Distribution Amount for such Distribution Date,
and (B) second, any related Carryover Interest Amount for such
Distribution Date, allocated first to pay all interest accrued and
unpaid on overdue Interest Distribution Amounts and then to pay such
overdue Interest Distribution Amounts;
(iv) Fourth, to the Class B-___ Certificates, (A) first,
the related Interest Distribution Amount for such Distribution Date and
(B) second, any related Carryover Interest Amount for such Distribution
Date, allocated first to pay all interest accrued and unpaid on overdue
Interest Distribution Amounts and then to pay such overdue Interest
Distribution Amounts;
(v) Fifth, concurrently, to each Class of Senior
Certificates, the related Principal Distribution Shortfall Carryover
Amount for the Senior Certificates, if any, for such Distribution
Date, allocated among the Senior Certificates pro rata based on their
respective Certificate Principal Balances;
(vi) Fixth, to the Senior Certificates, (A) if the Class
B Cross-over Date has not yet occurred or if the Class B Principal
Distribution Tests are not met for such Distribution Date, the
Principal Distribution Amount, or (B) if the Class B Cross-over Date
has occurred and the Class B Principal Distribution Tests are met for
such Distribution Date, the Class A Percentage of the Principal
Distribution Amount, in either case allocated in the following
sequential order:
(1) First, to the Class A-___ Certificates in
reduction of the Certificate Principal Balance of such Class,
until it has been reduced to zero;
(2) Second, to the Class A-___ Certificates in
reduction of the Certificate Principal Balance of such Class,
until it has been reduced to zero;
(3) Third, to the Class A-___ Certificates in
reduction of the Certificate Principal Balance of such Class,
until it has been reduced to zero;
(4) Fourth, to the Class A-___ Certificates in
reduction of the Certificate Principal Balance of such Class,
until it has been reduced to zero; and
(5) Fifth, to the Class A-___ Certificates in
reduction of the Certificate Principal Balance of such Class,
until it has been reduced to zero;
provided, however, that on any Distribution Date on which the
Pool Scheduled Principal Balance is less than the aggregate
Certificate Principal Balance of the Senior Certificates,
immediately prior to such Distribution Date, the Principal
Distribution Amount or applicable percentage thereof will be
allocated among the Senior Certificates pro rata based upon
their respective Certificate Principal Balances;
Exhibit 8 - Page 12
<PAGE> 120
(vii) Seventh, to the Class A-___ Certificates, the
related Principal Distribution Shortfall Carryover Amount for the Class
A-___ Certificates, if any, for such Distribution Date;
(viii) Eighth, to the Class A-___ Certificates, (A) if the
Class B Cross-over Date has not yet occurred or if the Class B
Distribution Tests are not met for such Distribution Date, the
Principal Distribution Amount, or (B) if the Class B Cross-over Date
has occurred and the Class B Distribution Tests are met for such
Distribution Date, the Class A Percentage of the Principal
Distribution Amount (in the case of (A) or (B), less the portion
thereof, if any, distributable pursuant to clause (vi) on such
Distribution Date);
(ix) Ninth, to the Class B-___ Certificates, the related
Principal Distribution Shortfall Carryover Amount for the Class B-___
Certificates, if any, for such Distribution Date;
(x) Tenth, to the Class B-___ Certificates, (A) if the
Class B Cross-over Date has occurred and the Class B Principal
Distribution Tests are met for such Distribution Date, the Class B
Percentage of the Principal Distribution Amount; or (B) if the Class A
Principal Balance has been or is reduced to zero on or before such
Distribution Date, the entire Principal Distribution Amount (in the
case of (A) or (B), less the portion thereof, if any, distributable
pursuant to clauses (vi) or (viii) above on such Distribution Date);
(xi) Eleventh, to the Class B-___ Certificates, the
related Principal Distribution Shortfall Carryover Amount for the Class
B-___ Certificates, if any, for such Distribution Date;
(xii) Twelfth, to the Class B-___ Certificates, (A) if the
Class B Cross-over Date has occurred, the Class B Principal
Distribution Tests are met for such Distribution Date and the Class
B-___ Principal Balance has been or is reduced to zero on or before
such Distribution Date, the Class B Percentage of the Principal
Distribution Amount or (B) if the Class A Principal Balance has been
or is reduced to zero on or before such Distribution Date and the
Class B-___ Principal Balance has been or is reduced to zero on or
before such Distribution Date, the entire Principal Distribution
Amount (in the case of (A) or (B), less the portion thereof, if any,
distributable pursuant to clauses (vi), (viii) or (x) above);
(xiii) Thirteenth, to the Class A-___ Liquidity Account and
the Class B-__ Liquidity Account in the following sequential order:
(1) to the Class A-___ Liquidity Account until the
amount on deposit therein equals the Class A-___ Liquidity
Account Required Amount; and
(2) to the Class B-___ Liquidity Account until the
amount on deposit therein equals the Class B-___ Liquidity
Account Required Amount;
(xiv) Fourteenth, to the Class X Certificates in the
following sequential order:
(A) the current Class X Strip Amount; and
(B) any Class X Carryover Strip Amount; and
(xv) Finally, any remainder to the holders of the Issuing
REMIC Residual Interest.
(c) All distributions or allocations made with respect to each
Class on each Distribution Date shall be allocated pro rata among the
outstanding Certificates of such Class based on their respective Percentage
Interests. So long as the Book-Entry Certificates are registered in the name of
a Clearing Agency or its nominee, the Trustee shall make all distributions or
allocations on such Certificates by wire transfers of immediately available
funds to the Clearing Agency or its nominee. In the case of Certificates issued
in fully-registered, certificated form, payment shall be made either (i) by
check mailed to the address of each Certificateholder as it appears in the
Certificate
Exhibit 8 - Page 13
<PAGE> 121
Register on the Record Date immediately prior to such Distribution Date or (ii)
by wire transfer of immediately available funds to the account of a Holder at a
bank or other entity having appropriate facilities therefor, if such Holder
shall have so notified the Trustee in writing at least five Business Days prior
to the Record Date immediately prior to such Distribution Date and such Holder
is (A) with respect to any Class A or Class B Certificates issued after the
Closing Date in certificated, fully-registered form, the registered owner of
Class A or Class B Certificates with an aggregate initial Certificate Principal
Balance of at least $1,000,000, and (B) with respect to the Residual
Certificates or Class X Certificates, the registered owner of the Residual
Certificates or Class X Certificates evidencing an aggregate Percentage
Interest of at least 50%. The Trustee may charge any Holder its standard wire
transfer fee for any payment made by wire transfer. Final distribution on the
Certificates will be made only upon surrender of the Certificates at the
offices of the Trustee set forth in the notice of such final distribution sent
by the Trustee to all Certificateholders pursuant to Section 9.01 of the
Standard Terms.
(d) (1) Any amounts remaining in the Distribution Account on any
Distribution Date after all allocations and distributions required to be made
by this Pooling and Servicing Agreement have been made, and any amounts
remaining in the Pooling REMIC after payment in full of all of the Regular
Interests therein and any administrative expenses associated with the Trust,
will be distributed to the Holders of the Pooling REMIC Residual Interest.
(2) Any amounts remaining in the Subaccounts on any Distribution
Date after all distributions required to be made by this Pooling and Servicing
Agreement have been made, and any amounts remaining in the Issuing REMIC after
payment in full of the Regular Interests therein and any administrative expenses
associated with the Trust, will be distributed to the Holders of the Issuing
REMIC Residual Interest.
SECTION 6. CLASS A-___ LIQUIDITY ACCOUNT AND CLASS B-___ LIQUIDITY
ACCOUNT.
(a)(1) A Class A-___ Liquidity Account is hereby established as part
of the Trust Estate. The Class A-___ Liquidity Account shall be an asset of the
Issuing REMIC. The Trustee shall hold the Class A-___ Liquidity Account and
maintain its status at all times as an Eligible Account. The account for the
Class A-___ Liquidity Account shall be in the name of the Trustee, or shall be
designated in a manner that reflects that all funds in such account are held in
trust for the benefit of the Trustee. The Trustee shall invest all amounts on
deposit in the Class A-___ Liquidity Account in Eligible Investments as
directed in writing by the holders of a majority in interest (by Percentage
Interest) of the Issuing REMIC Residual Interest. All net income and gain if
any, from such investments shall become funds available in the Class A-___
Liquidity Account. All loss, if any, from such investments shall become a
charge to the Class A-___ Liquidity Account.
(2) On each Distribution Date, after the amounts allocated to the
various Subaccounts have been allocated in accordance with Section 5(b) hereof,
the Trustee shall, in accordance with the related Remittance Report, withdraw
from the Class A-___ Liquidity Account the amount of the Class A-___ Liquidity
Account Draw Amount, if any, for such Distribution Date. Such Class A-___
Liquidity Account Draw Amount, if any, will be applied on the Class A-___
Certificates in accordance with clause (ii) under Section 5(b) hereof.
(3) If, after the disbursement of the related Class A-___
Liquidity Account Draw Amount, if any, in accordance with Section 6(a)(2) above
on any Distribution Date other than the final Distribution Date, the amount on
deposit in the Class A-___ Liquidity Account exceeds the Class A-___ Liquidity
Account Required Amount, the amount of such excess shall be withdrawn and
distributed first to the Class B-___ Liquidity Account, until the amount on
deposit therein equals the Class B-___ Liquidity Account Required Amount,
second, to the holders of the Class X Certificates in reduction of any unpaid
Class X Strip Amounts (such amounts to be distributed first in reduction of the
Class X Strip Amount for such Distribution Date, to the extent not previously
distributed, and next in reduction of any Class X Carryover Strip Amount for
such Distribution Date, to the extent not previously distributed), and then to
the holders of the Issuing REMIC Residual Interest.
Exhibit 8 - Page 14
<PAGE> 122
(4) On the final Distribution Date, after the disbursement of the
Class A-___ Liquidity Account Draw Amount, if any, in accordance with Section
6(a)(2) above, the amount, if any, on deposit in the Class A-___ Liquidity
Account will be withdrawn by the Trustee and distributed in the following order
of priority: (i) first, in reduction of any remaining Certificate Principal
Balance of the Class A-___ Certificates to zero; (ii) next, in reduction of any
remaining Certificate Principal Balance of the Class B-___ Certificates to
zero; (iii) next, to the Class B-___ Certificates in reduction of any remaining
Certificate Principal Balance of the Class B-___ Certificates to zero; (iv)
next, to the holders of the Class X Certificates in reduction of any unpaid
Class X Strip Amounts (such amounts to be distributed first in reduction of the
Class X Strip Amount for such Distribution Date, to the extent not previously
distributed, and next in reduction of any Class X Carryover Strip Amount for
such Distribution Date, to the extent not previously distributed); and (v)
finally, to the holders of the Issuing REMIC Residual Interest, whereupon the
Class A-___ Liquidity Account shall be terminated.
(b)(1) The Class B-___ Liquidity Account is hereby established as part
of the Trust Estate. The Class B- ___ Liquidity Account shall be an asset of
the Issuing REMIC. The Trustee shall hold the Class B-___ Liquidity Account and
maintain its status at all times as an Eligible Account. The account for the
Class B-___ Liquidity Account shall be in the name of the Trustee, or shall be
designated in a manner that reflects that all funds in such accounts are held
in trust for the benefit of the Trustee. The Trustee shall invest all amounts
on deposit in the Class B-___ Liquidity Account in Eligible Investments as
directed in writing by the holders of a majority in interest (by Percentage
Interest) of the Issuing REMIC Residual Interest. All net income and gain, if
any, from such investments shall become funds available in the Class B-___
Liquidity Account. All loss, if any, from such investments shall become a
charge to the Class B-___ Liquidity Account.
(2) On each Distribution Date, after the amounts allocated to the
various Subaccounts have been allocated in accordance with Section 5(b) hereof,
the Trustee shall, in accordance with the related Remittance Report, withdraw
from the Class B-___ Liquidity Account the amount of the Class B-___ Liquidity
Account Draw Amount, if any, for such Distribution Date. Such Class B-___
Liquidity Account Draw Amount, if any, will be applied on the Class B-___
Certificates in accordance with clause (iii) under Section 5(b) hereof.
(3) If, after the disbursement of the related Class B-___
Liquidity Account Draw Amount in accordance with Sections 6(b)(2) above on any
Distribution Date other than the final Distribution Date, the amount on deposit
in the Class B-___ Liquidity Account exceeds the Class B-___ Liquidity Account
Required Amount, the amount of such excess shall be withdrawn and distributed
first, to the holders of the Class X Certificates in reduction of any unpaid
Class X Strip Amounts (such amounts to be distributed first in reduction of the
Class X Strip Amount for such Distribution Date, to the extent not previously
distributed, and next in reduction of any Class X Carryover Strip Amount for
such Distribution Date, to the extent not previously distributed), and then to
the holders of the Issuing REMIC Residual Interest.
(4) On the final Distribution Date, after the disbursement of the
Class B-___ Liquidity Account Draw Amount in accordance with Sections 6(b)(2)
above, the amount, if any, on deposit in the Class B-___ Liquidity Account will
be withdrawn by the Trustee and distributed in the following order of priority:
(i) first, in reduction of any remaining Certificate Principal Balance of the
Class B-___ Certificates to zero; (ii) next, in reduction of any remaining
Certificate Principal Balance of the Class B-___ Certificates to zero, (iii)
next, to the holders of the Class X Certificates in reduction of any unpaid
Class X Strip Amounts (such amounts to be distributed first in reduction of the
Class X Strip Amount for such Distribution Date, to the extent not previously
distributed, and next in reduction of any Class X Carryover Strip Amount for
such Distribution Date, to the extent not previously distributed); and (iv)
finally, to the holders of the Issuing REMIC Residual Interest, whereupon the
Class B-___ Liquidity Account shall be terminated.
SECTION 7. REMITTANCE REPORTS.
(a) The Remittance Report for each Distribution Date shall
identify the following items, in addition to the items specified in Section 4.01
of the Standard Terms:
Exhibit 8 - Page 15
<PAGE> 123
(1) the Interest Distribution Amount for each Class of
the Certificates for such Distribution Date (which shall equal the
Priority Interest Amount for the Corresponding Subaccount) and the
Carryover Interest Amount, for each Class of the Certificates for such
Distribution Date, and the amount of interest of each such category to
be distributed on each such Class based upon the Available
Distribution Amount for such Distribution Date;
(2) the amount to be distributed on such Distribution
Date on each Class of the Certificates to be applied to reduce the
Certificate Principal Balance of such Class (which will be equal to the
amount to be allocated on such Distribution Date on the Corresponding
Subaccount to be applied to reduce the Subaccount Principal Balance of
such Subaccount), separately identifying any portion of such amount
attributable to any prepayments, and the amount to be distributed to
reduce the Principal Distribution Shortfall Carryover Amount on each
such Class based upon the Available Distribution Amount for such
Distribution Date;
(3) the aggregate amount, if any, to be distributed on
the Residual Certificates;
(4) (a) the Class A-___ Liquidity Account Required
Amount and the Class B-___ Liquidity Account Required Amount both
immediately before and after the Distribution Date, (b) the amount of
any Class A-___ Liquidity Account Draw Amount and any Class B-___
Liquidity Account Draw Amount for such Distribution Date, (c) the
amount to be deposited into the Class A-___ Liquidity Account and the
Class B-___ Liquidity Account pursuant to clause (xiii) under Section
5(b) above, and (d) the amount on deposit in the Class A-___ Liquidity
Account and the Class B-___ Liquidity Account both immediately before
and immediately after the Distribution Date;
(5) the Certificate Principal Balance of each Class of
the Certificates (which will be equal to the Subaccount Principal
Balance of the Corresponding Subaccount) and the Certificate Principal
Balance of each Class of the Offered Subordinated Certificates (which
will be equal to the Subaccount Principal Balance of the Corresponding
Subaccount) after giving effect to the distributions to be made on such
Distribution Date;
(6) the aggregate Interest Distribution Amount remaining
unpaid, if any, and the aggregate Carryover Interest Amount remaining
unpaid, if any, for each Class of Certificates (which will be equal to
the Priority Interest Amount and Carryover Interest Amount remaining
unpaid on the Corresponding Subaccount), after giving effect to all
distributions to be made on such Distribution Date;
(7) the aggregate Principal Distribution Shortfall
Carryover Amount remaining unpaid, if any, for each Class of
Certificates, after giving effect to the distributions to be made on
such Distribution Date.
In the case of information furnished pursuant to clauses (1), (2) and
(3) above, the amounts shall be expressed, with respect to any Class A or Class
B Certificate, as a dollar amount per $1,000 denomination.
(b) In addition to mailing a copy of the related Remittance
Report to each Certificateholder on each Distribution Date in accordance with
Section 4.01 of the Standard Terms, on each Distribution Date, the Trustee shall
mail a copy of the related Remittance Report to each Underwriter (to the
attention of the person, if any, reported to the Trustee by the applicable
Underwriter), to the Seller and to The Bloomberg (to the address and to the
person, if any specified to the Trustee by _________________________________).
The Trustee shall not be obligated to mail any Remittance Report to The
Bloomberg unless and until _____________ _______________________ shall have
notified the Trustee in writing of the name and address to which such reports
are to be mailed, which notice, once delivered, will be effective for all
Distribution Dates after the date such notice is received by the Trustee unless
and until superseded by a subsequent notice.
Exhibit 8 - Page 16
<PAGE> 124
SECTION 8. LIMITED RIGHT OF MASTER SERVICER TO RETAIN SERVICING FEES
FROM COLLECTIONS.
The Master Servicer may retain its Servicing Fee and any other
servicing compensation provided for herein and in the Standard Terms from gross
interest collections on the Assets prior to depositing such collections into
the Certificate Account; provided, however, that ___ as Master Servicer may
only so retain its Servicing Fee in respect of a Distribution Date from gross
interest collections on the Assets to the extent that the amounts on deposit in
the Certificate Account and attributable to the Available Distribution Amount
for such Distribution Date exceed the sum of all amounts to be allocated and
distributed on such Distribution Date pursuant to clauses (i) through (xiii)
under Section 5(b) hereof.
SECTION 9. REMIC ADMINISTRATION.
(a) For purposes of the REMIC Provisions, all of the Certificates
(except the Residual Certificates) will be designated as the "regular
interests" in the Issuing REMIC, the ________ Subaccounts will be designated as
the "regular interests" in the Pooling REMIC, the Class R Certificates will be
designated as the "residual interest" in each of the Issuing REMIC and the
Pooling REMIC and, following the division of the Class R Certificates into two
separately transferable, certificated and fully registered certificates in
accordance with Section 9(b) below, the Class R-1 Certificates will be
designated as the "residual interest" in the Issuing REMIC and the Class R-2
Certificates will be designated as the "residual interest" in the Pooling
REMIC.
(b) Upon the request of any registered Holder of a Class R
Certificate, the Trustee shall issue to such Holder two separately
transferable, certificated and fully registered Certificates (a Class R-1
Certificate and a Class R-2 Certificate), in substantially the forms of Exhibit
R-1 and Exhibit R-2 attached hereto. In the event that the Class R Certificates
are exchanged for separately transferrable Class R-1 and Class R-2
Certificates: (1) the Class R-1 Certificates will be designated as the residual
interest in the Issuing REMIC, (2) the Class R-2 Certificates will be
designated as the residual interest in the Pooling REMIC, (3) the Holders of a
majority of the Percentage Interest in the Class R-1 Certificates together with
the Holders of a majority of the Percentage Interest in the Class R-2
Certificates will have the option to make a Terminating Purchase given to the
Holders of a majority of the Percentage Interest in the Residual Certificates
pursuant to Section 9.01 of the Standard Terms, and (4) the restrictions on the
transfer of a Residual Certificate provided in the Standard Terms will apply to
both the Class R-1 and the Class R-2 Certificates.
SECTION 10. AUCTION CALL.
(a) If neither the Master Servicer nor the Residual Majority
exercises its optional termination right as described in Section 9.01 of the
Standard Terms within 90 days after it first becomes entitled to do so, the
Trustee shall use commercially reasonable efforts to solicit bids for the
purchase of all Assets and REO Properties remaining in the Trust from no fewer
than two prospective purchasers that it believes to be Qualified Bidders. If ___
is then the Master Servicer of the Assets, the solicitation of bids shall be
conditioned upon the continuation of ___ as the servicer of the Assets on terms
and conditions substantially similar to those in the Pooling and Servicing
Agreement, except that it shall not be required to pay compensating interest or
make Advances.
(b) If the Trustee receives bids from at least two Qualified
Bidders and the net proceeds of the highest bid are equal to or greater than the
Termination Price, the Trustee shall promptly advise the Master Servicer of the
highest bid and the terms of purchase, and the Master Servicer shall have three
Business Days, at its option, to match the terms of such bid. The Trustee shall
thereafter sell the Assets and REO Properties either (i) to the Master Servicer,
if it shall so elect, or (ii) to the highest bidder, and in either case the
Trustee shall distribute the net proceeds of such sale in redemption of the
Certificates in compliance with Article IX of the Standard Terms and Section 5
hereof. Any such sale must also comply with the requirements applicable to a
Terminating Purchase set forth in Section 9.02 of the Standard Terms.
(c) Any costs incurred by the Trustee in connection with such
sale (including without limitation any legal opinions or consents required by
Section 9.02 of the Standard Terms) shall be deducted from the bid price of the
Assets and REO Properties in determining the net proceeds therefrom.
Exhibit 8 - Page 17
<PAGE> 125
(d) If the Trustee does not obtain bids from at least two
Qualified Bidders, or does not receive a bid such that the net proceeds
therefrom would at least equal the Termination Price, it shall not sell the
Assets and REO Properties, and shall thereafter have no obligation to attempt to
sell same.
(e) The Master Servicer shall cooperate with and provide
necessary information to the Trustee in connection with any auction sale as
described herein.
SECTION 11. VOTING RIGHTS.
The Voting Rights applicable to the Certificates shall be allocated
0.5% to the Class R Certificates, 0.5% to the Class X Certificates and 99% to
the other Certificates in proportion with their respective Certificate
Principal Balance.
SECTION 12. GOVERNING LAW.
The Pooling and Servicing Agreement shall be construed in accordance
with and governed by the laws of the State of North Carolina applicable to
agreements made and to be performed therein. The parties hereto agree to submit
to the personal jurisdiction of all federal and state courts sitting in the
State of North Carolina and hereby irrevocably waive any objection to such
jurisdiction. In addition, the parties hereto hereby irrevocably waive any
objection that they may have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any federal or state
court sitting in the State of North Carolina, and further irrevocably waive any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
SECTION 13. FORMS OF CERTIFICATES.
Each of the Schedules and Exhibits attached hereto or referenced
herein are incorporated herein by reference as contemplated by the Standard
Terms. Each Class of Certificates shall be in substantially the related form
attached hereto, as set forth in the Index to Schedules and Exhibits attached
hereto.
SECTION 14. COUNTERPARTS.
This Pooling and Servicing Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all of such counterparts shall together constitute but one and the same
instrument.
SECTION 15. ENTIRE AGREEMENT.
This Pooling and Servicing Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof, and fully
supersedes any prior or contemporaneous agreements relating to such subject
matter.
Exhibit 8 - Page 18
<PAGE> 126
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the Trustee
have caused this Pooling and Servicing Agreement to be duly executed by their
respective officers thereunto duly authorized and their respective signatures
duly attested all as of the day and year first above written.
UNION PLANTERS MORTGAGE FINANCE CORP.
By:
--------------------------------------
Name:
Title:
[ ]
---------------------
By:
---------------------------------------
Name:
------------------------------------
Title:
------------------------------------
[ ],
AS TRUSTEE
By:
---------------------------------------
Name:
------------------------------------
Title:
------------------------------------
Exhibit 8 - Page 19
<PAGE> 127
STATE OF __________________ )
) s.
COUNTY OF _________ )
The foregoing instrument was acknowledged before me in the County of
__________ this ____ day of _____________, 19_____ by ______________,
_________________ of Union Planters Mortgage Finance Corp., a Delaware
corporation, on behalf of the corporation.
-----------------------------------
Notary Public
My Commission expires: ___________, ____
STATE OF _______________ )
) s.
COUNTY OF _______ )
The foregoing instrument was acknowledged before me in the County of
__________ this ____ day of ____________, 19____ by _______________,
______________ of _____________, a _________________ corporation, on behalf of
the corporation.
-----------------------------------
Notary Public
My Commission expires: ___________, ____
STATE OF ____________________ )
) s.
CITY OF ____________ )
The foregoing instrument was acknowledged before me in the City of
____________, this ____ day of ________, 19__, by , of _______________________,
a national banking association, on behalf of the association.
-----------------------------------
Notary Public
My Commission expires: _____________, ____
Exhibit 8 - Page 20
<PAGE> 128
INDEX TO SCHEDULES AND EXHIBITS
SCHEDULE I Mortgage Loan Schedule
EXHIBIT A-1 Form of Class A-___ Certificate
EXHIBIT A-2 Form of Class A-___ Certificate
EXHIBIT A-3 Form of Class A-___ Certificate
EXHIBIT A-4 Form of Class A-___ Certificate
EXHIBIT A-5 Form of Class A-___ Certificate
EXHIBIT A-6 Form of Class A-___ Certificate
EXHIBIT B-1 Form of Class B-___ Certificate
EXHIBIT B-2 Form of Class B-___ Certificate
EXHIBIT X Form of Class X Certificate
EXHIBIT R Form of Class R Certificate
Exhibit 8 - Page 21
<PAGE> 1
EXHIBIT 4.2
================================================================================
UNION PLANTERS MORTGAGE FINANCE CORP.,
Depositor
AND
-------------------------------,
Trustee
------------------------
INDENTURE
Dated as of ______________ 1, 1997
------------------------
COLLATERALIZED MORTGAGE BONDS
Issuable in Series
================================================================================
<PAGE> 2
INDENTURE DATED AS OF _______________ 1, 1997
BETWEEN UNION PLANTERS MORTGAGE FINANCE CORP.,
DEPOSITOR AND _____________________________, TRUSTEE
Cross-reference sheet showing the location in the Indenture
of the provisions inserted pursuant to Section 310
through 318(a) inclusive of the Trust Indenture Act of 1939.
<TABLE>
<CAPTION>
INDENTURE
TIA SECTION
--- -------
<S> <C> <C>
Section 310 (a)(1) 7.09
(a)(2) 7.09
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 7.08
7.10
Section 311 (a) 7.13(a)
(b) 7.13(b)
(c) Not Applicable
Section 312 (a) 8.01
(b) 8.02(b)
(c) 8.02(c)
Section 313 (a) 8.03(a)
(b) 8.03(b)
(c) 8.03(a)
8.03(b)
(d) 8.03(c)
Section 314 (a) 8.04
(b) 9.06
(c)(1) 15.01
(c)(2) 15.01
(c)(3) 4.02(6)
(d) 4.01, 12.10
(e) 15.01
Section 315 (a) 7.01(a)
(b) 7.02
(c) 7.01(b)
(d)(1) 7.01(c)(1)
(d)(2) 7.01(c)(2)
(d)(3) 7.01(c)(3)
(e) 6.16
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 316 (a)(1)(A) 6.14
(a)(1)(B) 6.15
(a)(2) Not Applicable
(b) 6.10
Section 317 (a)(1) 6.03
(a)(2) 6.06
(b) 9.03
Section 318 (a) 15.06
</TABLE>
NOTE: This cross-reference sheet shall not for any purpose be deemed to
constitute a part of the Indenture.
<PAGE> 4
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
PRELIMINARY STATEMENT..................................................................................... 1
ARTICLE ONE
DEFINITIONS
Section 1.01 Definitions............................................................................. 1
ARTICLE TWO
BOND FORM
Section 2.01 Forms Generally......................................................................... 17
Section 2.02 Form of Bonds........................................................................... 17
ARTICLE THREE
THE BONDS
Section 3.01 Amount Unlimited; Bonds Issuable in Series and Classes; Certain Related
Provisions.............................................................................. 17
Section 3.02 Denominations........................................................................... 19
Section 3.03 Execution, Authentication, Delivery and Dating.......................................... 19
Section 3.04 [Reserved].............................................................................. 19
Section 3.05 Registration, Registration of Transfer and Exchange..................................... 19
Section 3.06 Mutilated, Destroyed, Lost or Stolen Bonds.............................................. 20
Section 3.07 Payment of Principal and Interest; Principal and Interest Rights Preserved.............. 21
Section 3.08 Persons Deemed Owners................................................................... 23
Section 3.09 Cancellation............................................................................ 23
Section 3.10 [Reserved].............................................................................. 23
Section 3.11 Limited Right to Substitute Collateral.................................................. 23
Section 3.12 Book-Entry Bonds........................................................................ 24
ARTICLE FOUR
AUTHENTICATION AND DELIVERY OF BONDS
Section 4.01 General Provisions...................................................................... 25
Section 4.02 Security for Bonds...................................................................... 27
ARTICLE FIVE
SATISFACTION AND DISCHARGE
Section 5.01 Satisfaction and Discharge of Indenture................................................. 29
Section 5.02 Application of Trust Money.............................................................. 30
</TABLE>
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<TABLE>
<CAPTION>
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ARTICLE SIX
REMEDIES
<S> <C> <C>
Section 6.01 Events of Default................................................................. 30
Section 6.02 Acceleration of Maturity; Rescission and Annulment................................ 30
Section 6.03 Collection of Indebtedness and Suits for Enforcement by Trustee................... 31
Section 6.04 Remedies.......................................................................... 33
Section 6.05 [Reserved]........................................................................ 33
Section 6.06 Trustee May File Proofs of Claim.................................................. 33
Section 6.07 Trustee May Enforce Claims Without Possession of Bonds............................ 34
Section 6.08 Application of Money Collected.................................................... 34
Section 6.09 Limitation on Suits............................................................... 34
Section 6.10 Unconditional Rights of Bondholders to Receive Principal and Interest............. 35
Section 6.11 Restoration of Rights and Remedies................................................ 35
Section 6.12 Rights and Remedies Cumulative.................................................... 35
Section 6.13 Delay or Omission Not Waiver...................................................... 35
Section 6.14 Control by Bondholders............................................................ 36
Section 6.15 Waiver of Past Defaults........................................................... 36
Section 6.16 Undertaking for Costs............................................................. 36
Section 6.17 Waiver of Stay or Extension Laws; Non-Petition.................................... 37
Section 6.18 Sale of Trust Estate.............................................................. 37
Section 6.19 Action on Bonds................................................................... 38
Section 6.20 Recourse.......................................................................... 38
Section 6.21 Advances by Depositor............................................................. 38
Section 6.22 Application of the Trust Indenture Act............................................ 39
ARTICLE SEVEN
THE TRUSTEE
Section 7.01 Certain Duties and Responsibilities............................................... 39
Section 7.02 Notice of Default................................................................. 39
Section 7.03 Certain Rights of Trustee......................................................... 39
Section 7.04 Not Responsible for Recitals or Issuance of Bonds................................. 40
Section 7.05 May Hold Bonds.................................................................... 40
Section 7.06 Money Held in Trust............................................................... 41
Section 7.07 Compensation and Reimbursement.................................................... 41
Section 7.08 Disqualification.................................................................. 41
Section 7.09 Corporate Trustee Required; Eligibility........................................... 41
Section 7.10 Resignation and Removal; Appointment of Successor................................. 42
Section 7.11 Acceptance of Appointment by Successor............................................ 43
Section 7.12 Merger, Conversion, Consolidation or Succession to Business of Trustee............ 43
Section 7.13 Preferential Collection of Claims Against Depositor............................... 44
Section 7.14 Co-Trustees and Separate Trustees................................................. 44
Section 7.15 Review of Mortgage Files.......................................................... 45
</TABLE>
(ii)
<PAGE> 6
<TABLE>
<CAPTION> PAGE
----
ARTICLE EIGHT
BONDHOLDERS' LIST AND REPORTS BY TRUSTEE AND DEPOSITOR
<S> <C> <C>
Section 8.01 Depositor to Furnish Trustee Names and Addresses of Bondholders......................... 46
Section 8.02 Preservation of Information; Communications to Bondholders.............................. 47
Section 8.03 Reports by Trustee...................................................................... 47
Section 8.04 Reports by Depositor.................................................................... 48
ARTICLE NINE
COVENANTS OF DEPOSITOR
Section 9.01 Payment of Principal and Interest....................................................... 48
Section 9.02 Maintenance of Office or Agency......................................................... 48
Section 9.03 Money for Bond Payments to Be Held in Trust............................................. 48
Section 9.04 Corporate Existence..................................................................... 49
Section 9.05 Protection of Trust Estate.............................................................. 49
Section 9.06 Opinions as to Trust Estate............................................................. 50
Section 9.07 Performance of Obligations; Servicing Agreement......................................... 51
Section 9.08 Negative Covenants...................................................................... 51
Section 9.09 Statement as to Compliance.............................................................. 52
Section 9.10 Depositor May Consolidate, Etc., Only on Certain Terms.................................. 52
Section 9.11 Successor Substituted................................................................... 53
Section 9.12 No Other Business....................................................................... 53
Section 9.13 Limitation on Borrowing................................................................. 53
Section 9.14 Substitution of Insurance Policies, Etc.; Notification of Rating Agencies............... 54
Section 9.15 Notice of Events of Default............................................................. 55
Section 9.16 Investment Company Act.................................................................. 55
Section 9.17 Treatment of Bonds as Debt for Tax Purposes............................................. 55
ARTICLE TEN
SUPPLEMENTAL INDENTURES
Section 10.01 Supplemental Indentures Without Consent of Bondholders.................................. 55
Section 10.02 Supplemental Indentures With Consent of Bondholders..................................... 56
Section 10.03 Execution of Supplemental Indentures.................................................... 57
Section 10.04 Effect of Supplemental Indenture........................................................ 57
Section 10.05 Conformity with Trust Indenture Act..................................................... 58
Section 10.06 Reference in Bonds to Supplemental Indentures........................................... 58
ARTICLE ELEVEN
REDEMPTION OF BONDS
Section 11.01 Redemption at the Option of the Depositor; Election to Redeem........................... 58
</TABLE>
(iii)
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 11.02 [Reserved].............................................................................. 58
Section 11.03 Notice to Trustee....................................................................... 58
Section 11.04 Notice of Redemption by the Depositor................................................... 59
Section 11.05 Deposit of Redemption Price for Optional Redemptions.................................... 59
Section 11.06 Bonds Payable on Redemption Date........................................................ 59
ARTICLE TWELVE
ACCOUNTS, ACCOUNTINGS AND RELEASES
Section 12.01 Collection of Money..................................................................... 60
Section 12.02 [Reserved].............................................................................. 60
Section 12.03 [Reserved].............................................................................. 60
Section 12.04 Reserve Fund............................................................................ 60
Section 12.05 Collateral Proceeds Account............................................................. 61
Section 12.06 Custodial Reserve Fund.................................................................. 61
Section 12.07 Surplus Account; Other Funds and Accounts............................................... 62
Section 12.08 Reports by Trustee...................................................................... 62
Section 12.09 Monthly Remittance Reports and Related Matters.......................................... 63
Section 12.10 Trust Estate............................................................................ 64
Section 12.11 Releases of Mortgage Loans Withdrawn by Master Servicer................................. 65
Section 12.12 Delivery of the Loan Documents Pursuant to Servicing Agreement.......................... 65
Section 12.13 Records................................................................................. 66
Section 12.14 Collections on the Mortgage Loans....................................................... 66
Section 12.15 Amendments to Servicing Agreements...................................................... 66
Section 12.16 Termination and Substitution of Servicing Agreements.................................... 66
Section 12.17 Opinion of Counsel...................................................................... 66
ARTICLE THIRTEEN
APPLICATION OF MONIES
Section 13.01 Disbursements of Monies from Collateral Proceeds Account................................ 67
Section 13.02 [Reserved].............................................................................. 67
Section 13.03 Disbursement of Monies Out of Custodial Reserve Fund.................................... 67
Section 13.04 Trust Account........................................................................... 68
Section 13.05 Disbursements of Excess Funds; Release of Mortgage Collateral........................... 68
ARTICLE FOURTEEN
BONDHOLDERS' MEETINGS
Section 14.01 Purposes for Which Meetings May Be Called............................................... 68
Section 14.02 Manner of Calling Meetings.............................................................. 68
Section 14.03 Call of Meeting by Depositor or Bondholders............................................. 69
Section 14.04 Who May Attend and Vote at Meetings..................................................... 69
Section 14.05 Regulations May Be Made by Trustee...................................................... 69
</TABLE>
(iv)
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 14.06 Manner of Voting at Meetings and Records to be Kept..................................... 70
Section 14.07 Exercise of Rights of Trustee and Bondholders Not to Be Hindered or Delayed............. 70
ARTICLE FIFTEEN
MISCELLANEOUS
Section 15.01 Compliance Certificates and Opinions.................................................... 70
Section 15.02 Form of Documents Delivered to Trustee.................................................. 71
Section 15.03 Acts of Bondholders..................................................................... 71
Section 15.04 Notices, Etc., to Trustee and Depositor................................................. 72
Section 15.05 Notices to Bondholders; Waiver.......................................................... 72
Section 15.06 Conflict with Trust Indenture Act....................................................... 72
Section 15.07 Effect of Headings and Table of Contents................................................ 72
Section 15.08 Successors and Assigns.................................................................. 73
Section 15.09 Separability............................................................................ 73
Section 15.10 Benefits of Indenture................................................................... 73
Section 15.11 Legal Holidays.......................................................................... 73
Section 15.12 Governing Law........................................................................... 73
Section 15.13 Counterparts............................................................................ 73
Section 15.14 Corporate Obligation.................................................................... 73
Section 15.15 Recording of Indenture.................................................................. 73
Section 15.16 No Petition............................................................................. 74
Section 15.17 Amendments to Governing Documents....................................................... 74
EXHIBITS
Exhibit A-1 Form of Trustee's Initial Certification
Exhibit A-2 Form of Trustee's Final Certification
</TABLE>
(v)
<PAGE> 9
This INDENTURE, dated as of __________ 1, 1997, is hereby executed by
and between Union Planters Mortgage Finance Corp., a Delaware corporation (the
"Depositor"), and ______________________, a [national banking corporation], as
trustee (the "Trustee").
PRELIMINARY STATEMENT
The Depositor has duly authorized the execution and delivery of this
Indenture to provide for one or more Series of Bonds, issuable as provided in
this Indenture. Each Series of such Bonds will be issued only under a Supplement
to this Indenture duly executed and delivered by the Depositor and the Trustee
and limited to the amount therein prescribed. All covenants and agreements made
by the Depositor herein are for the benefit and security of the Bondholders. The
Depositor is entering into this Indenture, and the Trustee is accepting the
trusts created hereby, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged.
Section 1.01 Definitions.
Except as otherwise specified herein or in a Series Supplement or as
the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Indenture, and the definitions
of such terms are equally applicable both to the singular and plural forms of
such terms and to the masculine, feminine and neuter genders of such terms. All
other terms used herein that are defined in the Trust Indenture Act, either
directly or by reference therein, have the meanings assigned to them therein.
"Accountants' Certificate": A certificate of a firm of independent
certified public accountants of national reputation acceptable to the Trustee,
which may be the firm of independent accountants that audits the financial
statements of the Depositor.
"Accounting Date": With respect to any Series or Class of Bonds, the
date specified in the related Series Supplement as the Accounting Date for the
Bonds of such Series or Class.
"Accretion Bond": A Bond of a Series on which interest accrues and is
compounded and added to the principal of such Bond periodically, but with
respect to which neither interest nor principal is payable until the earlier of
(i) the Payment Date on which the entire principal amount of each Outstanding
Bond of the same Series having an earlier Stated Maturity of principal has been
paid in full or (ii) a date specified in the related Series Supplement.
"Accrual Date": With respect to any Series or Class of Bonds, the date
on which interest begins accruing on the Bonds of such Series, as specified in
such Bonds and the related Series Supplement.
"Act" and "Acts of Bondholders": The meanings specified in Section
15.03.
"Additional Mortgage Collateral": Any Mortgage Collateral added to the
Trust Estate for a Series of Bonds (other than Substitute Mortgage Collateral)
after the initial Issue Date for the Series.
"Administrative Fee": With respect to a Series, the administrative fees
set forth in the related Series Supplement.
<PAGE> 10
"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.
"Aggregate Collateral Value": With respect to any Series, the sum of
the Collateral Values of all Mortgage Collateral securing such Series on the
date of determination.
"Appraised Value": The value of a Mortgaged Premises as set forth in an
appraisal made by or for the originator in connection with the origination of
the Mortgage Loan secured by such Mortgaged Premises.
"ARM Loan": An "adjustable rate" Mortgage Loan, the Note Rate of which
is subject to periodic adjustment in accordance with the terms of the Note.
"Beneficial Owner": With respect to a Book-Entry Bond, the Person who
is the beneficial owner of such Bond as reflected on the books of the Clearing
Agency for the Series or on the books of a Person maintaining an account with
such Clearing Agency (directly or as an indirect participant, in accordance with
the rules of such Clearing Agency).
"Best Efforts": Efforts determined to be in good faith and reasonably
diligent by the Person performing such efforts, specifically the Issuer or the
Servicer, as the case may be, in its reasonable discretion. Such efforts do not
require the Issuer or the Servicer, as the case may be, to enter into any
litigation, arbitration or other legal or quasi-legal proceeding, nor do they
require the Issuer or the Servicer, as the case may be, to advance or expend
fees or sums of money in addition to those specifically set forth in this
Indenture and the Servicing Agreement.
"Board of Directors": The Board of Directors of the Depositor or any
committee of that Board duly authorized to act on behalf of that Board with
respect to any matters arising under the Indenture.
"Board Resolution": A copy of a resolution certified by the Secretary
or an Assistant Secretary of the Depositor to have been duly adopted by the
Board of Directors and to be in full force and effect on the date of such
certification and delivery to the Trustee.
"Bond Insurance": Any financial guaranty insurance policy covering any
Bonds or Class of Bonds of any Series.
"Bond Insurer": The issuer of any Bond Insurance.
"Bond Interest Rate": With respect to any Series or Class of Bonds, the
annual rate, which may be a variable rate, at which interest accrues on the
Bonds of such Series or Class, as specified in the related Series Supplement.
"Bond Period": The period between two successive Payment Dates or, with
respect to the initial Bond Period for a Series, the period between the Accrual
Date and the first Payment Date for that Series.
"Bond Register" and "Bond Registrar": The respective meanings specified
in Section 3.05.
"Bondholder" or "Holder": The Person in whose name a Bond is registered
in the Bond Register for the related Series.
"Bonds": Any bonds authorized by, and authenticated and delivered
under, this Indenture and any Series Supplement.
-2-
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"Book-Entry Bonds": Bonds of a Series for which the related Series
Supplement provides that ownership and transfers of beneficial ownership
interests in such Bonds shall be made through book entries by a Clearing Agency
as described in Section 3.12 or other entity satisfactory to the Rating Agency;
provided, however, that after the occurrence of a condition whereupon book-entry
registration is no longer permitted, Definitive Bonds shall be issued to the
Beneficial Owners of Bonds of such Series, and such Bonds shall no longer be
"Book-Entry Bonds."
"Borrower": The Person or Persons obligated to repay a Mortgage Loan.
"Broker's Price Opinion": The opinion of an independent real estate
broker as to the expected sale price for specified Mortgaged Premises.
"Business Day": Any day that is not a Saturday, Sunday, holiday, or
other day on which commercial banking institutions in the city and state in
which the Trustee's Corporate Trust Office is located are authorized or
obligated by law or executive order to be closed.
"Certificate of Deposit": A certificate of deposit satisfying the
definition of an Eligible Investment.
"Class": With respect to any Series, the classification of Bonds within
such Series as set forth in the related Series Supplement.
"Clearing Agency": An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended, and
the regulations of the Commission thereunder.
"Clearing Agency Participant": A broker, dealer, bank, other financial
institution or other person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Code": The Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Collateral": For a Series, the Trust Estate securing such Series.
"Collateral Proceeds": With respect to any Mortgage Collateral securing
a Series, the amount paid to the holder of such Mortgage Collateral in
accordance with the terms of such Mortgage Collateral.
"Collateral Proceeds Account": The meaning specified in Section 12.05.
"Collateral Value": With respect to each item of Mortgage Collateral,
an amount equal to the lesser of (i) the outstanding principal balance of such
item of Mortgage Collateral and (ii) as specified in the related Series
Supplement, either (a) the present value of remaining scheduled monthly payments
of principal and interest (at the Net Rate in the case of a Mortgage Loan)
discounted monthly to the date of computation at the Collateral Value Discount
Rate (the "Discounted Cash Flow Method") or (b) the scheduled principal balance
of such item of Mortgage Collateral multiplied by a fraction, the numerator of
which is the interest rate (or Net Rate in the case of a Mortgage Loan) and the
denominator of which is the Collateral Value Discount Rate (the "Interest
Method").
"Collateral Value Discount Rate": The Collateral Value Discount Rate
specified in the related Series Supplement.
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"Commission": The Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, as amended,
or if at any time such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing such
duties at such time under the Trust Indenture Act or similar legislation
replacing the Trust Indenture Act.
"Compound Value": With respect to any Payment Date for a Class of
Accretion Bonds of a Series, the original principal amount of such Class, plus
all interest accrued and added to the principal thereof through the Accounting
Date preceding the Payment Date, compounded at the Bond Interest Rate for such
Class, and with respect to any calculation on a date other than a Payment Date,
the Compound Value as of the immediately preceding Accounting Date or (if prior
to the first Payment Date) the original principal amount of such Class of
Accretion Bonds. The principal amount of any Accretion Bond at any time will be
equal to its Compound Value. The Compound Value of an Accretion Bond will be
reduced by any payments of principal on such Bond.
"Corporate Trust Office": The principal corporate trust office of the
Trustee presently located at ____________________________________, _______,
_________ __________, telephone number (___) ___-____ or at such other address
as the Trustee may designate from time to time by notice to the Bondholders and
the Depositor or the principal corporate trust office of any successor Trustee.
Any notices to the Trustee should be mailed to ______________________________,
__________________________, ____________, ______, ________ _____ or sent by
overnight courier to ________________________________, ________________________,
____________, ______, ________ _____.
"Credit Enhancement Rate": The per annum rate, if any, specified in the
Series Supplement for a Series.
"Current Interest Bond": A Bond other than an Accretion Bond.
"Custodial Reserve Fund": The fund established pursuant to Section
12.06.
"Custodian": A custodian appointed by the Trustee to hold some or all
of the Mortgage Collateral for the Bonds issued hereunder.
"Cut-off Date": With respect to any Series, the date or dates on and
after which all payments of principal and interest due in respect of Mortgage
Collateral securing the Series are to be transmitted to the Collateral Proceeds
Account for the benefit of the Holders of that Series. The Cut-off Date or Dates
for a Series shall be specified in the related Series Supplement.
"Date of Execution": The actual date of execution of this Indenture by
the Depositor and the Trustee as indicated by their respective acknowledgments
hereto annexed, and if the Depositor and the Trustee shall have executed this
Indenture at different dates, the later date.
"Default": Any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default or, when used in association with
obligations created by any agreement other than this Indenture, the meaning
specified in such agreement.
"Defaulted Mortgage Loan": A Mortgage Loan with respect to which any
scheduled payment of interest or principal has become ninety days past due.
"Defaulted Mortgage Loan Value": The amount that the holder of a
Defaulted Mortgage Loan can reasonably expect to realize with respect to such
Mortgage Loan, taking into account the Unpaid Principal Balance, the interest
accrued thereon to the date on which the determination is made, the additional
interest that will be accrued thereon prior to sale, estimated foreclosure and
other disposition costs, liabilities associated with the related Mortgaged
Premises, the value of the related Mortgaged Premises indicated in a Broker's
Price Opinion delivered not more than 12 months prior to the date of
determination of Defaulted Mortgage Loan Value and the amount of any claim to be
filed pursuant to any mortgage insurance or guarantee.
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"Definitive Bonds": Bonds other than Book-Entry Bonds.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be replaced by
a Qualified Substitute Mortgage Loan.
"Delivery Date": The date that Bonds of a Series are delivered to the
original purchasers of such Bonds as specified in the related Series Supplement.
"Depositor": Union Planters Mortgage Finance Corp., a Delaware
corporation, unless a successor Person shall have become the Depositor pursuant
to the applicable provisions of this Indenture, and thereafter "Depositor" shall
mean such successor Person.
"Depositor Officer": The Chairman of the Board of Directors, the
President or any Vice President of the Depositor.
"Depositor Order" and "Depositor Request": A written order or request
signed in the name of the Depositor by its Chairman, President or a Vice
President, and by its Treasurer, an Assistant Treasurer, Controller, an
Assistant Controller, Secretary or an Assistant Secretary, and delivered to the
Trustee.
"Discounted Cash Flow Method": A method for calculation of Collateral
Value described herein in the definition of Collateral Value, as modified, if
applicable, in the Series Supplement for a Series of Bonds.
"Due Date": Each date on which a payment, whether of principal,
interest or both, is due on a Mortgage Certificate or Mortgage Loan securing a
Series.
"Due Period": With respect to each Payment Date for a Class or Series
of Bonds, the period beginning immediately following the preceding Due Period
(or, in the case of the Due Period that is applicable to the first Payment Date,
beginning on the Accrual Date for such Series) and, unless otherwise specified
in the related Series Supplement, ending on the Accounting Date preceding such
Payment Date.
"Eligible Investments": Except to the extent expanded or restricted by
the Series Supplement for the Series for which such obligations or securities
form part of the Trust Estate for such Series, any one or more of the following
obligations or securities:
(i) direct obligations of, and obligations fully guaranteed
by, the United States of America, Freddie Mac, Fannie Mae or any agency
or instrumentality of the United States of America the obligations of
which are backed by the full faith and credit of the United States of
America, provided that such obligations of Freddie Mac or Fannie Mae
shall be limited to senior debt obligations and mortgage participation
certificates (except that investments in mortgage-backed or mortgage
participation securities with yields evidencing extreme sensitivity to
the rate of principal payments on the underlying mortgages shall not
constitute Eligible Investments hereunder);
(ii) (a) demand and time deposits in, certificates of deposit
of, bankers' acceptances issued by, or federal funds sold by any
depository institution or trust company incorporated under the laws of
the United States of America (including the Trustee) or any state
thereof and subject to supervision and examination by federal and/or
state banking authorities so long as the commercial paper and the
long-term debt obligations of such depository institution or trust
company (or, in the case of the principal depository institution in a
holding company system, the commercial paper and long-term debt
obligations of such holding company) at the time of such investment or
contractual commitment providing for such investment has a credit
rating in the highest applicable category from each Rating Agency in
the case of commercial paper and in one of the two highest applicable
categories from each Rating Agency in the case of long-term debt
obligations and (b) any other demand or time deposit or certificate of
deposit that is fully insured by the Federal Deposit Insurance
Corporation;
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(iii) repurchase obligations with respect to (a) any security
described in clause (i) above or (b) any other security issued or
guaranteed by an agency or instrumentality of the United States of
America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (ii)(a) above
(and having the ratings from each Rating Agency required in clause
(ii)(a) above), the repurchaser of which also has the ratings from each
Rating Agency described in clause (ii)(a) above;
(iv) securities bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States of
America or any state thereof which have a credit rating in one of the
two highest applicable categories from each Rating Agency at the time
of such investment or contractual commitment providing for such
investment; provided, however, that securities issued by any particular
corporation will not be Eligible Investments to the extent that
investment therein will cause the then outstanding principal amount of
securities issued by such corporation and held as part of the Trust
Estate to exceed 10% of the aggregate outstanding principal balances of
all the Mortgage Collateral and Eligible Investments held as part of
the Trust Estate; provided, further, that no securities representing
the right to receive only interest distributions on underlying
financial assets, and no securities that were purchased for a price in
excess of 120% of the outstanding principal amount thereof at the time
of purchase thereof, shall constitute Eligible Investments;
(v) commercial paper having a rating in the highest applicable
category from each Rating Agency at the time of such investment; and
(vi) a guaranteed investment contract issued by any insurance
company or other corporation or entity with a short-term debt rating in
the highest category by each Rating Agency and a long-term debt rating
in one of the two highest applicable categories by each Rating Agency;
provided, however, that, unless otherwise provided in the related Series
Supplement, Eligible Investments for a Series shall include only obligations or
securities that mature on or before the Business Day immediately preceding the
next Payment Date for such Series. In addition, no Eligible Investment that
incorporates a penalty for early withdrawal will be used unless the maturity of
such Eligible Investment is on or before the Business Day immediately preceding
the next Payment Date.
"Event of Default": With respect to any Series, the meaning specified
in the related Series Supplement, as provided in Section 6.01 or, when used in
association with obligations created by any agreement other than this Indenture,
the meaning specified in such agreement.
"Federal Bankruptcy Code": Title 11 of the United States Code, as
amended.
"FHA": The Federal Housing Administration or any successor thereof.
"Freddie Mac": Freddie Mac, formerly the Federal Home Loan Mortgage
Corporation, or any successor thereof.
"Freddie Mac Certificate": A mortgage participation certificate
representing an undivided interest in specified fixed rate, first lien
residential mortgages, or participation interests therein, purchased by Freddie
Mac, which is pledged to the Trustee under this Indenture and the related Series
Supplement as security for a Series, and all renewals, extensions, substitutions
and replacements thereof. Each Freddie Mac Certificate pledged to the Trustee as
security for a Series will be listed in a schedule to the related Series
Supplement.
"Final Payment Date": The Payment Date following the first to occur of
the Sale of the Mortgage Collateral or the final payment on each item of
Mortgage Collateral included in the Trust Estate.
"Fannie Mae": Fannie Mae, formerly the Federal National Mortgage
Association, or any successor thereof.
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<PAGE> 15
"Fannie Mae Certificate": A guaranteed mortgage pass-through
certificate issued and guaranteed by Fannie Mae and representing an undivided
interest in a pool of Mortgage Loans secured by first liens on residential
property, which is pledged to the Trustee under this Indenture and the related
Series Supplement as security for a Series, and all renewals, extensions,
substitutions and replacements thereof. Unless otherwise specified in the
related Series Supplement, each Fannie Mae Certificate shall only represent an
interest in a pool that consists of fixed rate Mortgage Loans. Each Fannie Mae
Certificate pledged to the Trustee as security for a Series will be listed in a
schedule to the related Series Supplement.
"Fund": Any fund established pursuant to the Indenture or Series
Supplement with respect to any Series of Bonds that is pledged as security for
such Series.
"GNMA": The Government National Mortgage Association or any successor
thereto.
"GNMA Certificate": A fixed rate, fully modified pass-through
mortgage-backed certificate guaranteed by GNMA, which is pledged to the Trustee
under this Indenture and the related Series Supplement as security for a Series,
and all renewals, extensions, substitutions and replacements thereof. Each such
GNMA Certificate will be a GNMA I Certificate or a GNMA II Certificate as
referred to by GNMA. Each GNMA Certificate pledged to the Trustee as security
for a Series will be listed in a schedule to the related Series Supplement.
"Grant": To grant, bargain, sell, warrant, alienate, remise, demise,
release, convey, assign, transfer, mortgage, pledge, create and grant a security
interest in and right of set-off against, deposit, set over and confirm. A Grant
of the Mortgage Collateral or of any other instrument shall include all rights,
powers and options (but none of the obligations) of the granting party
thereunder, including without limitation the immediate continuing right to claim
for, collect, receive and receipt for principal and interest payments in respect
of the Mortgage Collateral and all other monies payable thereunder, to give and
receive notices and other communications, to make waivers or other agreements,
to exercise all rights and options, to bring Proceedings in the name of the
granting party or otherwise, and generally to do and receive anything that the
granting party is or may be entitled to do or receive thereunder or with respect
thereto.
"Gross Margin": With respect to each ARM Loan, the fixed percentage
specified in the Note that is added to or subtracted from the Index on each
Interest Adjustment Date to determine the new Note Rate for such ARM Loan.
"Indenture": This instrument as supplemented or amended. It shall
include the forms and terms of a particular Series established as contemplated
hereunder. All references in this instrument to designated "Articles,"
"Sections," "Subsections" and other subdivisions are to the designated Articles,
Sections, Subsections and other subdivisions of this instrument as originally
executed. The words "herein," "hereof," "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section, Subsection or other subdivision.
"Independent": When used with respect to any specified Person means
such a Person who (1) is in fact independent of the Depositor and any other
obligor upon the Bonds and of any Affiliate of the Depositor or such other
obligor, (2) does not have any direct financial interest or any material
indirect financial interest in the Depositor or in any such other obligor or in
any Affiliate of the Depositor or such other obligor, and (3) is not connected
with the Depositor or any such other obligor as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
Whenever it is provided herein that any Independent Person's opinion or
certificate shall be furnished to the Trustee, such Person shall be appointed by
Depositor Order and approved by the Trustee in the exercise of reasonable care
and such opinion or certificate shall state that the signer has read this
definition and that the signer is independent within the meaning thereof.
"Index": With respect to each ARM Loan, the index rate specified in the
Note to which or from which the Gross Margin is added or subtracted, in
accordance with the terms of the Note, on each Interest Adjustment Date to
determine the new Note Rate for such ARM Loan.
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"Insurance Policy": Any Bond Insurance Policy, Primary Mortgage
Insurance Policy, Pool Insurance Policy, Special Hazard Insurance Policy,
earthquake insurance policy, Mortgagor Bankruptcy Bond, FHA insurance, VA
guarantees and any other insurance policy covering any Bonds, Mortgage
Certificate, Mortgage Loan or Mortgaged Premises securing such Series,
including, without limitation, any Standard Hazard Insurance Policy and any
Title Insurance Policy specified in the related Series Supplement, or any fund
established in lieu of such policy or policies.
"Insurance Proceeds": With respect to a Series, amounts paid or payable
under any Insurance Policy with respect to such Series, to the extent not
applied to the restoration or repair of the Mortgaged Premises covered thereby.
"Insurer": Any Bond Insurer, the Mortgage Insurer, Pool Insurance
Insurer, the issuer of the Mortgagor Bankruptcy Bond and the Special Hazard
Insurer, when no distinction is required by the context in which used.
"Interest Adjustment Date": With respect to each ARM Loan, the date on
which the Note Rate changes in accordance with the terms of the Note, the first
of which is set forth in the Note. Generally, but not in every case, the
Interest Adjustment Date for a Mortgage Loan will be one month before the
Payment Adjustment Date with respect to such Mortgage Loan.
"Interest Method": A method for calculation of Collateral Value
described herein in the definition of Collateral Value, as modified, if
applicable, in the Series Supplement for a Series of Bonds.
"Issue Date": With respect to a Series, the issue date specified in the
related Series Supplement.
"Letter of Credit": A letter of credit issued to the Trustee and its
successor or assign by any banking corporation situated in the United States (an
"LOC Issuer") whose long-term senior unsecured debt obligations have received
the highest rating from each Rating Agency or any other rating category
acceptable to each Rating Agency. Any such Letter of Credit shall provide that
(a) it is conditional only on certification by the Trustee of its authority to
draw on the Letter of Credit under the terms of the Indenture and (b) it is
subject to termination upon not less than 60 days' prior written notice to the
Trustee, in which case, unless such Letter of Credit is renewed or a substitute
Letter of Credit in the requisite amount is provided, upon receipt of any such
written notice the Trustee shall immediately, and in no case more than 15 days
after such notice, draw on the Letter of Credit for the entire unutilized
balance thereof and deposit such amount in the Reserve Fund.
In the event that the long-term senior unsecured debt obligations of
the LOC Issuer are downgraded by a Rating Agency and such downgrade affects any
Bonds secured by such Letter of Credit, then within 60 days of such event, the
Depositor will, in the case of such a downgrade, (i) replace the Letter of
Credit with a Letter of Credit in an amount not less than the amount of the
Letter of Credit being replaced issued by a successor letter of credit issuer
whose long-term senior unsecured debt obligations are rated in the highest
category by each Rating Agency or (ii) instruct the Trustee to cause an
automatic draw to be made under the Letter of Credit at the conclusion of such
60-day period for the entire amount of the Letter of Credit and deposit such
amount in the Reserve Fund. Notwithstanding the foregoing, the Letter of Credit
may only be replaced if immediately after any replacement of the Letter of
Credit the rating of the Bonds is at least equal to the rating assigned to the
Bonds by each Rating Agency prior to such replacement.
For purposes of the definition of "Letter of Credit," a bank shall be
deemed to have short-term senior unsecured debt obligations that have received
the highest rating if the bank is the principal subsidiary of a bank holding
company and the short-term senior unsecured debt obligations of the bank holding
company have received the highest rating. A bank shall be deemed the principal
subsidiary of a bank holding company if the bank's net worth exceeds 66-2/3% of
the consolidated net worth of the bank holding company.
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"Limited Purpose Entity": A corporation, trust or other entity
organized under the laws of the District of Columbia or any state of the United
States of America whose charter, articles of incorporation, trust instrument or
other governing document includes provisions that provide that the entity:
(a) is organized solely to acquire, own, hold, sell, transfer
or assign, and to issue bonds or mortgage pass-through certificates
backed by (i) mortgage loans, (ii) Fannie Mae Certificates, (iii)
Freddie Mac Certificates, (iv) GNMA Certificates, (v) any other
mortgage pass-through certificates or mortgage-collateralized
obligations and (vi) rights to any or all of the cash flows
attributable to any of the foregoing and, subject to the prohibition on
the entity's ability to incur debt obligations, to engage in any
activity that is incidental or convenient to the accomplishment of the
foregoing, and subsequent to the issuance of any series of bonds, to
sell any collateral securing such bonds to a limited purpose trust,
partnership, corporation, limited liability company or other entity,
subject to the lien of such bonds;
(b) shall not incur or assume any debt or guarantee any debt
if, as a result thereof, the then current rating of the Bonds by the
Rating Agency would be adversely affected; and
(c) shall not consolidate or merge with or into any other
entity or convey or transfer all or any portion of its assets or
properties unless the entity formed or surviving such consolidation or
merger or to which the entity transfers its assets or properties is a
Limited Purpose Entity that has expressly assumed all of the entity's
outstanding obligations to the Trustee.
"Liquidation Proceeds": Amounts (other than Insurance Proceeds)
received and retained in connection with the liquidation of defaulted Mortgage
Loans, whether through foreclosure or otherwise.
"Loan Documents": The loan documents pertaining to a particular
Mortgage Loan comprising the Mortgage Loan file reviewed and held by the Trustee
or a Custodian, on behalf of the Trustee, as provided in the related Servicing
Agreement.
"Loan-to-Value Ratio": The outstanding principal amount of a Note at
the time of the origination of such Note divided by the lesser of (i) the
Appraised Value of the related Mortgaged Premises or (ii) the selling price for
such Mortgaged Premises.
"Master Servicer": For each Mortgage Loan, the Person designated as the
Master Servicer in the related Servicing Agreement.
"Maturity": With respect to any Bond of a Series, the date on which the
unpaid principal of such Bond becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
"Maturity Date": With respect to any Mortgage Certificate or Mortgage
Loan securing a Series, the date on which the last payment of principal of such
Mortgage Certificate or Mortgage Loan shall be due and payable. In determining
the Maturity Date of such a Mortgage Certificate or Mortgage Loan, all
pre-payments received prior to the date of determination shall be taken into
account.
"Maximum Lifetime Note Rate": With respect to each ARM Loan, the
interest rate set forth in the related Note as the maximum Note Rate thereunder,
if any.
"Minimum Lifetime Note Rate": With respect to each ARM Loan, the
interest rate set forth in the related Note as the minimum Note Rate thereunder,
if any.
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"Minimum Principal Distribution Balance": With respect to a Payment
Date for a Series of Bonds, the balance, if any, by which (i) the aggregate
Outstanding principal balance of the Bonds of the Series (before giving effect
to any payments of principal on that Payment Date) plus the balance of any
interest accrued and added on the immediately preceding Accounting Date to the
principal balance of any Accretion Bonds included in such Series exceeds (ii)
the Aggregate Collateral Value of the Mortgage Collateral securing the Series as
of the most recent Principal Determination Date.
"Monthly Remittance Report": The report provided to the Trustee
pursuant to Section 12.09.
"Mortgage Certificates": With respect to a Series, the GNMA
Certificates, the Freddie Mac Certificates, the Fannie Mae Certificates and the
Other Mortgage Certificates securing such Series.
"Mortgage Collateral": With respect to a Series, together, the Mortgage
Certificates and the Mortgage Loans securing such Series.
"Mortgage Insurer": With respect to a Series, the insurance company or
companies specified in the related Series Supplement or its subsidiaries,
successors or any Affiliate.
"Mortgage Loan Documents": With respect to each Mortgage Loan, the
following documents:
(a) the original Note bearing a complete chain of
endorsements, if necessary, from the initial payee thereunder to the
Seller, with a further endorsement without recourse from the Seller in
blank or to the Trustee or its Custodian, in a form specified in the
related Sales Agreement, (or a copy or a duplicate original Mortgage
Note, together with an affidavit certifying that the original thereof
has been lost or destroyed) together with all related riders and
addenda and any related surety or guaranty agreement, power of attorney
and buydown agreement;
(b) the original recorded Security Instrument (or a copy
thereof certified to be a true and correct reproduction of the original
thereof by the appropriate public recording office) with evidence of
recordation noted thereon or attached thereto, or, if the Security
Instrument is in the process of being recorded, a photocopy of the
Security Instrument, certified by an officer of the related Seller or
the originator, the related title insurance company, the related
closing/settlement/escrow agent or the related closing attorney to be a
true and correct copy of the Security Instrument submitted for
recordation;
(c) the original recorded assignment of the Security
Instrument from the related Seller to the Trustee or its Custodian, in
a form specified in the related Sales Agreement (or a copy thereof
certified to be a true and correct reproduction of the original thereof
by the appropriate public recording office) with evidence of
recordation noted thereon or attached thereto, or, if the assignment is
in the process of being recorded, a photocopy of the assignment,
certified by an officer of the Seller to be a true and correct copy of
the assignment submitted for recordation;
(d) each original recorded intervening assignment of the
Security Instrument as is necessary to show a complete chain of title
from the initial mortgagee (or beneficiary, in the case of a deed of
trust) to the related Seller (or a copy of each such assignment
certified to be a true and correct reproduction of the original thereof
by the appropriate public recording office) with evidence of
recordation noted thereon or attached thereto, or, if an assignment is
in the process of being recorded, a photocopy of the assignment,
certified by an officer of the Seller to be a true and correct copy of
the assignment submitted for recordation;
(e) an original Title Insurance Policy or, if such policy has
not yet been issued or is otherwise not available, (1) a written
commitment to issue such policy issued by the applicable title
insurance company and an officer's certificate of the related Seller
certifying that all of the requirements specified in such commitment
have been satisfied, (2) a preliminary title report if the related
Mortgaged Premises
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<PAGE> 19
is located in a state in which preliminary title reports are acceptable evidence
of title insurance or (3) a certificate of an officer of the Seller certifying
that a Title Insurance Policy is in full force and effect as to the related
Security Instrument;
(f) for each Mortgage Loan identified in the related Agreement
as having in place a Primary Mortgage Insurance Policy, a Primary
Mortgage Insurance Policy or a certificate of primary mortgage
insurance issued by the related Mortgage Insurer or its agent
indicating that such a policy is in effect as to such Mortgage Loan or,
if neither a policy nor a certificate of insurance from the related
Mortgage Insurer is available, a certificate of an officer of the
related Seller certifying that a Primary Mortgage Insurance Policy is
in effect as to such Mortgage Loan;
(g) each related assumption agreement, modification, written
assurance or substitution agreement, if any; and
(h) proof of the maintenance of a Standard Hazard Insurance
Policy (and a flood insurance policy, if applicable) as to the related
Mortgaged Premises.
"Mortgage Loans": The mortgage loans pledged to the Trustee as security
for a Series, and all renewals, extensions, substitutions and replacements
thereof. Each Mortgage Loan pledged to the Trustee as security for a Series
shall be listed in a schedule to the related Series Supplement.
"Mortgaged Premises: The real property, together with improvements
thereto, securing the indebtedness of the Borrower under the related Mortgage
Loan.
"Mortgagor Bankruptcy Bond" or "Mortgagor Bankruptcy Fund": With
respect to a Series, a policy of insurance or Letter of Credit (or any other
instrument required to avoid a downgrading of the then applicable rating on the
Bonds of such Series by any Rating Agency rating the Bonds of such Series) to be
issued by the company or companies specified in the related Series Supplement
providing coverage with respect to each Mortgage Loan securing such Series in
the event of the bankruptcy of the Borrower thereof.
"Net Rate": Unless otherwise provided in the Series Supplement, with
respect to each Mortgage Loan, the Note Rate minus the sum of the Servicing Fee
Rate, Master Servicing Fee Rate and Credit Enhancement Rate, if any, as
specified in the related Series Supplement.
"Note": The note or other evidence of indebtedness of a Borrower with
respect to a Mortgage Loan.
"Note Rate": With respect to a Mortgage Loan, the annual interest rate
required to be paid by a Borrower under the terms of the related Note.
"Officer": With respect to any corporation, the Chairman of the Board
of Directors, the President, any Vice President, the Secretary, any Assistant
Secretary or the Treasurer of such corporation; with respect to any partnership,
any general partner thereof; with respect to any bank or trust company acting as
trustee of an express trust or as custodian, any trust officer or authorized
officer thereof.
"Officer's Certificate": For any Person, a certificate delivered to the
Trustee that has been signed on behalf of that Person by an individual who is
identified in that certificate as being an Officer of that Person or any other
individual authorized to execute the certificate.
"Opinion of Counsel": A written opinion of an attorney at law admitted
to practice before the highest court of any state of the United States or the
District of Columbia or a law firm that may, except as otherwise expressly
provided in this Indenture, be counsel for the Depositor and who shall be
satisfactory to the Trustee. Whenever an Opinion of Counsel is required
hereunder, such opinion may rely on opinions of other counsel who are so
admitted.
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"Original Mortgage Collateral": An item of Mortgage Collateral that is
pledged to the Trustee under this Indenture as security for a Series on the
Delivery Date of the Bonds of such Series.
"Originator": For a Mortgage Loan, the Person that originated such
Mortgage Loan.
"Other Mortgage Certificate": A mortgage pass-through certificate or
collateralized mortgage obligation other than a GNMA Certificate, Freddie Mac
Certificate or Fannie Mae Certificate that is pledged to the Trustee under this
Indenture and the related Series Supplement and all renewals, extensions,
substitutions and replacements thereof. Each Other Mortgage Certificate pledged
to the Trustee as security for a Series will be listed in a schedule to the
related Series Supplement.
"Outstanding":
(1) With respect to Bonds of a Series, as of the date of
determination, "Outstanding" refers to all Bonds of such Series theretofore
authenticated and delivered under this Indenture except:
(i) Bonds theretofore canceled by the Bond Registrar or
delivered to the Bond Registrar for cancellation;
(ii) Bonds or portions thereof for which payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Depositor) in
trust or set aside and segregated in trust by the Depositor for the
Holders of such Bonds; provided, however, that, if such Bonds or
portions thereof are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Bonds in exchange for or in lieu of which other
Bonds have been authenticated and delivered pursuant to this Indenture
unless proof satisfactory to the Trustee is presented that any such
Bonds are held by a holder in due course; and
(iv) Bonds alleged to have been destroyed, lost or stolen
for which replacement Bonds have been issued as provided in Section
3.06;
provided, however, that, in determining whether the Holders of the requisite
principal amount of the Outstanding Bonds of any or all Series have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Bonds owned by the Depositor or any other obligor upon the Bonds or any
Affiliate of the Depositor or of such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Bonds that the Trustee knows to be so
owned shall be so disregarded. Bonds so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Bonds and that the pledgee is not the Depositor or any other obligor upon the
Bonds or any Affiliate of the Depositor or such other obligor.
(2) With respect to Mortgage Collateral related to a Series as of
any date, "Outstanding" refers to Mortgage Collateral related to a Series with a
remaining principal balance.
"Outstanding Mortgage Collateral Amount": Together, the aggregate of
the outstanding principal balance of the Mortgage Certificates and the Mortgage
Loans.
"Paying Agent": Any Person authorized by the Depositor to pay the
principal of or interest on any Bonds on behalf of the Depositor.
"Payment Adjustment Date": With respect to each ARM Loan, the date on
which the Borrower's monthly payment of principal and interest changes in
accordance with the terms of the Note.
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"Payment Date": With respect to any Series or Class, each date
specified as a Payment Date for the Bonds of such Series or Class in the related
Series Supplement (or if such day is not a Business Day, the next succeeding
Business Day, in the case of payments to be made on any Payment Date).
"Periodic Payment Cap": With respect to an ARM Loan, the limit on the
percentage increase or decrease that may be made on the monthly payment of
principal and interest on any Payment Adjustment Date, as set forth in the Note.
"Periodic Rate Cap": With respect to an ARM Loan, the limit, if any, on
the percentage increase or decrease that may be made on the Note Rate on any
Interest Adjustment Date, as set forth in the Note.
"Permitted Encumbrance": With respect to any Mortgage Collateral
securing a Series, (i) the lien created by a Mortgage Loan, (ii) liens for
taxes, assessments, levies, fees and other governmental and similar charges
either not yet due or being contested in an appropriate Proceeding which shall
suspend the collection thereof, shall not expose any part of the Trust Estate
securing such Series to loss, sale or forfeiture and shall not affect the
payments to the Trustee of any amounts payable under this Indenture to the
Trustee, and (iii) the exceptions to title set forth in any Title Insurance
Policy.
"Person": Any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"Pool Insurance Insurer": With respect to a Series, the issuer of the
Pool Insurance Policy named in the related Series Supplement, or any successor
thereto, or the named Insurer in any replacement policy obtained by the Master
Servicer for such Series.
"Pool Insurance Policy": With respect to a Series, any blanket mortgage
insurance policy that may be provided for in the related Series Supplement as an
addition to or in place of the Primary Mortgage Insurance Policies for the
Mortgage Loans securing such Series, or any replacement policy.
"Primary Mortgage Insurance Policy": The policy of primary mortgage
insurance (including all endorsements thereto) issued by the Mortgage Insurer
with respect to a Mortgage Loan, or any replacement policy.
"Principal Determination Date": With respect to an accounting pursuant
to Section 12.09, for all Mortgage Collateral (other than Freddie Mac
Certificates) the first day of the month for which the accounting is given. For
Freddie Mac Certificates the Principal Determination Date shall be the first day
of the month preceding the month for which the accounting is given. The initial
Principal Determination Date for a Series shall be the date or dates specified
in the related Series Supplement.
"Principal Prepayment": With respect to any Mortgage Loan or Mortgage
Certificate securing a Series, a payment of principal on such Mortgage Loan or
the mortgage loans underlying such Mortgage Certificate in excess of the
scheduled principal payments.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"Qualified Substitute Mortgage Loan": A Mortgage Loan substituted by
the Depositor for a Deleted Mortgage Loan that must, on the date of such
substitution, (i) have an Unpaid Principal Balance not greater than (and not
more than $10,000 less than) the Unpaid Principal Balance of the Deleted
Mortgage Loan, (ii) have a Note Rate not less than (and not more than one
percentage point in excess of) the Note Rate of the Deleted Mortgage Loan, (iii)
have a Net Rate equal to the Net Rate of the Deleted Mortgage Loan, (iv) have a
remaining term to maturity not greater than (and not more than one year less
than) that of the Deleted Mortgage Loan, (v) have a Loan-to-Value Ratio as of
the first day of the month in which the substitution occurs equal to or less
than the Loan-to-Value Ratio of the Deleted Mortgage Loan as of such date (in
each case, using the value of the Mortgaged
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Premises at origination, and after taking into account the Monthly Payment due
on such date) and (vi) comply with each representation and warranty that had
been assigned to the Trustee with respect to the Deleted Mortgage Loan. In
addition, no ARM Loan may be substituted unless the Deleted Mortgage Loan is an
ARM Loan, in which case, the substituted Mortgage Loan must also (A) have a
Minimum Lifetime Note Rate that is not less than the Minimum Lifetime Note Rate
on the Deleted Mortgage Loan, (B) have a Maximum Lifetime Note Rate that is not
less than or 1% more than the Maximum Lifetime Note Rate on the Deleted Mortgage
Loan, (C) provide for a lowest possible Net Rate that is not lower than the
lowest possible Net Rate for the Deleted Mortgage Loan and a highest possible
Net Rate that is not lower than the highest possible Net Rate for the Deleted
Mortgage Loan, (D) have a Gross Margin not less than or 1% more than the Gross
Margin of the Deleted Mortgage Loan, (E) have a Periodic Rate Cap equal to the
Periodic Rate Cap on the Deleted Mortgage Loan, (F) have a next Interest
Adjustment Date that is the same as the next Interest Adjustment Date for the
Deleted Mortgage Loan or occurs not more than two months prior to the next
Interest Adjustment Date for the Deleted Mortgage Loan, (G) not have a permitted
increase or decrease in the Monthly Payment on each Payment Adjustment Date less
than or 1% more than the permitted increase or decrease applicable to the
Deleted Mortgage Loan, and (H) not be a Mortgage Loan convertible from a
variable to a fixed Note Rate unless the Deleted Mortgage Loan is so
convertible. In the event that more than one Mortgage Loan is substituted for a
Deleted Mortgage Loan, the amount described in clause (i) hereof shall be
determined on the basis of aggregate Unpaid Principal Balances, the rates
described in clauses (iii), (A), (B) and (C) hereof shall be determined on the
basis of weighted average Note Rates and Net Rates, as the case may be, the
terms described in clause (iv) hereof shall be determined on the basis of
weighted average remaining terms to stated maturity, provided that no Qualified
Substitute Mortgage Loan may have an original term to maturity beyond the latest
original term to maturity of any Mortgage Loan pledged to the Trustee on the
Closing Date for the related Series, the Gross Margins described in clause (D)
hereof shall be determined on the basis of weighted average Gross Margins, and
the Interest Adjustment Dates described in clause (F) hereof shall be determined
on the basis of weighted average Interest Adjustment Dates.
"Rating Agency": Any nationally recognized statistical rating
organization rating any Series at the request of the Depositor at the time of
the issuance of such Series as specified in the related Series Supplement.
"Record Date": With respect to any Payment Date for a Series or Class,
the close of business on the day specified as the Record Date for the Bonds of
such Series or Class in the related Series Supplement.
"Records": All of the books, ledgers, documents, communications,
writings, schedules, reconciliations, controls, computer data, printouts,
programs, tapes and other electronic data processing storage devices, and all
other data relating to or maintained in connection with the Mortgage Loans,
excluding, however, the Loan Documents.
"Redemption Date": With respect to any Series or Class, the date
specified for a redemption of the Bonds of such Series or Class pursuant to
Section 11.01.
"Redemption Price": With respect to any Bond of a particular Series or
Class to be redeemed pursuant to Section 11.01 hereof, an amount equal to the
percentage specified in the related Series Supplement of the unpaid principal
amount, or unpaid Compound Value in the case of any Accretion Bond, of such Bond
to be redeemed, together with accrued and unpaid interest thereon at the
applicable Bond Interest Rate to the date specified in the related Series
Supplement.
"Redemption Record Date": With respect to any redemption of Bonds of a
Series, a date fixed pursuant to Section 11.01.
"Registered Holder": The Person whose name appears on the Bond Register
as the registered holder of a Bond.
"REO": A Mortgaged Premises acquired by a Master Servicer on behalf of
the Bondholders through foreclosure or deed-in-lieu of foreclosure.
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"Reserve Fund": The meaning specified in Section 12.04.
"Sale": The meaning contemplated in Section 6.18.
"Sales Agreement": Any agreement between a Seller and the Depositor
relating to the sale of Mortgage Collateral to the Depositor.
"Schedule of Mortgage Collateral": The Mortgage Collateral securing a
Series listed in a schedule or schedules to the related Series Supplement.
"Security Instrument": The mortgage, deed of trust or other instrument
securing a Note.
"Security Instrument Assignment": The document that transfers all the
rights of the secured party pursuant to a transferee for valid consideration.
"Seller": With respect to each Mortgage Loan or Mortgage Certificate,
any Person other than the Depositor that executes a Sales Agreement.
"Series": A separate Series of Bonds issued pursuant to this Indenture
that may, as provided in the related Series Supplement, be divided into one or
more Classes and, if divided into two or more Classes, may include one or more
Classes of Accretion Bonds.
"Series Supplement": An indenture supplemental to this Indenture that
authorizes a particular Series.
"Series Year Reporting Date": The date, as specified in the related
Series Supplement, with respect to which a Yearly Accountants' Certificate shall
be delivered pursuant to Section 13.01(d).
"Servicer Mortgage Loan File": As defined in the related Servicing
Agreement.
"Servicing Agreement": With respect to a Series, each Servicing
Agreement pursuant to which the Master Servicer of a Mortgage Loan has agreed to
perform all the duties incident to the servicing of such Mortgage Loan, as such
agreement may be amended or modified; provided, however, that any such amendment
or modification shall not materially adversely affect the interests and rights
of Bondholders.
"Servicing Fee Rate": The per annum rate specified in a Servicing
Agreement as the rate to be used in determining the fee payable to the Master
Servicer.
"Special Hazard Fund": A fund pledged to the Trustee to cover risks
comparable to those covered by a Special Hazard Insurance Policy and funded,
from time to time, by cash, securities, Eligible Investments, a Letter of Credit
or other instrument acceptable to the Rating Agency as described in the related
Series Supplement.
"Special Hazard Insurance Policy": With respect to a Series, the
Special Hazard Insurance Policy to be issued by the Special Hazard Insurer named
in the related Series Supplement or any replacement policy obtained by the
Master Servicer for such Series pursuant to the Servicing Agreement for such
Series.
"Special Hazard Insurer": With respect to a Series, the issuer of the
Special Hazard Insurance Policy named in the related Series Supplement, or any
successor thereto, or the named Insurer in any replacement policy obtained by
the Master Servicer for such Series.
"Special Record Date": With respect to the payment of any defaulted
interest and principal for Bonds of a Series, a date fixed by the Trustee
pursuant to Section 3.07.
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"Standard Hazard Insurance Policy": With respect to a Mortgage Loan,
the hazard insurance policy issued by a company authorized to issue such
policies in the state in which the Mortgaged Premises securing such Mortgage
Loan is located.
"Stated Maturity": With respect to any Bond of a Series, the date
specified in such Bond as the fixed date on which the final installment of the
principal of such Bond is due and payable.
"Subsequent Delivery Date": A date fixed by the Depositor for the
substitution of Substitute Mortgage Collateral for Original Mortgage Collateral.
"Substitute Mortgage Collateral": An item of Mortgage Collateral that
is pledged to the Trustee under this Indenture as security for a Series as
provided in Section 3.11 in lieu of an item of Original Mortgage Collateral
pledged to the Trustee as security for such Series.
"Supplement": An indenture supplemental to this Indenture.
"Surplus": With respect to each Payment Date for a Series, the
aggregate cash available in the Collateral Proceeds Account in excess of the
obligation to make payments on the Series on such Payment Date pursuant to the
related Series Supplement.
"Surplus Account": The account established pursuant to Section 12.07.
"Surplus Balance": With respect to any Series, the difference as of any
determination date between the Aggregate Collateral Value and the outstanding
aggregate principal balance of the related Bonds.
"Termination of Book-Entry System":
"Title Insurance Policy": With respect to a Mortgage Loan, the policy
of mortgagee's title insurance issued in respect of the Mortgaged Premises
securing such Mortgage Loan or a binder or commitment therefor, or in lieu of
such policy, an attorney's opinion of title.
"Trust Estate": With respect to a Series, the meaning specified in the
granting clause of the related Series Supplement.
"Trust Indenture Act" or "TIA": The Trust Indenture Act of 1939 as in
force at the Date of Execution, unless otherwise specifically provided.
"Trustee": Texas Commerce Bank National Association, a national banking
corporation, unless a successor Person shall have become the Trustee pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Person.
"Trustee Mortgage Loan File": With respect to each Mortgage Loan, the
meaning assigned to such term in the Servicing Agreement except that the Trustee
Mortgage Loan File may, in lieu of the original documents required by the
Servicing Agreement, include (i) documents certified as true and correct by the
appropriate public recording office and (ii) Title Insurance Policies certified
as true and correct by the applicable title insurance company.
"Trustee Officer": With respect to the Trustee, the chairman or
vice-chairman of the board of directors, the chairman or vice-chairman of the
executive committee of the board of directors, the president or any
vice-president, any assistant vice-president, any assistant secretary, any
assistant treasurer, or other trust officer or assistant trust officer in the
corporate trust department of the Trustee and, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
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"Unpaid Principal Balance": With respect to any Mortgage Loan, the
outstanding principal balance payable by the Borrower under the terms of the
Note.
"VA": The U.S. Department of Veterans Affairs or any successor
thereof.
"Vice President": Any vice president, irrespective of whether such
title is modified by any other forms preceding or following.
"Yearly Accountants' Certificate": A certificate setting forth certain
information required by Section 13.01(d).
ARTICLE TWO
BOND FORM
Section 2.01 Forms Generally.
The Bonds of a Series and the Trustee's certificate of authentication
shall be in substantially the forms set forth in the related Series Supplement,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, or any Series Supplement, and
may have such letters, numbers or other marks of identification and such legends
or endorsements placed thereon as may be required to comply with the rules of
any securities exchange on which the Bonds may be listed or as may, consistently
herewith, be determined by the officers of the Depositor executing such Bonds,
as evidenced by their execution of such Bonds. Any portion of the text of any
Bond may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Bond.
The definitive Bonds shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner permitted by any Series
Supplement or the rules of any securities exchange on which the Bonds may be
listed, all as determined by the officers of the Depositor executing such Bonds,
as evidenced by their execution of such Bonds.
Section 2.02 Form of Bonds.
The form of each Class of Bonds for a Series shall be that specified in
the Series Supplement for such Series.
ARTICLE THREE
THE BONDS
Section 3.01 Amount Unlimited; Bonds Issuable in Series and Classes;
Certain Related Provisions.
The aggregate principal amount of Bonds that may be authenticated and
delivered under this Indenture is unlimited.
The Bonds may, at the election of and as authorized by the Board of
Directors, be issued in one or more Series, each of which Series may be issued
in one or more Classes which may include one or more Classes of Accretion Bonds,
and shall be designated generally as the "Collateralized Mortgage Bonds" of the
Depositor, with such further particular designations added or incorporated in
such title for the Bonds or any particular Series or Class as an Depositor
Officer may determine. Each Bond shall bear upon the face thereof the
designation so selected for the Series to which it belongs. All Bonds of the
same Series and Class shall be identical in all respects
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except for the denominations thereof. All Bonds of all Classes within one Series
at any time Outstanding (other than Accretion Bonds in such Series) shall be
identical except for differences among the Bonds of the different Classes within
such Series in Bond Interest Rates, priorities as to the payment of interest,
repayment of principal, and Stated Maturities. All Bonds of a Class of a
particular Series issued under this Indenture shall be in all respects equally
and ratably entitled to the benefits hereof without preference, priority or
distinction on account of the actual time or times of authentication and
delivery, all in accordance with the terms and provisions of this Indenture.
Each Series of Bonds shall be created by a Series Supplement authorized
by a Depositor Officer and establishing the terms and provisions of such Series.
The several Series may differ as between Classes or Series, in respect of any of
the following matters:
(a) designation of the Series;
(b) Accounting Dates;
(c) Accrual Date;
(d) the number of Classes and the maximum aggregate principal amount of
Bonds of each such Class that may be issued;
(e) the Bond Interest Rate for each Class;
(f) the Stated Maturities for each Class;
(g) the basis for principal payments on the Bonds of a Class, pro
rata or random lot;
(h) place or places for the payment of principal;
(i) denominations;
(j) Payment Dates;
(k) the Mortgage Collateral that will secure the Series;
(l) the method for determining Collateral Value;
(m) the Collateral Value Discount Rate (if applicable);
(n) the Rating Agency rating the Bonds;
(o) the amount, if any, to be deposited on the Delivery Date in
the Collateral Proceeds Account for such Series;
(p) the manner in which the Reserve Fund, if any, is to be funded
and the amount, if any, to be deposited on the Delivery Date
in the Reserve Fund for such Series;
(q) the types of Insurance Policies required for the Mortgage
Loans, if any, to be included as part of the Mortgage
Collateral for such Series;
(r) the provisions for redemption of the Bonds of such Series by
the Depositor;
(s) whether the Bonds of a Class or Series are to be issued in
certificated or Book-Entry form;
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(t) the dates on which Monthly Remittance Reports are due;
(u) the Series Year Reporting Date;
(v) provisions with respect to the definitions set forth in
Article One that require or permit further specification in
the related Series Supplement; and
(w) any other provisions expressing or referring to the terms and
conditions upon which the Bonds of that Series are to be
issued under this Indenture and supplementing or modifying the
provisions of this Indenture.
In authorizing the issuance of any Series, a Depositor Officer shall
determine all matters in respect of the Bonds of such Series permitted in
clauses (a) to (w) inclusive and shall also determine and specify the forms of
Bonds of such Series.
Section 3.02 Denominations.
The Bonds of each Series shall be issuable in registered certificated
or Book-Entry form, as specified in the related Series Supplement, in the
denominations as to each Class set forth in the related Series Supplement,
provided that one Bond of each Class of such Series may be issued in such
denomination as may be necessary to represent the remainder of the initial
aggregate principal amount of the Bonds of such Class of such Series.
Section 3.03 Execution, Authentication, Delivery and Dating.
The Bonds shall be executed on behalf of the Depositor by its President
or one of its Vice Presidents and attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these Officers on the Bonds may
be manual or facsimile.
Bonds bearing the manual or facsimile signatures of individuals who
were at any time the proper Officers of the Depositor shall bind the Depositor,
notwithstanding the fact that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Bonds or did
not hold such offices at the date of issuance of such Bonds.
At any time and from time to time after the execution and delivery of
this Indenture, the Depositor may deliver Bonds executed by the Depositor to the
Trustee for authentication; and the Trustee shall authenticate and deliver such
Bonds as in this Indenture provided and not otherwise.
Unless otherwise provided in the related Series Supplement, each Bond
shall be dated as of the date of its authentication, except that those Bonds
delivered on the Delivery Date shall be dated as of the Accrual Date.
No Bond in certificated form shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose, unless there appears
on such Bond a certificate of authentication substantially in the form provided
for in the related Series Supplement executed by the Trustee by the manual
signature of one of its authorized Officers, and such certificate upon any Bond
shall be conclusive evidence, and the only evidence, that such Bond has been
duly authenticated and delivered hereunder.
Section 3.04 [Reserved].
Section 3.05 Registration, Registration of Transfer and Exchange.
The Depositor shall cause to be kept a "Bond Register" in which,
subject to such reasonable regulations as it may prescribe, the Depositor shall
provide for the registration of Bonds and the registration of transfers of Bonds
in certificated form. The Trustee is hereby initially appointed "Bond Registrar"
for the purpose of registering Bonds and transfers of Bonds in certificated form
as herein provided.
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If a Person other than the Trustee is appointed by the Depositor as
Bond Registrar, the Depositor will give the Trustee prompt written notice of the
appointment of a Bond Registrar and of the location, and any change in the
location, of the Bond Register, and the Trustee shall have the right to inspect
the Bond Register at all reasonable times and to obtain copies thereof and the
right to rely upon a certificate executed on behalf of the Bond Registrar by an
Officer thereof as to the names and addresses of the Holders of the Bonds and
the principal amounts and numbers of such Bonds.
Upon surrender for registration of transfer of any Bond in certificated
form at the office or agency of the Depositor to be maintained as provided in
Section 9.02, the Depositor shall execute, and the Trustee shall authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Bonds of any authorized denominations of the same Series and Class and
of a like aggregate principal amount.
At the option of the Holder, Bonds in certificated form may be
exchanged for other Bonds of the same Series and Class in any authorized
denominations and of the like aggregate principal amount, upon surrender of such
Bonds to be exchanged at such office or agency. Whenever any Bonds in
certificated form are so surrendered for exchange, the Depositor shall execute,
and the Trustee shall authenticate and deliver, the Bonds that the Bondholder
making the exchange is entitled to receive.
All Bonds in certificated form issued upon any registration of transfer
or exchange of Bonds shall be the valid obligations of the Depositor, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Bonds surrendered upon such registration of transfer or exchange.
Every such Bond presented or surrendered for registration of transfer
or exchange shall (if so required by the Depositor or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Depositor and the Trustee duly executed by the Holder
thereof or his attorney duly authorized in writing with such signature
guaranteed by a commercial bank or trust company located, or having a
correspondent located, in the City of New York or the city in which the
Corporate Trust Office is located, or by a member firm of a national securities
exchange, and by such other documents as the Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Bonds in certificated form, but the Depositor may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of such Bonds, other than exchanges pursuant to Section 3.04 and 10.06
not involving any transfer.
Payment and transfer procedures for Bonds in Book-Entry form shall be
as specified in the related Series Supplement.
Section 3.06 Mutilated, Destroyed, Lost or Stolen Bonds.
If (a) any mutilated Bond is surrendered to the Trustee, or the
Depositor and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Bond, and (b) there is delivered to the
Depositor and the Trustee such security or indemnity as may be required by them
to save each of them harmless, then, in the absence of notice to the Depositor
or the Bond Registrar that such Bond has been acquired by a bona fide purchaser,
the Depositor shall execute and upon its request the Trustee shall authenticate
and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Bond, a new Bond of the same Series, Class, tenor and principal
amount, bearing a number not contemporaneously outstanding; provided, however,
that if any such mutilated, destroyed, lost or stolen Bond shall have become or
shall be about to become due and payable, or shall have been selected or called
for redemption, instead of issuing a new Bond, the Depositor may pay such Bond
without surrender thereof, except that any mutilated Bond shall be surrendered.
If, after the delivery of such new Bond or payment of a destroyed, lost or
stolen Bond pursuant to the proviso to the preceding sentence, a bona fide
purchaser presents for payment such original Bond, the Depositor and the Trustee
shall be entitled to recover such new Bond (or such payment) from the Person to
whom it was delivered or any Person taking such new Bond from such Person,
except a bona fide purchaser thereof, and shall be entitled to recover upon the
security or indemnity
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provided therefor to the extent of any loss, damage, cost or expenses incurred
by the Depositor or the Trustee in connection therewith.
Upon the issuance of any new Bond under this Section, the Depositor 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 reasonable expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Bond issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Bond shall constitute an original
additional contractual obligation of the Depositor, whether or not the
mutilated, destroyed, lost or stolen Bond shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Bonds of the same Series and Class duly
issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Bonds.
Section 3.07 Payment of Principal and Interest; Principal and Interest Rights
Preserved.
(a) The Current Interest Bonds of each Class shall bear interest for
each Due Period at the Bond Interest Rate for the Bonds of such Class, which
interest shall be due and payable on each Payment Date on the unpaid principal
amount of the Bonds of such Class determined as of the Accounting Date relating
to such Payment Date, commencing on the date specified in the related Series
Supplement and continuing on each Payment Date thereafter until the entire
unpaid principal amount of the Bonds of such Class is paid, whether by
acceleration or otherwise, and (to the extent lawful and enforceable) shall bear
interest on overdue interest at the Bond Interest Rate for the Bonds of such
Class.
(b) Until the entire unpaid principal balance of each Class of Bonds
of a Series with a prior Stated Maturity is paid in full or such other date as
specified in the related Series Supplement, interest for each Due Period on any
Accretion Bonds of the same Series shall be compounded at the Bond Interest Rate
of such Accretion Bonds on each Accounting Date for that Class on the unpaid
Compound Value of such Accretion Bonds determined as of such Accounting Date,
commencing on the first Accounting Date for such Class as specified in the
related Series Supplement, and on each Accounting Date thereafter.
On the Payment Date on which the entire unpaid principal balance of
each Class of Bonds of a Series with a prior Stated Maturity is paid in full or
such other date as specified in the related Series Supplement, any remaining
portion of the amount then payable on such Payment Date shall be paid as
interest on the Accretion Bonds of the same Series and, to the extent that such
amount is less than the amount of the interest accrued on such Accretion Bonds
for the immediately preceding Due Period, the difference shall be added to the
Compound Value of the Bonds of such Class as of the Accounting Date preceding
that Payment Date. Thereafter, such Accretion Bonds shall bear interest at the
Bond Interest Rate for such Accretion Bonds, which interest shall be due and
payable for each Due Period on each Payment Date on the unpaid Compound Value of
such Accretion Bonds determined as of the Accounting Date immediately preceding
such Payment Date until the entire unpaid Compound Value of such Accretion Bonds
is paid, whether by acceleration or otherwise, and (to the extent lawful and
enforceable) shall bear interest on overdue interest at the Bond Interest Rate
for the Bonds of such Class. Notwithstanding the foregoing, in the event that
each Class of Current Interest Bonds of a Series with a prior Stated Maturity is
paid in full and that the payment of principal and interest on the Mortgage
Collateral securing such Series is insufficient at that time to pay the full
amount of required interest on any Accretion Bond on any Payment Date, the
amount of interest that is not available shall be added to the Compound Value of
such Accretion Bonds.
(c) The principal of the Bonds of a Series shall be payable as
specified in the related Series Supplement until the entire unpaid principal
balance of the Bonds of such Series is paid. All payments of principal of the
Bonds of a Class within a Series shall be allocated on a pro rata basis.
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(d) Interest on and principal of Bonds issued in certificated form
shall be payable by check (subject to collection) mailed to the Person entitled
thereto at his address as it appears on the Bond Register, except for the final
payment due on Maturity of a certificated Bond of a Series, which, unless
otherwise provided by a Series Supplement, shall be made only upon presentation
and surrender of such Bond at the office or agency of the Depositor maintained
for that purpose as provided in Section 9.02. In the case of any certificated
Bond upon which the final payment is due on the Maturity of such Bond, the
Depositor or, at the Depositor's request, the Trustee in the name and at the
expense of the Depositor, shall notify the Person entitled thereto at his
address as it appears on the Bond Register that such Bond is to be paid in full.
Such notice shall be mailed as soon as practicable, and in any event no later
than the Payment Date on which the final payment is to be made on such Bond, and
shall specify the place where such Bond may be presented and surrendered for
final payment. If so provided in the related Series Supplement, upon timely
receipt by the Trustee of instructions and the payment of any required charge or
fee, the Trustee may make payments of principal and interest to certain
Bondholders by wire transfer of immediately available funds.
(e) Except to the extent provided in Section 6.21 or as may be
otherwise specifically provided by Series Supplement, interest on and principal
of the Bonds of a Series shall be payable solely from the proceeds of the Trust
Estate Granted in the related Series Supplement.
(f) The Holders of the Bonds of a Class as of the Record Date in
respect of a Payment Date shall be entitled to the interest accrued and payable
and principal payable on such Payment Date with respect to the Bonds of such
Class. Payments of principal to such Holders shall be made in the proportion
that the unpaid principal balance of the Bonds of such Class registered in the
name of each such Holder on such Record Date bears to the aggregate unpaid
principal balance of all Bonds of such Class on such Record Date. Any such
payments that are mailed and returned to the Paying Agent shall be held for
payment as herein provided at the office or agency of the Depositor to be
maintained as provided in Section 9.02.
(g) Unless otherwise provided in the related Series Supplement, any
interest on the Bonds of a Series that is payable, but is not punctually paid or
duly provided for, on any Payment Date ("Defaulted Interest") shall forthwith
cease to be payable to the Holder on the relevant Record Date by virtue of
having been such Holder; and such Defaulted Interest shall be paid by the
Depositor, at its election in each case, as provided in Clause (1) or Clause (2)
below:
(1) The Depositor may elect to make payment of any Defaulted
Interest to the Holders of the Bonds of such Series as of the close of
business on a record date for the payment of such Defaulted Interest
(the "Special Record Date"), which shall be fixed in the following
manner. The Depositor shall notify the Trustee in writing of the amount
of Defaulted Interest proposed to be paid on each Bond and the date of
the proposed payment, which date shall be no earlier than 45 days after
such notification (unless a shorter time shall be acceptable to the
Trustee), and at the same time the Depositor shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than
15 nor less than 10 days prior to the date of the proposed payment and
not less than 10 days after the receipt by the Trustee of the notice of
the proposed payment. The Trustee shall promptly notify the Depositor
of such Special Record Date and the Depositor shall either mail, or
cause to be mailed, notice of the proposed payment of such Defaulted
Interest and of the Special Record Date. Such notice shall be sent by
first-class mail, postage prepaid, to each Holder of Bonds of such
Series at his address as it appears in the Bond Register, not less than
10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and of the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest shall
be paid to the Holders of the Bonds of such Series as of the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
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(2) The Depositor may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Bonds may be listed, and upon such
notice as may be required by such exchange, if, after notice given by
the Depositor to the Trustee of the proposed payment pursuant to this
Clause, such manner of payment shall be deemed practicable by the
Trustee.
(h) Subject to the foregoing provisions of this Section, each Bond
of a Series delivered under this Indenture and the related Series Supplement
upon registration of transfer of or in exchange for or in lieu of any other Bond
shall carry the rights to unpaid interest and principal that were carried by
such other Bond.
Section 3.08 Persons Deemed Owners.
Prior to due presentment for registration of transfer of any Bond, the
Depositor, the Trustee and any agent of the Depositor or of the Trustee may
treat the Person in whose name any Bond is registered as the owner of such Bond
for the purpose of receiving payments of principal, premium, if any, and
interest on such Bond and for all other purposes whatsoever (whether or not such
Bond is overdue), and neither the Depositor, the Trustee nor any agent of the
Depositor or the Trustee shall be affected by notice to the contrary.
Section 3.09 Cancellation.
All Bonds surrendered for payment, registration of transfer, exchange
or redemption shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly canceled by it. The Depositor may
at any time deliver to the Trustee for cancellation any Bonds previously
authenticated and delivered hereunder that the Depositor may have acquired in
any manner whatsoever, and all Bonds so delivered shall be promptly canceled by
the Trustee. No Bonds shall be authenticated in lieu of or in exchange for any
Bonds canceled as provided in this Section, except as expressly permitted by
this Indenture. All canceled Bonds held by the Trustee shall be destroyed unless
the Depositor shall direct by a Depositor Order that they be returned to it.
Section 3.10 [Reserved].
Section 3.11 Limited Right to Substitute Collateral.
(a) Unless otherwise provided in the related Series Supplement, on
any Subsequent Delivery Date for any Series, the Depositor shall have the right
to pledge to the Trustee under a Series Supplement as security for the Series,
in substitution for any one or more items of Original Mortgage Collateral
securing such Series, one or more items of Substitute Mortgage Collateral as
long as each such item of Substitute Mortgage Collateral has (a) a Collateral
Value at least equal to the Collateral Value of the item of Original Mortgage
Collateral for which such item of Substitute Mortgage Collateral is substituted,
in each case determined on the last preceding Due Date with respect to such item
of Mortgage Collateral before taking into account payments received by the
Trustee on such Due Date, and (b) an interest rate within one percentage point
of, and a Maturity Date within 180 days of, such item of Original Mortgage
Collateral for which it is substituted.
On the Subsequent Delivery Date, the Depositor shall have the
right to deliver and pledge to the Trustee as security for the Series in
exchange for each such item of Original Mortgage Collateral (1) the item of
Substitute Mortgage Collateral plus (2) cash in an amount equal to the payment
of principal and interest paid or to be paid on such Substitute Mortgage
Collateral during the month of the Subsequent Delivery Date.
Upon such substitution, all of the Depositor's right, title
and interest to the item of Substitute Mortgage Collateral shall be assigned to
the Trustee pursuant to Section 4.02(2) or (3) of this Indenture, and the
Depositor shall receive (1) the item of Original Mortgage Collateral for which
the item of Substitute Mortgage Collateral was substituted and (2) all
Collateral Proceeds received on the Due Date in the month of the Subsequent
Delivery Date by the Trustee on the item of Original Mortgage Collateral
delivered to the Depositor. The Trustee
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shall also receive, not later than the Subsequent Delivery Date, an Officer's
Certificate of the Depositor and of the Master Servicer to the effect that:
(1) all instruments furnished to the Trustee in connection
with such substitution conform in all material respects to the
requirements of this Indenture and the related Series Supplement and
constitute sufficient authority hereunder for the Trustee to permit the
substitution then applied for;
(2) all conditions precedent provided for in this Indenture
and the related Series Supplement relating to the substitution then
applied for have been complied with and the Depositor is duly entitled
to effect such substitution; and
(3) each item of Substitute Mortgage Collateral has been duly
and validly assigned to the Trustee free and clear of any lien,
mortgage, pledge, charge, security interest or other encumbrance that
is prior to the lien of the Indenture, and each Mortgage Certificate
either has been registered in the name of the Trustee, its agent or
nominee or has been delivered to the Trustee for registration in the
name of the Trustee, its agent or nominee.
(b) The Depositor shall also have the right to pledge, under a
Supplement, on any date:
(1) in substitution of one or more items of Mortgage
Collateral directly securing such Series, one or more collateralized
mortgage obligations secured by the same items of Mortgage Collateral;
or
(2) in substitution of one or more collateralized mortgage
obligations pledged to secure such Series and secured by Mortgage
Collateral, a direct pledge of the Mortgage Collateral that secured the
collateralized mortgage obligations provided, however, that in each
case the Trustee shall have received a writing addressed to the Trustee
from each Rating Agency to the effect that such substitution will not
result in the lowering of its then rating of such Series of Bonds.
(c) Notwithstanding any other provision of this Section to the contrary
(i) the Depositor's right to substitute Mortgage Collateral is limited to
substitutions that are made pursuant to the terms of, and that take place within
the time constraints provided in, the Sales Agreement and (ii) any item of
Substitute Mortgage Collateral that is a Mortgage Loan must be a Qualified
Substitute Mortgage Loan.
Section 3.12 Book-Entry Bonds.
If the Series Supplement for a Series so provides, Bonds of the Series
shall be issued initially as a single certificate in the name of a Clearing
Agency maintaining book-entry records with respect to ownership and transfer of
Book-Entry Bonds of such Series, or its nominee. In such case, the Trustee shall
deal with the Clearing Agency and Clearing Agency Participants as
representatives of the Beneficial Owners of Book-Entry Bonds of such Series for
purposes of exercising the rights of Bondholders hereunder, and the rights of
Beneficial Owners with respect to such Book-Entry Bonds shall be limited to
those established by law and agreements between such Beneficial Owners and the
Clearing Agency and Clearing Agency Participants. Beneficial Owners of
Book-Entry Bonds shall not be entitled to certificates for the Book-Entry Bonds
as to which they are the Beneficial Owners. Requests and directions from, and
votes of, such representatives shall not be deemed to be inconsistent if they
are made with respect to different Beneficial Owners. Without the consent of the
Depositor and the Trustee, a Book-Entry Bond may not be transferred by the
Clearing Agency except to another Clearing Agency that agrees to hold the
Book-Entry Bond for the account of the Beneficial Owners.
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ARTICLE FOUR
AUTHENTICATION AND DELIVERY OF BONDS
Section 4.01 General Provisions.
At any time after the execution and delivery of this Indenture, Bonds
of any one or more Series may from time to time be executed by the Depositor and
delivered to the Trustee for authentication and thereupon the same shall be
authenticated and delivered by the Trustee upon Depositor Request and upon
compliance with the conditions of Section 4.02, and upon receipt by the Trustee
of the following:
(1) an Officer's Certificate evidencing the authorization of
the execution, authentication and delivery of the Bonds and specifying
the Series, the Classes within such Series and their respective Stated
Maturities and the principal amounts and Bond Interest Rates of each
Class of such Series of Bonds to be authenticated and delivered;
(2) an Officer's Certificate evidencing the authorization of
the execution, authentication, and delivery of this Indenture;
(3) in case the Bonds to be authenticated and delivered are of
any Series not theretofore created, an appropriate Series Supplement,
accompanied by an Officer's Certificate evidencing the authorization of
such Series Supplement (and, in the case of the first Series to be
authenticated and delivered hereunder, this Indenture), designating the
new Series to be created and prescribing, consistent with the
applicable provisions of this Indenture, the terms and provisions
relating to the Bonds of such Series;
(4) either (i) a certificate or other official document
evidencing the due authorization, approval or consent of any
governmental body or bodies at the time having jurisdiction in the
premises, together with an Opinion of Counsel that the Trustee is
entitled to rely thereon and that the authorization, approval or
consent of no other governmental body is required for the valid
issuance of such Series, or (ii) an Opinion of Counsel that no such
authorization, approval or consent of any governmental body is required
except for such registrations as are required under the Securities Act
of 1933, the TIA, and the "Blue Sky" securities and real estate
syndication laws of any state;
(5) an Opinion of Counsel, dated not earlier than the
Depositor Order, to the effect that:
(a) all instruments furnished to the Trustee in
connection with such Bonds conform in all material respects to
the requirements of this Indenture and the related Series
Supplement and constitute sufficient authority hereunder for
the Trustee to authenticate and deliver the Bonds then applied
for;
(b) all conditions precedent provided for in this
Indenture and the related Series Supplement relating to the
authentication and delivery of the Bonds then applied for have
been complied with, and the Depositor is duly entitled to the
authentication and delivery of such Bonds;
(c) all laws and requirements with respect to the
form and execution by the Depositor of the related Series
Supplement and the execution and delivery by the Depositor of
the Bonds then applied for have been complied with;
(d) the Depositor has corporate power and authority
to execute and deliver the related Series Supplement (and, in
the case of the first Series to be authenticated and delivered
hereunder, this Indenture), and to issue such Bonds and has
duly taken all necessary corporate action for those purposes;
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(e) this Indenture is, and the related Series
Supplement as executed and delivered, and the Bonds then
applied for, when issued, delivered, authenticated and paid
for, will be, the valid, legal and binding obligations of the
Depositor enforceable in accordance with their terms, subject
to bankruptcy, reorganization, insolvency and other laws
affecting the enforcement of creditors' rights generally and
to general principles of equity (regardless whether such
enforceability is considered in a Proceeding in equity or at
law);
(f) the Bonds then applied for, when issued, will be
entitled to the benefits of this Indenture and the related
Series Supplement, equally and ratably with all other Bonds of
a Class of such Series, if any, theretofore issued, delivered,
authenticated and paid for and then Outstanding hereunder;
(g) the amount of Bonds then Outstanding under this
Indenture, including the Bonds then applied for, will not
exceed the amount permitted by law;
(h) this Indenture has been duly qualified under the
Trust Indenture Act and that no qualification of the related
Series Supplement under the Trust Indenture Act is necessary;
(i) the Depositor has the corporate power and
authority to assign, pledge and deposit the Trust Estate with
the Trustee as security for such Series and has duly
authorized such assignment, pledge and deposit with the
Trustee by all necessary corporate action; and
(j) each Mortgage Certificate or Mortgage Loan
constituting part of the Trust Estate for such Series complies
with the requirements therefor in the applicable Series
Supplement, if any, and has been duly and validly assigned to
the Trustee, each Mortgage Certificate either has been
registered in the name of the Trustee, its nominee or agent,
or has been delivered to the Trustee for registration in the
name of the Trustee, its nominee or agent, and all steps
required by the applicable rules of GNMA, Freddie Mac, Fannie
Mae or the issuer of the Other Mortgage Certificates (other
than registration by the applicable transfer agent thereof)
necessary to permit the Mortgage Certificates that constitute
part of the Trust Estate for such Series to be duly and
validly registered in the name of the Trustee, its nominee or
agent, have been taken.
(6) an Officer's Certificate stating that no Default has
occurred and is continuing under this Indenture and that the issuance
of the Bonds applied for will not result in a breach of any of the
terms, conditions or provisions of, or constitute a default under, the
Depositor's certificate of incorporation or bylaws or any indenture,
mortgage, deed of trust or other agreement or instrument to which the
Depositor is a party or by which it is bound, or any order of any court
or administrative agency entered in any Proceeding to which the
Depositor is a party or by which it may be bound or to which it may be
subject, and that all conditions precedent provided in this Indenture
relating to the authentication and delivery of the additional Bonds
applied for have been complied with;
(7) an Accountants' Certificate as follows:
(a) confirming that they have verified the accuracy
of the data contained on the mortgage information listing
prepared by the Depositor with respect to the Mortgage Loans
securing such Series and on the data sheet prepared by the
Depositor for the Mortgage Certificates securing such Series
by comparing a sample of such data to information contained in
Mortgage Loan files furnished by the Depositor and in such
other sources as shall be specified by them in such
certificate; and
(b) confirming the initial Aggregate Collateral Value
for the Mortgage Collateral securing such Series by reference
to such sources as shall be specified by them;
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(8) such other documents as the Trustee may reasonably
require.
Section 4.02 Security for Bonds.
Bonds of a new Series may from, time to time, be executed by the
Depositor and delivered to the Trustee for authentication, and thereupon the
same shall be authenticated and delivered to the Depositor by the Trustee upon
Depositor Order and upon delivery by the Depositor to the Trustee, and receipt
by the Trustee, of the following:
(1) [Reserved].
(2) Assignment of Mortgage Collateral. The assignment of
all of the Depositor's right, title and interest in and to (a) Mortgage
Certificates securing such Series and (b) Mortgage Loans, together with
the related Loan Documents, securing such Series; provided that each
Mortgage Loan satisfies each of the requirements established for
Mortgage Loans in the Series Supplement for such Series. Such Mortgage
Collateral shall have aggregate initial Collateral Values that, when
taken together with the deposit required pursuant to Section 4.02 (12),
are at least equal to the aggregate principal amount of the Bonds of
such Series on the Delivery Date.
(3) Registration of Mortgage Collateral. The Trustee
shall use its best efforts to cause each such Mortgage Certificate to
be registered in the name of the Trustee, its nominee or agent, so that
the Trustee, its nominee or agent, shall be the holder of record
thereof on or before the applicable record date for such Mortgage
Certificates occurring in the month in which the Accrual Date occurs.
In the event the Trustee will not be able to become the holder of
record by such date, the Trustee shall use its best efforts to cause
each such Mortgage Certificate to be registered in the name of the
Trustee, its nominee or agent, on or prior to the applicable record
date of the succeeding month, and the Depositor shall cause a deposit
to be made for such Series in the Collateral Proceeds Account in
accordance with Section 4.02(12).
Notwithstanding any provisions herein to the contrary, the
Trustee or the Depositor shall cause assignments of Mortgage Loans to
the Trustee to be prepared and recorded with respect to all Mortgage
Loans not later than one-hundred twenty (120) calendar days following
the Delivery Date for a Series, which recordation shall be an expense
of the Depositor. For each Mortgage Loan for which an assignment is not
duly and timely recorded as provided above, the Trustee shall cause the
Master Servicer to withdraw the Mortgage Loan from the lien of the
Indenture pursuant to the provisions of Section 12.11 hereof. As
evidence of recordation, the Trustee shall be entitled to rely upon,
among other things, (i) a certification from a title insurance company,
(ii) an Opinion of Counsel, (iii) a recorded assignment or (iv) a
clerk's receipt as to the recordation of any or all of the assignments.
(4) [Reserved].
(5) [Reserved].
(6) Reserve Fund. Evidence of funding of the Reserve
Fund, if any, for such Series in the form of cash, Certificates of
Deposit or Letters of Credit in an amount that will satisfy the
requirements specified in the Series Supplement for such Series.
(7) Other Funds. Evidence of funding of any other funds
for such Series in the form of cash, Certificates of Deposit, Letters
of Credit, insurance policies or such other forms as may be specified
in the related Series Supplement.
(8) Certificate of the Depositor. An Officer's
Certificate from the Depositor, dated as of the date of the Depositor
Order, to the effect that, in the case of each Mortgage Certificate or
Mortgage Loan securing such Series and immediately prior to the
delivery thereof on the Delivery Date for such Series:
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(a) the Depositor is either the owner or the pledgee
of such Mortgage Certificate or Mortgage Loan;
(b) the Depositor has acquired its ownership or
security interest in such Mortgage Collateral in good faith
without notice of any adverse claim;
(c) the Depositor has not assigned any interest or
participation in such Mortgage Collateral (or, if any such
interest or participation has been assigned, it has been
released);
(d) the Depositor has full right to Grant a security
interest in and assign and pledge the Trust Estate to the
Trustee;
(e) the Special Hazard Insurance Policy, if any, is
in effect with respect to such Mortgage Loan;
(f) the Mortgagor Bankruptcy Bond, if any, is in
effect with respect to such Mortgage Loan; and
(g) the information set forth with respect to each
Mortgage Certificate and Mortgage Loan in the Schedule of
Mortgage Collateral for the Bonds of such Series is correct.
(9) Certificate of the Master Servicer. An Officer's
Certificate from the Master Servicer, if any, for such Series, dated as
of the date of the Depositor Order, to the effect that:
(a) no Event of Default by such Master Servicer has
occurred under the Servicing Agreement for such Series;
(b) to the extent required by any Rating Agency
rating the Bonds of such Series, a guaranty of the performance
of certain obligations of such Master Servicer under the
Servicing Agreement has been provided; and
(c) such Master Servicer maintains such errors and
omissions insurance and fidelity bond coverage as is required
by Fannie Mae and Freddie Mac.
(10) Certificates of Insurers. An Officer's Certificate,
dated the date of the Depositor Order, from each Insurer, if any, to
the effect that the Insurance Policy issued by such Insurer, if any, is
in effect, subject to its terms and conditions, with respect to the
Bond of such Series or the Mortgage Collateral securing such Series.
(11) [Reserved].
(12) Deposits to Collateral Proceeds Account. With respect
to each Series unless otherwise provided in the related Series
Supplement, the amount, if any, by which the principal amount of the
Bonds to be issued, plus interest thereon due on the first Payment
Date, exceeds the Collateral Value of the Mortgage Collateral, plus
interest that the Trustee will be entitled to receive on or before the
first Payment Date, in each case determined in accordance with
procedures acceptable to each Rating Agency rating the Bonds at the
request of the Depositor.
(13) [Reserved].
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(14) Mortgagor Bankruptcy Bond, Special Hazard Insurance
Policy and Pool Insurance Policy. Evidence of the execution and
delivery of the Mortgagor Bankruptcy Bond, if any, with respect to such
Series and of the issuance of the Special Hazard Insurance Policy, if
any, and Pool Insurance Policy, if any.
(15) Servicing Agreement. An executed copy of the Servicing
Agreement, if any, with respect to such Series.
(16) Other. Such other documents, certificates, instruments or
opinions as may be required by the terms of the Series Supplement
creating such Series of Bonds.
ARTICLE FIVE
SATISFACTION AND DISCHARGE
Section 5.01 Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect with respect to a
Series except as to (i) rights of registration of transfer and exchange, (ii)
substitution of mutilated, destroyed, lost or stolen Bonds, (iii) the rights of
Bondholders of such Series to receive payments of principal thereof and interest
thereon, (iv) the rights, obligations and immunities of the Trustee hereunder
and (v) the rights of Bondholders of such Series as beneficiaries hereof with
respect to the property so deposited with the Trustee and payable to all or any
of them, and the Trustee, on demand of and at the expense of the Depositor,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture with respect to such Series when:
(1) either:
(a) all Bonds of such Series theretofore
authenticated and delivered (other than (i) Bonds that have
been destroyed, lost or stolen and that have been replaced, or
paid as provided in Section 3.06, and (ii) Bonds for whose
payment money has theretofore been deposited in trust or
segregated and held in trust by the Depositor and thereafter
repaid to the Depositor or discharged from such trust, as
provided in Section 9.03) that have been delivered to the
Trustee for cancellation; or
(b) all Bonds of such Series not theretofore
delivered to the Trustee for cancellation:
(i) have become due and payable; or
(ii) will become due and payable at their
Stated Maturity of their principal within one year;
or
(iii) are to be called for redemption within
one year under an arrangement satisfactory to the
Trustee for the giving of notice of redemption by the
Depositor;
and the Depositor, in the case of (i), (ii) or (iii) of
paragraph (b) above, has irrecoverably deposited or caused to
be deposited with the Trustee, in trust for such purpose, cash
or Eligible Investments in an amount sufficient to pay and
discharge the entire indebtedness on such Bonds not
theretofore delivered to the Trustee for cancellation, for
principal, premium, if any, and interest to the date of such
deposit (in the case of Bonds which have become due and
payable), or to the Maturity or the Redemption Date, and in
the case of Bonds that were not paid at the Stated Maturity
Date of their unpaid principal amount, for all overdue and
other interest payable on such Bonds to the next succeeding
Payment Date therefor; provided, however, that (i), (ii) and
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(iii) of paragraph (b) above shall be inapplicable if an
election to act in accordance with the provisions of Section
6.05 shall have been made and not rescinded;
(2) the Depositor has paid or caused to be paid all other sums
payable hereunder by the Depositor with respect to such Series; and
(3) the Depositor has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel satisfactory in form and
substance to the Trustee, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture with respect to the Bonds of such Series have been complied
with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Depositor to the Trustee under Section 7.07 and of the
Trustee to the Bondholders under Section 5.02 shall survive.
Section 5.02 Application of Trust Money.
All monies deposited with the Trustee pursuant to Section 5.01 shall be
held in trust and applied by it, in accordance with the provisions of the Bonds
of the applicable Series and this Indenture, to the payment of the principal and
interest, either directly or through any Paying Agent, as the Trustee may
determine, to the Person entitled thereto of the principal and interest for
whose payment such money has been deposited with the Trustee; but such money
need not be segregated from other funds except to the extent required herein or
required by law.
ARTICLE SIX
REMEDIES
Section 6.01 Events of Default.
"Event of Default" with respect to any Series shall have the meaning
set forth in the related Series Supplement.
Section 6.02 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to the Bonds of a Series occurs and
is continuing then and in every such case the Trustee or the Holders of not less
than 25% in principal balance of the Outstanding Bonds of such Series (voting as
a group with respect to such Series) may declare the principal of all the Bonds
of such Series affected thereby to be immediately due and payable, by a notice
in writing to the Depositor (and to the Trustee if given by Bondholders), and
upon any such declaration such principal, together with accrued and unpaid
interest thereon to the date of such acceleration, shall become immediately due
and payable. Notwithstanding the foregoing, if an Event of Default with respect
to the Bonds of a Series occurs and is continuing solely as the result of an
order or judgment arising out of a Proceeding, which order or judgment prevents
the application by the Trustee, as provided in this Indenture, of the proceeds
of one or more items of Mortgage Collateral included in the Trust Estate for
such Series, the Trustee shall declare to be immediately due and payable by lot
among all Classes of Bonds of such Series, by notice in writing to the
Depositor, and upon any such declaration there shall become due and payable,
Bonds of such Series in a principal amount equal to the Collateral Values of
such Mortgage Collateral. The Bonds to become so due and payable shall be
allocated by Class among the Series on the basis of the principal amount of
Bonds attributable to such Mortgage Collateral. The Bonds to become so due and
payable will be allocated among Classes within the Series on the basis of the
principal amount of Bonds within each Class attributable to the Mortgage
Collateral sold by the Trustee. Such declarations and any other remedial action
in connection therewith by the Trustee shall be the sole remedy for the Holders
of Bonds of such Series upon the happening of such occurrence.
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At any time after such a declaration of acceleration of Maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the Holders of
a majority in principal balance of the Outstanding Bonds of the Series that has
been declared due and payable as herein provided, by written notice to the
Depositor and the Trustee, may rescind and annul such declaration and its
consequences if:
(1) (a) the Depositor has paid or deposited with the Trustee
a sum sufficient to pay
(i) all overdue installments of interest and
principal on all Bonds of such Series,
(ii) to the extent that payment of such interest is
lawful, interest upon overdue installments of interest on the
Bonds of such Series at the applicable Bond Interest Rates for
such Series, and
(iii) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel; and
(b) all Events of Default with respect to a Series, other
than the non-payment of the interest or principal of Bonds of such
Series that have become due solely by such acceleration, have been cured
or waived as provided in Section 6.15; or
(2) an election is made to act in accordance with the provisions
of Section 6.05 with respect to the Event of Default with respect to the Bonds
of such Series that gave rise to such declaration.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon.
Section 6.03 Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Depositor covenants that if Default is made in the payment of any
principal of or interest on any Bond of any Series, the Depositor will, upon
demand of the Trustee, pay to it, for the benefit of the Holder of such Bond of
such Series, but only from the Trust Estate securing the Bonds of such Series,
the whole amount then due and payable on such Bond for principal and interest,
with interest upon the overdue principal and, to the extent that payments of
such interest shall be legally enforceable, upon overdue installments of
interest, at the Bond Interest Rate for such Bond, and, in addition thereto,
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Depositor fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as Trustee of an express trust, may institute a
Proceeding for the collection of the sums so due and unpaid, and may prosecute
such Proceeding to judgment or final decree, and may enforce the same against
the Depositor or any other obligor upon the Bonds and collect the monies
adjudged or decreed to be payable in the manner provided by law.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Bondholders by such appropriate Proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Trustee by this Indenture or by law. Any
proceedings brought by the Trustee on behalf of the Bondholders or any
Bondholder against the Depositor shall be limited to the preservation,
enforcement and foreclosure of the liens, assignments, rights and security
interests under the Indenture and no attachment, execution or other unit or
process shall be sought, issued or levied upon any assets, properties or funds
of the Depositor, other than the Trust Estate relative to the Bonds in respect
of which such Event of Default has
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occurred. If there is a foreclosure of any such liens, assignments, rights and
security interests under this Indenture, by private power of sale or otherwise,
no judgment for any deficiency upon the indebtedness represented by the Bonds
may be sought or obtained by the Trustee or any Bondholder against the
Depositor. The Trustee shall be entitled to recover the costs and expenses
expended by it pursuant to this Article V including reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
In case there shall be pending Proceedings relative to the Depositor or
any other obligor upon the Bonds under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Depositor or its property or such other obligor or its
property, or in case of any other comparable judicial Proceedings relative to
the Depositor or other obligor upon the Bonds of any Series, or the creditors or
property of the Depositor or such other obligor, the Trustee, regardless whether
the principal of any Bonds shall then be due and payable as therein expressed or
by declaration or otherwise and regardless whether the Trustee shall have made
any demand pursuant to the provisions of this Section 6.03, shall be entitled
and empowered, by intervention in such Proceedings or otherwise:
(a) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of the Bonds of
any Series, and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the Trustee and
each predecessor Trustee, and their respective agents, attorneys and
counsel, and for reimbursement of all expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor
Trustee, except as a result of negligence or bad faith) and of the
Bondholders allowed in any Proceedings relative to the Depositor or
other obligor upon the Bonds of any Series, or to the creditors or
property of the Depositor or such other obligor;
(b) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of the Bonds of any Series in any
election of a trustee or a standby trustee in arrangement,
reorganization, liquidation or other bankruptcy or insolvency
Proceedings or person performing similar functions in comparable
Proceedings; and
(c) to collect and receive any monies or other property
payable or deliverable on any such claims, and to distribute all
amounts received with respect to the claims of the Bondholders and of
the Trustee on their behalf; and any trustee, receiver or liquidator,
custodian or other similar official is hereby authorized by each of the
Bondholders to make payments to the Trustee, and, in the event that the
Trustee shall consent to the making of payments directly to the
Bondholders, to pay to the Trustee such amounts as shall be sufficient
to cover reasonable compensation to the Trustee, each predecessor
Trustee and their respective agents, attorneys and counsel, and all
other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence
or bad faith.
Amounts payable to the Trustee under this section are intended to
constitute administrative expenses. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or vote for or accept or adopt
on behalf of any Bondholder any plan of reorganization, arrangement, adjustment
or composition affecting the Bonds of any Series or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Bondholder in any such Proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar person.
In any Proceedings brought by the Trustee (and also any Proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the Holders
of the Bonds, and it shall not be necessary to make any Holders of the Bonds
parties to any such Proceedings.
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Section 6.04 Remedies.
(a) If an Event of Default with respect to any Series shall have
occurred and be continuing and the Bonds for such Series have been declared due
and payable and such declaration and its consequences have not been rescinded
and annulled, the Trustee may, for the benefit of the Bondholders, do one or
more of the following:
(i) institute Proceedings for the collection of all amounts
then payable on the Bonds of such Series or under this Indenture,
whether by declaration or otherwise, enforce any judgment obtained, and
collect from the Trust Estate securing the Bonds of such Series and
from the Depositor monies adjudged due, subject in all cases to the
provisions of Sections 9.01 and 6.03;
(ii) in accordance with Section 6.18, sell all or a portion
of the Trust Estate securing the Bonds of such Series or rights of
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law;
(iii) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the Trust
Estate securing the Bonds of such Series;
(iv) exercise any remedies of a secured party under the
Uniform Commercial Code and take any other appropriate action to
protect and enforce the rights and remedies of the Trustee or the
Holders of the Bonds of such Series hereunder; and
(v) refrain from selling the Trust Estate and apply all
monies collected pursuant to Section 6.08;
Section 6.05 [Reserved].
Section 6.06 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial Proceeding relative to the Depositor or any other obligor upon the
Bonds of any Series or the property of the Depositor or of such other obligor,
the Trustee (regardless whether the principal of the Bonds of such Series shall
then be due and payable as therein expressed or by declaration or otherwise and
regardless whether the Trustee shall have made any demand on the Depositor for
the payment of overdue principal or interest) shall be entitled and empowered,
by intervention in such Proceeding or otherwise:
(i) to file and prove a claim for the whole amount of
principal and interest owing and unpaid in respect of the Bonds of such
Series and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the Holders of
the Bonds of such Series allowed in such judicial Proceeding; and
(ii) to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, or sequestrator (or other
similar official) in any such judicial Proceeding is hereby authorized by each
Holder of Bonds of such Series to make such payments to the Trustee, and in the
event that the Trustee shall consent to the making of such payments directly to
the Holders of the Bonds of such Series, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07.
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Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of Bonds of
such Series any plan of reorganization, arrangement, adjustment or composition
affecting the Bonds of such Series or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Bondholder in any
such Proceeding.
Section 6.07 Trustee May Enforce Claims Without Possession of Bonds.
All rights of action and claims under this Indenture or the Bonds of
any Series may be prosecuted and enforced by the Trustee without the possession
of any of the Bonds of such Series or the production thereof in any Proceeding
relating thereto, and any such Proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Bonds in respect of which such
judgment has been recovered.
Section 6.08 Application of Money Collected.
Except as provided in Section 6.21, if applicable, any money collected
by the Trustee with respect to the Bonds of any Series pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
or interest, upon presentation of the Bonds of such Series and the notation
thereon of such payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To reimbursement of the Trustee for all expenses associated with
the disposition of all or a portion of the Trust Estate or the exercise of any
of the other remedies set forth in this Article Six;
SECOND: To reimburse the Master Servicer, the Trustee and the Depositor
for advances made with respect to the Mortgage Loans;
THIRD: To the payment of the Bonds;
FOURTH: To reimburse the Reserve Fund, if any, for amounts drawn on it
pursuant to Section 12.15;
FIFTH: To the payment of all amounts due the Trustee under Section
7.07; and
SIXTH: To the Depositor or any other Person legally entitled thereto,
any remaining funds.
Section 6.09 Limitation on Suits.
No Holder of any Bond of a Series shall have any right to institute any
Proceedings, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default in respect of such Series;
(2) the Holders of not less than 25% in principal balance of
the Outstanding Bonds of such Series shall have made written request to
the Trustee to institute Proceedings in respect of such Event of
Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
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(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
Proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal balance of the Outstanding Bonds of such Series;
it being understood and intended that no one or more Holders of Bonds of a
Series shall have any right in any manner whatever by virtue of, or by availing
of, any provision of this Indenture to affect, disturb or prejudice the rights
of any other Holders of Bonds of such Series or to obtain or to seek to obtain
priority or preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all the Holders of Bonds of such Series.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Holders of Bonds, each
representing less than a majority of the then aggregate Outstanding balance of
the Outstanding Bonds of such Series, the Trustee in its sole discretion may
determine what action, if any, shall be taken, notwithstanding any other
provisions of this Indenture.
Section 6.10 Unconditional Rights of Bondholders to Receive Principal and
Interest.
Notwithstanding any other provision in this Indenture other than
Section 3.07(g), and subject to the provisions of the related Series Supplement
and any related Supplement the Holder of any Bond shall have the right, which is
absolute and unconditional, to receive payment of the principal of and interest
on such Bond as such principal and interest become due and payable and to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.
Section 6.11 Restoration of Rights and Remedies.
If the Trustee or any Bondholder has instituted any Proceeding to
enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Bondholder, then and in every such case the Depositor,
the Trustee and the Bondholder shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Bondholders shall continue as though no such Proceeding had been instituted.
Section 6.12 Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee or
to the Bondholder is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 6.13 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Bond to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Bondholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Bondholders, as the
case may be.
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Section 6.14 Control by Bondholders.
The Holders of a majority in principal balance of the Outstanding Bonds
of each Series affected (voting as one Class with respect to each Series) shall
have the right to direct the time, method and place of conducting any Proceeding
for any remedy available to the Trustee with respect to the Bonds of such Series
or exercising any trust or power conferred on the Trustee with respect to such
Series; provided that:
(1) such direction shall not be in conflict with any rule of
law or with this Indenture;
(2) any direction to the Trustee to undertake a sale of the
Trust Estate shall be by the Holders of the Bonds representing the
percentage of the principal balance of the Outstanding Bonds specified
in Section 6.18(b)(1), unless Section 6.18(b)(2) is applicable; and
(3) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction; provided,
however, that, subject to Section 7.01, the Trustee need not take any
action that it determines might involve it in liability or be unjustly
prejudicial to the Bondholders not consenting.
Section 6.15 Waiver of Past Defaults.
The Holders of a majority in principal balance of the Outstanding Bonds
of any Series may on behalf of the Holders of all the Bonds of such Series waive
any past Default with respect to such Series and its consequences, except a
Default:
(1) in the payment of the principal of or interest on any Bond
of such Series unless an election to act in accordance with the
provisions of Section 6.05 shall have been made and not been rescinded;
or
(2) in respect of a covenant or provision hereof that under
Section 10.02 cannot be modified or amended without the consent of the
Holder of each Outstanding Bond affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 6.16 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Bond by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Bondholder, or group of Bondholders,
holding in the aggregate more than 10% in principal balance of the Outstanding
Bonds of a Series, or to any suit instituted by any Bondholder for the
enforcement of the payment of the principal of or interest on any Bond on or
after the Stated Maturity expressed in such Bond (or, in the case of redemption,
on or after the applicable Redemption Date or Special Redemption Date).
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Section 6.17 Waiver of Stay or Extension Laws; Non-Petition.
Each Holder of a Bond shall be deemed to have agreed, by its acceptance
thereof, to not file, or join in filing, any petition in bankruptcy or commence
any similar proceeding in respect of the Depositor for a period of one year and
one day following the payment in full of such Bond.
The Depositor covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Depositor (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
Section 6.18 Sale of Trust Estate.
(a) The power to effect any sale of any portion of the Trust
Estate securing a Series pursuant to Section 6.04 shall not be exhausted by any
one or more Sales as to any portion of such Trust Estate remaining unsold but
shall continue unimpaired until the entire Trust Estate securing the Bonds of
such Series shall have been sold or all amounts payable on the Bonds of such
Series and under this Indenture with respect thereto shall have been paid. The
Trustee may from time to time postpone any Sale by public announcement made at
the time and place of such Sale. The Trustee hereby expressly waives its right
to any amount fixed by law as compensation for any Sale.
(b) To the extent permitted by law, the Trustee shall not in any
private Sale sell or otherwise dispose of the Trust Estate, or any portion
thereof, unless:
(1) the Holders of Bonds representing not less than 50% of the
principal balance of the Outstanding Bonds of any Series consent to or
direct the Trustee to make such Sale; or
(2) the proceeds of such Sale would be not less than the
entire amount that would be payable to the Holders of the Bonds of such
Series, in full payment thereof in accordance with the Series
Supplement for such Series, on the Payment Date next succeeding the
date of such Sale.
The purchase by the Trustee of all or any portion of the Trust
Estate at a private Sale shall not be deemed a Sale or disposition thereof for
purposes of this Section 6.18(b).
(c) Unless the Holders of all Outstanding Bonds of any Series have
otherwise consented or directed the Trustee, at any public Sale of all or any
portion of the Trust Estate at which a minimum bid equal to or greater than the
amount described in paragraph (2) of subsection (b) of this Section 6.18 has not
been established by the Trustee and no Person bids an amount equal to or greater
than such amount, Trustee, acting in its capacity as Trustee on behalf of the
Bondholders, shall prevent such sale and bid an amount (which shall include the
Trustee's right, in its capacity as Trustee, to credit bid) at least $1.00 more
than the highest other bid in order to preserve the Trust Estate on behalf of
the Bondholders.
(d) In connection with a Sale of all or any portion of the Trust
Estate:
(1) any Holder or Holders of Bonds of any Series may bid for
and purchase the property offered for Sale, and upon compliance with
the terms of sale may hold, retain and possess and dispose of such
property, without further accountability, and may, in paying the
purchase money therefor, deliver any Outstanding Bonds or claims for
interest thereon in lieu of cash up to the amount that shall, upon
distribution of the net proceeds of such Sale, be payable thereon, and
such Bonds, in case the amounts so payable thereon shall be less than
the amount due thereon, shall be returned to the Holders thereof after
being appropriately stamped to show such partial payment;
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(2) the Trustee may bid for and acquire the property offered
for Sale in connection with any public Sale thereof, and, in lieu of
paying cash therefor, may make settlement for the purchase price by
crediting the gross Sale price against the sum of (A) the amount that
would be payable to the Holders of the Bonds as a result of such Sale
in accordance with the Series Supplement for such Series on the Payment
Date next succeeding the date of such Sale and (B) the expenses of the
Sale and of any Proceedings in connection therewith which are
reimbursable to it, without being required to produce the Bonds in
order to complete any such Sale or in order for the net Sale price to
be credited against such Bonds, and any property so acquired by the
Trustee shall be held and dealt with by it in accordance with the
provisions of this Indenture;
(3) the Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of
the Trust Estate in connection with a Sale thereof;
(4) the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Depositor to transfer and convey its interest
in any portion of the Trust Estate in connection with a Sale thereof,
and to take all action necessary to effect such Sale; and
(5) no purchaser or transferee at such a Sale shall be bound
to ascertain the Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any moneys.
Section 6.19 Action on Bonds.
The Trustee's right to seek and recover judgment on the Bonds of any
Series or under this Indenture shall not be affected by the seeking or obtaining
of or application for any other relief under or with respect to this Indenture.
Neither the lien of this Indenture nor any rights or remedies of the Trustee or
the Bondholders shall be impaired by the recovery of any judgment by the Trustee
against the Depositor or by the levy of any execution under such judgment upon
any portion of the Trust Estate or upon any of the assets of the Depositor.
Section 6.20 Recourse.
Except as may be otherwise specifically provided in the related Series
Supplement, in the event of a Default on a Series of Bonds, the Holders of the
Bonds of that Series shall have no recourse (i) to the Depositor, (ii) to the
Trust Estate Granted to the Trustee to secure any other Series of Bonds or (iii)
to any other assets of the Depositor that have been pledged to secure debt
obligations of the Depositor other than the debt obligation represented by the
Series.
Section 6.21 Advances by Depositor.
Notwithstanding the provisions of Section 6.20 hereof, the Depositor or
any other Person may at any time advance funds to the Trustee, without the
obligation to do so, for the purpose of allowing the Trustee to make payments on
the Bonds. If the Depositor or other Person makes such an advance, it shall be
entitled to direct the Trustee to withdraw from the Collateral Proceeds Account,
on any Payment Date, the amount so advanced and to pay such amount to the
Depositor or such other Person.
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Section 6.22 Application of the Trust Indenture Act.
Pursuant to Section 316(a) of the TIA, all provisions automatically
provided for in Section 316(a) are hereby expressly excluded.
ARTICLE SEVEN
THE TRUSTEE
Section 7.01 Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not herein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01.
Section 7.02 Notice of Default.
Upon the occurrence of a Default hereunder known to the Trustee with
respect to the Bonds, the Trustee shall give the Holders notice of such Default
as and to the extent provided by the Trust Indenture Act.
Section 7.03 Certain Rights of Trustee.
Except as otherwise provided in Section 7.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Depositor mentioned herein
shall be sufficiently evidenced by a Depositor Request or Depositor
Order and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officer's
Certificate;
(d) as a condition to the taking, suffering or omitting of any
action by it hereunder, the Trustee may consult with counsel, and the
written advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture or to honor the
request or direction of any of the Bondholders pursuant to this
Indenture, unless such Bondholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such
request or direction;
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(f) 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, direction,
consent, order, bond, note or other paper or document, but the Trustee,
in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Depositor,
personally or by agent or attorney;
(g) 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, and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(h) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within
its rights or powers.
Section 7.04 Not Responsible for Recitals or Issuance of Bonds.
The recitals contained herein and in the Bonds, except the certificates
of authentication on the Bonds, shall be taken as the statements of the
Depositor, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representation as to the validity or sufficiency of this
Indenture or of the Bonds. The Trustee shall not be accountable for the use or
application by the Depositor of Bonds or the proceeds thereof or any money paid
to the Depositor or upon Depositor Order pursuant to the provisions hereof.
Section 7.05 May Hold Bonds.
(a) The Trustee, any Paying Agent, any Bond Registrar or any
other agent of the Depositor, in its individual or any other capacity, may
become the owner or pledgee of Bonds and, subject to Sections 7.08 and 7.13,
may otherwise deal with the Depositor with the same rights it would have if it
were not Trustee, Paying Agent, Bond Registrar or such other agent.
(b) The Trustee or one or more of its Affiliates may enter
into one or more custodial agreements with one or more Master Servicers of the
GNMA Certificates, as issuers of the GNMA Certificates, or one or more Master
Servicers of the Freddie Mac Certificates or Fannie Mae Certificates or to act
as custodian or agent of the documents evidencing and relating to the Mortgage
Loans that are grouped or pooled under one or more guaranty agreements or
Servicing Agreements between any such Master Servicer and GNMA, Freddie Mac or
Fannie Mae and with respect to which Mortgage Certificates are issued; and the
Trustee further may, from time to time, be the depository of custodial accounts
with respect to one or more of such Mortgage groups or pools of Mortgage Loans.
It is expressly recognized and agreed by all parties hereto, and each Holder of
a Bond by acceptance thereof shall be deemed to have agreed, that, in the Event
of Default under one or more Servicing Agreements, the Trustee, or one or more
of its Affiliates, as custodian of one or more groups or pools of Mortgage Loans
or accounts related thereto, may be obliged to comply with the directions of
GNMA, Freddie Mac or Fannie Mae regarding the property in its possession and, to
the extent that such actions are consistent with the directions of GNMA, Freddie
Mac or Fannie Mae, they shall not be, or be deemed to be, inconsistent or in
conflict with the duties, responsibilities and interests of the Trustee
hereunder.
(c) The Trustee, or one or more of its Affiliates, may enter into
one or more custodial agreements with one or more Master Servicers of the
Mortgage Loans or other persons acceptable to the Depositor and the Rating
Agency, to act as custodian of the Loan Documents; and the Trustee further may,
from time to time, be the depository of custodial accounts with respect to such
Loan Documents. It is expressly recognized and agreed by all parties hereto,
and each Holder of a Bond by acceptance thereof shall be deemed to have agreed,
that, in the Event of Default under one or more Servicing Agreements, the
Trustee, or one or more of its Affiliates, as custodian of the Loan Documents
or accounts related thereto, may be obliged to comply with the directions of
the Master Servicer regarding the property in its possession and, to the extent
that such actions are consistent with the
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directions of the Master Servicer, they shall not be, or be deemed to be,
inconsistent or in conflict with the duties, responsibilities and interests of
the Trustee hereunder.
Section 7.06 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds held by the Trustee in trust hereunder except to the extent
required by this Indenture or by law. The Trustee shall be under no liability
for interest on any money received by it hereunder except as otherwise agreed
upon by the Depositor and except to the extent of income or other gain on
investments that are obligations of the Trustee, in its commercial capacity, and
income or other gain actually received by the Trustee on investments, which are
obligations of others.
Section 7.07 Compensation and Reimbursement.
The Depositor agrees:
(1) to pay the Trustee, from time to time, reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents, including its attorneys, except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith); and
(3) to indemnify the Trustee and any director, officer,
employee or agent of the Trustee for any loss, liability or expense
(including costs and expenses of litigation, and of investigation,
counsel fees, damages, judgments and amounts paid in settlement)
incurred in connection with the Trustee's (i) enforcing its rights and
remedies and protecting the interests, and enforcing the rights and
remedies, of the Bondholders during the continuance of an Event of
Default, (ii) defending or prosecuting any legal action in respect of
this Indenture or the Bonds, (iii) being the mortgagee of record with
respect to the Mortgage Loans and the owner of record with respect to
any Mortgaged Property acquired in respect thereof for the benefit of
Bondholders, or (iv) acting or refraining from acting in good faith at
the direction of the holders of the related Series of Bonds entitled to
not less than 25% of the Voting Rights for such Series; provided,
however, that such indemnification will not extend to any loss,
liability or expense that constitutes a specific liability of the
Trustee pursuant to this Indenture, or to any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or
negligence on the part of the Trustee in the performance of its
obligations and duties hereunder, or by reason of its reckless
disregard of such obligations or duties, or as may arise from a breach
of any representation, warranty or covenant of the Trustee made herein.
To secure the Trustee's right to receive amounts pursuant to this
Section 7.07, the Trustee shall have a lien against the Trust Estate, which lien
shall at all times be subordinate to the lien in favor of the Bondholders. The
Trustee hereby agrees not to cause the filing of a petition in bankruptcy
against the Depositor for the non-payment to the Trustee of any amounts provided
by this Section 7.07 until at least 91 days after the payment in full of all
Bonds issued under this Indenture.
Section 7.08 Disqualification.
Irrespective of whether this Indenture is qualified under the TIA, this
Indenture shall always have a Trustee who satisfies the requirements of TIA
Sections 310(a)(1) and 310(a)(5). The Trustee shall always have a combined
capital and surplus as stated in Section 7.09. The Trustee shall be subject to
TIA Section 310(b).
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Section 7.09 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder that shall (a)(i) be a
corporation organized and doing business under the laws of the United States of
America or of any State, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, or (ii)
be a member of a bank holding system, having a combined capital and surplus of
at least $50,000,000, provided that the Trustee's separate capital and surplus
shall at all times be at least the amount specified in Section 310(a)(2) of the
TIA, (b) be subject to supervision or examination by federal or state authority
and (c) have an office within the United States of America. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, 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. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the affect hereinafter specified in
this Article.
Section 7.10 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 7.11.
(b) The Trustee may resign at any time with respect to one or
more Series of Bonds by giving written notice thereof to the Depositor. If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee for any Series may be removed at any time by Act
of the Holders of a majority in principal amount of the Outstanding Bonds of
such Series, delivered to the Trustee and to the Depositor. The Trustee for any
Series may be removed at any time by the Depositor provided that the Depositor
receives confirmation that the appointment of the successor Trustee will not
result in the lowering of the rating of that Series of Bonds.
(d) If at any time:
(1) the Trustee shall have a conflicting interest prohibited
by Section 7.08 with respect to any Series of Bonds and shall fail to
resign or eliminate such conflicting interest in accordance with
Section 7.08 after written request therefor by the Depositor or by any
Bondholder who has been a bona fide Holder of a Bond for at least six
months; or
(2) the Trustee shall cease to be eligible under Section 7.09
and shall fail to resign after written request therefor by the
Depositor or by any such Bondholder; or
(3) the Trustee shall become incapable of acting with respect
to any Series of Bonds or shall be adjudged a bankrupt or insolvent or
a receiver or liquidator of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, (i) the Depositor by a Board Resolution may remove the
Trustee, and the Depositor shall join with the Trustee in the execution,
delivery and performance of all instruments and agreements necessary or proper
to appoint a successor Trustee and to vest in such successor Trustee any
property, title, right or power deemed necessary or desirable, subject to the
other provisions of this Indenture; provided, however, if the Depositor does not
make such appointment within fifteen (15) days after the receipt by it of a
request to do so, or in case an Event of Default has occurred and is continuing,
the Trustee may petition a court of competent jurisdiction to make such
appointment, or (ii) subject to Section 6.16, and, in the case of a conflicting
interest as described in clause (1) above, unless the Trustee's duty to resign
has been stayed as provided in TIA Section 310(b), any Bondholder who has been a
bona fide Holder of a Bond for at least six months may, on behalf of himself and
all others similarly
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situated, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
the Depositor, by a Board Resolution, shall promptly appoint a successor
Trustee. If within one year after such resignation, removal or incapability or
the occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in principal balance of the Outstanding Bonds of that
Series delivered to the Depositor and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment,
become the successor Trustee and supersede the successor Trustee appointed by
the Depositor. If no successor Trustee shall have been so appointed by the
Depositor or the Bondholders and shall have accepted appointment in the manner
hereinafter provided, any Bondholder who has been a bona fide Holder of a Bond
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Depositor shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of the applicable Series of Bonds as their names and addresses appear in
the Bond Register. Each notice shall include the name of the successor Trustee
and the address of its Corporate Trust Office.
Section 7.11 Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Depositor and the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee with respect to all or any applicable Series shall become effective, and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts, duties and obligations with
respect to such Series of the retiring Trustee; but, on request of the Depositor
or the successor Trustee, such retiring Trustee shall, upon payment of its
charges then unpaid, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder, subject nevertheless to its
lien, if any, provided for in Section 7.07. Upon request of any such successor
Trustee, the Depositor shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
If a successor Trustee is appointed with respect to the Bonds of one or
more (but not all) Series, the Depositor, the predecessor Trustee and each
successor Trustee with respect to the Bonds of any applicable Series shall
execute and deliver an agreement supplemental hereto which shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the predecessor Trustee with respect to the
Bonds of any Series as to which the predecessor Trustee is not retiring shall
continue to be vested in the predecessor Trustee, and shall add to or change any
of the provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one Trustee,
it being understood that nothing herein or in such supplemental agreement shall
constitute such Trustees co-Trustees of the same trust and that each such
Trustee shall be a Trustee of a trust or trusts under separate indentures.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article and the Trustee or an Affiliate of the Trustee shall be approved by
Fannie Mae or Freddie Mac as a seller-servicer of Mortgage Loans.
Section 7.12 Merger, Conversion, Consolidation or Succession to Business 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 such corporation shall be otherwise qualified and eligible under this
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Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Bonds have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Bonds so authenticated with the same effect as if
such successor Trustee had itself authenticated such Bonds.
Section 7.13 Preferential Collection of Claims Against Depositor.
The Trustee (and any co-trustee or separate trustee) shall be subject
to TIA Section 311(a), excluding any creditor relationship listed in TIA Section
311(b), and a Trustee (and any co-trustee or separate trustee) who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
Section 7.14 Co-Trustees and Separate Trustees.
At any time or times, for the purpose of meeting the legal requirements
of the TIA or of any jurisdiction in which any of the Trust Estate may at the
time be located, the Depositor shall have power to appoint, and upon the written
request of the Trustee or of the Holders of Bonds representing more than 50% of
the principal balance of the Outstanding Bonds with respect to which a
co-trustee or separate trustee is being appointed, the Depositor shall for such
purpose join with the Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to appoint one or more Persons
approved by the Trustee either to act as co-trustee, jointly with the Trustee,
of all or any part of the Trust Estate, or to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section. If the Depositor does not join
in such appointment within 15 days after the receipt by it of a request to do
so, or in case an Event of Default has occurred and is continuing, the Trustee
alone shall have power to make such appointment. All fees and expenses of any
co-trustee or separate trustee shall be payable by the Depositor.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms:
(1) The Bonds shall be authenticated and delivered and all
rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Trustee hereunder, shall
be exercised, solely by the Trustee.
(2) The rights, powers, duties and obligations hereby
conferred or imposed upon the Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon and
exercised or performed by the Trustee or by the Trustee and such
co-trustee or separate trustee jointly, as shall be provided in the
instrument appointing such co-trustee or separate trustee, except to
the extent that under any law of any jurisdiction in which any
particular act is to be performed, the Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers,
duties and obligations shall be exercised and performed by such
co-trustee or separate trustee.
(3) The Trustee at any time, by an instrument in writing
executed by it, with the concurrence of the Depositor evidenced by a
Depositor Order, may accept the resignation of or remove any co-trustee
or separate trustee appointed under this Section, and, in case an Event
of Default has occurred and is continuing, the Trustee shall have power
to accept the resignation of, or remove, any such co-trustee or
separate trustee without the concurrence of the Depositor upon the
written request of the Trustee, the Depositor shall join with the
Trustee in the execution, delivery and performance of all instruments
and
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agreements necessary or proper to effectuate such resignation or
removal. A successor to any co-trustee or separate trustee so resigned
or removed may be appointed in the manner provided in this Section.
(4) No co-trustee or separate Trustee hereunder shall be
personally liable by reason of any act or omission of the Trustee, or
any other such trustee hereunder.
(5) Any Act of Bondholders delivered to the Trustee shall be
deemed to have been delivered to each such co-trustee and separate
trustee.
Section 7.15 Review of Mortgage Files.
(a) Initial Certification. The Indenture Trustee shall, for
the benefit of the Bondholders, review each Trustee Mortgage Loan File
prior to the Closing Date to ascertain that all documents required to
be included in the Trustee Mortgage Loan File are included therein, and
shall deliver to the Seller and the Master Servicer on the Closing Date
an Initial Certification in the form attached hereto as Exhibit A-1
with respect to each Mortgage Loan to the effect that, except as
specifically noted on a schedule of exceptions thereto, (A) all
documents required to be contained in the Trustee Mortgage Loan File
are in its possession, (B) such documents have been reviewed by it and
appear regular on their face and relate to such Mortgage Loan, and (C)
based on its examination and only as to the foregoing documents, the
information set forth on the related Mortgage Loan schedule accurately
reflects information set forth in the Trustee Mortgage Loan File.
It is understood that before making the Initial Certification,
the Security Instrument Trustee shall examine the related Mortgage Loan
Documents to confirm that:
(1) each Note and Security Instrument bears an
original signature or signatures purporting to be that of the
Person or Persons named as the maker and mortgagor/trustor or,
if photocopies are permitted, that such copies bear a
reproduction of such signature or signatures;
(2) except for the endorsement to the Trustee,
neither the Security Instrument nor any Assignment, on the
face or the reverse side(s) thereof, contains evidence of any
unsatisfied claims, liens, security interests, encumbrances or
restrictions on transfer;
(3) the principal amount of the indebtedness secured
by the related Security Instrument is identical to the
original principal amount of the related Note;
(4) the Assignment of the related Security Instrument
from the Seller to the Trustee bears an original signature of
the Seller and any other necessary party (or signatures
purporting to be that of the Seller and any such other party)
or, if photocopies are permitted, that such copies bear a
reproduction of such signature or signatures;
(5) if intervening Assignments are included in the
Trustee Mortgage Loan File, each such intervening Assignment
bears an original signature of the related mortgagee and/or
the assignee (and any other necessary party) (or signatures
purporting to be that of each such party) or, if photocopies
are permitted, that such copies bear a reproduction of such
signature or signatures;
(6) if either a Title Insurance Policy, a preliminary
title report or a written commitment to issue a Title
Insurance Policy is delivered, the address of the real
property set forth in such policy, report or written
commitment is identical to the real property address contained
in the related Security Instrument; and
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(7) if any of a Title Insurance Policy, certificate
of title insurance or a written commitment to issue a Title
Insurance Policy is delivered, such policy, certificate or
written commitment is for an amount not less than the original
principal amount of the related Note and such title insurance
policy insures that the related Security Instrument creates a
first lien, senior in priority to all other deeds of trust,
mortgages, deeds to secure debt, financing statements and
security agreements and to any mechanics' liens, judgment
liens or writs of attachment (or if the title insurance policy
or certificate of title insurance has not been issued, the
written commitment for such insurance obligates the insurer to
issue such policy for an amount not less than the original
principal amount of the related Note).
(b) Final Certification. On or before one year following the
Closing Date, the Trustee shall deliver to the Seller and the Master
Servicer a Final Certification in the form attached hereto as Exhibit
A-2 evidencing the completeness of the Trustee Mortgage Loan File for
each Mortgage Loan, except as specifically noted on a schedule of
exceptions thereto.
(c) Certification Generally. In giving each of the Initial
Certification and the Final Certification, the Trustee shall be under
no duty or obligation (1) to inspect, review or examine any such
documents, instruments, securities or other papers to determine that
they or the signatures thereto are genuine, enforceable, or appropriate
for the represented purpose or that they have actually been recorded or
that they are other than what they purport to be on their face or (2)
to determine whether any Trustee Mortgage Loan File should include a
flood insurance policy, any rider, addenda, surety or guaranty
agreement, power of attorney, buy down agreement, assumption agreement,
modification agreement, written assurance or substitution agreement.
(d) Recordation Report. No later than the fifth Business Day
of each third month, the Trustee shall deliver to the Master Servicer a
recordation report dated as of the first day of such month, identifying
those Mortgage Loans for which it has not yet received (1) an original
recorded Security Instrument or a copy thereof certified to be true and
correct by the public recording office in possession of such Security
Instrument or (2) an original recorded Assignment of the Security
Instrument to the Trustee and any required intervening Assignments or a
copy thereof certified to be a true and correct copy by the public
recording office in possession of such Assignment.
Section 7.16 Trustee Fees and Expenses.
The Trustee shall be entitled to receive the Trustee Fee on each
Payment Date as provided herein. The Trustee also shall be entitled, pursuant to
the provisions of Section 6.05 of the Servicing Agreement, to (i) payment of or
reimbursement for expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Indenture (including
but not limited to the reasonable compensation and the expenses and
disbursements of its counsel and of all persons not regularly in its employ) as
provided in the Servicing Agreement, and (ii) indemnification against losses,
liability and expenses, including reasonable attorney's fees, incurred, arising
out of or in connection with this Indenture and the Bonds as provided in the
Servicing Agreement.
ARTICLE EIGHT
BONDHOLDERS' LIST AND REPORTS BY TRUSTEE AND DEPOSITOR
Section 8.01 Depositor to Furnish Trustee Names and Addresses of
Bondholders.
(a) The Depositor shall furnish or cause to be furnished to the
Trustee (i) semi-annually, not less than 45 days nor more than 60 days after
each Record Date with respect to each Series of Bonds, all information in the
possession or control of the Depositor, in such form as the Trustee may
reasonably require, as to names and addresses of the Holders of Bonds as of
such Record Date, and (ii) at such other times, as the Trustee may request
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in writing, within 30 days after receipt by the Depositor of any such request, a
list of similar form and content as of a date not more than 10 days prior to the
time such list is furnished; provided, however, that so long as the Trustee is
the Bond Registrar, no such list shall be required to be furnished.
(b) In addition to furnishing to the Trustee the Bondholder lists, if
any, required under subsection (a), the Depositor shall also furnish all
Bondholder lists, if any, required under Section 9.03 at the times required by
Section 9.03.
Section 8.02 Preservation of Information; Communications to Bondholders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of certificated Bonds of a
Series contained in the most recent list furnished to the Trustee as provided in
Section 8.01 and the names and addresses of the Holders of certificated Bonds of
a Series received by the Trustee in its capacity as Bond Registrar. The Trustee
may destroy any list furnished to it as provided in Section 8.01 upon receipt of
a new list so furnished.
(b) Bondholders may communicate pursuant to TIA Section 312(6) with
other Bondholders with respect to their rights under this Indenture or under the
Bonds.
(c) The Depositor, the Trustee, and the Bond Registrar shall have the
protection of TIA Section 312(c).
Section 8.03 Reports by Trustee.
(a) Within 60 days after December 31 of each year commencing in the
year after the issuance of Bonds, the Trustee shall, if required by Section
313(a) of the Trust Indenture Act, transmit by mail to all Holders of Bonds of
each Series, as their names and addresses appear in the Bond Register for such
Series, a brief report dated as of December 31 (each a "Reporting Date") with
respect to the matters set forth therein.
(b) The Trustee shall transmit by mail to all Holders of Bonds of a
Series, as their names and addresses appear in the Bond Register for such Series
of Bonds, a brief report in accordance with Section 313(b) of the Trust
Indenture Act.
(c) A copy of each such report shall, at the time of such transmission
to the Holders of Bonds of such Series, be filed by the Trustee with each
securities exchange upon which the Bonds of such Series are listed, and also
with the Commission. The Depositor will notify the Trustee when the Bonds of any
Series are listed on any securities exchange.
(d) The Trustee shall transmit by mail to each Holder of certificated
Bonds of a Series, together with each check representing payment of principal
and/or interest on the Bonds of such Series, a report with respect to the
principal balance of the Bonds of such Series held by each Holder of Bonds of
such Series as of the immediately preceding Payment Date and the amount of
principal, interest and premium, if any, paid with respect to the Bonds of such
Series held by such Holder of Bonds of such Series since the immediately
preceding Payment Date.
(e) For Book-Entry Bonds, the Trustee shall provide an adequate number
of copies of its reports in order for the Clearing Agency and Clearing Agency
Participants to provide copies to Beneficial Owners.
(f) The Depositor shall supply to the Trustee at least fifteen calendar
days prior to any applicable filing date prescribed by law or Internal Revenue
Service regulation, and the Trustee, as agent for the Depositor, shall transmit
by mail to each Holder of Bonds, as his name and address appears in the Bond
Register, and to the Internal Revenue Service, within the time limits prescribed
by law, the amount of interest and original issue discount (which original issue
discount shall be calculated by the Depositor), if any, paid or accrued with
respect to Bonds held by such Bondholder.
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(g) As required by the Code or the Treasury regulations
thereunder, the Master Servicer shall supply to the Trustee and the Trustee, as
agent for the Master Servicer, shall transmit by mail to each Bondholder
appropriate tax accounting information, and any other tax accounting information
that a Bondholder reasonably requests, to enable it to prepare its tax returns.
Section 8.04 Reports by Depositor.
The Depositor shall file with the Trustee, within 15 days after the
Depositor is required to file the same with the Commission, copies of the annual
reports and of the information, documents, and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and regulations
prescribe) that the Depositor is required to file with the Commission pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended. The
Depositor shall also comply with the other provisions of TIA Section 314(a).
ARTICLE NINE
COVENANTS OF DEPOSITOR
Section 9.01 Payment of Principal and Interest.
The Depositor will pay or cause to be duly and punctually paid the
principal of, and interest on, the Bonds of each Series in accordance with the
terms of the Bonds and this Indenture solely, except to the extent provided in
Section 6.21, from proceeds of the Trust Estate for such Series Granted
hereunder and under the related Series Supplement and from such assets as may at
any time be pledged to secure payment of the Bonds, and the Depositor shall not
otherwise be liable for payment on the Bonds. No person shall be personally
liable for any amounts payable under the Bonds. If any other provision of this
Indenture conflicts or is deemed to conflict with the provisions of this Section
9.01, the provisions of this Section 9.01 shall control.
Section 9.02 Maintenance of Office or Agency.
The Depositor will maintain an office or agency within the United
States of America where certificated Bonds may be presented or surrendered for
payment, where certificated Bonds may be surrendered for registration of
transfer or exchange, and where notices and demands to or upon the Depositor in
respect of the Bonds and this Indenture may be served. The Depositor hereby
initially appoints the Trustee such office or agency. The Depositor will give
prompt written notice to the Trustee of the location, and of any change in the
location, of any such office or agency. If at any time the Depositor shall fail
to maintain any such office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands may be
made or served at the Corporate Trust Office, and the Depositor hereby appoints
the Trustee at its Corporate Trust Office as its agent to receive all such
presentations, surrenders, notices and demands.
Section 9.03 Money for Bond Payments to Be Held in Trust.
If the Depositor shall at any time act as its own Paying Agent, it
will, on or before each Payment Date, Redemption Date or Special Redemption Date
for a Series of Bonds, segregate and hold in trust for the benefit of the Person
entitled thereto a sum sufficient to pay the principal or interest so becoming
due until such sums shall be paid to such Persons or otherwise disposed of as
herein provided, and will promptly notify the Trustee of its action or failure
so to act.
Whenever the Depositor shall have one or more Paying Agents, the
Trustee will, on or before each Payment Date, Redemption Date or Special
Redemption Date for a Series of Bonds, deposit with such Paying Agent cash,
Certificates of Deposit or a Letter of Credit in an amount sufficient to pay the
principal or interest so becoming due (to the extent funds are then available
for such purposes), such sum to be held in trust for the benefit
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of the Persons entitled to such principal or interest, and (unless such Paying
Agent is the Trustee) the Depositor will promptly notify the Trustee of its
action or failure so to act.
The Depositor will cause each Paying Agent, other than the Trustee, to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of principal of
or interest on the Bonds in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(2) give the Trustee notice of any Default by the Depositor
(or any other obligor upon the Bonds) in the making of any payment of
principal or interest; and
(3) at any time during the continuance of any such Default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Depositor may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Depositor Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Depositor or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Depositor or such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Depositor, in trust for the payment of the principal of or interest on
any Bond and remaining unclaimed for two and one-half years after such principal
or interest has become due and payable to the Holder of such Bond (or if
earlier, three months before the date on which such amount would escheat to a
governmental entity under applicable law) shall be discharged from such trust
and paid to the Depositor; and the Holder of such Bond shall thereafter, as an
unsecured general creditor, look only to the Depositor for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money (but only to the extent of the amounts so paid to the Depositor), and all
liability of the Depositor as trustee thereof, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such release of payment, may at the expense of the Depositor cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in New York, New York
and in the city in which the Corporate Trust Office is located, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Depositor. The
Trustee may adopt and employ, at the expense of the Depositor, any reasonable
means of notification of such release of payment (including, but not limited to,
mailing notice of such release to Holders whose Bonds have been called but have
not been surrendered for redemption or whose right to or interest in monies due
and payable but not claimed is determinable from the records of the Trustee or
any Paying Agent, at the last address of record of each such Holder).
Section 9.04 Corporate Existence.
The Depositor will keep in full effect its existence, rights and
franchises as a corporation under the laws of the State of Delaware (unless it
becomes incorporated under the laws of any other state or the United States of
America in which case the Depositor will keep in full effect its existence,
rights and franchises as a corporation under the laws of such other
jurisdiction) and will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of this Indenture and
the Bonds.
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Section 9.05 Protection of Trust Estate.
(a) The Depositor will from time to time execute and deliver all
such supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
and will take such other action as the Trustee deems necessary or advisable to:
(i) grant more effectively all or any portion of the Trust
Estate for a Series;
(ii) maintain or preserve the lien (and the priority thereof)
of this Indenture or to carry out more effectively the purposes hereof;
(iii) perfect, publish notice of, or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any of the Loan Documents, GNMA Certificates,
Freddie Mac Certificates, Fannie Mae Certificates or Other Mortgage
Certificates; or
(v) preserve and defend title to the Trust Estate securing a
Series and the rights therein of the Trustee and the Holders of Bonds
of such Series secured thereby against the claims of all persons and
parties.
(b) The Trustee shall not remove any portion of the Trust Estate
that consists of money or is evidenced by an instrument, certificate or other
writing from the jurisdiction in which it was held at the date of the most
recent Opinion of Counsel delivered pursuant to Section 9.06 (or from the
jurisdiction in which it was held, or to which it is intended to be removed,
as described in the Opinion of Counsel delivered at the Closing Date pursuant
to the Series Supplement, if no Opinion of Counsel has yet been delivered
pursuant to Section 9.06) or cause or permit ownership or the pledge of any
portion of the Trust Estate that consists of book-entry securities to be
recorded on the books of a Person located in a different jurisdiction from the
jurisdiction in which such ownership or pledge was recorded at such time unless
the Trustee shall have first received an Opinion of Counsel to the effect that
the lien and security interest created by this Indenture with respect to such
property will continue to be maintained after giving effect to such action or
actions.
(c) The Depositor hereby designates the Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Trustee pursuant to this Section 9.05.
(d) The Depositor shall pay or cause to be paid any taxes levied
on the account of the beneficial ownership by the Depositor or an Affiliate of
the Depositor of Mortgage Collateral that secures a Series of Bonds.
Section 9.06 Opinions as to Trust Estate.
(a) The Depositor shall deliver to the Trustee, by the first day
of the fifth month following the Delivery Date for each Series, one of the
following: (i) an Opinion of Counsel reasonably satisfactory in form and
substance to the Trustee stating that, in the opinion of such counsel, such
action has been taken with respect to the recording and filing of this
Indenture, any indentures supplemental hereto and any other requisite document
as is necessary to make effective the lien and security interest of this
Indenture with respect to the Trust Estate for such Series and reciting the
details of such action; or (ii) an Opinion of Counsel stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective; or (iii) with respect to each Mortgage Loan
pledged to secure a Series, a certificate of the Depositor in a form acceptable
to the Trustee (a "Certificate of Nonrecordation") to the effect that (A) the
Trustee has received all scheduled payments of principal and interest on such
Mortgage Loan, and (B) recordation of the Trustee's interest in such Mortgage
Loan is not yet practicable because the applicable local recording office has
been unable to provide the Master Servicer or the Depositor with all the
information necessary to record the assignment of the Mortgage Loan to the
Trustee, or because of another administrative matter beyond the reasonable
control of the Master Servicer or the Depositor.
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With respect to each Mortgage Loan as to which the Depositor delivers a
Certificate of Nonrecordation, the Depositor shall, by the first day of the
following month, deliver an Opinion of Counsel meeting the requirements of
either of clauses (i) or (ii) above or another Certificate of Nonrecordation.
With respect to each Mortgage Loan pledged to secure a Series, the
Depositor shall, by the first day of the twelfth month following the Delivery
Date for such Series, deliver an Opinion of Counsel meeting the requirements of
either of clauses (i) or (ii) above or require the Master Servicer to withdraw
such Mortgage Loan from the lien of this Indenture pursuant to Section 12.11.
(b) On or before June 15 of each calendar year (commencing in the year
following the Delivery Date for a Series) the Depositor shall furnish to the
Trustee an Opinion of Counsel meeting the requirements of either of clauses (i)
or (ii) of subsection (a) above (except with respect to any Mortgage Loan as to
which a Certificate of Nonrecordation has been delivered by the Depositor by the
first day of June). Such Opinion of Counsel shall include a description of any
recording, filing, re-recording and refiling of this Indenture, any indentures
supplemental hereto and any other requisite documents that will, in the opinion
of such counsel, be required to maintain the lien and security interest of this
Indenture with respect to the Trust Estate for such Series until June 15 of the
following calendar year.
Section 9.07 Performance of Obligations; Servicing Agreement.
(a) The Depositor shall punctually perform and observe all of its
obligations under this Indenture and the Servicing Agreement with respect to
each Series.
(b) The Depositor shall not take any action, and will use its Best
Efforts not to permit any action to be taken by others, that would release any
Person from any of such Person's covenants or obligations under any of the Loan
Documents or under any instrument included in the Trust Estate for a Series, or
that would result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any of the Loan
Documents or any such instrument with respect to such Series, except as
expressly permitted in this Indenture, the Servicing Agreement or such Loan
Document for such Series or other instrument or unless such action will not
adversely affect the interests of the Holders of the Bonds of such Series.
(c) If the Depositor shall have knowledge of the occurrence of a
default under the Servicing Agreement, the Depositor shall promptly notify the
Trustee and the Rating Agencies thereof, and shall specify in such notice the
action, if any, the Depositor is taking with respect to such default.
(d) Upon any termination of the Servicer's rights and powers pursuant
to the Servicing Agreement, the Trustee shall promptly notify the Rating
Agencies. As soon as any successor Servicer is appointed, the Trustee shall
notify the Rating Agencies, specifying in such notice the name and address of
such successor Servicer.
Section 9.08 Negative Covenants.
(a) The Depositor will not:
(1) sell, transfer, exchange or otherwise dispose of any part
of the Trust Estate for a Series except as expressly permitted by this
Indenture or a related Series Supplement; or
(2) claim any credit on, or make any deduction from, the
principal, premium, if any, or interest payable in respect of the Bonds
of a Series by reason of the payment of any taxes levied or assessed
upon any portion of the Trust Estate for such Series.
(b) Notwithstanding paragraph (a) hereof, the Depositor may sell,
transfer, exchange or otherwise dispose of its interest in the Mortgage
Collateral securing any Series of Bonds to a Limited Purpose Entity provided
that:
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(1) all right, title and interest so transferred shall be
subject and subordinate to the rights of the Holders of the Series of
Bonds secured by such Mortgage Collateral;
(2) the transferee agrees in writing that, with respect to the
Mortgage Collateral in which it has acquired an interest from the
Depositor, it will assume the Depositor's obligations pursuant to
Section 9.05 of the Indenture and will designate the Trustee as it
agent and attorney-in-fact for the execution of any financing
statement, continuation statement, or other instrument required by the
Trustee pursuant to Section 9.05; and
(3) the transferee agrees in writing that it will not
subsequently transfer its interest in the Mortgage Collateral pledged
to secure a Series of Bonds, except in accordance with this Section
9.08.
(c) Notwithstanding paragraph (a) hereof or any other provision
of this Indenture, the Depositor may pledge its interest in the Collateral
securing any Series of Bonds to secure another Series of Bonds if:
(1) such pledge is permitted by the terms of the Supplemental
Indenture creating the earlier Series of Bonds; and
(2) each Rating Agency rating the earlier Series of Bonds
confirms in a writing delivered to the Trustee that such subsequent
pledge will not result in the withdrawal or downgrading of the rating
it assigns to any Outstanding Series of Bonds.
Section 9.09 Statement as to Compliance.
The Depositor will deliver to the Trustee, within 120 days after the
end of each fiscal year of the Depositor (commencing with the fiscal year ending
on December 31, 1998), a written statement signed by the Chairman or the
President or a Vice President and by any other Officer of the Depositor,
stating, as to each signer thereof, that:
(1) a review of the fulfillment of the Depositor during such
year and of its obligations under this Indenture has been made under
such Officer's supervision; and
(2) to the best of such Officer's knowledge, based on such
review, the Depositor complied with all conditions and covenants under
this Indenture throughout such year, or if there has been a Default in
the fulfillment of any such covenant or condition, specifying each such
Default known to such Officer and the nature and status thereof.
Section 9.10 Depositor May Consolidate, Etc., Only on Certain Terms.
The Depositor shall not consolidate or merge with or into any other
Person or convey or transfer its properties and assets substantially as an
entirety to any Person unless:
(1) the Person (if other than the Depositor) formed by or
surviving such consolidation or merger or that acquires by conveyance
or transfer the properties and assets of the Depositor substantially as
an entirety shall be a Limited Purpose Entity and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to
the Trustee, in form satisfactory to the Trustee, the due and punctual
payment of the principal of and interest on all Bonds and the
performance of every covenant of this Indenture on the part of the
Depositor to be performed or observed;
(2) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(3) the Depositor shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance or transfer and such supplemental
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indenture comply with this Article and that all conditions precedent in
this Article provided for relating to such transaction have been
complied with;
(4) each Rating Agency has confirmed in writing that such
merger, consolidation or transfer will not result in the withdrawal or
downgrading of the rating on the Bonds;
(5) the interest that the transferee acquires in any
properties or assets that are pledged to secure the Bonds shall
expressly be made subject and subordinate to the rights of the
Bondholders and the Trustee; and
(6) the Trustee shall have received on the date of the
transfer an agreement of the transferee to provide on or before June 15
of each subsequent year a certificate confirming its continued
qualification as a Limited Purpose Entity and its continued compliance
with the provisions of Section 9.04 hereof.
Section 9.11 Successor Substituted.
Upon any consolidation or merger, or any conveyance or transfer of the
properties and assets of the Depositor substantially as an entirety in
accordance with Section 9.10, the Person formed by or surviving such
consolidation or merger (if other than the Depositor) or the Person to which
such conveyance or transfer is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Depositor under this Indenture
with the same effect as if such Person had been named as the Depositor herein.
In the event of any such conveyance or transfer, the Person named as the
"Depositor" in the first paragraph of this instrument or any successor that
shall theretofore have become such in the manner prescribed in this Article may
be dissolved, wound-up and liquidated at any time thereafter, and such Person
thereafter shall be released from its liabilities as obligor and maker on all
the Bonds and from its obligations under this Indenture.
Section 9.12 No Other Business.
The Depositor shall not engage in any business or activity other than
in connection with or relating to the issuance of (a) Bonds pursuant to this
Indenture or any Series Supplement, the issuance of which will not, at the time
of their issuance, result in the lowering of the then rating of the Outstanding
Bonds of any Series by any Rating Agency rating such Series, (b) other bonds
pursuant to any indenture other than this Indenture secured principally by
mortgage collateral (which may include mortgage loans, GNMA Certificates,
Freddie Mac Certificates, Fannie Mae Certificates, Other Mortgage Certificates,
or other interests in mortgage loans and, to the extent that any such mortgage
collateral represents an interest in or is secured by mortgage loans, such
mortgage loans) or (c) the establishment of trusts to acquire, own, hold, sell,
and otherwise deal in or with mortgage collateral; provided, however, that if
such other bonds have a rating lower than the lowest rating of any Outstanding
Bonds of any Series, such lower rating will not, at the time of the issuance of
such bonds, result in the lowering of the then rating of the Outstanding Bonds
of any Series by any Rating Agency rating any Series of Bonds issued pursuant to
this Indenture.
Section 9.13 Limitation on Borrowing.
Except as contemplated by Section 9.12 hereof, the Depositor shall not
incur, assume or guarantee any indebtedness of any Person, except for
indebtedness that: (i) by its terms is completely subordinated to indebtedness
of the Depositor; (ii) is non-recourse other than with respect to proceeds in
excess of the proceeds necessary to pay the Bonds of any Series; (iii) does not
constitute a claim against the Depositor to the extent that such excess proceeds
are insufficient to pay such debt; (iv) by its terms provides that the holder
thereof may not cause the filing of a petition in bankruptcy or take any similar
action against the Depositor until at least 121 days after all indebtedness
represented by each Outstanding Bond is paid in full; and (v) will not adversely
affect or result in a withdrawal of the rating of the Bonds by any Rating
Agency.
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Section 9.14 Substitution of Insurance Policies, Etc.; Notification of Rating
Agencies.
(a) Provided that the conditions set forth in paragraph (b) hereof have
been satisfied, the Depositor may substitute a replacement policy or instrument
for any Bond Insurance, Mortgagor Bankruptcy Fund or Mortgagor Bankruptcy Bond,
Primary Mortgage Insurance Policy, Pool Insurance Policy, Special Hazard
Insurance Policy or Special Hazard Fund or a surety bond or Letter of Credit
pledged to secure any one or more Series of Bonds.
(b) The Depositor shall notify each Rating Agency rating the Bonds of a
Series in the event that any replacement policy or instrument is obtained for
any Bond Insurance, Mortgagor Bankruptcy Fund or Bond, Primary Mortgage
Insurance Policy, Pool Insurance Policy, Special Hazard Insurance Policy or Fund
or surety bond or Letter of Credit with respect to such Series from an Insurer
or other Person other than the Person who issued such policy or instrument;
provided, however, that the Trustee shall not be required to accept any such
replacement policy or instrument unless the Trustee has received from each
Rating Agency rating such Bonds a written instrument to the effect that such
acceptance by the Trustee will not result in the lowering of the then applicable
rating of any Bonds issued pursuant to this Indenture by such Rating Agency.
(c) Provided the conditions set forth in paragraph (d) hereof have been
satisfied, in substitution for any Bond Insurance, Mortgagor Bankruptcy Fund or
Bond, Primary Mortgage Insurance Policy, Pool Insurance Policy, Special Hazard
Insurance Policy or Fund, surety bond, letter of credit, and/or other policy,
instrument, or other credit enhancement securing Mortgage Loans pledged to
secure a Series of Bonds, the Depositor may pledge one or more Fannie Mae or
Freddie Mac Certificates representing interests in such Mortgage Loans, provided
the pass-through interest rate on each such Fannie Mae or Freddie Mac
Certificate is not less than the weighted average Net Rate of the Mortgage Loans
in which such Mortgage Certificate represents an interest. For this purpose, the
Net Rate of a Mortgage Loan will equal the per annum interest rate available to
make payments on the Bonds secured by such Mortgage Loan (i.e., such Mortgage
Loan's Note Rate less servicing and credit enhancement costs).
(d) To effect any substitution of credit enhancement pursuant to
paragraph (c) above, the Trustee shall transfer the Mortgage Loans to Fannie Mae
or Freddie Mac (subject to the Trustee (or its assignee) being named as the
registered holder of the Fannie Mae or Freddie Mac Certificates to be issued
representing interests in such Mortgage Loans) upon delivery by the Depositor to
the Trustee of the following:
(1) cash or Letter of Credit in an amount equal to the
aggregate Outstanding Mortgage Loan Amount of the Mortgage Loans being
transferred to Fannie Mae or Freddie Mac, which may be used to make any
payments of principal and interest on the Bonds pertaining to such
Mortgage Loans while the Mortgage Loans are held by Fannie Mae or
Freddie Mac;
(2) an Depositor Request identifying (i) the Mortgage Loans
subject to the substitution of credit enhancement and (ii) the issue
date, maturity, principal balance and pass-through interest rate of the
Fannie Mae or Freddie Mac Certificates to be issued with respect to
those Mortgage Loans; and
(3) an Opinion of Counsel to the effect that, upon the
Trustee's receipt of the Fannie Mae or Freddie Mac Certificates, the
Trustee will have a first-priority, perfected security interest in the
Fannie Mae or Freddie Mac Certificates.
To the extent that the Depositor substitutes Freddie Mac Certificates
for any credit enhancement as provided above, the Depositor will deposit cash
equal to one month's interest on such Freddie Mac Certificates. In addition, the
one month delay and the terms of Freddie Mac's guarantee with respect to Freddie
Mac Certificates shall not be construed as any change in the payment terms with
respect to such Series of Bonds.
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Section 9.15 Notice of Events of Default.
The Depositor shall give the Trustee and the Rating Agencies prompt
written notice of each Event of Default hereunder, each default on the part of
the Servicer of its obligations under the Servicing Agreement [and each default
on the part of the Mortgage Loan Seller of its obligations under the Mortgage
Loan Sale Agreement.]
Section 9.16 Investment Company Act.
The Depositor shall at all times conduct its operations so as not to be
subject to, or shall comply with, the requirements of the Investment Company Act
of 1940, as amended (or any successor statute), and the rules and regulations
thereunder.
Section 9.17 Treatment of Bonds as Debt for Tax Purposes.
The Depositor shall treat the Bonds as indebtedness for all federal and
state tax purposes.
ARTICLE TEN
SUPPLEMENTAL INDENTURES
Section 10.01 Supplemental Indentures Without Consent of Bondholders.
Without the consent of the Holders of any Bonds of any Series, the
Depositor and the Trustee, at any time and from time to time, may enter into one
or more indentures supplemental hereto, in form satisfactory to the Trustee, for
any of the following purposes:
(1) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Trustee any property subject or required to
be subjected to the lien of this Indenture, or to subject to the lien
of this Indenture additional property; or
(2) to add to the conditions, limitations and restrictions on
the authorized amount, terms and purposes of issue, authentication and
delivery of any Series of Bonds; or
(3) to set forth the terms of, and security for, any Series
that has not theretofore been authorized by a Series Supplement; or
(4) to amend any provision of this Indenture in connection
with the creation of any Series or Class but only with respect to a
Series or Class that has not theretofore been authorized by a Series
Supplement and only insofar as any such amendment does not adversely
affect any Outstanding Series or Class; or
(5) to evidence the succession of another Person to the
Depositor to the extent permitted herein, and the assumption by any
such successor of the covenants of the Depositor herein and in the
Bonds contained; or
(6) to add to the covenants of the Depositor or the Trustee,
for the benefit of the Holders of all Bonds or the Bonds of any Series,
or to surrender any right or power herein conferred upon the Depositor;
or
(7) to convey, transfer, assign, mortgage or pledge any
property to or with the Trustee; or
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(8) to cure any ambiguity, to amend, correct or supplement any
provision herein or in any supplemental indenture that may be
defective, ineffective or inconsistent with any other provision herein
or in any supplemental indenture, or amend any other provisions with
respect to matters or questions arising under this Indenture; provided
that such action shall not adversely affect the interests of the
Holders of the Outstanding Bonds of any Series or Class; or
(9) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to one or more Series of
Bonds and to add to or change any of the provisions of this Indenture
as shall be necessary to facilitate the administration of the trusts
hereunder by more than one Trustee, pursuant to the requirements of
Section 7.11 or 7.12 hereof; or
(10) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted or to conform the provisions of this
Indenture to the TIA, as amended from time to time, and to add to this
Indenture such other provisions as may be expressly required by the
TIA.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture that affects the
Trustee's own rights, duties, liabilities or immunities under this Indenture or
otherwise except to the extent required by law.
The Trustee may in its discretion determine whether or not the rights
of the Holder of Bonds of a particular Series would be adversely affected by any
supplemental indenture and any such determination shall be conclusive upon the
Holders of all Bonds, whether theretofore or thereafter authenticated and
delivered hereunder. In making such determination, a supplemental indenture
shall be conclusively deemed by the Trustee not to adversely affect a particular
Series if (i) the Trustee receives a letter or other writing from each Rating
Agency rating the Series to the effect that execution of the supplemental
indenture will not result in any change in the current rating assigned by that
Rating Agency to the Series and (ii) the supplemental indenture effects no
change in principal priority schedules, interest rates, Redemption and Special
Redemption prices, substitution of Mortgage Collateral, Payment Dates, Record
Dates, Accounting Dates, terms of Optional and Special Redemption, the
application of Surplus to the payment of the Series or other payment terms
established by the Series Supplement for the Series. The Trustee shall not be
liable for any such determination made in good faith.
Section 10.02 Supplemental Indentures With Consent of Bondholders.
With the consent of the Holders of not less than 66 2/3% of the
principal balance of the Outstanding Bonds of each Series to be affected, by Act
of said Holders delivered to the Depositor and the Trustee, the Depositor and
the Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture relating to such Series or
of modifying in any manner the rights of the Holders of the Bonds of such Series
under this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder or Beneficial Owner of each Outstanding
Bond as evidenced by the Bond Register and the records of the Clearing Agency
and Clearing Agency Participants affected thereby:
(1) change the Stated Maturity of the principal of, or the
timing of any installment of principal or interest on, any Bond, reduce
the principal amount thereof or the Bond Interest Rate thereon or the
Redemption Price or time for redemption with respect thereto, change
the provisions of this Indenture and the related Series Supplement
relating to the application of proceeds of the Trust Estate to the
payment of principal of Bonds, change any place where, or the coin or
currency in which, any Bond or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such
payment on or after the Maturity thereof (or, in the case of
redemption, on or after the applicable Redemption Date or Special
Redemption Date); or
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(2) reduce the percentage in principal amount of the
Outstanding Bonds of any Series, the consent of the Holders of which is
required for the execution of any such supplemental indenture, or the
consent of the Holders of which is required for any waiver of
compliance with certain provisions of this Indenture or certain
Defaults hereunder and their consequences provided for in this
Indenture; or
(3) impair or adversely affect the Trust Estate for a Series
except as otherwise permitted herein; or
(4) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of a
Trust Estate or terminate the lien of this Indenture on any property at
any time subject hereto or deprive the Holder of any Bond of the
security afforded by the lien of this Indenture; or
(5) change any of the conditions precedent for the redemption
of any Series of Bonds under this Indenture or any Series Supplement;
or
(6) modify any of the provisions of this Section 6.14, Section
6.15, or Section 6.16, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder or Beneficial
Owner of each Outstanding Bond as evidenced by the Bond Register and
the records of the Clearing Agency and Clearing Agency Participants
affected thereby.
The Trustee may in its discretion determine whether or not any Bonds of
a particular Series would be affected by any supplemental indenture, and any
such determination shall be conclusive upon the Holders and Beneficial Owners of
all Bonds of such Series, whether theretofore or thereafter authenticated and
delivered hereunder. The Trustee shall not be liable for any such determination
made in good faith.
It shall not be necessary for any Act of Bondholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Depositor and the Trustee of any
supplemental indenture pursuant to this Section 10.02, the Depositor shall mail
to the Holders of the Bonds as their names appear on the Bond Register to which
such supplemental indenture relates, a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Depositor to mail
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture.
Section 10.03 Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 7.01) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture that affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
The Depositor shall cause executed copies of any supplemental indentures to be
delivered to the Rating Agencies.
Section 10.04 Effect of Supplemental Indenture.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes with respect to
any affected Series; and every Holder of Bonds of any Series theretofore or
thereafter authenticated and delivered hereunder and affected by such
supplemental indenture shall be bound thereby.
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Section 10.05 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the TIA as then in effect so long as this
Indenture shall then be qualified under the TIA.
Section 10.06 Reference in Bonds to Supplemental Indentures.
Bonds authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and if required by the
Trustee shall, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Depositor shall so
determine, new Bonds so modified as to conform, in the opinion of the Trustee
and the Depositor, to any such supplemental indenture that relates to the Series
of which such Bonds are a part may be prepared and executed by the Depositor and
authenticated and delivered by the Trustee in exchange for Outstanding Bonds of
such Series.
ARTICLE ELEVEN
REDEMPTION OF BONDS
Section 11.01 Redemption at the Option of the Depositor; Election to Redeem.
The Bonds of any Class of a Series shall be redeemable at the option of
the Depositor, in whole or in part, on a pro rata or random lot basis as
permitted by the related Series Supplement, at the Redemption Price specified in
such Series Supplement (exclusive of installments of interest and principal
maturing on or prior to such date payment of which shall have been made or duly
provided for to the Holders of the Bonds on relevant Record Dates or as
otherwise provided in this Indenture and such Supplement).
Installments of interest and principal due on or prior to a Redemption
Date shall continue to be payable to the Holders of such Bonds of such Series as
of the relevant Record Dates according to their terms and the provisions of
Section 3.07. The election of the Depositor to redeem any Bonds of such Series
pursuant to this Section 11.01 shall be evidenced by an Depositor Order
directing the Trustee to make the payment of the Redemption Price of all of the
Bonds to be redeemed from funds in the Collateral Proceeds Account, the Reserve
Fund, other funds and/or monies deposited with the Trustee by the Depositor
pursuant to Section 11.05; provided, however, that funds shall be withdrawn from
the Reserve Fund in order to effect such redemption only if the Trustee shall
have received an Accountants' Certificate to the effect that the balances
remaining in such funds are adequate after giving effect to the redemption.
The Depositor shall set the Redemption Date and the Redemption Record
Date and give notice thereof to the Trustee pursuant to Section 11.03.
Section 11.02 [Reserved].
Section 11.03 Notice to Trustee.
Unless otherwise specified in the related Series Supplement, in case of
any redemption pursuant to Section 11.01, the Depositor shall, at least 15 days
prior to the Redemption Date (unless a shorter period shall be satisfactory to
the Trustee), notify the Trustee of such Redemption Date and of the expected
principal amount of any Bonds to be redeemed on such Redemption Date.
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Section 11.04 Notice of Redemption by the Depositor.
Notice of redemption shall be given by the Trustee in the name of and
at the expense of the Depositor by first-class mail, postage prepaid, mailed not
less than ten days prior to the applicable Redemption Date to each Holder of
Bonds of the affected Series at his address in the Bond Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price at which the Bonds of such
Series will be redeemed;
(3) that on a Redemption Date, if Bonds of a Class of
such Series are to be paid in full, the fact of such payment in full
and that interest thereon shall cease to accrue on the date specified
on the notice;
(4) if such payment is the final payment on such Bond of such
Series; and
(5) the place where such Bonds of such Series are to be
surrendered for payment of the Redemption Price if such Bonds of such
Series are to be paid in full, which shall be the office or agency of
the Depositor to be maintained as provided in Section 9.02.
Notice of redemption of Bonds of a Series shall be given by the
Depositor or, at the Depositor's request, by the Trustee in the name and at the
expense of the Depositor. Failure to give notice of redemption, or any defect
therein, to any Holder of any Bond of a Series selected for redemption shall not
impair or affect the validity of the redemption of any other Bond of such
Series.
Section 11.05 Deposit of Redemption Price for Optional Redemptions.
In the case of all redemptions, on or before the Business Day next
preceding the giving of notice of redemption as provided in Section 11.04, the
Depositor shall deposit with the Trustee cash, Certificates of Deposit or a
Letter of Credit in an amount sufficient to provide for payment of the
Redemption Price of all of the Bonds of the affected Series that are to be
redeemed on such Redemption Date (unless such payment is to be made from the
Collateral Proceeds Account or the Reserve Fund for such Series).
Section 11.06 Bonds Payable on Redemption Date.
Notice of redemption having been given as provided in Section 11.04,
the Bonds of a Series or portions thereof so to be redeemed shall, on the
applicable Redemption Date, become due and payable at the Redemption Price, and
on such Redemption Date (unless the Depositor shall Default in the payment of
the Redemption Price) such Bonds, shall cease to bear interest as specified in
the related Series Supplement. On or after the Redemption Date, such Bonds shall
be paid by the Depositor at the Redemption Price; provided, however, that
payments due on a Payment Date on or prior to the Redemption Date shall be
payable to the Holders of such Bonds registered as such on the relevant Record
Dates according to their terms and the provisions of Section 3.07.
If any Bond called for redemption shall not be so paid upon surrender
thereof for redemption, the principal shall, until paid, bear interest from the
Redemption Date at the applicable Bond Interest Rate.
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ARTICLE TWELVE
ACCOUNTS, ACCOUNTINGS AND RELEASES
Section 12.01 Collection of Money.
Except as otherwise expressly provided herein, the Trustee may demand
payment or delivery of, and shall receive and collect, directly and without
intervention or assistance of any fiscal agent or other intermediary, all money
and other property payable to or receivable by the Trustee pursuant to this
Indenture, including all payments due on the Mortgage Collateral securing a
Series in accordance with the terms and conditions of such Mortgage Collateral.
The Trustee shall hold all such money and property received by it in trust for
the Holders of the Bonds of the related Series and shall apply it as provided in
this Indenture and the related Series Supplement. Except as otherwise expressly
provided in this Indenture, if any Default occurs in the making of any payment
or performance under the Servicing Agreement, the Insurance Policies or any
Mortgage Collateral securing a Series, the Trustee may, and upon the request of
the Holders of a majority in principal balance of the Outstanding Bonds (as
evidenced by the Bond Register and the records of the Clearing Agency and
Clearing Agency Participants) of such Series 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 that the Trustee has
not received timely payment on the Mortgage Certificates securing a Series, the
Trustee shall immediately notify GNMA, Fannie Mae, Freddie Mac or other
appropriate Person or such other Persons designated by any of them, as the case
may be, of the failure to receive such payment. The Trustee shall request that
GNMA, Fannie Mae, Freddie Mac or other appropriate Person wire such payments in
immediately available funds to the Trustee, or take such other action as the
Trustee shall designate in accordance with (a) the procedures of GNMA, Fannie
Mae, Freddie Mac or other appropriate Person then in effect and (b) any
agreements made with the Depositor. Any such action shall be without prejudice
to any right to claim a Default or Event of Default under this Indenture and to
proceed thereafter as provided in Article Six.
Section 12.02 [Reserved].
Section 12.03 [Reserved].
Section 12.04 Reserve Fund.
(a) All monies received by the Trustee pursuant to Section 4.02(6)
with respect to a Series, together with any Eligible Investments in which such
monies are or will be invested or reinvested during the term of this Indenture,
and any income or other gain realized from such investment shall be held by the
Trustee in the Reserve Fund as part of the Trust Estate as security for such
Series subject to disbursement and withdrawal as herein provided. Monies shall
be subject to withdrawal pursuant to Subsection (d) of this Section 12.04.
(b) Upon Depositor Order all or a portion of the Reserve Fund for a
Series shall be invested and reinvested at the Depositor's direction in one or
more Eligible Investments. All income or other gain from such investments shall
be credited to such Reserve Fund, and any loss resulting from such investments
shall be charged to such Reserve Fund.
(c) If any amounts invested as provided in Section 12.04(b) shall be
needed for disbursement from the Reserve Fund for a Series as set forth in
Section 12.04(d), the Trustee shall cause a sufficient amount of such
investments of such Reserve Fund to be sold or otherwise converted to cash to
the credit of such Reserve Fund. The Trustee shall not in any way be held liable
by reason of the inability of the Trustee to make any required payment from such
Reserve Fund because of any insufficiency of such Reserve Fund either resulting
from any loss of investment in any Eligible Investment or resulting from
disbursements made pursuant to Section 12.04(d).
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(d) Disbursements from the Reserve Fund for a Series shall be
made, to the extent funds therefor are available, pursuant to instructions
contained in the Monthly Remittance Reports prepared in accordance with Section
12.09.
Section 12.05 Collateral Proceeds Account.
The Trustee shall, prior to the Delivery Date of the Bonds of a Series,
establish the Collateral Proceeds Account for such Series into which the Trustee
shall from time to time deposit all Collateral Proceeds relating to such Series
(including any proceeds from any deposits to be made by the Master Servicer
pursuant to the Servicing Agreement, with respect to such Series and including
any proceeds from any Insurance Policies for such Series) and all proceeds
transferred from the Reserve Fund or other funds pledged with respect to such
Series; provided, however, that all amounts as provided by Section 4.02(12)
shall be deposited in such Collateral Proceeds Account on the Delivery Date. All
monies deposited on a daily basis in the Collateral Proceeds Account for a
Series pursuant to this Indenture shall be held by the Trustee as part of the
Trust Estate for such Series as herein provided.
(a) All payments to be made from time to time by the Trustee
to the Holders of Bonds of a Series out of funds in the Collateral
Proceeds Account for such Series pursuant to this Indenture shall be
made by the Trustee as the Paying Agent of the Depositor.
(b) Monies in the Collateral Proceeds Account for a Series
shall be invested and reinvested, but only in one or more Eligible
Investments, by the Trustee in such manner as the Depositor shall by
Depositor Order from time to time direct. All income or other gain from
such investments shall be credited to such Collateral Proceeds Account,
and any loss resulting from such investments shall be charged to such
Collateral Proceeds Account. If any amounts invested as aforesaid shall
be needed for disbursement from the Collateral Proceeds Account for a
Series to make deposits to the Custodial Reserve Fund or to make the
payments due to Holders of Bonds of such Series and the Depositor as
set forth in the Monthly Remittance Report delivered pursuant to
Section 12.09, the Trustee shall cause a sufficient amount of such
investments of such Collateral Proceeds Account to be sold or otherwise
converted to cash to the credit of such Collateral Proceeds Account.
The Trustee shall not in any way be held liable by reason of any
insufficiency in any Collateral Proceeds Account resulting from any
loss on any Eligible Investment.
(c) Notwithstanding any other provision of this Section 12.05,
the Trustee may accept principal and interest payments on any Mortgage
Collateral prior to the Due Date thereof and distribute any earnings
from the investment thereof to such Due Date at the direction of the
Depositor.
Section 12.06 Custodial Reserve Fund.
If so provided in the Series Supplement for a Series, the Trustee
shall, prior to the Delivery Date of the Bonds of a Series that is secured in
part by Mortgage Loans, establish the Custodial Reserve Fund for such Series
into which the Trustee shall deposit monthly funds withdrawn from the Collateral
Proceeds Account for such Series required to pay any insurance premiums due on
Insurance Policies securing such Series, any amounts required to be paid to the
Master Servicer pursuant to the Servicing Agreement with respect to such Series,
any amounts due to each Master Servicer of a Mortgage Loan securing such Series
under its Servicing Agreement, and any amounts required to be paid to the
Depositor as Administrative Fees with respect to such Series all in the amounts
set forth in the Monthly Remittance Report referred to in Section 12.09.
(a) Upon Depositor Order all or a portion of the Custodial
Reserve Fund for a Series shall be invested and reinvested at the
Depositor's direction in one or more Eligible Investments.
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(b) Disbursements from the Custodial Reserve Fund for a Series
shall be made to the extent funds therefor are available, and the
Trustee shall withdraw from the Custodial Reserve Fund the amount, if
any, set forth in any Monthly Remittance Report referred to in Section
12.09(a) as the amount, if any, required to be so withdrawn and at the
times therein specified in order to make the payments due to pay the
premiums on the Pool Insurance Policy, the Special Hazard Insurance
Policy, the Mortgagor Bankruptcy Bond and any other surety bonds or
endorsements to Insurance Policies obtained by or on behalf of the
Depositor with respect to such Series, the Administrative Fee for such
Series and amounts due under the Servicing Agreement or any Servicing
Agreement for such Series.
(c) On each anniversary date of the Delivery Date of a Series
and after the payment of all insurance premiums, the Trustee may
release upon Depositor Request any amount remaining on deposit in the
Custodial Reserve Fund for such Series, and such amount shall thereupon
be deemed not to be a part of the Trust Estate for such Series.
Section 12.07 Surplus Account; Other Funds and Accounts.
(a) All monies received by the Trustee pursuant to Section 12.09
with respect to a Series, together with any Eligible Investments in which such
monies are or will be invested or reinvested during the term of this Indenture,
and any income or other gain realized from such investment shall be held by the
Trustee in the Surplus Account as part of the Trust Estate as security for such
Series subject to disbursement and withdrawal as provided herein or in the
related Series Supplement. Unless otherwise provided in the Series Supplement
for a Series, monies shall be subject to withdrawal by the Depositor pursuant to
Section 13.05.
(b) Upon Depositor Order all or a portion of the Surplus Account
for a Series shall be invested and reinvested at the Depositor's direction in
one or more Eligible Investments. All income or other gain from such
investments shall be credited to such Surplus Account and any loss resulting
from such investments shall be charged to such Surplus Account.
(c) If any amounts invested as provided in Section 12.07(b) shall
be needed for disbursement from the Surplus Account for a Series as set forth in
Section 12.07(d), the Trustee shall cause a sufficient amount of such
investments of such Surplus Account to be sold or otherwise converted to cash to
the credit of such Surplus Account. The Trustee shall not in any way be held
liable by reason of the inability of the Trustee to make any required payment
from such Surplus Account because of any insufficiency of such Surplus Account
either resulting from any loss of investment in any Eligible Investment or
resulting from disbursements made pursuant to Section 12.07(d).
(d) Disbursements from the Surplus Account for a Series shall be
made, to the extent funds therefor are available, only as provided in Section
13.05 or the Series Supplement for a Series.
(e) To the extent provided in the Series Supplement for a Series,
the Trustee shall, prior to the Delivery Date of the Bonds of such Series,
establish other funds and accounts to secure the related Series of Bonds.
Disbursements from such other funds and accounts shall be made as provided in
the Series Supplement.
Section 12.08 Reports by Trustee.
The Trustee shall timely supply to the Depositor any information in the
Trustee's possession that the Depositor may from time to time request for a
Series with respect to the Mortgage Collateral, the Reserve Fund, the Collateral
Proceeds Account, the Custodial Reserve Funds and any other funds or surety
bonds reasonably needed to complete the Monthly Remittance Report for such
Series or to provide any other information available to the Trustee and required
to be provided by the Depositor pursuant to Section 12.09.
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Section 12.09 Monthly Remittance Reports and Related Matters.
(a) Not later than the Business Day preceding each Payment Date
for a Series, the Depositor shall deliver, or cause to be delivered, to the
Trustee a report (a "Monthly Remittance Report") that shall contain the
following information with respect to that Series:
(1) the aggregate amount of interest due and payable on each
Class of Bonds on such Payment Date, the interest accrued for the most
recent Due Period on each Class of Accretion Bonds and the amount of
interest payable (or accrued) per $1,000 initial aggregate principal
amount of Bonds of each Class on such Payment Date;
(2) the aggregate amount of principal payable on each Class of
Bonds on such Payment Date and the amount of principal payable per
$1,000 initial aggregate principal amount of Bonds of each Class on
such Payment Date;
(3) a factor, expressed as a decimal of seven digits, with
respect to each Class of Bonds, equal to the percentage of such Class
of Bonds Outstanding on such Payment Date;
(4) the Aggregate Collateral Value of the Mortgage Collateral
as of the Payment Date;
(5) the amount of any deposit to or withdrawal from the
Surplus Account on such Payment Date;
(6) the amount of any deposit to or withdrawal from the
Reserve Fund;
(7) the amount to be released from the lien of the Indenture
from the Surplus Account on such Payment Date;
(8) the amount of the Master Servicing Fee to be paid to the
Master Servicer on such Payment Date and any other customary
information that the Master Servicer deems necessary or desirable, or
that a Bondholder reasonably requests, to enable Bondholders to prepare
their tax returns; and
(9) such additional information as is specified in the related
Series Supplement.
(b) On each Payment Date, the Trustee will transmit by mail to
Bondholders of record as of the related Record Date (including the Clearing
Agency, if any) a report setting forth, among other data, the information
contained in the Monthly Remittance Report for such Payment Date.
(c) On each Payment Date, the Trustee shall withdraw from the
Collateral Proceeds Account the amounts required to make the payments specified
in the related Monthly Remittance Report and shall make such payments or cause
the Paying Agent to make such payments in accordance with the priorities set
forth in the related Series Supplement.
(d) Not less than five Business Days after receiving an Depositor
Order requesting information regarding a redemption of Bonds of a Series as of a
proposed Redemption Date set forth in such Depositor Order, the Trustee shall
provide the necessary information (to the extent it is available to the Trustee)
to the Depositor, and the Depositor shall compute the following information:
(1) the aggregate principal amount of the Bonds as of such
Redemption Date;
(2) the amount of accrued interest due on the Bonds as of such
Redemption Date; and
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(3) the amount in any fund or account available for
application to the redemption of Bonds of such Series.
(e) The Trustee shall make available at its Corporate Trust
Office, during normal business hours, for review by any Bondholder or any person
identified to the Trustee as a prospective Bondholder, originals or copies of
the following items: (a) the Indenture and any amendments thereto, (b) all
Payment Date Statements delivered to the Depositor since the Closing Date, (c)
any Officers' Certificates delivered to the Trustee since the Closing Date as
described in the Indenture and (d) any Accountants' reports delivered to the
Trustee.
(f) To the extent that the Trustee is required to provide any
information or reports pursuant to this Section 12.09 as the result of the
failure of the Depositor to provide such information or reports, the Trustee
shall be entitled to retain an independent certified public accountant in
connection therewith, and the reasonable costs incurred by the Trustee for such
independent certified public accountant shall be reimbursed pursuant to Section
7.07.
Section 12.10 Trust Estate.
(a) The Trustee may, and when required by the provisions of this
Indenture shall, execute instruments to release property from the lien of this
Indenture, or convey the Trustee's interest in the same, in a manner and under
circumstances that are not inconsistent with the provisions of this Indenture.
No party relying upon an instrument executed by the Trustee as provided in this
Article Twelve shall be bound to ascertain the Trustee's authority, inquire into
the satisfaction of any conditions precedent or see to the application of any
monies.
(b) Upon the request of the Master Servicer accompanied by an
Officer's Certificate and the other documents required by the Servicing
Agreement for a Series, to the effect that a Mortgage Loan securing such Series
has been the subject of a full prepayment or repurchase so as to become a
prepaid Mortgage Loan, the Trustee shall release such Mortgage Loan including
the related Loan Documents to the Master Servicer or its designees or assigns
in accordance with the recommendation of the Master Servicer. Upon Depositor
Request accompanied by an Officer's Certificate of the Depositor to the effect
that a GNMA Certificate, a Freddie Mac Certificate, a Fannie Mae Certificate or
Other Mortgage Certificate has been the subject of a full prepayment so as to
become a prepaid GNMA Certificate, a prepaid Freddie Mac Certificate, a prepaid
Fannie Mae Certificate or a prepaid Other Mortgage Certificate, the Trustee
shall promptly release such GNMA Certificate, Freddie Mac Certificate, Fannie
Mae Certificate or Other Mortgage Certificate to the Depositor or its designees
or assigns.
(c) In any case in which a Mortgaged Premises is to be conveyed
to a Person by a borrower, and the Person is to enter into an assumption
agreement or other equivalent agreement or agreements as provided for in the
Servicing Agreement for a Series that require the signature of the Trustee, the
Master Servicer shall obtain such agreement or agreements and such other
appropriate documents and deliver them to the Trustee for signature with a
letter explaining the nature of such documents and why the Trustee's signature
is required. With such letter, the Master Servicer shall deliver an Officer's
Certificate as required by such Servicing Agreement. Upon receipt of such
documents and an Officer's Certificate, the Trustee shall execute such
documents.
(d) Upon compliance with the terms of Section 3.11 relating to the
substitution of a Substitute Mortgage Certificate in exchange for an Original
Mortgage Certificate, the Trustee shall release to the Depositor or its
designees or assigns (1) the Original Mortgage Certificate, (2) all Collateral
Proceeds received by the Trustee on such Original Mortgage Certificate on the
Due Date in the month of the Subsequent Delivery Date (and to be received the
following month in the case of Freddie Mac Certificates), (3) all amounts
deposited in the Collateral Proceeds Account with the Trustee with respect to
such Original Mortgage Certificate on the Subsequent Delivery Date and (4) any
investment earnings on such Collateral Proceeds and such amounts deposited in
the Collateral Proceeds Account.
(e) The Trustee shall, at such time as there are no Bonds
Outstanding for a Series, release the Trust Estate for such Series from the
lien of this Indenture in accordance with Article Five.
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(f) The Trustee shall enter into an agreement to subordinate a
Security Instrument related to a Mortgage Loan securing a Series of Bonds to a
conservation easement or other easement created subsequent to the date of
origination of the Mortgage Loan provided that: (i) the Master Servicer shall
have consented to such subordination; (ii) the Loan-to-Value Ratio of the
Mortgage Loan following the creation of such easement will not exceed the
greater of the Loan-to-Value Ratio of the Mortgage Loan at the time of
origination; (iii) the Trustee shall have received an opinion of counsel,
acceptable to the Trustee, that, under the laws of the state in which the
related Mortgaged Premises is located, the Security Instrument held by the
Trustee will continue to represent a first lien on the Mortgaged Premises,
notwithstanding the execution of the agreement subordinating such Security
Instrument to the easement; and (iv) the Trustee shall have received an
Officer's Certificate of the Master Servicer of such Mortgage Loan certifying
that the creation of such easement will not materially and adversely affect the
marketability of title to the Mortgaged Premises.
(g) Notwithstanding anything herein to the contrary, the Depositor
shall be entitled to purchase a Defaulted Mortgage Loan upon payment to the
Trustee for deposit to the Collateral Proceeds Account of the lesser of (i) the
Unpaid Principal Balance of the Defaulted Mortgage Loan plus accrued and unpaid
interest thereon to the Payment Date following the date of the purchase and (ii)
[105%] of the Defaulted Mortgage Loan Value as determined by the Master Servicer
of such Loan or an independent party selected by the Depositor with the approval
of the Trustee. Upon receipt of the required payment, the Trustee shall release
the Defaulted Mortgage Loan including the related Loan Documents to the
Depositor.
Section 12.11 Releases of Mortgage Loans Withdrawn by Master Servicer.
(a) If the Master Servicer determines that any of the representations
or warranties of which the Depositor and the Trustee are beneficiaries with
respect to any Mortgage Loan securing a Series was materially incorrect as of
the time made, it will promptly notify the Depositor and the Trustee of the
inaccuracy. Following such notice, the Depositor and the Trustee shall take such
action as is recommended by the Master Servicer to enforce cure, repurchase or
other rights in favor of the owner of the Mortgage Loans under the terms of the
agreements pursuant to which the inaccurate representation or warranty was made.
(b) If a Security Instrument Assignment to the Trustee has not been
recorded in the manner and within the time provided in the related Servicing
Agreement or Sales Agreement, as the case may be, the Master Servicer will
promptly notify the Depositor and the Trustee of such failure. Following such
notice, the Depositor and the Trustee shall take such action as is recommended
by the Master Servicer to enforce the rights in favor of the Trustee under the
terms of the related Servicing Agreement or Sales Agreement. Any amounts
remitted to the Trustee by the Master Servicer or a Seller, as the case may be,
in escrow pursuant to the related Servicing Agreement or Sales Agreement, as the
case may be, shall be deposited into the Reserve Fund for the related Series and
shall, together with earnings thereon, (i) be released to the Master Servicer or
a Seller, as the case may be, on receipt by the Trustee of satisfactory evidence
that the Security Instrument Assignment has been recorded in the name of the
Trustee or (ii) be applied by the Trustee to redeem Bonds in the event of a
default in the payment of the principal or interest on the related Mortgage
Loan.
Section 12.12 Delivery of the Loan Documents Pursuant to Servicing
Agreement.
As is appropriate for the servicing or foreclosure of any Mortgage Loan
securing a Series, the Trustee shall deliver to the Master Servicer the Loan
Documents for such Mortgage Loan upon receipt by the Trustee on or prior to the
date such release is to be made of:
(a) such Officer's Certificate as is required by the Servicing
Agreement for such Series; and
(b) a trust receipt in the form prescribed by the Servicing
Agreement for such Series, executed by the Master Servicer, providing
that the Master Servicer will hold or retain the Loan Documents in
trust for the benefit of the Trustee and the Holders of Bonds of such
Series.
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Section 12.13 Records.
In order to facilitate the servicing of the Mortgage Loans securing a
Series by the Master Servicer, the Master Servicer may retain the Records in
accordance with the provisions of the Servicing Agreement and applicable
Servicing Agreement for such Series and this Indenture. The Trustee hereby
designates the Master Servicer its agent and bailee to hold the Records pursuant
to the Servicing Agreement and applicable Servicing Agreement. By the
designation pursuant to this Section 12.13 and the acceptance of such
designation pursuant to this Section 12.13 and the acceptance of such
designation by the Master Servicer pursuant to the Servicing Agreement, the
Trustee, as a secured party, has possession of the Records for purposes of
Section 9-305 of the applicable Uniform Commercial Code.
Section 12.14 Collections on the Mortgage Loans.
In order to facilitate the servicing of the Mortgage Loans securing a
Series by the Master Servicer of such Mortgage Loans, each Master Servicer of a
Mortgage Loan securing such Series shall retain, in accordance with the
provisions of the applicable Servicing Agreement for such Series and this
Indenture, all collections on such Mortgage Loans prior to the time they are
deposited into the Collateral Proceeds Account for such Series. The Trustee
hereby designates the Master Servicer as its agent and bailee to hold such
collections on such Mortgage Loans until they are deposited into the Collateral
Proceeds Account for such Series. By the designation pursuant to this Section
12.14 and the acceptance of such designation by the Master Servicer pursuant to
its Servicing Agreement, the Trustee, as secured party, has possession of all
collections on the Mortgage Loans for purposes of Section 9-305 of the
applicable Uniform Commercial Code.
Section 12.15 Amendments to Servicing Agreements.
The Trustee may, without the consent of any Holder of a Bond of a
Series, enter into or consent to any amendment or supplement to the Servicing
Agreement with respect to such Series for the purpose of increasing the
obligations or duties of any party other than the Trustee or the Bondholders,
provided that such amendment or supplement cannot reasonably be expected to
adversely affect the Holders of Bonds of such Series. Such amendment or
supplement shall be deemed not to adversely affect the Holders of the Bonds of
such Series if there is delivered to the Trustee written notification from each
Rating Agency that rated such Series to the effect that such amendment or
supplement will not result in any change in the current rating assigned by that
Rating Agency to such Series. The Trustee may, in its discretion, decline to
enter into or consent to any such supplement or amendment if its own rights,
duties or immunities shall be adversely affected.
Section 12.16 Termination and Substitution of Servicing Agreements.
In the event of an event of default specified in Section 6.01 of the
Servicing Agreement, the Trustee may (or as otherwise provided in the Servicing
Agreement) terminate the Servicer as provided in Section 6.01 and Section 6.02
of the Servicing Agreement. If the Trustee terminates the Servicer, the Trustee
shall pursuant to Section 6.02 of the Servicing Agreement assume the duties of
the Servicer or appoint a successor servicer acceptable to the Issuer and the
Rating Agencies and meeting the requirements set forth in the Servicing
Agreement.
Section 12.17 Opinion of Counsel.
The Trustee shall be entitled to receive at least five Business Days
notice of any action to be taken pursuant to Section 12.16 with respect to a
Series, accompanied by copies of any instruments involved, and the Trustee shall
also be entitled to receive an Opinion of Counsel, in form and substance
reasonably satisfactory to the Trustee, stating the legal effect of any such
action, outlining the steps required to complete the same, and concluding that
all conditions precedent to the taking of such action have been complied with.
Counsel rendering any such opinion may rely without independent investigation on
the accuracy and validity of any certificate or other instrument delivered to
the Trustee in connection with any such action.
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ARTICLE THIRTEEN
APPLICATION OF MONIES
Section 13.01 Disbursements of Monies from Collateral Proceeds Account.
(a) On each Payment Date for a Series, if either no Default or
Event of Default shall have occurred and be continuing or a Default or Event of
Default shall have occurred and be continuing but the entire unpaid principal
amount of the Bonds of such Series shall not have been declared due and payable
pursuant to Section 6.02, then on such Payment Date, the Trustee shall withdraw
funds from the Collateral Proceeds Account for such Series and shall make the
disbursements described in the related Series Supplement.
(b) On each Redemption Date for a Series, the Trustee shall
withdraw from the Collateral Proceeds Account for such Series and, if
appropriate, from the Reserve Fund for such Series an amount equal to the
aggregate Redemption Price of the Bonds of such Series to be redeemed on that
Redemption Date and, on behalf of the Depositor, apply that amount to the
payment of such Redemption Price as provided in Article Eleven.
(c) On each Payment Date, the Trustee shall withdraw any excess
funds in the Reserve Fund and, as directed by the Depositor, deposit such funds
in the Surplus Account.
(d) For each Series, the Depositor shall cause to be delivered to
the Trustee within 120 days after the Series Year Reporting Date, as specified
inthe related Series Supplement, a Yearly Accountants' Certificate (i)
confirming that they have read this Indenture and the related Series
Supplement, the Monthly Remittance Report for the Payment Date next preceding
the Series Year Reporting Date and applicable information from the Trustee with
respect to that Monthly Remittance Report, (ii) specifying the procedures they
have applied to the data and the computations used in preparing that Monthly
Remittance Report and to the information received from the Trustee, (iii)
indicating, based on such procedures, the amount they have recalculated as the
Aggregate Collateral Value of the Mortgage Collateral as of the Series Year
Reporting Date, (iv) indicating the principal balance of the Bonds of each
Class of such Series Outstanding immediately after the Payment Date for which
such Monthly Remittance Report is given as reported by the Trustee, (v)
indicating, based on such procedures, the amount by which the Aggregate
Collateral Value of the Collateral securing the Series exceeds the principal
balance of Bonds of such Series Outstanding after giving effect to the payments
on the Payment Date for which the related Monthly Remittance Report is given,
and (vi) confirming that, based upon such procedures, nothing has come to their
attention that leads them to believe that the calculations within the Monthly
Remittance Report have not been performed in accordance with the provisions of
this Indenture and the related Series Supplement.
If a Yearly Accountants' Certificate delivered pursuant to Section
13.01(d) indicates that any correction should be made in the preparation of
Monthly Remittance Reports, the Depositor shall cause such correction to be made
and reflected in succeeding Reports.
Section 13.02 [Reserved].
Section 13.03 Disbursement of Monies Out of Custodial Reserve Fund.
If any Monthly Remittance Report for a Series received by the Trustee
sets forth an amount to be withdrawn from the Custodial Reserve Fund for such
Series, the Trustee shall withdraw such funds from such Custodial Reserve Fund
and timely pay the premiums due on the applicable Insurance Policy or the
amounts due to the Master Servicer as specified in such Monthly Remittance
Report.
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Section 13.04 Trust Account.
All monies for a Series held by or deposited with the Trustee in any
fund or account pursuant to the provisions of this Indenture, including the
Collateral Proceeds Account, the Reserve Fund and the Custodial Reserve Fund for
such Series, and not invested in Eligible Investments as herein provided, shall
be deposited in one or more trust accounts for the benefit of the Holders of
Bonds of such Series. To the extent monies deposited in a trust account exceed
the Federal Deposit Insurance Corporation insured amounts, such account shall be
invested in Eligible Investments.
Section 13.05 Disbursements of Excess Funds; Release of Mortgage Collateral.
As and to the extent provided in the Series Supplement of a Series or
any other Supplement related to such Series, the Trustee, at the request of the
Depositor and upon satisfaction of the conditions set forth herein, shall
withdraw Mortgage Collateral or cash to the extent of the excess, if any, of the
Aggregate Collateral Value of the Mortgage Collateral over the principal balance
of the Bonds of such Series then Outstanding.
The Depositor may deliver to the Trustee written instructions with
respect to identified Mortgage Collateral executed by the Depositor and another
Person to the effect that, following notice from the other Person, excess funds
attributable to the identified Collateral are to be disbursed to the other
Person and not to the Depositor. Such instructions may be irrevocable except
upon receipt by the Trustee of a written revocation executed by the other
Person. On receipt of notice from the other Person requesting that such excess
funds be delivered to the other Person, the Trustee shall so disburse such
excess funds rather than releasing those funds to the Depositor.
ARTICLE FOURTEEN
BONDHOLDERS' MEETINGS
Section 14.01 Purposes for Which Meetings May Be Called.
A meeting of the Holders of Bonds of any or all Series may be called at
any time and from time to time pursuant to the provisions of this Article
Fourteen for any of the following purposes:
(1) to give any notice to the Depositor or to the Trustee, or
to give any directions to the Trustee, or to consent to the waiver of
any Default hereunder and its consequences, or to take any other action
authorized to be taken by Bondholders pursuant to any of the provisions
of Article Six;
(2) to remove the Trustee and appoint a successor Trustee
pursuant to the provisions of Article Seven;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Article Ten; or
(4) to take any other action authorized to be taken by or on
behalf of the Holders of any specified aggregate principal balance of
the Bonds of any or all Series under any other provision of this
Indenture or under applicable law.
Section 14.02 Manner of Calling Meetings.
The Trustee may at any time call a meeting of Bondholders to take any
action specified in Section 14.01, to be held at such time and at such place in
the United States of America as the Trustee shall determine. Notice of every
meeting of the Bondholders, setting forth the time and the place of such meeting
and in general terms the action proposed to be taken at such meeting, shall be
mailed to such Bondholders not less than twenty nor more than
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sixty days prior to the date fixed for the meeting as provided in Section 15.05.
For Book-Entry Bonds, the Trustee shall provide an adequate number of copies of
such notice in order for the Clearing Agency and Clearing Agency Participants to
provide copies to Beneficial Owners. The Trustee may fix, in advance of the
giving of such notice, a date as the Record Date for determining the Bondholders
entitled to notice of or to vote at any such meeting not more than 15 days prior
to the date fixed for the giving of such notice.
Section 14.03 Call of Meeting by Depositor or Bondholders.
In case at any time the Depositor, pursuant to a resolution of its
Board of Directors or the Holders of at least 10% in aggregate principal balance
of the Bonds of any Series then Outstanding, shall have requested the Trustee to
call a meeting of Bondholders of such Series to take any action authorized in
Section 14.01 by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have mailed
notice of such meeting within twenty days after receipt of such request, then
the Depositor or the Holders of Bonds in the amount above specified may
determine the time and the place for such meeting, the record date for
determining the Bondholders entitled to notice of or to vote at such meeting,
and may call such meeting to take any action authorized in Section 14.01, by
mailing notice thereof as provided in Section 14.02.
Section 14.04 Who May Attend and Vote at Meetings.
To be entitled to vote at any meeting of Bondholders of any or all
Series a Person shall (a) be a Holder, as of the Record Date, of one or more
Bonds of the Series with respect to which such meeting was called or (b) be a
Person appointed by an instrument in writing as proxy by a Holder, as of the
Record Date, of one or more such Bonds of the applicable Series. The only
Persons who shall be entitled to be present or to speak at any meeting of
Bondholders of any or all Series shall be the Persons entitled to vote at such
meeting and their counsel, any representatives of the Trustee and its counsel
and any representatives of the Depositor and its counsel.
Section 14.05 Regulations May Be Made by Trustee.
Notwithstanding any other provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Bondholders in regard to proof of the holding of Bonds and of the appointment of
proxies, and in regard to the appointment and duties of inspectors of votes, the
submission and examination of proxies, certificates and other evidence of the
right to vote, and such other matters concerning the conduct of the meeting.
Except as otherwise permitted or required by any such regulations, the holding
of Bonds shall be proved in the manner specified in Section 15.03, and the
appointment of any proxy shall be proved in the manner specified in said Section
15.03; provided, however, that such regulations may provide that written
instruments appointing proxies regular on their face may be presumed valid and
genuine without the proof hereinabove or in said Section 15.03 specified.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Depositor or by Bondholders as provided in Section 14.03, in which case the
Depositor or the Bondholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the Holders of a majority
in principal amount of the Bonds represented at the meeting.
At any meeting each Holder of Bonds of any Series or any proxy shall be
entitled to one vote for each $1,000 in initial principal amount of Outstanding
Bonds held or represented by him; provided, however, that no vote shall be cast
or counted at any meeting in respect of the principal amount of any Bond
challenged as not Outstanding and ruled by the chairman of the meeting to be not
Outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Bonds held by him or by virtue of instruments in writing as
aforesaid duly designating him as the person to vote on behalf of other
Bondholders. Any meeting of Bondholders duly called pursuant to the provisions
of Section 14.02 or Section 14.03 may be adjourned from time to time, and the
meeting so adjourned may be held without further notice.
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At any meeting of Bondholders of any or all Series, the presence of
Persons holding or representing Outstanding Bonds of the applicable Series in an
aggregate principal balance sufficient to take action on the business for the
transaction of which such meeting was called shall constitute a quorum, but, if
less than a quorum is present, the Persons holding or representing a majority in
aggregate principal balance of the Bonds of the applicable Series represented at
the meeting may adjourn such meeting with the same effect, for all intents and
purposes, as though a quorum had been present, and the meeting may be held as so
adjourned without further notice.
Section 14.06 Manner of Voting at Meetings and Records to be Kept.
The vote upon any matter submitted to any meeting of Bondholders shall
be by written ballots on which shall be subscribed the signatures of the Holders
of Bonds or of their representatives by proxy and the serial number or numbers
of the Bonds held or represented by them. The chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at the meeting
for or against any resolution and who shall make and file with the secretary of
the meeting their verified written reports in duplicate of all votes cast at the
meeting. A record in duplicate of the proceedings of each meeting of Bondholders
shall be prepared by the secretary of the meeting and there shall be attached to
said record the original reports of the inspectors of votes on any vote by
ballot taken thereat and affidavits by one or more persons having knowledge of
the facts setting forth a copy of the notice of the meeting and showing that
said notice was mailed as provided in Section 14.02. The record shall show the
serial numbers of the Bonds voting in favor of and against any resolution. The
record shall be signed and verified by the affidavits of the permanent chairman
and secretary of the meeting and one of the duplicates shall be delivered to the
Depositor and the other to the Trustee to be preserved by the Trustee.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 14.07 Exercise of Rights of Trustee and Bondholders Not to Be
Hindered or Delayed.
Nothing in this Article Fourteen shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Bondholders or any
rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Bondholders under any of the provisions of
this Indenture or of the Bonds.
ARTICLE FIFTEEN
MISCELLANEOUS
Section 15.01 Compliance Certificates and Opinions.
Upon any application or request by the Depositor to the Trustee to take
any action under any provision of this Indenture, the Depositor shall furnish to
the Trustee an Officer's Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, including one furnished
pursuant to specific requirements of this Indenture relating to a particular
application or request (other than certificates provided pursuant to TIA Section
324(a)(4)) shall include and shall be deemed to include (regardless of whether
specifically stated therein) the following:
(1) a statement that each individual signing such certificate,
opinion, or letter has read such covenant or condition and the
definitions herein relating thereto;
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(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion whether such covenant or condition
has been complied with; and
(4) a statement whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 15.02 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Officer of the Depositor may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such Officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an Officer or Officers of the Depositor, stating that the
information with respect to such factual matters is in the possession of the
Depositor, unless such counsel knows that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 15.03 Acts of Bondholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Bondholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Bondholders in person or by 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, where it is hereby expressly required, to the
Depositor. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Bondholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and conclusive in favor of the Trustee and the
Depositor, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner that the Trustee deems
sufficient.
(c) The ownership of Bonds shall be proved by the Bond Register.
(d) The beneficial ownership of Book-Entry Bonds shall be proved
by the books of the Clearing Agency or Clearing Agency Participant.
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(e) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Bonds shall bind the
Holder (and any transferee thereof) of every Bond issued upon the registration
thereof or in exchange therefor or in lieu thereof, in respect of anything
done, omitted or suffered to be done by the Trustee or the Depositor in
reliance thereon, whether or not notation of such action is made upon such Bond.
Section 15.04 Notices, Etc., to Trustee and Depositor.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Bondholders or other documents provided for or permitted by this
Indenture to be made upon, given or furnished to, or filed with:
(1) the Trustee by any Bondholder or by the Depositor shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office;
or
(2) the Depositor by the Trustee or by any Bondholder shall be
sufficient for every purpose hereunder (except as provided in the
Series Supplement for a Series) if in writing and mailed, first-class
postage prepaid, to the Depositor addressed to it at 7130 Goodlett
Farms Parkway, Cordova, Tennessee 38018, Attention: President, or at
any other address previously furnished in writing to the Trustee by the
Depositor.
Section 15.05 Notices to Bondholders; Waiver.
Where this Indenture provides for notice to Bondholders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Bondholder affected by such event at his address as it appears on the Bond
Register not later than the latest date, and not earlier than the earliest date,
prescribed for the giving of such notice. In any case where notice to
Bondholders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Bondholder shall affect the
sufficiency of such notice with respect to other Bondholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed to
have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Bondholders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In the event that, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Bondholders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice that is satisfactory to the Trustee shall be deemed
to be a sufficient giving of such notice.
Section 15.06 Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with another
provision hereof that is required to be included in this Indenture by any of the
provisions of the TIA, such required provision shall control.
Section 15.07 Effect of Headings and Table of Contents.
The Article and Section headings and the Table of Contents herein are
for convenience only and shall not affect the construction hereof.
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Section 15.08 Successors and Assigns.
All covenants and agreements in this Indenture by the Depositor shall
bind its successors and assigns, whether so expressed or not.
Section 15.09 Separability.
In case any provision in this Indenture or in the Bonds shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 15.10 Benefits of Indenture.
Nothing in this Indenture or in the Bonds, express or implied, shall
give to any Person, other than the parties hereto, and their successors
hereunder, any separate trustee or co-trustee appointed under Section 7.10 and
the Bondholders, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 15.11 Legal Holidays.
In the event that the date of any Payment Date shall not be a Business
Day, then notwithstanding any other provision of the Bonds or this Indenture,
payment need not be made on such date but may be made on the next succeeding
Business Day with the same force and effect as if made on the nominal date of
any such Payment Date, and no interest shall accrue for the period from and
after any such nominal date provided such payment is made in full on such next
succeeding Business Day.
Section 15.12 Governing Law.
IN VIEW OF THE FACT THAT BONDHOLDERS ARE EXPECTED TO RESIDE IN MANY
STATES AND OUTSIDE THE UNITED STATES AND THE DESIRE TO ESTABLISH WITH CERTAINTY
THAT THIS INDENTURE WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAW OF A STATE HAVING A WELL-DEVELOPED BODY OF COMMERCIAL
AND FINANCIAL LAW RELEVANT TO TRANSACTIONS OF THE TYPE CONTEMPLATED HEREIN, THIS
INDENTURE AND EACH BOND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED THEREIN.
Section 15.13 Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 15.14 Corporate Obligation.
No recourse may be taken, directly or indirectly, against any
incorporator, subscriber to the capital stock, stockholder, officer, director or
employee of the Depositor or of any predecessor or successor of the Depositor
with respect to the Depositor's obligations on the Bonds or under this Indenture
or any certificate or other writing delivered in connection herewith or
therewith except as otherwise expressly provided in any such certificate or
other writing.
Section 15.15 Recording of Indenture.
This Indenture is subject to recording in any appropriate public
recording offices, such recording to be effected by this Issuer and at its
expense in compliance with any Opinion of Counsel delivered pursuant to Section
2.11(c) or 3.06.
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Section 15.16 No Petition.
The Trustee, by entering into this Indenture, and each Bondholder and
Beneficial Owner, by accepting a Bond, hereby covenant and agree that they will
not at any time institute against the Depositor, or join in any institution
against the Depositor of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Bonds, this Indenture or any of the Basic Documents.
This Section 15.16 will survive for one year AND ONE DAY following the
termination of this Indenture.
Section 15.17 Amendments to Governing Documents.
The Trustee shall, upon Depositor Request, consent to any proposed
amendment to the Depositor's governing documents, or an amendment to or waiver
of any provision of any other document relating to the Depositor's governing
documents, such consent to be given without the necessity of obtaining the
consent of the Holders of any Bonds upon receipt by the Trustee of:
(i) an Officer's Certificate, to which such proposed amendment
or waiver shall be attached, stating that such attached copy is a true
copy of the proposed amendment or waiver and that all conditions
precedent to such consent specified in this Section 15.17 have been
satisfied; and
(ii) written confirmation from the Rating Agencies that the
implementation of the proposed amendment or waiver will not adversely
affect their implied ratings of the Bonds.
Notwithstanding the foregoing, the Trustee may decline to consent to a
proposed waiver or amendment that adversely affect its own rights, duties or
immunities under this Indenture or otherwise.
Nothing in this Section 15.17 shall be construed to require that any
Person obtain the consent of the Trustee to any amendment or waiver or any
provision of any document where the making of such amendment or the giving of
such waiver without obtaining the consent of the Trustee is not prohibited by
this Indenture or by the terms of the document that is the subject of the
proposed amendment or waiver.
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IN WITNESS WHEREOF, the Depositor and the Trustee have caused this
Indenture, dated as of ___________ 1, 1997, to be duly executed by their
respective officers thereunto duly authorized and attested, all as of the 1st
day of __________, 1997.
UNION PLANTERS MORTGAGE FINANCE CORP.
By:
------------------------------
Attest:
- -------------------------------
Assistant Secretary
-----------------------------------,
as Trustee
By:
--------------------------------
Attest:
- -------------------------------
Trust Officer
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EXHIBIT A-1
FORM OF TRUSTEE'S INITIAL CERTIFICATION
[Date]
[Name]
[Address]
[Address]
Re: Indenture, dated as of ___________ 1, 199__ (the "indenture"), between
Union Planters Mortgage Finance Corp. (the "Depositor") and
____________________ as Trustee (the "Trustee").
Gentlemen:
In accordance with Section 7.15 of the Indenture, the undersigned, as
Trustee, hereby certifies that, as to each Mortgage Loan (other than any
Mortgage Loan paid in full or listed on the attachment hereto) it has reviewed
the Trustee Mortgage Loan File and has determined that, except as noted on the
Schedule of Exceptions attached hereto: (i) all documents required to be
included in the Trustee Mortgage Loan File (as set forth in the definition of
"Mortgage Loan Documents" in the Indenture) are in its possession; (ii) such
documents have been reviewed by it and appear regular on their face and relate
to such Mortgage Loan; and (iii) based on examination by it, and only as to such
documents, the information set forth on the schedule to the Indenture accurately
reflects the information set forth in the Trustee Mortgage Loan File. The
undersigned further certifies that the Trustee's review of each Trustee Mortgage
Loan File included each of the procedures listed in Section 7.15(a) of the
Indenture.
Except as described herein, the Trustee has not made an independent
examination of any documents contained in any Trustee Mortgage Loan File. The
Trustee makes no representations as to: (i) the validity, legality, sufficiency,
enforceability or genuineness of any documents contained in any Trustee Mortgage
Loan File for any of the Mortgage Loans listed on the schedule to the Indenture,
(ii) the collectibility, insurability, effectiveness or suitability of any such
Mortgage Loan or (iii) whether any Trustee Mortgage Loan File should include any
flood insurance policy, any rider, addenda, surety or guaranty agreement, ,power
of attorney, buy down agreement, assumption agreement, modification agreement,
written assurance or substitution agreement.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Indenture.
----------------------------------,
as Trustee
By: ____________________________
Its: ____________________________
Exhibit A-1 - Page 1
<PAGE> 85
EXHIBIT A-2
FORM OF TRUSTEE'S FINAL CERTIFICATION
[Date]
[Name]
[Address]
[Address]
Re: Indenture, dated as of ________ 1, 1997 (the "Indenture"), between
Union Planters Mortgage Finance Corp. (the "Depositor") and
_____________, as Trustee (the "Trustee").
Gentlemen:
In accordance with Section 7.15 of the Indenture, the undersigned, as
Trustee, hereby certifies that, except as noted on the Schedule of Exceptions
attached hereto, for each Mortgage Loan listed in the schedule to the Indenture
(other than any Mortgage Loan paid in full or listed on the attachment hereto)
it has received a complete Trustee Mortgage Loan File which includes each of the
documents required to be included in the Trustee Mortgage Loan File as set forth
in the definition of "Mortgage Loan Documents" in the Indenture.
The Trustee has made no an independent examination of any documents
contained in any Mortgage File beyond the review specifically required in
Section 7.15 of the Indenture. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any
documents contained in any Trustee Mortgage Loan File for any of the Mortgage
Loans listed on the schedule to the Indenture, (ii) the collectibility,
insurability, effectiveness or suitability of any such Mortgage Loan or (iii)
whether any Trustee Mortgage Loan File should include any flood insurance
policy, any rider, addenda, surety or guaranty agreement, power of attorney, buy
down agreement, assumption agreement, modification agreement, written assurance
or substitution agreement.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Indenture.
----------------------------------,
as Trustee
By: ____________________________
Its: ____________________________
Exhibit A-2 - Page 1
<PAGE> 86
________________________________________________________________________________
________________________________________________________________________________
UNION PLANTERS MORTGAGE FINANCE CORP.,
as Depositor,
AND
--------------------------------,
as Trustee
_____________
SERIES __ SUPPLEMENT
Dated as of 1, 19
-------- --
TO
INDENTURE
Dated as of 1, 1997
--------------
_____________
COLLATERALIZED MORTGAGE BONDS
SERIES
--
________________________________________________________________________________
________________________________________________________________________________
<PAGE> 87
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PRELIMINARY STATEMENT..................................................................................S-1
GRANTING CLAUSES.......................................................................................S-1
SECTION 1. Certain Defined Terms......................................................................S-2
SECTION 2. Class Designation; Principal Amount; Maturity..............................................S-9
SECTION 3. Date of the Bonds..........................................................................S-9
SECTION 4. Book-Entry Bonds...........................................................................S-9
SECTION 5. Denominations.............................................................................S-10
SECTION 6. Determination of Interest and Interest Payments...........................................S-10
SECTION 7. Priority of Payments......................................................................S-11
SECTION 8. Places for Payment........................................................................S-12
SECTION 9. Redemption.................................................................................S-12
SECTION 10. Separate Trustees in the Event of a Conflict..............................................S-13
SECTION 11. Transfer or Pledge of Depositor's Interest in the Trust Estate............................S-15
SECTION 12. Default...................................................................................S-15
SECTION 13. Substitution or Repurchase of Mortgage Collateral.........................................S-17
SECTION 14. Converted Mortgage Loans..................................................................S-17
SECTION 15. Trustee's Advance Obligation..............................................................S-18
SECTION 16. Form of Bonds.............................................................................S-18
SECTION 17. Notice to the Rating Agencies.............................................................S-18
SECTION 18. Payment Instructions......................................................................S-19
</TABLE>
(i)
<PAGE> 88
<TABLE>
<S> <C>
SECTION 19. Ratification of Indenture.................................................................S-19
SECTION 20. Schedules.................................................................................S-19
SECTION 21. Counterparts..............................................................................S-19
</TABLE>
(ii)
<PAGE> 89
SERIES __ SUPPLEMENT
THIS SERIES __ SUPPLEMENT (this "Series Supplement"), dated as of
________ 1, 19__, by and between UNION PLANTERS MORTGAGE FINANCE CORP., a
Delaware corporation (the "Depositor"), and ___________________________, a
[national banking association], as trustee (the "Trustee"), under an indenture
dated as of ___________ 1, 1997 (the "Original Indenture" and, as supplemented
by this Series Supplement, the "Indenture"), recites and provides as follows:
PRELIMINARY STATEMENT
Sections 4.01, 4.02 and 10.01 of the Indenture provide, among other
things, that the Depositor, when authorized by its Board of Directors, and the
Trustee may at any time and from time to time enter into an indenture
supplemental to the Indenture for the purpose of authorizing a Series of Bonds
and to specify certain terms of each Series of Bonds. The Board of Directors of
the Depositor has duly authorized the creation of a Series of Bonds with an
aggregate principal amount of $___________, to be known as the Collateralized
Mortgage Bonds, Series (the "Bonds") which will consist of four Classes
designated as provided herein.
GRANTING CLAUSES
To secure the payment of the principal of and interest on the Bonds in
accordance with their terms, all of the sums payable under the Indenture and
this Series Supplement with respect to the Bonds and the performance of the
covenants contained in the Indenture and this Series Supplement, the Depositor
hereby Grants to the Trustee, in trust and as collateral security as provided in
the Indenture and this Series Supplement, for the benefit of the Holders of the
Bonds, all of the Depositor's right, title and interest in and to any and all
benefits accruing to the Depositor from (a) the Mortgage Loans listed in
Schedule I-A and Schedule I-B to this Series Supplement (the "Mortgage Loans")
that the Depositor is causing to be delivered to the Trustee herewith (and all
substitutions therefor as provided by Section 3.11 of the Indenture), together
with the related Loan Documents and the Depositor's interest in any Mortgaged
Property that secured a Mortgage Loan but that is acquired by foreclosure or
deed in lieu of foreclosure after the Delivery Date, (b) all rights of the
Depositor under the Sales Agreement relating to the Mortgage Loans, by and
between _____________ (the "Seller") and the Depositor, dated ________, 199_
(the "Sales Agreement"), except the Depositor's right to fees and
indemnification under Sections __ and __ thereof, respectively; (c) the
Servicing Agreement; (d) the Custody Agreement among the Trustee,
______________________________, the Seller and the Master Servicer, dated as of
________, 199_; (e) the Primary Mortgage Insurance Policies for the Mortgage
Loans; (f) the Standard Hazard Insurance Policies for the Mortgage Loans; (g)
the Title Insurance Policies for the Mortgage Loans; (h) the Collateral Proceeds
Account and its constituent subaccounts, whether in the form of cash,
instruments, securities or other properties; (i) the Class One Subordinated
Account and the Class Two Subordinated Account,
S-1
<PAGE> 90
whether in the form of cash, instruments, securities or other properties; and
(j) proceeds of all the foregoing (including, but not by way of limitation, all
cash, proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, rights to payment of any and every
kind, and other forms of obligations and receivables which at any time
constitute all or part or are included in the proceeds of any of the foregoing)
(items (a) through (j) collectively, the "Trust Estate") to secure the Bonds.
The Trustee acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions hereof and of the Indenture and agrees to perform
the duties herein or therein required to the best of its ability to the end that
the interests of each of the Series __ Bondholders may be adequately and
effectively protected.
SECTION 1. Certain Defined Terms.
With respect to the Bonds and in addition to the definitions set forth
in Section 1.01 of the Indenture, the following provisions shall govern the
defined terms set forth below.
"Accounting Date": For each Payment Date, the last day of the month
preceding the month in which such Payment Date occurs.
"Accrual Date": ________ 1, 199_.
"Accrual Period": The calendar month preceding the month in which the
applicable Payment Date occurs.
"Accrued Interest": For any Payment Date for each Class of Bonds, an
amount equal to one month's interest on their outstanding principal balances at
the rate set forth in Section 2 hereof, in either case based on a 360-day year
of twelve 30-day months, reduced by any Shortfall allocable thereto.
"Bond Percentage": For each Mortgage Pool for each Payment Date, the
Bond Percentage shall be the lesser of (a) 100% and (b) a fraction, expressed as
a percentage, the numerator of which is the outstanding principal balance of the
Class A Bonds and Class B Bonds relating to such Mortgage Pool immediately prior
to such Payment Date or on the Delivery Date, as appropriate, and the
denominator of which is the aggregate outstanding principal balance of the
Mortgage Loans in such Mortgage Pool that remain outstanding as of the first day
of the related Due Period or the Cut-off Date, as appropriate.
S-2
<PAGE> 91
"Bond Prepayment Percentage":
<TABLE>
<CAPTION>
Payment Date Bond Prepayment Percentage
- ------------ --------------------------
<S> <C>
_____ 199_ through _____ 20__........................100%;
_____ 20__ through _____ 20__........................Applicable Bond Percentage for such
Mortgage Pool, plus 70% of the
Subordinated Percentage for such
Mortgage Pool;
_____ 20__ through _____ 20__........................Applicable Bond Percentage for such
Mortgage Pool, plus 60% of the
Subordinated Percentage for such
Mortgage Pool;
_____ 20__ through _____ 20__........................Applicable Bond Percentage for such
Mortgage Pool, plus 40% of the
Subordinated Percentage for such
Mortgage Pool;
_____ 20__ through _____ 20__........................Applicable Bond Percentage for such
Mortgage Pool, plus 20% of the
Subordinated Percentage for such
Mortgage Pool; and
_____ 20__ and thereafter............................Applicable Bond Percentage for such
Mortgage Pool;
</TABLE>
provided, however, that for any Payment Date on which the Bond Percentage for a
Mortgage Pool is greater than the initial Bond Percentage for such Mortgage
Pool, such Bond Prepayment Percentage for such Payment Date shall be 100%; and,
provided further, that the reduction of the Bond Prepayment Percentage under the
foregoing provisions is subject to satisfaction as of the related Payment Date
of the applicable Step-Down Conditions.
Notwithstanding the foregoing, if the Subordinated Percentage for a Mortgage
Pool equals at least twice the initial Subordinated Percentage for such Mortgage
Pool on any Payment Date (A) occurring within three years following the Closing
Date, then such Bond Prepayment Percentage for such Payment Date will equal the
related Bond Percentage for such Payment Date plus 50% of the applicable
Subordinated Percentage for such Payment Date; or (B) occurring more than three
years following the Closing Date, such Bond Prepayment Percentage for such
Payment Date shall equal the related Bond Percentage for such Payment Date;
provided, however, that the applicable Step-Down Conditions are satisfied.
S-3
<PAGE> 92
"Bond Principal Amount": For any Payment Date an amount equal to the
sum of the following:
(a) the then applicable related Bond Percentage multiplied by
the principal portion of all Monthly Payments on the Mortgage Loans in
the related Mortgage Pool due during the related Due Period, whether or
not received;
(b) the product of (i) the then applicable related Bond
Prepayment Percentage and (ii) the sum of the following amounts: (A)
all full and partial principal prepayments on the Mortgage Loans in the
related Mortgage Pool made by the respective Borrowers during the
related Prepayment Period, (B) all other unscheduled collections,
including Insurance Proceeds, and net Liquidation Proceeds (other than
with respect to any Mortgage Loan that was finally liquidated during
the related Prepayment Period), representing or allocable to recoveries
of principal of the Mortgage Loans in the related Mortgage Pool
received during the related Prepayment Period and (C) the principal
portion of all proceeds of the purchase (or, in the case of a
substitution, amounts representing a principal adjustment) of any
Mortgage Loans in the related Mortgage Pool received during the related
Prepayment Period;
(c) with respect to unscheduled recoveries allocated to
principal of any Mortgage Loan in the related Mortgage Pool that was
finally liquidated during the related Prepayment Period, the lesser of
(A) the then applicable related Bond Prepayment Percentage multiplied
by the remaining Scheduled Principal Balance of such Mortgage Loan at
the time of liquidation and (B) the net Liquidation Proceeds; and
(d) any amounts described in clauses (a) or (b) hereof
remaining unpaid from any previous Payment Date.
"Certificated Bond": A certificated Bond other than a Book-Entry Bond.
"Class A Bonds": The Class A-1 and Class A-2 Bonds.
"Class B Bonds": The Class B-1 and Class B-2 Bonds.
"Class One Bonds": The Class A-1 and Class B-1 Bonds.
"Class One CP Subaccount": The CP Subaccount of the Collateral Proceeds
Account into which the proceeds of the Class One Mortgage Loans are to be
segregated.
"Class One Mortgage Loans": The Mortgage Loans listed in Schedule I-A
to this Series Supplement.
S-4
<PAGE> 93
"Class One Subordinated Account": The account to be created pursuant to
this Indenture into which will be deposited the proceeds of the Class One
Mortgage Loans remaining in the Class One CP Subaccount after all payments have
been made to the Class A-1 Bonds, if a Subordinated Trustee has been appointed
pursuant to Section 11 hereof. The Class One Subordinated Account will be
maintained by the Subordinated Trustee for the benefit of the Class B-1 Bonds.
"Class Two Bonds": The Class A-2 and Class B-2 Bonds.
"Class Two CP Subaccount": The CP Subaccount of the Collateral Proceeds
Account into which the proceeds of the Class Two Mortgage Loans are to be
segregated.
"Class Two Mortgage Loans": The Mortgage Loans listed in Schedule I-B
to this Series Supplement.
"Class Two Subordinated Account": The account to be created pursuant to
this Indenture into which will be deposited the proceeds of the Class Two
Mortgage Loans remaining in the Class Two CP Subaccount after all payments have
been made to the Class A-2 Bonds, if a Subordinated Trustee has been appointed
pursuant to Section 11 hereof. The Class Two Subordinated Account will be
maintained by the Subordinated Trustee for the benefit of the Class B-2 Bonds.
"Clearing Agency": The meaning assigned to such term in Section 5
hereof.
"Closing Date": _______________________.
"Collateral Value": For any Mortgage Loan, the Scheduled Principal
Balance of such Mortgage Loan.
"CP Subaccount": Either of the Class One or Class Two Subaccounts of
the Collateral Proceeds Account.
"Cut-off Date": ___________ __, 199_.
"Delivery Date": ___________ __, 199_.
"Eligible Investments": For purposes of the definition of Eligible
Investments in the Indenture, references to long-term debt ratings in one of the
two highest applicable categories from each Rating Agency shall be deemed to be
ratings of "AA" or higher by Standard & Poor's Ratings Group and "Aa3" or higher
by Moody's Investors Service, Inc. and references to commercial paper or
short-term debt ratings in the highest applicable category from each Rating
Agency shall be deemed to be "A-1" by Standard & Poor's Ratings Group and "P-1"
by Moody's Investor's Service, Inc.
S-5
<PAGE> 94
"Issue Date": _____________ __, 199_.
"Master Servicer": ____________________________, a _________________.
"Master Servicer Advance Limit": An amount equal to ___% of the
Scheduled Principal Balance of the Mortgage Loans as of the Cut-off Date.
"Month End Interest Shortfall": In the event of any Liquidation or
prepayment of a Mortgage Loan other than on the last day of a month, the excess
of (A) the difference between the interest payment that would have been paid on
such Mortgage Loan through the last day of the month in which the Liquidation or
prepayment occurred and the interest payment actually received by the Services
on such Mortgage Loan, over (B) the amount paid by the Services as compensating
interest with respect to such Mortgage Loan.
"Mortgage Pool": The group of Class One Mortgage Loans or the group of
Class Two Mortgage Loans.
"Net Rate": For any month for each Mortgage Loan, the Note Rate on such
Mortgage Loan minus the Servicing Fee Rate for such Mortgage Loan.
"Payment Date": The twenty-fifth day of each month (or, if such day is
not a Business Day, then the next succeeding Business Day), commencing in _____
1994.
"Prepayment Period": With respect to a Payment Date, _______________.
"Purchase Price": With respect to a Mortgage Loan purchased from the
Trust Estate, an amount equal to the unpaid principal balance of the Mortgage
Loan plus accrued and unpaid interest thereon through the end of the calendar
month in which the purchase occurs, at the Note Rate, and, if the Master
Servicer is the purchaser, minus any unreimbursed advances of principal made by
the Master Servicer on such Mortgage Loan and any outstanding Servicing Fees
owed with respect to such Mortgage Loan. If the purchaser is an entity other
than the Master Servicer, the Purchase Price will also include an amount equal
to any interest payments advanced by the Master Servicer and any outstanding
Servicing Fees owed with respect to the Mortgage Loan.
"Rating Agency": Each of Moody's Investors Service, Inc. and Standard &
Poor's Ratings Group.
"Realized Loss": With respect to any Mortgage Loan, (a) in the case of
a modification of a Mortgage Loan resulting from the bankruptcy of a Borrower,
the amount of any reduction of the principal balance of the Mortgage Loan or if
the principal and interest payments for any Mortgage Loan are recast in a
bankruptcy proceeding, the difference on each Payment Date between the
originally scheduled Monthly Payment relating to such Payment Date and the
revised Monthly Payment relating to such Payment Date; and (b) in the case of a
liquidated
S-6
<PAGE> 95
Mortgage Loan, the excess of (i) the unpaid principal balance of the Mortgage
Loan plus accrued interest thereon and the costs and expenses of disposition
over (ii) Liquidation Proceeds; (c) in the case of a mortgage insurer's failure
to pay a claim with respect to a Mortgage Loan on the grounds of fraud,
dishonesty or misrepresentation in the origination of such Mortgage Loan, the
amount of such claim; and (d) in the case of a loss on a Mortgage Loan arising
out of damage to the Mortgaged Property that is not covered by a Standard Hazard
Insurance Policy, the amount of such loss.
"Record Date": With respect to the first Payment Date, the Delivery
Date and, with respect to each succeeding Payment Date, the last Business Day of
the month preceding the month in which such Payment Date occurs.
"Redemption Price": With respect to the Bonds, the Redemption Price
shall be an amount equal to the sum of the then outstanding principal balance of
each Bond plus one month's Accrued Interest (plus any principal and interest on
such Bond remaining unpaid from any previous Payment Date) plus unreimbursed
Advances and unpaid Servicing Fees.
"Sales Agreement": The sales agreement relating to the Mortgage Loans,
by and between the Depositor and the Seller, dated _______ __, 1994.
"Scheduled Principal Balance": With respect to each Mortgage Loan as of
the date of determination, an amount equal to the scheduled principal balance
thereof as of the Cut-off Date, reduced by the principal portion of all
scheduled Monthly Payments due on or before such determination date, whether or
not received, and by all amounts allocable to unscheduled principal payments
received on or before such determination date and as further reduced by the
amount of any Realized Loss (to the extent treated as a principal loss) with
respect to such Mortgage Loan on or before such determination date.
"Series Year Reporting Date": ___________ 1 of each year, commencing in
__________ ( )1995.
"Servicing Agreement": The Servicing Agreement [(including the Standard
Terms to the Servicing Agreement, ________ __, 199_ Edition)] between the
Depositor and the Master Servicer, dated as of _____ 1, 199_.
"Servicing Fee": In any month, an amount equal to one-twelfth of the
Servicing Fee Rate times the aggregate Scheduled Principal Balance of the
Mortgage Loans as of the immediately preceding Due Date, without taking into
account any payment of principal due on such Due Date.
"Servicing Fee Rate": _____% per annum.
"Shortfall": Collectively, Month-End Interest Shortfall and Soldiers'
and Sailors' Shortfall.
S-7
<PAGE> 96
"Soldiers' and Sailors' Shortfall": The shortfall in interest resulting
from the reduction of the Note Rate on a Mortgage Loan with respect to military
personnel called to active service.
"Step-Down Conditions": For each Payment Date through _____, the
Step-Down Conditions are satisfied if either (a) or (b) below is satisfied:
(a)(i) not more than an average of 4% per annum of all Monthly
Payments on all of the Mortgage Loans due in the preceding
twelve months have been delinquent 60 days or more (including
Monthly Payments that would have been due with respect to
Mortgage Loans in foreclosure or that have become REO); and
(ii) aggregate Realized Losses of all of the Mortgage Loans prior
to the applicable Payment Date do not exceed 10% of the
initial Subordinated Percentage; or
(b)(i) not more than an average of 2% per annum of all Monthly
Payments on all of the Mortgage Loans due in the preceding
twelve months have been delinquent 60 days or more (including
Monthly Payments that would have been due with respect to
Mortgage Loans in foreclosure or that have become REO); and
(ii) aggregate Realized Losses of all of the Mortgage Loans prior
to the applicable Payment Date do not exceed 30% of the
initial Subordinated Percentage.
For each Payment Date following _____, the Step-Down Conditions are
satisfied if the following conditions are satisfied:
(i) not more than an average of 2% per annum of all Monthly
Payments on all of the Mortgage Loans due in the preceding
twelve months have been delinquent 60 days or more (including
Monthly Payments that are due or would have been due with
respect to Mortgage Loans in foreclosure or that have become
REO); and
(ii) aggregate Realized Losses of all of the Mortgage Loans do not
exceed the following percentages of the initial Subordinated
Percentage Surplus Accounts as of the applicable Payment Date,
as follows: Payments Dates from _____ 2004 through _____ 2005,
25%; Payment Dates from _____ 2005 through _____ 2006, 31%;
Payment Dates from _____ 2006 through _____ 2007, 38%; Payment
Dates from _____ 2007 through _____ 2008, 45%; and Payment
Dates from _____ 2008 and thereafter, 50%.
"Subordinated Percentage": 100% less the related Bond Percentage.
"Trustee": __________________________________, solely in its capacity
as Trustee under this Indenture, __________________________________________
Attn: Corporate Trust Dept., or its successor in interest, or any successor
trustee appointed as herein provided.
S-8
<PAGE> 97
"Underwriter": ____________________________________.
"Variable Rate": A per annum rate, calculated on each Payment Date,
equal to the weighted average of the Net Rates on the Mortgage Loans in the
related Mortgage Pool in effect on the first day of the applicable Due Period.
SECTION 2. Class Designation; Principal Amount; Maturity.
The Bonds shall be designated generally as the Depositor's
Collateralized Mortgage Bonds, Series ____. The aggregate principal amount of
Bonds that may be authenticated and delivered under this Series Supplement is
limited to $_____________ except for Bonds authenticated and delivered upon
registration of, transfer of or in exchange for, or in lieu of, other Bonds
pursuant to Sections 3.04, 3.05 or 3.06 of the Indenture. Such aggregate
principal amount shall be divided among four Classes having designations,
initial principal amounts, Interest Rates and Stated Maturities as follows:
<TABLE>
<CAPTION>
INITIAL
PRINCIPAL AMOUNT INTEREST STATED
DESIGNATION ----- RATE MATURITY
----------- ---- --------
<S> <C> <C> <C>
Class A-1 $ (1) 25, 2024
---------- ----------
Class A-2 (1) 25, 2024
---------- ----------
Class B-1 (1) 25, 2024
---------- ----------
Class B-2 (1) 25, 2024
---------- ----------
</TABLE>
__________________
(1) The Class One Bonds and Class Two Bonds are entitled to receive
interest on their outstanding principal balances immediately prior to
such Payment Date at the Variable Rate of the related Mortgage Pool.
SECTION 3. Date of the Bonds.
The Bonds that are authenticated and delivered by the Trustee to or
upon the order of the Depositor on the Delivery Date shall be dated _____ 1,
1994. All other Bonds that are authenticated after the Delivery Date for any
other purpose under the Indenture shall be dated the date of their
authentication.
SECTION 4. Book-Entry Bonds.
Each Class of Bonds shall be Book-Entry Bonds and shall be issued
initially as one or more certificates in the name of the Clearing Agency or its
nominee. For all purposes, the Trustee shall deal with the Clearing Agency as
Holder of such Book-Entry Bonds. The rights of Beneficial Owners of the
Book-Entry Bonds shall be limited to those established by law and agreements
between such Beneficial Owners and the Clearing Agency and Clearing Agency
S-9
<PAGE> 98
Participants. The Beneficial Owners of the Book-Entry Bonds shall not be
entitled to certificated securities for the Book-Entry Bonds as to which they
are the Beneficial Owners, except as provided below. Requests and directions
from, and votes of, the Clearing Agency, as Holder, shall not be deemed to be
inconsistent if they are made with respect to different Beneficial Owners.
Without the consent of the Depositor and the Trustee, a Book-Entry Bond may not
be transferred by the Clearing Agency except to another Clearing Agency that
agrees to hold the Book-Entry Bond for the account of the respective Clearing
Agency Participants and Beneficial Owners.
Neither the Depositor, the Master Servicer nor the Trustee will have
any liability for any aspect of the records relating to or payment made on
account of Beneficial Owners of the Book- Entry Bonds held by the Clearing
Agency, or for maintaining, supervising or reviewing any records relating to
such Beneficial Owners.
The Book-Entry Bonds will be issued in fully registered, certificated
form to Beneficial Owners of Book-Entry Bonds or their nominees, rather than to
the Clearing Agency or its nominee, only if (a) the Depositor advises the
Trustee in writing that the Clearing Agency is no longer willing or able to
discharge properly its responsibilities as depository with respect to the
Book-Entry Bonds and the Depositor is unable to locate a qualified successor
within 30 days or (b) the Depositor, at its option, elects to terminate the
book-entry system operating through the Clearing Agency.
Upon the occurrence of either event described in the immediately
preceding paragraph, the Trustee is required to notify the Clearing Agency,
which in turn will notify all Beneficial Owners of Book-Entry Bonds through
Clearing Agency Participants, of the availability of Certificated Bonds. Upon
surrender by the Clearing Agency of the certificates representing the Book-Entry
Bonds and receipt of instructions for re-registration, the Trustee will reissue
the Book-Entry Bonds as Certificated Bonds to the Beneficial Owners identified
in writing by the Clearing Agency. Such Certificated Bonds shall not constitute
Book-Entry Bonds.
SECTION 5. Denominations.
Except as provided below, each Class of Bonds will be registered in one
or more certificates in the name of a nominee of The Depository Trust Company
(the "Depository" or the "Clearing Agency") (together with any successor
depository selected by the Depositor), and beneficial interests will be held by
investors through the book-entry facilities of the Depository in minimum
denominations of $25,000 and increments of $1,000 in excess thereof.
SECTION 6. Determination of Interest and Interest Payments.
Each Class of Bonds will be entitled to receive its applicable Accrued
Interest on each Payment Date. Interest shall be calculated on the basis of a
360-day year consisting of twelve 30-day months. Interest accruing on the
outstanding principal balance of each Class of Bonds on any Payment Date will
include interest for the applicable Accrual Period.
S-10
<PAGE> 99
SECTION 7. Priority of Payments.
(a) In accordance with the Indenture, on each Payment Date, the Trustee
(or the Paying Agent on behalf of the Trustee) shall segregate monies in the
Collateral Proceeds Account into the Class One CP Subaccount, in the case of
funds received with respect to the Class One Mortgage Loans, and the Class Two
CP Subaccount, in the case of funds received with respect to the Class Two
Mortgage Loans, in accordance with the statement furnished by the Master
Servicer and shall distribute such funds for each Mortgage Pool in the following
manner:
(i) funds in each CP Subaccount will be applied in the following
order:
(A) to the related Class A Bonds, an amount equal to the
Accrued Interest on such Bonds or Amount for such Payment Date (plus
any interest for such Bonds or Amount remaining unpaid from any
previous Payment Date);
(B) to the related Class A Bonds, an amount equal to the
related Bond Principal Amount, to be applied to reduce the
outstanding principal balance thereof, until the related Class A
Bonds have been paid in full;
(C) if the amount in such CP Subaccount is in excess of the
amounts necessary to distribute in full the amounts described in
clauses (A) and (B) above and the amount in the CP Subaccount
relating to the other Mortgage Pool is less than the amount required
to distribute in full the amounts described in clauses (A) through
(B) above for the Class A Bonds and relating to such other Mortgage
Pool, then such excess amount will be applied to such other Mortgage
Pool to reduce such insufficiency, if any;
(D) to the related Class B Bonds, an amount equal to Accrued
Interest on such Class B Bonds for such Payment Date (plus any
interest for such Class B Bonds remaining unpaid from any previous
Payment Date);
(E) provided that the outstanding principal balance of the
related Class A Bonds has been paid in full, to the related Class B
Bonds, an amount equal to the related Bond Principal Amount, to be
applied to reduce the outstanding principal balance thereof, until
the related Class B Bonds have been paid in full;
(F) if the amount in such CP Subaccount is in excess of the
amounts necessary to distribute in full the amounts described in
paragraphs (D) and (E) above and the amount in the CP Subaccount
relating to the other Mortgage Pool is less than the amount required
to distribute in full the amounts described in clauses (D) and (E)
above for the Class B Bonds relating to such other Mortgage Pool,
then such excess amount will be applied to such other Mortgage Pool
to reduce such insufficiency, if any;
S-11
<PAGE> 100
(G) To the extent amounts have been diverted into a CP
Subaccount from another CP Subaccount pursuant to clauses (C) or (F)
above and not reimbursed previously, equivalent amounts, to the
extent of available funds, shall be diverted from the CP Subaccount
so increased into the CP Subaccount from which the funds were taken;
and
(ii) any principal and interest amounts on the Mortgage Loans
remaining in each CP Subaccount shall be deposited in the Surplus Account
and released from the lien of the Indenture and paid to the Depositor or
such Person as the Depositor shall designate in accordance with Section
13.05 of the Indenture.
(b) In the event that a Subordinated Trustee is appointed pursuant to
Section 11 hereof, on each Payment Date after the payment of the Class A Bonds
related to each Mortgage Pool in accordance with subsections (a)(i)(A) through
(a)(i)(C) of this Section 7, all amounts remaining in a CP Subaccount as
specified in the statement furnished by the Master Servicer shall be transferred
by the Trustee to the Subordinated Trustee for deposit into a Subordinated
Account for such Class established by the Subordinated Trustee for payment in
accordance with (a)(i)(D) through (a)(i)(G) and (a)(ii).
(c) All distributions or allocations made with respect to each Class of
Bonds on each Payment Date shall be allocated pro rata among the Outstanding
Bonds of such Class.
SECTION 8. Places for Payment.
Payments to the Holders of each Class of Bonds on any Payment Date will be
made to the Holders of record of the respective Class on the related Record
Date. Distributions on the Book-Entry Bonds shall be made to the Depository by
wire transfer. Payments on any Certificated Bond will be made either (a) by
check mailed to the address of each Bondholder as it appears in the Bond
Register maintained by the Bond Registrar or (b) by wire transfer of immediately
available funds (upon request to the Trustee in writing by the Record Date
immediately prior to such Payment Date) by any holder of such Bonds having an
initial principal amount of at least $10,000. A fee may be charged by the
Trustee to a Certificated Bondholder for any payment made by wire transfer.
Final payments on the Bonds will be made only upon surrender of the Bonds at the
Corporate Trust Office of the Trustee.
SECTION 9. Redemption.
The Bonds are subject to redemption, in whole but not in part, at the
option of the Depositor, on any Payment date on or after the Payment Date on
which, after giving effect to payments on the Bonds to be made on such date, the
aggregate principal balance of Bonds then outstanding is equal to or less than
__ % of the original aggregate principal amount of the Bonds. Any such
redemption shall be at a price equal to the Redemption Price and shall be
conducted in accordance with Article Eleven of the Indenture.
S-12
<PAGE> 101
SECTION 10. Separate Trustees in the Event of a Conflict
At any time or times (a) for the purpose of meeting the legal requirements
of any jurisdiction in which any part of the Trust Estate may at the time be
located or (b) if the Holders of a majority of the then outstanding principal
balance of the Class B Bonds determines that there is a conflict between the
interests of the Holders of Class A Bonds, on the one hand, and the interests of
the Holders of Class B Bonds, on the other, the majority of the Holders of the
Class B Bonds may so notify the Trustee and the Depositor in writing, and the
Depositor shall, upon such notification, appoint one or more Persons (who shall
not be Bondholders) to act as co-trustee, jointly with the Trustee (referred to
herein, in the event a Subordinated Trustee has been appointed, as the "Senior
Trustee"), of all or any part of the Trust Estate (such co-trustee, if appointed
pursuant to clause (b) above, a "Subordinated Trustee"), or to act as
Subordinated Trustee of any such property, in either case with such powers as
may be provided in the instrument of appointment, which shall expressly
designate the property affected and the capacity of the appointee as either a
co-trustee or Subordinated Trustee and to vest in such Person or Persons in the
capacity aforesaid any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section; provided, however,
that in cases of appointment of a Subordinated Trustee, the Senior Trustee shall
have possession of the Trust Estate in accordance with this Indenture. Any such
co-trustee or Subordinated Trustee shall accept its appointment in accordance
with Section 7.11 of the Indenture.
The Depositor shall join with the Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to appoint
such co-trustee or Subordinated Trustee. If the Depositor does not join in such
appointment within 15 days after the receipt by them of a request to do so, the
Trustee alone shall have power to make such appointment; provided, however, that
if an Event of Default has occurred and is continuing and a Subordinated Trustee
is to be appointed, the Holders of a majority of the outstanding principal
balance of the Class B Bonds shall also have power to make such appointment.
Should any written instrument from the Depositor be required by any
co-trustee or Subordinated Trustee so appointed to more fully confer to such
co-trustee or Subordinated Trustee such property, title, right or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Depositor.
Every co-trustee or Subordinated Trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms:
(i) the Bonds shall be authenticated and delivered and all rights,
powers, duties and obligations hereunder in respect of the custody of the
Mortgage Collateral held by, or required to be deposited or pledged with,
the Trustee hereunder, shall be exercised solely by the Trustee or the
Senior Trustee as the case may be;
(ii) the rights, powers, duties and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by the
appointment of a co-trustee
S-13
<PAGE> 102
or Subordinated Trustee shall be conferred or imposed upon and exercised
or performed by the Trustee or the Senior Trustee and such co-trustee or
Subordinated Trustee jointly, as shall be provided in the instrument
appointing such co-trustee or Subordinated Trustee, except to the extent
that under any law of any jurisdiction in which any particular act is to
be performed, the Trustee or the Senior Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers,
duties and obligations shall be exercised and performed by such co-trustee
or Subordinated Trustee;
(iii) the Trustee at any time, by an instrument in writing executed
by it, with the approval of the Depositor evidenced by an Depositor Order,
may accept the resignation of or remove any co-trustee (except a
Subordinated Trustee) appointed under this Section and, in case an Event
of Default has occurred and is continuing, the Trustee shall have power to
accept the resignation of, or remove, any such co-trustee (except a
Subordinated Trustee) without the approval of the Depositor. In the case
of a Subordinated Trustee, the Holders of a majority of the then
outstanding principal balance of the Class B Bonds shall have the power to
accept the resignation of or remove any such Subordinated Trustee. Upon
the written request of the Trustee, or, in the case of the removal or
resignation of a Subordinated Trustee, upon the written request of a
majority of the Holders of a majority of the then outstanding principal
balance of the Class B Bonds, the Depositor shall join with the Trustee in
the execution, delivery and performance of all instruments and agreements
necessary or proper to effectuate such resignation or removal; a successor
to any co-trustee or Subordinated Trustee so resigned or removed may be
appointed in the manner provided in this Section. On the date on which the
Class B Bonds have been paid in full, any Subordinated Trustee that has
been appointed and is then serving pursuant to this Section shall resign
and the Senior Trustee shall accept the resignation of, or remove, such
Subordinated Trustee, effective immediately, without the approval of the
Depositor or the Holders of the Class B Bonds;
(iv) no co-trustee or Subordinated Trustee hereunder shall be
personally liable by reason of any act or omission of the Trustee, or any
other such co-trustee, Senior Trustee or Subordinated Trustee hereunder;
(v) the Trustee shall not be liable by reason of any act or
omission of a co-trustee or Subordinated Trustee to the extent such
co-trustee or Subordinated Trustee is appointed in good faith and with
due care;
(vi) except in the case of conflicts between Classes, any Act of
Bondholders delivered to the Trustee shall be deemed to have been
delivered to each co-trustee and Subordinated Trustee; in the case of
conflicts between Classes, any Act of Bondholders delivered to the Senior
Trustee shall be effective upon such delivery in accordance with the
Indenture; the Senior Trustee shall promptly deliver a copy thereof to any
Subordinated Trustee appointed pursuant to this Section; and
S-14
<PAGE> 103
(vii) any co-trustee or Subordinated Trustee must meet the
eligibility requirements of Section 7.9 of the Original Indenture.
SECTION 11. Transfer or Pledge of Depositor's Interest in the Trust Estate.
The Depositor may transfer its interest in the Trust Estate or pledge its
interest in the Trust Estate to secure additional series of Bonds, provided that
(i) all right, title and interest so transferred shall be subject to the rights
of the Holders of the Bonds and to the lien of the Indenture and (ii) there
shall be delivered to the Trustee a letter from each of the Rating Agencies to
the effect that such transfer will not result in a lowering of the rating
assigned to the Bonds by such Rating Agency.
SECTION 12. Default.
(a) An Event of Default with respect to a Bond means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) With respect to the Class A Bonds:
(A) Default in the payment of any principal of or interest on any
Bond when the same becomes due and payable, which Default shall continue
for a period of five days; or
(B) Failure in the payment in full of the principal amount of any
Bond by its Stated Maturity; or
(C) Default in the performance, or breach, of any covenant,
representation or warranty of the Depositor in the Indenture or in this
Series Supplement (other than a Default in the performance of or breach of
any covenant or warranty that is specifically dealt with elsewhere in this
Section or in Article Nine of the Indenture), and continuance of such
Default or breach for a period of 60 days after there shall have been
given, by registered or certified mail, to the Depositor by the Trustee or
to the Depositor and the Trustee by the Holders of at least 25% in then
outstanding principal balance of the Class A Bonds, a written notice
specifying such Default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" under the Indenture.
(ii) With respect to the Class B Bonds, so long as 121 days have elapsed
during which no Class A Bonds have remained Outstanding:
(A) Default in the payment of principal of or interest on any Bond
when the same becomes due and payable, which Default shall continue for a
period of five days; or
S-15
<PAGE> 104
(B) Failure in the payment in full of the principal amount of any
Bond by its Stated Maturity; or
(C) Default in the performance, or breach, of any covenant,
representation or warranty of the Depositor in the Indenture or in this
Series Supplement (other than a Default in the performance of or breach of
any covenant or warranty that is specifically dealt with elsewhere in this
Section or in Article Nine of the Indenture), and continuance of such
Default or breach for a period of 60 days after there shall have been
given, by registered or certified mail, to the Depositor by the Trustee or
to the Depositor and the Trustee by the Holders of at least 25% in then
outstanding principal balance of the Class B Bonds, a written notice
specifying such Default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" under the Indenture.
(iii) With respect to all Bonds:
(A) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Depositor bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Depositor under the
Federal Bankruptcy Code or any other applicable federal or state law, or
appointing a receiver, liquidator, assignee, or sequestrator (or other
similar official) of the Depositor or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for a
period of 90 consecutive days; or
(B) the institution by the Depositor of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or
relief under the Federal Bankruptcy Code or any other similar applicable
federal or state law, or the consent by it to the filing of any such
petition or to the appointment of a receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) of the Depositor or of
any substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Depositor in furtherance of any such action.
(b) If the Trustee sells the Trust Estate pursuant to Section 6.04 of the
Original Indenture, any money collected by the Trustee and applied to the
payment of the Bonds pursuant to Section 6.08 of the Original Indenture shall be
applied in accordance with Section 7 hereof.
(c) Each Bondholder shall be deemed to have agreed, by its acceptance of
the Bonds, not to file, or join in filing, any petition in bankruptcy or
commence any similar proceeding in respect of the Depositor for a period of one
year and one day following the payment in full of such Bond.
S-16
<PAGE> 105
(d) Upon the occurrence of a default hereunder with respect to any Class
of Bonds (without regard to the passage of time or giving of notice, or both)
and the continuance of such default for 90 days, the Trustee is required to
resign as trustee for the Class B Bonds and appoint a new trustee for such Bonds
pursuant to Section ___ of the Indenture.
(e) Upon the occurrence of an Event of Default under Section 6.01 of the
Servicing Agreement, the Trustee shall, at the direction of the Holders of at
least 51% of the aggregate outstanding principal balance of the Bonds, and may
without such direction, enforce any of the remedies set forth in the Servicing
Agreement.
SECTION 13. Substitution or Repurchase of Mortgage Collateral.
(a) The Depositor's right to substitute Mortgage Collateral as security
for the Bonds pursuant to Section 3.11 of the Original Indenture is subject to
the additional limitations that in no event may such a substitution (i)
materially change the characteristics of the Mortgage Loans pledged to secure
the Bonds or (ii) result in an extension of the Stated Maturity of any Class of
Bonds. In addition, the Depositor's right to substitute Mortgage Collateral
shall be limited to substitutions of items of Mortgage Collateral that (i) the
Seller substitutes pursuant to the Sales Agreement and (ii) take place within
the time constraints to which the Seller is subject under the Sales Agreement.
The Trustee shall be entitled to rely on an Officer's Certificate of the
Depositor as to the Depositor's compliance with these requirements.
The Depositor shall not be required to provide the Trustee with a letter
from the Rating Agencies or an Accountant's Certificate as required by Section
3.11 of the Indenture in connection with a substitution of Mortgage Collateral
if the sum of the Collateral Value at the time of withdrawal of the Original
Mortgage Collateral withdrawn plus the Collateral Value at the time of
withdrawal of all Original Mortgage Collateral previously withdrawn under this
Section 13 does not exceed $1,000,000, and the substitution otherwise meets the
requirements of the Indenture. The Trustee shall be entitled to rely on an
Officer's Certificate of the Depositor as to a substitution meeting such
requirements.
(b) The Depositor may also obtain the release from the lien of the
Indenture of any Mortgage Loan that has suffered a material impairment in value
due to a breach of the representations and warranties contained in the Sales
Agreement. In order to obtain such release, the Depositor must remit to the
Trustee the amount of the Purchase Price, which the Trustee shall treat as a
prepayment in full of such Mortgage Loan.
SECTION 14. Converted Mortgage Loans.
Upon receipt of written notice of the conversion of any ARM Loan to a
Converted Mortgage Loan, the Master Servicer shall on behalf of the Trustee
enforce the provisions of the Sales Agreement with respect to such Converted
Mortgage Loan to purchase such Converted Mortgage Loan from the Trust Estate. In
the event that the Master Servicer is unable to enforce the provisions of the
Sales Agreement relating to the purchase of any Converted Mortgage Loan
S-17
<PAGE> 106
due to the default of the party obligated thereunder, and such default remains
unremedied for five Business Days following notice thereof to such party, the
Master Servicer shall on behalf of the Trustee use its best efforts to cause
such Converted Mortgage Loan to be sold for settlement on the last day of any
month. Any such Converted Mortgage Loan that is not purchased or sold as
provided herein shall remain in the Trust Estate.
SECTION 15. Trustee's Advance Obligation.
As a successor Master Servicer, the Trustee shall be obligated to make
Advances with respect to the Mortgage Loans in accordance with the terms of the
Servicing Agreement if the Master Servicer fail to make a required Advance;
provided, however, that the Trustee shall not be obligated to make an Advance
that it deems unrecoverable. The Trustee is entitled to rely upon any
determination by the Master Servicer that an Advance is unrecoverable. The
Trustee shall not be required to make Advances in excess of the Master Servicer
Advance Limit.
SECTION 16. Form of Bonds.
The forms of each Class of Bonds are set forth as Exhibit A-1, Exhibit
A-2, Exhibit B-1 and Exhibit B-2, which are attached hereto in accordance with
the terms of the Indenture. Exhibit Z also is attached hereto.
SECTION 17. Notice to the Rating Agencies.
The Depositor shall use its best efforts promptly to provide notice to the
Rating Agencies of the following events of which it has actual knowledge with
respect to each of the Class One Mortgage Loans and Class Two Mortgage Loans:
(a) any material change to or amendment of this Series Supplement or
the Original Indenture;
(b) the occurrence of any Event of Default that has not been cured;
(c) the resignation or termination of the Trustee;
(d) the substitution of Mortgage Collateral; or
(e) the final payment to Bondholders.
In addition, the Depositor shall provide to the Rating Agencies (i) each
month a copy of the Payment Date Report and (ii) within 90 days after the end of
each calendar year a report on delinquencies and foreclosures occurring with
respect to the Mortgage Loans of each Mortgage Pool during such calendar year.
S-18
<PAGE> 107
SECTION 18. Payment Instructions.
The Trustee shall direct funds released from the lien of the Indenture
pursuant to Section 7 hereof in accordance with separate payment instructions of
the Depositor with respect to each Surplus Account.
SECTION 19. Ratification of Indenture.
As supplemented by this Series Supplement, the Indenture is in all
respects ratified and confirmed, and the Indenture as so supplemented by this
Series Supplement shall be read, taken and construed as one and the same
instrument.
SECTION 20. Schedules.
Schedule I-A, Schedule I-B and Schedule II are attached hereto as
contemplated by the Indenture.
SECTION 21. Counterparts.
This Series Supplement may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same instrument.
S-19
<PAGE> 108
IN WITNESS WHEREOF, the Depositor and the Trustee have caused this Series
Supplement to be duly executed by their respective officers thereunto duly
authorized and their respective signatures duly attested all as of the 1st day
of ________ 19__.
UNION PLANTERS MORTGAGE
FINANCE CORP.
Attest:
By:
------------------------------
By: Its:
---------------------------- -----------------------------
Its:
---------------------------
---------------------------------
_____________, as Trustee
Attest:
By: -----------------------------
By: Its:
----------------------------- ----------------------------
Its:
- ---------------------------
S-20
<PAGE> 109
LIST OF SCHEDULES AND EXHIBITS
<TABLE>
<S> <C>
SCHEDULE I-A CLASS ONE MORTGAGE LOANS
SCHEDULE I-B CLASS TWO MORTGAGE LOANS
SCHEDULE II LIST OF THIRD PARTY SALES AGREEMENTS
EXHIBIT A-1 FORM OF CLASS A-1 BOND
EXHIBIT A-2 FORM OF CLASS A-2 BOND
EXHIBIT B-1 FORM OF CLASS B-1 BOND
EXHIBIT B-2 FORM OF CLASS B-2 BOND
EXHIBIT Z ORIGINAL ISSUE DISCOUNT DISCLOSURE
</TABLE>
S-21
<PAGE> 1
EXHIBIT 4.3
===============================================================================
UNION PLANTERS MORTGAGE FINANCE CORP.,
Depositor,
and
----------------------------------,
Trustee
--------------------------------
TRUST AGREEMENT
Dated ___________, 19___
--------------------------------
Mortgage Pass-Through Certificates
Series 199__
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C> <C> <C>
Section 1.01. Defined Terms............................................................. 1
ARTICLE II
CONVEYANCE OF THE UNDERLYING CERTIFICATES;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of the Underlying Certificates................................. 11
Section 2.02. Issuance of Certificates Evidencing Interests in the Trust Fund........... 13
Section 2.03. Representations, Warranties and Covenants of the Depositor................ 14
ARTICLE III
ADMINISTRATION OF THE UNDERLYING CERTIFICATES;
PAYMENTS AND REPORTS TO CERTIFICATEHOLDERS
Section 3.01. Administration of the Trust Fund and the Underlying Certificates.......... 14
Section 3.02. Collection of Monies...................................................... 15
Section 3.03. Establishment of Certificate Account; Deposits in Certificate Account..... 16
Section 3.04. Permitted Withdrawals From the Certificate Account........................ 16
Section 3.05. Payments.................................................................. 17
Section 3.06. Statements to Certificateholders.......................................... 19
Section 3.07. Access to Certain Documentation and Information........................... 21
Section 3.08. Permitted Investments..................................................... 21
Section 3.09. Reports of Certificate Principal Balances to the Clearing Agency.......... 21
ARTICLE IV
THE CERTIFICATES
Section 4.01. The Certificates.......................................................... 21
Section 4.02. Registration of Transfer and Exchange of Certificates..................... 22
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates......................... 28
Section 4.04. Persons Deemed Owners..................................................... 28
Section 4.05. Appointment of Paying Agent............................................... 28
Section 4.06. Book-Entry Certificates................................................... 29
ARTICLE V
THE TRUSTEE
Section 5.01. Duties of Trustee......................................................... 30
Section 5.02. Certain Matters Affecting the Trustee..................................... 31
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
Section 5.03. Trustee Not Liable for Certificates or Underlying Certificates............ 32
Section 5.04. Trustee May Own Certificates.............................................. 32
Section 5.05. Trustee's Fees; Indemnification........................................... 32
Section 5.06. Eligibility Requirements for Trustee...................................... 33
Section 5.07. Resignation and Removal of the Trustee.................................... 33
Section 5.08. Successor Trustee......................................................... 34
Section 5.09. Merger or Consolidation of Trustee........................................ 34
Section 5.10. Appointment of Co-Trustee or Separate Trustee............................. 35
Section 5.11. Appointment of Office or Agency........................................... 36
Section 5.12. Trustee May Enforce Claims Without Possession of Certificates............. 36
Section 5.13. Filings with the Securities and Exchange Commission....................... 36
ARTICLE IV
TERMINATION; EVENTS OF DEFAULT
Section 6.01. Termination of the Trust Fund............................................. 36
Section 6.02. Termination of Underlying Trusts.......................................... 38
ARTICLE VII
THE DEPOSITOR
Section 7.01. Liability of the Depositor................................................ 38
Section 7.02. Merger, Consolidation or Conversion of the Depositor...................... 38
Section 7.03. Limitation on Liability of the Depositor.................................. 39
ARTICLE VIII
TAX PROVISIONS
Section 8.01. Trust Administration...................................................... 39
Section 8.02. Prohibited Activities..................................................... 40
Section 8.03. Tax Matters Person of Underlying Trusts................................... 40
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.01. Amendment................................................................. 41
Section 9.02. Counterparts.............................................................. 42
Section 9.03. Limitation on Rights of Certificateholders................................ 42
Section 9.04. Governing Law............................................................. 43
Section 9.05. Notices................................................................... 43
Section 9.06. Notices to Rating Agency.................................................. 44
Section 9.07. Severability of Provisions................................................ 44
Section 9.08. Successors and Assigns.................................................... 44
Section 9.09. Article and Section Headings.............................................. 45
</TABLE>
<PAGE> 4
Exhibits
Exhibit A Form of Class __ Certificates
Exhibit B Form of Class __ Certificates
Exhibit C Underlying Certificate Schedule
[Exhibit D Form of Transferee Agreement]
[Exhibit E Form of Rule 144A Certificate]
[Exhibit F Form of Transfer Affidavit and Agreement]
[Exhibit G Form of ERISA Representation Letter for Insurance Companies
and Bank Collective Investment Funds]
<PAGE> 5
THIS TRUST AGREEMENT, dated _____________ __, 19__, between
UNION PLANTERS MORTGAGE FINANCE CORP., as depositor (the "Depositor") and
________________________, as trustee (the "Trustee").
PRELIMINARY STATEMENT
The Depositor desires to transfer to the Trust Fund on the
date hereof the Underlying Certificates, and the Trustee will issue [two] new
Classes of Certificates, as provided herein.
The Depositor intends to sell the Mortgage Pass-Through
Certificates, Series 199_-_ (the "Certificates"), to be issued hereunder in
[two] classes, which in the aggregate will evidence the entire beneficial
ownership in the Underlying Certificates.
The following table sets forth the designation, aggregate
Initial Certificate Principal Balance and Maturity Date for each Class of
Certificates:
<TABLE>
<CAPTION>
INITIAL CERTIFICATE
DESIGNATION PRINCIPAL BALANCE MATURITY DATE
----------- ----------------- -------------
<S> <C> <C>
Class __ $________________ _____ __, 20__
Class __ (1) _____ __, 20__
</TABLE>
- -----------------
(1) Although the Class __ Certificates have no actual Certificate Principal
Balance, the initial notional Certificate Principal Balance of the Class __
Certificates is $_____, which corresponds to the aggregate notional Underlying
Certificate Principal Balance of the Underlying Residual Certificates as of the
Cut-Off Date.
In consideration of the mutual agreements herein contained,
the Depositor and the Trustee agree as follows:
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 following
meanings:
Agreement: This Trust Agreement and all amendments hereof and
supplements hereto.
<PAGE> 6
-2-
Anticipated Termination Date: Any Payment Date on which the
Trustee anticipates that the Trust Fund will be terminated pursuant to Section
6.01.
Available Distribution Amount: As of any date of
determination, the aggregate amount on deposit in the Certificate Account as of
such date of determination, net of any portion thereof which represents amounts
payable pursuant to clause (ii), (iii) or (iv) of Section 3.04.
Beneficial Owner: With respect to a Book-Entry Certificate,
the Person who is registered as owner of that Certificate in the books of the
Clearing Agency for that Certificate or in the books of a Person maintaining an
account with such Clearing Agency.
Book-Entry Certificates: The Class __ Certificates.
Business Day: Any day other than a Saturday or a Sunday, or a
day on which banking institutions in the State of _________________ or such
other state or states in which the Certificate Account or any account relating
to the Underlying Certificates, are located and are required or authorized by
law or executive order to be closed.
Certificate: Any Class __ Certificate or Class __ Certificate.
Certificate Account: The trust account or accounts, which
shall at all times be Eligible Accounts, created and maintained by the Trustee
pursuant to Section 3.03. Funds deposited in the Trust Certificate Account shall
be held in trust for the Certificateholders for the uses and purposes set forth
in Article III hereof.
Certificate Principal Balance: With respect to any Class __
Certificate, on any date of determination, an amount equal to the Initial
Certificate Principal Balance of such Certificate as specified on the face
thereof, as adjusted pursuant to Section 3.05. The Class __ Certificates have no
Certificate Principal Balance.
Certificate Registrar and Certificate Register: Shall each
have the meanings provided in Section 4.02.
Certificateholder or Holder: The person in whose name a
Certificate is registered in the Certificate Register, except that, neither a
Disqualified Organization nor a non-United States Person shall be a Holder of a
Class __ Certificates for any purposes hereof, and solely for the purpose of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Depositor, the Trustee or any affiliate thereof shall be deemed not
to be Outstanding Certificates or counted in any way.
Class: Collectively, all of the Certificates bearing the same
designation.
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Class __ Certificate: Any one of the Class __ Certificates
executed, authenticated and delivered by the Trustee substantially in the form
annexed hereto as Exhibit A.
Class __ Certificate: Any one of the Class __ Certificates
executed, authenticated and delivered by the Trustee substantially in the form
annexed hereto as Exhibit B.
Clearing Agency: The Depository Trust Company, or any
successor organization or any other organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended, and the regulations of the Securities and Exchange Commission
thereunder.
Clearing Agency Participant: A broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
Closing Date: _____ __, 19__.
Code: The Internal Revenue Code of 1986, as amended.
Commission: The Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or if at any time such Commission is not existing and performing the
duties now assigned to it under the such Act, then the body performing such
duties at such time under such Act or similar legislation.
Corporate Trust Office: The principal corporate trust office
of the Trustee in the State of ____________ at which at any particular time its
corporate trust business with respect to this Agreement shall be administered,
which office at the date of the execution of this Agreement is located at
_________________________________________________________, Attention: Corporate
Trust Services.
Cut-Off Date: _____ 1, 19__ (after giving effect to
distributions to be made on the Underlying Certificates on _____ [25], 19__
pursuant to the Underlying Agreements).
Depositor: Union Planters Mortgage Finance Corp., a Delaware
corporation, or its successor in interest.
Disqualified Organization: Any of the following: (i) the
United States or any possession thereof, any State or political subdivision
thereof, or any agency or instrumentality of the foregoing (other than an
instrumentality that is a corporation if all of its activities are subject to
tax and, except for the Freddie Mac, a majority of its board of directors is not
selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than
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certain farmers' cooperatives described in Section 521 of the Code) which is
exempt from the tax imposed by Chapter 1 of the Code (unless such organization
is subject to the tax imposed by Section 511 of the Code on unrelated business
taxable income), or rural electric and telephone cooperatives described in
Section 1381(a)(2)(C) of the Code and (iv) any other Person so designated by the
Trustee based upon an Opinion of Counsel provided to the Trustee that the
holding of an ownership interest in a Class __ Certificate by such Person may
cause the Trust Fund or any Person having an ownership interest in any Class of
Certificates (other than such Person) to incur liability for any federal tax
imposed under the Code that would not otherwise be imposed but for the transfer
of an ownership interest in the Class __ Certificate to such Person. The terms
"United States," "State" and "international organization" shall have the
meanings set forth in Section 7701 of the Code.
Distribution Date: With respect to any Underlying Certificate,
"Distribution Date" shall have the meaning assigned thereto in the related
Underlying Agreement.
Distribution Date Statement: With respect to any Underlying
Certificate and any Distribution Date, the monthly remittance report forwarded
to the holder of such Underlying Certificate with respect to such Distribution
Date pursuant to the related Underlying Agreement.
Eligible Account: An account that is any of the following: (i)
maintained with a depository institution the short-term deposits of which have
been rated not lower than "___" by the Rating Agency and the long-term deposits
of which have been rated not lower than "___" by the Rating Agency, (ii) an
account or accounts the deposits in which such accounts are fully insured to the
limits established by the FDIC, provided that any such deposits not so insured
shall, to the extent acceptable to the Rating Agency, as evidenced in writing,
be otherwise maintained such that (as evidenced by an Opinion of Counsel
delivered to the Trustee and the Rating Agency) the registered Holders of
Certificates have a claim with respect to the funds in such account or a
perfected first security interest against any collateral (which shall be limited
to Permitted Investments) securing such funds that is superior to claims of any
other depositors or creditors of the depository institution with which such
account is maintained, (iii) a trust account or accounts maintained in the
corporate trust department of the Trustee, or (iv) an account or accounts of a
depository institution acceptable to the Rating Agency (as evidenced in writing
by the Rating Agency that use of any such account as the Certificate Account
will not have an adverse effect on the then-current ratings assigned to the
Classes of the Certificates then rated by the Rating Agency).
ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
ERISA Restricted Certificates: The Class __ Certificates.
Fannie Mae: Fannie Mae (formerly the Federal National Mortgage
Association) or any successor.
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FDIC: The Federal Deposit Insurance Corporation or any
successor.
Final Payment Date: The Payment Date set forth in the notice
delivered by the Trustee of the final payment of the Certificates pursuant to
Section 6.01.
Freddie Mac: Freddie Mac (Formerly known as The Federal Home
Loan Mortgage Corporation) or any successor.
Independent: When used with respect to any specified Person,
such Person who (i) is in fact independent of the Depositor, (ii) does not have
any direct financial interest in the Depositor or in an affiliate of the
Depositor and (iii) is not connected with the Depositor as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing similar
functions.
Initial Certificate Principal Balance: With respect to any
Class of Certificates, the aggregate initial Certificate Principal Balance of
such Class of Certificates as of the Closing Date as set forth in the
Preliminary Statement hereto.
Servicer: With respect to each Underlying Certificate and the
Mortgage Loans in which such Underlying Certificate evidences a beneficial
ownership interest, _____________________, and its successors and assigns, as
servicer under the related Underlying Agreement.
Maturity Date: With respect to each Class of Certificates, the
date as designated in the Preliminary Statement hereof.
Mortgage Loans: With respect to any Underlying Certificate,
the mortgage loans in which such Underlying Certificate evidences a beneficial
ownership interest.
Non-United States Person: Any Person other than a United
States Person.
Notice of Final Distribution: With respect to any Underlying
Certificate, the notice to be provided pursuant to the related Underlying
Agreement to the effect that final distribution on such Underlying Certificate
shall be made only upon presentation and surrender thereof.
Notice of Termination: Any of the notices given by the Trustee
pursuant to Section 6.01(b).
Officer's Certificate: As required by this Agreement, a
certificate signed by (i) with respect to the Depositor, the Chairman of the
Board, the President or a Vice President or and by the Secretary of the
Depositor or (ii) with respect to the Trustee, a Responsible Officer.
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Opinion of Counsel: A written opinion of counsel, who may be
counsel for the Depositor, which opinion is reasonably acceptable to the
Trustee; except that any opinion of counsel relating to the qualification of any
account required to be maintained pursuant to this Agreement as an Eligible
Account must be an opinion of Independent counsel. No such opinion of counsel
shall be deemed unacceptable by the Trustee merely because such opinion is an
opinion of counsel who is an employee of the Person on whose behalf such opinion
is rendered unless such opinion of counsel is required to be an opinion of
Independent counsel.
Outstanding Certificates: With respect to the Certificates, as
of the date of determination, all Certificates theretofore executed and
delivered under this Agreement except:
(i) Certificates theretofore canceled by the Trustee or
delivered to the Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of
which other Certificates have been executed and
delivered pursuant to this Agreement unless proof
satisfactory to the Trustee is presented that any
such Certificates are held by a holder in due course.
Ownership Interest: As to any Certificate or Underlying
Certificate, any ownership or security interest in such Certificate or
Underlying Certificate, including any interest in such Certificate as the Holder
thereof and any other interest therein, whether direct or indirect, legal or
beneficial, as owner or as pledgee.
Paying Agent: Any Paying Agent appointed by the Trustee in
accordance with Section 4.05 hereof.
Payment Date: The Business Day immediately following (a) the
[25]th day of each month or, (b) if such day is not a Business Day, then the
Business Day immediately following such [25]th day. The anticipated first
Payment Date will be _____ __, 19__.
Percentage Interest: With respect to any Class __ Certificate,
the undivided percentage ownership interest evidenced by such Certificate in all
of the Certificates of such Class, which percentage ownership interest shall be
equal to the Initial Certificate Principal Balance of such Certificate divided
by the aggregate Initial Certificate Principal Balance of all of the
Certificates of such Class. With respect to a Class __ Certificate, the
undivided percentage ownership interest in such Class, as stated on the face of
such Certificate.
Permitted Investments: One or more of the following:
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(i) direct obligations of, or obligations fully guaranteed
as to 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;
(ii) repurchase obligations (the collateral for which is
held by a third party or the Trustee) with respect to any security
described in clause (i) above, provided that the long-term unsecured
obligations of the party agreeing to repurchase such obligations are at
the time rated by the Rating Agency in one of its two highest
short-term rating categories available;
(iii) federal funds, certificates of deposit, demand
deposits, time deposits and bankers' acceptances (which shall each have
an original maturity of not more than 90 days and, in the case of
bankers' acceptances, shall in no event have an original maturity of
more than 365 days or a remaining maturity of more than 30 days) of any
U.S. depository institution or trust company incorporated under the
laws of the United States or any state thereof or of any domestic
branch of a foreign depository institution or trust company; provided
that the debt obligations of such depository institution or trust
company at the date of acquisition thereof have been rated by the
Rating Agency in one of its two highest short-term rating categories
available;
(iv) commercial paper (having original maturities of not
more than 365 days) of any corporation incorporated under the laws of
the United States or any state thereof which on the date of acquisition
has been rated by the Rating Agency in its highest short-term rating
available; provided that such commercial paper shall have a remaining
maturity of not more than 30 days;
(v) a money market fund or mutual fund rated by the Rating
Agency in the highest long-term rating category available; and
(vi) other obligations or securities that are acceptable to
the Rating Agency as a Permitted Investment hereunder and will not
reduce the rating assigned to the Certificates by such Rating Agency
below the lower of the then-current rating or the rating assigned to
such Certificates as of the Closing Date by such Rating Agency, as
evidenced in writing;
provided, however, that no instrument shall be a Permitted Investment if it
represents, either (1) the right to receive only interest payments with respect
to the underlying debt instrument or (2) the right to receive both principal and
interest payments derived from obligations underlying such instrument and the
principal payments with respect to such instrument provide a yield to maturity
greater than 120% of the yield to maturity at par of such underlying
obligations. References herein to one of the two highest rating categories
available on unsecured long-term debt shall mean "AAA" or "AA" in the case of
Standard & Poor's Ratings Services, "Aaa" or
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"Aa" in the case of Moody's Investors Service, Inc. and "AA-" or "A-" or higher
in the case of Fitch Investors Service, L.P. and Duff & Phelps Credit Rating
Co., and references herein to the highest rating available on unsecured
commercial paper and short-term debt obligations shall mean "A-1" in the case of
Standard & Poor's Ratings Services, "P-1" in the case of Moody's Investors
Service, Inc. and either "A-1" by Standard & Poor's Ratings Services, "P-1" by
Moody's Investors Service, Inc. or "F-1" by Fitch Investors Service, L.P. in the
case of Fitch Investors Service, L.P. and either "A-1" by Standard & Poor's
Ratings Services, "P-1" by Moody's Investors Service, Inc. or "D-1" by Duff &
Phelps Credit Rating Co. in the case of Duff & Phelps Credit Rating Co.
Permitted Transferee: Any transferee of a Class __ Certificate
other than a Non-United States Person or Disqualified Organization.
Person: Any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
estate, unincorporated organization or government or any agency or political
subdivision thereof.
Plan: Any employee benefit plan or certain other retirement
plans and arrangements, including individual retirement accounts and annuities,
Keogh plans and bank collective investment funds and insurance company general
or separate accounts in which such plans, accounts or arrangements are invested,
that are subject to the ERISA and Section 4975 of the Code.
Rating Agency: _______________________ or its successors. If
such agency and its successor are no longer in existence, "Rating Agency" shall
be such nationally recognized statistical rating agency, or other comparable
Person, designated by the Depositor, notice of which designation shall be given
to the Trustee.
Realized Loss: With respect to any Underlying Certificate,
"Realized Loss" shall have the meaning assigned thereto in the related
Underlying Agreement.
Record Date: With respect to any Payment Date occurring in the
same month as the related Distribution Date, the last Business Day of the month
preceding the month in which the related Distribution Date on the Underlying
Certificates occurs, and with respect to any Payment Date occurring in the month
subsequent to the month in which the related Distribution Date occurs, the last
Business Day of the second month preceding the month in which such Payment Date
occurs.
REMIC: A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
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Responsible Officer: When used with respect to the Trustee,
any officer of the Corporate Trust Division of the Trustee, including any Senior
Vice President, any Vice President, any Assistant Vice President, any Assistant
Secretary, any Trust Officer or any other officer of the Trustee customarily
performing functions substantially similar to those performed by any of the
above designated officers to whom, with respect to a particular matter, such
matter is referred.
Rule 144A: Rule 144A under the Securities Act of 1933, as
amended, as in effect from time to time.
Termination Date: The Payment Date on which the Trust Fund is
terminated pursuant to Section 6.01.
Transfer: Any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any Ownership Interest in a
Certificate.
Transferee: Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
Transferor: Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.
Trust Fund: The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
consisting of:
(i) the Underlying Certificates described in the
Underlying Certificate Schedule, attached hereto as
Exhibit C;
(ii) the Certificate Account; and
(iii) all distributions on the Underlying Certificates
after the Closing Date.
Trustee: _____________________, a [national banking
association], its successor in interest, or any successor trustee appointed as
herein provided, as trustee.
Trustee Fee: With respect to any Payment Date, the related
monthly fee payable to the Trustee as compensation for its activities hereunder,
which shall be payable from amounts on deposit in the Certificate Account and
which shall be equal to an amount payable at the Trustee Fee Rate on the
aggregate Underlying Certificate Principal Balance of the Underlying
Certificates immediately prior to the related Distribution Date.
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Trustee Fee Rate: With respect to any Underlying Certificate,
an annual rate equal to _________%.
Underlying Certificate: Any one of the mortgage pass-through
certificates transferred to the Trustee by the Depositor pursuant to Section
2.01, as from time to time are held as a part of the Trust Fund and as are more
fully described in the Underlying Certificate Schedule attached hereto as
Exhibit C.
Underlying Certificate Principal Balance: With respect to any
Underlying Certificate, as of any Distribution Date (following all distributions
to be made with respect to the Underlying Certificate on such Distribution
Date), and as of any date of determination thereafter until the next succeeding
Distribution Date, the principal balance of such Underlying Certificate as set
forth in, or calculated in accordance with the terms of the related Underlying
Agreement on the basis of, the Distribution Date Statement sent to the Trustee
as Underlying Certificateholder relating to such Distribution Date.
Underlying Certificateholder: The registered holder of any
Underlying Certificate, which following the execution and delivery of this
Agreement by the parties hereto, shall be the Trustee for the benefit of the
Certificateholders.
Underlying Certificate Schedule: The schedule attached as
Exhibit C hereto identifying the Underlying Certificates.
Underlying Event of Default: An "Event of Default" as defined
in the related Underlying Agreement.
Underlying Regular Certificates: The classes of Underlying
Certificates that represent regular interests in a REMIC.
Underlying Residual Certificates: The classes of Underlying
Certificates that represent residual interests in a REMIC.
Underlying Trust: With respect to any Underlying Certificate,
the trust created by the related Underlying Agreement.
Underlying Agreement: With respect to any Underlying
Certificate, the related agreement, together with all exhibits thereto, pursuant
to which such Underlying Certificate was issued.
Underlying Trustee: With respect to any Underlying Agreement,
the related trustee thereunder.
<PAGE> 15
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United States Person: A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate whose income is subject to United States federal income tax purposes
regardless of its source, or a trust if a court within the United States is able
to exercise primary supervision over the administration of the trust and one or
more United States fiduciaries have the authority to control all decisions of
the trust. The term "United States" shall have the meaning set forth in Section
7701 of the Code or successor provisions.
Voting Rights: The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. For so long as the related
Classes of Certificates remain outstanding, 99% of all of the Voting Rights
shall be allocated among Holders of the Class __ Certificates and 1% of the
Voting Rights shall be allocated to the Holders of the Class __ Certificates;
provided, however, that any Certificate registered in the name of the Depositor,
the Trustee or any affiliate thereof shall be deemed not to have any Voting
Rights.
All other capitalized terms used herein, if not otherwise
defined herein and unless the context otherwise requires, shall have the
respective meanings set forth in the applicable Underlying Agreements.
ARTICLE II
CONVEYANCE OF THE UNDERLYING CERTIFICATES;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of the Underlying Certificates.
The Depositor, concurrently with the execution and delivery
hereof, does hereby sell, transfer, assign, set-over and otherwise convey to the
Trustee, in trust, for the use and benefit of the Certificateholders, without
recourse, all the right, title and interest of the Depositor in and to any and
all benefits accruing to the Depositor from (a) the Underlying Certificates, and
all payments thereon to be made after _____ 1, 19__; (b) the Certificate Account
and all investments therein and proceeds thereof, whether in the form of cash,
instruments, securities or any other properties; and (c) proceeds of the
foregoing (including, but not by way of limitation, cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, rights to payment of any and every kind, and other forms of
obligations and receivables that at any time constitute all or part or are
included in the proceeds of any of the foregoing) (collectively, the "Trust
Fund").
In connection with such transfer and assignment, the Depositor
does hereby deliver or cause to be delivered to, and deposit or cause to be
deposited with, the Trustee each
<PAGE> 16
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of the Underlying Certificates, together with the following documents or
instruments relating to each Underlying Certificate:
(i) either (A) a duly issued and authenticated
certificate endorsed to "____________, as trustee under the Trust
Agreement, dated _____ __, 19__, relating to the Union Planters
Mortgage Finance Corp. Mortgage Pass-Through Certificates, Series
199_-_," together with such documents as shall be necessary to cause
registration of transfer of such certificate to be made and to obtain a
duly issued and authenticated certificate in such name, or (B)
definitive evidence that each Underlying Certificate in uncertificated
or book-entry form, or held through a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, is registered directly
or on the books of such clearing corporation or of a financial
intermediary in the name of the Trustee for the benefit of the
Certificateholders;
(ii) a copy of the related Underlying Agreement; and
(iii) copies of the most recent Distribution Date
Statements delivered to the related Underlying Certificateholder with
respect to the Underlying Certificate.
The Trustee hereby acknowledges the receipt by it of the
Underlying Certificates and the other documents and instruments referenced
above, and declares that it holds and will hold such Underlying Certificates,
such other documents and instruments and that it holds and will hold all other
assets and documents included in the Trust Fund, in trust for the exclusive use
and benefit of all present and future Certificateholders.
The transfer of the Underlying Certificates and all other
assets constituting the Trust Fund is absolute and is intended by the parties
hereto as a sale. Except as provided in Sections 2.02, 3.02(b) and 6.01 hereof,
the Trustee shall not assign, sell, dispose of or transfer any interest in the
Underlying Certificates or any other asset constituting the Trust Fund or permit
the Underlying Certificates or any other asset constituting the Trust Fund to be
subjected to any lien, claim or encumbrance arising by, through or under the
Trustee or any person claiming by, through or under the Trustee.
Promptly after the Closing Date, the Trustee shall cause
registration of transfer of each Underlying Certificate to be made and shall
obtain, in exchange for the documents and instruments specified in Section
2.01(i), a duly issued and authenticated certificate registered in the name
specified in Section 2.01 in respect of such Underlying Certificate. The
Depositor shall promptly remit to the Trustee (by wire transfer of immediately
available funds on the date of receipt) any amounts received by the Depositor in
respect of any Underlying Certificate on or following the date hereof.
<PAGE> 17
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It is intended that the conveyance of the Underlying
Certificates by the Depositor to the Trustee as provided in this Section be, and
be construed as, an absolute sale of the Underlying Certificates by the
Depositor to the Trustee for the benefit of the Certificateholders. Furthermore,
it is not intended that such conveyance be deemed a pledge of the Underlying
Certificates 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 Underlying Certificates are held to be the property
of the Depositor, or if for any other reason this Agreement is held or deemed to
create a security interest in the Underlying Certificates, then it is intended
that, (a) this Agreement shall also be deemed to be a security agreement within
the meaning of Articles 8 and 9 of the ____________ Uniform Commercial Code and
the Uniform Commercial Code of any applicable jurisdiction; (b) the conveyance
provided for in this Section and Section 2.02 shall be deemed to be a grant by
the Depositor to the Trustee for the benefit of the Certificateholders of a
security interest in all of the Depositor's right, title and interest in and to
the Underlying Certificates and all amounts payable to the Holders of the
Underlying Certificates after the Closing Date 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
Certificate Account, whether in the form of cash, instruments, securities or
other property; (c) the possession by the Trustee or its agent of Underlying
Certificates 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 the
______________ Uniform Commercial Code and the Uniform Commercial Code of any
applicable jurisdiction (including, without limitation, Sections 9-305, 8-313 or
8-321 thereof); 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. The Depositor and the Trustee, at the Depositor's direction, shall to the
extent consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in the
Underlying Certificates and other assets constituting the Trust Fund described
above, 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 the Agreement.
Section 2.02. Issuance of Certificates Evidencing Interests in
the Trust Fund.
The Trustee acknowledges the assignment to it of the
Underlying Certificates and, concurrently therewith and in exchange therefor,
pursuant to the written request of the Depositor executed by an officer of the
Depositor, the Trustee has executed and caused to be authenticated and delivered
to, or upon the order of, the Depositor the Certificates in authorized
denominations which evidence ownership of the entire Trust Fund.
<PAGE> 18
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Section 2.03. Representations, Warranties and Covenants of the
Depositor.
The Depositor hereby represents and warrants to the Trustee
for the benefit of Certificateholders, as of the Closing Date, that immediately
prior to the assignment of the Underlying Certificates to the Trustee, the
Depositor had good title to, and was the sole owner of, each Underlying
Certificate free and clear of any pledge, lien, encumbrance or security interest
and such assignment validly transfers ownership of the Underlying Certificates
to the Trustee, free and clear of any pledge, lien, encumbrance or security
interest.
It is understood and agreed that the representations and
warranties set forth in this Section 2.03 shall survive delivery of the
Underlying Certificates to the Trustee.
Upon discovery by either the Depositor or the Trustee of a
breach of any representation or warranty set forth in this Section 2.03 which
materially and adversely affects the interests of the Certificateholders in any
Underlying Certificate, the party discovering such breach shall give prompt
written notice to the other party. In the event of such breach, the Depositor
shall have 30 days, from the earlier of the discovery by the Depositor of such
breach or the receipt of such written notice, to cure such breach in all
material respects or repurchase such Underlying Certificate as provided below.
If the Depositor fails to cure such breach, the Depositor shall deposit into the
Certificate Account on the next succeeding Distribution Date an amount equal to
100% of the then outstanding Underlying Certificate Principal Balance of such
Underlying Certificate, together with the sum of accrued interest on such
Underlying Certificate Principal Balance to the first day of the month in which
the proceeds of such repurchase are to be distributed and the aggregate of all
previously unpaid Available Interest Shortfall Amounts in respect of such
Underlying Certificate. Upon the deposit of such amount, the Trustee is hereby
authorized and shall, at the Depositor's written direction and expense, take
such actions and execute such documents and instruments as shall be necessary to
reconvey to the Depositor the Ownership Interest in such repurchased Underlying
Certificate.
ARTICLE III
ADMINISTRATION OF THE UNDERLYING CERTIFICATES;
PAYMENTS AND REPORTS TO CERTIFICATEHOLDERS
Section 3.01. Administration of the Trust Fund and the
Underlying Certificates.
If at any time the Trustee, as an Underlying
Certificateholder, is requested in such capacity to take any action or to give
any consent, approval or waiver, including without limitation in connection with
an amendment of the related Underlying Agreement or if an Underlying Event of
Default occurs under the related Underlying Agreement, the Trustee, in its
capacity as an Underlying Certificateholder, may take such action in connection
with the
<PAGE> 19
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enforcement of any rights and remedies available to it in such capacity with
respect thereto, but only in accordance with the written directions of Holders
of Certificates entitled to at least 51% of the Voting Rights. The Trustee shall
promptly notify all of the Certificateholders in writing of any such request.
Section 3.02. Collection of Monies.
(a) In connection with its receipt of any distribution on an
Underlying Certificate on any Distribution Date, the Trustee shall review the
related Distribution Date Statement and shall confirm that the information
contained therein is arithmetically consistent; provided, however, that the
Trustee shall have no obligation to recompute, recalculate or verify any
underlying information from which the information in the Distribution Date
Statement is derived. The Trustee shall review each Distribution Date Statement
received with respect to the Underlying Certificates and use its reasonable
efforts to obtain any Distribution Date Statement not timely received and any
missing information required to be disclosed in the Distribution Date Statement
pursuant to the Underlying Agreement to the extent such information is needed to
its perform its duties hereunder. In the event that the Trustee is unable to
obtain any Distribution Date Statement or any such information, the Trustee
shall notify the Depositor and the Trustee and the Depositor shall cooperate in
obtaining the Distribution Date Statement or missing information from the
Underlying Trustee. The Trustee shall not be under any obligation to contact any
Underlying Trustee for information in the Distribution Date Statements which is
not required by the Underlying Agreement.
If the Trustee shall not have received a distribution on any
Underlying Certificate by the close of business on the date on which such
distribution was expected to be received by the Trustee, the Trustee shall
notify the trustee or other party responsible for effectuating distributions
under the related Underlying Agreement, and (i) if such distribution shall not
have been received by the Trustee one Business Day following such notice or (ii)
a Responsible Officer of the Trustee shall gain actual knowledge of any
Underlying Event of Default under and as defined in any Underlying Agreement,
the Trustee shall promptly notify the Depositor and the Certificateholders in
writing and such parties shall proceed in accordance with the terms and
conditions of Section 3.01. The Trustee shall notify the Depositor if any
trustee or other party responsible for effecting distributions under the related
Underlying Agreement discontinues making payments by wire transfer and sends
them by regular or express mail. With respect to each Underlying Agreement for
which the Trustee is the underlying trustee, the Trustee shall make all payments
with respect to the related Underlying Certificate by wire transfer in
immediately available funds.
(b) Except as otherwise provided in Section 6.01, upon its
receipt of a Notice of Final Distribution, the Trustee shall present and
surrender the Underlying Certificate to which such notice applies for final
payment thereon in accordance with the terms and conditions of the related
Underlying Agreement and such Notice of Final Distribution. The Trustee shall
<PAGE> 20
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promptly deposit in the Certificate Account the final distribution received upon
presentation and surrender of any Underlying Certificate.
Section 3.03. Establishment of Certificate Account; Deposits
in Certificate Account.
(a) The Trustee, for the benefit of the
Certificateholders, shall establish and maintain one or more accounts
(collectively, the "Certificate Account"), each of which shall be an Eligible
Account, entitled "___________________, in trust for the registered holders of
Union Planters Mortgage Finance Corp. Mortgage Pass-Through Certificates, Series
19_-_," held in trust by the Trustee for the benefit of the Certificateholders.
The Trustee shall cause the following payments and collections in respect of the
Underlying Certificates to be deposited directly into the Certificate Account on
a daily basis:
(i) all distributions due and received on the Underlying
Certificates subsequent to the Cut-off Date;
(ii) any amounts received in connection with the sale of
the Underlying Certificates pursuant to Section 6.01;
and
(iii) any other amounts specifically required to be
deposited in the Certificate Account hereunder.
The foregoing requirements for deposit in the Certificate
Account shall be exclusive.
(b) Funds in the Certificate Account may be invested by
the Trustee in Permitted Investments in accordance with the provisions set
forth in Section 3.08.
Section 3.04. Permitted Withdrawals From the Certificate
Account.
The Trustee may from time to time withdraw funds from the
Certificate Account for the following purposes:
(i) to make payments in the amounts and in the manner
provided for in Section 3.05;
(ii) to pay itself any Trustee Fee and, to the extent not
previously paid, any unpaid Trustee Fees, and the
costs incurred by it in making certain filings with
the Commission pursuant to Section 5.12;
(iii) to pay itself any investment income on amounts in the
Certificate Account;
<PAGE> 21
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(iv) to reimburse the Depositor or the Trustee for
expenses incurred by and reimbursable to the
Depositor or the Trustee pursuant to Section 5.05 or
Section 7.03 or to pay any tax pursuant to Section
860E(e)(6) of the Code, except as otherwise provided
in such sections; and
(v) to clear and terminate the Certificate Account upon
the termination of this Agreement.
The Trustee shall determine the Payment Date in accordance
with the definition thereof. On each Payment Date (other than with respect to
the investment income in clause (iii) above, which may be paid on any date), the
Trustee shall withdraw all funds from the Certificate Account and shall use such
funds withdrawn from the Certificate Account only for the purposes described in
Sections 3.04 and 3.05.
Section 3.05. Payments.
(a) On each Payment Date, the Trustee shall withdraw from
the Certificate Account all Available Distribution Amount then on deposit, and
the Trustee or the Paying Agent appointed by the Trustee shall pay such
Available Distribution Amount in the following amounts and order of priority, in
each case to the extent of the remaining Available Distribution Amount:
(i) to the Holders of the Class __ Certificates, an
amount equal to the excess of (A) interest and
principal in respect of the Underlying Regular
Certificates to the extent received by the Trustee on
or before the related Distribution Date and not
previously paid over (B) amounts paid since the prior
Payment Date pursuant to clauses (ii) and (iv) of
Section 3.04; and
(ii) to the Holders of the Class __ Certificates, an
amount equal to principal, interest and any other
amounts in respect of the Underlying Residual
Certificates, to the extent received by the Trustee
on or before the related Distribution Date and not
previously paid.
After making the foregoing payments, the Trustee will adjust
the Certificate Principal Balance of the Class __ Certificates to equal the
aggregate outstanding principal balance of the Underlying Regular Certificates.
(b) All payments made with respect to each Class on any
Payment Date shall be allocated pro rata among the Outstanding Certificates of
such Class based upon their respective Percentage Interests. Payments to the
Certificateholders of each Class on each Payment Date will be made to the
Certificateholders of record on the related Record Date. Payments to any
Certificateholder on any Payment Date shall be made by wire transfer of
immediately available funds to the account of such Certificateholder at a bank
or other entity
<PAGE> 22
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having appropriate facilities therefor, if such Certificateholder shall have so
notified the Trustee or the Paying Agent in writing at least five Business Days
prior to the related Record Date (which notification shall need to be made only
once) and if such Certificateholder is the registered owner of Certificates with
an aggregate Initial Certificate Principal Balance of not less than
$_______________, or otherwise by check mailed by first class mail to the
address of such Certificateholder appearing in the Certificate Register. Final
payment on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the Corporate Trust Office or
such other location specified in the notice to Certificateholders of such final
payment.
(c) Except as otherwise provided in Section 6.01,
whenever the Trustee expects that the final payment with respect to any Class
of Certificates will be made on the related Payment Date based on information
in the Distribution Date Statements, the Trustee shall mail on the Business
Day prior to such Payment Date to each Holder of such Class of Certificates a
notice to the effect that:
(i) the Trustee expects that the final payment with
respect to such Class of Certificates will be made on
such Payment Date but only upon presentation and
surrender of such Certificates at the office of the
Trustee therein specified; and
(ii) no interest shall accrue on such Certificates from
and after such Payment Date.
Upon presentation and surrender of the Certificates by the Certificateholders on
the Termination Date, the Trustee shall distribute to the Certificateholders the
amounts otherwise distributable on such Payment Date pursuant to Section
3.05(a). Any funds not distributed on such Payment Date because of the failure
of any Certificateholders to tender their Certificates shall be set aside and
held uninvested in trust for the account of the appropriate non-tendering
Certificateholders. If any Certificates as to which notice has been given
pursuant to this Section 3.05(c) 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 payment with respect thereto. If within one year after the second notice
any Certificate shall not have been surrendered for cancellation, the Trustee
shall directly or through an agent, take reasonable 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 Trustee shall segregate all amounts
distributable to the Holders thereof and shall thereafter hold such amounts
uninvested for the benefit of such Holders. No interest shall accrue or be
payable to any Certificateholder on any amount held as a result
<PAGE> 23
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of such Certificateholder's failure to surrender its Certificates for final
payment thereof in accordance with this Section 3.05(c). Notwithstanding the
foregoing, if in the Trustee's judgment, the escheat or unclaimed property laws
of the relevant jurisdiction provide for different procedures regarding
unclaimed funds, the Trustee shall abide by such procedures.
Section 3.06. Statements to Certificateholders.
On each Payment Date, the Trustee shall prepare (based, in
part and as applicable, on information in the Distribution Date Statements), and
shall forward by mail, a statement to each Certificateholder and to the
Depositor stating:
(i) the Available Distribution Amount for such Payment
Date;
(ii) with respect to such Payment Date, amounts of
interest and principal (and other amounts if
applicable) distributed to the Certificateholders of
each Class of Certificates on such Payment Date
pursuant to Section 3.05;
(iii) the Certificate Principal Balance of the Class __
Certificates after giving effect to payments and
other adjustments on such Payment Date;
(iv) the amount of the Trustee Fee for such Payment Date
paid to the Trustee on such Payment Date; the amounts
of any previously unpaid Trustee Fees paid to the
Trustee on such Payment Date and any accrued but
unpaid Trustee Fees receivable by the Trustee on
future Payment Dates; and amounts paid to the Trustee
on such Payment Date pursuant to Section 3.04(iv) and
any unpaid amounts receivable on future Payment
Dates;
(v) with respect to the Mortgage Loans in each Underlying
Trust, the amount and percent of delinquencies
(broken down by 30 days, 60 days and 90 days),
foreclosures and REO;
(vi) the Realized Losses, if any, allocated to the
Underlying Certificates, by Underlying Trust, on the
immediately preceding Distribution Date and to the
Class __ Certificates on that Payment Date and the
aggregate Realized Losses, if any, allocated to the
Underlying Certificates, by Underlying Trust, and to
the Class __ Certificates through that Payment Date;
(vii) with respect to each Underlying Trust, the coverage
amount or principal balance of the related pool
insurance policy, special hazard policy, special
hazard fund and letter of credit, as applicable,
after application of any covered losses on the
immediately preceding Distribution Date and the
<PAGE> 24
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cumulative covered losses applied to such type of
credit enhancement through the immediately preceding
Distribution Date;
(viii) the shortfall of interest, if any, allocated to
Holders of the Underlying Regular Certificates on the
immediately preceding Distribution Date that have
reduced the amount of interest distributed to the
holders of the Class __ Certificates on that Payment
Date and the aggregate amounts of shortfall of
interest, if any, allocated to Holders of the
Underlying Regular Certificates that have reduced the
amount of interest distributed to the holders of the
Class __ Certificates through that Payment Date; and
(ix) the aggregate Underlying Certificate Principal
Balances of the Underlying Certificates as of the
close of business on the immediately preceding
Distribution Date.
In the case of the information furnished pursuant to clause
(ii) above, the amounts shall also be expressed as a dollar amount per $1,000 of
the applicable Class.
In addition, the Trustee promptly will furnish to
Certificateholders and the Depositor copies of any notices, statements, reports
(other than any servicing reports) or other communications, including any
Distribution Date Statements, for each Distribution Date received by the Trustee
as the Underlying Certificateholder.
On or before [the date of this Agreement] of each calendar
year, beginning with calendar year 19__, the Trustee shall prepare, or cause to
be prepared, and deliver, or cause to be delivered, by first class mail to each
Person who at any time during the previous calendar year was a Certificateholder
of record a statement containing the information required to be contained in the
regular monthly report to Certificateholders, as set forth in clause (ii) above
aggregated for such calendar year or the applicable portion thereof during which
such Person was a Certificateholder. Such obligation of the Trustee shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Trustee pursuant to any requirements of the
Code and regulations thereunder as from time to time are in force.
[Upon the request of any Certificateholder, the Trustee shall
furnish to such holder such information with respect to the Trust Fund and the
Certificates as is reasonably requested by such holder for purposes of enabling
such holder to satisfy the applicable informational requirements under Rule 144A
or otherwise, to the extent that the Trustee possesses such information or can
obtain possession of such information without incurring undue burden or
expense.]
<PAGE> 25
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Section 3.07. Access to Certain Documentation and Information.
The Trustee shall provide to the Certificateholders access to
the Underlying Certificates and all reports, documents and records maintained by
the Trustee in respect of its duties hereunder, such access being afforded at a
reasonable charge but only upon reasonable written request and during normal
business hours at offices designated by the Trustee.
Section 3.08. Permitted Investments.
The Trustee may invest or direct any institution maintaining
the Certificate Account to invest the funds in such Certificate Account in
Permitted Investments, which shall mature not later than the Business Day
immediately preceding the next Payment Date (except that, any investment in the
institution with which the Certificate Account is maintained may mature on such
Payment Date) and shall not be sold or disposed of prior to its maturity. All
such Permitted Investments shall be made in the name of the Trustee or its
nominee. All income and gain received from any such investment shall be
deposited in the Certificate Account, and may only be withdrawn and applied for
the purposes set forth in Section 3.04. The Trustee in its individual capacity,
shall deposit in the Certificate Account the amount of any loss incurred in
respect of such Permitted Investments immediately upon realization of such loss.
[Section 3.09.Reports of Certificate Principal Balances to
the Clearing Agency].
If and for so long as any Certificate is held by the Clearing
Agency, on the second Business Day before each Payment Date, the Trustee shall
give oral notice to the Clearing Agency (and shall promptly thereafter confirm
in writing) the following: (a) the amount of interest and principal to be
distributed on the Certificates of such Class on the upcoming Payment Date, as
reported in the related remittance report, (b) the Record Date for such
distribution, (c) the Payment Date for such distribution and (d) the aggregate
Certificate Principal Balance of each Class of Certificates reported in such
month.]
ARTICLE IV
THE CERTIFICATES
Section 4.01. The Certificates.
The Certificates will be substantially in the respective forms
annexed hereto as Exhibit A and Exhibit B. The Certificates will be issuable in
[registered form only]. The Class __ Certificates will be issuable in
denominations evidencing initial Certificate Principal Balances of not less than
$[100,000] and integral multiples of $[1,000] in excess thereof, except that one
Certificate of such Class may be issued in an amount evidencing the sum of the
authorized
<PAGE> 26
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minimum denomination thereof and the remainder of the aggregate initial
Certificate Principal Balance of such Class. The Class __ Certificates will each
be issuable in denominations of any Percentage Interest representing [5.00]% and
multiples of [0.01]% in excess thereof, except that one Certificate of such
Class may be issued with a Percentage Interest representing 0.01%, as provided
in Section 8.03.
The Certificates shall, on original issue, be executed and
authenticated by the Trustee, not in its individual capacity but solely as
Trustee, and delivered by the Trustee to or upon the order of the Depositor upon
receipt by the Trustee of the Underlying Certificates and any other documents
that are required by this Agreement or that the Trustee may reasonably request.
The Certificates shall be executed by manual signature on behalf of the Trustee
in its capacity as trustee hereunder by an authorized officer. Certificates
bearing the manual signatures of individuals who were at any time the proper
officers of the Trustee shall bind the Trustee, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Certificates or did not hold such offices 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 substantially in the form provided
for herein executed by the Trustee by manual signature, and such certificate
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.
Section 4.02. Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall cause to be kept at one of the offices
or agencies to be appointed by the Trustee in accordance with the provisions of
this Section 4.02 a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee shall provide for the registration
of Certificates and of transfers and exchanges of Certificates as herein
provided. The Trustee is initially appointed Certificate Registrar for the
purpose of registering Certificates and transfers and exchanges of Certificates
as herein provided. The Certificate Registrar (if not the Trustee) shall provide
the Trustee with a certified list of Certificateholders as of each Record Date
prior to the Payment Date. Upon satisfaction of the conditions set forth below,
the Trustee shall execute and the Certificate Registrar shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Certificates of a like Class and aggregate Percentage Interest. In addition,
the Trustee shall notify the Depositor of every proposed transfer or exchange of
the Certificates.
(b) At the option of the Certificateholders, Certificates may
be exchanged for other Certificates of authorized denominations of a like Class
and aggregate Percentage Interest, upon surrender of the Certificates to be
exchanged at any such office or agency. Whenever any Certificates are so
surrendered for exchange the Trustee shall execute and the Certificate Registrar
shall authenticate and deliver the Certificates of such Class which the
Certificateholder
<PAGE> 27
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making the exchange is entitled to receive. Every Certificate presented or
surrendered for transfer or exchange shall (if so required by the Trustee or the
Certificate Registrar) be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by, the Holder thereof or his attorney duly authorized
in writing.
[(c) Except as provided in Section 4.02(d) no transfer, sale,
pledge or other disposition of a Certificate shall be made unless such transfer,
sale, pledge or other disposition is exempt from the registration requirements
of the Securities Act of 1933, as amended (the "1933 Act") and such transfer
will not result in the registration of the Trust Fund as an "investment company"
under the Investment Company Act of 1940, as amended (the "1940 Act"), and the
applicable securities laws of any state or other jurisdiction or is registered
or qualified in accordance with the 1933 Act and such laws. In the event that a
Transfer of a Certificate is to be made, (i) the Depositor may direct the
Trustee to require a written Opinion of Counsel acceptable to and in form and
substance satisfactory to the Trustee and the Depositor that such Transfer may
be made pursuant to an exemption, describing the applicable exemption and the
basis therefor, from the 1933 Act and such laws or is being made pursuant to the
1933 Act and such laws, and that such Transfer will not result in the Trust Fund
being deemed an "investment company" under the 1940 Act, which Opinion of
Counsel shall not be an expense of the Trustee or the Depositor and (ii) the
Trustee shall require the Transferee to execute an investor representation
letter, substantially in the form of Exhibit D hereto (a "Transferee
Agreement"), acceptable to and in form and substance satisfactory to the
Depositor and the Trustee certifying to the Trustee and the Depositor the facts
surrounding such Transfer, which Transferee Agreement shall not be an expense of
the Trustee or the Depositor; provided however that such Transferee Agreement
will not be required in connection with any transfer of any such Certificate by
the Depositor to an affiliate of the Depositor, and the Trustee shall be
entitled to conclusively rely upon a representation (which, upon the request of
the Trustee, shall be a written representation) from the Depositor of the status
of such transferee as an affiliate of the Depositor.]
[The Holder (including the Depositor) of a Certificate desiring to
effect such transfer, sale, pledge or other disposition shall, and by acceptance
of such Certificate agrees to, indemnify the Trustee and the Depositor and the
Certificate Registrar against any liability that may result if the transfer,
sale, pledge or other disposition is not so exempt or is not made in accordance
with the 1933 Act and state laws or results in the registration of the Trust
Fund as an "investment company" under the 1940 Act. Moreover, the Holder
(including the Depositor) of each Certificate, by accepting such Certificate,
covenants with the Depositor and the Trustee that neither such Holder nor anyone
acting on its behalf will (a) offer, pledge, sell, dispose of or otherwise
transfer any Certificate, any interest in any Certificate or any other similar
security to any person in any manner, (b) solicit any offer to buy or to accept
a pledge, disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c)
otherwise approach or negotiate with respect to any
<PAGE> 28
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Certificate, any interest in any Certificate or any other similar security with
any person in any manner, (d) make any general solicitation by means of general
advertising or in any other manner, or (e) take any other action, that (as to
any of (a) through (e) above) would constitute a distribution of the
Certificates under the Securities Act of 1933, as amended (the "1933 Act"), that
would render the disposition of any Certificate a violation of Section 5 of the
1933 Act or any state securities law, that would result in the registration of
the Trust Fund as an "investment company" under the Investment Company Act of
1940, that would require registration or qualification pursuant thereto, or that
would constitute a sale or other transfer of the Certificates, except in
compliance with the provisions of this Agreement.]
[(d) No transfer of the Class __ Certificates may be made
except to "qualified institutional buyers" who have complied with the
requirements of this Section 4.02(d) hereof and who constitute Permitted
Transferees or to the Depositor or an Affiliate of the Depositor. Transfers of
each Class of Certificates may be made in accordance with this Section 4.02(d)
if the prospective transferee of a Certificate provides the Trustee and the
Depositor with an investment letter substantially in the form of Exhibit E
attached hereto (a "Rule 144A Certificate"), which Rule 144A Certificate shall
not be an expense of the Trustee or the Depositor, and which Rule 144A
Certificate states that, among other things, such transferee is a "qualified
institutional buyer" as defined under Rule 144A. Such transfers shall be deemed
to have complied with the requirements of Section 4.02(c) hereof; provided,
however, that no Transfer of any of the Certificates may be made pursuant to
this Section 4.02(d) by the Depositor. The Holder (including the Depositor) of a
Certificate desiring to effect any such Transfer hereunder does hereby agree to
indemnify the Trustee and the Depositor and the Certificate Registrar against
any liability that may result if the Transfer is not made in accordance with
federal and state laws and this Agreement.]
(e)(i) Each Person who has or who acquires any Ownership
Interest in a Class __ Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest to have agreed to be bound by the
following provisions and to have irrevocably authorized the Trustee or its
designee under clause (iii)(A) below to deliver payments to a Person other than
such Person and to negotiate the terms of any mandatory sale under clause
(iii)(B) below and to execute all instruments of transfer and to do all other
things necessary in connection with any such sale. The rights of each Person
acquiring any Ownership Interest in a Class __ Certificate are expressly subject
to the following provisions:
(A) Each Person holding or acquiring any Ownership Interest in
a Class __ Certificate shall be a Permitted Transferee and shall
promptly notify the Trustee of any change or impending change in its
status as a Permitted Transferee.
(B) In connection with any proposed Transfer of any Ownership
Interest in a Class __ Certificate to a United States Person, the
Trustee shall require delivery to it, and shall not register the
Transfer of any Class __ Certificate until its receipt of an
<PAGE> 29
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affidavit and agreement (a "Transfer Affidavit and Agreement" attached
hereto as Exhibit F) from the proposed Transferee, in form and
substance satisfactory to the Trustee, representing and warranting,
among other things, such Transferee is a Permitted Transferee, that it
is not acquiring its Ownership Interest in the Class __ Certificate
that is the subject of the proposed Transfer as a nominee, trustee or
agent for any Person who is not a Permitted Transferee, that for so
long as it retains its Ownership Interest in a Class __ Certificate, it
will endeavor to remain a Permitted Transferee, and that it has
reviewed the provisions of this Section 4.02(e) and agrees to be bound
by them.
(C) Notwithstanding the delivery of a Transfer Affidavit and
Agreement by a proposed Transferee under clause (B) above, if a
Responsible Officer of the Trustee assigned to and working in relation
to this transaction has actual knowledge that the proposed Transferee
is not a Permitted Transferee or that the proposed Transferee is acting
as a nominee, trustee, or agent for any Person who is not a Permitted
Transferee in acquiring an Ownership Interest in a Class __
Certificate, no Transfer of an Ownership Interest in a Class __
Certificate to such proposed Transferee shall be effected.
(D) Each Person holding or acquiring an Ownership Interest in
a Class __ Certificate shall agree to require a Transfer Affidavit and
Agreement from any other Person to whom such Person attempts to
transfer its Ownership Interest in a Class __ Certificate.
(E) Each Person holding or acquiring an Ownership Interest in
a Class __ Certificate shall agree not to transfer such Ownership
Interest if (1) a purpose of such transfer is or will be to impede the
assessment or collection of any tax, (2) the Transferor knows or
believes that any representation contained in the proposed Transferee's
Transfer Affidavit and Agreement is false, or (3) the Transferor has
any actual knowledge that the proposed Transferee is not a Permitted
Transferee.
(F) Each Person holding or acquiring an Ownership Interest in
a Class __ Certificate, by purchasing an Ownership Interest in such
Certificate, agrees to give the Trustee written notice that it is a
"pass-through interest holder" within the meaning of temporary Treasury
regulation Section 1.67-3T(a)(2)(i)(A) immediately upon acquiring an
Ownership Interest in a Class __ Certificate, if it is a "pass-through
interest holder," or is holding an Ownership Interest in a Class __
Certificate on behalf of a "pass-through interest holder."
(ii) The Trustee will register the Transfer of any Class __
Certificate only if it shall have received the Transfer Affidavit and Agreement
and all of such other documents as shall have been reasonably required by the
Trustee as a condition to such registration. Transfers
<PAGE> 30
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of the Class __ Certificates to Non-United States Persons and Disqualified
Organizations are prohibited.
(iii)(A) If any Disqualified Organization or Non-United States
Person shall become a holder of a Class __ Certificate, then the last
preceding Permitted Transferee shall be restored, to the extent
permitted by law, to all rights as Holder thereof retroactive to the
date of registration of such Transfer of such Class __ Certificate. If
a transfer of a Class __ Certificate is disregarded pursuant to the
provisions of Treasury regulation Sections 1.860E-1(c) or 1.860G-3(a),
then the last preceding Permitted Transferee shall be restored, to the
extent permitted by law, to all rights and obligations as Holder
thereof retroactive to the date of registration of such Transfer of
such Class __ Certificate. The Trustee shall be under no liability to
any Person for any registration of Transfer of a Class __ Certificate
that is in fact not permitted by this Section 4.02(e) or for making any
payments due on such Certificate to the holder thereof or for taking
any other action with respect to such holder under the provisions of
this Agreement.
(B) If any purported Transferee shall become a Holder of a
Class __ Certificate in violation of the restrictions in this Section
4.02(e) and to the extent that the retroactive restoration of the
rights of the last preceding Permitted Transferee of such Class __
Certificate as described in clause (iii)(A) above shall be invalid,
illegal or unenforceable, then the Trustee shall have the right,
without notice to the holder or any prior holder of such Class __
Certificate, to sell such Class __ Certificate to a purchaser selected
by the Trustee on such terms as the Trustee may choose. Such purported
Transferee shall promptly endorse and deliver each Class __ Certificate
in accordance with the instructions of the Trustee. Such purchaser may
be the Depositor, the Trustee itself or any affiliate of the Depositor
or the Trustee. The proceeds of such sale, net of the commissions
(which may include commissions payable to the Trustee or its
affiliates), expenses and taxes due, if any, will be remitted by the
Trustee to such purported Transferee. The terms and conditions of any
sale under this clause (iii)(B) shall be determined in the sole
discretion of the Trustee, and the Trustee shall not be liable to any
Person having an Ownership Interest in a Class __ Certificate as a
result of its exercise of such discretion. In addition, the purported
Transferee shall be obligated to reimburse the Trustee for any tax
imposed on the Trust Fund pursuant to Section 860E(e)(6) of the Code.
The Trustee may collect such reimbursement by withholding from the
proceeds of selling the Class __ Certificate to a Permitted Transferee
or by exercising any other remedies available at law or equity against
the purported Transferee.
[(iv) The Trustee shall make available to the Internal Revenue
Service and those Persons specified by the REMIC Provisions all information
necessary to compute any tax imposed as a result of the Transfer of an Ownership
Interest in a Class __ Certificate to any Person that is a regulated investment
company, real estate investment trust, common trust fund,
<PAGE> 31
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partnership, trust, estate or organization described in Section 1381 of the Code
having as among its record holders at any time any Person that is a Disqualified
Organization.]
(v) The Trustee may charge and shall be entitled to reasonable
compensation for providing such information as may be required from those
Persons which may have had a tax imposed upon them as specified in Section
4.02(e)(iv).
(f) Except as provided in Section 4.02(e)(v), no service
charge shall be made for any transfer or exchange of Certificates of any Class,
but the Trustee may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.
(g) All Certificates surrendered for transfer and exchange
shall be canceled and retained or destroyed by the Trustee in accordance with
the Trustee's standard procedures.
(h) [(1) Certificated Certificates.] The Trustee shall require
an Opinion of Counsel from a transferee prior to the transfer of any Certificate
to any Plan subject to ERISA or Section 4975 of the Code, any Person acting,
directly or indirectly, on behalf of any such Plan or any Person acquiring such
Certificates with "plan assets" of a Plan within the meaning of the Department
of Labor regulation promulgated at 29 C.F.R. ss.2510.3-101 ("Plan Assets"). Such
Opinion of Counsel must establish to the satisfaction of the Depositor and the
Trustee or the Certificate Registrar that the purchase of Certificates is
permissible under applicable law, will not constitute or result in any
prohibited transaction under ERISA or Section 4975 of the Code and will not
subject the Depositor or the Trustee to any obligation or liability (including
obligations or liabilities under ERISA or Section 4975 of the Code) in addition
to those undertaken in this Agreement, which Opinion of Counsel shall not be an
expense of the Depositor or the Trustee. In lieu of such Opinion of Counsel, a
Plan, any Person acting, directly or indirectly, on behalf of any such Plan or
any Person acquiring such Certificates with Plan Assets of a Plan may provide a
certification in the form of Exhibit G to this Agreement, which the Trustee may
rely upon without further inquiry or investigation. Neither an Opinion of
Counsel or certification will not be required in connection with the initial
transfer of any such Certificate by the Depositor to an affiliate of the
Depositor (in which case, the Depositor or any affiliate thereof shall have
deemed to have represented that such affiliate is not a Plan or a Person
investing Plan Assets of any Plan) and the Trustee shall be entitled to
conclusively rely upon a representation (which, upon the request of the Trustee,
shall be a written representation) from the Depositor of the status of such
transferee as an affiliate of the Depositor.
[(2) Book-Entry Certificates. No transfer of all or any
portion of any Class of Book-Entry Certificates that are ERISA Restricted
Certificates shall be made to a transferee that is a Plan Investor.]
<PAGE> 32
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Section 4.03. Mutilated, Destroyed, Lost or Stolen
Certificates each Beneficial Owner of such a Certificate shall be deemed to have
represented, by virtue of its acquisition of such a Certificate, that it is not
a Plan Investor. If (i) any mutilated Certificate is surrendered to the
Certificate Registrar, or the Trustee and the Certificate Registrar receive
evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee and the Certificate
Registrar such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of notice to the Trustee or the Certificate
Registrar that such Certificate has been acquired by a bona fide purchaser, the
Trustee shall execute and the Certificate Registrar shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of the same Class and initial Certificate
Principal Balance. Upon the issuance of any new Certificate under this Section,
the Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee and the Certificate
Registrar) connected therewith. Any replacement Certificate issued pursuant to
this Section shall constitute complete and indefeasible evidence of ownership in
the Trust Fund, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
Section 4.04. Persons Deemed Owners.
Prior to due presentation of a Certificate for registration of
transfer, the Depositor, the Trustee, the Certificate Registrar and any agent of
the Depositor, the Trustee or the Certificate Registrar may treat the Person in
whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving payments pursuant to Section 3.05 and for all other
purposes whatsoever, and neither the Depositor, the Trustee, the Certificate
Registrar nor any agent of the Depositor, the Trustee or the Certificate
Registrar shall be affected by notice to the contrary except as provided in
Sections 4.02(c) or 4.02(d).
Section 4.05. Appointment of Paying Agent.
The Trustee initially shall be the Paying Agent. The Trustee
may appoint a Paying Agent for the purpose of making payments to
Certificateholders pursuant to Section 3.05. In the event of any such
appointment, on or prior to each Payment Date the Trustee shall deposit or cause
to be deposited with the Paying Agent a sum sufficient to make the payments to
Certificateholders in the amounts and in the manner provided for in Section
3.05, such sum to be held in trust for the benefit of Certificateholders.
The Trustee shall cause each Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee that such Paying Agent will hold all
sums held by it for the payment to Certificateholders in trust for the benefit
of the Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. Any sums so held by such Paying Agent shall be held only in
Eligible
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Accounts to the extent such sums are not distributed to the Certificateholders
on the date of receipt by such Paying Agent.
[Section 4.06.Book-Entry Certificates].
(a) The Book-Entry Certificates will be represented initially by one or
more certificates registered in the name of CEDE & Co., as nominee of the
Clearing Agency. The Depositor and the Trustee may for all intents and purposes
(including the making of payments on the Book-Entry Certificates) deal with the
Clearing Agency as the authorized representative of the Beneficial Owners of the
Book-Entry Certificates for as long as those Certificates are registered in the
name of the Clearing Agency. The rights of Beneficial Owners of the Book-Entry
Certificates shall be limited to those established by law and agreements between
such Beneficial Owners and the Clearing Agency and Clearing Agency Participants.
The Beneficial Owners of the Book-Entry Certificates shall not be entitled to
certificates for the Book-Entry Certificates as to which they are the Beneficial
Owners, except as provided in subsection (c) below. Requests and directions
from, and votes of, the Clearing Agency, as Holder, shall not be deemed to be
inconsistent if they are made with respect to different Beneficial Owners.
Without the consent of the Depositor and the Trustee, a Book-Entry Certificate
may not be transferred by the Clearing Agency except to another Clearing Agency
that agrees to hold the Book-Entry Certificate for the account of the respective
Clearing Agency Participants and Beneficial Owners.
(b) Neither the Depositor nor the Trustee will have any liability for
any aspect of the records relating to or payment made on account of Beneficial
Owners of the Book-Entry Certificates held by the Clearing Agency, for
monitoring or restricting any transfer of beneficial ownership in a Book-Entry
Certificate or for maintaining, supervising or reviewing any records relating to
such Beneficial Owners.
(c) The Book-Entry Certificates will be issued in fully-registered,
certificated form to Beneficial Owners of Book-Entry Certificates or their
nominees, rather than to the Clearing Agency or its nominee, only if (1) the
Depositor advises the Trustee in writing that the Clearing Agency is no longer
willing or able to discharge properly its responsibilities as depository with
respect to the Book-Entry Certificates and the Depositor is unable to locate a
qualified successor within 30 days or (2) the Depositor, at its option, elects
to terminate the book-entry system operating through the Clearing Agency. Upon
the occurrence of either such event, the Trustee shall notify the Clearing
Agency, which in turn will notify all Beneficial Owners of Book-Entry
Certificates through Clearing Agency Participants, of the availability of
certificated Certificates. Upon surrender by the Clearing Agency of the
certificates representing the Book-Entry Certificates and receipt of
instructions for re-registration, the Trustee will reissue the Book-Entry
Certificates as certificated Certificates to the Beneficial Owners identified in
writing by the Clearing Agency. Such certificated Certificates shall not
constitute Book-Entry Certificates. All reasonable costs associated with the
preparation and delivery of certificated Certificates shall be borne by the
Depositor.]
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ARTICLE V
THE TRUSTEE
Section 5.01. Duties of Trustee.
(a) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement and each of the Underlying
Agreements. The Trustee shall notify the Certificateholders of any such
documents which do not materially conform to the requirements of this Agreement
in the event that the Trustee, after so requesting, does not receive
satisfactorily corrected documents or a satisfactory explanation regarding any
such nonconformities.
The Trustee shall forward or cause to be forwarded in a timely
fashion the notices, reports and statements required to be forwarded by the
Trustee pursuant to Sections 3.02, 3.06 and 6.01.
(b) No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct; provided, however, that:
(i) 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 certificates, opinions or other documents (including, but not
limited to, all Distribution Date Statements) reasonably believed by
the Trustee to be genuine and to have been furnished by the proper
party to the Trustee and which on their face, do not contradict the
requirements of this Agreement;
(ii) The Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, 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 Certificateholders of
any Class holding Certificates which evidence, as to such Class,
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Percentage Interests aggregating not less than 25% as 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) Except to the extent provided in Section
5.02, no provision in this Agreement shall require the Trustee to
expend or risk its own funds or otherwise incur any personal financial
liability in the performance of any of its duties as Trustee hereunder,
or in the exercise of any of its rights or powers, if the Trustee shall
have reasonable grounds for believing that repayment of funds or
adequate indemnity against such risk or liability is not reasonably
assured to it.
Section 5.02. Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 5.01:
(i) The Trustee may rely and shall be protected
in acting or refraining from acting upon any resolution, Officer's
Certificate, certificate of auditors or any other certificate,
statement (including any Distribution Date 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;
(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) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement or
to institute, conduct or defend any litigation 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;
(iv) The Trustee shall not be personally liable
for any action taken, suffered or omitted by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Agreement; and
(v) 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.
<PAGE> 36
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Section 5.03. Trustee Not Liable for Certificates or
Underlying Certificates.
The recitals contained herein and in the Certificates (other
than the execution of the Certificates and relating to the acceptance and
receipt of the Underlying Certificates) shall be taken as the statements of the
Depositor and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (except that the Certificates shall be duly and
validly executed and authenticated by it as Certificate Registrar) or of the
Underlying Certificates of any related document. Except as otherwise provided
herein, the Trustee shall not be accountable for the use or application by the
Depositor 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 in respect of the
Underlying Certificates deposited in or withdrawn from the Certificate Account
by the Depositor.
Section 5.04. Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Certificates with the same rights it would have if it
were not Trustee.
Section 5.05. Trustee's Fees; Indemnification.
The Trustee shall be entitled to the Trustee Fee for each
Payment Date from amounts on deposit in the Certificate Account as compensation
for all services rendered by the Trustee and any co-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 and any co-trustee. Such compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust. The Depositor covenants and agrees to pay or
reimburse the Trustee for all reasonable expenses, disbursements and advances
incurred or made by the Trustee or any co-trustee in accordance with any of the
provisions of this Agreement (including the reasonable compensation and the
reasonable expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advance as may
arise from the Trustee's or co-trustee's negligence, willful misconduct or bad
faith. The Trustee and any director, officer, employee or agent of the Trustee
shall be indemnified by the Trust Fund and held harmless against any claim,
loss, liability or expense (including costs and expenses of litigation, and of
investigation, counsel fees, damages, judgments and amounts paid in settlement)
incurred in connection with the Trustee's (i) enforcing its rights and remedies
and protecting the interests, and enforcing the rights and remedies, of the
Certificateholders during the continuance of an Event of Default, (ii) defending
or prosecuting any legal action in respect of this Agreement or the
Certificates, (iii) being the owner of record with respect to the Underlying
Certificates acquired for the benefit of Certificateholders, or (iv) acting or
refraining from acting in good faith at the direction of the holders of the
Certificates entitled to not less than 25% of the Voting Rights; provided,
however, that such indemnification will not extend to any loss, liability or
expense that constitutes a specific liability of the Trustee pursuant to this
<PAGE> 37
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Agreement, or to any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence on the part of the Trustee in the
performance of its obligations and duties hereunder, or by reason of its
reckless disregard of such obligations or duties, or as may arise from a breach
of any representation, warranty or covenant of the Trustee made herein. The
provisions of this Section 5.05 shall survive the termination of this Agreement.
Any payment made hereunder by the Depositor to the Trustee shall be from the
Depositor's own funds, without reimbursement from the Trust Fund therefor.
Section 5.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or a
national banking association having its principal office in City of
______________, _____________ or in a state and city acceptable to the Depositor
and organized and doing business under the laws of such state or the United
States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authority. If such
corporation or national banking association publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time the 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 5.07.
Section 5.07. Resignation and Removal of the Trustee.
(a) The Trustee may at any time upon 30 days' prior notice
resign and be discharged from the trusts hereby created by giving written notice
thereof to the Depositor and all Certificateholders. Upon receiving such notice
of resignation, the Depositor shall promptly appoint a successor trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor trustee. If no
successor trustee shall have been so appointed and have accepted appointment
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 5.06 and shall fail to resign after
written request therefor by the Depositor, 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, then the
Depositor may remove the Trustee and appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee.
<PAGE> 38
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(c) The Holders of Certificates entitled to at least 51% of
the Voting Rights may at any time remove the Trustee and appoint a successor
trustee by written instrument or instruments, in triplicate, 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 Trustee
so removed and one complete set to the successor so appointed.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 5.08.
Section 5.08. Successor Trustee.
(a) Any successor trustee appointed as provided in Section
5.07 shall execute, acknowledge and deliver to the Depositor and to its
predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with the like effect as if originally named as trustee herein. The
predecessor trustee shall deliver to the successor trustee all Underlying
Certificates and related documents and statements held by it hereunder, and the
Depositor, the Trustee 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.
(b) No successor trustee shall accept appointment as provided
in this Section unless at the time of such acceptance such successor trustee
shall be eligible under the provisions of Section 5.06.
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section, 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.
Section 5.09. Merger or Consolidation of Trustee.
Any corporation or national banking association into which the
Trustee may be merged or converted or with which it may be consolidated or any
corporation or national banking association resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation or national banking association succeeding to all or substantially
all of the corporation trust business of the Trustee, shall be the successor of
the Trustee hereunder, provided such corporation or national banking association
shall be eligible
<PAGE> 39
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under the provisions of Section 5.06, 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. The Trustee shall mail notice of any
such merger or consolidation to the Certificateholders at their address as shown
in the Certificate Register.
Section 5.10. Appointment of Co-Trustee or Separate Trustee.
(a) 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 Trustee shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee to act as
co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust Fund, and to vest in such
Person or Persons, in such capacity, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this Section 5.10, such powers,
duties, obligations, rights and trusts as the Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under Section 5.06 hereunder and
no notice to Holders of Certificates of the appointment of co-trustee(s) or
separate trustee(s) shall be required under Section 5.08 hereof.
(b) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 5.10 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, 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
successor to the Trustee 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 at the direction of the Trustee.
(c) 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 V. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of, or affording protection to, the
Trustee. Every such instrument shall be filed with the Trustee.
(d) 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,
<PAGE> 40
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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 5.11. Appointment of Office or Agency].
The Trustee will maintain an office or agency in the [City of
New York] where Certificates may be surrendered for registration of transfer or
exchange. The Trustee initially designates its offices located at
____________________________________________________ for the purpose of keeping
the Certificate Register. The Trustee will maintain an office at the address
stated in Section 9.05 hereof where notices and demands to or upon the Trustee
in respect of this Agreement may be served.
Section 5.12. Trustee May Enforce Claims Without Possession of
Certificates.
All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto and any such proceeding instituted by the Trustee
shall be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Certificateholders in respect of which such
judgment has been recovered.
[Section 5.13. Filings with the Securities and Exchange
Commission.
The Trustee shall, prepare and file with the Commission any
and all reports, statements and information respecting the Trust Fund and/or the
Certificates required to be filed. Notwithstanding the foregoing, within 15 days
following the Closing Date, the Depositor shall prepare, and the Trustee shall
execute and file with the Commission, a report on Form 8-K setting forth
information with respect to the Underlying Certificates included in the Trust
Fund on the Closing Date.]
ARTICLE IV
TERMINATION; EVENTS OF DEFAULT
Section 6.01. Termination of the Trust Fund.
(a) The Trust Fund shall be terminated upon the earliest of
(i) the payment in full of the Certificates pursuant to Section 3.05 hereof,
(ii) termination of all of the Underlying
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Trusts pursuant to Section 6.02 hereof, or (iii) the date that is twenty-one
(21) years from the death of the survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James's,
living on the date hereof.
(b) The Trustee shall give notice (a "Notice of
Termination") of the Payment Date on which the Trustee anticipates that the
final payment will be made to the Certificateholders. Such Notice of Termination
shall be mailed by the Trustee to affected Certificateholders at their addresses
shown in the Certificate Register as soon as practicable, 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 payment is anticipated to be made to Holders of
Certificates of the Classes specified therein;
(ii) specify the amount of any such final payment, if
known; and
(iii) state that the final payment to Certificateholders
will be made only upon presentation and surrender of
Certificates at the office of the Trustee therein
specified.
If the Trust Fund is not terminated on the Anticipated Termination Date for any
reason, the Trustee shall promptly mail notice thereof to each affected
Certificateholder.
(c) Upon presentation and surrender of the Certificates
by the Certificateholders on the Termination Date, the Trustee shall distribute
to the Certificateholders the amounts otherwise distributable on such Payment
Date pursuant to Section 3.05(a). 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 6.01 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 payment with respect thereto. If within one year after the second notice
any Certificate shall not have been surrendered for cancellation, the Trustee
shall directly or through an agent, take reasonable 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 Trustee shall segregate all amounts
distributable to the Holders thereof and shall thereafter hold such amounts
uninvested for the benefit of such Holders.
<PAGE> 42
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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 6.01.
Section 6.02. Termination of Underlying Trusts. As the Holder
of the Underlying Residual Certificates, the Trustee has certain rights to cause
an optional termination of each of the Underlying Trusts in accordance with the
terms of the Underlying Agreements. The Trustee shall not exercise any such
right until (a) the Certificate Principal Balance of the Class __ Certificates
is reduced to 5% or less of the Initial Certificate Principal Balance of the
Class __ Certificates, (b) the Trustee's right to cause a termination of each
Underlying Trust is presently exercisable, and (c) a majority in interest of the
Class __ Certificates directs the Trustee in writing to exercise all of such
rights. The Trustee must exercise its rights to terminate all of the Underlying
Trusts if any such right is exercised.
ARTICLE VII
THE DEPOSITOR
Section 7.01. Liability of the Depositor.
The Depositor shall be liable in accordance herewith only to
the extent of the respective obligations specifically imposed upon and
undertaken by the Depositor herein.
Section 7.02. Merger, Consolidation or Conversion of the
Depositor.
Subject to the following paragraph, the Depositor will keep in
full effect its existence, rights and franchises as a corporation or association
under the laws of the jurisdiction of its incorporation, and will obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement and the Certificates and to
perform its duties under this Agreement.
The Depositor 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 the
Depositor shall be a party, or any Person succeeding to the business of the
Depositor, shall be the successor of the Depositor hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
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Section 7.03. Limitation on Liability of the Depositor.
Neither the Depositor, nor any of the directors, officers, employees
or agents of the Depositor, 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. The Depositor, and any director, officer, employee or agent of the
Depositor may rely in good faith on any document of any kind which, prima facie,
is properly executed and submitted by any Person respecting any matters arising
hereunder. The Depositor and any director, officer, employee or agent of the
Depositor 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 this Agreement or the Certificates, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations or
duties hereunder. The Depositor shall be under no obligation to appear in,
prosecute or defend any legal action unless such action is related to its duties
under this Agreement and which in its opinion does not involve it in any expense
or liability; provided, however, that the Depositor may in its discretion
undertake any such action 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, and provided that
such action has been consented to by the Holders of Certificates entitled to at
least 51% of the Voting Rights, 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 shall be entitled to be reimbursed therefor
from the Certificate Account as provided in Section 3.04.
ARTICLE VIII
TAX PROVISIONS
Section 8.01. Trust Administration. For federal income tax purposes,
the Trust Fund formed pursuant to this Agreement will be classified as a grantor
trust under Subpart E, Part 1 of Subchapter J of the Code and not as an
association taxable as a corporation.
(a) The Depositor, the Trustee, and the Certificateholders shall take
any action or cause the Trust Fund to take any action necessary to create and
maintain the status of the Trust Fund as a grantor trust for federal income tax
purposes and shall assist each other as necessary to create or maintain such
status.
(b) The Depositor, the Trustee, and the Certificateholders shall not
take any action or cause the Trust Fund to take any action that could endanger
the status of the Trust Fund as a grantor trust for federal income tax purposes,
unless the Trustee and the Depositor have
<PAGE> 44
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received an Opinion of Counsel (at the expense of the party seeking to take such
action) to the effect that the contemplated action will not endanger such
status.
(c) The Trustee or its designee may employ counsel, accountants
and professional assistance to aid in the performance of the accounting
necessary for federal and state tax reporting and compliance or the performance
of the above powers and duties. The expenses incurred by the Trustee or its
designee in connection with the foregoing shall be reimbursed as part of the
administrative expenses of the Trust Fund described in Section 3.01 hereof.
Section 8.02. Prohibited Activities.
(a) No REMIC election has been or will be made with respect to the
assets of the Trust.
(b) Neither the Trustee nor the Depositor shall permit any
modification of any term of any of the Underlying Certificates (including, but
not limited to, the interest rate, the principal balance, the amortization
schedule, the remaining term to maturity, or any other term affecting the amount
or timing of payments on the Underlying Certificates) unless the Trustee has
received an Opinion of Counsel (at the expense of the party seeking to modify
any of the Underlying Certificates) to the effect that such modification would
not be treated as giving rise to a new debt instrument for federal income tax
purposes.
(c) The Trustee shall not sell or dispose of the Underlying
Certificates (except in a disposition pursuant to (i) the default of any
Underlying Certificate, (ii) the bankruptcy of the Trust, (iii) the termination
of the Trust Fund as set forth in Section 6.01 hereof, or (iv) a disposition of
an Underlying Certificate pursuant to Section 2.03 hereof), nor acquire any
assets for the Trust, unless it has received an Opinion of Counsel that such
sale, disposition, or acquisition will not affect adversely the status of the
Trust Fund as a grantor trust under the Code.
Section 8.03. Tax Matters Person of Underlying Trusts.
_______________________, as servicer of each of the Underlying Trusts, shall
acquire a Class __ Certificate, representing a [0.01]% Percentage Interest in
such Class, in order to continue to act as the tax matters person (within the
meaning of the provisions of the Code relating to REMICs, which appear at
Sections 860A through 860G of the Code, related Code provisions, and
regulations, announcements and rulings thereunder, as the foregoing may be in
effect from time to time) of each of the REMICs related to the Underlying Trusts
as contemplated in the Underlying Agreements.
<PAGE> 45
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ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.01. Amendment.
(a) This Agreement may be amended from time to time by
the Depositor and the Trustee, without the consent of any of the
Certificateholders, (i) to cure any ambiguity, (ii) to correct, modify or
supplement any provisions herein which may be defective or inconsistent with any
other provisions herein, (iii) to amend this Agreement in any respect subject to
the provisions below, or (iv) if such amendment, as evidenced by an Opinion of
Counsel (provided by the Person requesting such amendment) delivered to the
Trustee, is reasonably necessary to comply with any requirements imposed by the
Code or any successor or amendatory statute or any temporary or final
regulation, revenue ruling, revenue procedure or other written official
announcement or interpretation relating to federal income tax laws or any
proposed such action which, if made effective, would apply retroactively to the
Trust Fund at least from the effective date of such amendment; provided that
such action (except any amendment described in (iv) above) shall not, as
evidenced by an Opinion of Counsel (provided by the Person requesting such
amendment) or by confirmation of each Rating Agency that the credit ratings
assigned to the Certificates will not be downgraded or withdrawn, delivered to
the Trustee, adversely affect in any material respect the interests of any
Certificateholder (other than Certificateholders who shall consent to such
amendment).
(b) This Agreement may also be amended from time to time
by the Depositor, and the Trustee with the consent of the Holders of
Certificates evidencing in the aggregate not less than 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 this Agreement or of modifying in any manner the rights of the
Holders of Certificates of such Class; provided, however, that no such amendment
shall:
(i) reduce in any manner the amount of, or delay
the timing of, payments which are required to be distributed on any
Certificate without the consent of the Holder of such Certificate,
(ii) adversely affect in any material respect the
interest of the Holders of Certificates of any Class in a manner other
than as described in clause (i) hereof without the consent of all
Holders of Certificates of such Class, or
(iii) reduce the aforesaid percentage of
Certificates of any Class the Holders of which are required to consent
to any such amendment, in any such case without the consent of the
Holders of all Certificates of such Class then outstanding.
<PAGE> 46
-42-
(c) Notwithstanding any contrary provision of this Agreement,
the Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel (at the expense of the party seeking
such amendment) to the effect that such amendment or the exercise of any power
granted to the Depositor or the Trustee in accordance with such amendment will
not result in a loss of grantor trust status for, or the imposition of a tax on,
the Trust Fund.
(d) Promptly after the execution of any such amendment the
Trustee shall furnish written notification of the substance of such amendment to
each Certificateholder. It shall not be necessary for the consent of
Certificateholders under this Section 9.01 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable regulations as the Trustee may prescribe. The cost of an Opinion
of Counsel delivered pursuant to this Section 9.01 shall be an expense of the
party requesting such amendment, but in any case shall not be an expense of the
Trustee.
(e) The Trustee may, but shall not be obligated to enter into
any amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
Section 9.02. Counterparts.
For the purpose of facilitating the recordation of this
Agreement as herein provided and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
Section 9.03. Limitation on Rights of Certificateholders.
(a) 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.
(b) 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
<PAGE> 47
-43-
under any liability to any third party by reason of any action taken by the
parties to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a notice of a default by the
Depositor or the Trustee in the performance of any obligation hereunder, and of
the continuance thereof, as hereinbefore provided, and unless also the Holders
of Certificates entitled to at least 33% of the Voting Rights 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 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 Certificateholders. 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 9.04. Governing Law.
This Agreement and the Certificates shall be construed in
accordance with the laws of the State of _____________ and the obligations,
rights and remedies of the parties hereunder shall be determined in accordance
with such laws.
Section 9.05. Notices.
All demands and notices hereunder shall be in writing and
shall be deemed effective upon receipt when delivered to (a) in the case of the
Depositor, Union Planters Mortgage Finance Corp., 7130 Goodlett Farms Parkway,
Cordova, Tennessee 38018, Attention: President, with a copy to Kevin J. Buckley,
Esquire, Hunton & Williams, Riverfront Plaza, East Tower, 951 East Byrd Street,
Richmond, Virginia 23219-4074 or such other address as may hereafter be
furnished to the Trustee in writing by the Depositor, (b) in the case of the
Trustee, ___________________________________________, Attention:
_______________________ or such other address as may hereafter be furnished to
the Depositor in writing by the Trustee, and (c) in the case of the Rating
Agency, _____________________________________, New York, New York __________,
Attention: ___________________, or such other address as may hereafter be
furnished to the Depositor and the Trustee in writing by the Rating Agency. Any
<PAGE> 48
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notice required or permitted to be mailed to a Certificateholder shall be given
by first-class mail, postage prepaid, at the address of such Holder as shown in
the Certificate Register. Any notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly given, whether
or not the Certificateholder receives such notice.
Section 9.06. Notices to Rating Agency.
The Depositor or the Trustee, as applicable, shall notify the
Rating Agency at such time as it is otherwise required pursuant to this
Agreement to give notice of the occurrence of any of the events described in
clauses (a), (b), (d), (e) or (f) below or provide a copy to the Rating Agency
at such time as otherwise required to be delivered pursuant to this Agreement of
the statements described in clause (c) below:
(a) a material change or amendment to this Agreement,
(b) the termination or appointment of a successor Trustee
or a change in the majority ownership of the Trustee,
(c) the statement required to be delivered to the Holders
of each Class of Certificates pursuant to Section
3.06,
(d) a change in the location of the Certificate Account,
(e) the occurrence of the Final Payment Date, and
(f) the repurchase of any Underlying Certificate.
Section 9.07. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.
Section 9.08. Successors and Assigns.
The provisions of this Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the parties
hereto, and all such provisions shall inure to the benefit of the
Certificateholders.
<PAGE> 49
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Section 9.09. Article and Section Headings.
The article and section headings herein are for convenience of
reference only, and shall not limit or otherwise affect the meaning hereof.
<PAGE> 50
IN WITNESS WHEREOF, the Depositor, and the Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized and their respective seals, if required, duly attested, to be
hereunto affixed, all as of the day and year first above written.
UNION PLANTERS MORTGAGE FINANCE
CORP.,
as Depositor
By:
---------------------------------------
Name:
Title:
-------------------------------------,
as Trustee
By:
---------------------------------------
Name:
Title:
<PAGE> 51
STATE OF __________ )
) ss:
COUNTY OF ___________ )
On the _____ day of _____, 19__ before me, a notary public in
and for said State, personally appeared , known to me to be a of Union Planters
Mortgage Finance Corp., the Delaware corporation that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
------------------------------
Notary Public
[Notarial Seal]
<PAGE> 52
STATE OF ___________ )
) ss:
COUNTY OF _________ )
On the ____ day of _____, 19__ before me, a notary public in
and for said State, personally appeared , known to me to be a of
_______________________, the [national banking association] that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
------------------------------
Notary Public
[Notarial Seal]
<PAGE> 53
EXHIBIT A
FORM OF CLASS __ CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR 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.
UNION PLANTERS MORTGAGE FINANCE CORP.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 199 -
- -
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN EMPLOYEE BENEFIT PLAN, OR
PERSON USING "PLAN ASSETS" OF ANY PLAN TO EFFECT SUCH ACQUISITION (INCLUDING ANY
INSURANCE COMPANY OR BANK COLLECTIVE INVESTMENT FUND UNDER THE CIRCUMSTANCES
DESCRIBED IN THE AGREEMENT), SUBJECT TO SECTION 406 OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR THE INTERNAL REVENUE CODE
OF 1986 (THE "CODE"), UNLESS THE TRANSFEREE PROVIDES AN OPINION OF COUNSEL OR
CERTIFICATION OF FACTS UNDER THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
AGREEMENT), SATISFACTORY TO THE DEPOSITOR AND THE TRUSTEE OR THE CERTIFICATE
REGISTRAR, THAT SUCH DISPOSITION WILL NOT VIOLATE THE PROHIBITED TRANSACTION
PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE.
Series 199 -
- - Aggregate Initial Certificate
Class Principal Balance of all of
the Class __ Certificates as
[Rate] of the Closing Date:
$_____________
Date of Trust Agreement and
Closing Date: _____ __, 19__ Initial Certificate Principal
Balance of this Certificate:
$_____________
Depositor: Union Planters
Mortgage Finance Corp.
Anticipated First Payment Date:
No. _____ _____ [25], 19__
Trustee: _____________________
CUSIP: _____________________
<PAGE> 54
[THE PRINCIPAL OF THIS CERTIFICATE IS SUBJECT TO PREPAYMENT FROM TIME
TO TIME WITHOUT SURRENDER OF OR NOTATION ON THIS CERTIFICATE. ACCORDINGLY, THE
CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE LESS THAN THAT SET
FORTH ABOVE, AND MAY BE ZERO. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN
ITS CURRENT CERTIFICATE PRINCIPAL BALANCE BY INQUIRY OF THE TRUSTEE.]
TRUST CERTIFICATE
evidencing a beneficial ownership interest in a trust fund (the "Trust
Fund") consisting primarily of mortgage pass-through certificates sold
by
UNION PLANTERS MORTGAGE FINANCE CORP.
THIS CERTIFICATE IS PAYABLE SOLELY FROM THE ASSETS OF THE TRUST FUND,
AND DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE DEPOSITOR,
THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. THIS CERTIFICATE IS
NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY
OR BY THE DEPOSITOR, THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES.
This certifies that _____________________________ is the
registered owner of the Percentage Interest evidenced by this Certificate
(obtained by dividing the Initial Certificate Principal Balance of this
Certificate by the Aggregate Initial Certificate Principal Balance of all of the
Class __ Certificates, both as specified above) in that certain beneficial
ownership interest evidenced by all of the Class __ Certificates in the Trust
Fund, which consists primarily of mortgage pass-through certificates (the
"Underlying Certificates") sold by the Depositor specified above (which term
includes any successor entity under the Agreement referred to below). The Trust
Fund was created pursuant to an Trust Agreement dated the date specified above
(the "Agreement") between the Depositor, as depositor, and the Trustee specified
above, as trustee, a summary of certain of the pertinent provisions of which is
set forth hereinafter. To the extent not defined herein, the capitalized terms
used herein have the meanings assigned thereto in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, the Trustee will pay
or cause to be paid on the Business Day immediately following (i) the [25]th day
of each month or, (ii) if such [25]th day is not a Business Day, then the next
Business Day (the "Payment Date"), commencing on the anticipated first Payment
Date specified above, to the Person in whose name this Certificate is registered
(x) with respect to any Payment Date that occurs in the same month as the
related Distribution Date, on the last Business Day of the month preceding the
month of the related Distribution Date for the Underlying Certificates or (y)
with respect to any Payment Date that occurs in the month subsequent to the
month in which the related Distribution Date occurs, the last Business Day in
the second month preceding the month in which such Payment Date
-2-
<PAGE> 55
occurs (the "Record Date"). Payments will be made from the Available
Distribution Amount in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be paid to the Holders
of Class __ Certificates on such Payment Date. Reference is hereby made to the
further provisions of this Certificate and the Agreement set forth herein, which
further provisions shall for all purposes have the same effect as though fully
set forth at this place.
[So long as this Certificate is registered in the name of a
Clearing Agency or its nominee, the Trustee will make payments of principal and
interest on this Certificate by wire transfers of immediately available funds to
the Clearing Agency or its nominee. Otherwise, all distributions made on any
Certificate pursuant to the Agreement will be made by or on behalf of the
Trustee on each Distribution Date to the Holder of such Certificate as of the
related Record Date (i) by check mailed to such Holder at its address reflected
in the Certificate Register as of the related Record Date or (ii) if such Holder
is the Holder of Certificates of this Class with aggregate initial denominations
of at least $___________, by wire transfer of immediately available funds to the
account of such Holder, upon receipt by the Trustee of a written request of such
Holder accompanied by the appropriate wiring instructions at or before the
Closing Date or, in the case of any wire instructions delivered after the
Closing Date, at least five Business Days prior to the related Record Date. A
fee may be charged by the Trustee to a Holder of Certificates for any
distribution made to such Holder by wire transfer. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency of the Trustee specified
in the final distribution notice to Certificateholders.]
[All payments will be made or caused to be made by the Trustee
either (i) by check mailed to the address of the Person entitled thereto, as
such name and address shall appear on the Certificate Register, or (ii) at the
request of the Person entitled thereto, if such Person shall have so notified
the Trustee in writing at least five Business Days prior to the related Record
Date and such Certificateholder is the registered holder of Certificates the
aggregate Initial Certificate Principal Balance of which is not less than
$____________, in immediately available funds by wire transfer to the account of
such Person at a bank or other entity having appropriate facilities therefor.
Notwithstanding the above, the final payment on this Certificate will be made
after due notice by the Trustee of the pendency of such payment and only upon
presentation and surrender of this Certificate at the office of the Trustee. The
Certificate Principal Balance hereof will be reduced to the extent of payments
allocable to principal and the principal portions of any Realized Losses
allocable hereto.]
This Certificate is one of a duly authorized issue of
Certificates issued in several Classes designated as Mortgage Pass-Through
Certificates of the Series specified above (herein collectively called the
"Certificates"). The Certificates are limited in right of payment to certain
distributions in respect of the Underlying Certificates, all as more
specifically set forth herein and in the Agreement.
-3-
<PAGE> 56
As provided in the Agreement, withdrawals from the Certificate
Account created for the benefit of Certificateholders may be made by the Trustee
from time to time for purposes other than payments to Certificateholders, such
purposes including reimbursement to the Depositor and the Trustee of certain
expenses incurred by either of them.
The Agreement permits, with certain exceptions therein
provided, the amendment of the Agreement and the modification of the rights and
obligations of the Depositor and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor and the
Trustee with the consent of the Holders of Certificates evidencing in the
aggregate not less than 66% of the Percentage Interests of each Class of
Certificates affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefore or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
[As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at Corporate Trust Office, duly endorsed by, or accompanied by an
assignment in the form below or other written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by, the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of the same Class in authorized
denominations evidencing the same aggregate initial Certificate Principal
Balance will be issued to the designated transferee or transferees.]
[As provided in the Agreement and subject to any limitations
on transfer of this Certificate by a Clearing Agency or its nominee and certain
limitations set forth in the Agreement, the transfer of this Certificate is
registrable in the Certificate Register upon surrender of this Certificate for
registration of transfer at the principal Corporate Trust Office of the Trustee
or such other offices or agencies appointed by the Trustee for that purpose or
such other locations, if any, provided in the Agreement, duly endorsed by, or
accompanied by an assignment in the form attached hereto or other written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations will be issued to the designated transferee or
transferees.]
[No transfer of this Certificate will be made unless such
transfer is exempt from or is made in accordance with the registration and
qualification requirements of the 1933 Act and any applicable state securities
laws. In the event that such transfer is to be made without such registration or
qualification, (i) the Trustee will require the transferee to execute an
investment letter in substantially the form required under the Agreement, which
investment letter shall not be an expense of the Depositor or the Trustee, and
(ii) in the event that such transfer is not made pursuant to Rule 144A under the
1933 Act, the Depositor may direct the Trustee
-4-
<PAGE> 57
to require an Opinion of Counsel satisfactory to the Depositor and the Trustee
that such transfer may be made without such registration or qualification and
that such transfer will not result in the registration of the Trust Fund as an
"investment company" under the Investment Company Act of 1940 (the "1940 Act"),
which Opinion of Counsel shall not be an expense of the Depositor or the
Trustee. Neither the Depositor, the Trustee nor any other entity will register
this Certificate under the 1933 Act, qualify this Certificate under any state
securities law or provide registration rights to any purchaser. The holder of
this Certificate desiring to effect such transfer shall indemnify the Trustee
and the Depositor against any liability that may result if the transfer is not
so exempt or is not made in accordance with such federal and state laws. This
Certificate may not be transferred to any Person other than a Person that is an
"accredited investor" of the type specified in Rule 3a-7(a)(2)(i) under the
Investment Company Act of 1940, as amended, or to "qualified institutional
buyers" within the meaning of Rule 144A in accordance with the provisions of
Section 4.02 of the Agreement.]
[The Depositor, the Trustee and the Certificate Registrar and
any agent of the Depositor, the Trustee or the Certificate Registrar may treat
the Person in whose name this Certificate is registered as the owner hereof for
all purposes, and neither the Depositor, the Trustee, the Certificate Registrar
nor any such agent shall be affected by notice to the contrary.]
In addition, no transfer of this Certificate or any interest
herein will be made to any employee benefit plan or other retirement
arrangement, including individual retirement accounts and annuities, Keogh plans
and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested, or any entity that is deemed to be
investing plan assets, that is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the Code (each a "Plan"), unless
the prospective transferee of this Certificate provides the Trustee with an
Opinion of Counsel (or, if such prospective transferee is an insurance company
or a bank collective investment fund, a certification of facts) which
establishes to the satisfaction of the Depositor and the Trustee that such
transfer will not result in a violation of Section 406 of ERISA or Section 4975
of the Code or subject the Depositor or the Trustee to any obligation in
addition to those undertaken in the Agreement or result in the imposition of an
excise tax under Section 4975 of the Code. Neither the Depositor nor the Trustee
will be required to obtain or pay for any such Opinion of Counsel or
certification of facts on behalf of any prospective transferee of this
Certificate.
[The Certificates are issuable in fully registered form and in
denominations specified in the Agreement. As provided in the Agreement and
subject to certain limitations therein set forth, the Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
evidencing the same aggregate Initial Certificate Principal Balance, as
requested by the Holder surrendering the same.]
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.
-5-
<PAGE> 58
The Depositor, the Trustee and the Certificate Registrar and
any agent of the Depositor, the Trustee or the Certificate Registrar may treat
the Person in whose name this Certificate is registered as the owner hereof for
all purposes, and neither the Depositor, the Trustee, the Certificate Registrar
nor any such agent shall be affected by notice to the contrary.
This Certificate shall be governed by and construed in
accordance with the laws of the State of ______________________.
The obligations created by the Agreement in respect of the
Certificates and the Trust Fund created thereby shall terminate upon payment to
the Certificateholders of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following receipt of the
final distribution to be made on the last remaining Underlying Certificate in
the Trust Fund upon presentation and surrender of such Underlying Certificate in
accordance with the terms and conditions of the related Underlying Trust
Agreement. The Agreement provides for the Trustee to terminate each of the
Underlying Trusts by a terminating purchase upon the direction of a majority in
interest of the Class __ Certificates. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate of the Certificate Principal Balances of the Certificates at
the time of purchase being less than or equal to 5% of the aggregate of the
Initial Certificate Principal Balances of the Certificates at the Closing Date.
Unless the certificate of authentication hereon has been
executed by the Certificate Registrar, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
The recitals contained herein shall be taken as statements of
the Depositor or the Trustee, as the case may be.
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<PAGE> 59
IN WITNESS WHEREOF, the Trustee in its capacity as trustee
under the Agreement has caused this Certificate to be duly executed.
Dated: ______ __, 19__
___________________________________,
as Trustee
By:
_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class __ Certificates referred to in the
within-mentioned Agreement.
______________________________,
as Certificate Registrar
By:___________________________
Authorized Officer
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<PAGE> 60
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Social Security or other identifying number of assignee:
(Please print or typewrite name and address including postal zip code of
assignee)
the beneficial interest evidenced by the within Trust Certificate and hereby
authorizes the registration of transfer of such interest to the above-named
assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and class to the above named assignee and
deliver such Certificate(s) to the following address:___________________________
________________________________________________________________________________
________________________________________________________________________________
Dated:
_______________________________________
Signature by or on behalf of assignor
_______________________________________
Signature Guaranteed
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration or enlargement or any change whatever, and must be guaranteed by a
commercial bank or trust company on the continental United States or by a firm
or corporation having membership in any national securities exchange or in the
National Association of Securities Dealers, Inc.
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<PAGE> 61
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payments shall be made, by wire transfer or otherwise, in immediately
available funds to ______________________________________________________ for
the account of ______________ _________________________________ account number
_______________, or, if mailed by check, to ____________________. Applicable
statements should be mailed to ________________________________________________.
This information is provided by _______________________________, the assignee
named above, or _____________________________, as its agent.
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<PAGE> 62
EXHIBIT B
FORM OF CLASS __ CERTIFICATE
UNION PLANTERS MORTGAGE FINANCE CORP.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 199_-_
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE TRANSFERRED UNLESS IT IS REGISTERED OR QUALIFIED
PURSUANT TO THE 1933 ACT AND SUCH LAWS OR IS TRANSFERRED IN A TRANSACTION WHICH
IS EXEMPT FROM REGISTRATION AND QUALIFICATION UNDER THE 1933 ACT AND UNDER
APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 4.02 OF THE TRUST AGREEMENT REFERRED TO HEREIN (THE "AGREEMENT"). THIS
CERTIFICATE MAY ONLY BE TRANSFERRED TO QUALIFIED INSTITUTIONAL BUYERS WITHIN THE
MEANING OF RULE 144A IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4.02 OF THE
AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN EMPLOYEE BENEFIT PLAN, OR
PERSON USING "PLAN ASSETS" OF ANY PLAN TO EFFECT SUCH ACQUISITION (INCLUDING ANY
INSURANCE COMPANY OR BANK COLLECTIVE INVESTMENT FUND UNDER THE CIRCUMSTANCES
DESCRIBED IN THE AGREEMENT), SUBJECT TO SECTION 406 OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR THE INTERNAL REVENUE CODE
OF 1986 (THE "CODE"), UNLESS THE TRANSFEREE PROVIDES AN OPINION OF COUNSEL OR
CERTIFICATION OF FACTS UNDER THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
AGREEMENT), SATISFACTORY TO THE DEPOSITOR AND THE TRUSTEE OR THE CERTIFICATE
REGISTRAR, THAT SUCH DISPOSITION WILL NOT VIOLATE THE PROHIBITED TRANSACTION
PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE MADE ONLY
IF THE PROPOSED TRANSFEREE PROVIDES TO THE TRUSTEE A TRANSFER AFFIDAVIT TO THE
EFFECT THAT (1) SUCH TRANSFEREE IS NOT EITHER (A) THE UNITED STATES, ANY STATE
OR POLITICAL SUBDIVISION THEREOF, ANY POSSESSION OF THE UNITED STATES OR ANY
AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN AN INSTRUMENTALITY
WHICH IS A CORPORATION IF ALL OF ITS ACTIVITIES ARE SUBJECT TO TAX AND, EXCEPT
FOR THE FEDERAL HOME LOAN MORTGAGE CORPORATION, A MAJORITY OF ITS BOARD OF
DIRECTORS IS NOT SELECTED BY SUCH GOVERNMENTAL AUTHORITY), (B) ANY FOREIGN
GOVERNMENT, ANY INTERNATIONAL ORGANIZATION OR ANY AGENCY OR INSTRUMENTALITY OF
ANY OF THE FOREGOING, (C) ANY ORGANIZATION (OTHER THAN A FARMERS' COOPERATIVE
DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY
CHAPTER 1 OF THE CODE UNLESS SUCH
<PAGE> 63
ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE ON
UNRELATED BUSINESS TAXABLE INCOME, (D) A RURAL ELECTRIC AND TELEPHONE
COOPERATIVE DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE OR (E) ANY OTHER
PERSON DESIGNATED BY THE TRUSTEE BASED ON AN OPINION OF COUNSEL, (ANY SUCH
PERSON DESCRIBED IN THE FOREGOING CLAUSES (A), (B), (C), (D) OR (E) BEING
HEREINAFTER REFERRED TO AS A "DISQUALIFIED ORGANIZATION") OR (F) AN AGENT OF A
DISQUALIFIED ORGANIZATION, (2) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE
ASSESSMENT OR COLLECTION OF TAX AND (3) SUCH TRANSFEREE SATISFIES CERTAIN
ADDITIONAL CONDITIONS TO THE PROPOSED TRANSFER. NOTWITHSTANDING THE REGISTRATION
IN THE CERTIFICATE REGISTER OF ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS
CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED
ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR
EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER
FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF
PAYMENTS ON THIS CERTIFICATE. IF A TAX IS IMPOSED ON THE TRUST FUND AS A RESULT
OF THE ACQUISITION OF THIS CERTIFICATE BY A DISQUALIFIED ORGANIZATION, SUCH
DISQUALIFIED ORGANIZATION SHALL BE LIABLE TO REIMBURSE THE TRUST FUND FOR SUCH
TAX. EACH HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, SHALL
BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH.
IF ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE IS MADE TO ANY
OF CERTAIN "PASS-THROUGH ENTITIES" DESCRIBED IN SECTION 860E(E)(6) OF THE CODE,
AND A DISQUALIFIED ORGANIZATION IS THE RECORD HOLDER OF AN INTEREST IN SUCH
ENTITY, THEN A TAX MAY BE IMPOSED ON SUCH ENTITY.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO A NON-UNITED STATES PERSON (AS
DEFINED IN THE AGREEMENT).
Series 199 - Depositor: Union Planters
- - Mortgage Finance Corp.
Class __
Percentage Interest Evidenced
No. _____ by this Certificate: _____%
CUSIP: ___________ Anticipated First Payment
Date: _____ __, 19__
Date of Trust Agreement and
Closing Date: _____ __, 19__ Trustee: ______________________
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<PAGE> 64
TRUST CERTIFICATE
evidencing a beneficial ownership interest in a trust fund (the "Trust
Fund") consisting primarily of mortgage pass-through certificates sold
by
UNION PLANTERS MORTGAGE FINANCE CORP.
THIS CERTIFICATE IS PAYABLE SOLELY FROM THE ASSETS OF THE TRUST FUND,
AND DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE DEPOSITOR,
THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. THIS CERTIFICATE IS
NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY
OR BY THE DEPOSITOR, THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES.
This certifies that _____________________________ is the
registered owner of the Percentage Interest specified above in that certain
beneficial ownership interest evidenced by all of the Class __ Certificates in
the Trust Fund, which consists primarily of mortgage pass-through certificates
(the "Underlying Certificates") sold by the Depositor specified above (which
term includes any successor entity under the Agreement referred to below). The
Trust Fund was created pursuant to a Trust Agreement dated the date specified
above (the "Agreement") between the Depositor, as depositor, and the Trustee
specified above, as trustee, a summary of certain of the pertinent provisions of
which is set forth hereinafter. To the extent not defined herein, the
capitalized terms used herein have the meanings assigned thereto in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, the Trustee will pay
or cause to be paid on the Business Day immediately following (i) the [25]th day
of each month or, (ii) if such [25]th day is not a Business Day, then the next
Business Day (the "Payment Date"), commencing on the anticipated first Payment
Date specified above, to the Person in whose name this Certificate is registered
(x) with respect to any Payment Date that occurs in the same month as the
related Distribution Date, on the last Business Day of the month preceding the
month of the related Distribution Date for the Underlying Certificates or (y)
with respect to any Payment Date that occurs in the month subsequent to the
month in which the related Distribution Date occurs, the last Business Day in
the second month preceding the month in which such Payment Date occurs (the
"Record Date"). Payments will be made from the Available Distribution Amount in
an amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be paid to the Holders of Class __
Certificates on such Payment Date. Reference is hereby made to the further
provisions of this Certificate and the Agreement set forth herein, which further
provisions shall for all purposes have the same effect as though fully set forth
at this place.
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<PAGE> 65
All payments will be made or caused to be made by the Trustee
by check mailed to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final payment on this Certificate will be made after due notice by the Trustee
of the pendency of such payment and only upon presentation and surrender of this
Certificate at the office of the Trustee.
This Certificate is one of a duly authorized issue of
Certificates issued in several Classes designated as Mortgage Pass-Through
Certificates of the Series specified above (herein collectively called the
"Certificates"). The Certificates are limited in right of payment to certain
distributions in respect of the Underlying Certificates, all as more
specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the Certificate
Account created for the benefit of Certificateholders may be made by the Trustee
from time to time for purposes other than payments to Certificateholders, such
purposes including reimbursement to the Depositor and the Trustee of certain
expenses incurred by either of them.
The Agreement permits, with certain exceptions therein
provided, the amendment of the Agreement and the modification of the rights and
obligations of the Depositor and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor and the
Trustee with the consent of the Holders of Certificates evidencing in the
aggregate not less than 66% of the Percentage Interests of each Class of
Certificates affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefore or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at Corporate Trust Office, duly endorsed by, or accompanied by an
assignment in the form below or other written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by, the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of the same Class in authorized
denominations evidencing the same aggregate initial Certificate Principal
Balance will be issued to the designated transferee or transferees.
No transfer of this Certificate will be made unless such
transfer is exempt from or is made in accordance with the registration and
qualification requirements of the 1933 Act and any applicable state securities
laws. In the event that such transfer is to be made without such registration or
qualification, (i) the Trustee will require the transferee to execute an
investment letter in substantially the form required under the Agreement, which
investment letter shall not be an expense of the Depositor or the Trustee, and
(ii) in the event that such transfer is not made pursuant to Rule 144A under the
1933 Act, the Depositor may direct the Trustee
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<PAGE> 66
to require an Opinion of Counsel satisfactory to the Depositor and the Trustee
that such transfer may be made without such registration or qualification and
that such transfer will not result in the registration of the Trust Fund as an
"investment company" under the Investment Company Act of 1940 (the "1940 Act"),
which Opinion of Counsel shall not be an expense of the Depositor or the
Trustee. Neither the Depositor, the Trustee nor any other entity will register
this Certificate under the 1933 Act, qualify this Certificate under any state
securities law or provide registration rights to any purchaser. The holder of
this Certificate desiring to effect such transfer shall indemnify the Trustee
and the Depositor against any liability that may result if the transfer is not
so exempt or is not made in accordance with such federal and state laws. This
Certificate may not be transferred to any Person other than a Person that is a
"qualified institutional buyer" within the meaning of Rule 144A in accordance
with the provisions of Section 4.02 of the Agreement.
In addition, no transfer of this Certificate or any interest
herein will be made to any employee benefit plan or other retirement
arrangement, including individual retirement accounts and annuities, Keogh plans
and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested, or any entity that is deemed to be
investing plan assets, that is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the Code (each a "Plan"), unless
the prospective transferee of this Certificate provides the Trustee with an
Opinion of Counsel (or, if such prospective transferee is an insurance company
or a bank collective investment fund, a certification of facts) which
establishes to the satisfaction of the Depositor and the Trustee that such
transfer will not result in a violation of Section 406 of ERISA or Section 4975
of the Code or subject the Depositor or the Trustee to any obligation in
addition to those undertaken in the Agreement or result in the imposition of an
excise tax under Section 4975 of the Code. Neither the Depositor nor the Trustee
will be required to obtain or pay for any such Opinion of Counsel or
certification of facts on behalf of any prospective transferee of this
Certificate.
The Certificates are issuable in fully registered form and in
denominations specified in the Agreement. As provided in the Agreement and
subject to certain limitations therein set forth, the Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
evidencing the same aggregate Initial Certificate Principal Balance, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.
The Depositor, the Trustee and the Certificate Registrar and
any agent of the Depositor, the Trustee or the Certificate Registrar may treat
the Person in whose name this Certificate is registered as the owner hereof for
all purposes, and neither the Depositor, the Trustee, the Certificate Registrar
nor any such agent shall be affected by notice to the contrary.
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<PAGE> 67
This Certificate shall be governed by and construed in
accordance with the laws of the State of _______________.
The obligations created by the Agreement in respect of the
Certificates and the Trust Fund created thereby shall terminate upon payment to
the Certificateholders of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following receipt of the
final distribution to be made on the last remaining Underlying Certificate in
the Trust Fund upon presentation and surrender of such Underlying Certificate in
accordance with the terms and conditions of the related Underlying Trust
Agreement. The Agreement provides for the Trustee to terminate each of the
Underlying Trusts by a terminating purchase upon the direction of a majority in
interest of the Class __ Certificates. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate of the Certificate Principal Balances of the Certificates at
the time of purchase being less than or equal to 5% of the aggregate of the
Initial Certificate Principal Balances of the Certificates at the Closing Date.
Unless the certificate of authentication hereon has been
executed by the Certificate Registrar, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
The recitals contained herein shall be taken as statements of
the Depositor or the Trustee, as the case may be.
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<PAGE> 68
IN WITNESS WHEREOF, the Trustee in its capacity as trustee
under the Agreement has caused this Certificate to be duly executed.
Dated: _____ __, 19__
-------------------------------,
as Trustee
By:
---------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class __ Certificates referred to in the
within-mentioned Agreement.
------------------------------------,
as Certificate Registrar
By:
---------------------------------
Authorized Officer
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<PAGE> 69
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Social Security or other identifying number of assignee:
(Please print or typewrite name and address including postal zip code of
assignee)
the beneficial interest evidenced by the within Trust Certificate and hereby
authorizes the registration of transfer of such interest to the above-named
assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and class to the above named assignee and
deliver such Certificate(s) to the following address:___________________________
________________________________________________________________________________
________________________________________________________________________________
Dated:
_______________________________________
Signature by or on behalf of assignor
_______________________________________
Signature Guaranteed
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration or enlargement or any change whatever, and must be guaranteed by a
commercial bank or trust company on the continental United States or by a firm
or corporation having membership in any national securities exchange or in the
National Association of Securities Dealers, Inc.
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<PAGE> 70
PAYMENT INSTRUCTIONS
Payments shall be made, by wire transfer or otherwise, in immediately
available funds to ______________________________________________________ for
the account of ______________ _________________________________ account number
_______________, or, if mailed by check, to ____________________. Applicable
statements should be mailed to ________________________________________________.
This information is provided by _______________________________, the assignee
named above, or _____________________________, as its agent.
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<PAGE> 71
EXHIBIT C
UNDERLYING CERTIFICATE SCHEDULE
1.
2.
3.
4.
5.
<PAGE> 72
EXHIBIT D
FORM OF TRANSFEREE AGREEMENT
_____________, 19__
Union Planters Mortgage Finance Corp.
7130 Goodlett Farms Parkway
Cordova, Tennessee 38018
Attention: President
[Trustee]
[Address]
[Address]
Attention: Corporate Trust Services
Re: Union Planters Mortgage Finance Corp. Mortgage Pass-Through
Certificates
Series 199_-_, Class __
Gentlemen:
_____________________________________ (the "Transferee")
intends to acquire from ________________________________________ (the
"Transferor") $________________ Initial Certificate Principal Balance of Union
Planters Mortgage Finance Corp. Mortgage Pass-Through Certificates, Series
199_-_, Class ___ (the "Certificates"), issued pursuant to the Trust Agreement
(the "Agreement") dated _____ __, 19__ between Union Planters Finance Acceptance
Corp., as depositor (the "Depositor"), and _________________, as trustee (the
"Trustee"). Capitalized terms used herein and not otherwise defined shall have
the meanings assigned thereto in the Agreement.
In connection with such acquisition, the Transferee hereby
certifies and agrees:
1. The Transferee is acquiring the Certificates either (a) for
its own account or for accounts for which it exercises sole investment
discretion and not with a view to or for sale in connection with any
distribution thereof, subject nevertheless to any requirement of law
that the disposition of the Transferee's property shall at all times be
and remain within its control, or (b) for resale to "Qualified
Institutional Buyers" within the meaning of Rule 144A under the 1933
Act and in accordance with the provisions of the Agreement.
2. The Transferee has received, and has had an opportunity to
review, (a) a copy of the [Offering Circular] dated _____ __, 19__
relating to the Certificates (the "Memorandum"), (b) a copy of the
Agreement and (b)(c) such other information concerning the
Certificates, the Trust Fund and the Depositor as has been requested by
<PAGE> 73
the Transferee and is relevant to the Transferee's decision to purchase
the Certificates. The Transferee has had any questions arising from
such review answered by the Depositor to the satisfaction of the
Transferee. If the Transferee was provided with a copy of the
Memorandum, the Transferee acknowledges that the Underlying Memoranda
and the Distribution Date Statements (each as defined in the
Memorandum) were not prepared by the Depositor or any of its affiliates
and that neither the Depositor nor any of its affiliates has made any
representation or warranty as to the accuracy or completeness of the
information contained therein, and the Transferee agrees that it will
not look to the Depositor or any of its affiliates with respect to any
damage, liability, claim or expense arising out of, resulting from or
in connection with (i) any error or omission, or alleged error or
omission, contained therein or (ii) any information, development or
event arising after the respective dates thereof. Further, if the
Transferee did not acquire the Certificates from the Transferor in
connection with the initial distribution of the Certificates and was
provided with a copy of the Memorandum related to the original sale
(the "Original Sale") of the Certificates by the Depositor, the
Transferee acknowledges that such Memorandum was provided to it by the
Transferor, that the Memorandum was prepared by the Depositor solely
for use in connection with the Original Sale and neither the Depositor
nor any of its affiliates participated in or facilitated in any way the
acquisition of the Certificates by the Transferee from the Transferor,
and the Transferee agrees that it will look solely to the Transferor
and not to the Depositor or any of its affiliates with respect to any
damage, liability, claim or expense arising out of, resulting from or
in connection with (i) any error or omission, or alleged error or
omission, contained in the Memorandum or (ii) any information,
development or event arising after the date of the Memorandum.
3. The Transferee is an "accredited investor" of the type
specified in Rule 3a- 7(a)(2)(i) under the Investment Company Act of
1940, as amended (the "1940 Act"), and has such expertise, knowledge
and sophistication in financial and business matters generally, and in
financial and business matters related to securities similar to the
Certificates in particular, as to be capable of evaluating the merits
and risks of an investment in the Certificates. The Transferee (or any
account referred to above) is able to bear the economic risks of such
an investment.
4. The Transferee will comply with all applicable federal and
state securities laws in connection with any subsequent resale of the
Certificates by the Transferee.
5. The Transferee understands that (a) the Certificates have
not been and will not be registered under the Securities Act of 1933,
as amended (the "1933 Act"), (b) the Depositor is not required to so
register the Certificates, (c) the Certificates may be resold only if
registered pursuant to the provisions of the 1933 Act, or if an
exemption from such registration is available, (d) the Certificates may
not be resold if such transfer would result in the registration of the
Trust Fund as an "investment company" under the 1940 Act, (e) the
Agreement contains restrictions regarding the transfer of the
Certificates, (f) the Certificates will bear a legend to the foregoing
effect and (g) a stop order may be
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<PAGE> 74
placed in the certificate register relating to the Certificates against
the transfer of any Certificate subject to compliance with the 1933
Act, the rules and regulations thereunder and state securities laws.
6. The Transferee is not an employee benefit plan subject to
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the Internal Revenue Code of 1986, as amended (the
"Code"), nor a Person acting, directly or indirectly, on behalf of any
such plan, and understands that registration of transfer of any
Certificate to any such employee benefit plan, or to any person acting
on behalf of such plan, will not be made unless such employee benefit
plan delivers a certification of facts and an opinion of its counsel,
addressed and satisfactory to the Trustee and the Depositor to the
effect that such transfer will not result in a violation of Section 406
of ERISA or Section 4975 of the Code or subject the Trustee or the
Depositor to any obligation in addition to these undertaken in the
Agreement or result in the imposition of an excise tax under Section
4975 of the Code.
7. The Transferee will not nor has it authorized or will it
authorize any person to (a) offer, pledge, sell, dispose of or
otherwise transfer any Certificate, any interest in any Certificate or
any other similar security to any person in any manner, (b) solicit any
offer to buy or to accept a pledge, disposition or other transfer of
any Certificate, any interest in any Certificate or any other similar
security from any person in any manner, (c) otherwise approach or
negotiate with respect to any Certificate, any interest in any
Certificate or any other similar security with any person in any
manner, (d) make any general solicitation by means of general
advertising or in any other manner, or (e) take any other action, that
(as to any of (a) through (e) above) would constitute a distribution of
any Certificate under the 1933 Act, that would render the disposition
of any Certificate a violation of Section 5 of the 1933 Act or any
state securities law, that would result in the registration of the
Trust Fund as an "investment company" under the 1940 Act, or that would
require registration or qualification pursuant thereto. The Transferee
will not sell or otherwise transfer any of the Certificates, except in
compliance with the provisions of the Agreement. Without limiting the
generality of the foregoing sentence, if the Transferee sells any of
the Certificates, the Transferee will comply with any applicable
requirements set forth in Section 4.02 of the Agreement, and if the
Transferee sells any of the Certificates, the Transferee will obtain
from any purchaser any representations required pursuant to Section
4.02 of the Trust Agreement.
Very truly yours,
--------------------------------------------
(Transferee)
By:
-----------------------------------------
Name:
Title:
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<PAGE> 75
EXHIBIT E
FORM OF RULE 144A CERTIFICATE
Description of Rule 144A Securities, including numbers:
UNION PLANTERS MORTGAGE FINANCE CORP.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 19_-_, CLASS ___
$____________ INITIAL CERTIFICATE PRINCIPAL BALANCE
ISSUED PURSUANT TO A TRUST AGREEMENT DATED _____ __, 19__
BETWEEN UNION PLANTERS MORTGAGE FINANCE CORP., AS DEPOSITOR
(THE "DEPOSITOR"), AND ____________________, AS TRUSTEE
The undersigned seller, as registered holder (the
"Transferor"), intends to transfer the Rule 144A Securities described above to
the undersigned buyer (the "Buyer").
1. In connection with such transfer and in accordance
with the agreements pursuant to which the Rule 144A Securities were issued, the
Transferor hereby certifies the following facts: Neither the Transferor nor
anyone acting on its behalf has offered, transferred, pledged, sold or otherwise
disposed of the Rule 144A Securities, any interest in the Rule 144A Securities
or any other similar security to, or solicited any offer to buy or accept a
transfer, pledge or other disposition of the Rule 144A Securities, or otherwise
approached or negotiated with respect to the Rule 144A Securities, any interest
in the Rule 144A Securities or any other similar security with, any person in
any manner, or made any general solicitation by means of general advertising or
in any other manner, or taken any other action, which would constitute a
distribution of the Rule 144A Securities under the Securities Act of 1933, as
amended (the "1933 Act"), or which would render the disposition of the Rule 144A
Securities a violation of Section 5 of the 1933 Act or require registration
pursuant thereto, and that the Transferor has not offered the Rule 144A
Securities to any person other than the Buyer or another "qualified
institutional buyer" as defined in Rule 144A under the 1933 Act.
2. The Buyer warrants and represents to, and covenants
with, the Transferor, the Trustee and the Depositor pursuant to Section 4.02 of
the Agreement as follows:
a. The Buyer understands that the Rule 144A
Securities have not been registered under the 1933 Act or the
securities laws of any state.
b. The Buyer considers itself a substantial,
sophisticated institutional investor having such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of investment in the Rule 144A
Securities.
c. The Buyer has been furnished with all
information regarding the Rule 144A Securities that it has requested
from the Transferor and the Trustee.
<PAGE> 76
d. Neither the Buyer nor anyone acting on its
behalf has offered, transferred, pledged, sold or otherwise disposed of
the Rule 144A Securities, any interest in the Rule 144A Securities or
any other similar security to, or solicited any offer to buy or accept
a transfer, pledge or other disposition of the Rule 144A Securities,
any interest in the Rule 144A Securities or any other similar security
from, or otherwise approached or negotiated with respect to the Rule
144A Securities, any interest in the Rule 144A Securities or any other
similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or
taken any other action, that would constitute a distribution of the
Rule 144A Securities under the 1933 Act or that would render the
disposition of the Rule 144A Securities a violation of Section 5 of the
1933 Act or require registration pursuant thereto, nor will it act, nor
has it authorized or will it authorize any person to act, in such
manner with respect to the Rule 144A Securities.
e. The Buyer is a "qualified institutional
buyer" as that term is defined in Rule 144A under the 1933 Act and has
completed either of the forms of certification to that effect attached
hereto as Annex 1 or Annex 2. The Buyer is aware that the sale to it is
being made in reliance on Rule 144A. The Buyer is acquiring the Rule
144A Securities for its own account or the account of other qualified
institutional buyers and understands that such Rule 144A Securities may
be resold, pledged or transferred only (i) to a person reasonably
believed to be a qualified institutional buyer that purchases for its
own account or for the account of a qualified institutional buyer to
whom notice is given that the resale, pledge or transfer is being made
in reliance on Rule 144A, or (ii) pursuant to another exemption from
registration under the 1933 Act.
[3]. The Buyer is not an employee benefit plan subject to
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
the Internal Revenue Code of 1986, as amended (the "Code"), nor a Person acting,
directly or indirectly, on behalf of any such plan, and understands that
registration of transfer of any Certificate to any such employee benefit plan,
or to any person acting on behalf of such plan, will not be made unless such
employee benefit plan delivers a certification of facts and an opinion of its
counsel, addressed and satisfactory to the Trustee and the Depositor to the
effect that such transfer will not result in a violation of Section 406 of ERISA
or Section 4975 of the Code or subject the Trustee or the Depositor to any
obligation in addition to these undertaken in the Agreement or result in the
imposition of an excise tax under Section 4975 of the Code.
[3/4]. If the Buyer was provided with a copy of the
[Offering Circular] dated _____ __, 19__ (the "Memorandum") relating to the Rule
144A Securities, the Buyer acknowledges that the Underlying Memoranda and the
Distribution Date Statements (each as defined in the Memorandum) were not
prepared by the Depositor or any of its affiliates and that neither the
Depositor nor any of its affiliates has made any representation or warranty as
to the accuracy or completeness of the information contained therein, and the
Buyer agrees that it will not look to the Depositor or any of its affiliates
with respect to any damage, liability, claim or expense arising out of,
resulting from or in connection with (i) any error or omission, or alleged
-2-
<PAGE> 77
error or omission, contained therein or (ii) any information, development or
event arising after the respective dates thereof.
[4/5]. This document may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same document.
IN WITNESS WHEREOF, each of the parties has executed this
document as of the date set forth below.
- ----------------------------------- -------------------------------------
Print Name of Transferor Print Name of Buyer
By: By:
-------------------------------- ----------------------------------
Name: Name:
Title: Title:
Taxpayer Identification: Taxpayer Identification:
No. No.
-------------------------------- ----------------------------------
Date: Date:
------------------------------ --------------------------------
-3-
<PAGE> 78
ANNEX 1 TO EXHIBIT E
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule
144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because (i) the Buyer owned and/or invested
on a discretionary basis $______________________(1) in securities (except for
the excluded securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with Rule 144A)
and (ii) the Buyer satisfies the criteria in the category marked below.
___ Corporation, etc. The Buyer is a corporation (other than a
bank, savings and loan association or similar institution),
Massachusetts or similar business trust, partnership, or
charitable organization described in Section 501(c)(3) of the
Internal Revenue Code.
___ Bank. The Buyer (a) is a national bank or banking institution
organized under the laws of any State, territory or the
District of Columbia, the business of which is substantially
confined to banking and is supervised by the State or
territorial banking commission or similar official or is a
foreign bank or equivalent institution, and (b) has an audited
net worth of at least $25,000,000 as demonstrated in its
latest annual financial statements, a copy of which is
attached hereto.
___ Savings and Loan. The Buyer (a) is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution, which is
supervised and examined by a State or Federal authority having
supervision over any such institutions or is a foreign savings
and loan association or equivalent institution and (b) has an
audited net worth of at least $25,000,000 as demonstrated in
its latest annual financial statements.
(1) Buyer must own and/or invest on a discretionary basis at least $100,000,000
in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or
invest on a discretionary basis at least $10,000,000 in securities.
<PAGE> 79
___ Broker-dealer. The Buyer is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934.
___ Insurance Company. The Buyer is an insurance company whose
primary and predominant business activity is the writing of
insurance or the reinsuring of risks underwritten by insurance
companies and which is subject to supervision by the insurance
commissioner or a similar official or agency of a State,
territory or the District of Columbia.
___ State or Local Plan. The Buyer is a plan established and
maintained by a State, its political subdivisions, or any
agency or instrumentality of the State or its political
subdivisions, for the benefit of its employees.
___ ERISA Plan. The Buyer is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security
Act of 1974.
___ Investment Adviser. The Buyer is an investment adviser
registered under the Investment Advisers Act of 1940.
___ SBIC. The Buyer is a Small Business Investment Company
licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of
1958.
___ Business Development Company. The Buyer is a business
development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940.
___ Trust Fund. The Buyer is a trust fund whose trustee is a bank
or trust company and whose participants are exclusively (a)
plans established and maintained by a State, its political
subdivisions, or any agency or instrumentality of the State or
its political subdivisions, for the benefit of its employees,
or (b) employee benefit plans within the meaning of Title I of
the Employee Retirement Income Security Act of 1974, but is
not a trust fund that includes as participants individual
retirement accounts or H.R. 10 plans.
3. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer, (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a dealer, (iii) bank deposit notes and certificates of deposit, (iv) loan
participations, (v) repurchase agreements, (vi) securities owned but subject to
a repurchase agreement and (vii) currency, interest rate and commodity swaps.
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Buyer, the Buyer used the
cost of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph. Further, in determining such aggregate
amount, the Buyer may have included securities owned by
-2-
<PAGE> 80
subsidiaries of the Buyer, but only if such subsidiaries are consolidated with
the Buyer in its financial statements prepared in accordance with generally
accepted accounting principles and if the investments of such subsidiaries are
managed under the Buyer's direction. However, such securities were not included
if the Buyer is a majority-owned, consolidated subsidiary of another enterprise
and the Buyer is not itself a reporting company under the Securities Exchange
Act of 1934.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.
6. Will the Buyer be purchasing the Rule 144A Securities only for
the Buyer's own account?
Yes____ No____.
If the answer to the foregoing question is "no", the Buyer agrees that,
in connection with any purchase of securities sold to the Buyer for the account
of a third party (including any separate account) in reliance on Rule 144A, the
Buyer will only purchase for the account of a third party that at the time is a
"qualified institutional buyer" within the meaning of Rule 144A. In addition,
the Buyer agrees that the Buyer will not purchase securities for a third party
unless the Buyer has obtained a current representation letter from such third
party or taken other appropriate steps contemplated by Rule 144A to conclude
that such third party independently meets the definition of "qualified
institutional buyer" set forth in Rule 144A.
7. The Buyer will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein
during the period between the date of this certification and the date the Buyer
purchases the Rule 144A Securities. Unless such notice is given, the Buyer's
purchase of the Rule 144A Securities will constitute a reaffirmation of this
certification as of the date of such purchase.
----------------------------------
Print Name of Buyer
By:
-------------------------------
Name:
Title:
Date:
-----------------------------
-3-
<PAGE> 81
ANNEX 2 TO EXHIBIT E
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule
144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because Buyer is part of a Family of
Investment Companies (as defined below), is such an officer of the Adviser.
2. In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in SEC Rule 144A because (i) the
Buyer is an investment company registered under the Investment Company Act of
1940, and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used.
____ The Buyer owned $___________________ in securities (other than
the excluded securities referred to below) as of the end of
the Buyer's most recent fiscal year (such amount being
calculated in accordance with Rule 144A).
____ The Buyer is part of a Family of Investment Companies which
owned in the aggregate $______________ in securities (other
than the excluded securities referred to below) as of the end
of the Buyer's most recent fiscal year (such amount being
calculated in accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein means
two or more registered investment companies (or series thereof) that have the
same investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) bank deposit notes and certificates
of deposit, (iii) loan participations, (iv) repurchase agreements, (v)
securities owned but subject to a repurchase agreement and (vi) currency,
interest rate and commodity swaps.
5. The Buyer is familiar with Rule 144A and understands that each
of the parties to which this certification is made are relying and will continue
to rely on the statements made
<PAGE> 82
herein because one or more sales to the Buyer will be in reliance on Rule 144A.
In addition, the Buyer will only purchase for the Buyer's own account.
6. The Buyer will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein
during the period between the date of this certification and the date the Buyer
purchases the Rule 144A Securities. Unless such notice is given, the Buyer's
purchase of the Rule 144A Securities will constitute a reaffirmation of this
certification as of the date of such purchase.
-----------------------------------------
Print Name of Buyer
By:
-------------------------------------
Name:
Title:
IF AN ADVISER:
-----------------------------------------
Print Name of Buyer
Date:
-----------------------------------
-2-
<PAGE> 83
EXHIBIT F
TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF )
) ss.:
COUNTY OF )
___________________, being first duly sworn, deposes,
represents and warrants:
1. That he is [Title of Officer] of [Name of Owner] a [savings
institution] [corporation] duly organized and existing under the laws of [the
State of ___________] [the United States], (the "Owner"), record or beneficial
owner of Union Planters Mortgage Finance Corp. Mortgage Pass-Through
Certificates, Series 199_-_, Class __ (the "Class __ Certificates"), on behalf
of which he makes this affidavit and agreement. The Class __ Certificates were
issued pursuant to the Trust Agreement dated _____ __, 19__ (the "Agreement")
between Union Planters Mortgage Finance Corp., as depositor, and __________, as
trustee (the "Trustee").
2. That the Owner (i) is and will be a "Permitted Transferee" as
of _______________, 199__ and (ii) is acquiring the Class __ Certificates for
its own account or for the account of another Owner from which it has received
an affidavit in substantially the same form as this affidavit. A "Permitted
Transferee" is any person other than a "disqualified organization" or a
Non-United States Person. For this purpose, a "disqualified organization" means
any of the following: (i) the United States, any State or political subdivision
thereof, any possession of the United States, or any agency or instrumentality
of any of the foregoing (other than an instrumentality which is a corporation if
all of its activities are subject to tax and, except for the Freddie Mac, a
majority of its board of directors is not selected by such governmental unit),
(ii) a foreign government, any international organization, or any agency or
instrumentality of any of the foregoing, (iii) any organization (other than
certain farmers' cooperatives described in Section 521 of the Internal Revenue
Code of 1986 (the "Code")) which is exempt from the tax imposed by Chapter 1 of
the Code (unless such organization is subject to the tax imposed by Section 511
of the Code on unrelated business taxable income), (iv) rural electric and
telephone cooperatives described in Section 1381(a)(2)(C) of the Code and (v)
any other Person so designated based upon an Opinion of Counsel that the holding
of an Ownership Interest in a Class __ Certificate by such Person may cause the
Trust Fund or any Person having an Ownership Interest in any Class of
Certificates, other than such Person, to incur a liability for any federal tax
imposed under the Code that would not otherwise be imposed but for the Transfer
of an Ownership Interest in a Class __ Certificate to such Person. The terms
"United States", "State" and "international organization" shall have the
meanings set forth in Section 7701 of the Code or successor provisions.
<PAGE> 84
3. That the Owner is aware (i) of the tax that would be imposed
on the Trust Fund if a Class __ Certificate is transferred to a disqualified
organization under Section 860E(e)(6) of the Code and that any Owner that is a
disqualified organization will be obligated to reimburse the Trust Fund for any
such tax; (ii) that the Underlying Residual Certificates may be "noneconomic
residual interests" within the meaning of Treasury regulation section 1.860E-
1(c)(2) and that the transferor of an ownership interest in a "noneconomic
residual interest" will remain liable for any taxes due with respect to the
income on such residual interest, unless no significant purpose of the transfer
is to enable the transferor to impede the assessment or collection of tax; and
(iii) that the Underlying Residual Certificates may have "tax avoidance
potential" within the meaning of Treasury regulation section 1.860G-3(a)(2) and
that the transferor of an ownership interest in an Underlying Residual
Certificate with "tax avoidance potential" to a Non-United States Person will
remain liable for any taxes due with respect to the income on such certificate.
4. That the Owner is aware of the tax imposed on a "pass-through
entity" holding the Class __ Certificates if at any time during the taxable year
of the pass-through entity a disqualified organization is the record holder of
an interest in such entity. For this purpose, a "pass through entity" includes a
regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.
5. That the Owner is aware that the Trustee will not register the
transfer of any Class __ Certificates unless the transferee, or the transferee's
agent, delivers to the Trustee, among other things, an affidavit in
substantially the same form as this affidavit. The Owner expressly agrees that
it will not consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.
6. That the Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class __ Certificates will only be
owned, directly or indirectly, by Owners that are Permitted Transferees.
7. That the Owner's taxpayer identification number is __________.
8. That the Owner has reviewed the restrictions set forth on the
face of the Class __ Certificates and the provisions of Section 4.02 of the
Agreement under which the Class __ Certificates were issued (and, in particular,
the Owner is aware that such Section authorizes the Trustee to deliver payments
to a person other than the Owner and negotiate a mandatory sale by the Trustee
in the event that the Owner holds such Class __ Certificates in violation of
Section 4.02 of the Agreement); and that the Owner expressly agrees to be bound
by and to comply with such restrictions and provisions.
9. That the Owner is not acquiring and will not transfer the
Class __ Certificates in order to impede the assessment or collection of any
tax.
-2-
<PAGE> 85
10. That the Owner anticipates that it will, so long as it holds
the Class __ Certificates, have sufficient assets to pay any taxes owed by the
holder of such Class __ Certificates.
11. That the Owner has no present knowledge that it may become
insolvent or subject to a bankruptcy proceeding for so long as it holds the
Class __ Certificates.
12. That the Owner has no present knowledge or expectation that it
will be unable to pay any United States taxes owed by it so long as any of the
Class __ Certificates remain outstanding. In this regard, the Owner hereby
represents to and for the benefit of the Person from whom it acquired the Class
__ Certificates that the Owner intends to pay taxes associated with holding the
Class __ Certificates as they become due, fully understanding that it may incur
tax liabilities in excess of any cash flows generated by the Class __
Certificates.
13. That the Owner is not acquiring the Class __ Certificates with
the intent to transfer the Class __ Certificates to any person or entity that
will not have sufficient assets to pay any taxes owed by the holder of such
Class __ Certificates, or that may become insolvent or subject to a bankruptcy
proceeding, for so long as the Class __ Certificates remain outstanding.
14. That Owner will, in connection with any transfer that it makes
of the Class __ Certificates, obtain from its transferee the representations
required by Section 4.02(d) of the Agreement under which the Class __
Certificates were issued and will not consummate any such transfer if it knows,
or knows facts that should lead it to believe, that any such representations are
false.
15. That Owner will, in connection with any transfer that it makes
of the Class __ Certificates, represent and warrant that it is not transferring
the Class __ Certificates to impede the assessment or collection of any tax and
that it has no actual knowledge that the proposed transferee: (i) has
insufficient assets to pay any taxes owed by such transferee as holder of the
Class __ Certificates; (ii) may become insolvent or subject to a bankruptcy
proceeding, for so long as the Class __ Certificates remain outstanding and;
(iii) is not a "Permitted Transferee".
16. That the Owner is a United States Person.
IN WITNESS WHEREOF, the Owner has caused this instrument to be executed
on its behalf, by its [TITLE OF OFFICER], attested by its [Assistant Secretary],
this ___ day of _______, 199__.
[NAME OF OWNER]
By:
----------------------------------
Name: [NAME OF OFFICER]
Title: [TITLE OF OFFICER]
-3-
<PAGE> 86
ATTEST:
__________________________
[Assistant] Secretary
Personally appeared before me the above-named [NAME OF OFFICER],
known or proved to me to be the same person who executed the foregoing
instrument and to be a [TITLE OF OFFICER] of the Owner, and acknowledged to me
that he or she executed the same as his or her free act and deed and the free
act and deed of the Owner.
Subscribed and sworn before me this _____ day of _______, 1997.
________________________________________
NOTARY PUBLIC
COUNTY OF ___________________
STATE OF ___________________
My Commission expires the _______ day of
__________________ , 19__.
-4-
<PAGE> 87
EXHIBIT G
FORM OF ERISA REPRESENTATION LETTER FOR
INSURANCE COMPANIES
BANK COLLECTIVE INVESTMENT FUNDS
______________, 199__
Union Planters Mortgage Finance Corp.
7130 Goodlett Farms Parkway
Cordova, Tennessee 38018
Attention: President
[Trustee]
[Address]
[Address]
Attention: Corporate Trust Services
Re: Union Planters Mortgage Finance Corp.
Mortgage Pass-Through Certificates
Series 199_-_, Class ___
Gentlemen:
__________________________________ (the "Transferee") intends to
acquire from _____________________ (the "Transferor") $____________ Initial
Certificate Principal Balance of Union Planters Mortgage Finance Corp. Mortgage
Pass-Through Certificates, Series 199_-_, Class ___ (the "Certificates"), issued
pursuant to a Trust Agreement (the "Agreement") dated _____ __, 19__ between
Union Planters Mortgage Finance Corp., as depositor (the "Depositor"), and
___________________, as trustee (the "Trustee"). Capitalized terms used herein
and not otherwise defined shall have the meanings assigned thereto in the
Agreement.
The Transferee hereby certifies, represents and warrants to, and
covenants with, the Depositor and the Trustee that:
1. The Certificates will not be transferred to any employee
benefit plan or other retirement arrangement including individual
retirement accounts and Keogh plans that is subject to Section 406
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or Section 4975 of the Internal Revenue Code of 1986 (the
"Code") (any of the foregoing, a "Plan").
<PAGE> 88
2. Either (a) the Transferee is an insurance company and (i)
the source of funds used to purchase the Certificates, is an
"insurance company general account" (as such term is defined in
Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60") issued
by the United States Department of Labor (the "DOL") and there is
no plan with respect to which the amount of such general account's
reserves and liabilities for contracts held by or on behalf of such
Plan and all other plans maintained by the same employer (or
"affiliate" thereof, as defined in PTCE 95-60), or by the same
employee organization, exceed 10% of the total reserves and
liabilities of such general account (as determined under PTCE
95-60) as of the date of acquisition of the Certificates or (ii)
the source of funds used to purchase the Certificates is an
"insurance company pooled separate account" (as such term is
defined in Prohibited Transaction Class Exemption 90-1 issued by
the DOL ("PTCE 90-1")) and that there is no Plan with respect to
which the amount of such general account's reserves and liabilities
for contracts held by or on behalf of such Plan and all other Plans
maintained by the same employer (or any "affiliate" thereof, as
defined in PTCE 90-1), or by the same employee organization, exceed
10% of the total of all reserves and liabilities of such pooled
separate account (as determined under PTCE 90-1) as of the date of
acquisition of the Certificates or (b) the Transferee is a bank
collective investment fund and the source of funds used to purchase
the Certificates is a "collective investment fund" (as defined in
Prohibited Transaction Class Exemption 91-38 issued by the DOL
("PTCE 91-38")) and that there is no Plan, the interests of which
together with the interests of any other Plans maintained by the
same employer or employee organization in the collective investment
fund does not exceed 10% of the total of all assets in the
collective investment fund (as determined under PTCE 91-38) as of
the date of acquisition of the Certificates.
Very truly yours,
------------------------------------
(Transferee)
By:
--------------------------------
Name:
Title:
-2-
<PAGE> 1
EXHIBIT 4.4
- --------------------------------------------------------------------------------
DEPOSIT TRUST AGREEMENT
AMONG
UNION PLANTERS MORTGAGE FINANCE CORP,
AS DEPOSITOR,
__________________________,
AS OWNER TRUSTEE
____________________________________________
AS TRUST PAYING AGENT AND BOND ADMINISTRATOR,
AND
____________________________________________,
AS SERVICER
- --------------------------------------------------------------------------------
UNION PLANTERS MORTGAGE FINANCE TRUST 199__-__
COLLATERAL MORTGAGE BONDS
SERIES 199__-__
DATED AS OF ____________ 1, 199__
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS................................................ 1
Section 1.1. Capitalized Terms................................. 1
Section 1.2. Other Definitional Provisions..................... 7
ARTICLE II ORGANIZATION............................................... 8
Section 2.1. Name.............................................. 8
Section 2.2. Office............................................ 9
Section 2.3. Purposes and Powers............................... 9
Section 2.4. Appointment of Owner Trustee......................10
Section 2.5. Initial Capital Contribution of Owner
Trust Estate..............................10
Section 2.6. Declaration of Trust..............................10
Section 2.7. Liability of the Holders..........................12
Section 2.8. Title to Trust Property...........................12
Section 2.9. Situs of Trust....................................12
Section 2.10 Representations and Warranties of the
Company; Covenant of the Company..........13
Section 2.11 Federal Income Tax Provisions.....................16
ARTICLE III CERTIFICATES AND TRANSFER OF INTERESTS.....................20
Section 3.1. Initial Ownership.................................20
Section 3.2. The Certificates..................................20
Section 3.3. Execution, Authentication and Delivery of
Trust Certificates........................21
Section 3.4. Registration of Transfer and Exchange of
Trust Certificates........................21
Section 3.5. Mutilated, Destroyed, Lost or Stolen
Certificates..............................23
Section 3.6. Persons Deemed Owners.............................24
Section 3.7. Access to List of Holders' Names and Addresses....24
Section 3.8. Maintenance of Office or Agency...................25
Section 3.9. Appointment of Trust Paying Agent.................25
Section 3.10 Restrictions on Transfer of Certificates..........27
ARTICLE IV ACTIONS BY OWNER TRUSTEE...................................29
Section 4.1. Prior Notice to Holders with Respect to
Certain Matters...........................29
Section 4.2. Action by Holders with Respect to Bankruptcy......32
Section 4.3. Restrictions on Holders' Power....................32
Section 4.4. Majority Control..................................32
ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES.................33
Section 5.1. Establishment of Certificate Distribution
Account...................................33
Section 5.2. Application of Trust Funds........................34
Section 5.3. Method of Payment.................................35
Section 5.4. Segregation of Moneys; No Interest................36
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE......................36
Section 6.1. General Authority.................................36
Section 6.2. General Duties....................................37
Section 6.3. Action upon Instruction...........................37
Section 6.4. No Duties Except as Specified in this
Agreement, the Basic Documents or Any
Instructions..............................39
Section 6.5. No Action Except Under Specified Documents
or Instructions...........................40
Section 6.6. Restrictions......................................40
ARTICLE VII CONCERNING THE OWNER TRUSTEE...............................40
Section 7.1. Acceptance of Trusts and Duties...................40
Section 7.2. Furnishing of Documents...........................42
Section 7.3. Representations and Warranties....................42
Section 7.4. Reliance; Advice of Counsel.......................44
Section 7.5. Not Acting in Individual Capacity.................44
Section 7.6. Owner Trustee Not Liable for Certificates
or Mortgage Loans.........................45
Section 7.7. Owner Trustee May Own Certificates and Bonds......46
Section 7.8. Licenses..........................................46
ARTICLE VIII COMPENSATION OF OWNER TRUSTEE..............................46
Section 8.1. Owner Trustee's Fees and Expenses.................46
Section 8.2. Indemnification...................................47
Section 8.3. Payments to the Owner Trustee.....................49
Section 8.4. Servicer Liability................................49
ARTICLE IX TERMINATION OF TRUST AGREEMENT.............................49
Section 9.1. Termination of Trust Agreement....................49
ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER
TRUSTEES...................................................51
Section 10.1. Eligibility Requirements for Owner Trustee........51
Section 10.2. Resignation or Removal of Owner Trustee...........51
Section 10.3. Successor Owner Trustee...........................53
Section 10.4. Merger or Consolidation of Owner Trustee..........54
Section 10.5. Appointment of Co-Trustee or Separate Trustee.....55
ARTICLE XI CONTRIBUTION OF MORTGAGE LOANS............................57
Section 11.1. Agreement to Contribute and Convey................57
Section 11.2. Conveyance of Mortgage Loans......................58
Section 11.3. Assignment of Related Rights and Remedies.........59
Section 11.4. Closing...........................................60
Section 11.5. Servicing.........................................61
Section 11.6. Grant of a Security Interest......................61
ARTICLE XII MANAGEMENT OF THE TRUST...................................63
Section 12.1. Powers and Duties of the Bond Administrator.......63
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<TABLE>
<S> <C> <C> <C>
Section 12.2. Compensation; Payment of Certain Expenses.......66
Section 12.3. Instruction of the Owner Trustee.................67
Section 12.4. Benefit of the Agreement.........................67
Section 12.5. Limitation of Responsibility of the Bond
Administrator............................68
Section 12.6. Termination of Bond Administrator................68
Section 12.7. Bankruptcy Matters...............................70
ARTICLE XIII MISCELLANEOUS............................................70
Section 13.1. Supplements and Amendments.......................70
Section 13.2. No Legal Title to Owner Trust Estate in
Holders..................................73
Section 13.3. Limitations on Rights of Others..................73
Section 13.4. Notices..........................................74
Section 13.5. Severability.....................................75
Section 13.6. Separate Counterparts............................75
Section 13.7. Successors and Assigns...........................75
Section 13.8. No Petition......................................75
Section 13.9. No Recourse......................................76
Section 13.10. Headings.........................................76
Section 13.11. GOVERNING LAW....................................76
Section 13.12. Grant of Certificateholder Rights to Bond
Insurer..................................77
Section 13.13. Third Party Beneficiary..........................77
Section 13.14. Suspension and Termination of Bond
Insurer's Rights.................................78
</TABLE>
<PAGE> 5
DEPOSIT TRUST AGREEMENT
This DEPOSIT TRUST AGREEMENT, dated as of __________ 1, 199__,
among UNION PLANTERS MORTGAGE FINANCE CORP, a Delaware corporation, as Depositor
(the "Company"), __________________, a ___________________________, as Owner
Trustee (the "Owner Trustee") and ____________________________________________,
a __________________________, as Trust Paying Agent and Bond Administrator (in
each such capacity, the "Trust Paying Agent" or the "Bond Administrator"), and
_______________________________, as Servicer (the "Servicer"), is entered into
for the limited purposes set forth herein.
ARTICLE I
DEFINITIONS
Section 1.1. Capitalized Terms.
For all purposes of this Agreement, the following terms shall
have the meanings set forth below:
"ACCOUNTS" shall mean, collectively, the Collection Account
and the Bond Account.
"AGREEMENT" shall mean this Deposit Trust Agreement, as may be
amended and supplemented from time to time.
"ANNUAL TAX REPORTS" shall have the meaning assigned thereto
in Section 2.11(k).
"BASIC DOCUMENTS" shall mean this Agreement, the Servicing
Agreement, the Sales Agreement, [the Insurance Agreement,] and the Indenture.
"BOND ACCOUNT" shall have the meaning assigned thereto in the
Indenture.
<PAGE> 6
"BOND ADMINISTRATOR" shall mean ___________________, or any
successor thereto.
"BOND INSURER" shall mean _________________________.
"BOND INSURER DEFAULT" shall have the meaning assigned to such
term in the Indenture.
"BONDS" shall mean the Issuer's Collateralized Mortgage Bonds,
Series 199__-__.
"BUSINESS DAY" shall mean any day other than (i) a Saturday or
Sunday or (ii) a day that is either a legal holiday or a day on which banking
institutions in the State of New York, the State of Tennessee, the State of
Delaware, or the state in which the Trust Paying Agent's office from which
payments will be made to Certificateholders are authorized or obligated by law,
regulation or executive order to be closed.
"BUSINESS TRUST STATUTE" shall mean Chapter 38 of Title 12 of
I the Delaware Code, 12 Del. Code S 3801 et seq., as the same may be amended
from time to time.
"CAPITAL ACCOUNT" shall have the meaning assigned thereto in
Section 2.11(a).
"CERTIFICATE" shall mean a certificate evidencing the
beneficial interest of a Certificateholder in the Trust, substantially in the
form attached hereto as Exhibit A.
"CERTIFICATE DISTRIBUTION ACCOUNT" shall have the meaning
assigned to such term in Section 5.1.
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<PAGE> 7
"CERTIFICATE OF TRUST" shall mean the Certificate of Trust in
the form of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of
the Business Trust Statute.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" shall mean
the register mentioned and the registrar appointed pursuant to Section 3.4.
"CERTIFICATEHOLDER" or "HOLDER" shall mean a Person in whose
name a Certificate is registered.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and, where appropriate in context, Treasury Regulations promulgated
thereunder.
"COLLECTION ACCOUNT" shall have the meaning assigned thereto
in the Servicing Agreement.
"COMPANY" shall mean Union Planters Mortgage Finance Corp., a
Delaware corporation.
"CORPORATE TRUST OFFICE" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
_____________________________________________; or at such other address in the
State of Delaware as the Owner Trustee may designate by notice to the
Certificateholders and the Company, or the principal corporate trust office of
any successor Owner Trustee (the address (which shall be in the State of
Delaware) of which the successor owner trustee will notify the Certificateholder
and the Company).
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
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<PAGE> 8
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"EXPENSES" shall have the meaning assigned to such term in
Section 8.2.
"HOLDER NONRECOURSE DEBT MINIMUM GAIN" shall have the meaning
set forth for "partner nonrecourse debt minimum gain" in Treasury Regulations
Section 1.704-2(i)(2). A Holder's share of Holder Nonrecourse Debt Minimum Gain
shall be determined in accordance with Treasury Regulations Section
1.704-2(i)(5).
"INDENTURE" shall mean the Indenture, dated as of ____________
1, 199___, by and between the Issuer and the Indenture Trustee.
"INDENTURE TRUSTEE" means ________________________, as
Indenture Trustee under the Indenture.
["INSURANCE AGREEMENT" means the Insurance Agreement, dated as
of ____________ 1, 199__, among ______________________, the Issuer,
_________________________, as Seller and Servicer, the
Company, and the Indenture Trustee.]
["INSURANCE POLICY" shall mean the policy issued by the Bond
Insurer for the benefit of the holders of the Bonds.]
"ISSUER" shall mean Union Planters Mortgage Finance Trust
199__-__, the Delaware business trust created pursuant to this Agreement.
"NON-U.S. PERSON" shall mean an individual, corporation,
partnership or other person other than a citizen or resident of the United
States, a corporation, partnership or other entity created or
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<PAGE> 9
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 (i) a court in the United States is able to
exercise primary supervision over the administration of the trust and (ii) one
or more United States fiduciaries have the authority to control all substantial
decisions of the trust.
"OWNER TRUST ESTATE" shall mean the Trust Estate (as defined
in the Indenture), including the contribution of $1 referred to in Section 2.5
hereof.
"OWNER TRUSTEE" shall mean _______________________, a
__________________________, not in its individual capacity but solely as owner
trustee under this Agreement, and any successor owner trustee hereunder.
"PAYMENT DATE" shall mean the twenty-fifth day of each month
or, if such twenty-fifth day is not a Business Day, the next succeeding Business
Day, commencing _______________.
"PERCENTAGE INTEREST" shall mean with respect to any
Certificate the percentage portion of all of the Trust Interest evidenced
thereby as stated on the face of such Certificate.
"PERMITTED INVESTMENTS" shall have the meaning assigned to
such term in the Indenture.
"PROSPECTIVE HOLDER" shall have the meaning set forth in
Section 3.11(a).
"RATING AGENCY CONDITION" means, with respect to any action to
which a Rating Agency Condition applies, that each Rating Agency
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<PAGE> 10
shall have been given 10 days (or such shorter period as is acceptable to each
Rating Agency) prior notice thereof and that each of the Rating Agencies shall
have notified the Company, the Servicer, the Bond Insurer, the Owner Trustee,
and the Issuer in writing that such action will not result in a reduction or
withdrawal of the then current "implied" rating of the Bonds that it maintains
[without taking into account the Bond Insurance].
"RECORD DATE" shall mean as to each Payment Date the last
Business Day of the month immediately preceding the month in which such Payment
Date occurs.
"SALES AGREEMENT" shall mean that certain Sales Agreement,
dated as of _____________ 1, _____, among ________________________, as Seller,
and the Company, as Purchaser.
"SERVICING AGREEMENT" shall mean the Servicing Agreement dated
as of _________________, among the Trust, as Issuer, the Indenture Trustee, and
_____________________, as Servicer.
"SECRETARY OF STATE" shall mean the Secretary of State of
the State of Delaware.
"TAXABLE YEAR" shall have the meaning assigned thereto in
Section 2.11(j).
"TAX MATTERS PARTNER" shall have the meaning assigned thereto
in Section 2.11(l).
"TREASURY REGULATIONS" shall mean regulations, including
proposed or temporary regulations, promulgated under the Code. References herein
to specific provisions of proposed or temporary
6
<PAGE> 11
regulations shall include analogous provisions of final Treasury Regulations or
other successor Treasury Regulations.
"TRUST" shall mean the trust established by this Agreement.
"TRUST INTEREST" shall mean the right to receive, on each
Payment Date, distributions of the amounts, if any, released to the Issuer
pursuant to Section 8.02(d) of the Indenture or pursuant to Section 2.05 of the
Servicing Agreement.
"TRUST MINIMUM GAIN" shall have the meaning set forth for
"partnership minimum gain" in Treasury Regulations 1.704-2(b)(2) and 1.704-2(d).
In accordance with Treasury Regulations Section 1.704- 2(d), the amount of Trust
Minimum Gain is determined by first computing, for each nonrecourse liability of
the Trust, any gain the Trust would realize if it disposed of the property
subject to that liability for no consideration other than full satisfaction of
the liability, and then aggregating the separately computed gains. A Holder's
share of Trust Minimum Gain shall be determined in accordance with Treasury
Regulations Section 1.704-2(g)(1).
"TRUST PAYING AGENT" shall mean any paying agent or co-paying
agent appointed pursuant to Section 3.9 and authorized by the Owner Trustee to
make payments to and distributions from the Certificate Distribution Account.
Section 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise
defined herein have the meanings assigned to them in
the Servicing Agreement or, if not defined therein,
in the Indenture.
(b) All terms defined in this Agreement shall have the
defined meanings when used in any certificate or
other
7
<PAGE> 12
document made or delivered pursuant hereto unless
otherwise defined therein.
(c) As used in this Agreement and in any certificate or
other document made or delivered pursuant hereto or
thereto, accounting terms not defined in this
Agreement or in any such certificate or other
document, and accounting terms partly defined in this
Agreement or in any such certificate or other
document to the extent not defined, shall have the
respective meanings given to them under generally
accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement
or in any such certificate or other document are
inconsistent with the meanings of such terms under
generally accepted accounting principles, the
definitions contained in this Agreement or in any
such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder," and words
of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any
particular provision of this Agreement; Section and
Exhibit references contained in this Agreement are
references to Sections and Exhibits in or to this
Agreement unless otherwise specified; and the term
"including" shall mean "including without
limitation."
(e) The definitions contained in this Agreement are
applicable to the singular as well as the plural
forms of such terms and to the masculine as well as
to the feminine and neuter genders of such terms.
(f) Any agreement, instrument, or statute defined or
referred to herein or in any instrument or
certificate delivered in connection herewith means
such agreement, instrument, or statute as from time
to time amended, modified, or supplemented and
includes (in the case of agreements or instruments)
references to all attachments thereto and
instruments incorporated therein; references to a
Person are also to its permitted successors and
assigns.
ARTICLE II
ORGANIZATION
Section 2.1. Name.
The Trust created hereby shall be known as "Union Planters
Mortgage Finance Trust 199__-__," in which name the Owner Trustee may
8
<PAGE> 13
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
Section 2.2. Office.
The office of the Trust shall be in care of the Owner Trustee
at the Corporate Trust Office or at such other address in Delaware as the Owner
Trustee may designate by written notice to the Certificateholders, the Bond
Insurer and the Company.
Section 2.3. Purposes and Powers.
The purpose of the Trust is to engage in the following
activities:
(i) to issue the Bonds pursuant to the Indenture and to
sell such Bonds;
(ii) with the proceeds of the sale of the Bonds, to pay
the organizational, start-up, and transactional
expenses of the Trust and to pay the balance to the
Company pursuant to Article XI.
(iii) to assign, grant, transfer, pledge, mortgage, and
convey the Owner Trust Estate pursuant to the
Indenture and to hold, manage, and distribute to the
Holders any portion of the Owner Trust Estate
released from the lien of, and remitted to the Trust
pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the
Basic Documents to which it is or is to be a party;
(v) to engage in those activities, including entering
into agreements, that are necessary, suitable, or
convenient to accomplish the foregoing or are
incidental thereto or connected therewith;
(vi) subject to compliance with the Basic Documents, to
engage in such other activities as may be required in
connection with conservation of the Owner Trust
Estate and the making of distributions and payments
to the Holders and the Bondholders; and
(vii) to issue the Certificates pursuant to this Agreement.
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<PAGE> 14
The Trust is hereby authorized by the initial Certificateholders to engage in
the foregoing activities. The Trust shall not engage in any activity other than
in connection with the foregoing or other than as required or authorized by the
terms of this Agreement or the Basic Documents.
Section 2.4. Appointment of Owner Trustee.
The Company hereby appoints the Owner Trustee as trustee of
the Trust effective as of the date hereof, to have all the rights, powers, and
duties set forth herein.
Section 2.5. Initial Capital Contribution of Owner Trust Estate.
The Company hereby sells, assigns, transfers, conveys, and
sets over to the Owner Trustee, as of the date hereof, the sum of $1. The Owner
Trustee hereby acknowledges receipt in trust from the Company, as of the date
hereof, of the foregoing contribution, which shall constitute the initial Owner
Trust Estate and shall be deposited in the Certificate Distribution Account. The
Certificateholders shall pay organizational expenses of the Trust as they may
arise or shall, upon the request of the Owner Trustee, promptly reimburse the
Owner Trustee for any such expenses paid by the Owner Trustee.
Section 2.6. Declaration of Trust.
The Owner Trustee hereby declares that it will hold the Owner
Trust Estate in trust upon and subject to the conditions set forth herein for
the use and benefit of the Holders, subject to the obligations of the Trust
under the Basic Documents. It is the intention of the parties hereto that the
Trust constitute a business
10
<PAGE> 15
trust under the Business Trust Statute and that this Agreement constitute the
governing instrument of such business trust. It is the intention of the parties
hereto that, solely for income and franchise tax purposes, after issuance of the
Certificates, the Trust shall be treated as a partnership, with the assets of
the partnership being the Mortgage Loans and other assets held by the Trust, the
partners of the partnership being the holders of the Certificates and the Bonds
being non-recourse debt of the partnership (or, if there is only one
Certificateholder, that the Trust shall be disregarded as an entity separate
from such Holder, with the assets held by the Trust being treated as assets of
the Holder and the Bonds being treated as non-recourse debt of the Holder). The
parties agree that, unless otherwise required by appropriate tax authorities or
unless the Trust is disregarded as an entity separate from its sole
Certificateholder for income and franchise tax purposes, the Owner Trustee will
file or cause to be filed annual or other necessary returns, reports, and other
forms consistent with the characterization of the Trust as a partnership for
such tax purposes pursuant to Section 2.11(k). The parties agree that no
election will be made to treat the Trust or the Owner Trust Estate as a real
estate mortgage investment conduit as defined in Section 860D of the Code.
Effective as of the date hereof, the Owner Trustee shall have all rights,
powers, and duties set forth herein and in the Business Trust Statute with
respect to accomplishing the purposes of the Trust. The Owner Trustee shall file
the Certificate of Trust with the Secretary of State.
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<PAGE> 16
Section 2.7. Liability of the Holders.
No Holder shall have any personal liability for any liability
or obligation of the Trust. The Certificates shall be fully paid and
non-assessable.
Section 2.8. Title to Trust Property.
(a) Subject to the Indenture, legal title to all of the
Owner Trust Estate shall be vested at all times in
the Trust as a separate legal entity except where
applicable law in any jurisdiction requires title to
any part of the Owner Trust Estate to be vested in a
trustee or trustees, in which case title shall be
deemed to be vested in the Owner Trustee and/or a
separate trustee, as the case may be.
(b) The Certificateholders shall not have legal title to
any part of the Owner Trust Estate. No transfer by
operation of law or otherwise of any interest of the
Certificateholders shall operate to terminate this
Agreement or the trusts hereunder or entitle any
transferee to an Accounting or to the transfer to it
of any part of the Owner Trust Estate.
Section 2.9. Situs of Trust.
The Trust will be located and administered in the state of
Delaware. All accounts maintained at a bank by the Owner Trustee on behalf of
the Trust shall be located in the State of Delaware, the State of
_____________________, or the State of Tennessee. The Trust shall not have any
employees; provided however, nothing herein shall restrict or prohibit the Owner
Trustee from having employees within or without the State of Delaware. Payments
will be received by the Trust only in Delaware, New York, ____________________,
or Tennessee, and payments will be made by the Trust only from Delaware, New
York, _______________________, or Tennessee. The only office of the Trust will
be at the Corporate Trust Office in Delaware.
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Section 2.10. Representations and Warranties of the Company; Covenant
of the Company.
(a) The Company hereby represents and warrants to the
Owner Trustee and the Bond Insurer that:
(i) The Company is duly organized and validly
existing as a corporation in good standing
under the laws of the State of Delaware,
with power and authority to own its
properties and to conduct its business as
such properties are currently owned and such
business is presently conducted.
(ii) The Company has the power and authority to
execute and deliver this Agreement and to
carry out its terms; the Company has full
power and authority to transfer and assign
the property to be transferred and assigned
to and deposited with the Trust and the
Company has duly authorized such transfer
and assignment and deposit to the Trust by
all necessary corporate action; and the
execution, delivery and performance of this
Agreement has been duly authorized by the
Company by all necessary corporate action.
(iii) The consummation of the transactions
contemplated by this Agreement and the
fulfillment of the terms hereof do not
conflict with, result in any breach of any
of the terms and provisions of, or
constitute (with or without notice or lapse
of time) a default under, the certificate of
incorporation or by-laws of the Company, or
any indenture, agreement, or other
instrument to which the Company is a party
or by which it is bound; nor result in the
creation or imposition of any lien upon any
of its properties pursuant to the terms of
any such indenture, agreement, or other
instrument (other than pursuant to the Basic
Documents); nor violate any law or, to the
best of the Company's knowledge, any order,
rule, or regulation applicable to the
Company of any court or of any Federal or
state regulatory body, administrative
agency, or other governmental
instrumentality having jurisdiction over the
Company or its properties.
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(iv) There are no proceedings or investigations
pending or notice of which has been received
in writing before any court, regulatory
body, administrative agency, or other
governmental instrumentality having
jurisdiction over the Company or its
properties: (x) asserting the invalidity of
this Agreement, (y) seeking to prevent the
consummation of any of the transactions
contemplated by this Agreement, or (z)
seeking any determination or ruling that
should reasonably be expected to materially
and adversely affect the performance by the
Company of its obligations under, or the
validity or enforceability of, this
Agreement.
(v) The Company is not in violation of, and its
execution and delivery of this Agreement and
its performance and compliance with the
terms of this Agreement will not constitute
a violation of, any law, any order, or
decree of any court or arbiter, or any
order, regulation, or demand of any federal,
state, or local governmental or regulatory
authority, which violation is likely to
affect materially and adversely either the
ability of the Company to perform its
obligations under this Agreement or the
financial condition of the Company.
(vi) The assignment of the Mortgage Loans to the
Trust as contemplated herein is not subject
to any bulk transfer or similar law in
effect in any applicable jurisdiction;
(vii) The Company has no knowledge of any recent
adverse financial condition or event with
respect to itself that is likely to
materially and adversely affect its ability
to perform its obligations under this
Agreement.
(viii) The Company has not failed to obtain any
consent, approval, authorization, or order
of, and has not failed to cause any
registration or qualification with, any
court or regulatory authority or other
governmental body having jurisdiction over
the Company, which consent, approval,
authorization, order, registration, or
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<PAGE> 19
qualification is required for, and the
absence of which would materially and
adversely affect, the legal and valid
execution, delivery, and performance of this
Agreement by the Company. No consent or
approval of any other person or entity is
necessary for the Company to transfer the
Mortgage Loans to the Trust as contemplated
herein, or, if any such consent or approval
is necessary, such consent or approval has
previously been obtained.
(ix) Immediately prior to the transfer and
assignment herein contemplated, the Company
held good, marketable, and indefeasible
title to, and was the sole owner of, each
Mortgage Loan conveyed by the Company
subject to no liens, charges, mortgages,
encumbrances, or rights of others, except
with respect to liens that will be released
simultaneously with such transfer and
assignment; and immediately upon the
transfer and assignment herein contemplated,
the Trust will hold good, marketable, and
indefeasible title to, and be the sole owner
of, each Mortgage Loan subject to no liens,
charges, mortgages, encumbrances, or rights
of others and the assignment of the Mortgage
Loans contemplated hereby is valid and
effective.
(b) The representations and warranties of __________ with
respect to the Mortgage Loans set forth in the Sales
Agreement are hereby incorporated by reference in
their entirety and are assigned to the Trust in lieu
of any other representations and warranties of the
Company in respect of the Mortgage Loans. Nothing
herein shall be deemed to limit in any respect either
the representations and warranties of
_______________________ or the rights and remedies
assigned by the Company to the Trust against
_________________________ on account of a breach
thereof under the Sales Agreement.
(c) Except for the representations and warranties of the
Company in Section 2.10(a) hereof, the Company is
contributing and conveying the Mortgage Loans,
without recourse to the Company and without
representations or warranties of any kind, express,
or implied, by the Company, whether statutory or
otherwise, including, without limitation, any
warranties of transfer,
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<PAGE> 20
merchantability, or fitness for a particular, or the
Trust's intended, use, or purposes.
(d) Each Certificateholder covenants with the Owner
Trustee [and the Bond Insurer] that during the
continuance of this Agreement, and while it holds
Certificates, it will comply in all respects with the
provisions of its certificate of incorporation in
effect from time to time.
Section 2.11. Federal Income Tax Provisions.
If the Trust is treated as a partnership (rather than
disregarded as a separate entity) for federal income tax purposes pursuant to
Section 2.6, the following provisions shall apply:
(a) A separate capital account (a "Capital Account")
shall be established and maintained for each
Certificateholder in accordance with Treasury
Regulations Section 1.704-1(b)(2)(iv). No
Certificateholder shall be entitled to interest on
its Capital Account or any capital contribution made
by such Holder to the Trust.
(b) Upon termination of the Trust pursuant to Article IX,
any amounts available for distribution to Holders
shall be distributed to the Holders with positive
Capital Account balances in accordance with such
balances. For purposes of this Section 2.11(b), the
Capital Account of each Holder shall be determined
after all adjustments made in accordance with this
Section 2.11 resulting from the Trust's operations
and from all sales and dispositions of all or any
part of the assets of the Trust. Any distributions
pursuant to this Section 2.11(b) shall be made by the
end of the Taxable Year in which the termination
occurs (or, if later, within 90 days after the date
of the termination).
(c) No Certificateholder shall be required to restore any
deficit balance in its Capital Account. Furthermore,
no Holder shall be liable for the return of the
Capital Account of, or of any capital contribution
made to the Trust by, another Holder.
(d) Profit and loss of the Trust for each Taxable Year
shall be allocated to the Certificateholders in
accordance with their respective Percentage
Interests.
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(e) Notwithstanding any provision to the contrary, (i)
any expense of the Trust that is a "nonrecourse
deduction" within the meaning of Treasury Regulations
Section 1.704-2(b)(1) shall be allocated in
accordance with the Holders' respective Percentage
Interests, (ii) any expense of the Trust that is a
"partner nonrecourse deduction" within the meaning of
Treasury Regulations Section 1.704-2(i)(2) shall be
allocated in accordance with Treasury Regulations
Section 1.704-2(i)(1), (iii) if there is a net
decrease in Trust Minimum Gain within the meaning of
Treasury Regulations Section 1.704-2(f)(1) for any
Taxable Year, items of gain and income shall be
allocated among the Holders in accordance with
Treasury Regulations Section 1.704- 2(f) and the
ordering rules contained in Treasury Regulations
Section 1.704-2(j), and (iv) if there is a net
decrease in Holder Nonrecourse Debt Minimum Gain
within the meaning of Treasury Regulations Section
1.704-2(i)(4) for any Taxable Year, items of gain and
income shall be allocated among the Holders in
accordance with Treasury Regulations Section 1.704-
2(i)(4) and the ordering rules contained in Treasury
Regulations Section 1.704-2(j). A Holder's "interest
in partnership profits" for purposes of determining
its share of the nonrecourse liabilities of the Trust
within the meaning of Treasury Regulations Section
1.752-3(a)(3) shall be such Holder's Percentage
Interest.
(f) If a Holder receives in any Taxable Year an
adjustment, allocation, or distribution described in
subparagraphs (4), (5), or (6) of Treasury
Regulations Section 1.704-1(b)(2)(ii)(d) that causes
or increases a negative balance in such Holder's
Capital Account that exceeds the sum of such Holder's
shares of Trust Minimum Gain and Holder Nonrecourse
Debt Minimum Gain, as determined in accordance with
Treasury Regulations Sections 1.704-2(g) and
1.704-2(i), such Holder shall be allocated specially
for such Taxable Year (and, if necessary, later
Taxable Years) items of income and gain in an amount
and manner sufficient to eliminate such negative
Capital Account balance as quickly as possible as
provided in Treasury Regulations Section
1.704-1(b)(2)(ii)(d). After the occurrence of an
allocation of income or gain to a Holder in
accordance with this Section 2.11(f), to the extent
permitted by Regulations Section 1.704-1(b), items of
expense or loss shall be allocated to such Holder in
an amount necessary to offset the income or gain
previously allocated to such Holder under this
Section 2.11(f).
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(g) Loss shall not be allocated to a Holder to the extent
that such allocation would cause a deficit in such
Holder's Capital Account (after reduction to reflect
the items described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the
sum of such Holder's shares of Trust Minimum Gain and
Holder Nonrecourse Debt Minimum Gain. Any loss in
excess of that limitation shall be allocated to all
the Holders in accordance with their respective
Percentage Interests. After the occurrence of an
allocation of loss to a Holder in accordance with
this Section 2.11(g), to the extent permitted by
Treasury Regulations Section 1.704-1(b), profit shall
be allocated to such Holder in an amount necessary to
offset the loss previously allocated to such Holder
under this Section 2.11(g).
(h) If a Holder transfers any part or all of its
Holdership Interest and the transferee is admitted as
provided herein (a "Transferee Holder"), the
distributive shares of the various items of profit
and loss allocable among the Holders during such
Taxable Year shall be allocated between the
transferor and the Transferee Holder (at the election
of the Holders (including the transferor, but
excluding the Transferee Holder)) either (i) as if
the Taxable Year had ended on the date of the
transfer or (ii) based on the number of days of such
Taxable Year that each was a Holder without regard to
the results of Trust activities in the respective
portions of such Taxable Year in which the transferor
and Transferee Holder were Holders.
(i) "Profit" and "loss" and any items of income, gain,
expense or loss referred to in this Section 2.11
shall be determined in accordance with federal income
tax accounting principles as modified by Treasury
Regulations Section 1.704-1(b)(2)(iv), except that
profits and losses shall not include items of income,
gain, and expense that are specially allocated
pursuant to Sections 2.11(e), 2.11(f) or 2.11(g)
hereof. All allocations of income, profits, gains,
expenses, and losses (and all items contained
therein) for federal income tax purposes shall be
identical to all allocations of such items set forth
in this Section 2.11, except as otherwise required by
Section 704(c) of the Code and Section 1.704-1(b)(4)
of the Treasury Regulations.
(j) The taxable year of the Trust (the "Taxable Year")
shall be the calendar year or such other taxable year
as may be required by Section 706(b) of the Code.
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(k) At the Trust's expense, the Owner Trustee shall (i)
prepare, or cause to be prepared, and file such tax
returns relating to the Trust (including a
partnership information return, IRS Form 1065) as
are required by applicable federal, state, and local
law, (ii) cause such returns to be signed in the
manner required by law, (iii) make such elections as
may from time to time be required or appropriate
under any applicable law so as to maintain the
Trust's classification as a partnership for tax
purposes, (iv) prepare and deliver, or cause to be
prepared and delivered, to the Holders, no later
than 75 days after the close of each Taxable Year, a
Schedule K-1, a copy of the Trust's informational
tax return (IRS Form 1065), and such other reports
(collectively, the "Annual Tax Reports") setting
forth in sufficient detail all such information and
data with respect to the transactions effected by or
involving the Trust during such Taxable Year as
shall enable the each Holder to prepare its federal,
state, and local income tax returns in accordance
with the laws then prevailing, and (v) collect, or
cause to be collected, any withholding tax as
described in Section 5.2(c) with respect to income
or distributions to Certificateholders.
(l) The Holders shall designate a Holder as the tax
matters partner for the Trust within the meaning of
Section 6231(a)(7) of the Code (the Tax Matters
Partner"), and shall notify the Indenture Trustee,
the Manager (as defined in Section 5.2(d)) and the
Owner Trustee in writing of the name and address of
such Tax Matters Partner. The Tax Matters Partner
shall have the right and obligation to take all
actions authorized and required, respectively, by
the Code for the Tax Matters Partner. The Tax
Matters Partner shall have the right to retain
professional assistance in respect of any audit or
controversy proceeding initiated with respect to the
Trust by the Internal Revenue Service or any state
or local taxing authority, and all expenses and fees
incurred by the Tax Matters Partner on behalf of the
Trust shall constitute expenses of the Trust. In
the event the Tax Matters Partner receives notice of
a final partnership adjustment under Section
6223(a)(2) of the Code, the Tax Matters Partner
shall either (i) file a court petition for judicial
review of such adjustment within the period provided
under Section 6226(a) of the Code, a copy of which
petition shall be mailed to all other Holders on the
date such petition is filed, or (ii) mail a written
notice to all other Holders, within such period,
that describes the Tax Matters
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Partner's reasons for determining not to file such a
petition.
(m) Except as otherwise provided in this Section 2.11,
the Holders shall instruct the Owner Trustee as to
whether to make any available election under the
Code or any applicable state or local tax law on
behalf of the Trust. Notwithstanding the foregoing,
any Holder may request that the Owner Trustee make
an election under section 754 of the Code; provided
that the requesting Holder shall agree to bear the
cost of preparing such election and any additional
accounting expenses of the Trust incurred as a
result of such election.
ARTICLE III
CERTIFICATES AND TRANSFER OF INTERESTS
Section 3.1. Initial Ownership.
Upon the formation of the Trust by the contribution by the
Company pursuant to Section 2.5 and until the issuance of the Certificates, the
Company shall be the sole beneficiary of the Trust.
Section 3.2. The Certificates.
The Certificates shall be issued without a principal amount
and shall evidence beneficial ownership interests in the Trust. The Certificates
shall be printed, lithographed, or engraved or may be produced in any other
manner as is reasonably acceptable to the Owner Trustee, as evidenced by its
execution thereof. The Certificates shall be executed on behalf of the Trust by
manual or facsimile signature of a Trust Officer of the Owner Trustee.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be valid, notwithstanding that such individuals or
any of them shall have ceased to be so authorized prior to the authentication
and delivery of such Certificates or did
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not hold such offices at the date of authentication and delivery of
such Certificates.
A transferee of a Certificate shall become a
Certificateholder, and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder upon such transferee's acceptance
of a Certificate duly registered in such transferee's name pursuant to Section
3.4.
Section 3.3. Execution, Authentication and Delivery of Trust
Certificates.
Concurrently with the initial transfer of the Mortgage Loans
to the Trust pursuant to Article XI hereof, the Owner Trustee shall cause the
Certificates, representing 100% of the Percentage Interests of the Trust
Interest, to be executed on behalf of the Trust, authenticated and delivered to
________________________, as the Company's designee. No Certificate shall
entitle its holder to any benefit under this Agreement, or shall be valid for
any purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee or the Owner Trustee's authenticating agent, by manual or
facsimile signature; such authentication shall constitute conclusive evidence
that such Certificate shall have been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
Section 3.4. Registration of Transfer and Exchange of Trust
Certificates.
The Certificate Registrar shall keep or cause to be kept, at
the office or agency maintained pursuant to Section 3.8, a
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Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Owner Trustee shall provide for the registration of Certificates
and of transfers and exchanges of Certificates as herein provided. The Owner
Trustee shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Certificate
at the office or agency maintained pursuant to Section 3.8, the Owner Trustee
shall execute, authenticate and deliver (or shall cause its authenticating agent
to authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Certificates of a like Percentage Interest dated
the date of authentication by the Owner Trustee or any authenticating agent. At
the option of a Certificateholder, Certificates may be exchanged for other
Certificates of a like Percentage Interest upon surrender of the Certificates to
be exchanged at the office or agency maintained pursuant to Section 3.8.
Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Certificateholder or his attorney duly authorized in writing. In
addition, each Certificate presented or surrendered for registration of transfer
and exchange must be accompanied by a letter from the Prospective Holder
certifying as to the representations set forth in Section 3.11(a), (b), and (c).
Each Certificate surrendered for registration of
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transfer or exchange shall be canceled and disposed of by the Owner Trustee in
accordance with its customary practice.
No service charge shall be made for any registration of
transfer or exchange of Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.
The preceding provisions of this Section notwithstanding, the
Owner Trustee shall not make and the Certificate Registrar shall not register
transfer or exchanges of Certificates for a period of 15 days preceding the
Payment Date with respect to the Certificates.
Section 3.5. Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate shall be surrendered to the
Certificate Registrar, or if the Certificate Registrar shall receive evidence to
its satisfaction of the destruction, loss, or theft of any Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Certificate shall have been acquired by
a bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute
and the Owner Trustee, or the Owner Trustee's authenticating agent, shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost, or stolen Certificate, a new Certificate of like Percentage
Interest. In connection with the issuance of any new Certificate under this
Section, the Owner Trustee or the Certificate Registrar may require
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the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute conclusive evidence of ownership in
the Trust, as if originally issued, whether or not the lost, stolen, or
destroyed Certificate shall be found at any time.
Section 3.6. Persons Deemed Owners.
Each person by virtue of becoming a Certificateholder in
accordance with this Agreement shall be deemed to be bound by the terms of this
Agreement. Prior to due presentation of a Certificate for registration of
transfer, the Owner Trustee or the Certificate Registrar may treat the Person in
whose name any Certificate shall be registered in the Certificate Register as
the owner of such Certificate for the purpose of receiving distributions
pursuant to Section 5.2 and for all other purposes whatsoever, and neither the
Owner Trustee nor the Certificate Registrar shall be bound by any notice to the
contrary.
Section 3.7. Access to List of Holders' Names and Addresses.
The Owner Trustee shall furnish or cause to be furnished to
the Servicer, the Company and the Trust Paying Agent immediately prior to each
Payment Date, a list of the names and addresses of the Certificateholders as of
the most recent Record Date. If three or more Certificateholders or one or more
Holders of Certificates, together evidencing Percentage Interests totaling not
less than 25%, apply in writing to the Owner Trustee, and such application
states that the applicants desire to communicate with other
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Certificateholders with respect to their rights under this Agreement or under
the Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Owner Trustee
shall, within five Business Days after the receipt of such application, afford
such applicants access during normal business hours to the current list of
Certificateholders. Each Certificateholder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Company, the
Certificate Registrar, or the Owner Trustee accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
Section 3.8. Maintenance of Office or Agency.
The Owner Trustee shall maintain an office or offices or
agency or agencies where Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Owner Trustee
in respect of the Certificates and the Basic Documents may be served. The Owner
Trustee initially designates ________________________ as its principal corporate
trust office for such purposes. The Owner Trustee shall give prompt written
notice to the Company and to the Certificateholders of any change in the
location of the Certificate Register or any such office or agency.
Section 3.9. Appointment of Trust Paying Agent.
The Owner Trustee hereby appoints ___________________, as
Trust Paying Agent under this Agreement. The Trust Paying Agent shall make
distributions to Certificateholders from the Certificate
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Distribution Account pursuant to Section 5.2 and shall report to the Owner
Trustee on the Payment Date via facsimile transmission of a distribution
statement the amounts of such distributions to the Certificateholders. The Trust
Paying Agent shall have the revocable power to withdraw funds from the
Certificate Distribution Account for the purpose of making the distributions
referred to above. In the event that __________, shall no longer be the Trust
Paying Agent hereunder, the Owner Trustee shall appoint a successor to act as
Trust Paying Agent (which shall be a bank or trust company) acceptable to the
Certificateholders and the Bond Insurer. The Owner Trustee shall cause such
successor Trust Paying Agent or any additional Trust Paying Agent appointed by
the Owner Trustee to execute and deliver to the Owner Trustee an instrument in
which such successor Trust Paying Agent or additional Trust Paying Agent shall
agree with the Owner Trustee that as Trust Paying Agent, such successor Trust
Paying Agent or additional Trust Paying Agent will hold all sums, if any, held
by it for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. After one year from the date of receipt, the Trust Paying
Agent shall promptly return all unclaimed funds to the Owner Trustee, and upon
removal of a Trust Paying Agent, such Trust Paying Agent shall also return all
funds in its possession to the Owner Trustee. The provisions of Sections 7.1,
7.3(b), 7.4, 8.1, and 10.2 as to resignations, shall apply to the Trust Paying
Agent to the same extent as if it were named therein and, to the extent
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applicable, to any other paying agent appointed hereunder. Any reference in this
Agreement to the Trust Paying Agent shall include any co-paying agent unless the
context requires otherwise.
Section 3.10. Restrictions on Transfer of Certificates.
(a) Each prospective purchaser and any subsequent
transferee of a Certificate (each, a "Prospective
Holder"), other than ____________________, shall
represent and warrant, in writing, to the Owner
Trustee and the Certificate Registrar and any of
their respective successors that:
(i) Such Person is (A) a "qualified
institutional buyer" as defined in Rule 144A
under the Securities Act of 1933, as amended
(the "Securities Act"), and is aware that
the seller of the Certificate may be relying
on the exemption from the registration
requirements of the Securities Act provided
by Rule 144A and is acquiring such
Certificate for its own account or for the
account of one or more qualified
institutional buyers for whom it is
authorized to act, or (B) a Person involved
in the organization or operation of the
Trust or an affiliate of such Person within
the meaning of Rule 3a-7 of the Investment
Company Act of 1940, as amended (including,
but not limited to, _____________________.
(ii) Such Person understands that the
Certificates have not been and will not be
registered under the Securities Act and may
be offered, sold, pledged, or otherwise
transferred only to a person whom the seller
reasonably believes is (C) a qualified
institutional buyer or (D) a Person involved
in the organization or operation of the
Trust or an affiliate of such Person, in a
transaction meeting the requirements of Rule
144A under the Securities Act and in
accordance with any applicable securities
laws of any state of the United States.
(iii) Such Person understands that the
Certificates bear a legend to the following
effect:
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"THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS. THIS CERTIFICATE MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING
PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE ACT, IN
A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) A PERSON
INVOLVED IN THE ORGANIZATION OR OPERATION OF THE TRUST OR AN
AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3a-7 OF
THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT
NOT LIMITED TO, _______________________________ IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED
TO REGISTER THIS CERTIFICATE UNDER THE ACT OR ANY STATE
SECURITIES LAWS."
(b) By its acceptance of a Certificate, each Prospective Holder
agrees and acknowledges that no legal or beneficial
interest in all or any portion of any Certificate may be
transferred directly or indirectly to an entity that holds
residual securities as nominee to facilitate the clearance
and settlement of such securities through electronic book-
entry changes in Accounts of participating organizations (a
"Book-Entry Nominee") and any such purported transfer shall
be void and have no effect.
(c) No transfer of this certificate or any beneficial interest
therein shall be made to any person unless the Owner
Trustee has received a certificate from the Transferee to
the effect that such transferee (i) is not a person which
is an employee benefit plan, trust, or account subject to
Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or Section 4975 of the Code or
a governmental plan, defined in Section 3(32) of ERISA
subject to any federal, state or local law which is, to a
material extent, similar to the foregoing provisions of
ERISA or the Code (any such person being a "plan") and (ii)
is not an entity, including an insurance company separate
account or general account, whose underlying assets include
plan assets by reason of a plan's investment in the entity.
(d) The Owner Trustee shall not execute, and shall not countersign
and deliver, a Certificate in connection with any transfer
thereof unless the transferor shall have
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provided to the Owner Trustee a certificate, substantially in
the form attached as Exhibit C to this Agreement, signed by
the transferee, which certificate shall contain the consent of
the transferee to any amendments of this Agreement as may be
required to effectuate further the foregoing restrictions on
transfer of the Certificates to Book-Entry Nominees, and an
agreement by the transferee that it will not transfer a
Certificate without providing to the Owner Trustee a
certificate substantially in the form attached as Exhibit C to
this Agreement.
(e) The Certificates shall bear an additional legend referring
to the restrictions contained in paragraph (b) above.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
Section 4.1. Prior Notice to Holders with Respect to Certain Matters.
With respect to the following matters, the Owner Trustee shall
not take action, and the Certificateholders shall not direct the Owner Trustee
to take any action, unless at least 30 days before the taking of such action,
the Owner Trustee shall have notified the Certificateholders and the Bond
Insurer in writing of the proposed action and neither the Certificateholders nor
the Bond Insurer shall have notified the Owner Trustee in writing prior to the
30th day after such notice is given that such Certificateholders and/or the Bond
Insurer have withheld consent or the Certificateholders have provided
alternative direction (any direction by the Certificateholders shall require the
prior consent of the Bond Insurer):
(a) the initiation of any claim or lawsuit by the Trust (except
claims or lawsuits brought in connection with the collection
of the Mortgage Loans) and the compromise of any action, claim
or lawsuit brought by or against the Trust (except with
respect to the aforementioned claims or lawsuits for
collection of the Mortgage Loans);
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(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be
filed under the Business Trust Statute);
(c) the amendment or other change to this Agreement or any Basic
Document in circumstances where the consent of any Holder or
the Bond Insurer is required;
(d) the amendment or other change to this Agreement or any Basic
Document in circumstances where the consent of any Holder or
the Bond Insurer is not required and such amendment materially
adversely affects the interest of the Certificateholders;
(e) the appointment pursuant to the Indenture of a successor Bond
Registrar, Trust Paying Agent, or Indenture Trustee or
pursuant to this Agreement of a successor Certificate
Registrar or Trust Paying Agent, or the consent to the
assignment by the Bond Registrar, Paying Agent, or Indenture
Trustee or Certificate Registrar or Trust Paying Agent of its
obligations under the Indenture or this Agreement, as
applicable.
(f) the consent to the calling or waiver of any default of any
Basic Document;
(g) the consent to the assignment by the Indenture Trustee or
Servicer of their respective obligations under any Basic
Document;
(h) except as provided in Article IX hereof, dissolve, terminate
or liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other entity,
or convey or transfer all or substantially all of the Trust's
assets to any other entity;
(j) cause the Trust to incur, assume or guaranty any indebtedness
other than as set forth in this Agreement or the Basic
Documents;
(k) do any act that conflicts with any other Basic Document;
(l) do any act which would make it impossible to carry on the
ordinary business of the Trust as described in Section 2.3
hereof;
(m) confess a judgment against the Trust;
(n) possess Trust assets, or assign the Trust's right to property,
for other than a Trust purpose;
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(o) cause the Trust to lend any funds to any entity; or
(p) change the Trust's purpose and powers from those set forth
in this Trust Agreement.
In addition the Trust shall not commingle its assets with
those of any other entity. The Trust shall maintain its financial and accounting
books and records separate from those of any other entity. Except as expressly
set forth herein, the Trust shall pay its indebtedness, operating expenses, and
liabilities from its own funds, and the Trust shall not pay the indebtedness,
operating expenses, and liabilities of any other entity. The Trust shall
maintain appropriate minutes or other records of all appropriate actions and
shall maintain its office separate from the offices of the Company and
________________.
The Owner Trustee shall not have the power, except upon the
direction of the Certificateholders with the consent of the Bond Insurer, and to
the extent otherwise consistent with the Basic Documents, to (i) remove or
replace the Servicer or the Indenture Trustee, (ii) institute proceedings to
have the Trust declared or adjudicated a bankruptcy or insolvent, (iii) consent
to the institution of bankruptcy or insolvency proceedings against the Trust,
(iv) file a petition or consent to a petition seeking reorganization or relief
on behalf of the Trust under any applicable federal or state law relating to
bankruptcy, (v) consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator, or any similar official of the Trust or a substantial
portion of the property of the Trust, (vi) make any assignment for the benefit
of the Trust's creditors, (vii) cause the Trust to admit
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in writing its inability to pay its debts generally as they become due, and
(viii) take any action, or cause the Trust to take any action, in furtherance of
any of the foregoing (any of the above, a "Bankruptcy Action"). So long as the
Indenture and the Insurance Agreement remain in effect and no Bond Insurer
Default exists, no Certificateholder shall have the power to take, and shall not
take, any Bankruptcy Action with respect to the Trust or direct the Owner
Trustee to take any Bankruptcy Action with respect to the Trust.
Section 4.2. Action by Holders with Respect to Bankruptcy.
The Owner Trustee shall not have the power to commence a
voluntary proceeding in bankruptcy relating to the Trust without the consent and
approval of the Bond Insurer, the unanimous prior approval of all
Certificateholders and the Bond Insurer and the delivery to the Owner Trustee by
each such Certificateholder of a certification that such Certificateholder
reasonably believes that the Trust is insolvent.
Section 4.3. Restrictions on Holders' Power.
The Certificateholders shall not direct the Owner Trustee to
take or refrain from taking any action if such action or inaction would be
contrary to any obligation of the Trust or the Owner Trustee under this
Agreement or any of the Basic Documents or would be contrary to Section 2.3 nor
shall the Owner Trustee be obligated to follow any such direction, if given.
Section 4.4. Majority Control.
Except as expressly provided herein, any action that may be
taken by the Certificateholders under this Agreement may be taken by
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the Holders of Certificates evidencing more than 50% of the Percentage Interest
in the Trust Interest and such action shall be binding upon all
Certificateholders. Except as expressly provided herein, any written notice of
the Certificateholders delivered pursuant to this Agreement shall be effective
if signed by Holders of Certificates evidencing more than 50% of the Percentage
Interest in the Trust Interest at the time of the delivery of such notice and
such action shall be binding upon all Certificateholders.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
Section 5.1. Establishment of Certificate Distribution Account.
The Owner Trustee shall cause the Trust Paying Agent, for the
benefit of the Certificateholders, to establish and maintain with
________________________, for the benefit of the Owner Trustee one or more
Accounts that while the Trust Paying Agent holds such Account shall be entitled
"Certificate Distribution Account, _________________________, as Trust Paying
Agent, in trust for the Holders of Certificates evidencing beneficial interests
in Union Planters Mortgage Finance Trust 199__-__." Funds shall be deposited in
the Certificate Distribution Account as required by the Indenture or, following
satisfaction and release of the Indenture, by the Servicing Agreement.
All of the right, title, and interest of the Owner Trustee in
all funds on deposit from time to time in the Certificate Distribution Account
and in all proceeds thereof shall be held for the benefit of the
Certificateholders, the Bond Insurer, and such
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other persons entitled to distributions therefrom. Except as otherwise expressly
provided herein, the Certificate Distribution Account shall be under the sole
dominion and control of the Owner Trustee for the benefit of the
Certificateholders and the Bond Insurer.
Section 5.2. Application of Trust Funds.
(a) On each Payment Date, the Trust Paying Agent shall distribute
to the Certificateholders, on the basis of their respective
Percentage Interests, all amounts then on deposit in the
Certificate Distribution Account.
(b) On each Payment Date, the Trust Paying Agent shall send to
Certificateholders the statement provided to the Owner
Trustee by the Indenture Trustee pursuant to Section
2.08(d) of the Indenture with respect to such Payment Date.
If the Trust Paying Agent is an entity other than the
Indenture Trustee, the Owner Trustee shall provide a copy
of such statement to the Trust Paying Agent to enable it to
perform its duties under this Section 5.2(b).
(c) In the event that any withholding tax is imposed under
federal, state, or local tax on the Trust's payment (or
allocations of income) to a Certificateholder, such tax
shall reduce the amount otherwise distributable to such
Certificateholder in accordance with this Section. The
Owner Trustee, and the Trust Paying Agent on its behalf, is
hereby authorized and directed to retain in the Certificate
Distribution Account from amounts otherwise distributable
to the Certificateholders sufficient funds for the payment
of any tax that is legally owed by the Trust (but such
authorization shall not prevent the Owner Trustee from
contesting any such tax in appropriate proceedings, and
withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings). The Certificate
Registrar will provide the Trust Paying Agent with a
statement indicating the amount of any such withholding
tax. The amount of any withholding tax imposed with
respect to a Certificateholder shall be treated as cash
distributed to such Certificateholder at the time it is
withheld by the Trust and remitted to the appropriate
taxing authority from the Certificate Distribution Account
at the direction of the Owner Trustee or the Trust Paying
Agent on its behalf. If there is a possibility that
withholding tax is payable with respect to a distribution
(such as a distribution to a Certificateholder who is a
Non-U.S. Person), the Trust Paying Agent may in its sole
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discretion withhold such amounts in accordance with this
paragraph (c). In the event that a Certificateholder wishes to
apply for a refund of any such withholding tax, the Owner
Trustee and the Trust Paying Agent shall reasonably cooperate
with such Certificateholder in making such claim so long as
such Certificateholder agrees to reimburse the Owner Trustee
for any out-of-pocket expenses incurred.
(d) Notwithstanding anything to the contrary herein, at any time
after the Indenture is no longer in effect but while this
Agreement remains in effect, the Bond Administrator shall be
entitled to a fee on each Payment Date equal to the Indenture
Trustee Fee that would have been payable to the Indenture
Trustee on such Payment Date if the Indenture were still in
effect. Such fee shall be distributed to the Bond
Administrator from funds in the Certificate Distribution
Account prior to distribution of any such funds to
Certificateholders. Also, in such event, the Servicer shall
provide the same information to the Bond Administrator that it
would have provided to the Indenture Trustee pursuant to the
Servicing Agreement, as well as any other information
concerning the Mortgage Loans as may be reasonably requested
by the Bond Administrator to enable the Bond Administrator to
perform its obligations hereunder. On each such Payment Date,
the Trust Paying Agent shall mail to each Certificateholder a
statement detailing the amount remitted to the Trust Paying
Agent by the Servicer on the related Deposit Date and setting
forth the amount of the Monthly Servicing Fee and fees paid to
the Bond Administrator with respect to such Payment Date, and
the aggregate amount distributed to Certificateholders on such
Payment Date.
Section 5.3. Method of Payment.
Distributions required to be made to Certificateholders on any
Payment Date shall be made to each Certificateholder of record on the preceding
Record Date either by wire transfer, in immediately available funds, to the
account of such Holder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder shall have provided to the Trust Paying
Agent appropriate written instructions at least five Business Days prior to such
Payment Date, or, if not, by check mailed to such
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Certificateholder at the address of such Holder appearing in the Certificate
Register.
Section 5.4. Segregation of Moneys; No Interest.
Subject to Sections 5.1 and 5.2, moneys received by the Trust
Paying Agent hereunder and deposited into the Certificate Distribution Account
will be segregated except to the extent required otherwise by law and, if the
Holders of more than 50% of the Certificates so direct, shall be invested in
Permitted Investments maturing no later than one Business Day prior to the
related Payment Date at the direction of such Certificateholders. The Trust
Paying Agent shall not be liable for payment of any interest or losses in
respect of such moneys. Investment gains shall be for the account of and paid to
the Certificateholders.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.1. General Authority.
The Owner Trustee is authorized and directed to execute and
deliver or cause to be executed and delivered the Bonds, the Certificates, and
the Basic Documents to which the Trust is to be a party and each certificate or
other document attached as an exhibit to or contemplated by the Basic Documents
to which the Trust is to be a party and any amendment or other agreement or
instrument described in Article III, in each case, in such form as the Owner
Trustee shall approve, as evidenced conclusively by the Owner Trustee's
execution thereof. In addition, the Owner Trustee is authorized and directed, on
behalf of the Trust, to execute and deliver to the Authenticating Agent, the
Issuer Request and the Issuer Order referred to in Section
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2.11 of the Indenture, in such form as the Company shall approve, as evidenced
conclusively by the Owner Trustee's or the Company's execution thereof, directly
to the Authenticating Agent to authenticate and deliver Bonds in the aggregate
principal amount of $___________. In addition to the foregoing, the Owner
Trustee is authorized, but shall not be obligated, to take all actions required
of the Trust, pursuant to the Basic Documents.
Section 6.2. General Duties.
It shall be the duty of the Owner Trustee:
(a) To discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this
Agreement and the Basic Documents to which the Trust
is a party and to administer the Trust in the
interest of the Certificateholders, subject to the
Basic Documents and in accordance with the provisions
of this Agreement; the Owner Trustee shall not be
responsible for taking any action with respect to the
Indenture or any other of the Basic Documents unless
a Responsible Office of the Owner Trustee has actual
knowledge of the facts which require such action or
has received written notice of the need to take such
action; the Owner Trustee shall not be responsible
for any matter regarding the Investment Company Act
of 1940, as amended (or any successor statute) or the
rules or regulations thereunder; and
(b) To obtain and preserve the Issuer's qualification to
do business in each jurisdiction in which such
qualification is or shall be necessary to protect the
validity and enforceability of the Indenture, the
Bonds, the Mortgage Loans, and each other instrument
and agreement included in the Trust Estate.
Section 6.3. Action upon Instruction.
(a) Subject to Article IV and in accordance with the
terms of the Basic Documents, the Certificateholders
may by written instruction direct the Owner Trustee
in the management of the Trust but only to the extent
consistent with the limited purpose of the Trust.
Such direction may be exercised at anytime by written
instruction of the Certificateholders pursuant to
Article IV. Without limiting the generality of the
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foregoing, the Owner Trustee shall act as directed by
the Certificateholders in connection with Bond
redemptions requested by the Certificateholders, and
shall take all actions and deliver all documents that
the Trust is required to take and deliver in
accordance with Section 4.01 and Article X of the
Indenture in order to effect any redemption requested
by the Certificateholders.
(b) The Owner Trustee shall not be required to take any
action hereunder or under any Basic Document if the
Owner Trustee shall have reasonably determined, or
shall have been advised by counsel, that such action
is likely to result in liability on the part of the
Owner Trustee or is contrary to the terms hereof or
of any Basic Document or is otherwise contrary to
law.
(c) Whenever the Owner Trustee is unable to decide
between alternative courses of action permitted
or required by the terms of this Agreement or under
any Basic Document, the Owner Trustee shall promptly
give notice (in such form as shall be appropriate
under the circumstances) to the Certificateholders
and the Bond Insurer requesting instruction from the
Certificateholders as to the course of action to be
adopted, and to the extent the Owner Trustee acts in
good faith in accordance with any written
instruction of the Certificateholders received, the
Owner Trustee shall not be liable on Account of such
action to any Person. If the Owner Trustee shall
not have received appropriate instruction within 10
days of such notice (or within such shorter period
of time as reasonably may be specified in such
notice or may be necessary under the circumstances)
it may, but shall be under no duty to, take or
refrain from taking such action, not inconsistent
with this Agreement or the Basic Documents, as it
shall deem to be in the best interests of the
Certificateholders, and shall have no liability to
any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to
the application of any provision of this Agreement or
any Basic Document or any such provision is ambiguous
as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in
the event that this Agreement permits any
determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner
Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give
notice (in such form as shall be appropriate under
the circumstances) to the Certificateholders
requesting
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instruction and, to the extent that the Owner Trustee
acts or refrains from acting in good faith in
accordance with any such instruction received, the
Owner Trustee shall not be liable, on account of such
action or inaction, to any Person. If the Owner
Trustee shall not have received appropriate
instruction within 10 days of such notice (or within
such shorter period of time as reasonably may be
specified in such notice or may be necessary under
the circumstances) it may, but shall be under no duty
to, take or refrain from taking such action, not
inconsistent with this Agreement or the Basic
Documents, as it shall deem to be in the best
interests of the Certificateholders, and shall have
no liability to any Person for such action or
inaction.
Section 6.4. No Duties Except as Specified in this Agreement, the Basic
Documents or Any Instructions.
The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement, any Basic Document, or in any document or written instruction
received by the Owner Trustee pursuant to Section 6.3; and no implied duties or
obligations shall be read into this Agreement or any Basic Document against the
Owner Trustee. The Owner Trustee shall have no responsibility for filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to record this Agreement or any Basic Document. The
Owner Trustee nevertheless agrees that it will, at its own cost and expense,
promptly take all action as may be necessary to discharge any liens on any part
of the Owner Trust
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Estate that result from actions by, or claims against, the Owner Trustee that
are not related to the ownership or the administration of the Owner Trust
Estate.
Section 6.5. No Action Except Under Specified Documents or
Instructions.
The Owner Trustee shall not manage, control, use, sell,
dispose of, or otherwise deal with any part of the Owner Trust Estate except (i)
in accordance with the powers granted to and the authority conferred upon the
Owner Trustee pursuant to this Agreement, (ii) in accordance with the Basic
Documents, and (iii) in accordance with any document or instruction delivered to
the Owner Trustee pursuant to Section 6.3.
Section 6.6. Restrictions.
The Owner Trustee shall not take any action (a) that is
inconsistent with the purposes of the Trust set forth in Section 2.3 or (b)
that, to the actual knowledge of the Owner Trustee, would result in the Trust's
becoming taxable as a corporation for Federal income tax purposes. The
Certificateholders shall not direct the Owner Trustee to take action that would
violate the provisions of this Section.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
Section 7.1. Acceptance of Trusts and Duties.
The Owner Trustee accepts the trusts hereby created and agrees
to perform its duties hereunder with respect to such trusts but only upon the
terms of this Agreement and the Basic Documents. The Owner Trustee also agrees
to disburse all moneys actually
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received by it constituting part of the Owner Trust Estate upon the terms of the
Basic Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful misconduct or negligence or (ii) in the case of
the inaccuracy of any representation or warranty contained in Section 7.3
expressly made by the Owner Trustee. In particular, but not by way of limitation
(and subject to the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment made by a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with
the instructions of the Certificateholders;
(c) no provision of this Agreement or any Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise
incur any financial liability in the performance of any of its
rights or powers hereunder or under any Basic Document if the
Owner Trustee shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic
Documents, including the principal of and interest on the
Bonds;
(e) the Owner Trustee shall not be responsible for or in respect
of the validity or sufficiency of this Agreement or for the
due execution hereof by the Company or for the form,
character, genuineness, sufficiency, value, or validity of any
of the Owner Trust Estate or for or in respect of the validity
or sufficiency of the Basic Documents, other than the
certificate of authentication on the Certificates, and the
Owner Trustee shall in no event assume or incur any liability,
duty, or obligation to any Bondholder or to any
Certificateholder, other than as expressly provided for herein
and in the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Seller, the Company, the Indenture
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Trustee or the Servicer under any of the Basic Documents or
otherwise and the Owner Trustee shall have no obligation or
liability to perform the obligations of the Trust under this
Agreement or the Basic Documents that are required to be
performed by the Indenture Trustee under the Indenture or the
Servicer under the Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement, or to
institute, conduct, or defend any litigation under this
Agreement or otherwise or in relation to this Agreement or any
Basic Document, at the request, order or direction of any of
the Certificateholders, unless such Certificateholders have
offered to the Owner Trustee security or indemnity
satisfactory to it against the costs, expenses, and
liabilities that may be incurred by the Owner Trustee therein
or thereby. The right of the Owner Trustee to perform any
discretionary act enumerated in this Agreement or in any Basic
Document shall not be construed as a duty, and the Owner
Trustee shall not be answerable for other than its gross
negligence or willful misconduct in the performance of any
such act.
Section 7.2. Furnishing of Documents.
The Owner Trustee shall furnish to the Certificateholders
promptly upon receipt of a written request therefor, duplicates or copies of all
reports, notices, requests, demands, certificates, financial statements, and any
other instruments furnished to the Owner Trustee under the Basic Documents. On
behalf of the Owner Trustee, the Company shall furnish to Bondholders promptly
upon written request therefor, copies of the Servicing Agreement and the
Indenture.
Section 7.3. Representations and Warranties.
(a) The Owner Trustee hereby represents and warrants to
the Company for the benefit of the Certificateholders,
that:
(i) It is a [banking corporation] duly organized and
validly existing in good standing under the laws of
________________. It has all requisite corporate
power and authority to execute,
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deliver and perform its obligations under
this Agreement.
(ii) It has taken all corporate action necessary
to authorize the execution and delivery by
it of this Agreement, and this Agreement
will be executed and delivered by one of its
officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it
of this Agreement nor the consummation by it
of the transactions contemplated hereby nor
compliance by it with any of the terms or
provisions hereof will contravene any
Federal or Delaware law, governmental rule
or regulation governing the banking or trust
powers of the Owner Trustee or any judgment
or order binding on it, or constitute any
default under its charter documents or
by-laws.
(b) The Trust Paying Agent hereby represents and warrants
to the Company and the Bond Insurer for the benefit
of the Certificateholders, that:
(i) It is a [banking association] duly organized
and validly existing in good standing under
the laws of the _______________. It has all
requisite corporate power and authority to
execute, deliver, and perform its
obligations under this Agreement.
(ii) It has taken all corporate action necessary
to authorize the execution and delivery by
it of this Agreement, and this Agreement
will be executed and delivered by one of its
officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it
of this Agreement nor the consummation by it
of the transactions contemplated hereby nor
compliance by it with any of the terms or
provisions hereof will contravene any
Federal law, governmental rule, or
regulation governing the banking or trust
powers of the Trust Paying Agent or any
judgment or order binding on it, or
constitute any default under its charter
documents or by-laws.
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Section 7.4. Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone
in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate,
report, opinion, bond, or other document or paper
believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Owner
Trustee may accept a certified copy of a resolution
of the board of directors or other governing body of
any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and
that the same is in full force and effect. As to
any fact or matter the method of the determination
of which is not specifically prescribed herein, the
Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice
president or by the treasurer or other authorized
officers of the relevant party, as to such fact or
matter and such certificate shall constitute full
protection to the Owner Trustee for any action taken
or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts
hereunder and in the performance of its duties and
obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or
through its agents or attorneys pursuant to
agreements entered into with any of them, and the
Owner Trustee shall not be liable for the conduct or
misconduct of such agents or attorneys if such
agents or attorneys shall have been selected by the
Owner Trustee with reasonable care, and (ii) may
consult with counsel, accountants, and other skilled
persons to be selected with reasonable care and
employed by it. The Owner Trustee shall not be
liable for anything done, suffered, or omitted in
good faith by it in accordance with the written
opinion or advice of any such counsel, Accountants,
or other such persons and not contrary to this
Agreement or any Basic Document.
Section 7.5. Not Acting in Individual Capacity.
Except as provided in this Article VII, in accepting the
trusts hereby created, Wilmington Trust Company acts solely as Owner Trustee
hereunder and not in its individual capacity, and all Persons having any claim
against the Owner Trustee by reason of the transactions contemplated by this
Agreement or any Basic Document
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shall look only to the Owner Trust Estate for payment or satisfaction
thereof.
Section 7.6. Owner Trustee Not Liable for Certificates or Mortgage
Loans.
The recitals contained herein and in the Certificates (other
than the signature and countersignature of the Owner Trustee on the
Certificates) shall be taken as the statements of the Company, and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of this Agreement, of
any Basic Document, of the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates and as specified in
Section 7.3), of the Bonds, or of any Mortgage Loans or related documents. The
Owner Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity, and enforceability of any Mortgage Loan, or
the perfection and priority of any security interest created by any Mortgage
Loan or the maintenance of any such perfection and priority, or for or with
respect to the sufficiency of the Owner Trust Estate or its ability to generate
the payments to be distributed to Certificateholders under this Agreement or the
Bondholders under the Indenture, including, without limitation, the existence,
condition and ownership of any Mortgaged Property, the existence and
enforceability of any insurance thereon, the existence and contents of any
Mortgage Loan on any computer or other record thereof, the validity of the
assignment of any Mortgage Loan to the Trust or of any intervening assignment,
the completeness of any Mortgage Loan, the performance or enforcement
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of any Mortgage Loan, the compliance by the Company or the Servicer with any
warranty or representation made under any Basic Document or in any related
document or the accuracy of any such warranty or representation, or any action
of the Indenture Trustee or the Servicer or any subservicer taken in the name of
the Owner Trustee.
Section 7.7. Owner Trustee May Own Certificates and Bonds.
The Owner Trustee in its individual or any other capacity may
become the owner or pledgee of Certificates or Bonds and may deal with the
Company, the Indenture Trustee and the Servicer in banking transactions with the
same rights as it would have if it were not Owner Trustee.
Section 7.8. Licenses.
The Owner Trustee shall cause the Trust to use its best
efforts to obtain and maintain the effectiveness of any licenses required in
connection with this Agreement and the Basic Documents and the transactions
contemplated hereby and thereby until such time as the Trust shall terminate in
accordance with the terms hereof.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
Section 8.1. Owner Trustee's Fees and Expenses.
The Owner Trustee shall receive as compensation for its
services hereunder such fees as have been separately agreed upon before the date
hereof between ____________________________ and the Owner Trustee, and the Owner
Trustee shall be entitled to be reimbursed by _______________________ for its
other reasonable expenses hereunder, including the reasonable compensation,
expenses and disbursements of such agents, representatives, experts, and
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counsel as the Owner Trustee may employ in connection with the exercise and
performance of its rights and its duties hereunder. Such fees and expenses are
as set forth on Exhibit D hereto. The Certificateholders shall be responsible
and liable for the payment of such fees and expenses, pro rata based upon their
respective Percentage Interests, and shall pay such fees and expenses promptly
after receipt of a written invoice therefor from the Owner Trustee.
Section 8.2. Indemnification.
The Certificateholders shall be liable as obligor for, and
shall indemnify the Owner Trustee and the Trust Paying Agent and their
respective successors, assigns, agents, and servants (collectively, the
"Indemnified Parties") from and against, any and all liabilities, obligations,
losses, damages, taxes, claims, actions, and suits, and any and all reasonable
costs, expenses, and disbursements (including reasonable legal fees and
expenses) of any kind and nature whatsoever (collectively, "Expenses") which may
at any time be imposed on, incurred by, or asserted against any Indemnified
Party in any way relating to or arising out of this Agreement, the Basic
Documents, the Owner Trust Estate, the administration of the Owner Trust Estate,
or the action or inaction of the Owner Trustee or the Trust Paying Agent
hereunder, except only that the Certificateholders shall not be liable for or
required to indemnify an Indemnified Party from and against Expenses arising or
resulting from any of the matters described in the third sentence of Section
7.1. The indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the Trust
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Paying Agent or the termination of this Agreement. In any event of any claim,
action or proceeding for which indemnity will be sought pursuant to this
Section, the Certificateholders will be entitled to participate therein, with
counsel selected by such Holders and reasonably satisfactory to the Indemnified
Parties, and after notice from Certificateholders to the Indemnified Parties of
its election to assume the defense thereof, the Certificateholders shall not be
liable to the Indemnified Party under this Section 8.2 for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense of such action; provided, however, that this sentence shall not be in
effect if (1) the Certificateholders shall not have employed counsel reasonably
satisfactory to the Indemnified Party to represent the Indemnified Party within
a reasonable time after notice of commencement of the action or (2) the
Certificateholders shall have authorized the employment of counsel for the
Indemnified Party at the expense of the Certificateholders. If the
Certificateholders assume the defense of any such proceeding, they shall be
entitled to settle such proceeding without any liability being assessed against
any Indemnified Party or, if such settlement provides for release of any such
Indemnified Party without any liability being assessed against any Indemnified
Party in connection with all matters relating to the proceeding which have been
asserted against such Indemnified Party in such proceeding by the other parties
to such settlement, without the consent of such Indemnified Party, but otherwise
only with the consent of such Indemnified Party. Certificateholders shall be
liable for this
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indemnification obligation pro rata, based upon their respective
Percentage Interests.
Section 8.3. Payments to the Owner Trustee.
Any amounts paid to the Owner Trustee or the Trust Paying
Agent pursuant to this Article VIII shall be deemed not to be a part of the
Owner Trust Estate immediately after such payment.
Section 8.4. Servicer Liability.
In the event the Certificateholders fail to pay all or any
portion of any fees, expenses, or indemnification amounts to the Owner Trustee
or the Trust Paying Agent for which they are liable under this Article VIII, the
Servicer shall pay such amounts to the Owner Trustee or the Trust Paying Agent,
as the case may be, promptly after receipt of an invoice therefor from the party
entitled thereto.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
Section 9.1. Termination of Trust Agreement.
(a) This Agreement (other than Article VIII) and the
Trust shall terminate and be of no further force or
effect on the earlier of: (i) the final payment or
other liquidation of the [Mortgage Loans and the
disposition of all REO Properties] and the
remittance of all funds due hereunder with respect
to such [Mortgage Loans and REO Properties] or the
disposition of the [Mortgage Loans and REO
Properties] at the direction of a majority of the
Certificateholders, in either case after the
satisfaction and discharge of the Indenture pursuant
to Section 4.01 of the Indenture; and (ii) the
expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy (the
late ambassador of the United States to the Court of
St. James's). The bankruptcy, liquidation,
dissolution, death, or incapacity of any
Certificateholder or the Company shall not (x)
operate to terminate this Agreement or the Trust,
nor (y) entitle such Certificateholder's legal
representatives or heirs to claim an Accounting or
to take any action or proceeding in any court for a
partition or winding
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up of all or any part of the Trust or Owner Trust
Estate, nor (z) otherwise affect the rights,
obligations, and liabilities of the parties hereto.
(b) Except as provided in Section 9.1(a) above, none of
the Company, the Servicer, the Bond Insurer, nor any
Certificateholder shall be entitled to revoke or
terminate the Trust.
(c) Notice of any termination of the Trust, specifying
the Payment Date upon which the Certificateholders
shall surrender their Certificates to the Owner
Trustee for payment of the final distributions and
cancellation, shall be given by the Owner Trustee to
the Certificateholders, the Bond Insurer, the Rating
Agencies and the Trust Paying Agent mailed within
five Business Days of receipt by the Owner Trustee
of notice of such termination pursuant to Section
9.1(a) above, which notice given by the Owner
Trustee shall state (i) the Payment Date upon or
with respect to which final payment of the
Certificates shall be made upon presentation and
surrender of the Certificates at the office of the
Owner Trustee therein designated, (ii) the amount of
any such final payment, and (iii) that the Record
Date otherwise applicable to such Payment Date is
not applicable, payments being made only upon
presentation and surrender of the Certificates at
the office of the Owner Trustee therein specified.
The Owner Trustee shall give such notice to the
Certificate Registrar (if other than the Owner
Trustee) and the Trust Paying Agent at the time such
notice is given to Certificateholders. The Owner
Trustee shall give notice to the Trust Paying Agent
of each presentation and surrender of Certificates
promptly, and the Trust Paying Agent shall promptly
cause to be distributed to the related
Certificateholders amounts distributable on such
Payment Date pursuant to Section 5.2(a).
(d) Upon the winding up of the Trust and its termination,
the Owner Trustee shall cause the Certificate of
Trust to be canceled by filing a certificate of
cancellation with the Secretary of State in
accordance with the provisions of Section 3820 of the
Business Trust Statute.
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ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.1. Eligibility Requirements for Owner Trustee.
The Owner Trustee shall at all times be a corporation
satisfying the provisions of Section 3807(a) of the Business Trust Statute;
authorized to exercise corporate powers; having a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by Federal or
state authorities; and having (or having a parent that has) a rating of at least
"Baa3" by Moody's and "A-1" by Standard & Poor's [and being acceptable to the
Bond Insurer]. If such corporation shall publish reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section, the Owner Trustee shall resign immediately in
the manner and with the effect specified in Section 10.2.
Section 10.2. Resignation or Removal of Owner Trustee.
The Owner Trustee may at any time resign and be discharged
from the trusts hereby created by giving written notice thereof to the Servicer,
the Indenture Trustee, and the Bond Insurer. Upon receiving such notice of
resignation, the Servicer shall promptly appoint a successor Owner Trustee
(acceptable to the Bond Insurer) by written instrument, in duplicate, one copy
of which instrument shall
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be delivered to the resigning Owner Trustee and one copy to the successor Owner
Trustee. If no successor Owner Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee or the Bond Insurer may petition any
court of competent jurisdiction for the appointment of a successor Owner
Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Certificateholders or the Servicer, or if at any
time the Owner Trustee shall be legally unable to act, or shall be adjudged
bankrupt or insolvent, or a receiver of the Owner Trustee or of its property
shall be appointed, or any public officer shall take charge or control of the
Owner Trustee or of its property or affairs for the purpose of rehabilitation,
conservation, or liquidation, then the Bond Insurer, or the Certificateholders
or the Servicer with the consent of the Bond Insurer, may remove the Owner
Trustee. If the Certificateholders or the Servicer or the Bond Insurer shall
remove the Owner Trustee under the authority of the immediately preceding
sentence, the Bond Insurer, or the Servicer with the consent of the Bond
Insurer, shall promptly appoint a successor Owner Trustee by written instrument
in duplicate, one copy of which instrument shall be delivered to the outgoing
Owner Trustee so removed and one copy to the successor Owner Trustee and payment
of all fees owed to the outgoing Owner Trustee.
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Any resignation or removal of the Owner Trustee and
appointment of a successor Owner Trustee pursuant to any of the provisions of
this Section shall not become effective until acceptance of appointment by the
successor Owner Trustee pursuant to Section 10.3 written approval by the Bond
Insurer and payment of all fees and expenses owed to the outgoing Owner Trustee.
The Servicer shall provide notice of such resignation or removal of the Owner
Trustee to each of the Rating Agencies, the Indenture Trustee, the Trust Paying
Agent and the Bond Insurer.
Section 10.3. Successor Owner Trustee.
Any successor Owner Trustee appointed pursuant to Section 10.2
shall execute, acknowledge, and deliver to the Company, the Indenture Trustee,
the Bond Insurer, and to its predecessor Owner Trustee an instrument accepting
such appointment under this Agreement, and thereupon the resignation or removal
of the predecessor Owner Trustee shall become effective and such successor Owner
Trustee (if acceptable to the Bond Insurer), without any further act, deed, or
conveyance, shall become fully vested with all the rights, powers, duties, and
obligations of its predecessor under this Agreement, with like effect as if
originally named as Owner Trustee. The predecessor Owner Trustee shall upon
payment of its fees and expenses deliver to the successor Owner Trustee all
documents and statements and moneys held by it under this Agreement; and the
Company and the predecessor Owner Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the
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successor Owner Trustee all such rights, powers, duties, and obligations.
No successor Owner Trustee shall accept appointment as
provided in this Section unless at the time of such acceptance such successor
Owner Trustee shall be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section, the Company shall mail notice of the successor of such
Owner Trustee to all Certificateholders, the Indenture Trustee, the Trust Paying
Agent, the Bondholders, the Bond Insurer and the Rating Agencies. If the Company
fails to mail such notice within 10 days after acceptance of appointment by the
successor Owner Trustee, the successor Owner Trustee shall cause such notice to
be mailed at the expense of the Company.
Section 10.4. Merger or Consolidation of Owner Trustee.
Any corporation into which the Owner Trustee may be merged or
converted or with which it may be consolidated or any corporation resulting from
any merger, conversion, or consolidation to which the Owner Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Owner Trustee, shall be the successor of the
Owner Trustee hereunder, provided such corporation shall be eligible pursuant to
Section 10.1, without the execution or filing of any instrument or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided further that the Owner Trustee shall mail notice of
such merger or consolidation to the Rating Agencies.
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Section 10.5. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Owner Trust Estate or any Mortgaged Property may at the
time be located, and for the purpose of performing certain duties and
obligations of the Owner Trustee with respect to the Trust and the Certificates,
the Owner Trustee shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Owner Trustee and
acceptable to the Bond Insurer to act as co-trustee, jointly with the Owner
Trustee, or separate trustee or separate trustees, of all or any part of the
Owner Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights, and trusts as the Bond
Insurer and the Owner Trustee may consider necessary or desirable. No co-trustee
or separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 10.1 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant to
Section 10.3.
Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provision and
conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee
shall be conferred upon and exercised or
performed by the Owner Trustee and such
separate trustee or co-trustee jointly (it
being understood that such separate trustee
or co-
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trustee is not authorized to act separately
without the Owner Trustee joining in such
act), except to the extent that under any
law of any jurisdiction in which any
particular act or acts are to be performed,
the Owner Trustee shall be incompetent or
unqualified to perform such act or acts, in
which event such rights, powers, duties, and
obligations (including the holding of title
to the Trust or any portion thereof in any
such jurisdiction) shall be exercised and
performed singly by such separate trustee or
co-trustee, but solely at the direction of
the Owner Trustee;
(ii) no trustee under this Agreement shall be
personally liable by reason of any act or
omission of any other trustee under this
Agreement; and
(iii) the Owner Trustee may at any time accept the
resignation of or remove any separate
trustee or co-trustee.
Any notice, request, or other writing given to the
Owner Trustee shall be deemed to have been given to the separate trustees and
co-trustees, as if given to each of them. Every instrument appointing any
separate trustee or co-trustee, other than this Agreement, shall refer to this
Agreement and to the conditions of this Article. Each separate trustee and
co-trustee, upon its acceptance of appointment, shall be vested with the estates
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee.
Any separate trustee or co-trustee may at any time
appoint the Owner Trustee as its Agent or attorney-in-fact with full power
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and authority, to the extent not prohibited by law, to do any lawful act under
or in respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Owner Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
ARTICLE XI
CONTRIBUTION OF MORTGAGE LOANS
Section 11.1. Agreement to Contribute and Convey.
The Issuer will deliver the net proceeds from the sale of the
Bonds and issue the Certificates to the order of the Company or its designee in
consideration of the transfer of the Mortgage Loans and the related rights
thereunder and the rights pursuant to the Sales Agreement (collectively, the
"Consideration"). As and for the Consideration and subject to the terms and
conditions set forth herein, the Company agrees to contribute and convey, and
the Trust agrees to accept and acquire, all of the Company's right, title, and
interest in and to the Mortgage Loans identified on the schedule (the "Loan
Schedule") annexed hereto as Exhibit E. The Loan Schedule will set forth as to
each Mortgage Loan the items specified in the definition of "Loan Schedule" in
the Indenture.
The aggregate of the principal balances of the Mortgage Loans
being contributed and conveyed pursuant to this Agreement as of the close of
business on the applicable Cut-off Dates, after application of all payments of
principal received in respect of such Mortgage Loans before the applicable
Cut-off Dates (the "Initial Pool
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Balance"), is set forth on the Cross Receipt executed concurrently herewith in
the form of Exhibit F attached hereto (the "Cross Receipt"). Simultaneously with
and in consideration of the Company's contribution and conveyance of the
Mortgage Loans to the Trust, the Trust shall cause the Bonds to be issued and
delivered and shall transfer the net proceeds received from the sale of the
Bonds to be delivered to the Company and the Trust shall cause the Certificates
to be issued to the order of the Company or its designee. The Company shall be
deemed automatically and for all purposes to have made a contribution to the
capital of the Trust (which contribution shall be reflected in the value
assigned to the certificates evidencing equity interests in the Trust) in an
aggregate amount specified on the Cross Receipt. The transfer and conveyance of
the Mortgage Loans shall take place on the Closing Date.
Section 11.2. Conveyance of Mortgage Loans.
(a) Effective as of the Closing Date, subject only to
delivery of the Mortgage Loan File (as defined in the
Sales Agreement) for each Mortgage Loan pursuant to
subsection (c) below, the Company does hereby
contribute, assign, transfer, and otherwise convey to
the Trust, without recourse, representation, or
warranty (other than as expressly set forth in
Section 2.10 (a) hereof), and the Trust does hereby
accept, assume, and acquire, all of the Company's
right, title, and interest in and to the Mortgage
Loans identified on the Loan Schedule, and the Trust
hereby assumes and agrees to perform and be bound by
each and all of the covenants, agreements, duties,
and obligations of the Company arising under or
relating to such Mortgage Loans.
(b) The Trust and its assignees shall be entitled to
receive all payments of principal and interest due on
or with respect to the Mortgage Loans after the
applicable Cut-off Date, and all other recoveries of
principal and interest collected on or after the
applicable Cut-off Date (other than in respect of
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interest that accrued on such Mortgage Loan during
periods prior to the applicable Cut-off Date), and
each of the rights of the Company pursuant to
representations, warranties, and indemnities in favor
of the Company contained in the Sales Agreement. All
payments of interest and principal due before the
applicable Cut-off Date, but collected after the
applicable Cut-off Date, and recoveries of principal
and interest collected before the applicable Cut-off
Date (other than amounts representing interest that
accrued on the Mortgage Loans during any period on or
after the applicable Cut-off Date), shall belong to,
and be promptly remitted to, _____________________.
(c) In connection with its contribution and conveyance of
the Mortgage Loans pursuant to subsection (a) above,
the terms of the Sales Agreement govern the delivery
of the Mortgage Loan Files to the Indenture Trustee,
as the Trust's designee, and the Company assigns all
of its rights under the Sales Agreement to the Trust.
(d) In connection with its conveyance of the Mortgage
Loans pursuant to subsection (a) above, the Company
shall deliver to the Trust or its designee in
respect of such Mortgage Loans, on or before the
Closing Date, all amounts, if any, received on each
Mortgage Loan on or after the applicable Cut-off
Date (other than amounts representing interest and
principal due on or prior to the applicable Cut-off
Date) held by or on behalf of the Company.
(e) The Company shall, at any time upon the request of
the Trust, without limiting the obligations of the
Company under this Agreement, execute, acknowledge,
and deliver all such additional documents and
instruments and all such further assurances and will
do or cause to be done all such further acts and
things as may be proper or reasonably necessary to
carry out the intent of this Agreement.
Section 11.3. Assignment of Related Rights and Remedies.
(a) Effective as of the Closing Date, subject only to
delivery of the Mortgage Loan File for each Mortgage
Loan pursuant to Section 11.2(c) hereof, the Company
does hereby assign, transfer, and otherwise convey to
Trust, without recourse, representation, or warranty
(other than as expressly set forth in Section 2.10(a)
hereof), and the Trust does hereby accept, assume,
and acquire, to be held jointly and severally with
the Company, all of the Company's rights and remedies
under the Sales Agreement and the Trust hereby
assumes
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and agrees to perform and be bound by each and all of
the covenants and agreements of the Company arising
under the Sales Agreement relating to such rights and
remedies and the exercise or enforcement thereof.
(b) Simultaneously with the exercise of any rights and
remedies or any notices given to ________________ by
the Trust under the Sales Agreement, the Trust shall
give the Company and the Bond Insurer notice thereof,
including, without limitation, copies of all notices
given to ________________________.
(c) This Section 11.3 provides the sole remedies
available to the Trust, its successors and assignees,
respecting any breach (i) of representations and
warranties with respect to the Mortgage Loans to
which reference is made in Section 2.10(c) or (ii) on
the part of the Company under Section 2(c) hereof.
Section 11.4. Closing.
The closing of the conveyance of the Mortgage Loans (the
"Closing") shall be held at the offices of _____________________________________
________________________________________, on the Closing Date.
The Closing shall be subject to each of the following
conditions:
(a) All terms and conditions of this Agreement required
to be complied with on or before the Closing Date
shall have been complied with and the Company shall
have the ability to comply with all terms and
conditions and perform all duties and obligations
required to be complied with or performed after the
Closing Date.
(b) The Trust shall have paid all costs and expenses
payable by it to the Company or otherwise pursuant to
this Agreement.
Both parties shall use their best efforts to perform their
respective obligations hereunder in a manner that will enable the Trust to
acquire the Mortgage Loans on the Closing Date. Notwithstanding the foregoing,
satisfaction by the Company or Trust
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of its respective obligations under the foregoing provisions of this Section
11.4 shall not be conditions precedent to the obligation of the Company or
Trust, respectively, to close the transactions contemplated by this Agreement.
Section 11.5. Servicing.
As of the applicable Cut-off Date, the Mortgage Loans will be
serviced by _________________________ (in such capacity, the "Servicer")
pursuant to the terms of a Servicing Agreement, to be dated as of __________ 1,
199__ (the "Servicing Agreement"), by and among the Trust, the Servicer and the
Indenture Trustee.
Section 11.6. Grant of a Security Interest.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Company to the Trust as provided in
Section 11.2(a) hereof be, and be construed as, a complete and absolute transfer
by the Company to the Trust of all of the Company's right, title, and interest
in and to the Mortgage Loans and not as a pledge of the Mortgage Loans by the
Company to the Trust to secure a debt or other obligation of the Company.
However, if, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Company, then (a) it is the
express intent of the parties that such conveyance be deemed a pledge of the
Mortgage Loans by the Company to the Trust to secure a debt or other obligation
of the Company, and (b) (i) this Agreement shall also be deemed to be a security
agreement within the meaning of Article 9 of the ______________ Uniform
Commercial Code; (ii) the conveyance provided for in Section 11.2(a) hereof
shall be deemed to
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be a grant by the Company to the Trust of a security interest in all of the
Company's right, title and interest in and to the Mortgage Loans, and all
amounts payable to the holder 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 such amounts, other than investment earnings from time to
time held or invested pursuant to and in accordance with the provisions of the
Servicing Agreement or the Indenture, as applicable, whether in the form of
cash, instruments, securities, or other property; (iii) the subsequent pledge of
the Mortgage Loans by the Trust to the Indenture Trustee as contemplated by the
preamble hereto shall be deemed to be an assignment of any security interest
created hereunder; (iv) the possession by the Company or the Trust or any of
their respective agents, including, without limitation, the Indenture Trustee or
its agent, of the notes or other instruments evidencing the indebtedness of the
mortgagors under the related Mortgage Loans (the "Mortgage Bonds") and such
other items of property relating to the Mortgage Loans 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 ____________ Uniform Commercial Code;
and (v) notifications to persons (other than the Indenture Trustee) holding such
property, and acknowledgments, receipts, or confirmations from persons holding
such property, shall be deemed notifications to, or acknowledgments, receipts,
or
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confirmations from, financial intermediaries, bailees, or agents (as applicable)
of the secured party for the purpose of perfecting such security interest under
applicable law. The Company and the Trust shall, to the extent consistent with
this Agreement, 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 and the Indenture..
ARTICLE XII
MANAGEMENT OF THE TRUST
Section 12.1. Powers and Duties of the Bond Administrator.
(a) The Bond Administrator shall perform, on behalf of
the Trust acting through the Owner Trustee, the
duties of the Trust under the Indenture specified
below, and shall consult with the Owner Trustee
regarding such duties. The duties referred to above
are as follows (section references are to sections of
the Indenture):
(i) The determination of the form of the Bonds
(Section 2.01);
(ii) Directing the Owner Trustee to execute the Bonds
for the Trust and to return them to the
Indenture Trustee for authentication and
delivery (Section 2.05);
(iii) Direction of the Owner Trustee to execute and
deliver Bonds for registration of transfer and
exchange (Section 2.06);
(iv) Direction of the Owner Trustee as to actions
to be taken with respect to Bonds alleged to
have been lost, stolen, destroyed or
mutilated (Section 2.07);
(v) Maintenance of Bond Registrar's office and
designation of any offices where Bonds may be
presented or surrendered (Section 3.02);
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(vi) If an additional Trust Paying Agent is to be
appointed, the solicitation and review of bids,
examination of the qualifications of bidders,
and submission to the Owner Trustee of a list of
candidates from which such appointment may be
made by the Owner Trustee; preparation and
submission to each such Trust Paying Agent for
execution of an agreement to the effect that
such Trust Paying Agent holds funds in trust;
the direction of a Trust Paying Agent to remit
all funds it is holding to the Indenture
Trustee; the direction of the Indenture Trustee
to deposit moneys with such Trust Paying Agent;
and notifications to Holders of Bonds of
availability of their last payments (Section
3.03);
(vii) The monitoring of and compliance with the
Trust's obligations under Section 3.07(c)
(Section 3.07(c));
(viii) The monitoring of and compliance with the
Trust's obligations under Sections 3.12 (but
only to the extent of the Bond
Administrator's obligations under Section
(b)(i) hereof) and 3.13 of the Indenture
(Sections 3.11 and 3.13);
(ix) If necessary, the preparation and, upon
execution by the Owner Trustee, delivery and
(as necessary) filing of documents necessary
for the satisfaction and discharge of the
Indenture, except that, in the case of a
redemption, the party calling for the
redemption would be responsible for these
matters (Section 4.01);
(x) Direction of Owner Trustee in connection with
anything required of the Issuer relating to the
appointment of any co-Trustees (Section 6.13);
(xi) If an Authenticating Agent is to be
appointed, the solicitation and review of
bids, examination of the qualifications of
bidders, and submission to the Owner Trustee
of a list of qualified candidates from which
such appointment may be made by the Owner
Trustee (Section 6.14);
(xii) Furnishing to the Indenture Trustee the names
and addresses of Bondholders to the extent
required by Section 7.01 (Section 7.01);
(xiii) [Preparing for execution by the Owner Trustee,
direction to the Owner Trustee regarding
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execution, and filing reports with the
Securities and Exchange Commission (Section
7.04);]
(xiv) Direction of the Owner Trustee's execution
of documents, if any, as provided by the
Servicer as necessary to reconvey title to
repurchased Mortgage Loans to _____ (Section
8.05);
(xv) Appointment of any Custodian and ensuring
Custodian complies with all applicable
duties Section 8.13); and
(xvi) Notifying the Owner Trustee when the Bond
Administrator is of the opinion that a
Supplemental Indenture may be necessary or
appropriate and determining, based on advice
of counsel, whether notations of amendments
should be made on Bond Certificates
(Sections 9.01, 9.02, and 9.06).
(b) The Bond Administrator shall, subject at all times to
Section 12.5 of this Agreement, take all appropriate
action with respect to the following tasks, inter
alia:
(i) The preparation and delivery of the income
tax returns, tax elections, financial
statements, and such annual or other reports
of the Trust pursuant to Section 2.11 (k)
hereof; provided however, that the Bond
Administrator shall not be required to
compute the Trust's gross income except to
the extent it can do so without unreasonable
effort or expense based upon income
statements furnished to it; and
(ii) The review of documentation in connection
with transfers of the Bonds, in the
preparation and delivery of Bonds and the
determination of whether a proposed transfer
of a Bond is permissible under the terms of
the Indenture.
(c) The Bond Administrator shall carry out in timely
fashion, and in accordance with the provisions of the
Indenture, all duties which the Bond Administrator is
required to perform under the Indenture on behalf of
the Issuer pursuant to the terms of this Agreement.
The Bond Administrator shall have absolute discretion
in the performance of the function set forth in this
subsection (c) and shall have no obligation to notify
the Owner Trustee of its actions except as set forth
in the Indenture.
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(d) [In addition to the filings required under Section
12.1(a)(xiii) above, as soon as practicable, but not
later than eighteen months after ____________, 199__,
the Bond Administrator shall prepare, direct the
Owner Trustee as to the execution of, and file with
the Securities and Exchange Commission a report on
Form 8- K containing a copy of the annual Payment
Date Statement described in Section 2.08 of the
Indenture.]
(e) The Indenture Trustee hereby agrees that it will not
take any action that is not related to the
administration of the Trust Estate to (i) impair the
validity or effectiveness of the Indenture or the
Grant of the Trust Estate thereunder or release any
Person from any covenant or obligation under the
Indenture, except as expressly permitted thereby,
(ii) creating any lien, charge, security interest, or
similar encumbrance (other than the lien of the
Indenture or other permitted encumbrance or as
otherwise permitted under the provisions of the
Indenture) on the Trust Estate, or (iii) cause the
lien of the Indenture not to constitute a valid
perfected first priority security interest in the
Trust Estate, except as otherwise expressly permitted
under the Indenture. The Indenture Trustee shall, in
connection with its tax reporting obligations under
Section (b)(i) above, comply with the provisions of
Section 2.11 hereof and shall not take any action
that, to the actual knowledge of the Bond
Administrator, would result in the Issuer becoming
taxable as a corporation for federal income tax
purposes.
Section 12.2. Compensation; Payment of Certain Expenses.
The Bond Administrator will provide the services called for
under the enumerated subparagraphs of paragraphs 12.1(a), 12.1(b), and 12.1(d)
hereof above without any separate compensation therefor for so long as the
Indenture remains in effect and thereafter shall receive monthly compensation
equal to the Indenture Trustee Fee payable under the Indenture from amounts
otherwise payable to the Certificateholders as provided in the this Agreement.
The Bond Administrator shall perform any other services as may be agreed between
the Bond Administrator and the Owner Trustee for such
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compensation as may be agreed between the Bond Administrator and the Owner
Trustee; provided that such compensation shall be paid to the Bond Administrator
by the Owner Trustee solely from funds received by the Owner Trustee from the
Owners pursuant to the this Agreement. If the date of termination of this
Agreement is not a date on which the Bond Administrator is entitled to be paid
hereunder, the Bond Administrator shall be paid the amount due it pursuant to
this Sections and Section 12.5(a) as of such termination promptly after such
date of termination.
Section 12.3. Instruction of the Owner Trustee.
If in performing its duties under this Agreement, the Bond
Administrator is required to determine any matter or perform any function above
which is non-ministerial in nature, then the Bond Administrator shall properly
deliver notice to the Owner Trustee and the Certificateholders requesting
written instructions as to the course of action to be taken. The
Certificateholders shall instruct the Bond Administrator in writing as to the
action to be taken by the Bond Administrator. If the Bond Administrator does not
receive such instructions within ten days after it has delivered such notice, it
may, but shall be under no duty to, take or refrain from taking such action not
inconsistent with this Agreement or the Indenture as it shall deem advisable in
the best interest of the holders of the Bonds and the Trust.
Section 12.4. Benefit of the Agreement.
It is expressly agreed that in performing its duties pursuant
to Section 12.1 of this Agreement the Bond Administrator
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will act for the benefit of holders of the Bonds and the Bond Insurer as well as
for the benefit of the Trust, and that such obligations on the part of the Bond
Administrator shall be enforceable at the instance of the Indenture Trustee and
the Trust.
Section 12.5. Limitation of Responsibility of the Bond Administrator.
(a) The Bond Administrator will have no responsibility
under this Agreement other than to render the
services provided for hereunder in good faith. The
Bond Administrator, its affiliates, its directors,
officers, shareholders, and employees will not be
liable to the Trust, the Owner Trustee, the Indenture
Trustee, the Bondholders, or others, except by reason
of acts constituting bad faith, willful misfeasance,
gross negligence, or reckless disregard of the duties
of the Bond Administrator hereunder. The Owner
Trustee will reimburse, indemnify, and hold harmless
the Bond Administrator and its affiliates,
shareholders, directors, officers, and employees with
respect to all expenses, losses, damages,
liabilities, demands, charges, and claims of any
nature in respect of any acts or omissions performed
or omitted by the Bond Administrator in good faith
and in accordance with the standard set forth above.
(b) The Trust undertakes to pay or cause to be paid any
amount due the Bond Administrator or its affiliates,
shareholders, directors, officers and employees,
under Section 12.2 or Section 12.5(a) and such
amounts shall be paid as provided for under the
Indenture or out of the assets of the Trust that are
free of the lien of the Indenture (and in no event by
_______________________ in its individual capacity).
Section 12.6. Termination of Bond Administrator.
(a) The Bond Administrator, at its election, may resign
as Bond Administrator hereunder and be discharged of
its duties hereunder upon at least 30 days' prior
notice to the Owner Trustee, the Bond Insurer, and
the Indenture Trustee; provided however, that at any
time while the Bonds are outstanding no such
resignation and discharge shall become effective
until a Person selected by the Bond Administrator in
its discretion and acceptable to the Owners, the Bond
Insurer, and the Rating Agencies shall have assumed
and agreed to perform the duties of the Bond
Administrator hereunder
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as evidenced by a written instrument to such effect
delivered to the Owner Trustee. Upon delivery of such
written instrument to the Owner Trustee, the Trust
shall promptly deliver to the successor Bond
Administrator a written instrument acknowledging and
accepting the assignment of the resigning Bond
Administrator's rights hereunder to the successor
Bond Administrator. Each such successor Bond
Administrator shall be deemed to be the Bond
Administrator for all purposes of this Agreement.
(b) If any of the following events shall occur and be
continuing:
(i) The Bond Administrator shall violate any
provision of this Agreement and such default
is not cured within ten days after notice
thereof is given to the Bond Administrator
by the Owner Trustee, [the Bond Insurer,] or
the Indenture Trustee;
(ii) A court having jurisdiction over the
premises shall enter a decree or order for
relief in respect of the Bond Administrator
in an involuntary case under any applicable
bankruptcy, insolvency, or other similar law
now or hereafter in effect, or appoint a
receiver, liquidation, assignee, custodian,
trustee, sequestrator (or other similar
official) of the Bond Administrator or for
any substantial part of its property, or
order the winding-up or liquidation of its
affairs; or
(iii) The Bond Administrator shall commence a
voluntary case under any applicable
bankruptcy, insolvency, or other similar law
now or hereafter in effect, or shall consent
to the entry of an order for relief in an
involuntary case under any such law, or
shall consent to the appointment of or
taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator
(or other similar official) of the Bond
Administrator or for any substantial part of
its property, or shall make any general
assignment for the benefit of creditors, or
shall fail generally to pay its debts as
they become due,
then in any such event this Agreement may be terminated by the Owner Trustee
upon notice to the Bond Administrator; provided however, that
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the Bond Administrator shall nevertheless be entitled to any amounts due to it
pursuant to Sections 12.2 and 12.5 accruing prior to the date of such
termination.
(c) Following receipt of instructions from [the Bond
Insurer or] the owners of the Bonds[, with the prior
consent of the Bond Insurer, and] upon 30 days'
written notice to the Bond Administrator, the Owner
Trustee may remove the Bond Administrator; provided
however, that the Bond Administrator shall
nevertheless be entitled to any amounts due to it
pursuant to Sections 12.2 and 12.5 accruing prior to
the date of such termination.
Section 12.7. Bankruptcy Matters.
The Bond Administrator shall not take any action to cause the
Trust to dissolve in whole or in part or file a voluntary petition or otherwise
initiate proceedings to have the Trust adjudicated bankrupt or insolvent, or
consent to the institution of bankruptcy or insolvency proceedings against the
Trust, or file a petition seeking or consenting to reorganization or relief of
the Trust, as debtor, under any applicable federal or state law relating to
bankruptcy, insolvency, or other relief for debtors with respect to the Trust;
or seek or consent to the appointment of any trustee, receiver, conservator,
assignee, sequestrator, custodian, liquidator (or other similar official) of the
Trust or of all or any substantial part of the properties and assets of the
Trust, or cause the Trust to make any general assignment for the benefit of
creditors of the Trust, or take any action in furtherance of any of the above
actions.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Supplements and Amendments.
This Agreement may be amended by the Company and the Owner
Trustee, [with the prior consent of the Bond Insurer,] and with prior
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written notice to the Rating Agencies, but to cure any ambiguity, to correct or
supplement any provisions in this Agreement, or for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement without the consent of any of the Bondholders or the
Certificateholders or the Indenture Trustee, or of modifying in any manner the
rights of the Bondholders or the Certificateholders; provided however, such
action shall not adversely affect in any material respect the interests of any
Bondholder or Certificateholder or the rights of the Bond Insurer. An amendment
described above shall be deemed not to adversely affect in any material respect
the interests of any Bondholder or Certificateholder if the party requesting the
amendment satisfies the Rating Agency Condition with respect to such amendment.
This Agreement may also be amended from time to time by the
Company and the Owner Trustee, with the prior written consent of the Rating
Agencies and with the prior written consent of the Indenture Trustee, [the Bond
Insurer,] the Holders (as defined in the Indenture) of Bonds evidencing more
than 50% of the Outstanding Amount of the Bonds, the Holders of Certificates
evidencing more than 50% of the Percentage Interests of the Trust Interest and
if the party requesting such amendment satisfies the Rating Agency Condition
with respect to such 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 Bondholders or the
Certificateholders; provided however, no such amendment shall (a) increase or
reduce in any manner the amount
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<PAGE> 76
of, or accelerate or delay the timing of, collections of payments on the
Mortgage Loans or distributions that shall be required to be made for the
benefit of the Bondholders, the Certificateholders [or the Bond Insurer,] or (b)
reduce the aforesaid percentage of the Outstanding Amount of the Bonds or the
Percentage Interests required to consent to any such amendment, in either case
of clause (a) or (b) without the consent of the holders of all the outstanding
Bonds [and the Bond Insurer,] and in the case of clause (b) without the consent
of the Holders of all the outstanding Certificates.
Promptly after the execution of any such amendment or consent,
the Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee[, the Bond
Insurer] and each of the Rating Agencies.
It shall not be necessary for the consent of
Certificateholders, the Bondholders, or the Indenture Trustee pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Basic Document) and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Owner Trustee may prescribe.
72
<PAGE> 77
Promptly after the execution of any amendment to the
Certificate of Trust, the Owner Trustee shall cause the filing of such amendment
with the Secretary of State.
Prior to the execution of any amendment to this Agreement or
the Certificate of Trust, the Owner Trustee shall be entitled to receive and
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties, or immunities under this Agreement or otherwise.
Section 13.2. No Legal Title to Owner Trust Estate in Holders.
The Certificateholders shall not have legal title to any part
of the Owner Trust Estate. The Certificateholders shall be entitled to receive
distributions with respect to their undivided ownership interest therein only in
accordance with Articles V and IX. No transfer, by operation of law or
otherwise, of any right, title, or interest of the Certificateholders to and in
their ownership interest in the Owner Trust Estate shall operate to terminate
this Agreement or the Trust hereunder or entitle any transferee to an
[Accounting] or to the transfer to it of legal title to any part of the Owner
Trust Estate.
Section 13.3. Limitations on Rights of Others.
Except for Section 2.7, the provisions of this Agreement are
solely for the benefit of the Owner Trustee, the Company, the
Certificateholders, [the Bond Insurer,] and to the extent expressly provided
herein, the Indenture Trustee and the Bondholders, and
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nothing in this Agreement (other than Section 2.7), whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions, or provisions contained herein.
Section 13.4. Notices.
(a) Unless otherwise expressly specified or permitted by
the terms hereof, all communications provided for or
permitted hereunder shall be in writing and shall be
deemed to have been given if (1) personally
delivered, (2) upon receipt by the intended
recipient or three Business Days after mailing if
mailed by certified mail, postage prepaid (except
that notice to the Owner Trustee shall be deemed
given only upon actual receipt by the Owner
Trustee), (3) sent by express courier delivery
service and received by the intended recipient, or
(4) except with respect to notices sent to the Owner
Trustee, transmitted by telex or facsimile
transmission (or any other type of electronic
transmission agreed upon by the parties and
confirmed by a writing delivered by any of the means
described in (1), (2) or (3), at the following
addresses: (i) if to the Owner Trustee, its
Corporate Trust Office; (ii) if to the Company,
____________________________________, Attention:
__________, Telecopy: ______; (iii) if to the Bond
Insurer, ____________________________________,
Attention: __________, Telecopy: ______; (iv) if to
the Trust Paying Agent, ___________________________,
Attention: __________, Telecopy: ______; (v) if to
_____________________, Attention: __________,
Telecopy: ______ or, as to each such party, at such
other address as shall be designated by such party
in a written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail,
postage prepaid, at the address of such
Certificateholder as shown in the Certificate
Register. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the
Certificateholder receives such notice.
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Section 13.5. Severability.
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
Section 13.6. Separate Counterparts.
This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 13.7. Successors and Assigns.
All covenants and agreements contained herein shall be binding
upon, and inure to the benefit of, the Company, [the Bond Insurer,] the Owner
Trustee, and its successors and each owner and its successors and permitted
assigns, all as herein provided. Any request, notice, direction, consent,
waiver, or other instrument or action by a Certificateholder shall bind the
successors and assigns of such Certificateholder.
Section 13.8. No Petition.
The Owner Trustee, by entering into this Agreement, each
Certificateholder, by accepting a Certificate, and the Indenture Trustee and
each Bondholder by accepting the benefits of this Agreement, hereby covenant and
agree that they will not at any time
75
<PAGE> 80
institute against the Company or the Trust, or join in any institution against
the Company or the Trust of, any bankruptcy, reorganization, arrangement,
insolvency, or liquidation proceedings, or other proceedings under any United
States Federal or state bankruptcy or law in connection with any obligations
relating to the Certificates, the Bonds, this Agreement, or any of the Basic
Documents.
Section 13.9. No Recourse.
Each Certificateholder by accepting a Certificate acknowledges
that such Certificateholder's Certificate represents a beneficial interest in
the Trust only and does not represent an interest in or an obligation of the
Servicer, the Company, the Owner Trustee, or any Affiliate thereof and no
recourse may be had against such parties or their assets, except as may be
expressly set forth or contemplated in this Agreement, the Certificates, or the
Basic Documents.
Section 13.10. Headings.
The headings of the various Articles and Sections herein are
for convenience of reference only and shall not define or limit any of the terms
or provisions hereof.
Section 13.11. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
76
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[Section 13.12. Grant of Certificateholder Rights to Bond Insurer.
(a) In consideration for the issuance of the Certificates
and for the guarantee of the Bonds by the Bond
Insurer pursuant to the Insurance Policy, the
holders of the Certificates hereby grant to the Bond
Insurer the right to act as the holder of 100% of
the outstanding Certificates for the purpose of
exercising the rights of the Certificateholders
under this Agreement without the consent of the
Certificateholders, including the voting rights of
such holders hereunder, but excluding those rights
requiring the consent of all such holders under
Section 13.1 and any rights of such holders to
distributions under Section 5.2(a); provided that
the preceding grant of rights to the Bond Insurer by
the holders of the Trust Interest shall be subject
to Section 13.14.
(b) The rights of the Bond Insurer to direct certain
actions and consent to certain actions of the
Certificateholders hereunder will terminate at such
time as the Balance of the Bonds has been reduced to
zero and the Bond Insurer has been reimbursed for any
amounts owed under the Insurance Policy and the
Insurance Agreement and the Bond Insurer has no
further obligation under the Insurance Policy.]
[Section 13.13. Third Party Beneficiary.
The Bond Insurer is an intended third-party beneficiary of
this Agreement, and this Agreement shall be binding upon and inure to the
benefit of the Bond Insurer; provided that, notwithstanding the foregoing, for
so long as a Bond Insurer Default is continuing with respect to its obligations
under the Bond Insurance Policy, the Bondholders shall succeed to the Bond
Insurer's rights hereunder. Without limiting the generality of the foregoing,
all covenants and agreements in this Agreement that expressly confer rights upon
the Bond Insurer shall be for the benefit of and run directly to the Bond
Insurer, and the Bond Insurer shall be entitled to rely on and
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<PAGE> 82
enforce such covenants to the same extent as if it were a party to
this Agreement.]
[Section 13.14. Suspension and Termination of Bond Insurer's Rights.
During the continuation of a Bond Insurer Default, rights
granted or reserved to the Bond Insurer hereunder shall vest instead in the
Owners; provided that the Bond Insurer shall be entitled to any distributions in
reimbursement of the Bond Insurer Reimbursement Amount, and the Bond Insurer
shall retain those rights under Section 13.1 to consent to any amendment of this
Agreement.
At such time as either (i) the Bond Balance of the Bonds has
been reduced to zero or (ii) the Insurance Policy has been terminated and in
either case of (i) or (ii) the Bond Insurer has been reimbursed for all amounts
owed under the Insurance Policy and the Insurance Agreement (and the Bond
Insurer no longer has any obligation under the Insurance Policy, except for
breach thereof by the Bond Insurer), then the rights and benefits granted or
reserved to the Bond Insurer hereunder (including the rights to direct certain
actions and receive certain notices) shall terminate and the Certificateholders
shall be entitled to the exercise of such rights and to receive such benefits of
the Bond Insurer following such termination to the extent that such rights and
benefits are applicable to the Certificateholders.]
[Signatures follow]
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<PAGE> 83
IN WITNESS WHEREOF, the parties hereto have caused this Deposit Trust Agreement
to be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
UNION PLANTERS MORTGAGE FINANCE
CORP., as Depositor
By:
______________________________
Name:
______________________________
Title:
______________________________
______________________________, in
its individual capacity only as
specifically set forth herein and
otherwise not in its individual
capacity, but solely as Owner
Trustee
By:
_________________________________
Authorized Signatory
The Trust Paying Agent hereby acknowledges its appointment as
Trust Paying Agent under this Agreement and agrees to act in such capacity as
described herein and as Bond Administrator.
____________________________________
By:
______________________________
Name:
______________________________
Title:
______________________________
79
<PAGE> 84
The Servicer hereby acknowledges its obligations under this
Agreement and agrees to act in accordance therewith.
___________________________________
By:
_____________________________
Name:
_____________________________
Title:
_____________________________
80
<PAGE> 85
EXHIBIT A-1
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE)
A-1
<PAGE> 86
THE EQUITY INTEREST IN THE TRUST REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS. THIS EQUITY INTEREST MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE
HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) A PERSON INVOLVED IN THE
ORGANIZATION OR OPERATION OF THE TRUST OR AN AFFILIATE OF SUCH A PERSON WITHIN
THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED
(INCLUDING, BUT NOT LIMITED TO, ________________________________) IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH
LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS EQUITY INTEREST UNDER THE ACT OR
ANY STATE SECURITIES LAWS.
NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST THEREIN SHALL BE MADE
TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A CERTIFICATE FROM THE
TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT A PERSON WHICH IS AN
EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR SECTION 4975 OF
THE CODE OR A GOVERNMENTAL PLAN, DEFINED IN SECTION 3(32) OF ERISA SUBJECT TO
ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE
FOREGOING PROVISIONS OF ERISA OR THE CODE (ANY SUCH PERSON BEING A "PLAN") AND
(II) IS NOT AN ENTITY, INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR
GENERAL ACCOUNT, WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A
PLAN'S INVESTMENT IN THE ENTITY.
THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, OR OTHERWISE DISPOSED OF UNLESS,
PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE
AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE (A)
AGREES TO BE BOUND BY AND TO ABIDE BY THE TRANSFER RESTRICTIONS APPLICABLE TO
THIS CERTIFICATE; (B) IS NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS
NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY THROUGH
ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING ORGANIZATIONS; AND
(C) UNDERSTANDS THAT IT MUST TAKE INTO ACCOUNT ITS PERCENTAGE INTEREST OF THE
TAXABLE INCOME RELATING TO THIS CERTIFICATE.
A-2
<PAGE> 87
UNION PLANTERS MORTGAGE FINANCE 199 -
CERTIFICATE
No. 0001
THIS CERTIFIES THAT ______________________ (the "Owner") is
the registered owner of a 100% Percentage Interest of the Trust Interest in
Union Planters Mortgage Finance Trust 199__-____ (the "Trust") existing under
the laws of the State of Delaware and created pursuant to that certain Deposit
Trust Agreement, dated as of __________ 1, 199__ (the "Trust Agreement"), among
Union Planters Mortgage Finance Corp., as Depositor, ___________________________
__________________, in its individual capacity and in its fiduciary capacity as
Owner Trustee under the Trust Agreement (the "Owner Trustee"), _________________
________________________________________, as Trust Paying Agent and Bond
Administrator, and _________________ _____________________________, as Servicer.
Capitalized terms used but not otherwise defined herein have the meanings
assigned to such terms in the Trust Agreement. The Owner Trustee, on behalf of
the Issuer and not in its individual capacity, has executed this Certificate by
one of its duly authorized signatories as set forth below. This Certificate is
one of the Certificates referred to in the Trust Agreement and is issued under
and is subject to the terms, provisions, and conditions of the Trust Agreement
to which the holder of this Certificate by virtue of the acceptance hereof
agrees and by which the holder hereof is bound. Reference is hereby made to the
Trust Agreement for the rights of the holder of this Certificate, as
A-3
<PAGE> 88
well as for the terms and conditions of the Trust created by the Trust
Agreement.
The holder, by its acceptance hereof, agrees not to transfer
this Certificate except in accordance with terms and provisions of the
Agreement.
A-4
<PAGE> 89
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust
and not in its individual capacity, has caused this Certificate to be duly
executed.
UNION PLANTERS MORTGAGE FINANCE
TRUST 199___-___
By: ________________________, not
in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:
____________________________________
Authorized Signatory
DATED: , 199
_________________ ___ __
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Agreement.
____________________________________
as Authenticating Agent
By:
_______________________________
Authorized Signatory
A-5
<PAGE> 90
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
________________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
________________________________________________________________________________
the within Instrument, and all rights thereunder, hereby irrevocably
constituting and appointing __________ Attorney to transfer said Instrument on
the books of the Certificate Registrar, with full power of substitution in the
premises.
Dated:
____________________________
*/
________________________
Signature Guaranteed:
*/
________________________
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Instrument in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-6
<PAGE> 91
EXHIBIT B
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
UNION PLANTERS MORTGAGE FINANCE TRUST 199___-___
THIS CERTIFICATE OF TRUST OF UNION PLANTERS MORTGAGE FINANCE
TRUST 199___-___ (the "Trust"), dated as of _____________ __, 199___, is being
duly executed and filed by ____________________, a _______________, as trustee,
to form a business trust under the Delaware Business Trust Act (12 Del. Code, S
3801 et seq.).
1. Name. The name of the business trust formed hereby
is UNION PLANTERS MORTGAGE FINANCE TRUST 199___-___.
2. Delaware Trustee. The name and business address of
the trustee of the Trust in the State of Delaware is _________________________
______________________________________________________________________________.
Attention:____________.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of
the Trust, has executed this Certificate of Trust as of the date first above
written.
_______________________________, not
in its individual capacity but
solely as Owner Trustee under a
Deposit Trust Agreement, dated as of
________ 1, 199_
By:
______________________________________
Name:
_____________________________________
Title:
____________________________________
B-1
<PAGE> 92
EXHIBIT C
FORM OF INVESTMENT LETTER
___________, 1997
Union Planters Mortgage Finance Corp.
7130 Goodlett Farms Parkway
Cordova, Tennessee 38018
[OWNER TRUSTEE]
[ADDRESS]
Re: Union Planters Mortgage Finance Trust 199__-__ (the
"Issuer") Collateralized Mortgage Bonds
Ladies and Gentlemen:
___________________________________________________ (the
"Holder") has purchased or acquired, or intends to purchase or acquire from
______________, the current Holder (the "Current Holder"), a Certificate
representing a ___% Percentage Interest (the "__% Certificate") in the Trust
Interest for the referenced Issuer, which represents an interest in the Issuer
created pursuant to that certain Deposit Trust Agreement, dated as of
______________ 1, 199__ (the "Trust Agreement"), among Union Planters Mortgage
Finance Corp., as Depositor, _______________, as Owner Trustee, _______________,
as Trust Paying Agent and Bond Administrator, and _______________, as Servicer.
Capitalized terms used and not otherwise defined herein have the meanings
assigned to such terms in the Trust Agreement.
CERTIFICATION
The undersigned, as an authorized officer or agent of the
Holder, hereby certifies, represents, warrants, and agrees on behalf of the
Holder as follows:
1. The Holder is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was formed and is
authorized to invest in the __% Certificate. The person executing this letter on
behalf of the Holder is duly authorized to do so on behalf of the Holder.
2. The Holder hereby acknowledges that no transfer of the __%
Certificate may be made unless such transfer is exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and applicable state securities laws, or is made in accordance with the
Securities Act and such laws.
C-1
<PAGE> 93
3. The Holder understands that the __% Certificate has not
been and will not be registered under the Securities Act and may be offered,
sold, pledged or otherwise transferred only to a person whom the transferor
reasonably believes is (A) a qualified institutional buyer (as defined in Rule
144A under the Securities Act) or (B) a Person involved in the organization or
operation of the Trust or an affiliate of such Person, in a transaction meeting
the requirements of Rule 144A under the Securities Act and in accordance with
any applicable securities laws of any state of the United States. The Holder
understands that the __% Certificate bears a legend to the foregoing effect.
4. The Holder is acquiring the __% Certificate for its own
account or for accounts for which it exercises sole investment discretion, and
not with a view to or for sale or other transfer in connection with any
distribution of the __% Certificate in any manner that would violate Section 5
of the Securities Act or any applicable state securities laws, subject
nevertheless to any requirement of law that the disposition of the Holder's
property shall at all times be and remain within its control.
5. The Holder is (A) a "qualified institutional buyer" (a
"QIB") as defined in Rule 144A under the Securities Act, and is aware that the
transferor of the __% Certificate may be relying on the exemption from the
registration requirements of the Securities Act provided by Rule 144A and is
acquiring such __% Certificate for its own Account or for the Account of one or
more qualified institutional buyers for whom it is authorized to act, or (B) a
Person involved in the organization or operation of the Trust or an affiliate of
such Person within the meaning of Rule 3a-7 of the Investment Company Act of
1940, as amended (including, but not limited to, the Transferor). The Holder is
able to bear the economic risks of such an investment. The Holder is a QIB
because [STATE FACTUAL BASIS FOR QIB STATUS]
6. If the Holder sells or otherwise transfers the registered
ownership of such __% Certificate, the Holder will comply with the restrictions
and requirements with respect to the transfer of the ownership of the __%
Certificate under the Trust Agreement, and the Holder will obtain from any
subsequent purchaser or transferee substantially the same certifications,
representations, warranties and covenants as required under the Trust Agreement
in connection with such subsequent sale or transfer thereof.
7. The Holder is not an entity that will hold a __%
Certificate as nominee (a "Book Entry Nominee") to facilitate the clearance and
settlement of such security through electronic book-entry changes in Accounts or
participating organizations.
8. The Holder is not (i) is not a person which is an employee
benefit plan, trust or account subject to Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code or
a governmental plan, defined in
C-2
<PAGE> 94
Section 3(32) of ERISA subject to any federal, state or local law which is, to a
material extent, similar to the foregoing provisions of ERISA or the Code (any
such person being a "plan") and (ii) is not an entity, including an insurance
company separate account or general account, whose underlying assets include
plan assets by reason of a plan's investment in the entity and is not directly
or indirectly purchasing such __% Certificate on behalf of, as investment
manager of, as named fiduciary of, as trustee of, or with assets of a Plan.
9. The Holder hereby agrees to indemnify each of the Issuer,
the Indenture Trustee and the Owner Trustee against any liability that may
result if the Holder's transfer of a __% Certificate (or any portion thereof) is
not exempt from the registration requirements of the Securities Act and any
applicable state securities laws or is not made in accordance with such federal
and state laws. Such indemnification of the Issuer, the Owner Trustee shall
survive the termination of the related Trust Agreement.
IN WITNESS WHEREOF, the Holder has caused this instrument to
be executed on its behalf, pursuant to the authority of its Board of Directors,
by its duly authorized signatory this ___ day of _________, 199_.
[NAME OF HOLDER]
________________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
C-3
<PAGE> 95
EXHIBIT D
FEES AND EXPENSES OF OWNER TRUSTEE
D-1
<PAGE> 96
EXHIBIT E
LOAN SCHEDULE
E-1
<PAGE> 97
EXHIBIT F
CROSS RECEIPT
[Attached]
F-1
<PAGE> 98
UNION PLANTERS MORTGAGE FINANCE TRUST 199___-__
COLLATERALIZED MORTGAGE BONDS, SERIES 199___-__
CROSS RECEIPT BETWEEN UNION PLANTERS MORTGAGE FINANCE CO. AND UNION PLANTERS
MORTGAGE FINANCE TRUST 199___-__ ACKNOWLEDGING RECEIPT OF MORTGAGE BONDS
Reference is made to that certain Deposit Trust Agreement,
dated as of ______________ 1, 199__ (the "Trust Agreement"), among Union
Planters Mortgage Finance Co., as Depositor, ________________________, as Owner
Trustee, ___________________, as Trust Paying Agent and Bond Administrator, and
___________, as Servicer. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to such terms in the Trust Agreement.
The Trust hereby acknowledges receipt from the Company of the
Mortgage Bonds relating to the Mortgage Loans identified on the Loan Schedule
annexed as Exhibit E to the Trust Agreement (the "Mortgage Loans"). The Mortgage
Loans have an Initial Pool Balance of $_________________________.
UNION PLANTERS MORTGAGE FINANCE TRUST
199___-__
By: ________________________, not in
its individual capacity but solely as
Owner Trustee of the Trust
By: __________________________________
Authorized Signatory
The Company hereby acknowledges receipt of the Consideration for the
contribution of the Mortgage Loans by the Company to the Trust as specified in
the Trust Agreement. The Consideration consists of (a) $_______________________,
in immediately available funds, representing the aggregate net proceeds from the
sale of the Bonds delivered to the Placement Agent pursuant to the Placement
Agent Agreement, and (b) a Certificate, delivered to ____________________, a
____________________________, representing a 100% beneficial interest in the
Trust.
_________________________
By: ___________________________
Name:
Title:
Dated: ________ __ 199__
F-2
<PAGE> 1
Exhibit 8.1
[Hunton & Williams Letterhead]
March 20, 1998
Union Planters Mortgage Finance Corp.
7130 Goodlett Farms Parkway
Cordova, Tennessee 38018
Ladies and Gentlemen:
We have acted as counsel to Union Planters Mortgage Finance Corp., a
Delaware corporation (the "Depositor"), in connection with the preparation of a
Registration Statement on Form S-11 (the "Registration Statement"),
which has been filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), for the registration under the
Act of Securities (as such term is defined in the Registration Statement) in
one or more series ("Series"). As set forth in the Registration Statement, each
Series of Securities will be issued under and pursuant to the conditions of a
separate pooling and servicing agreement, trust agreement or indenture (each,
an "Agreement") among the parties thereto, each to be identified in the
prospectus supplement for such Series of Securities.
We have examined the prospectus and prospectus supplements related
thereto contained in the Registration Statement (each, a "Prospectus") and such
other documents, records and instruments as we have deemed necessary for the
purposes of this opinion.
In arriving at the opinion expressed below, we have assumed that each
Agreement will be duly authorized by all necessary corporate action on the part
of the parties thereto for such Series of Securities and will be duly executed
and delivered by the parties thereto substantially in the applicable form filed
or incorporated by reference as an exhibit to the Registration Statement, that
each Series of Securities will be duly executed and delivered in substantially
the forms set forth in the related Agreement filed or incorporated by reference
as an exhibit to the Registration Statement, and that Securities will be sold
as described in the Registration Statement, and that the parties to the
transactions involving the issuance of Securities comply (without waiver) with
all of the provisions of the related Agreements and the other documents
prepared and executed in connection with such transactions.
As tax counsel to the Depositor, we have considered certain federal
income tax aspects of the proposed issuance of Securities of each Series. In
particular, we have considered the material federal income tax consequences for
holders of Securities and have reviewed the description of the material federal
income tax consequences for holders of
<PAGE> 2
Union Planters Mortgage Finance Corp.
March 20, 1998
Page 2
Securities that appears in each Prospectus Supplement under the caption "Summary
Federal Income Tax Consequences" and in the core Prospectus under the caption
"Federal Income Tax Consequences", each forming a part of the Registration
Statement. Such descriptions do not purport to discuss all possible federal
income tax ramifications of the proposed issuance of the Securities, but, with
respect to those federal income tax consequences that are discussed, in our
opinion, the description is accurate in all material respects. We hereby confirm
that the matters discussed in each Prospectus Supplement under the caption
"Summary - Federal Income Tax Consequences" and under the caption "Federal
Income Tax Consequences" in the core Prospectus, each forming a part of the
Registration Statement represent the opinion of Hunton & Williams as to the
material federal income tax consequences associated with the purchase, ownership
and disposition of the Securities. You should be aware that this opinion
represents our conclusions as to the application of existing law to the
purchase, ownership and disposition of the Securities. This opinion is effective
as of the date of issuance of any Series of Securities, subject to the
limitation set forth herein regarding our participation as tax counsel to the
Depositor, provided that a new opinion will be rendered by us upon any material
change in law prior to the issuance of Securities for which we act as special
tax counsel to the Depositor. There can be no assurance that contrary positions
will not be taken by the Internal Revenue Service or that the law will not
change.
This opinion is based on the facts and circumstances set forth in the
Registration Statement, in the final Prospectus and in the other documents
reviewed by us. Our opinion as to the matters set forth herein could change
with respect to a particular Series of Securities as a result of changes in law
subsequent to the date hereof. Furthermore, we express no opinion with respect
to any Series of Securities for which we do not act as tax counsel to the
Depositor.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the references to Hunton & Williams
under the caption "Federal Income Tax Consequences" in the Prospectus. In
giving this consent, we do not admit that we are in the category of persons
whose consent is required by Section 7 of the Act or the rules and regulations
promulgated thereunder by the Securities and Exchange Commission.
No opinion has been sought and none has been given concerning the tax
treatment of the issuance and sale of the Securities under the laws of any
state.
Very truly yours,
/s/ Hunton & Williams
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-11 of our report dated March 16, 1998 relating
to Union Planters Mortgage Finance Corp.'s balance sheet as of December 30,
1997, which appears in such Prospectus. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Memphis, Tennessee
March 20, 1998
<PAGE> 1
EXHIBIT 99.1
SALES AGREEMENT
THIS SALES AGREEMENT, made as of __________ __, 19__, (this "Sales
Agreement") by and between _____________, a ____________ [corporation] (the
"Seller") and UNION PLANTERS MORTGAGE FINANCE CORP., a Delaware corporation (the
"Purchaser"), recites and provides as follows:
RECITALS
1. Schedule I attached hereto and made a part hereof lists a pool of [one- to
four family, fully amortizing, [fixed][adjustable] rate, first-lien mortgage
loans (collectively, the "Mortgage Loans")][[certain mortgage
certificates][certain mortgage securities][certain agency securities] (the
"Assets")] currently owned by the Seller that the Seller desires to sell to the
Purchaser.
2. The Purchaser desires to purchase the [Mortgage Loans][Assets] and intends
immediately thereafter to [transfer][pledge] the [Mortgage Loans][Assets] to the
Series 199_-_ Trust (the "Trust") pursuant to the terms of [an Indenture] [a
Pooling and Servicing Agreement][a Trust Agreement] (the "Agreement"), dated as
of ____________ 1, 19__, by and among the Purchaser,[ ___________________, as
master servicer (the "Master Servicer"),] and _-
______________________________________________, as trustee (the "Trustee").
3. Pursuant to the terms of the Agreement, the Trust will issue securities
[evidencing 100% of the beneficial ownership interest in the Trust][secured by
the Trust] to the Purchaser in consideration of the Purchaser's
[deposit][pledge] of the [Mortgage Loans][Assets] to the Trust.
4. Securities to be issued by the Trust to the Purchaser will be designated as
the [Mortgage Pass-Through Certificates][Collateralized Mortgage Bonds], Series
199_-_, Class __, Class __, Class ___, and Class __ Securities and shall be
collectively referred to herein as the "Securities."
5. The Class __, Class __, and Class __ Securities (collectively, the
"Underwritten Securities") shall be sold pursuant to an underwriting agreement,
dated as of __________ __, 19__ (the "Underwriting Agreement"), by and among the
Purchaser, the Seller and ________, as underwriter (the "Underwriter"). The
Underwritten Securities will be registered pursuant to a prospectus supplement
dated ______________ __, 19__ (the "Prospectus Supplement") to a prospectus
dated ____________ __, 19__ (collectively, with the Prospectus Supplement, the
"Prospectus"). The Class __ Securities will not be offered by the Prospectus.
The Class __ Securities will be sold to ______________ pursuant to a Purchase
Agreement between the Purchaser, the Seller and ______________ dated
______________ __, 19__ (the "_____ Purchase Agreement").
6. Capitalized terms used and not defined herein shall have the meanings
assigned to them in the Agreement[ or, if not defined therein, in the Servicing
Agreement, dated as of _______
<PAGE> 2
1, 19__, between _____________, as master servicer (the "Master Servicer") and
___________ (the "Servicing Agreement")].
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises herein made and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereby agree as follows:
SECTION 1. SALE AND PURCHASE.
(a) Subject to the terms and conditions of this Sales Agreement, the
Seller agrees to sell, and the Purchaser agrees to purchase, on the date of the
issuance of the Securities, which is expected to be on or about ____________ __,
19__ (the "Closing Date"), [Mortgage Loans][Assets] having an aggregate
principal balance as of the close of business on __________ 1, 19__ (the
"Principal Cut-off Date"), of approximately $_______________, [plus or minus
5%].
(b) The Seller and the Purchaser have agreed upon which of the
[mortgage loans][assets] owned by the Seller are to be purchased by the
Purchaser pursuant to this Sales Agreement, and the Seller has prepared, or has
provided information to the Purchaser enabling it to prepare, the schedule
attached hereto as Schedule I, setting forth all of the [Mortgage Loans][Assets]
to be purchased by the Purchaser as of the Closing Date and describing such
[Mortgage Loans][Assets]. The Seller shall, with the Purchaser's consent, amend
or modify, (or provide information to the Purchaser enabling it to amend or
modify) Schedule I on or prior to the Closing Date, if necessary to reflect the
actual [Mortgage Loans][Assets] transferred by the Seller and accepted by the
Purchaser on the Closing Date. Schedule I, as so amended or modified
(collectively, the "Closing Schedule"), shall conform to the requirements of the
Purchaser as set forth in this Sales Agreement and to the definition of
"[Mortgage Loan][Asset] Schedule" under the Agreement, and shall be used as the
definitive [Mortgage Loan][Asset] Schedule attached as an exhibit to the
Agreement.
(c) The sale of the [Mortgage Loans][Assets] shall be effected pursuant
to the Bill of Sale substantially in the form attached hereto as Exhibit A (the
"Bill of Sale").
SECTION 2. POOL PURCHASE PRICE.
(a) On the Closing Date, as full consideration for the Seller's
transfer of the [Mortgage Loans][Assets] to the Purchaser, the Purchaser will
deliver to the Seller, (i) cash in an amount that shall be set out in the Bill
of Sale and shall be equal to the sum of (A) _____________% of the aggregate
initial Security Principal Balance of the Securities, (B) accrued interest on
each Class of Securities [(except the Class __ Securities)] from ___________ 1,
19__ to the Closing Date (collectively, the "Pool Purchase Price").
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<PAGE> 3
(b) The Purchaser or any assignee or transferee of the Purchaser (which
may include the Trustee acting on behalf of the Securityholders) shall be
entitled to all [Monthly] Payments due after _____________ 1, 19__ (the "Cut-off
Date"), and all Curtailments or other principal prepayments received with
respect to the [Mortgage Loans][Assets] paid by the Obligor on or after the
Cut-off Date, except that the Purchaser or any assignee or transferee of the
Purchaser will not be entitled to any Curtailments or other prepayments received
after the Cut-off Date but reflected in the aggregate Scheduled Principal
Balance of the [Mortgage Loans][Assets] on the Cut-off Date (the "Cut-off
Balance"). All [Monthly] Payments due on or before the Cut-off Date and
collected on or after the Cut-off Date shall belong to the Seller.
(c) Pursuant to the Agreement, the Purchaser will [transfer and
assign][pledge] all of its right, title and interest in and to the [Mortgage
Loans][Assets] to the Trustee for the benefit of the Holders of the Securities
in consideration of the issuance of the Securities to the Purchaser.
SECTION 3. TRANSFER OF THE [MORTGAGE LOANS][ASSETS].
[(a) Trustee Mortgage Loan File. For purposes of this Sales
Agreement, the "Trustee Mortgage Loan File" will be as defined in the Agreement.
(b) Transfer of Ownership. Upon sale of the Mortgage Loans, the
ownership of each Mortgage Loan Document with respect to each Mortgage Loan
shall be vested in the Purchaser, and the ownership of all other records and
documents with respect to the related Mortgage Loan prepared by or which come
into the possession of the Seller shall immediately vest in the Purchaser. The
Seller shall promptly deliver to the Custodian (as defined below) or the Master
Servicer, as appropriate, any documents that come into its possession with
respect to the Mortgage Loans following the sale of the Mortgage Loans to the
Purchaser. Prior to such delivery, the Seller shall hold any such documents for
the benefit of the Purchaser, its successors and assigns.
(c) Delivery of Mortgage Loan Files. Not later than two Business Days
prior to the Closing Date, the Seller shall deliver to
____________________________________, or its agent, as custodian (the
"Custodian"), each of the Mortgage Loan Documents required to be included in the
Trustee Mortgage Loan File for such Mortgage Loan. The Mortgage Note for each
Mortgage Loan shall be endorsed, without recourse, to the Trustee or Custodian
or in blank, and the Security Instrument for each Mortgage Loan shall be
assigned to the Trustee or Custodian or in blank.
Prior to the transfer and sale of the Mortgage Loans pursuant to this
Sales Agreement, all Mortgage Loan Documents delivered to the Custodian shall be
held by the Custodian for the benefit of the Sellers and the possession by the
Custodian of such Mortgage Loan Documents will be at the will of the Seller and
will be in a custodial capacity only. Following the transfer and sale of the
Mortgage Loans from the Seller to the Purchaser in accordance with the terms and
upon satisfaction of the conditions of this Sales Agreement, the Custodian will
hold all
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<PAGE> 4
Mortgage Loan Documents delivered to it hereunder for the benefit of the
Purchaser, as its agent and bailee. The Custodian, who will also act as the
Trustee, will act on its behalf as a custodian for the receipt and custody of
all Trustee Mortgage Loan Files and after the transfer of the Mortgage Loans
from the Purchaser to the Trust, the Custodian will hold all Mortgage Loan
Documents delivered to it hereunder for the benefit of the Trustee, as trustee
of the Trust.
(d) Examination of Mortgage Loan Documents: Acceptance of Mortgage
Loans. Prior to the Closing Date, the Seller shall either (i) deliver to the
Purchaser or its designee in escrow, for examination, the Mortgage Loan
Documents pertaining to each Mortgage Loan, or (ii) make such Mortgage Loan
Documents available to the Purchaser or its designee for examination at the
Seller's offices or at such other place as the Seller shall specify. The
Purchaser, the Trustee, or a designee of either entity may review the Mortgage
Loan Documents to verify that all documents required to be included in each
Trustee Mortgage Loan File (as such term has been defined in the Agreement) are
so included.
Prior to the Closing Date, the Trustee or its designee shall review the
documents delivered pursuant to Section 3(c) hereof to ascertain that, as to
each Mortgage Loan listed in Schedule I, (i) all documents required to be
delivered by the Seller pursuant to Section 3(c) have been received, (ii) such
documents appear regular on their face and relate to such Mortgage Loan, and
(iii) the information on the Mortgage Loans set forth in Schedule I accurately
reflects the information set forth in the corresponding Trustee Mortgage Loan
File, to the extent required by Section ___ of the Agreement. An additional
review shall be conducted by the Trustee or its designee prior to the first
anniversary of the Closing Date to determine that all Mortgage Loan Documents
required to be included in the Trustee Mortgage Loan File are included therein.
If at any time the Purchaser or the Trustee discovers or receives notice that
any Mortgage Loan Document is missing or defective in any material respect with
respect to any Mortgage Loan, the Seller shall correct or cure any such omission
or defect or, if such omission or defect materially impairs the value of the
Mortgage Loans, repurchase or substitute for such defective Mortgage Loan in
accordance with and if permitted by the terms of Section 7 hereof. At the time
of such repurchase or substitution, the Trustee shall release documents in its
possession relating to such Mortgage Loan to the Seller. The fact that the
Purchaser, the Trustee or a designee of either entity has conducted or has
failed to conduct any partial or complete examination of the Mortgage Loan
Documents prior to the Closing Date shall not affect the rights of the Purchaser
(or any assignee or successor thereof) to demand repurchase or other relief as
provided herein.
(e) Incomplete Trustee Mortgage Loan Files. In the event the Seller
does not deliver or cause to be delivered to the Custodian a complete Trustee
Mortgage Loan File for each Mortgage Loan identified on the Closing Schedule
(each such Mortgage Loan, an "Incomplete Mortgage Loan") by 5:00 p.m. Eastern
Time on the day prior to the Closing Date, the Purchaser may withhold from the
Pool Purchase Price and deposit with the Trustee cash in an amount equal to the
Principal Cut-off Balance for each Incomplete Mortgage Loan, plus one month's
interest thereon at the Note Rate less the Servicing Fee Rate for each such
Incomplete Mortgage Loan. If cash is deposited with the Trustee by the Purchaser
with respect to an Incomplete
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<PAGE> 5
Mortgage Loan, the Seller shall use its best reasonable efforts to provide the
Trustee with the Mortgage Loan Documents missing from the Trustee Mortgage Loan
File for the Incomplete Mortgage Loan by [one business day prior to the first
distribution date]. If the Seller fails to provide such missing Mortgage Loan
Documents prior to such date, the Seller shall either repurchase from the
Purchaser the Incomplete Mortgage Loan for the Purchase Price or substitute a
Qualified Substitute Mortgage Loan therefor, provided, however, that any such
repurchase of or substitution for an Incomplete Mortgage Loan occurs by [one
business day prior to the first distribution date]. Any funds deposited with the
Trustee with respect to an Incomplete Mortgage Loan shall be retained by the
Trustee until all of the Mortgage Loan Documents with respect to the Incomplete
Mortgage Loan have been delivered to the Trustee, or until the Seller has
repurchased such Incomplete Mortgage Loan from the Purchaser or effected a
substitution therefor. However, if the Seller does not complete the repurchase
or substitution of the Incomplete Mortgage Loan by [one business day prior to
the first distribution date], the Trustee will apply the cash deposited in
satisfaction of the Seller's obligation to repurchase such Incomplete Mortgage
Loan pursuant to the Agreement. Such repurchase shall be applied on the first
Distribution Date in payment on the Securities, and the Trustee shall
simultaneously release the Incomplete Mortgage Loan File to the Purchaser or its
designee.
(f) Recordation of Assignments of Security Instrument. Subject to the
sale of the Mortgage Loans by the Seller to the Purchaser in accordance with the
terms of this Sales Agreement, The Purchaser hereby authorizes and instructs the
Seller, and the Seller hereby agrees, with respect to each Mortgage Loan, to
record all Assignments required to be contained in the Trustee Mortgage Loan
File pursuant to the Agreement in the public recording office for the
jurisdiction in which the related Mortgage Premises is located. All recording
fees relating to the recordation of the Assignments as described above shall be
paid by the Seller. If the Trustee does not receive, within the time specified
in the Agreement, evidence satisfactory to it of such recording with respect to
any Mortgage Loan or, in the alternative, an Opinion of Counsel acceptable to
the Purchaser to the effect that such recording is not required to protect the
right, title and interest of the Trustee in any such Mortgage Loan, the Seller
shall, in cooperation with the Master Servicer, correct or cure any such
omission.]
[ Upon the transfer of the Assets to the Purchaser by the Seller,
ownership thereof shall be vested in the Purchaser. As soon as possible prior to
the Closing Date of the sale of the Assets to the Purchaser, the Seller shall
deliver to the Trustee the Assets together with bond powers executed in favor of
"__________________________, AS TRUSTEE FOR __________ SERIES 199_-_" and any
transferor documents and opinions of counsel required by the Agreement or other
documents under which the Assets were issued. Prior to the closing of the sale,
the Trustee shall hold the Assets for the benefit of the Seller. Proceeds shall
be delivered on the Closing Date or may, upon the agreement of the parties, be
netted against amounts due the Seller. [Notwithstanding the foregoing, the
parties acknowledge that the [PARTICULAR CERTIFICATE] has been lost. The Seller
agrees to provide the Trustee with a replacement certificate, registered in the
name of the Trustee or in negotiable form, as promptly as possible after the
Closing Date.]]
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<PAGE> 6
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
hereby represents and warrants to the Purchaser as of the date of this Sales
Agreement, or as of such other date as is specifically provided, as follows:
(a) Due Organization. The Seller has been duly incorporated
and is validly existing [and in good standing under] the laws of the
[State of ___________] and duly qualified to do business and in good
standing under the laws of each jurisdiction that requires such
qualification wherein it owns or leases any material properties (except
where the failure so to qualify would not have a material adverse
effect on it). The Seller has the full power and authority (corporate
and other) to own its properties and conduct its business as presently
conducted.
(b) Due Authority. The Seller has the full power, authority
and legal right to transfer and convey the [Mortgage Loans][Assets] to
the Purchaser, and has the full power, authority (corporate and other)
and legal right to execute and deliver, engage in the transactions
contemplated by, and perform and observe the terms and conditions of,
this Sales Agreement.
(c) Enforceability. This Sales Agreement has been duly and
validly authorized, executed and delivered by the Seller and (assuming
the due authorization, execution and delivery hereof by the Purchaser)
constitutes the valid, legal and binding agreement of the Seller,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, receivership, conservatorship, reorganization, moratorium
or other similar laws affecting creditors' rights generally and to
general principles of equity, regardless of whether such enforcement is
sought in a proceeding in equity or at law and except that the
provisions of indemnity contained herein may be unenforceable as
against public policy.
(d) No Consent. No consent, approval, authorization or order
of or registration or filing with, or notice to, any governmental
authority or court is required, under federal laws or the laws of the
State of ___________, for the execution, delivery and performance of or
compliance by the Seller with this Sales Agreement or the consummation
by the Seller of any other transaction contemplated hereby.
(e) No Conflict. Neither the execution and delivery of this
Sales Agreement by the Seller, nor the consummation by the Seller of
the transactions herein contemplated, nor compliance with the
provisions hereof by the Seller, will (i) conflict with or result in a
breach of, or constitute a default under, any of the provisions of the
Seller's charter or by-laws, or any law, governmental rule or
regulation, or any judgment, decree or order binding on the Seller or
any of its properties, or any of the provisions of any indenture,
mortgage, deed of trust, contract or other instrument to which the
Seller is a party or by which it is bound or (ii) result in the
creation or imposition of any lien, charge or encumbrance which would
have a material adverse effect upon any of its
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<PAGE> 7
properties pursuant to the terms of any such indenture, mortgage, deed
of trust, contract or other instrument.
(f) Disclosure. No certificate of an officer, statement or
other information furnished in writing or a report delivered to the
Underwriter, the Purchaser, any affiliate or designee of the Purchaser
or the Trustee by the Seller for use in connection with the purchase of
the [Mortgage Loans][Assets] and the transactions contemplated
hereunder will, to the knowledge of the Seller, contain any untrue
statement of a material fact, or omit a material fact necessary to make
the information, certificate, statement or report not misleading.
(g) Financial Statements. The Seller has delivered to the
Purchaser financial statements as to its last two complete fiscal
years. All such financial statements fairly present the pertinent
results of operations and changes in financial position for each of
such periods and the financial position at the end of each such period
of the Seller and its subsidiaries and have been prepared in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved, except as set forth in the notes
thereto.
(h) No Change. There has been no change in the business,
operations, financial condition, properties or assets of the Seller
since the date of the Seller's financial statements that would have a
material adverse effect on its ability to perform its obligations under
this Sales Agreement.
(i) No Broker. The Seller has not dealt with any broker,
investment banker, agent or other person that may be entitled to any
commission or compensation in connection with the sale of the [Mortgage
Loans][Assets] to the Purchaser, except for the Underwriter to the
extent described in the Prospectus Supplement, the Purchaser or an
affiliate of the Purchaser.
(j) No Litigation. There is no litigation pending or, to the
Seller's knowledge, threatened against the Seller that would reasonably
be expected to (i) affect adversely the transfer of the [Mortgage
Loans][Assets], the issuance of the Securities, or the execution,
delivery, performance or enforceability of this Sales Agreement or (ii)
have a material adverse effect on the financial condition of the
Seller.
(k) Sale. The Seller will treat the transfer of the [Mortgage
Loans][Assets] to the Purchaser as a sale on its books and records in
accordance with generally accepted accounting principles.
(l) Good Title. Immediately prior to the sale of the [Mortgage
Loans][Assets] to the Purchaser, the Seller will be the sole owner of,
and will have good and marketable title to, the [Mortgage Loans]
[Assets], subject to no prior lien, mortgage, security interest,
pledge, charge or other encumbrance, and on the Closing Date, the
[Security
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<PAGE> 8
Instrument for the Mortgage Loans][Assets] will be duly and validly
assigned by the Seller as described in Section 3(c) hereof, the related
[Mortgage Notes][certificates] will be endorsed as described in Section
3(c) hereof and such [Security Instruments and Mortgage
Note][certificate] will be delivered to the Custodian, together with
the other [Mortgage Loan] Documents required by such Section to be
included in the Trustee [Mortgage Loan] File. Following the sale of the
[Mortgage Loans][Assets], the Purchaser will own such [Mortgage
Loans][Assets], free and clear of any prior lien, mortgage, security
interest, pledge, charge or other encumbrance [(assuming, with respect
to each Mortgage Loan secured by Mortgaged Premises located in a
jurisdiction in which recordation of an assignment is necessary to
transfer a lien on the Mortgaged Premises, that an Assignment of the
Security Instrument from the Seller to the Purchaser, or its designee,
including the Trustee[ or the Master Servicer], has been so recorded)].
[(m) Mortgage Loan Documents. With respect to each Mortgage
Loan, the Seller is in possession of each of the Mortgage Loan
Documents required to be included in the Trustee Mortgage Loan File and
the Servicer Mortgage Loan File, except for such documents as have been
delivered to the Purchaser, the Custodian or the Master Servicer.]
(n) No Bulk Transfer. The transfer, assignment and conveyance
of the [Mortgage Notes][Assets] and the Security Instruments by the
Seller pursuant to this Sales Agreement are not subject to the bulk
transfer or any similar statutory provisions in effect in any
applicable jurisdiction.
(o) No Adverse Selection. The Seller used no adverse
selection procedures in selecting the [Mortgage Loans][Assets] from
among the outstanding [mortgage loans][assets] in its portfolio as to
which the representations and warranties in this Section could be made.
[(p) Primary Mortgage Insurance. There is in effect with
respect to each Mortgage Loan identified on Schedule II hereto a policy
of Primary Mortgage Insurance issued by the mortgage insurance company
specified therein; all the information set forth in Schedule II is true
and correct.]
(q) Disclosure. The description of the [Mortgage
Loans][Assets] acquired from the Seller set forth in the Prospectus
Supplement under the heading "____________________" does not contain an
untrue statement of a material fact or omit a material fact required to
be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they are
made, not misleading.
(r) Mortgage Loan Schedule. The information set forth in
Schedule I hereto will be true and correct in all material respects as
of the Cut-off Date.
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<PAGE> 9
(s) Fair Consideration. The consideration received by the
Seller upon the sale of the [Mortgage Loans][Assets] under this Sales
Agreement constitutes fair consideration and reasonably equivalent
value for the [Mortgage Loans][Assets].
(t) Solvency. The Seller is solvent, and the sale of the
[Mortgage Loans][Assets] will not cause the Seller to become insolvent.
The sale of the [Mortgage Loans][Assets] is not undertaken with the
intent to hinder, delay or defraud any of the Seller's creditors.
(u) No Modification. The Seller intends to relinquish all
rights to possess, control and monitor the [Mortgage Loans][Assets]
sold pursuant to this Sales Agreement. After the Closing Date, the
Seller will have no right to modify or alter the terms of the sale of
the [Mortgage Loans][Assets], and the Seller will have no right or
obligation to repurchase any [Mortgage Loan][Asset] or substitute
another [mortgage loan][asset] for any [Mortgage Loan][Asset] sold
hereunder, except as provided in Sections 3(e) and 7 hereof.
[(v) No Default. As of the date hereof, no property securing a
Mortgage Loan is subject to foreclosure, litigation, bankruptcy or
insolvency proceedings or any work out or foreclosure agreement, and,
to the best of the Seller's knowledge, the filing of a bankruptcy or
insolvency proceeding that would result in such Mortgage Loan becoming
subject to bankruptcy or insolvency proceedings is not imminent.]
[(w) Loan-to-Value Ratios. The Loan-to-Value Ratio of each
Mortgage Loan at the time of origination or as of the date hereof is
less than or equal to 95%; and, with respect to each Mortgage Note that
has been modified, the related Mortgage Loan has a Loan-to-Value Ratio
of less than or equal to 95% as of the date of such modification or the
date hereof.]
(x) Bill of Sale. The Seller's representations and warranties
contained in the Bill of Sale (attached hereto as Exhibit A) are true
and correct.
(y) Place of Business. the Seller's principal place of
business and chief executive office are located in ______________,
________________.
(z) Not Plan Investor. the Seller is not a "benefit plan
investor" described in or subject to the Department of Labor
Regulations set forth in 29 C.F.R. section 2510.3-101.
[(aa) Mortgage Loan Representations. As to each Mortgage Loan,
the Seller hereby represents and warrants to the Purchaser as of the
date of this Sales Agreement, or as of such other date as is
specifically provided, that each applicable representation and warranty
set forth in Schedule III hereto is true and accurate.]
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser hereby represents and warrants to Seller as of the date of this Sales
Agreement, or as of such other date as is specifically provided, as follows:
(a) The Purchaser is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware.
(b) The Purchaser has the full power, authority (corporate and
other) and legal right to execute and deliver, engage in the
transactions contemplated by, and perform and observe the terms and
conditions of, this Sales Agreement.
(c) This Sales Agreement has been duly and validly authorized,
executed and delivered by the Purchaser, and (assuming the due
authorization, execution and delivery thereof by the Seller)
constitutes the valid, legal and binding agreement of the Purchaser,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, receivership, moratorium or other similar
laws affecting creditors' rights generally, and to general principles
of equity, regardless of whether such enforcement is sought in a
proceeding in equity or at law.
(d) No consent, approval, authorization or order of or
registration of filing with, or notice to, any governmental authority
or court is required, under federal laws or the laws of the States of
Delaware or Tennessee, for the execution, delivery and performance of
or compliance by the Purchaser with this Sales Agreement or the
consummation by the Purchaser of any other transaction contemplated
hereby, except such as may be required pursuant to state "blue sky"
laws.
(e) Neither the execution and delivery of this Sales Agreement
by the Purchaser, nor the consummation by the Purchaser of the
transactions hereby contemplated, nor compliance with the provisions
hereof by the Purchaser, will (i) conflict with or result in a breach
of, or constitute a default under, any of the provisions of the
Purchaser's articles of incorporation or by-laws, or any law,
governmental rule or regulation, or any judgment, decree or order
binding on the Purchaser or any of its properties, or any of the
provisions of any contract or other instrument to which the Purchaser
is a party or by which it is bound or (ii) result in the creation or
imposition of any lien, charge or encumbrance which would have a
material adverse effect upon the Securities.
(f) There is no litigation pending or, to the Purchaser's
knowledge, threatened against the Purchaser that would reasonably be
expected to affect adversely the execution, delivery, performance or
enforceability of this Sales Agreement.
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<PAGE> 11
SECTION 6. COVENANTS OF THE SELLER. The Seller hereby covenants to
the Purchaser as follows:
(a) Simultaneously with the execution hereof, the Seller shall
execute and deliver a [Secretary's or Assistant Secretary's]
Certificate relating to the Seller's authority to enter into the
transactions contemplated by this Sales Agreement.
(b) On or before the Closing Date, the Seller shall take all
steps required of it to effectuate the [transfer][pledge] of the
[Mortgage Loans][Assets] to the [Trust- ee][Trust], as transferee of
the Purchaser, free and clear of any lien, charge, or encumbrance. The
aggregate Principal Cut-off Balance of the Mortgage Loans will be
approximately $_____________________[, plus or minus 5%].
(c) The Seller shall use its best efforts to make available to
counsel for the Purchaser in executed form each of the Closing
Documents (as defined in Section 8(b) below) no later than two Business
Days before the Closing Date, it being understood that such documents
are to be released and delivered only on the closing of the transaction
contemplated hereby and the sale of the Securities.
(d) The Seller shall deliver or cause to be delivered to the
Purchaser (i) an Opinion of Counsel as to various corporate matters
substantially in a form satisfactory to the Purchaser and (ii) such
other Opinions of Counsel, if any, as are required by either Rating
Agency for the issuance of the ratings on the Securities specified in
Section 8(f) below.
(e) The Seller shall record its transfer of the [Mortgage
Loans][Assets] to the Purchaser as a sale of its interest therein under
generally accepted accounting principles. The Seller shall also report
the transfer as a sale in all financial statements and reports to
regulatory and supervisory agencies and authorities to which it
reports, if any. For federal income tax purposes, the Seller will treat
the transfer of the [Mortgage Loans][Assets] as a sale.
SECTION 7. CURE, REPURCHASE AND SUBSTITUTION OBLIGATIONS.
(a) Each of the representations and warranties of the Seller
contained herein shall survive the purchase by the Purchaser of the [Mortgage
Loans][Assets] and shall continue in full force and effect[, notwithstanding any
restrictive or qualified endorsement on the Mortgage Notes and] notwithstanding
subsequent termination of this Sales Agreement or the Agreement. The
representations and warranties shall not be impaired by any review and
examination of [Mortgage Loan Documents or other] documents evidencing or
relating to the [Mortgage Loans][Assets] or any failure on the part of the
Purchaser to review or examine such documents and shall inure to the benefit of
the Trustee (as the assignee of the Purchaser) for the benefit of the
Securityholders. With respect to the representations and warranties contained
herein, which are made to the best of the Seller's knowledge or as to which the
Seller has no knowledge, if
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<PAGE> 12
it is discovered by either the Seller, the Purchaser or the Trustee that the
substance of any such representation and warranty is inaccurate and such
inaccuracy materially and adversely affects the value of the related [Mortgage
Loan][Asset], then notwithstanding the Seller's lack of knowledge with respect
to the substance of such representation and warranty being inaccurate at the
time the representation or warranty was made, the Seller shall take such action
described in the following paragraph in respect of such [Mortgage Loan][Asset].
(b) Upon discovery or receipt of notice by the Seller, the Purchaser or
the Trustee of any missing or materially defective document[ in any Trustee
Mortgage Loan File], or a breach of any of the Seller's representations and
warranties set forth in Section 4 hereof, or a default in the performance of any
of the covenants or other obligations of the Seller under this Sales Agreement,
which in any of the foregoing cases materially and adversely affects the value
of any [Mortgage Loan][Asset] or the interest therein of the Purchaser or the
Trustee or causes a Qualification Defect, the party discovering or receiving
notice of such missing or materially defective document, breach, or default
shall give prompt written notice to the others. Upon its discovery or its
receipt of notice of any such missing or materially defective document, breach
or default, the Seller shall either (a) within 60 days of such discovery or
receipt of such notice, provide the Trustee with such missing documents or cure
such defect, breach or default, in all material respects, or (b) within 90 days
of such discovery or receipt of such notice, either repurchase the affected
[Mortgage Loan][Asset] at the Purchase Price or cause the removal of such
[Mortgage Loan][Asset] from the Trust (in which case it shall become a Deleted
[Mortgage Loan][Asset]) and substitute therefor one or more Qualified Substitute
[Mortgage Loans][Asset] as defined in the Agreement; provided, however, that any
such substitution occurs within two years of the Closing Date. Notwithstanding
the foregoing, however, if such defect, breach, or default results in a
Qualification Defect, or if a Qualification Defect otherwise exists with respect
to [a Mortgage Loan][an Asset], the Seller must cure such defect or repurchase
the affected [Mortgage Loan][Asset] within 75 days of the Defect Discovery Date.
[The Master Servicer shall amend the Mortgage Loan Schedule to reflect the
withdrawal of any Mortgage Loan from the terms of this Sales Agreement and the
Agreement and the addition, if any, of a Qualified Substitute Mortgage Loan.]
[In order to effect a substitution pursuant to this section, the Seller will
deliver to the Trustee (i) each of the [Mortgage Loan] Documents required to be
contained in the Trustee [Mortgage Loan] File with respect to the Qualified
Substitute [Mortgage Loan][Asset](s) and (ii) if the aggregate Unpaid Principal
Balance on the date of substitution of the Qualified Substitute [Mortgage
Loan][Asset](s) is less than the aggregate Unpaid Principal Balance of the
Deleted [Mortgage Loan][Asset](s) (after application of [Monthly] Payments due
in the month of substitution), cash in an amount equal to such shortfall.] [Any
repurchase pursuant to this Section shall be accomplished by the delivery to the
Trustee, on (or determined as of) the last day of the calendar month in which
such repurchase is made, of the Purchase Price.]
(c) It is understood and agreed that the obligations of the Seller set
forth in this Sales Agreement to cure, repurchase or substitute for a materially
defective [Mortgage Loan][Asset] and to indemnify the Purchaser as provided in
this Sales Agreement constitute the sole remedies of the Purchaser and the
Trustee against the Seller respecting a defective document in any
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<PAGE> 13
Trustee [Mortgage Loan] File [or Servicer Mortgage Loan File] or a breach of
representations and warranties of the Seller set forth in Section 4 hereof.
SECTION 8. CONDITIONS TO OBLIGATION OF THE PURCHASER. The obligation of
the Purchaser hereunder to purchase the [Mortgage Loans][Assets] is subject to:
(a) The accuracy in all material respects of all of the
representations and warranties of the Seller under this Sales
Agreement, and no event shall have occurred which, with notice or the
passage of time, would constitute a default under this Sales Agreement;
(b) The Purchaser shall have received, or the Purchaser's
attorneys shall have received, in escrow (to be released from escrow at
the time of closing), the following documents (collectively, the
"Closing Documents") in such forms as are agreed upon and acceptable to
the Purchaser, duly executed by all signatories other than the
Purchaser as required pursuant to the respective terms thereof:
(i) A Bill of Sale substantially in the form of
Exhibit A hereto;
(ii) An Opinion of Counsel for the Seller as to various
corporate matters and such other Opinions of Counsel as are
necessary in order to obtain the ratings set forth in Section
8(f) below, each of which shall be acceptable to the
Purchaser, its counsel, the Underwriter, its counsel, and the
Rating Agencies (it being understood that such opinions shall
expressly provide that the Trustee shall be entitled to rely
on such Opinions of Counsel);
[(iii) The Servicing Agreement described in Section 10
hereof;]
(iv) A letter from ____________________ dated the date
hereof containing in substance the information required by
Section ____ of the Underwriting Agreement; and
(v) A certificate dated the date hereof from the
Seller's chief financial officer or an officer of the Seller
who is knowledgeable about the Seller's financial and
accounting matters stating that the transfer of the Mortgage
Loans from the Seller to the Purchaser pursuant to this Sales
Agreement will be classified as a sale of the Seller's
interest in the Mortgage Loans under generally accepted
accounting principles.
(c) The Seller shall have delivered to the Custodian, in
escrow, all documents [(including, without limitation, the Security
Instrument assigned by the Seller in blank or to the Trustee or
Custodian and the Mortgage Note endorsed in blank or to the Trustee or
Custodian with respect to each Mortgage Loan)] required to be delivered
hereunder and shall have released its interest therein to the Purchaser
or its designee;
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<PAGE> 14
(d) All other terms and conditions of this Sales Agreement
shall have been complied with;
(e) The purchase by the Underwriter of the Underwritten
Securities pursuant to the terms of the Underwriting Agreement, and the
purchase by _______ of the Class __ Securities pursuant to the
_________ Purchase Agreement; and
(f) The receipt of written confirmation from each of _______________
and from ________________ that it has assigned the ratings shown in the
following table:
<TABLE>
<CAPTION>
Class of Securities Rating by Rating by
------------------- --------- ---------
<S> <C> <C>
-- -- --
-- -- --
-- -- --
-- -- --
</TABLE>
SECTION 9. FEES AND DEPOSITS.
[(a)] On the Closing Date, the Seller will pay to the Purchaser an
"Issuance Fee," which fee includes (i) a fee for the Purchaser's services in an
amount not greater than $_________ which fee includes fees and expenses of
attorneys, accountants (but not in connection with an accountant's review of
"Collateral Term Sheets," "Series Term Sheets," and/or "Computational
Materials," as such terms are defined in the Underwriting Agreement), printers
and the Trustee in connection with the issuance of the Securities, (ii) the fees
payable to the Securities and Exchange Commission relative to the Underwritten
Securities and (iii) the fees payable to each Rating Agency for its initial
rating of the Securities. [In addition, the Seller shall pay (i) any fees
related to the Custodian's receipt and review of the Trustee Mortgage Loan Files
with respect to the Mortgage Loans, (ii) the fees and expenses of its attorneys
and accountants, (iii) any required reserve fund deposits.]
[(b) The Master Servicer shall be entitled to receive in consideration
of its services under the Agreement a monthly fee (from which it shall pay the
Trustee's fees and out-of-pocket expenses with respect to the Trustee's
administration of the Trust) in an amount equal to no more than one-twelfth of
______% per annum times the aggregate Scheduled Principal Balance of the
Mortgage Loans as of the immediately preceding Due Date without taking into
account any payments of principal due on such Due Date.]
[SECTION 10. SERVICING.
(a) The Seller has represented to the Purchaser that the Mortgage Loans
are serviced by ________________________.
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<PAGE> 15
(b) In consideration of the services rendered under the Servicing
Agreement, the Master Servicer shall be entitled to a monthly Servicing Fee for
each Mortgage Loan computed based upon the Scheduled Principal Balance of the
Mortgage Loan as of the immediately preceding Due Date (without taking into
account any payment of principal due on such Due Date). The Servicing Fee for
each Mortgage Loan shall be payable solely from the interest portion of each
[Monthly] Payment paid by the Obligor or other payment of interest paid with
respect to the Mortgage Loan, whether from the proceeds of foreclosure or any
judgment, writ of attachment or levy against the Obligor or its assets, or from
funds paid in connection with any prepayment in full or from Insurance Proceeds
or Liquidation Proceeds.
The Master Servicer shall also be entitled to retain in addition to the
Servicing Fee any late charges, prepayment fees, conversion fees, penalty
interest or assumption fees paid by the Obligor, which amounts are not required
to be deposited to their Custodial Principal and Interest Accounts.]
SECTION 11. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST. The sale
and delivery on the Closing Date of the [Mortgage Loans][Assets] described in
the [Mortgage Loan] [Asset] Schedule is mandatory, it being specifically
understood and agreed that each [Mortgage Loan][Asset] is unique and
identifiable on the date hereof and that an award of money damages would be
insufficient to compensate the Purchaser for the losses and damages incurred by
the Purchaser in the event of the Seller's failure to deliver the [Mortgage
Loans][Assets] on or before the Closing Date. The Seller hereby grants to the
Purchaser a lien on and a continuing security interest in each [Mortgage
Loan][Asset] and each document and instrument evidencing each such [Mortgage
Loan][Asset] to secure the performance by the Seller of its obligation to
deliver such [Mortgage Loans][Assets] hereunder. Subject to Section 7(c) hereof,
all rights and remedies of the Purchaser under this Sales Agreement are distinct
from, and cumulative with, any other rights or remedies under this Sales
Agreement or afforded by law or equity and all such rights and remedies may be
exercised concurrently, independently or successively.
SECTION 12. INDEMNIFICATION; ASSIGNMENT OF CLAIMS; THIRD-PARTY
BENEFICIARY.
(a) In the event the Seller breaches its representations, warranties,
covenants or obligations set forth herein, the Seller shall indemnify and hold
harmless the Purchaser from and against any actual loss, damages, penalties,
fines, forfeiture, legal fees and related costs, judgments, and other costs and
expenses resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, such breach, except to the extent such breach
is the result of the Purchaser's failure to fulfill its obligations under this
Sales Agreement. Promptly after receipt by the Purchaser of notice of the
commencement of any such action, the Purchaser will, if a claim in respect
thereof is to be made against the Seller under this Section, notify the Seller
in writing of the commencement thereof, but the omission so to notify the Seller
will not relieve the Seller from any liability hereunder unless such omission
materially prejudices the rights and positions of the Seller. In case any such
action is brought against the Purchaser, and it notifies the Seller of the
commencement thereof, the Seller will be entitled to participate therein, and to
assume the defense thereof, with counsel satisfactory to the Purchaser, and
after
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<PAGE> 16
notice from the Seller to the Purchaser of its election so to assume the defense
thereof, the Seller will not be liable to the Purchaser under this Section for
any legal or other expenses subsequently incurred by the Purchaser in connection
with the defense thereof other than reasonable costs of such investigation. The
Seller shall (i) pay to the Purchaser, in addition to any amounts that may be
due hereunder, the Issuance Fee and (ii) to the extent such breach by Seller
results in the inability of the Purchaser to perform its obligations under the
Underwriting Agreement, reimburse the Underwriter upon demand for all amounts
otherwise payable by the Purchaser pursuant to Section __ of the Underwriting
Agreement, in either case in the event that any such breach or any of the
following results in the inability of the parties hereto to consummate the
transactions contemplated herein: (A) failure to obtain any consent or
authorization, if any, required under federal or Tennessee law for the Seller to
perform the transactions contemplated herein; or (B) Seller's failure to satisfy
any of the conditions set forth in Section 8(a), (b), (c) or (d) hereof.
(b) In the event of a breach by the Underwriter of the obligation to
purchase the Underwritten Securities pursuant to the Underwriting Agreement or a
breach by _______ of the obligation to purchase the Class __ Securities pursuant
to the ____ Purchase Agreement, the Purchaser hereby assigns to the Seller,
subject to payment in full of the Issuance Fee by the Seller to the Purchaser,
any and all rights of action or other claims the Purchaser may have against the
Underwriter pursuant to the Underwriting Agreement and against ____ pursuant to
the ____ Purchase Agreement; provided, however, that the Purchaser expressly
reserves, and does not hereby assign, its rights to indemnification and
contribution under the Underwriting Agreement, the ____ Purchase Agreement and
any other rights to indemnification or contribution it may have at law or in
equity.
(c) In the event the Seller breaches its obligation to sell and deliver
the [Mortgage Loans][Assets] hereunder, the Purchaser hereby assigns to the
Underwriter any and all rights of action or other claims the Purchaser may have
against the Seller pursuant hereto, except its rights to the Issuance Fee
referred to in Section 9(a) above. The parties agree that the Underwriter is an
intended third-party beneficiary of the Seller's representations and warranties
contained in Section 4 of this Sales Agreement[, provided, however, that the
Underwriter's sole remedy for materially defective documents in, or the omission
of required documents from, any Trustee Mortgage Loan File or Servicer Mortgage
Loan File shall be limited to the cure or repurchase of, or substitution for, a
defective Mortgage Loan from the Trust as provided in Section 7(b) hereof, and
provided further that the Underwriter's remedy for any other breach of the
Seller's representations and warranties contained in Section 4 of this Sales
Agreement shall be the indemnification by the Seller from and against any actual
loss, damages, penalties, fines, forfeiture, legal fees and related costs,
judgments and other costs and expenses resulting from any claim, demand, defense
or assertion based on or grounded upon, or resulting from, such breach.] Seller
hereby agrees to so indemnify the Underwriter; provided, however, that the
second and third sentences of Section 12(a) above (modified to change references
to the Purchaser to be references to the Underwriter, as the case may be) shall
apply to the Seller's indemnification obligations to the Underwriter under this
Section 12(c).
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<PAGE> 17
(d) To the extent that the Purchaser and the Trustee are not
indemnified by the Master Servicer, the Seller shall indemnify and hold
harmless the Purchaser and the Trustee and any of their respective directors,
officers, employees or agents against any loss, liability or expense, including
reasonable attorney's fees, incurred arising out of or in connection with this
Sales Agreement, the Agreement or the Securities, including, but not limited to,
any such loss, liability, or expense incurred in connection with any legal
action against the Purchaser or the Trustee or any of their respective
directors, officers, employees or agents, or the performance of any of the
Purchaser or the Trustee's duties under this Sales Agreement or the Agreement
other than any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of their respective
duties under this Sales Agreement or the Agreement or by reason of reckless
disregard of obligations and duties under this Sales Agreement or the Agreement.
The provisions of this Section 12(d) shall survive the termination of this Sales
Agreement and the Agreement. The Seller acknowledges that the Purchaser and the
Trustee are relying upon the foregoing indemnification in entering into this
Sales Agreement and the Agreement.
SECTION 13. NOTICES. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered to or mailed by registered mail, postage prepaid, or transmitted by
telecopier, telex or telegraph and confirmed by a similar mailed writing, as
follows:
(a) If to the Purchaser:
Union Planters Mortgage Finance Corp.
7130 Goodlett Farms Parkway
Cordova, Tennessee 38018
Attention: President
with a copy, given in the manner
prescribed above, to:
Kevin J. Buckley, Esquire
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219
(b) If to the Seller:
____________________
____________________
____________________
Attn:_______________
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<PAGE> 18
Any party may alter the address to which communications or copies are to be sent
by giving notice of such change of address in conformity with the provisions of
this Section for the giving of notice.
SECTION 14. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Sales Agreement which is prohibited or which
is held to be void or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof. Any part, provision, representation or warranty of this Sales Agreement
that is prohibited or unenforceable or is held to be void or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any [Mortgage Loan][Asset] shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
SECTION 15. GOVERNING LAW. THIS SALES AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE,
NOTWITHSTANDING ANY TENNESSEE OR OTHER CONFLICT OF LAWS PROVISIONS TO THE
CONTRARY.
SECTION 16. AGREEMENT OF THE SELLER. The Seller agrees to execute and
deliver such instruments and take such actions as the Seller or the Trustee may,
from time to time, reasonably request in order to effectuate the purpose and to
carry out the terms of this Sales Agreement including, without limitation, the
execution and filing of any UCC financing statements to evidence the interests
of the Purchaser and any of its transferees in the [Mortgage Loans][Assets] and
other assets assigned to the Trust.
SECTION 17. SURVIVAL. The Seller agrees that the representations,
warranties and agreements made by it herein and in any certificate or other
instrument delivered pursuant hereto shall be deemed to be relied upon by the
Purchaser, notwithstanding any investigation heretofore or hereafter made by the
Purchaser or on the Purchaser's behalf, and that the representations, warranties
and agreements made by the Seller herein or in any such certificate or other
instrument shall survive the delivery of and payment for the [Mortgage
Loans][Assets].
SECTION 18. ASSIGNMENT. The Seller hereby acknowledges that the
Purchaser will assign all its rights hereunder (except those rights set forth in
Sections 9 and 12) to the Trustee. The Seller agrees that, upon the execution of
the Agreement, the Trustee will have all such rights and remedies provided to
the Purchaser hereunder (except those rights set forth in Sections 9 and 12) and
this Sales Agreement will inure to the benefit of the Trustee. The Trustee shall
constitute not only an assignee of the Purchaser's rights in accordance with
this Section but also an intended third party beneficiary of this Sales
Agreement to the extent necessary to enforce such rights and to obtain the
benefit of such remedies.
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<PAGE> 19
SECTION 19. MISCELLANEOUS.
(a) This Sales Agreement may be executed in two or more counterparts,
each of which when so executed and delivered shall be an original, but all of
which together shall constitute one and the same instrument. This Sales
Agreement shall inure to the benefit of, and be binding upon, the parties hereto
and their respective successors and assigns.
(b) Any person into which the Seller may be merged or consolidated or
any person resulting from a merger or consolidation involving the Seller or any
person succeeding to the business of the Seller shall be considered the
successor of the Seller hereunder, without the further act or consent of either
party. Except as provided above, this Sales Agreement cannot be assigned,
pledged or hypothecated by any party without the written consent of each other
party to this Sales Agreement.
(c) This Sales Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof. Neither this Sales
Agreement nor any term hereof may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought. The
headings in this Sales Agreement are for purposes of reference only and shall
not limit or otherwise affect the meaning hereof.
(d) The Purchaser shall immediately effect the redelivery of the
[Mortgage Loans][Assets] [and all Mortgage Loan Documents] and any security
interest created by Section 11 hereof shall be deemed to have been released if,
on the Closing Date, each of the conditions set forth in Section 8 hereof shall
not have been satisfied or waived.
(e) It is the express intent of the parties hereto that the conveyance
of the [Mortgage Loans][Assets] by the Seller to the Purchaser as contemplated
by this Sales Agreement be construed as a sale of the [Mortgage Loans][Assets]
by the Seller to the Purchaser. It is, further, not the intention of the parties
that such conveyance be deemed a pledge of the [Mortgage Loans][Assets] by the
Seller to the Purchaser or any assignee of the Purchaser, including, but not
limited to, the Trustee, to secure a debt or other obligation of the Seller.
However, in the event that, notwithstanding the intent of the parties, the
[Mortgage Loans][Assets] are held to be property of the Seller then (a) this
Sales Agreement shall also be deemed to be a security agreement within the
meaning of Article 9 of the Tennessee Uniform Commercial Code or the Uniform
Commercial Code of any jurisdiction, as necessary; (b) the conveyance provided
for herein shall be deemed to be a grant by the Seller to the Purchaser of a
security interest in all of the Seller's right, title and interest in and to the
[Mortgage Loans][Assets] and all amounts payable to the holder of the [Mortgage
Loans][Assets] 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, other
than investment earnings, from time to time held or invested in the Custodial
Principal and Interest Account, [the related Master Servicer Custodial Account,]
or the Asset Proceeds Account, whether in the form of cash, instruments,
securities or other property; [(c)
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<PAGE> 20
the conveyance provided for herein shall be deemed to be a grant by the Seller
to the Purchaser of a security interest in all of the Seller's right, title and
interest in and to the Servicing Agreements with respect to the Mortgage Loans;]
(d) all insurance policies relating to the [Mortgage Loans][Assets]; [(e) the
possession by the Purchaser or its agents of Mortgage 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 [Trustee's
jurisdiction] Uniform Commercial Code;] and (f) 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 Purchaser for the purpose of perfecting such security
interest under applicable law. Any assignment of the interest of the Purchaser
pursuant to any provision hereof shall also be deemed to be an assignment of any
security interest created hereby. The Seller and the Purchaser shall, to the
extent consistent with this Sales Agreement, take such actions as may be
necessary to ensure that, if this Sales Agreement were deemed to create a
security interest in the [Mortgage Loans][Assets], 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 Sales Agreement
and the Agreement.
SECTION 20. REQUEST FOR OPINIONS. The Seller and the Purchaser hereby
request and authorize Hunton & Williams, as their counsel in this transaction,
to issue on behalf of the Seller and the Purchaser such legal opinions to the
Trustee, the Underwriter, and the Rating Agencies as may be (i) required by any
and all documents, certificates or agreements executed in connection with this
Sales Agreement or (ii) requested by the Trustee, the Underwriter, or the Rating
Agencies, or their respective counsel.
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<PAGE> 21
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Sales
Agreement to be executed and delivered by their respective officers thereunto
duly authorized as of the date first above written.
UNION PLANTERS MORTGAGE FINANCE
CORP.
By:
_____________________________
Its:
_____________________________
By:
_______________________________
Its:
______________________________
-21-
<PAGE> 22
SCHEDULE I
[MORTGAGE LOANS][ASSETS]
[SCHEDULE II
MORTGAGE LOANS FOR WHICH
PRIMARY MORTGAGE INSURANCE
IS IN EFFECT]
[SCHEDULE III
REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER
AS TO THE MORTGAGE LOANS]
-22-
<PAGE> 23
[ SCHEDULE III
REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER
AS TO THE MORTGAGE LOANS
(a) The information pertaining to each Mortgage Loan set forth
in the Mortgage Loan Schedule was true and correct at the date or dates as of
which such information was furnished.
(b) The Seller has not assigned any interest or participation
in any Mortgage Loan other than to the Purchaser (or if any such interest or
participation has been assigned it has been released or will be released prior
to or concurrently with the purchase of such Mortgage Loan by the Purchaser).
The Seller has not acted to (i) modify any Mortgage Note or Mortgage relating to
any Mortgage Loan in any material respect, (ii) satisfy, cancel or subordinate
any Mortgage Loan in whole or in part, (iii) release the related Mortgaged
Property in whole or in part from the lien of any Mortgage Loan or (iv) execute
any instrument effecting the release, cancellation, modification or satisfaction
of any Mortgage Loan.
(c) The Mortgage Note for each Mortgage Loan delivered to the
Purchaser, the Custodian or the Purchaser's other designee is the original
Mortgage Note and is the only Mortgage Note evidencing the Mortgage Loan that
has been manually signed by the related Obligor. As of the Cut-off Date, there
is no default, breach, violation or event of acceleration existing under any of
the Mortgage Loan Documents transferred to the Purchaser or any event that with
notice and expiration of any grace or cure period would result in such a
default, breach, violation or event of acceleration.
(d) As of the Cut-off Date, no [Monthly] Payment on any
Mortgage Loan was more than 30 days delinquent.
(e) Each Mortgage Note and Security Instrument executed and
delivered by a Obligor in connection with a Mortgage Loan has been duly executed
and delivered by the related Obligor and constitutes a legal, valid and binding
obligation of such Obligor, enforceable against such Obligor in accordance with
its terms, subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and to general principles of equity (whether
considered in a proceeding at law or in equity).
(f) Each Security Instrument securing a Mortgage Loan has been
duly recorded in the appropriate governmental recording office in the
jurisdiction where the related Mortgaged Property is located or has been
submitted to such recording office for recordation.
-23-
<PAGE> 24
(g) If the Security Instrument securing a Mortgage Loan does
not name the Seller as the beneficiary or mortgagee, then a valid assignment, in
recordable form, assigning the Security Instrument to the Seller or to the
Purchaser, has been duly recorded (or has been sent for recordation) in the
appropriate records depository for the jurisdiction in which the related
Mortgaged Property is located, and the Seller has delivered to the Purchaser the
original of such assignment accompanied by appropriate evidence that such
assignment has been duly recorded (or a copy thereof certified by the
appropriate records depository to be a true and complete copy of the recorded
assignment) or a copy of the original assignment together with a certificate
from an officer of the Seller certifying that such assignment has been sent for
recordation in the appropriate records depository, but that such recorded
assignment has not been returned to the Seller.
(h) No Mortgage Loan has been modified in any material respect
since the date of its origination and no Mortgage Loan is presently subordinated
in whole or in part to any other lien, nor has the Mortgaged Property securing
any Mortgage Loan been released in whole or in part from the lien of the related
Mortgage.
(i) Each Security Instrument contains customary and
enforceable provisions which render the rights and remedies of the holder
thereof adequate for the realization of the holder's rights against the related
Mortgaged Property in the event of a foreclosure or trustee's sale of such
property. Upon default by an Obligor on a Mortgage Loan and foreclosure on, or
trustee's sale of, the related Mortgaged Property pursuant to proper procedures,
the holder of the Mortgage Loan will be able to deliver good and merchantable
title to the Mortgaged Property underlying that Mortgage Loan, except to the
extent that the enforceability of remedies against such Obligor may be subject
to applicable bankruptcy, insolvency or other similar laws affecting creditors'
rights generally, and to general principles of equity (whether considered in a
proceeding at law or in equity). There is no homestead exemption or other
exemption or defense available to the related Obligor that would prevent the
sale of the Mortgaged Property at a trustee's sale or impair the right of the
holder to foreclose thereon.
(j) In connection with the origination of each Mortgage Loan,
the originator complied with all applicable federal, state and local laws and
regulations, including but not limited to those related to consumer credit,
equal credit opportunity, real estate settlement procedures, truth-in-lending
and usury.
(k) An appraisal of the Mortgaged Property underlying each
Mortgage Loan was made at the time the Mortgage Loan was originated by an
appraiser who met the minimum qualifications of Fannie Mae or Freddie Mac for
appraisers of conventional residential mortgage loans and was completed on a
form satisfactory to Fannie Mae or Freddie Mac.
-24-
<PAGE> 25
(l) The Seller has legal authority to transfer the Mortgage
Loans and the assignment of each Security Instrument to the Trustee constitutes
a legal, valid and binding assignment of the Security Instrument and creates, or
upon recordation will create, a valid first priority security interest in favor
of the Trustee in such Security Instrument or vests ownership of such Security
Instrument in the Trustee.
(m) The Security Instrument securing each Mortgage Loan
creates a valid and enforceable first lien on the related Mortgaged Property
subject only to Permitted Encumbrances. "Permitted Encumbrances" consist of the
following in respect of any Mortgage Loan:
1) the lien of current real property taxes and
assessments not yet due and payable;
2) covenants, conditions and restrictions, rights of
way, easements and other matters of public record as of the
date of recording acceptable to prudent mortgage lending
institutions generally and specifically referred to in the
lender's title insurance policy delivered to the related
originator and referred to or otherwise considered in the
appraisal made for the originator; and
3) other matters to which like properties are
commonly subject which do not materially interfere with the
benefits of the security intended to be provided by the
Security Instrument or the use, enjoyment, value or
marketability of the related Mortgaged Property.
(n) There are no mechanic's or other liens against the related
Mortgaged Property which are superior to or equal to the first lien of the
related Mortgage Loan, except such liens that are expressly insured against by a
Title Insurance Policy.
(o) There are no delinquent taxes, ground rents, water
charges, sewer rents, insurance premiums, assessments (including, but not
limited to, assessments payable in future installments), governmental
assessments or municipal charges due and owing as to any Mortgaged Property. All
such charges have been paid or a sufficient escrow has been established to make
payment of such charges.
(p) Each Mortgaged Property is free of material damage and, to
the best of the Seller's knowledge, is in good repair. The Seller is not aware
of any condemnation proceedings with respect to any Mortgaged Property.
(q) All improvements located on each Mortgaged Property that
were considered in determining the appraised value of the Mortgaged Property lie
within the boundary lines of, and comply with building restrictions applicable
to, the Mortgaged Property. There is no violation of applicable zoning laws or
regulations with respect to any Mortgaged Property. No improvements on adjoining
properties encroach upon any Mortgaged Property in any respect so as to affect
adversely the value or marketability of the Mortgaged Property.
-25-
<PAGE> 26
(r) The full principal amount of each Mortgage Loan has been
paid to the related Obligor or according to the direction of the Obligor. The
Obligor has no option under the related Security Instrument to borrow additional
funds secured by the related Security Instrument from the Seller or any other
person. The principal balance of each Mortgage Loan as of the Cut-off Date, as
set forth in the Mortgage Loan Schedule, is correct and is fully secured by the
related Mortgage.
(s) Except with respect to any funds held in a temporary
buy-down fund for a buy-down loan, no Mortgage Loan is subject to any right of
rescission, set-off, counterclaim or defense, including without limitation the
defense of usury, nor will the operation of any of the terms of the related
Mortgage Note or Security Instrument, or the exercise of any right thereunder,
render either the Mortgage Note or the Security Instrument unenforceable, in
whole or in part, or subject to any right of rescission, set-off, counterclaim
or defense, including without limitation the defense of usury, and no such right
of rescission, set-off, counterclaim or defense has been asserted with respect
thereto.
(t) Pursuant to the terms of each Mortgage, all improvements
on the related Mortgaged Property are insured by an insurer acceptable to Fannie
Mae against loss by fire and such other risks as are usually insured against by
the broad form of extended coverage hazard insurance policy as is from time to
time available. All such improvements are also insured against flood hazards if
the Mortgaged Property is in an area identified by the Secretary of Housing and
Urban Development or the Director of the Federal Emergency Management Agency as
subject to special flood hazards (and if flood insurance is available for real
properties located in the area in which such Mortgaged Property is located). All
such insurance policies (collectively, the "hazard insurance policy") meet the
requirements of the current guidelines of the Federal Insurance Administration,
conform to the Fannie Mae Sellers' Guide and the Fannie Mae Servicers' Guide,
and collectively constitute a standard policy of insurance for the locale where
the Mortgaged Property is located. The coverage provided by such a hazard
insurance policy is in the amount of the lesser of (i) the full insurable value
of the related Mortgaged Property on a replacement cost basis or (ii) the unpaid
balance of the Mortgage Loan, and in any event must at least be sufficient to
avoid application of any co-insurance clause contained in such hazard insurance
policy. The hazard insurance policy names (and will name) the present owner of
the Mortgaged Property as the insured and contains a standard mortgagee loss
payable clause in favor of the originator (or another initial payee under the
related Mortgage Note) and its successors and assigns, including the Seller and
its successors and assigns. The Security Instrument obligates the Obligor
thereunder to maintain the hazard insurance policy at the Obligor's cost and
expense, and on the mortgagor's failure to do so, authorizes the holder of the
Security Instrument to obtain and maintain such insurance at such holder's cost
and expense, and to seek reimbursement therefor from the Obligor. Where required
by state law or regulation, the Obligor has been given an opportunity to choose
the carrier of the required hazard insurance.
(u) Each Standard Hazard Insurance Policy and Primary Mortgage
Insurance Policy (if any) is the valid and binding obligation of the related
insurer, is in full force and
-26-
<PAGE> 27
effect, and will be in full force and effect and inure to the benefit of the
Purchaser and its successors and assigns (including the Trustee) upon the
consummation of the transactions contemplated by the Sales Agreement. The Seller
has not engaged in, and has no knowledge of the Obligor having engaged in, any
act or omission which would impair the coverage of any such policy, the benefits
of any endorsement provided for therein, or the validity and binding effect of
either of the foregoing. Statements made by either the Seller or the related
Obligor in the applications for such insurance were true and complete at the
times of such applications and, to the best of the Seller's knowledge, no events
have occurred since the policies for such insurance were issued that would
reduce the stated coverage provided by such policies.
(v) Each Mortgage Loan is secured by a fee simple estate (or,
if the Mortgaged Property is located in Hawaii or Maryland, a leasehold estate)
and the related Mortgaged Property consists of a parcel of real property with a
single family residence or a two- to four-family dwelling erected thereon.
(w) Each Mortgage Loan is covered by either (i) an attorney's
opinion of title and abstract of title the form and substance of which is
acceptable to Fannie Mae or (ii) an American Land Title Association ("ALTA")
lender's title insurance policy or other generally acceptable form of policy of
insurance for the jurisdiction in which the related Mortgaged Property is
located, issued by a title insurer qualified to do business in the jurisdiction
where the related Mortgaged Property is located, insuring the initial mortgagee
(or beneficiary in the case of a deed of trust) and its successors and assigns
(including the Trustee) as to the first priority status of the lien created by
the related Mortgage, subject only to Permitted Encumbrances (as defined above
in paragraph II(m)), providing coverage in the amount of 100% of the outstanding
principal amount of the Mortgage Loan and providing coverage against any loss by
reason of the invalidity or unenforceability of the lien resulting from any
provisions of the Security Instrument providing for adjustment to the Mortgage
Rate and [Monthly] Payment. Where required by state law or regulation, the
Obligor has been given the opportunity to choose the carrier of such lender's
title insurance. The related initial mortgagee (or beneficiary in the case of a
deed of trust), together with its successors or assigns (including the Trustee),
is the sole insured under such lender's title insurance policy, and such
lender's title insurance policy is in full force and effect and will be in full
force and effect upon the sale of the Mortgage Loan to the Purchaser. No claims
have been made under such lender's title insurance policy, and no prior holder
of the related Mortgage, including the Seller, has done, by act or omission,
anything which would impair the coverage provided by such lender's title
insurance policy.
(x) The Mortgage Loan was originated by a savings and loan
association, savings bank, commercial bank, credit union, insurance company, or
similar institution which is supervised and examined by a federal or state
authority, or by a mortgagee approved by the Secretary of Housing and Urban
Development pursuant to Sections 203 and 211 of the National Housing Act.
(y) Neither the related originator nor the Seller has made any
representations to the related Obligor that are inconsistent with the mortgage
instruments used. If the Mortgage
-27-
<PAGE> 28
Loan has an adjustable interest rate, (i) the Mortgage Rate is adjusted on each
applicable interest rate adjustment date, in accordance with the schedule set
forth or described in the related Mortgage Note, to equal the applicable index
plus the applicable gross margin, rounded as specified in the related Mortgage
Note, subject to any periodic and/or lifetime Mortgage Rate caps; (ii) all
required notices of interest rate and payment amount adjustments have been sent
to the Obligor on a timely basis and such adjustments were properly calculated;
(iii) installments of interest are subject to change due to the adjustments to
the Mortgage Rate on each interest rate adjustment date, with interest
calculated and payable in arrears, sufficient to amortize the Mortgage Loan
fully by its stated maturity date, over an original term of not more than thirty
years from commencement of amortization; and (iv) all Mortgage Rate adjustments
have been made in strict compliance with state and federal law and the terms of
the related Mortgage Note. Any interest required to be paid pursuant to state
and local law has been properly paid and credited.
(z) For any Security Instrument that constitutes a deed of
trust, a trustee, authorized and duly qualified under applicable law to serve as
such, has been properly designated and currently serves as such trustee and is
named in the Mortgage, and no fees or expenses are or will become payable by the
Seller or the Purchaser or its assignees (including the Trustee) to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Obligor.
(aa) The Seller has no knowledge of any circumstances or
conditions with respect to any Mortgage, the related Mortgaged Property, the
related Obligor or the Obligor's credit standing that can reasonably be expected
to cause private institutional investors to regard the Mortgage Loan as an
unacceptable investment, cause the Mortgage Loan to become delinquent, or
adversely affect the value or marketability of the Mortgage Loan.
(ab) Each Mortgage Loan is a "qualified mortgage" within the
meaning specified for such term in section 860G of the Code and does not contain
any provision requiring action that would render it not such a "qualified
mortgage."
(ac) Any Mortgage Loan identified on Schedule [ ] to the Sales
Agreement as being insured by the Federal Housing Administration ("FHA") or
guaranteed in whole or in part by the U.S. Department of Veterans Affairs ("VA")
has been serviced in compliance with applicable FHA or VA regulations and the
FHA insurance or VA guarantee with respect to such Mortgage Loan as in effect at
the origination of such Mortgage Loan is in full force and effect. Any premiums
required to be paid to date with respect to such federal insurance or guarantee
have been paid and such federal insurance or guarantee is valid and enforceable.
(ad) As of the date hereof, no property securing a Mortgage
Loan is subject to foreclosure, litigation, bankruptcy or insolvency proceedings
or any workout or foreclosure agreement, and, to the best of the Seller's
knowledge, the filing of a bankruptcy or insolvency proceeding that would result
in any Mortgage Loan becoming subject to bankruptcy or insolvency proceedings is
not imminent.
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<PAGE> 29
(ae) If one or more REMIC elections are to be made with
respect to all or part of the Trust, the REMIC Loan-to-Value Ratio of each
Mortgage Loan is less than 125% either (i) at the time of its origination or as
of the Startup Day or (ii) if such Mortgage Loan has been modified other than as
a result of a default or reasonably foreseeable default, as of the Startup Day.
(af) Each Mortgage Loan has closed and the proceeds of each
Mortgage Loan have been fully disbursed; there is no requirement for future
advances thereunder; and any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow funds
therefor have been complied with.
(ag) All parties that have had any interest in each Mortgage
Loan, whether as a mortgagee, assignee, pledgee or otherwise, are (or, during
the period in which they held and disposed of such interest, were) (a) and
FHA-approved mortgagee and a VA-approved lender, (b) in compliance with any and
all applicable licensing requirements of the laws of the state wherein the
Mortgaged Property is located or is otherwise exempt, and (c)(1) organized under
the laws of such state, (2) qualified to do business in such state, (3) a
federal savings and loan association, savings bank or national bank having
principal offices in such state or (4) not doing business in such state.
(ah) To the best of the Seller's knowledge, no action, error,
omission, misrepresentation, negligence, fraud or similar occurrence in respect
of any Mortgage Loan has taken place on the part of any Person (including,
without limitation, the mortgagor, any appraiser, any builder or developer or
any party involved in the origination of the Mortgage Loan or in the application
for any insurance relating to such Mortgage Loan) that would result in an
exclusion from, or denial, defense to coverage, under any insurance policy
required to be obtained for the Mortgage Loan including, without limitation, any
FHA insurance or VA guarantee.]
-29-
<PAGE> 30
EXHIBIT A TO THE SALES AGREEMENT
BILL OF SALE
BILL OF SALE, made as of the __th day of ___________, 19__, by
___________ ________________ a __________ [corporation] (the "Seller"), to Union
Planters Mortgage Finance Corp., a Delaware corporation (the "Purchaser").
WHEREAS, the Seller and the Purchaser are parties to that certain Sales
Agreement, dated as of ______________ __, 19__, with respect to the sale by the
Seller and purchase by the Purchaser of certain [Mortgage Loans][Assets] (the
"Sales Agreement");
WHEREAS, the Purchaser intends to [transfer][pledge] the [Mortgage
Loans][Assets] and certain other assets to __________________________, as
Trustee (the "Trustee") for the Series 199_-_ Trust (the "Trust") established
pursuant to the [Agreement] (the "[Agreement]") dated as of ____________ 1, 19__
among the Purchaser, the Trustee and _______________________;
NOW THEREFORE, the Seller, for and in consideration of the purchase
price set forth in the Sales Agreement, and for other good and valuable
consideration, the sufficiency of which is hereby acknowledged, does hereby
bargain, sell, convey, assign and transfer to the Purchaser, without recourse,
free and clear of any liens, claims or other encumbrances, all of its right,
title and interest in and to each of the [Mortgage Loans][Assets] identified on
Schedule I to the Sales Agreement[, together with the Mortgage Loan Documents
and other documents maintained as part of the related Trustee Mortgage Loan
Files and Servicer Mortgage Loan Files] and all payments thereon and proceeds of
the conversion, voluntary or involuntary of the foregoing.
The Seller hereby acknowledges receipt from the Purchaser of cash in
the amount of $_____________________, which cash constitutes the purchase price
for the [Mortgage Loans][Assets] set forth in Section 2 of the Sales Agreement.
Nothing in this Bill of Sale shall be construed to be a modification
of, or limitation on any provision of the Sales Agreement, including the
representations, warranties and agreements set forth therein except that the
Seller, as of the date hereof, makes the following additional representations
and warranties to the Purchaser concerning the [Mortgage Loans][Assets].
(a) All of the representations and warranties made by the Seller in the
Sales Agreement are true and correct in all material respects as of the date
hereof (subject, in the case of the Closing Schedule delivered pursuant to the
Sales Agreement, to such amendments thereto as were duly made on or before the
date hereof).
(b) Since the date of the Sales Agreement, no event has occurred which,
with notice or the passage of time, would constitute a default under the Sales
Agreement, and there has been
-30-
<PAGE> 31
no material adverse change or development involving a prospective material
adverse change in the business operations, financial condition, properties or
assets of the Seller.
[(c) There has been no casualty damage to the Mortgaged Premises.]
(d) The Obligor's [Monthly] Payment due under each [Mortgage
Loan][Asset] is not more than 30 days delinquent in payment.
[(e) An appraisal of each Mortgaged Premises was made by an appraiser
who either (i) meets the minimum qualifications of Fannie Mae or Freddie Mac for
appraisers, and each appraisal was completed on a form satisfactory to Fannie
Mae and Freddie Mac and includes information concerning comparable property
values, or (ii) at the time that the appraisal was made, was certified in the
state in which the Mortgaged Premises are located and met all of the other
requirements.]
[(f) No Mortgage Loan is secured by a leasehold estate.]
[(g) Approximately __% by Scheduled Principal Balance of the Mortgage
Loans were originated pursuant to a limited documentation origination process.]
[(h) Approximately __% by Scheduled Principal Balance of the Mortgage
Loans are Level Payment Mortgage Loans.]
[(i) None of the Mortgage Loans will be subject to negative
amortization.]
[(j) Approximately __% by Scheduled Principal Balance of the Mortgaged
Premises are owner occupied as a primary residence.]
[(k) Approximately __% by Scheduled Principal Balance of the Mortgaged
Premises are investor owned.]
[(l) Less than __% by Scheduled Principal Balance of the Mortgaged
Premises are condominiums that are also investor properties or second homes.]
[(m) Primary Mortgage Insurance covers approximately __% (by Scheduled
Principal Balance) of the Mortgage Loans with an initial Loan-to-Value Ratio
greater than 80%, except to the extent that such insurance was canceled by the
Master Servicer if (i) state law required such cancellation or (ii) the original
loan-to-value ratio was reduced to 80% or below or (iii) the current
loan-to-value ratio, based on a current appraisal obtained by a related Obligor,
is 80% or lower.]
[(n) There exist no deficiencies with respect to escrow deposits and
payments, if required, for which customary arrangements for repayment thereof
have not been made, and no
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<PAGE> 32
escrow deposits or payments of other charges or payments due the Seller have
been capitalized under the Security Instruments or Mortgage Notes.]
[(o) The Loan-to-Value Ratio of each Mortgage Loan at the time of
origination or as of the date hereof is less than or equal to 95%; and, with
respect to each Mortgage Note that has been modified, the related Mortgage Loan
has a Loan-to-Value Ratio of less than or equal to 95% as of the date of the
modification or as of the date hereof.]
[(p) No Mortgage Loan is subject to foreclosure proceedings or any
workout or foreclosure agreements.]
(q) Taking into account the specific characteristics of the various
[Mortgage Loans][Assets], [(1)(A) a weighted average Servicing Fee of
approximately _____% per annum, and (B)] all [other] amounts such as late
charges, prepayment fees, penalty interest, assumption fees or interest earnings
(the "Additional Amounts") that the [Master Servicer and any subservicer
retained by the Master Servicer are][Trustee is] entitled to receive pursuant to
the terms of the Agreement, represent a reasonable and customary [servicing] fee
for the performance of the [Mortgage Loan servicing and other] [Trustee] duties
required to be performed by the [Master Servicer and the subservicers][Trustee]
under the Agreement[, and (2) the Servicing Fee and the Additional Amounts will
be divided between the [Master Servicer and the subservicers in such proportions
that the amounts retained by the Master Servicer and each subservicer will
represent a reasonable and customary servicing fee for the performance of the
Mortgage Loan servicing and other duties required to be performed by each of
them].
[(r) There is no offset, defense or counterclaim to any Mortgage Note
or Security Instrument, including the obligation of the Obligor to pay the
unpaid principal or interest on such Mortgage Note.]
Unless otherwise defined herein, capitalized terms used in this Bill of
Sale shall have the meanings assigned to them in the Sales Agreement, or if not
assigned in the Sales Agreement, the Agreement.
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<PAGE> 33
IN WITNESS WHEREOF, the Seller has caused this Bill of Sale to be
executed and delivered by its respective officer thereunto duly authorized as of
the date above written.
_______________________________
By:____________________________
Its:___________________________
The Purchaser hereby acknowledges receipt from the Seller of the
[Mortgage Loans][Assets] identified on Schedule I to the Sales Agreement,
subject to its right of inspection set forth in Section 3 of the Sales
Agreement, and cash in the amount of $_____________ in payment of the Issuance
Fee referred to in Section 9 of the Sales Agreement.
UNION PLANTERS MORTGAGE FINANCE
CORP.
By:___________________________
Its:__________________________
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<PAGE> 1
EXHIBIT 99.2
===============================================================================
SERVICING AGREEMENT
Dated as of _________ 1, 19___
among
UNION PLANTERS MORTGAGE FINANCE CORP.
as Depositor,
-------------------------------------------
as Master Servicer,
and
-------------------------------------------
as Trustee
===============================================================================
Mortgage Loans
Pledged under an Indenture dated as of _________ 1, 19___
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1
DEFINITIONS
<S> <C> <C>
Section 1.1 Definitions................................................................. 1
Section 1.2 Interest Calculations....................................................... 15
Section 1.3 Determination of Material Adverse Effect.................................... 15
ARTICLE 2
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 2.1 Servicing Generally......................................................... 15
Section 2.2 Collection of Certain Mortgage Loan Payments; Collateral
Proceeds Account............................................................ 17
Section 2.3 Hazard Insurance Policies................................................... 20
Section 2.4 Enforcement of Due-on-Sale Clauses; Assumption and
Modification Agreements..................................................... 21
Section 2.5 Realization upon Defaulted Mortgage Loans, Options to
Purchase Mortgage Loans..................................................... 22
Section 2.6 Trustee to Cooperate; Release of Mortgage Loan Files........................ 24
Section 2.7 Servicing Compensation; Payment of Certain Expenses by the
Master Servicer[; Compensation Interest].................................... 25
Section 2.8 Annual Statement as to Compliance........................................... 26
Section 2.9 Annual Independent Public Accountants' Servicing Report..................... 26
Section 2.10 Access to Certain Documentation and Information Regarding the
Mortgage Loans.............................................................. 26
Section 2.11 Maintenance of Fidelity Bond and Errors and Omissions Policy................ 27
Section 2.12 Notices to the Depositor, the Rating Agencies, the Trustee [and
the Bond Insurer]........................................................... 27
Section 2.13 Reports of Foreclosures and Abandonment of Mortgaged
Properties.................................................................. 27
Section 2.14 Sub-Servicers and Sub-Servicing Agreements.................................. 28
Section 2.15 Servicing for Benefit of the Bond Insurer................................... 28
Section 2.16 Annual Lien Opinions; Bond Redemptions...................................... 29
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE 3
SERVICER REMITTANCE REPORT
<S> <C> <C>
Section 3.1 Servicer Remittance Report.................................................. 29
ARTICLE 4
MONTHLY ADVANCES AND SERVICING ADVANCES
Section 4.1 Monthly Advances; Servicing Advances........................................ 30
ARTICLE 5
THE MASTER SERVICER
Section 5.1 Representations and Warranties of the Master Servicer....................... 31
Section 5.2 Liability of the Master Servicer............................................ 33
Section 5.3 Merger or Consolidation of, or Assumption of the Obligations
of, the Master Servicer..................................................... 33
Section 5.4 Limitation on Liability of the Master Servicer and Others................... 33
Section 5.5 Master Servicer Not to Resign............................................... 34
ARTICLE 6
DEFAULT
Section 6.1 Events of Default........................................................... 34
Section 6.2 Trustee to Act; Appointment of Successor.................................... 36
Section 6.3 Notifications to Bondholders................................................ 37
Section 6.4 Assumption or Termination of Sub-Servicing Agreements by the
Trustee or any Successor Master Servicer.................................... 37
Section 6.5 Payment of Trustee's Fees and Expenses...................................... 38
ARTICLE 7
TERMINATION
Section 7.1 Termination................................................................. 39
</TABLE>
iii
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE 8
MISCELLANEOUS PROVISIONS
<S> <C> <C>
Section 8.1 Amendment................................................................... 39
Section 8.2 Governing Law............................................................... 40
Section 8.3 Notices..................................................................... 41
Section 8.4. Severability of Provisions.................................................. 41
Section 8.5 Assignment.................................................................. 41
Section 8.6 Third Party Beneficiary; Rating............................................. 41
Section 8.7 Counterparts................................................................ 42
Section 8.8 Intention of the Parties.................................................... 42
Section 8.9 Waivers and Modifications................................................... 42
Section 8.10 Further Agreements.......................................................... 42
Section 8.11 Attorney-in-Fact............................................................ 42
</TABLE>
SCHEDULES AND EXHIBITS
Schedule I Mortgage Loan Schedule
Exhibit A Form of Annual Statement as to Compliance
Exhibit B Form of Request for Release
Exhibit C Ancillary Servicing Compensation
Exhibit D Summary of Servicer's Collection Procedures
Exhibit E Form of Liquidation Report
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<PAGE> 5
THIS SERVICING AGREEMENT (this "Agreement"), dated as of _________ 1,
19___, among UNION PLANTERS MORTGAGE FINANCE CORP., as depositor of its
Collateralized Mortgage Bonds, Series _________ (the "Depositor"),
________________, as master servicer (in such capacity, together with permitted
successors hereunder, the "Master Servicer"), and _______________, not in its
individual capacity but as trustee pursuant to that certain indenture (the
"Indenture"), dated as of _________ 1, 19___ (the "Trustee"), between the
Depositor and the Trustee, recites and provides as follows:
RECITALS
WHEREAS, the Master Servicer is engaged in the business of servicing
mortgage loans;
WHEREAS, the Depositor desires to pledge to the Trustee certain
residential mortgage loans, identified on Schedule I hereto (the "Mortgage
Loans") in connection with the issuance of the Issuer's Collateralized Mortgage
Bonds, Series _________ (the "Bonds");
WHEREAS, the Depositor desires to contract with the Master Servicer
for the servicing responsibilities associated with the Mortgage Loans and the
Master Servicer desires to assume the servicing responsibilities associated
with such Mortgage Loans; and
WHEREAS, the Depositor, the Master Servicer and the Trustee desire to
execute this Agreement to define each party's rights, duties and obligations
relating to the servicing of the Mortgage Loans.
NOW, THEREFORE, in consideration of the above premises and of the
mutual agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Depositor, the Master Servicer and the Trustee hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS.
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the meanings specified in
this Section 1.01.
"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 corresponding to the foregoing.
"AGGREGATE COLLATERAL VALUE": As defined in the Indenture.
<PAGE> 6
"AGREEMENT": This Servicing Agreement, dated as of _______ 1, 19___,
among the Depositor, the Master Servicer and the Trustee, and all amendments
hereof and supplements hereto.
"ANCILLARY SERVICING COMPENSATION": Prepayment fees, assumption fees,
fees for insufficient funds, and other items listed on Exhibit C hereto
collected by the Master Servicer from Mortgagors.
"APPRAISAL": A written appraisal of a Mortgaged Property made by an
appraiser holding all state certifications or licenses provided by the state in
which the Mortgaged Property is located, which appraisal must be written, in
form and substance, to FDIC, Fannie Mae and Freddie Mac standards, and must
meet the appraisal standards of the Uniform Standards of Professional Appraisal
Practice.
"APPRAISED VALUE": With respect to any Mortgaged Property, the lesser
of (a) the value thereof as determined by an Appraisal and (b) the purchase
price paid for the related Mortgaged Property by the Mortgagor with the
proceeds of the related Mortgage Loan; provided, however, that in the case of a
Refinanced Mortgage Loan, the Appraised Value of the Mortgaged Property shall
be equal to the value thereof as determined by an Appraisal.
"BASE NET WORTH": For any fiscal quarter at the end of which the
Master Servicer's Net Worth is less than $____________. For any fiscal quarter
after the first fiscal quarter at the end of which the Master Servicer's Net
Worth equals or exceeds $_____________.
"BOND ACCOUNT": The segregated trust account established and
maintained by the Trustee pursuant to Section ____ of the Indenture.
"BOND BALANCE": The aggregate outstanding principal balance of all
Classes of Bonds on any date of determination.
"BONDHOLDER" or "HOLDER": The Person in whose name a Bond is
registered in the Bond Register, except that, solely for the purpose of taking
any action under Article Six or giving any consent pursuant to this Agreement,
any Bond registered in the name of the Depositor or the Master Servicer or any
Person actually known to a Responsible Officer of the Trustee to be an
Affiliate of the Depositor or the Master Servicer shall be deemed not to be
outstanding and the Voting Interest evidenced thereby shall not be taken into
account in determining whether Holders of the requisite Voting Interests
necessary to take any such action or effect any such consent have acted or
consented unless the Depositor, the Master Servicer or any such Person is an
owner of record of all of the Bonds.
["BOND INSURANCE POLICY": The ___________________ Policy (No. ______),
dated _________ ___, 19___, including any endorsements thereto, issued by the
Bond Insurer for the benefit of the Bondholders, pursuant to which the Bond
Insurer guarantees payment of Insured Payments.]
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<PAGE> 7
["BOND INSURER": ________________, a stock insurance company organized
and created under the laws of the State of New York, and any successors
thereto.]
["BOND INSURER DEFAULT": The existence and continuance of any of the
following:
(a) an _____ Payment Default;
(b) entry by a court having jurisdiction in the premises of (1) a
final and nonappealable decree or order for relief in respect of the Bond
Insurer in an involuntary case or proceeding under any applicable United States
federal or state bankruptcy, insolvency, rehabilitation, reorganization or
other similar law or (2) a final and nonappealable decree or order adjudging
the Bond Insurer bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, rehabilitation, arrangement, adjustment or
composition of or in respect of the Bond Insurer under any applicable United
States federal or state law, or appointing a custodian, receiver, liquidator,
rehabilitator, assignee, trustee, sequestrator or other similar official of the
Bond Insurer or of any substantial part of its property, or ordering the
winding-up or liquidation of its affairs, and the continuance of any such
decree or order for relief or any such other decree or order unstayed and in
effect for a period of 60 consecutive days; or
(c) the commencement by the Bond Insurer of a voluntary case or
proceeding under any applicable United States federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated bankrupt or insolvent, or the consent of the Bond
Insurer to the entry of a decree or order for relief in respect of the Bond
Insurer in an involuntary case or proceeding under any applicable United States
federal or state bankruptcy, insolvency case or proceeding against Bond
Insurer, or the filing by the Bond Insurer of a petition or answer or consent
seeking reorganization or relief under any applicable United States federal or
state law, or the consent by the Bond Insurer to the filing of such petition or
to the appointment of or the taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of the Bond
Insurer or of any substantial part of its property, or the failure by the Bond
Insurer to pay debts generally as they become due, or the admission by the Bond
Insurer in writing of its inability to pay its debts generally as they become
due, or the taking of corporate action by the Bond Insurer in furtherance of
any such action.
Notwithstanding anything to the contrary contained herein, upon the
existence and continuance of a Bond Insurer Default, the consent by the Bond
Insurer shall not be required for any action or inaction hereunder and the Bond
Insurer shall not have any rights with respect thereto except that the Bond
Insurer shall be entitled to an Opinion of Counsel to the effect that such
amendment does not materially and adversely impair the Bond Insurer's interests
if an amendment is requested while a Bond Insurer Default is continuing.]
["BOND INSURER PARTIES": The Bond Insurer or its respective agents,
representatives, directors, officers or employees.]
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<PAGE> 8
"BOND REGISTER": As defined in the Indenture.
"BONDS": The Depositor's Collateralized Mortgage Bonds, Series ______,
issued pursuant to the Indenture.
"BUSINESS DAY": Any day other than (a) a Saturday or a Sunday or (b) a
day on which banking institutions in the State of Tennessee, the State of New
York or the State of Delaware [or the state in which the principal office of
the Bond Insurer is located] are required or authorized by law, executive order
or governmental decree to be closed.
"CLOSING DATE": On or about __________ ___, 19___.
"CODE": The Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form and proposed regulations thereunder to the extent that,
by reason of their proposed effective date, such proposed regulations would
apply.
"COLLATERAL PROCEEDS ACCOUNT": As defined in the Indenture.
"COLLECTION PERIOD": As to any Deposit Date, the period beginning on
the first day of the calendar month immediately preceding the month in which
such Deposit Date occurs and ending on the last day of such calendar month.
["COMPENSATING INTEREST": With respect to any Mortgage Loan as to
which a prepayment in whole or in part was received by the Servicer from the
related Mortgagor during a Collection Period, an amount equal to the lesser of
(a) the Monthly Servicing Fee for such Collection Period and (b) the difference
between (1) 30 days' interest at the related Note Rate on the Principal Balance
of such Mortgage Loan (immediately prior to such prepayment) and (2) the amount
of interest actually collected by the Servicer on such Mortgage Loan during the
related Due Period.]
"CUMULATIVE LOSS PERCENTAGE": As of any Payment Date, the percentage
equivalent of the fraction obtained by dividing (1) the principal amount of
cumulative Realized Losses on the Mortgage Loans from the applicable Cut-off
Dates through the end of the related Collection Period by (2) the Initial Pool
Balance.
"CUMULATIVE LOSS RATE TRIGGER": The "Cumulative Loss Rate Trigger"
occurs on a Deposit Date if the Cumulative Loss Percentage exceeds the
percentage specified in the table below for the period in which such Deposit
Date occurs.
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<PAGE> 9
<TABLE>
<CAPTION>
Deposit Dates Cumulative
from and including to and including Loss Percentage
------------------ ---------------- ---------------
<S> <C> <C>
[Date] [Date] %
[Date] [Date] %
[Date] [Date] %
[Date] [Date] %
[Date] thereafter %
</TABLE>
"CUT-OFF DATE": As to any Mortgage Loan, the later of _________ ___,
19___ or the date of origination of such Mortgage Loan.
"DELINQUENCY PERCENTAGE": For any Payment Date, the percentage
equivalent of the fraction obtained by dividing (1) the aggregate of the
Principal Balances of all Mortgage Loans that were 90 days contractually
delinquent, REO Property, in foreclosure, or for which the related Mortgagor
was in a bankruptcy proceeding or paying a reduced Monthly Payment as a result
of a bankruptcy workout, as of the end of the related Collection Period, by (2)
the aggregate of the Principal Balance of all of the Mortgage Loans as of the
related Determination Date.
"DELINQUENCY RATE TRIGGER": The Rolling Delinquency Percentage
equalling or exceeding ____% as of any Payment Date.
"DEPOSIT DATE": As to any Payment Date, the ___th day of the month in
which such Payment Date occurs or, if such ___th day is not a Business Day, the
next succeeding Business Day.
"DEPOSITOR": Union Planters Mortgage Finance Corp., as issuer of the
Bonds pursuant to the Indenture.
"DETERMINATION DATE": As to any Deposit Date, the close of business on
the last day of the calendar month preceding the calendar month in which such
Deposit Date occurs.
"DUE PERIOD": As defined in the Indenture.
"ELIGIBLE ACCOUNT": Either (A) a segregated account or accounts
maintained with an institution the deposits of which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
unsecured and uncollateralized debt obligations of which shall be rated "AA" or
better by Standard & Poor's and "Aa2" or better by Moody's and in the highest
short-term rating category by Standard & Poor's and Moody's, and that is either
(1) a federal savings and loan association duly organized, validly existing and
in good standing under the federal banking laws, (2) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (3) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (4) a principal
5
<PAGE> 10
subsidiary of a bank holding company [or (5) approved in writing by the Bond
Insurer] or (B) a trust account maintained with the trust department of a
federal or state chartered depository institution or trust company, having
capital and surplus of not less than $100,000,000, acting in its fiduciary
capacity, the unsecured and uncollateralized debt obligations of which shall be
rated "Baa3" or better by Moody's. Any Eligible Accounts maintained with the
Trustee shall conform to the preceding clause (B).
"ELIGIBLE INVESTMENTS": As defined in the Indenture.
"EVENT OF DEFAULT": As defined in Section 6.01.
"FDIC": The Federal Deposit Insurance Corporation and its successors
in interest.
"FEMA": The Federal Emergency Management Agency and its successors in
interest.
"FANNIE MAE": Fannie Mae and its successors in interest.
"FREDDIE MAC": Freddie Mae (formerly The Federal Home Loan Mortgage
Corporation) and its successors in interest.
["GROSS MARGIN": With respect to any Mortgage Loan, the fixed
percentage amount set forth in the related Mortgage Note, which amount is added
to the Index in accordance with the terms of the related Mortgage Note to
determine the Note Rate.]
"INDENTURE": The indenture, dated as of ________ 1, 19___, between the
Depositor and the Trustee pursuant to which the Mortgage Loans and certain
other assets included in the Trust Estate are pledged as collateral for the
Bonds, and any supplements or amendments thereto.
["INDEX": With respect to any Mortgage Loan, the applicable index for
computing the Note Rate as specified in the Mortgage Note. The Index for each
Mortgage Loan shall be -------------.]
"INFORMATION": As defined in Section 3.02.
"INITIAL POOL BALANCE": The aggregate of the Principal Balances of the
Mortgage Loans determined as of their respective Cut-off Dates (after
application of all payments of principal received in respect of any such
Mortgage Loan before such Cut-off Dates), which aggregate amount is
$_____________.
["INSURANCE PROCEEDS": With respect to any Deposit Date, proceeds paid
by any insurer (other than the Bond Insurer) and received by the Master
Servicer during the related Collection Period pursuant to any insurance policy
covering a Mortgage Loan or the related Mortgaged Property, including any
deductible payable by the Master Servicer with respect to a blanket insurance
policy pursuant to Section 2.03 and the proceeds from any fidelity bond or
errors and
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<PAGE> 11
omission policy pursuant to Section 2.11, net of any component thereof covering
any expenses incurred by or on behalf of the Master Servicer and specifically
reimbursable under this Agreement.]
["INSURED PAYMENT": As defined in the Indenture.]
["[INSURER] PAYMENT DEFAULT": As defined in the Indenture.]
"LIQUIDATED MORTGAGE LOAN": As to any Deposit Date, any Mortgage Loan
(1) as to which the Master Servicer has determined, in accordance with the
servicing procedures specified herein, that all Liquidation Proceeds that it
expects to recover from or on account of such Mortgage Loan have been
recovered, (2) that has been purchased by the Master Servicer pursuant to
Section 2.05 on or prior to such Deposit Date or (3) that has been repurchased
by the Seller pursuant to the Sales Agreement on or prior to such Deposit Date.
"LIQUIDATION EXPENSES": Expenses that are incurred by the Master
Servicer in connection with the liquidation of any Mortgage Loan and not
recovered under any insurance policy or from any Mortgagor. Such expenses with
respect to any Liquidated Mortgage Loan shall include, without limitation,
legal fees and expenses, real estate brokerage commissions, any unreimbursed
amount expended by the Master Servicer pursuant to Section 2.05 respecting the
related Mortgage Loan, and any other related and previously unreimbursed
Servicing Advances.
"LIQUIDATION PROCEEDS": Cash (other than Insurance Proceeds) received
in connection with the liquidation of any Mortgaged Property, whether through
trustee's sale, foreclosure sale, condemnation, taking by eminent domain or
otherwise received in respect of any Mortgage Loan foreclosed upon as described
in Section 2.05 (including, without limitation, proceeds from the rental of the
related Mortgaged Property).
"LIQUIDATION REPORT": A liquidation report in the form of Exhibit E
attached hereto.
"LOAN-TO-VALUE RATIO": With respect to any Mortgage Loan as of its
date of origination, the ratio as of its date of origination borne by the
outstanding principal amount of the Mortgage Loan to the Appraised Value of the
related Mortgaged Property.
"MASTER SERVICER": ________________ or any successor master servicer
appointed as provided pursuant to this Agreement.
"MAXIMUM RATE": With respect to any Mortgage Loan, any absolute
maximum Note Rate set by provisions in the related Mortgage Note.
["MINIMUM RATE": With respect to any Mortgage Loan, any absolute
minimum Note Rate, set by provisions in the related Mortgage Note, subject to
the initial Note Rate first adjusting to a level in excess of such minimum Note
Rate in accordance with the terms of the Mortgage Note.]
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<PAGE> 12
"MONTHLY ADVANCE": As defined in Section 4.01(a).
"MONTHLY PAYMENT": With respect to any Mortgage Note, the amount of
each monthly payment payable by the Mortgagor under such Mortgage Note in
accordance with its terms, including one month's accrued interest on the
related Principal Balance at the then applicable Note Rate, but net of any
portion of such monthly payment that represents late payment charges,
prepayment or extension fees or collections allocable to payments to be made by
Mortgagors for payment of insurance premiums or similar items.
"MONTHLY SERVICING FEE": With respect to any Payment Date, 1/12 of the
product of the Servicing Fee Rate and the Aggregate Collateral Value of the
Mortgage Loans as of the first day of the related Due Period (or, in the case
of the first Collection Period, the Initial Pool Balance).
["MOODY'S": Moody's Investors Service, Inc. and its successors in
interest.]
"MORTGAGE": The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple in real property securing a Mortgage
Loan.
"MORTGAGE LOAN": Each of the mortgage loans pledged to the Trustee
pursuant to the Indenture that from time to time comprise part of the Trust
Estate, all of which originally so held being identified in the Mortgage Loan
Schedule attached hereto as Schedule I.
"MORTGAGE LOAN DOCUMENTS": As defined in the Sales Agreement and the
Indenture.
"MORTGAGE LOAN FILE": Either the Servicer Mortgage Loan File or the
Trustee Mortgage Loan File, as applicable.
"MORTGAGE LOAN SCHEDULE": As of any date, the schedule of Mortgage
Loans then subject to this Agreement. The initial schedule of Mortgage Loans as
of the Cut-off Dates therefor is attached hereto as Schedule I. The Mortgage
Loan Schedule shall be amended from time to time by the Master Servicer to
reflect the addition of Mortgage Loans to, and the removal of Mortgage Loans
from, the Trust Estate pursuant to the Indenture. The Mortgage Loan Schedule
shall identify each Mortgage Loan by the Master Servicer's loan number and
address (including the state) of the related Mortgaged Property and shall set
forth as to each Mortgage Loan the initial Loan-to-Value Ratio, the Cut-off
Date, [the Index, the Gross Margin,] the current Monthly Payment amount and the
stated maturity date of the related Mortgage Note. The Mortgage Loan Schedule
shall be delivered to the Trustee in both physical and computer- readable form.
"MORTGAGE NOTE": The note or other instrument evidencing the
indebtedness of a Mortgagor under the related Mortgage Loan.
"MORTGAGED PROPERTY": The underlying property securing a Mortgage
Loan.
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<PAGE> 13
"MORTGAGOR": The obligor under a Mortgage Note.
"NET LIQUIDATION PROCEEDS": As to any Mortgage Loan, Liquidation
Proceeds net of Liquidation Expenses. For all purposes of this Agreement, Net
Liquidation Proceeds shall be allocated first to accrued and unpaid interest on
the related Mortgage Loan through the end of the Collection Period in which the
related liquidation occurred, and then to the Principal Balance thereof.
"NET WORTH": For any fiscal quarter, the sum of the Master Servicer's
assets reflected on a balance sheet for such fiscal quarter prepared in
accordance with GAAP consistently applied minus the sum of the Master
Servicer's liabilities required to be shown as such on a balance sheet for such
fiscal quarter prepared in accordance with GAAP consistently applied.
"NONRECOVERABLE ADVANCE": Any Servicing Advance or Monthly Advance
that, in the Master Servicer's reasonable judgment, would not be ultimately
recoverable by the Master Servicer from late collections, Insurance Proceeds or
Liquidation Proceeds on the related Mortgage Loan or otherwise, as evidenced by
an Officer's Certificate delivered to the [Bond Insurer and the] Trustee no
later than the Business Day following the Master Servicer's determination
thereof.
"NOTE RATE": As defined in the Indenture.
"OFFICER'S CERTIFICATE": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, Chief Operating Officer
or a Vice President of the Master Servicer or the Depositor, as the case may
be, and delivered to the Trustee, [Bond Insurer] or each Rating Agency, as the
case may be.
"OPINION OF COUNSEL": A written opinion of counsel in form and
substance reasonably acceptable to the Trustee and[, in the case of opinions
delivered to Bond Insurer,] in form and substance reasonably acceptable to it.
Any expense related to obtaining an Opinion of Counsel for an action requested
by a party shall be borne by the party required to obtain such opinion or
seeking to effect the action that requires the delivery of such Opinion of
Counsel.
"ORIGINAL PRINCIPAL AMOUNT": With respect to any Mortgage Loan, the
original principal amount due under the related Mortgage Note as of its date of
origination.
"PAYMENT AHEAD": Any payment remitted by a Mortgagor with respect to a
Mortgage Note during a Due Period in excess of the Monthly Payment due during
such Due Period with respect to such Mortgage Note, which excess sums the
related Mortgagor has instructed the Master Servicer to apply to Monthly
Payments due in one or more subsequent Due Periods. A Monthly Payment that was
a Payment Ahead shall, for purposes of computing certain amounts under this
Agreement, be deemed to have been received by the Master Servicer on the date
in the related Due Period on which such Monthly Payment would have been due if
such Monthly Payment had not been paid as part of a Payment Ahead.
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<PAGE> 14
"PAYMENT DATE": The date of payment on the Bonds pursuant to the
Indenture, which date is the 25th day of each month or, if such day is not a
Business Day, the Business Day immediately following such 25th day, beginning
________ ___, 19___.
"PERCENTAGE INTEREST": With respect to a Bond, the undivided
percentage interest (carried to eight places rounded down) obtained by dividing
the original principal balance of such by Bond by the original principal
balance of all Bonds in the related Series and multiplying the result by 100.
"PERSON": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political
subdivision thereof.
"PRINCIPAL BALANCE": As to any Mortgage Loan and any Determination
Date, the actual outstanding principal amount thereof as of the close of
business on the Determination Date in the preceding month (or, in the case of
the first Determination Date, as of the applicable Cut-off Date) less (1) all
scheduled payments of principal received or advanced in respect of such
Mortgage Loan and due during the related Due Period, (2) all other amounts
collected, received or otherwise recovered in respect of principal on the
Mortgage Loans (including Principal Prepayments, but not including Payments
Ahead that are not allocable to principal for the related Due Period) during or
in respect of the related Collection Period, (3) Net Liquidation Proceeds and
Trust Insurance Proceeds allocable to principal recovered or collected in
respect of such Mortgage Loan during the related Collection Period, (4) the
portion of the Purchase Price allocable to principal to be remitted to the
Trustee on or prior to the next succeeding Deposit Date in connection with a
release and removal of such Mortgage Loan pursuant to the Indenture, to the
extent such amount is actually remitted on or prior to such Deposit Date, and
(5) the amount to be remitted by the Seller to the Trustee on the next
succeeding Deposit Date in connection with a substitution of a Qualified
Replacement Mortgage Loan for such Mortgage Loan pursuant to the Indenture, to
the extent such amount is actually remitted on or prior to such Deposit Date;
provided, however, that a Mortgage Loan that has become a Liquidated Mortgage
Loan since the preceding Determination Date (or, in the case of the first
Determination Date, since the applicable Cut-off Date) will be deemed to have a
Principal Balance of zero on the current Determination Date.
"PRINCIPAL PREPAYMENT": As to any Mortgage Loan and Collection Period,
any payment by a Mortgagor or other recovery in respect of principal on a
Mortgage Loan (including Net Liquidation Proceeds) that, in the case of a
payment by a Mortgagor, is received in advance of its scheduled due date and is
not a Payment Ahead.
"PURCHASE PRICE": As defined in the Indenture.
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<PAGE> 15
"RATING AGENCIES": [Standard & Poor's and Moody's] (each, a "Rating
Agency"). If either such agency or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical credit rating
agency, or other comparable Person, designated by the Master Servicer, notice
of which designation shall be given to the Trustee.
"REALIZED LOSS": With respect to any Liquidated Mortgage Loan, the
amount, if any, by which the Principal Balance of such Mortgage Loan and
accrued and unpaid interest thereon (determined as of the Determination Date
immediately prior to such Mortgage Loan becoming a Liquidated Mortgage Loan)
exceeds the Net Liquidation Proceeds, if any, in respect of such Mortgage Loan,
which amount shall in no event exceed the Principal Balance of such Mortgage
Loan (determined as of the Determination Date immediately prior to such
Mortgage Loan becoming a Liquidated Mortgage Loan).
"REFINANCED MORTGAGE LOAN": A Mortgage Loan the proceeds of which were
not used to purchase the related Mortgaged Property.
"REMITTABLE FUNDS": With respect to any Deposit Date, the amount equal
to the aggregate of the following amounts:
(a) all payments in respect of or allocable to interest received (or
deemed to have been received in the case of Payments Ahead) with respect to the
Mortgage Loans and due during the related Due Period and all other interest
payments on or in respect of the Mortgage Loans received by or on behalf of the
Master Servicer during the related Collection Period, net of amounts
representing interest accrued on such Mortgage Loans in respect of any period
prior to the applicable Cut-off Dates, plus [any Compensating Interest payments
made by the Master Servicer and] any net income from related REO Properties
collected during the related Collection Period;
(b) all scheduled payments of principal received (or deemed to have
been received, in the case of Payments Ahead) with respect to the Mortgage
Loans and due during the related Due Period, and all other principal payments
(including Principal Prepayments) received or deemed to have been received
during the related Collection Period;
(c) all Trust Insurance Proceeds and Net Liquidation Proceeds
received during the related Collection Period; and
(d) the amount of Monthly Advances made by the Master Servicer in
respect of such Deposit Date pursuant to Section 4.01(a); but net of the
following amounts:
(1) the Monthly Servicing Fee and any other compensation
payable to the Master Servicer pursuant to Section 2.07 for the
related Collection Period [(except to the extent used to pay
Compensating Interest)] to the extent not previously paid to or
retained by the Master Servicer;
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<PAGE> 16
(2) the aggregate amount of Monthly Advances, if not
theretofore recovered from the Mortgagor on whose behalf such Monthly
Advance was made, from subsequent collections on the related Mortgage
Loan (other than those included in the related Liquidation Expenses or
netted out by the Master Servicer from related Insurance Proceeds);
(3) the aggregate amount of Servicing Advances, if not
theretofore recovered from the Mortgagor on whose behalf such
Servicing Advance was made, from subsequent collections on the related
Mortgage Loan (other than those included in the related Liquidation
Expenses or netted out by the Master Servicer from related Insurance
Proceeds);
(4) the aggregate amount of Nonrecoverable Advances not
previously reimbursed to the Master Servicer;
(5) any amount deposited into the Collateral Proceeds
Account that may not be withdrawn therefrom pursuant to a final and
nonappealable order of a United States bankruptcy court of competent
jurisdiction imposing a stay pursuant to Section 362 of the United
States Bankruptcy Code and that would otherwise have been included in
Remittable Funds on such Deposit Date; and
(6) excess Net Liquidation Proceeds as described in the
second paragraph of Section 2.05.
"REO PROPERTY": As defined in Section 4.01(a).
"RESPONSIBLE OFFICER": When used with respect to the Trustee, the
Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman
or Vice Chairman of the Executive or Standing Committee of the Board of
Directors or Trustees, the President, the Chairman of the Committee on Trust
Matters, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any
Trust Officer or Assistant Trust Officer, the Controller and any Assistant
Controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and to whom,
with respect to a particular matter, such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"ROLLING DELINQUENCY PERCENTAGE": As of any Payment Date, the average
of the Delinquency Percentages as of the last day of each of the six (or one,
two, three, four and five in the case of the first five Deposit Dates, as
applicable) most recently ended Collection Periods.
"ROLLING LOSS PERCENTAGE": As of any Payment Date, the percentage
equivalent of a fraction, the numerator of which is the aggregate amount of
Realized Losses incurred during the preceding 12 Collection Periods, and the
denominator of which is the Aggregate Collateral Values of the Mortgage Loans
as of the first day of the 12th preceding Collection Period.
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"ROLLING LOSS RATE TRIGGER": The Rolling Loss Percentage equalling or
exceeding ____% as of any Deposit Date on or after the Deposit Date occurring
in ____________.
"SALES AGREEMENT": That certain agreement, dated as of _________ 1,
19___, between ____________________, as seller, and the Depositor, as
purchaser, pursuant to which the Depositor acquired the Mortgage Loans.
"SELLER": _______________________, as seller of the Mortgage Loans
pursuant to the Sales Agreement.
"SERVICER MORTGAGE LOAN FILE": As to each Mortgage Loan, a file
maintained by the Master Servicer that contains (1) an original hazard
insurance policy (and flood insurance policy, if required pursuant to Section
2.03 hereof) relating to the underlying Mortgaged Property or a certificate of
insurance issued by the insurer or its agent indicating that a hazard insurance
policy (and flood insurance policy, if required pursuant to Section 2.03
hereof) is in effect with respect to such Mortgaged Property, (2) the originals
of all RESPA and Regulation Z disclosure statements executed by the related
Mortgagors, (3) the appraisal report made in connection with the origination of
the Mortgage Loan (4) the settlement statement for the purchase and/or
refinancing of the underlying Mortgaged Property by the related Mortgagor under
the related Mortgage Note and Mortgage, (5) the originals of any tax service
contracts, (6) documentation relating to any approvals by the Master Servicer
of any modifications of the original related Mortgage Loan Documents and any
releases of collateral supporting the related Mortgage Loan, together with
copies of the documentation effecting any such modifications or releases, (7)
collection notices or form notices sent to the related Mortgagor, (8)
foreclosure correspondence and legal notifications, if applicable, (9) water
and irrigation company stock certificates, if applicable, and (10) all other
documents relating to such Mortgage Loan which would customarily be maintained
in a mortgage loan file by the Master Servicer in order to service the mortgage
loan properly, as well as any other documents relating to such Mortgage Loan
(other than Mortgage Loan documents) that come into the Master Servicer's
possession.
"SERVICER REMITTANCE REPORT": The monthly report prepared by the
Master Servicer and delivered to the parties specified in Section 3.01.
"SERVICING ADVANCES": All reasonable and customary "out-of-pocket"
costs and expenses incurred in the performance by the Master Servicer of its
servicing obligations, including, but not limited to, the cost of (1) the
preservation, restoration and protection of the Mortgaged Properties, including
without limitation advances in respect of real estate taxes and assessments and
insurance premiums on fire, hazard and, if applicable, flood insurance
policies, to the extent not paid by the related Mortgagors, (2) any enforcement
or judicial proceedings with respect to the Mortgage Loans or Mortgaged
Properties, including foreclosures, (3) the management and liquidation of any
REO Property and (4) compliance with the Master Servicer's obligations under
Section 2.03 (other than its obligation to deposit in the Collateral Proceeds
Account amounts representing the deductible in respect of any blanket hazard
insurance policy).
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"SERVICING FEE RATE": _____%.
"SERVICING OFFICER": Any officer of the Master Servicer involved in,
or responsible for, the administration and servicing of the Mortgage Loans
whose name and specimen signature appear on a list of servicing officers
annexed to an Officer's Certificate furnished to the Trustee by the Master
Servicer, as such list may from time to time be amended.
["STANDARD & POOR'S" OR "S&P": Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc., and its successors in interest.]
"SUB-SERVICER": Any Person, including an Affiliate of the Master
Servicer, with whom the Master Servicer has entered into a Sub-Servicing
Agreement and who satisfies the requirements set forth in Section 2.14 hereof
in respect of the qualification of a Sub-Servicer.
"SUB-SERVICING ACCOUNT": Any segregated trust account, which shall at
all times be an Eligible Account, established and maintained as though it were
a Collateral Proceeds Account pursuant to Section 2.02(b) and entitled
"[Sub-Servicer], in trust for the benefit of Holders of UPMFC Trust
Collateralized Mortgage Bonds, Series ________[, and _____ as Bond Insurer]
Collateral Proceeds Account". References herein to the Collateral Proceeds
Account shall include any Sub-Servicing Account as the context requires.
"SUB-SERVICING AGREEMENT": A written contract between the Master
Servicer and any Sub-Servicer relating to the servicing and/or administration
of certain Mortgage Loans.
"TARGET NET WORTH": As of the end of any fiscal quarter, the lesser of
(1) $20,000,000 or (ii) the applicable Base Net Worth plus 75% of all
cumulative after tax net income earned by the Master Servicer from the later of
______ ___, 19___ or the date such Base Net Worth was established, through the
end of such quarter.
"TRUST ESTATE": As defined in the Indenture.
"TRUST INSURANCE PROCEEDS": Insurance Proceeds that (1) are applied by
the Master Servicer to reduce the Principal Balance of the related Mortgage
Loan and (2) not applied to the restoration or repair of the related Mortgaged
Property or released to the related Mortgagor in accordance with the Master
Servicer's normal servicing procedures, applicable law or the terms of the
related Mortgage Loan.
"TRUSTEE": ______________________________, [a national banking
association,] and its successors in interest or any successor trustee appointed
as provided pursuant to the Indenture.
"TRUSTEE FEE": The monthly fee of the Trustee, which shall be
determined as set forth in the Indenture.
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"TRUSTEE MORTGAGE LOAN FILE": As to each Mortgage Loan, a file
containing all of the related Mortgage Loan Documents.
"UNDERWRITERS": ______________ and _________________.
"UNDERWRITING AGREEMENT": The underwriting agreement, dated as of
_________ ___, 19___, between the Depositor and the Underwriters.
"VICE PRESIDENT": Any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
"VOTING INTEREST": With respect to any provisions hereof providing for
the action, consent or approval of the Holders of all Bonds evidencing
specified Voting Interests in the Trust Estate, the Bondholders will
collectively be entitled to 100% of the aggregate Voting Interests represented
by all Bonds. Voting Interests allocated to the Bonds shall be allocated in
proportion to the Bond Balance. With respect to any provision hereof providing
for action, consent or approval of the Bonds, each Holder of the Bonds will
have a Voting Interest in the Bonds equal to such Holder's Percentage Interest
in the Bonds.
SECTION 1.2 INTEREST CALCULATIONS.
All calculations of interest at the Mortgage Loan Rate that are made
in respect of the Principal Balance of a Mortgage Loan, shall be made on a
daily basis using a 360-day year of twelve 30-day months.
[SECTION 1.3 DETERMINATION OF MATERIAL ADVERSE EFFECT.
Whenever a determination is to be made under this Agreement as to
whether a given action, course of conduct, event or set of facts or
circumstances could or would have a material adverse effect on the Trust
Estate[, the Bond Insurer] or any Bondholder (or any similar or analogous
determination), such determination shall be made without giving effect to the
insurance provided by the Bond Insurance Policy.]
ARTICLE 2
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
SECTION 2.1 SERVICING GENERALLY.
(a) General Duties; Licensing. Acting directly or through one or
more Sub-Servicers as provided in Section 2.14, the Master Servicer, as
servicer, shall administer the Mortgage Loans with reasonable care, using that
degree of skill and attention that the Master Servicer exercises with respect
to all comparable mortgage loans that it services for itself or others. The
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Master Servicer shall follow its customary standards, policies and procedures
in performing its duties as Master Servicer, to the extent not in conflict with
the provisions of this Agreement. Notwithstanding the appointment of any
Sub-Servicer, the Master Servicer shall remain liable for the performance of
all of the servicing obligations and responsibilities under this Agreement. The
Master Servicer shall maintain all licenses and qualifications necessary under
the laws of any jurisdiction where Mortgaged Properties are located for it to
perform the servicing obligations hereunder legally. The Master Servicer shall
cause any Sub-Servicer to maintain for it all licenses and qualifications
necessary to perform its servicing obligations in the states where the
Mortgaged Properties to which the applicable Sub-Servicing Agreement relates
are located. The Master Servicer shall cooperate with the Depositor and the
Trustee and furnish to the Depositor and the Trustee such information in its
possession as may be necessary or otherwise reasonably requested to enable the
Depositor and the Trustee to perform their respective tax reporting duties
under the Indenture. The Depositor and the Trustee shall furnish the Master
Servicer with any powers of attorney and other documents necessary or
appropriate to enable the Master Servicer to carry out its servicing and
administrative duties hereunder.
(b) Interest Rate and Monthly Payment Adjustments. The Master
Servicer shall enforce each Mortgage Loan and shall timely calculate, record,
report and apply all Note Rate adjustments in accordance with the related
Mortgage Note. The Master Servicer's records shall, at all times, reflect the
then-current Note Rate and Monthly Payment and the Master Servicer shall timely
notify the Mortgagor of any changes to the Note Rate and the Monthly Payment.
(c) Servicer Authority. Without limiting the generality of the
foregoing, the Master Servicer (1) shall continue, and is hereby authorized and
empowered by the Depositor and the Trustee, to execute and deliver, on behalf
of itself, the Depositor, the Bondholders, [the Bond Insurer] and the Trustee
or any of them, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge and all other comparable instruments, with
respect to the Mortgage Loans and with respect to the related Mortgaged
Properties and (2) subject to Section 2.05, to institute foreclosure
proceedings or obtain deeds in lieu of foreclosure so as to convert ownership
of Mortgaged Properties into the name of the Trustee pursuant to Section 2.05
of this Agreement. The Master Servicer may sue to enforce or collect on any of
the Mortgage Loans or any insurance policy covering a Mortgage Loan, in its own
name if possible, or on behalf of the Depositor or the Trustee. If the Master
Servicer commences a legal proceeding to enforce a Mortgage Loan or any such
insurance policy, the Depositor and the Trustee shall thereupon be deemed to
have automatically assigned the Mortgage Loan or the rights under such
insurance policy to the Master Servicer for purposes of collection only. If,
however, in any suit or legal proceeding for enforcement, it is held that the
Master Servicer may not enforce or collect on a Mortgage Loan or any insurance
policy covering a Mortgage Loan on the ground that it is not a real party in
interest or a holder entitled to enforce such Mortgage Loan or such insurance
policy, as the case may be, then the Depositor and the Trustee shall, upon the
written request of a Servicing Officer, execute and return to the Master
Servicer such powers of attorney and other documents as are necessary or
appropriate to enable the Master Servicer to enforce such Mortgage Loan or
insurance policy, as the case may be, and which are prepared by the Master
Servicer and submitted to the Depositor or the Trustee for execution.
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The Master Servicer, on behalf of the Depositor, the Bondholders [and
the Bond Insurer,] shall prepare, execute, deliver and take all actions
reasonably necessary to protect the Trust Estate pursuant to Section 3.05 of
the Indenture and shall, on behalf of the Depositor, execute and deliver and
take any additional actions as shall be deemed necessary to effect the
administrative obligations of the Depositor under the Indenture.
The Master Servicer may agree to modify, waive or amend any term of
any Mortgage Loan in a manner consistent with the servicing standard described
in Section 2.1(a) herein so long as the modification, waiver or amendment will
not (i) affect the amount or timing of any scheduled payments of principal or
interest on the Mortgage Loan or (ii) in its judgment, materially impair the
security for the Mortgage Loan or reduce the likelihood of timely payment of
amounts due thereon. The Master Servicer also may agree to any modification,
waiver or amendment that would so affect or impair the payments on, or the
security for, a Mortgage Loan if, (i) in its judgment, a material default on
the Mortgage Loan has occurred or a payment default is imminent and (ii) in its
judgment, such modification, waiver or amendment is reasonably likely to
produce a greater recovery on a present value basis than would liquidation. The
Master Servicer promptly shall notify the Trustee in the event of any
modification, waiver or amendment of any Mortgage Loan.
(d) Independent Contractor Relationship. The relationship of the
Master Servicer to the Depositor and the Trustee under this Agreement is
intended by the parties to be that of an independent contractor and not that of
a joint venturer, partner or agent.
SECTION 2.2 COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS;
COLLATERAL PROCEEDS ACCOUNT.
(a) Collection Procedures. The Master Servicer shall, to the extent
such procedures shall be consistent with this Agreement, follow such collection
procedures as it follows from time to time with respect to mortgage loans in
its servicing portfolio that are comparable to the Mortgage Loans. A summary of
the Master Servicer's collection procedures is attached hereto as Exhibit D. A
written copy of any such amendment or modification shall be furnished to the
Trustee. Consistent with the foregoing, the Master Servicer may in its
discretion (1) waive any assumption fees, late payment charges, charges for
checks returned for insufficient funds, prepayment fees, if any, or other fees
that may be collected in the ordinary course of servicing the Mortgage Loans,
(2) if a Mortgagor is in default or appears about to be in default because of a
Mortgagor's financial condition, arrange with the Mortgagor a schedule for the
payment of delinquent payments due on the related Mortgage Loan or (3) modify
payments of monthly principal and interest on any Mortgage Loan becoming
subject to the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), in accordance with the Master Servicer's general
policies for comparable mortgage loans subject to the Relief Act; provided,
however, that the Master Servicer shall not, [without the prior written consent
of the Bond Insurer,] permit any waiver, modification or variance of a Mortgage
Loan that would (1) change the Note Rate, (2) forgive the payment of any
principal or interest, (3) impair the priority of the lien represented by the
related Mortgage or (4) extend the final maturity date of the Mortgage
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Loan beyond _______ 20___, in any case except to the extent required under the
Relief Act. The Master Servicer will not consent to the placement of a deed of
trust or mortgage, as applicable, on any Mortgaged Property that has a priority
equal to or higher than the lien securing the related Mortgage Loan unless such
Mortgage Loan is prepaid in full. No partial release of a Mortgage Loan shall
be made if it would cause the Loan-to-Value Ratio of the Mortgage Loan (taking
into account the partial release) to be higher than the Loan-to-Value Ratio of
the Mortgage Loan at origination.
(b) Collateral Proceeds Account. The Master Servicer shall establish
and maintain, or cause to be established and maintained, one or more Eligible
Accounts that in the aggregate are the Collateral Proceeds Account. At the
Master Servicer's option, amounts held in the Collateral Proceeds Account shall
be invested by the depository institution or trust company then maintaining the
account at the written direction of the Master Servicer in Eligible Investments
that mature not later than the Deposit Date next succeeding the date of
investment. The Master Servicer shall not retain any cash or investment in the
Collateral Proceeds Account for a period in excess of 12 months and cash
therein shall be considered transferred on a first-in, first-out basis to the
Trustee for inclusion in the Bond Account, as described in Section 2.02(d). All
net income and gain realized from any such investment shall be for the benefit
of the Master Servicer as additional servicing compensation and shall be
subject to its withdrawal or order from time to time. Any losses realized in
connection with any such investment shall be for the account of the Master
Servicer and the Master Servicer shall deposit or cause to be deposited the
amount of such loss (to the extent not offset by income from other investments)
in the Collateral Proceeds Account immediately upon the realization of such
loss and shall have no right to reimbursement therefor. Any benefit resulting
from deposits, maintenance or investment of funds in the Collateral Proceeds
Account shall be for the Master Servicer's benefit.
(c) Deposits to Collateral Proceeds Account. Subject to the last
paragraph of this Section 2.02(c), the Master Servicer shall deposit in the
Collateral Proceeds Account each of the following payments on and collections
in respect of the Mortgage Loans as soon as practicable, but in no event later
than the close of business on the second Business Day after its receipt
thereof:
(i) all payments in respect of or allocable to interest
on the Mortgage Loans (including any net income from REO Properties),
net of the Monthly Servicing Fees attributable to such payments;
(ii) all collections of principal on or with respect to the
Mortgage Loans;
(iii) all Payments Ahead;
(iv) all Net Liquidation Proceeds; and
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(v) all Trust Insurance Proceeds (including, for this
purpose, any amounts required to be credited by the Servicer pursuant
to the last sentence of Section 2.03).
in any case net of its Monthly Servicing Fees, Ancillary Servicing
Compensation, and reimbursable outstanding Servicing Advances and Monthly
Advances, to the extent the Master Servicer's automated system deducts such
amounts from collected funds prior to deposit of such collected funds into the
Collateral Proceeds Account.
The Master Servicer shall replace all amounts previously withdrawn
from the Collateral Proceeds Account and applied by the Master Servicer towards
the payment of a Monthly Advance pursuant to Section 4.01(a) or towards the
payment of a Servicing Advance pursuant to Section 4.01(b) by depositing into
the Collateral Proceeds Account on or prior to the Deposit Date immediately
following such withdrawal an amount equal to the total of all such amounts so
applied since the immediately preceding Deposit Date.
The foregoing requirements respecting deposits to the Collateral
Proceeds Account are exclusive, it being understood that, without limiting the
generality of the foregoing, the Master Servicer need not deposit in the
Collateral Proceeds Account amounts representing fees, late payment charges,
charges for checks returned for insufficient funds, prepayment fees, if any, or
extension or other administrative charges paid by Mortgagors or amounts
received by the Master Servicer for the account of Mortgagors for application
towards the payment of taxes, insurance premiums, assessments and similar
items. The amounts deposited in the Collateral Proceeds Account are subject to
withdrawal by the Master Servicer, from time to time, (1) to make transfers to
the Trustee for deposit into the Bond Account pursuant to Section 2.02(d), (2)
to pay itself the Monthly Servicing Fee, to the extent not already paid to or
retained by the Master Servicer, pursuant to Section 2.07, Ancillary Servicing
Compensation, and investment income on Permitted Investments, (3) to make
Servicing Advances or to reimburse itself for Servicing Advances, as
applicable, in either case in accordance with Section 4.01(b), (4) to make
Monthly Advances in accordance with Section 4.01(a) or to reimburse itself for
payments of Monthly Advances as described in Section 4.01(a), and (5) to clear
and terminate the Collateral Proceeds Account. In addition, if the Master
Servicer deposits in the Collateral Proceeds Account any amount not required to
be so deposited or any amount in respect of payments by Mortgagors made by
checks subsequently returned for insufficient funds or other reason for
non-payment, it may at any time withdraw such amount from the Collateral
Proceeds Account, any provision herein to the contrary notwithstanding.
Upon such terms as [the Bond Insurer and] the Rating Agencies may
approve, the Master Servicer may make the deposits to the Collateral Proceeds
Account referred to in Section 2.02(c) on a later day than the second Business
Day after receipt of the amounts required to be so deposited, which terms and
later day shall be specified [by the Bond Insurer and] the Rating Agencies and
confirmed to the Trustee and the Master Servicer in writing; provided, however,
that in any event such amounts shall be deposited into the Collateral Proceeds
Account no later than the next succeeding Deposit Date.
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(d) Remittances to Trustee. At or before 12:00 noon _______ time on
each Deposit Date, the Master Servicer shall withdraw from the Collateral
Proceeds Account all amounts on deposit therein that constitute any portion of
Remittable Funds for the related Deposit Date (including any amounts therein
that are being held for remittance on a subsequent Deposit Date and are applied
toward the Monthly Advance for the related Deposit Date pursuant to Section
4.01(a)) and remit such amounts to the Trustee for deposit into the Bond
Account. In addition, any amounts required pursuant to the Indenture to be
deposited into the Bond Account in connection with a purchase of any Mortgage
Loans by the Master Servicer pursuant to the Indenture and any other amounts
(including Monthly Advances [and Compensating Interest] for such Deposit Date)
required by this Agreement to be deposited by the Master Servicer with the
Trustee shall be remitted to the Trustee for deposit into the Bond Account on
the applicable Deposit Date.
In the event that the Master Servicer does not remit all Remittable
Funds for the related Payment Date on the Deposit Date, the Master Servicer
also shall pay to the Trustee on demand, for its own account and not for the
account of the Bondholders, an amount equal to the income that the Trustee
would have received on the investment of such funds in Eligible Investments, as
reasonably calculated by the Trustee, from the Deposit Date until the date that
such Remittable Funds have been remitted to the Trustee.
SECTION 2.3 HAZARD INSURANCE POLICIES.
The Master Servicer shall cause to be maintained for each Mortgage
Loan (including any Mortgage Loan as to which the related Mortgaged Property
has been acquired on behalf of the Trustee upon foreclosure, by deed in lieu of
foreclosure or comparable conversion), hazard insurance (including flood
insurance coverage, if obtainable, to the extent such property is located in a
federally designated flood area in such amount as is required under applicable
FEMA guidelines) with extended coverage in an amount that is not less than the
lesser of (1) the maximum insurable value from time to time of the improvements
that are a part of such property or a replacement cost basis, or (2) the
principal balance of such Mortgage Loan, determined in the case of a Mortgage
Loan that has been foreclosed at the time of such foreclosure; provided,
further, that such hazard insurance shall be in an amount not less than such
amount as is necessary to avoid the application of any coinsurance clause
contained in the related hazard insurance policy. Each such hazard insurance
policy shall contain a standard mortgagee loss payable clause naming the
originator, its successors and assigns, as mortgagee. The Master Servicer shall
be under no obligation to require that any Mortgagor maintain earthquake or
other additional insurance and shall be under no obligation itself to maintain
any such additional insurance on property acquired in respect of a Mortgage
Loan, other than pursuant to such applicable laws and regulations as shall at
any time be in force and as shall require such additional insurance. Amounts
collected by the Master Servicer under any such policies shall be deposited
into the Collateral Proceeds Account in accordance with Section 2.02 to the
extent that they constitute Net Liquidation Proceeds or Trust Insurance
Proceeds. If the Master Servicer shall obtain and maintain a blanket policy,
issued by an insurer acceptable to each Rating Agency [and the Bond Insurer],
insuring against such hazard losses, it shall
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conclusively be deemed to have satisfied its obligations as set forth in the
first sentence of this Section, it being understood and agreed that such policy
may contain a deductible clause that is in form and substance consistent with
standard industry practice, in which case the Master Servicer shall, in the
event that there shall not have been maintained on the related Mortgaged
Property a policy complying with the first sentence of this Section 2.03, and
there shall have been a loss that would have been covered by such policy,
deposit in the Collateral Proceeds Account in accordance with Section 2.02 the
amount not otherwise payable under the blanket policy because of such
deductible clause from its own funds, and such amount shall not be reimbursable
to the Master Servicer.
SECTION 2.4 ENFORCEMENT OF DUE-ON-SALE CLAUSES; ASSUMPTION AND
MODIFICATION AGREEMENTS.
In any case in which property subject to a Mortgage is voluntarily
conveyed by the Mortgagor, the Master Servicer may enter into an assumption
agreement with the Person to whom such Mortgaged Property has been or is about
to be conveyed, pursuant to which such Person becomes liable under the related
Mortgage Note and, to the extent permitted by applicable law or the related
mortgage documents, the Mortgagor remains liable thereon. [The Master Servicer
shall not enter into any assumption agreement which modifies the Note Rate or
payment terms of the Mortgage Note without the consent of the Bond Insurer.] If
the Person to whom such Mortgaged Property has been or is about to be conveyed
satisfies the Master Servicer's then-current underwriting standards as to
borrower creditworthiness for mortgage loans similar to the Mortgage Loans and
is in the same Seller credit rating category as that which was assigned to the
borrower under the Mortgage Loan being replaced, the Master Servicer may enter
into a substitution of liability agreement with such person, under which the
previous Mortgagor is released from liability thereon and the transferee is
substituted as a Mortgagor and becomes liable under the Mortgage Note. The
Master Servicer shall not permit an assumption agreement or a substitution of
liability agreement with respect to a Mortgage Loan unless permitted by
applicable law and unless the Master Servicer determines that such action would
not materially increase the risk of default or delinquency on such Mortgage
Loan or materially impair the security for such Mortgage Loan. The Master
Servicer will not enter into any assumption agreement or substitution of
liability agreement unless such agreement complies with the Master Servicer's
standard servicing procedures and the Master Servicer would enter into such
agreement with respect to a mortgage loan in its own portfolio. The Master
Servicer shall notify the Trustee that any assumption agreement or substitution
of liability agreement has been completed and the Master Servicer shall forward
to the Trustee the original of such assumption agreement or substitution of
liability agreement. Such assumption agreement or substitution of liability
agreement shall, for all purposes, be considered a part of the related Mortgage
Loan File to the same extent as all other documents and instruments
constituting a part thereof. In connection with any such agreement, the Note
Rate shall not be reduced (but may be increased), the Principal Balance of such
Mortgage Loan shall not be changed and the term of such Mortgage Loan will not
be extended beyond the existing term of such Mortgage Loan. Any fee collected
by the Master Servicer for entering into any such agreement shall be retained
by the Master Servicer as Ancillary Servicing Compensation.
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In the event the Master Servicer does not approve an assumption of a
Mortgage Loan as described above, the Master Servicer will enforce any related
due-on-sale clause to the extent permitted by the related Mortgage Note and
Mortgage and by all applicable laws and regulations, but only to the extent the
Master Servicer does not believe that such enforcement will (1) adversely
affect or jeopardize coverage under any related insurance policy, (2) result in
legal action by the Mortgagor, or (3) materially increase the risk of default
or delinquency on, or materially impair the security for, such Mortgage Loan.
Notwithstanding the foregoing paragraph of this Section 2.04 or any
other provision of this Agreement, the Master Servicer shall not be deemed to
be in default, breach or any other violation of its obligations hereunder by
reasons of any assumption of a Mortgage Loan, or transfer of any Mortgaged
Property without the assumption thereof, by operation of law or any assumption
or transfer that the Master Servicer reasonably believes it may be restricted
by law from preventing, for any reason whatsoever.
SECTION 2.5 REALIZATION UPON DEFAULTED MORTGAGE LOANS, OPTIONS
TO PURCHASE MORTGAGE LOANS.
The Master Servicer, on behalf of and as the agent of the Indenture
Trustee, shall foreclose upon or otherwise comparably convert the ownership of
Mortgaged Properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments pursuant to Section 2.02(a) into the name
of the Trustee; provided, however, that if the Master Servicer has actual
knowledge or reasonably believes that any Mortgaged Property is affected by
hazardous or toxic wastes or substances, then the Master Servicer will cause to
be undertaken an environmental inspection of the Mortgaged Property that
complies with Fannie Mae's selling and servicing guide applicable to single
family homes and its servicing procedures. If the environmental inspection
reveals any potentially hazardous substances, the Master Servicer will notify
the Trustee [and the Bond Insurer], and the Master Servicer will not foreclose
or accept a deed in lieu of foreclosure on the Mortgaged Property without the
consent of the Trustee [and the Bond Insurer]. In connection with such
foreclosure or other conversion, the Master Servicer shall follow such
practices and procedures as it shall deem necessary or advisable and as shall
be normal and usual in its general first lien one- to four-family mortgage loan
servicing activities. The foregoing is subject to the proviso that the Master
Servicer shall not be required to expend its own funds in connection with any
foreclosure or restoration of any Mortgaged Property unless, in the reasonable
judgment of the Master Servicer, such foreclosure, correction or restoration
will increase Net Liquidation Proceeds (taking into account the reimbursement
of such expenses to the Master Servicer and any unreimbursed Servicing Advances
and Monthly Advances made or expected to be made with respect to such Mortgage
Loan).
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To the extent the Net Liquidation Proceeds derived from any such
foreclosure or conversion exceed the Principal Balance of the related Mortgage
Loan and accrued interest thereon at the applicable Note Rate through the
Determination Date during the Collection Period in which such foreclosure or
conversion occurs (net of any Monthly Advances or Servicing Advances made by
the Master Servicer with respect to such Mortgage Loan and that were
unreimbursed prior to the receipt of such Net Liquidation Proceeds), such
excess shall be paid directly to the Master Servicer as additional Servicing
Compensation and shall be free from the lien of the Indenture.
The Master Servicer must determine, as to each defaulted Mortgage
Loan, when such Mortgage Loan has become a Liquidated Mortgage Loan.
The Master Servicer, at its sole option, may purchase from the Trust
Estate on any Deposit Date any Mortgage Loan as to which the related Mortgagor
has failed to make full Monthly Payments as required under the related Mortgage
Note for three consecutive months at any time following the applicable Cut-off
Date and prior to such Deposit Date at a price equal to the Purchase Price by
transferring such amount to the Trustee for deposit into the Bond Account on
such Deposit Date pursuant to Section 2.02; provided, however, that the
Aggregate Collateral Values of the Mortgage Loans purchased by the Master
Servicer pursuant to the exercise of the option granted in this sentence shall
not exceed 10% of the Initial Pool Balance, unless otherwise approved by the
[Bond Insurer]. On any Deposit Date following the Determination Date as of
which the aggregate of the Principal Balances of the Mortgage Loans is equal to
or less than 10% of the Initial Pool Balance, if the Depositor shall not have
elected to redeem the Bonds pursuant to the Indenture, the Master Servicer, in
its sole discretion, may purchase from the Trust Estate all, but not less than
all, of the Mortgage Loans then included in the Trust Estate at a price equal
to the Purchase Price for each such Mortgage Loan by transferring such amount
to the Trustee for deposit in the Bond Account on such Deposit Date pursuant to
Section 2.02. Upon the receipt by the Trustee of the Purchase Price for any
Mortgage Loan as to which the Master Servicer has exercised its option to
purchase pursuant to this paragraph, the Trustee shall release to the Master
Servicer the Mortgage Loan File pertaining to each such Mortgage Loan and the
Trustee and the Depositor shall execute and deliver such instruments of
transfer and all other documents furnished by the Master Servicer as are
necessary to transfer their respective interests in such Mortgage Loans to the
Master Servicer. For purposes of this Agreement, any purchase effected in
accordance with this paragraph shall be deemed to be a prepayment of each
Mortgage Loan so purchased.
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In the event that title to any Mortgaged Property is acquired as REO
Property by the Trustee 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 the Bondholders [and the Bond Insurer], and the Master Servicer
shall manage, conserve, protect and operate each such REO Property for the
Bondholders solely for the purpose of its prompt disposition and sale. The
Master Servicer shall use its best efforts to dispose of each such REO Property
as expeditiously as possible consistent with the goal of maximizing Net
Liquidation Proceeds (taking into account any unreimbursed Servicing Advances
and Monthly Advances made or expected to be made with respect to such REO
Property). None of the Depositor, the Trustee or the Master Servicer, acting on
behalf of the Trust Estate, shall provide financing from the Trust Estate to
any purchaser of any such REO Property.
SECTION 2.6 TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE LOAN
FILES.
(a) Upon the payment in full of the principal balance of any
Mortgage Loan, the Master Servicer shall notify the Trustee by a certification
in the form of Exhibit B hereto (a "Request for Release") (which certification
shall include a statement to the effect that all amounts received in connection
with such payment which are required to be deposited to the Collateral Proceeds
Account pursuant to Section 2.02 have been so deposited) of a Servicing
Officer. Such notification shall be made each month at the time that the Master
Servicer delivers its Servicer Remittance Report to the Depositor and the
Trustee pursuant to Section 3.01. Upon any such payment in full, the Master
Servicer is authorized to procure a deed of full reconveyance covering the
related Mortgaged Property encumbered by such Mortgage, which deed, except as
otherwise provided in applicable law, shall be recorded in the office of the
County Recorder in which the Mortgage is recorded, or, as the case may be, to
procure an instrument of satisfaction or, if the related Mortgagor so requests,
an assignment without recourse, in each case prepared by the Master Servicer at
its expense and executed by the Trustee, which deed of reconveyance, instrument
of satisfaction or assignment shall be delivered by the Master Servicer to the
Person entitled thereto, it being understood and agreed that no expenses
incurred in connection with such deed of reconveyance, assignment or instrument
of satisfaction shall be reimbursed from amounts at the time on deposit in the
Collateral Proceeds Account.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan or to effect a partial release of any
Mortgaged Property from the lien of the related Mortgage, the Master Servicer
shall deliver to the Trustee a Request for Release requesting the related
Trustee Mortgagee Loan File or specified documents included therein. The
Trustee shall, within five Business Days after its receipt of such Request for
Release, release the related Mortgage Loan File or the specified documents to
the Master Servicer. Any such Request for Release shall obligate the Master
Servicer to return each and every document previously requested from the
Mortgage Loan File to the Trustee by the twenty-first day following the release
thereof, unless (1) the Mortgage Loan has been liquidated and the Net
Liquidation Proceeds relating to the Mortgage Loan have been deposited in the
Collateral Proceeds Account or the Bond Account or (2) the Mortgage Loan File
or such document has
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been delivered to an attorney, or to a public trustee or other public official
as required by law, for the purposes of initiating or pursuing legal action or
other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Master Servicer has delivered to the
Trustee a certificate of the Master Servicer certifying as to the name and
address of the Person to which such Mortgage Loan File or such document was
delivered and the purpose or purposes of such delivery. Upon receipt of an
officer's certificate of the Master Servicer 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 Collateral
Proceeds Account or the Bond Account have been so deposited, or that such
Mortgage Loan has become an REO Property (each, a "Servicing Officer's
Certificate"), the Request for Release shall be released by the Trustee to the
Master Servicer.
(c) Upon receipt of a Servicing Officer's Certificate, the Trustee
shall execute any documents prepared by the Master Servicer and delivered to it
as necessary or appropriate to enable the Master Servicer to perform its
obligations hereunder, including, without limitation, documents to enable the
Master Servicer to convey title to a Mortgaged Property to the Mortgagor or its
designee upon payment of the Mortgage Loan in full or to convey title to an REO
Property to the purchaser thereof, or to convey title to a Mortgaged Property
into the name of the Trustee pursuant to Section 2.05.
SECTION 2.7 SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES
BY THE MASTER SERVICER[; COMPENSATION INTEREST].
On each Deposit Date, the Master Servicer shall be entitled to
receive, by withdrawal by the Master Servicer from the Collateral Proceeds
Account, out of collections of interest on the Mortgage Loans for the related
Collection Period, as servicing compensation for such Collection Period, the
Monthly Servicing Fee, to the extent not retained by the Master Servicer from
amounts remitted to the Collateral Proceeds Account pursuant to Section
2.02(c)(i). The Master Servicer shall also be entitled to retain any Ancillary
Servicing Compensation when received.
[The Servicer shall pay Compensating Interest to the Trustee on behalf
of the Bondholders out of the related Monthly Servicing Fee on each Deposit
Date, to the extent of the amount of the Monthly Servicing Fee, and shall not
be entitled to reimbursement therefor. The Master Servicer shall be required to
pay all expenses incurred by it in connection with its activities hereunder
(including payment of the fees and expenses relating to the Annual Independent
Public Accountant's Servicing Report described in Section 2.09, and all other
fees and expenses not otherwise expressly stated hereunder for the account of
the Bondholders) and shall not be entitled to reimbursement therefor except as
specifically provided herein.]
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SECTION 2.8 ANNUAL STATEMENT AS TO COMPLIANCE.
(a) The Master Servicer will deliver to the Depositor, the Trustee,
[the Bond Insurer] and each Rating Agency, with a copy to each of the
Underwriters, on or before March 31 of each year, beginning with March 31,
_____ an Officer's Certificate of the Master Servicer substantially in the form
set forth in Exhibit A hereto stating that (1) a review of the activities of
the Master Servicer during the preceding calendar year (or since the Closing
Date in the case of the first such statement) and of its performance under this
Agreement has been made under such officer's supervision and (2) to the best of
such officer's knowledge, based on such review, the Master Servicer has
fulfilled all its material obligations under this Agreement throughout such
year (or since the Closing Date in the case of the first such statement), or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof.
(b) The Master Servicer shall deliver to the Depositor and the
Trustee, with a copy to [the Bond Insurer,] each Rating Agency and each of the
Underwriters, promptly after having obtained knowledge thereof, but in no event
later than ten Business Days thereafter, written notice by means of an
Officer's Certificate of any event that with the giving of notice or the lapse
of time, or both, would become an Event of Default.
SECTION 2.9 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING
REPORT.
On or before March 31 of each year, beginning with March 31, _____,
the Master Servicer at its expense shall cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Master Servicer) to furnish a report to the Depositor, the Trustee, [the Bond
Insurer] and each Rating Agency, with a copy to each of the Underwriters, to
the effect that such firm has examined certain documents and records relating
to the servicing activities of the Master Servicer for the period covered by
such report, and that such examination, which has been conducted substantially
in compliance with the Uniform Single Attestation Program for Mortgage Bankers
(to the extent that the procedures in such audit guide are applicable to the
servicing obligations set forth in this Agreement), has disclosed no exceptions
or errors in records relating to the servicing activities of the Master
Servicer that, in the opinion of such firm, are material, except for such
exceptions as shall be set forth in such report.
SECTION 2.10 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING THE MORTGAGE LOANS.
(a) The Master Servicer shall provide to Bondholders that are
federally insured savings associations and the FDIC and its supervisory agents
and examiners access to the documentation regarding the Mortgage Loans required
by applicable regulations of the Office of Thrift Supervision, and to the
Depositor, the Trustee [and the Bond Insurer] and their respective agents all
documentation relating to the Mortgage Loans that is in the possession of the
Master Servicer, such access being afforded without charge but only upon
reasonable request
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and during normal business hours at the offices of the Master Servicer. Nothing
in this Section 2.10(a) shall derogate from the obligation of the Master
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Mortgagors, and the failure of the Master Servicer to provide
access as provided in this Section as a result of such obligation shall not
constitute a breach of this Section.
(b) The Master Servicer shall supply information to the Trustee,
upon reasonable advance notice, in such form as the Trustee shall reasonably
request, as is required in the Trustee's reasonable judgment to enable the
Trustee to make required payments and to furnish the certificates, statements
and reports to Bondholders [and the Bond Insurer] as required of the Trustee
pursuant to the Indenture, it being understood that the Master Servicer is
responsible for supplying information concerning the Mortgage Loans and not for
any other information, including, without limitation, calculation of payments
due on the Bonds. [The Master Servicer shall also supply information upon
reasonable advance notice, in such form as the Bond Insurer shall reasonably
request, as is reasonably requested by the Bond Insurer to enable the Bond
Insurer to monitor the performance of the Mortgage Loans.]
SECTION 2.11 MAINTENANCE OF FIDELITY BOND AND ERRORS AND
OMISSIONS POLICY.
The Master Servicer shall during the term of its service as Master
Servicer maintain in force a (1) policy or policies of insurance covering
errors and omissions in the performance of its obligations as Master Servicer
hereunder and (2) fidelity bond in respect of its officers, employees and
agents, in each case having coverage amounts deemed by the Master Servicer to
be adequate to its operations.
SECTION 2.12 NOTICES TO THE DEPOSITOR, THE RATING AGENCIES, THE
TRUSTEE [AND THE BOND INSURER].
In addition to the other notices required to be given to the
Depositor, the Rating Agencies, the Trustee, [the Bond Insurer] and the
Underwriters by the provisions of this Agreement, the Master Servicer shall
give prompt notice to the Depositor, each Rating Agency, the Trustee [and the
Bond Insurer] of (1) any amendment to this Agreement, (2) the occurrence of an
Event of Default and (3) the purchase of any Mortgage Loan pursuant to Section
2.01 or 2.05 by the Master Servicer, as the case may be.
SECTION 2.13 REPORTS OF FORECLOSURES AND ABANDONMENT OF MORTGAGED
PROPERTIES.
On or before February 28 of each year beginning in 19___, the Master
Servicer shall file the reports of foreclosures and abandonments of any
Mortgaged Property required by Code Section 6050J with the Internal Revenue
Service and provide a copy of such filing to the Trustee. The reports from the
Master Servicer shall be in form and substance sufficient to meet the reporting
requirements imposed by such Section 6050J.
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SECTION 2.14 SUB-SERVICERS AND SUB-SERVICING AGREEMENTS.
(a) The Master Servicer may enter into Sub-Servicing Agreements for
any servicing and administration of Mortgage Loans with any institution that is
acceptable to [the Bond Insurer and] the Indenture Trustee and that is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Sub-Servicing Agreement. [The Master Servicer shall give
notice to the Bond Insurer of the appointment of any Sub-Servicer.] The Master
Servicer shall not enter into any Sub-Servicing Agreement that does not provide
for the servicing of the Mortgage Loans specified therein on a basis consistent
with the terms of this Agreement or that otherwise violates the provisions of
this Agreement. The Master Servicer may enter into, and make amendments to, any
Sub-Servicing Agreement or enter into different forms of Sub- Servicing
Agreements; provided, however, that any such amendments or forms shall be
consistent with and not violate the provisions of this Agreement.
(b) For purposes of this Agreement the Master Servicer shall be
deemed to have received payments on Mortgage Loans when any Sub-Servicer has
received such payments. With respect to the Master Servicer's obligations under
Section 2.01 to make deposits into the Collateral Proceeds Account, the Master
Servicer shall be deemed to have made such deposits when any Sub-Servicer has
made such deposits into a Sub-Servicing Account if permitted by the related
Sub-Servicing Agreement.
(c) 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 Sub-Servicer and the Master Servicer alone [and the
Bond Insurer] and the Trustee shall not be deemed parties thereto and shall
have no claims, rights, obligations, duties or liabilities with respect to any
Sub- Servicer, except that the Trustee shall have such claims or rights that
arise as a result of any funds held by a Sub-Servicer in trust for or on behalf
of the Trust Estate, the Bondholders [and the Bond Insurer]. Notwithstanding
the execution of any Sub-Servicing Agreement, the Master Servicer shall not be
relieved of any liability hereunder and shall remain obligated and liable for
the servicing and administration of the Mortgage Loans.
[SECTION 2.15 SERVICING FOR BENEFIT OF THE BOND INSURER.
Provided there does not exist a Bond Insurer Default, the Master
Servicer hereby acknowledges and agrees that it shall service and administer
the Mortgage Loans and any REO Properties, and shall maintain the Collateral
Proceeds Account for the benefit of the Bondholders and for the benefit of the
Bond Insurer, and all references in this Agreement to the benefit of or actions
on behalf of the Bondholders shall be deemed to include the Bond Insurer.
All notices, statements, reports, certificates or opinions required by
this Agreement to be sent to any other party hereto or to the Bondholders shall
also be sent to the Bond Insurer.]
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SECTION 2.16 ANNUAL LIEN OPINIONS; BOND REDEMPTIONS.
(a) The Master Servicer shall procure, at its own expense, the
Opinions of Counsel required to be delivered annually to the Trustee pursuant
to Section 9.06 of the Indenture, to the extent that the Depositor fails to do
so.
(b) In the event the Depositor exercises its right to redeem the
Bonds pursuant to Article Eleven of the Indenture, the Master Servicer shall,
at its own expense, prepare all documents necessary for the Depositor to sign
in connection with such redemption, and deposit amounts required to be
deposited by the Depositor in connection with such redemption, and shall advise
the Depositor as to the actions it must take in accordance with the Indenture
in order to effect such redemption. The Depositor shall follow all such
directions of the Master Servicer.
ARTICLE 3
SERVICER REMITTANCE REPORT
SECTION 3.1 SERVICER REMITTANCE REPORT.
Not later than the third Business Day prior to each Deposit Date, the
Master Servicer shall deliver to the Depositor, the Trustee, [the Bond Insurer]
and each of the Underwriters a computer-readable magnetic tape (the "Tape" for
such month) and a series of hard copy reports generally including the same
information included on the Tape (the "Report," and, together with the Tape,
the "Servicer Remittance Report" for such month) detailing the payments and
collections received in respect of the Mortgage Loans during the immediately
preceding Collection Period. The Servicer Remittance Report shall include
loan-by-loan information that specifies account number, borrower name,
outstanding principal balance and activity for the preceding Collection Period
and Due Period, as applicable, and any other information sufficient to enable
the Trustee to report the items specified in Section 12.09 in the Indenture, as
well as the information set forth on Exhibit E hereto as to Mortgage Loans that
became Liquidated Mortgage Loans during the related Collection Period, and may
be delivered in a separate report in the form of Exhibit E hereto or as part of
the Servicer Remittance Report. The Servicer shall only be required to report
information concerning the Mortgage Loans, and shall not be required to
calculate any required payments on the Bonds [or to the Bond Insurer].
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ARTICLE 4
MONTHLY ADVANCES AND SERVICING ADVANCES
SECTION 4.1 MONTHLY ADVANCES; SERVICING ADVANCES.
(a) Monthly Advances. On or before each Deposit Date, the Master
Servicer will transfer to the Trustee for deposit in the Bond Account, in same
day funds, an amount (a "Monthly Advance") equal to the sum of (1) with respect
to all Mortgage Loans for which the Monthly Payment due on the first day of the
month in which the Deposit Date occurs has not yet been paid, the amount of
such late Monthly Payment (net of the Monthly Servicing Fee attributable to
such Mortgage Loan), plus (2) with respect to each Mortgaged Property that was
acquired in foreclosure or similar action (each, an "REO Property") during or
prior to the related Collection Period and as to which a final sale did not
occur during the related Collection Period, an amount equal to the excess, if
any, of the Monthly Payment that would have been due on the related Mortgage
Loan (net of the Monthly Servicing Fee attributable to such REO Property) over
the net income from such REO Property transferred to the Bond Account for such
Payment Date; provided, however, that in no case will the Master Servicer be
required to make advances with respect to any period following the final due
date with respect to any Mortgage Loan. All or a portion of any Monthly Advance
required to be made on a Deposit Date may be paid out of amounts on deposit in
the Collateral Proceeds Account that are not required to be transferred on such
Deposit Date to the Trustee for deposit into the Bond Account as any portion of
Remittable Funds for the related Deposit Date; provided, however, that the
Master Servicer shall be required to replace any such amounts by deposit into
the Collateral Proceeds Account on or before the next Deposit Date and the
amount of such deposit shall thereafter be considered a Monthly Advance for
purposes of reimbursement under this Agreement.
The Master Servicer may recover Monthly Advances, if not theretofore
recovered from the Mortgagor on whose behalf such Monthly Advance was made,
from collections on the related Mortgage Loan, including Liquidation Proceeds,
Insurance Proceeds and such other amounts as may be collected by the Master
Servicer from the Mortgagor or otherwise relating to the Mortgage Loan. In
addition, if the Master Servicer determines, in its good faith business
judgment, that a previously made Monthly Advance has become a Nonrecoverable
Advance, the Master Servicer may reimburse itself for such Nonrecoverable
Advances from amounts on deposit in the Collateral Proceeds Account, regardless
of whether such amounts are attributable to such Mortgage Loan. Notwithstanding
anything herein to the contrary, no Monthly Advance need be made hereunder if
such Monthly Advance would, if made, constitute a Nonrecoverable Advance.
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(b) Servicing Advances. The Master Servicer shall from time to time
during the term of this Agreement make such Servicing Advances as the Master
Servicer shall deem appropriate or advisable under the circumstances and are
required pursuant to the terms of this Agreement. Servicing Advances may be
paid by the Master Servicer out of amounts on deposit in the Collateral
Proceeds Account from time to time; provided, however, that the Master Servicer
shall be required to replace any such amounts by deposit into the Collateral
Proceeds Account on or before the first Deposit Date occurring after the
payment of a Servicing Advance with such amounts, and the amount of such
deposit shall thereafter be considered a Servicing Advance for purposes of
reimbursement under this Agreement. All Servicing Advances made by the Master
Servicer shall be reimbursable from collections or recoveries relating to the
Mortgage Loans in respect of which such Servicing Advances have been made
including Liquidation Proceeds and Insurance Proceeds, and such other amounts
as may be collected by the Master Servicer from the Mortgagor, or from other
amounts on deposit in the Collateral Proceeds Account after the Master Servicer
shall have determined, in its good faith business judgment that such Servicing
Advance has become a Nonrecoverable Advance. Notwithstanding anything herein to
the contrary, no Servicing Advances need be made hereunder if such Servicing
Advance would, if made, constitute a Nonrecoverable Advance.
ARTICLE 5
THE MASTER SERVICER
SECTION 5.1 REPRESENTATIONS AND WARRANTIES OF THE MASTER
SERVICER.
(a) The Master Servicer hereby represents and warrants to the
Depositor, the Trustee, [the Bond Insurer] and the Bondholders that, as of the
Closing Date:
(i) The Master Servicer is a [corporation] duly organized,
validly existing and in good standing under the laws of [the State of
__________]. The Master Servicer is in compliance with the laws of
each state in which it is acting as Master Servicer with respect to a
Mortgage Loan to the extent necessary to perform all servicing
obligations with respect to the related Mortgaged Property hereunder.
The Master Servicer has the power and authority to execute and deliver
this Agreement and to perform its obligations in accordance herewith.
The execution, delivery and performance of this Agreement (including
all instruments of transfer to be delivered pursuant to this
Agreement) by the Master Servicer and the consummation of the
transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action. This Agreement evidences the valid
and binding obligation of the Master Servicer enforceable against the
Master Servicer in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally or the
application of equitable principles in any proceeding, whether at law
or in equity. The consummation of the transactions contemplated hereby
will not result in the breach of any terms or provisions of the
articles of incorporation or by-laws
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of the Master Servicer or result in the breach of any term or
provision of, or conflict with or constitute a default under or result
in the acceleration of any obligation under, any material agreement,
indenture or loan or credit agreement or other material instrument to
which the Master Servicer or its property is subject, or result in the
violation of any law, rule, regulation, order, judgment or decree to
which the Master Servicer or its property is subject.
(ii) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or
agency, that are necessary in connection with the execution and
delivery by the Master Servicer of this Agreement, have been duly
taken, given or obtained, as the case may be, are in full force and
effect, are not subject to any pending proceedings (administrative,
judicial or otherwise) with respect to which the time within which any
appeal therefrom may be taken or review thereof may be obtained has
expired or no review thereof may be obtained or appeal therefrom
taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement on the part of the Master
Servicer and the performance by the Master Servicer of its obligations
under this Agreement.
(iii) There is no action, suit, proceeding or investigation
pending or, to the best of the Master Servicer's knowledge, threatened
against the Master Servicer that, either in any one instance or in the
aggregate, should reasonably be expected to result in any material
adverse change in the business, operations, financial condition,
properties or assets of the Master Servicer or in any material
impairment of the right or ability of the Master Servicer to carry on
its business substantially as now conducted, or in any material
liability on the part of the Master Servicer or that 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 Master Servicer contemplated herein, or that should be reasonably
expected to impair the ability of the Master Servicer to perform under
the terms of this Agreement.
(iv) The Master Servicer is not in default with respect to
any order or decree of any court or any order, regulation or demand of
any federal, state, municipal or governmental agency, which default
should reasonably be expected to have consequences that would
materially and adversely affect the condition (financial or other) or
operations of the Master Servicer or its properties or to have
consequences that should reasonably be expected to adversely affect
its performance hereunder.
(v) The collection practices used by the Master Servicer
are in all material respects legal and customary in the non-conforming
mortgage loan servicing business.
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(vi) Upon discovery by any party hereto of a breach of any
of the foregoing representations and warranties that materially and adversely
affects the interests of the Bondholders, the party discovering such breach
shall give prompt written notice to the other parties hereto [and the Bond
Insurer]. Within 30 days of its discovery or its receipt of notice of breach,
the Master Servicer shall cure such breach in all material respects.
SECTION 5.2 LIABILITY OF THE MASTER SERVICER.
The Master Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically imposed upon and undertaken by the
Master Servicer herein.
SECTION 5.3 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE MASTER SERVICER.
Any corporation or other entity (1) into which the Master Servicer may
be merged or consolidated, (2) that may result from any merger, conversion or
consolidation to which the Master Servicer shall be a party, or (3) that may
succeed to all or substantially all of the business of the Master Servicer,
which corporation or other entity shall be the successor to the Master Servicer
under this Agreement without the execution or filing of any document or any
further act by any of the parties to this Agreement; provided that if the
Master Servicer is not the surviving entity, or if the assumption by the
surviving entity is not effective by operation of law, then the surviving
entity shall execute and deliver to the Depositor and the Trustee an agreement
of assumption to perform every obligation of the Master Servicer hereunder and
provided further that if the surviving entity is not the Master Servicer, the
surviving entity must (A) have a net worth of not less than $10,000,000, [(B)
be acceptable to the Bond Insurer and] (C) each Rating Agency must have issued
written confirmation that the succession of such successor will not result in a
downgrading of the implied rating then assigned by such Rating Agency to the
Bonds [(without taking into account the Bond Insurance Policy)].
SECTION 5.4 LIMITATION ON LIABILITY OF THE MASTER SERVICER AND
OTHERS.
Neither the Master Servicer nor any of its directors, officers,
employees or agents shall be under any liability to the Depositor, the Trustee,
the Trust Estate, [the Bond Insurer] or the Bondholders for any action taken or
for refraining from the taking of any action by the Master Servicer in good
faith pursuant to this Agreement, or for errors in judgment; provided, however,
that this provision shall not protect the Master Servicer or any such person
against any breach of warranties or representations made herein or against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of the duties of the Master Servicer or
by reason of reckless disregard of the obligations and duties of the Master
Servicer hereunder. The Depositor, the Master Servicer and any director,
officer, employee or agent of the Depositor or the Master Servicer may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Master
Servicer shall not be under any obligation to appear in, prosecute or defend
any legal action that is not incidental to its duties to service the Mortgage
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Loans in accordance with this Agreement, and that in its opinion may involve it
in any expense or liability.
SECTION 5.5 MASTER SERVICER NOT TO RESIGN.
Subject to the provisions of Section 5.03 regarding the merger or
consolidation of the Master Servicer into or with another entity, the Master
Servicer shall not resign from the obligations and duties hereby imposed on it
except upon determination that the performance of its duties or obligations
hereunder is no longer permissible under applicable law or regulation or are in
material conflict by reason of applicable law or regulation with any other
activities carried on by it at the date of this Agreement. Any such
determination permitting the resignation of the Master Servicer pursuant to
this Section shall be evidenced by an Opinion of Counsel to such effect
delivered to the Depositor, the Trustee [and the Bond Insurer] obtained by the
Master Servicer at its own expense. No resignation pursuant to this Section
5.05(a) shall become effective until the Trustee or a successor servicer shall
have assumed the responsibilities and obligations of the Master Servicer in
accordance with Section 6.02 or (b) shall relieve the Master Servicer of
responsibility for any obligations pursuant to this Agreement that specifically
survive the resignation or termination of the Master Servicer. Each of the
Rating Agencies shall be given written notice of a resignation of the Master
Servicer pursuant to this Section.
Notwithstanding the foregoing, the Master Servicer may resign
effective upon its appointment of a successor the appointment of whom has been
approved by the [Bond Insurer and] the Trustee in writing, but only if each
Rating Agency shall have confirmed in writing that the appointment of such
successor will not result in the downgrading of the then-current implied
ratings assigned by them to the Bonds [(without taking into account the Bond
Insurance Policy)].
ARTICLE 6
DEFAULT
SECTION 6.1 EVENTS OF DEFAULT.
If any one of the following events (each an "Event of Default") shall
occur and be continuing:
(a) Any failure by the Master Servicer to (1) make a required
Monthly Advance on the related Deposit Date or (2) deposit into the Collateral
Proceeds Account or transfer to the Trustee for deposit in the Bond Account any
other amount required to be deposited therein under this Agreement on the
related Deposit Date, which failure, in the case of only clause (2) hereof, is
not remedied by the close of business on the Business Day after the date upon
which written notice of such failure shall have been given to the Master
Servicer by the Trustee [or the Bond Insurer] or to the Master Servicer, [the
Bond Insurer] and the Trustee by Holders of Bonds evidencing Voting Interests
represented by all Bonds aggregating not less than 51%;
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<PAGE> 39
(b) Failure on the part of the Master Servicer duly to observe or
perform in any material respect any other covenants or agreements of the Master
Servicer set forth in this Agreement or in the Sales Agreement, which failure
(1) materially and adversely affects the Bondholders [or the Bond Insurer] and
(2) continues unremedied for a period of 30 days after the date on which
written notice of such failure (which notice shall refer specifically to this
Section), requiring the same to be remedied, shall have been given to the
Master Servicer by the Trustee[, at the direction of the Bond Insurer, or by
the Bond Insurer, or, with the consent of the Bond Insurer, to the Master
Servicer by the Holders of Bonds evidencing Voting Interests represented by all
Bonds aggregating not less than 51%].
(c) The entry against the Master Servicer of a decree or order by a
court or agency or supervisory authority having jurisdiction in the premises
for the appointment of a trustee, conservator, receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days;
(d) The consent by the Master Servicer to the appointment of a
trustee, conservator or receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Master Servicer or of or relating to
substantially all of its property; or the admission by the Master Servicer in
writing of its inability to pay its debts generally as they become due, the
Master Servicer's filing of a petition to take advantage of any applicable
bankruptcy, insolvency or reorganization statute, the Master Servicer's making
of an assignment for the benefit of its creditors, or the Master Servicer's
voluntary suspension of payment of its obligations;
(e) The occurrence of a Delinquency Rate Trigger, a Cumulative Loss
Rate Trigger or a Rolling Loss Rate Trigger;
(f) The Master Servicer's Net Worth as of the end of any fiscal
quarter, commencing with the fiscal quarter ended _________ ___, 19___, being
less than the Target Net Worth for such quarter; provided, however, that this
default test shall not apply to any quarter ended after _________ ___, 20___;
or
(g) Breach by the Master Servicer in any material respect of any of
its representations and warranties made herein or in the Sales Agreement (not
including Section 4(b) thereof), or in any certificate delivered pursuant
hereto or thereto, and the failure of the Master Servicer to cure such breach
in all material respects within 30 days after the notice of such breach shall
have been given to the Master Servicer by the Depositor, the Trustee [or the
Bond Insurer];
then, and in each and every such case, so long as such Event of Default shall
not have been remedied by the Master Servicer, [either (1) the Bond Insurer or
(2) with the prior written consent of the Bond Insurer,] either the Trustee or
the Holders of Bonds evidencing Voting Interests represented by all Bonds
aggregating not less than 25%, by notice then given in writing
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<PAGE> 40
to the Master Servicer with a copy to [the Bond Insurer and to] the Trustee,
may terminate all of the rights, responsibilities and obligations of the Master
Servicer as servicer under this Agreement. On or after the receipt by the
Master Servicer of such written notice, all authority and power of the Master
Servicer under this Agreement, whether with respect to the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee (unless a successor
Master Servicer has been appointed pursuant to Section 6.02) pursuant to and
under this Section and, without limitation, the Trustee or successor Master
Servicer is hereby authorized and empowered to execute and deliver, on behalf
of the Servicer, as attorney-in-fact or otherwise, any and all documents and
other instruments, and to do or accomplish all other acts or things necessary
or appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Mortgage Notes and related
documents, or otherwise. The Master Servicer agrees to cooperate with the
Trustee in effecting the termination of its responsibilities and rights as
Master Servicer hereunder, including, without limitation, the transfer to the
Trustee or successor Master Servicer for the administration by it of all cash
amounts that shall at the time be held by the Master Servicer that have been
deposited by the Master Servicer in the Collateral Proceeds Account or
transferred to the Trustee for deposit into the Bond Account or thereafter
received by the Master Servicer with respect to the Mortgage Loans.
The Trustee shall notify the Master Servicer in writing immediately
upon its becoming aware of a default described in Section 6.01(a).
All reasonable costs and expenses (including attorneys' fees) incurred
in connection with transferring the Servicer Mortgage Loan Files to a successor
Master Servicer, amending this Agreement to reflect the appointment of a
successor as Master Servicer pursuant to this Section 6.01 or otherwise in
connection with the assumption by a successor Master Servicer of the duties of
the predecessor Master Servicer hereunder shall be paid by the predecessor
Master Servicer upon presentation of reasonable documentation of such costs and
expenses.
SECTION 6.2 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 6.01, the Trustee shall appoint a successor
Master Servicer meeting the criteria described below and, if it does not
appoint a successor, or until the successor's appointment takes effect, the
Trustee shall be the successor in all respects to the Master Servicer in its
capacity as servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Master Servicer by the terms and
provisions hereof, including without limitation, the obligation to make Monthly
Advances [and to pay Compensating Interest]. As compensation therefor, the
Trustee shall be entitled to such compensation as the Master Servicer would
have been entitled to hereunder if no such notice of termination had been
given. In the event the Trustee fails to appoint a successor Master Servicer,
and the Trustee is unwilling or legally unable to act as successor Master
Servicer itself, it may petition a court of competent jurisdiction to appoint,
any established housing and home finance institution or any institution that
regularly services residential mortgage loans that is then servicing a
residential mortgage loan portfolio and having
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<PAGE> 41
all licenses, permits and approvals required by applicable law, and having a
net worth of not less than $10,000,000, as the successor to the Master Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Master Servicer hereunder; [provided that any such
successor Master Servicer (other than the Trustee) shall be acceptable to the
Bond Insurer, which acceptance shall not be unreasonably withheld and] provided
further that the appointment of any such successor Master Servicer will not
result in the qualification, reduction or withdrawal of the implied rating
assigned to the Bonds by any Rating Agency, [without taking into account the
existence of the Bond Insurance Policy]. Pending appointment of a successor to
the Master Servicer hereunder, unless the Trustee is prohibited by law from so
acting, the Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the 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 Master Servicer
hereunder. The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effect any such succession. The
appointment of a successor Master Servicer shall not affect any liability of
the predecessor Master Servicer that may have arisen under this Agreement prior
to its termination as Master Servicer, nor shall any successor Master Servicer
be liable for any acts or omissions of the predecessor Master Servicer or for
any breach by such Master Servicer or the Depositor of any of its
representations or warranties contained herein or in any related document or
agreement. Each of the Rating Agencies shall be given written notice of the
appointment of a successor Master Servicer pursuant to this Section.
SECTION 6.3 NOTIFICATIONS TO BONDHOLDERS.
Upon any termination or appointment of a successor to the Master
Servicer pursuant to this Article Six, the Trustee shall give prompt written
notice thereof to Bondholders at their respective addresses appearing in the
Bond Register, the Depositor, [the Bond Insurer] and to each Rating Agency.
Within 60 days of obtaining actual knowledge of the occurrence of any
Event of Default that remains uncured, the Trustee shall transmit by mail to
all Bondholders notice of such Event of Default.
SECTION 6.4 ASSUMPTION OR TERMINATION OF SUB-SERVICING
AGREEMENTS BY THE TRUSTEE OR ANY SUCCESSOR MASTER
SERVICER.
Upon the termination of the Master Servicer as servicer under this
Agreement, the Trustee as successor to the Master Servicer hereunder or any
other successor to the Master Servicer hereunder may, subject to the terms of
any Sub-Servicing Agreement, in its sole and absolute discretion elect to
assume or terminate any Sub-Servicing Agreement then in force and effect
between the Master Servicer and the Sub-Servicer. Notwithstanding the
foregoing, any termination fee due to a Sub-Servicer because of its termination
by the Trustee hereunder shall be the responsibility of the terminated Master
Servicer and not the Trustee. Upon the
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<PAGE> 42
assumption of any Sub-Servicing Agreement, the terminated Master Servicer
agrees to deliver to the assuming party any and all documents and records
relating to the applicable Sub-Servicing Agreement and an accounting of amounts
collected and held by it and otherwise use its best reasonable efforts to
effectuate the orderly transfer of the Sub-Servicing Agreement.
SECTION 6.5 PAYMENT OF TRUSTEE'S FEES AND EXPENSES.
(a) On each Payment Date, the Trustee will be entitled to retain its
Trustee Fee from amounts deposited into the Bond Account on the related Deposit
Date. The Trustee Fee constitutes compensation for all services rendered by the
Trustee in the exercise and performance of any of the powers and duties
hereunder or under the Indenture. The Trustee does not and will not have any
lien on the Trust Estate for payment of any such fees or expenses.
(b) The Master Servicer shall pay or reimburse the Trustee, from its
own funds, upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any of the
provisions of this Agreement and the Indenture, (including but not limited to
the reasonable compensation and the expenses and disbursements of its counsel
and of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith or that
is otherwise reimbursed to the Trustee, and except for routine, recurring or
nominal expenses, disbursements and advances; provided, however, that the
Trustee shall not refuse to perform any of its duties hereunder or under the
Indenture solely as a result of the failure of the Master Servicer to pay or
reimburse such expenses, disbursements or advances.
(c) The Master Servicer agrees to indemnify the Trustee, and its
agents, directors, employees and officers (each an "Indemnified Party") from,
and hold it harmless against, any and all losses and liabilities, damages,
claims or expenses (including reasonable attorneys' fees, expenses and
disbursements), incurred or in connection with this Agreement, the Indenture or
the Bonds, including, but not limited to, any such loss, liability or expense
incurred, arising in respect of or in connection with any legal action against
the Trust Estate, the Depositor or the Trustee or any director, officer,
employee or agent thereof, or the performance of any of the Trustee's duties
hereunder (except in the event it assumes the duties and obligations of the
Servicer hereunder as the result of an Event of Default) or the Indenture,
other than any loss, liability or expense incurred by reason of the negligence,
bad faith or intentional misconduct of the Trustee. Notwithstanding the
generality of the foregoing, if any action, suit or other proceeding is brought
against an Indemnified Party for which the Indemnified Party seeks
indemnification hereunder, the Indemnified Party shall promptly notify the
Master Servicer of the commencement thereof, whereupon the Master Servicer will
be entitled to participate therein, and to assume the defense thereof, with
counsel selected by the Master Servicer and reasonably satisfactory to such
Indemnified Party, provided, that, if in the Indemnified Party's reasonable
judgment the Indemnified Party has any claims or defenses that conflict with or
differ from the interests of the Master Servicer, the Indemnified Party shall
be entitled to select counsel of its choosing and pursue such claims and
defenses separately and all related costs, expenses and liabilities associated
with such separate claims or defenses will continue to be covered by the
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Master Servicer's indemnification obligation hereunder. The Master Servicer
shall not be entitled to settle any proceeding without the consent of any
Indemnified Party with any right of indemnification hereunder with respect to
such proceeding except upon such terms as will provide each such Indemnified
Party reasonable assurance of full indemnity hereunder.
(d) This Section 6.05 shall survive the termination of this
Agreement or the resignation or removal of the Trustee or the Master Servicer
as regards rights accrued prior to such resignation or removal.
(e) Amounts required to be paid by the Master Servicer to the
Trustee under subsections (b) and (c) above shall be paid by the Master
Servicer out of its own funds, and shall not be reimbursable to the Master
Servicer from the Collateral Proceeds Account or netted by the Master Servicer
out of funds it is required to deposit into the Collateral Proceeds Account.
ARTICLE 7
TERMINATION
SECTION 7.1 TERMINATION.
Except as otherwise specifically set forth herein, the obligations and
responsibilities of the Master Servicer shall terminate upon the earliest to
occur of (1) the final payment or other liquidation of the Mortgage Loans and
the disposition of all REO Properties and the remittance of all funds due
hereunder with respect to such Mortgage Loans and REO Properties and (2) the
satisfaction and discharge of the indebtedness evidenced by the Bonds [and the
payment of all amounts due the Bond Insurer under the Indenture].
ARTICLE 8
MISCELLANEOUS PROVISIONS
SECTION 8.1 AMENDMENT.
This Agreement may be amended from time to time by the Master
Servicer, the Depositor and the Trustee, without the consent of any of the
Bondholders [but only with the prior written consent of the Bond Insurer (which
consent shall not be unreasonably withheld)], (1) to cure any error or any
ambiguity or to correct or supplement any provisions herein which may be
inconsistent with any other provisions herein, or (2) to comply with the
requirements of the Code; provided that in all such cases the Trustee shall
have received written confirmation from each Rating Agency that any such
modifications to this Agreement will not result in a qualification, reduction
or withdrawal of the implied rating assigned to the Bonds by such Rating Agency
[(without taking into account the Bond Insurance Policy)]; provided, further,
that in all
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<PAGE> 44
such cases such action shall not, as evidenced by an Opinion of Counsel
furnished by and at the expense of the party requesting such amendment,
adversely affect in any material respect the interests of any Bondholder [or
the Bond Insurer].
This Agreement may also be amended from time to time by the Master
Servicer, the Depositor and the Trustee, with the consent of the [Bond Insurer
(which consent shall not be unreasonably withheld) and the] Holders of Bonds
evidencing Voting Interests of the Bonds affected thereby aggregating greater
than 50%, 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 Holders of Bonds of such Bonds; provided, however,
that no such amendment shall (1) reduce in any manner the amount of, or delay
the timing of, collections of payments on Mortgage Loans or payments which are
required to be deposited into the Bond Account without the consent of all
Bondholders or (2) reduce the aforesaid percentage of the Bonds the Holders of
which are required to consent to any such amendment, without the consent of the
Holders of all Bonds then outstanding.
Promptly after the execution of any such amendment or consent pursuant
to the second preceding paragraph, the Trustee shall furnish written
notification of the substance of such amendment to each Bondholder and an
executed copy of such amendment to each Rating Agency, with a copy to each of
the Underwriters.
It shall not be necessary for the consent of Bondholders under this
Section to approve the particular form of any proposed amendment or consent,
but it shall be sufficient if such consent shall approve the substance thereof.
The manner of obtaining such consents and of evidencing the authorization of
the execution thereof by Bondholders shall be subject to such reasonable
requirements as the Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the Trustee
[and the Bond Insurer] shall be entitled to receive and rely upon an Opinion of
Counsel furnished by and at the expense of the party requesting such amendment
stating that the execution of such amendment is authorized or permitted by this
Agreement. The Trustee may, but shall not be obligated to, enter into any such
amendment that affects the Trustee's own rights, duties or immunities under
this Agreement.
SECTION 8.2 GOVERNING LAW.
This Agreement shall be construed in accordance with the laws of the
State of New York (without regard to conflict of laws principles and the
application of the laws of any other jurisdiction), and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
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SECTION 8.3 NOTICES.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given when delivered to (a) in the case
of the Depositor in care of
___________________________________________________; (b) in the case of the
Master Servicer, at _____________________________________________________; (c)
in the case of the Trustee, at its Corporate Trust Office at
____________________________________; (d) in the case of the Bond Insurer,
____________________________________________; (e) in the case of S&P, to
Standard & Poor's, 26 Broadway, 15th Floor, New York, New York 10004,
Attention: Mortgage Surveillance Group; and (f) in the case of Moody's, to
Moody's Investors Service Inc., 99 Church Street, New York, New York 10007, or,
as to each party, at such other address as shall be designated by such party in
a written notice to each other party; and (g) in the case of the Underwriters,
to the respective addresses specified in the Underwriting Agreement. Any notice
required or permitted to be mailed to a Bondholder shall be given by first
class mail, postage prepaid, at its address shown in the Bond Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the Bondholder
receives such notice. Any notice or other document required to be delivered or
mailed by the Trustee to any Rating Agency shall be given on a best efforts
basis and only as a matter of courtesy and accommodation and the Trustee shall
have no liability for failure to deliver such notice or document to any such
Rating Agency.
SECTION 8.4. SEVERABILITY OF PROVISIONS.
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions
of this Agreement or of the Bonds or the rights of the Holders thereof.
SECTION 8.5 ASSIGNMENT.
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 5.03 and 5.05, this Agreement may not be assigned by the
Depositor or the Master Servicer without the prior written consent of [the Bond
Insurer and] the Holders of Bonds evidencing not less than 66% of the Voting
Interests of all Bonds.
[SECTION 8.6 THIRD PARTY BENEFICIARY; RATING.
(a) The Bond Insurer is an intended third-party beneficiary of this
Agreement. This Agreement shall be binding upon and inure to the benefit of the
Bond Insurer; provided that, notwithstanding the foregoing, for so long as a
Bond Insurer Default is continuing, the Bondholders shall succeed to the Bond
Insurer's rights hereunder. Without limiting the generality of the foregoing,
all covenants and agreements in this Agreement that expressly confer rights
upon the Bond Insurer shall be for the benefit of and run directly to the Bond
Insurer, and
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<PAGE> 46
the Bond Insurer shall be entitled to rely on and enforce such covenants to the
same extent as if it were a party to this Agreement.
(b) In the event the rating of the Bond Insurer by any of the Rating
Agencies is reduced to a rating that is below "investment grade" (as that term
is then commonly used), the Servicer shall, at its own expense, seek to obtain
ratings of the Bonds (apart from the rating related to the Bond Insurance
Policy) from such Rating Agency.]
SECTION 8.7 COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument.
SECTION 8.8 INTENTION OF THE PARTIES.
It is the intention of the parties that the Depositor is conveying,
and the Master Servicer is receiving, only a contract for servicing and
administering the Mortgage Loans. Accordingly, the parties hereby acknowledge
that the Trustee remains the sole and absolute record holder of the Mortgage
Loans and all rights related thereto.
SECTION 8.9 WAIVERS AND MODIFICATIONS.
No term or provision of this Agreement may be waived or modified
unless such waiver or modification is in writing and signed by the party
against whom such waiver or modification is sought to be enforced.
SECTION 8.10 FURTHER AGREEMENTS.
The Master Servicer and the Depositor each agree to execute and
deliver to the other such reasonable and appropriate additional documents,
instruments or agreements as may be necessary or appropriate to effectuate the
purposes of this Agreement.
SECTION 8.11 ATTORNEY-IN-FACT.
The Depositor hereby designates the Master Servicer its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required pursuant to this Agreement or the Indenture.
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<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers, all as of the day and year first
above written.
UNION PLANTERS MORTGAGE FINANCE
CORP., AS DEPOSITOR
By:
--------------------------------
Authorized Signatory
--------------------------------
AS MASTER SERVICER
By:
--------------------------------
Name:
Title:
--------------------------------
AS TRUSTEE AND NOT IN ITS
INDIVIDUAL CAPACITY
By:
---------------------------
Name:
Title:
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<PAGE> 48
Schedule I
Mortgage Loan Schedule
[on file with the Trustee and the Master Servicer]
44
<PAGE> 49
EXHIBIT A
FORM OF ANNUAL STATEMENT AS TO COMPLIANCE
The undersigned, ________________________, of ________________________
(the "Master Servicer"), in its capacity as Master Servicer under that certain
Servicing Agreement dated as of __________ 1, 19___ (the "Servicing Agreement")
among Union Planters Mortgage Finance Corp., as Depositor,
____________________, as Master Servicer, and __________________, National
Association, as Trustee, does hereby certify pursuant to Section 2.08 of the
Servicing Agreement that as of the ___ day of ____________, 199_:
(a) review of the activities of the Servicer for the year ended
December 31, 199_ and of its performance under the Servicing
Agreement has been made under my supervision, and
(b) to the best of my knowledge, based on such review, the
Servicer has fulfilled all of its material obligations under
the Servicing Agreement throughout such year.
IN WITNESS WHEREOF, I have hereunto signed my name as of this ____ day
of ___________, 199_.
----------------------------------
Name:
Title:
Exhibit A-1
<PAGE> 50
EXHIBIT B
REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT
TO: [Trustee]
[Address]
[Address]
RE: Servicing Agreement, dated as of ____________ 1, 19___, among
Union Planters Mortgage Finance Corp. (the "Depositor"),
_________________________, as Master Servicer, and
_________________, National Association, as Trustee (the
"Servicing Agreement")
In connection with the administration of the Mortgage Loans held by
you as the Trustee, we request the release and acknowledge receipt of the
Mortgage Loan File [specify documents if only a partial Mortgage Loan File is
being released) for the Mortgage Loan described below, for the reason
indicated.
Mortgagor's Name and Address & Zip Code:
Mortgage Loan Number:
Reason for Requesting Documents (check one)
_____ 1. Mortgage Loan Paid in Full. (The Master Servicer hereby
certifies that all amounts received in connection therewith
have been deposited into the Collateral Proceeds Account as
provided in the Servicing Agreement.)
_____ 2. Mortgage Loan in Foreclosure.
_____ 3. Substitution of Qualified Replacement Mortgage Loan.
_____ 4. Mortgage Loan Liquidated by _________________. (The Master
Servicer hereby certifies that all proceeds of foreclosure,
insurance, condemnation or other liquidation have been
finally received.)
_____ 5. Other (explain). ________________________________________
If item 1, 3 or 4 above is checked, and if all or part of the Mortgage Loan
File was previously released to us, please release to us our previous request
and receipt on file with you, as well as any additional documents in your
possession relating to the specified Mortgage Loan.
Exhibit B - Page 1
<PAGE> 51
If item 1, 3 or 4 above is checked, and if all or part of the Mortgage
Loan File was previously released to us, please release to us our previous
request and receipt on file with you, as well as any additional documents in
your possession relating to the specified Mortgage Loan.
If item 2 or 5 is checked, upon our return of all of the above
documents to you as the Trustee, please acknowledge your receipt by signing in
the space indicated below, and returning this form.
Capitalized terms used herein but not defined herein have the meanings
ascribed to them in the Servicing Agreement or in the Indenture.
--------------------------------
AS MASTER SERVICER
By:
--------------------------------
Name:
-------------------------
Title:
-------------------------
Date:
-------------------------
Acknowledgment of Documents returned to the Trustee:
-------------------------------
AS TRUSTEE
By:
--------------------------------
Name:
-------------------------
Title:
-------------------------
Date:
-------------------------
Exhibit B - Page 2
<PAGE> 52
EXHIBIT E
FORM OF LIQUIDATION REPORT
Customer Name:
Account Number:
Original Principal Balance:
<TABLE>
<S> <C> <C>
1. Type of Liquidation (REO disposition/charge-off/short pay-off)
Date last paid
Date of foreclosure
Date of REO
Date of REO Disposition
Property Sale Price/Estimated Market Value of disposition
2. Liquidation Proceeds $____________
Principal Prepayment _____________
Property Sale Proceeds _____________
Insurance Proceeds _____________
Other (itemize) _____________
Total Proceeds $____________
3. Liquidation Expenses
Servicing Advances $____________
Delinquency Advances _____________
Monthly Advances _____________
Servicing Fees _____________
Other Servicing Compensation _____________
Total Advances $____________
4. Net Liquidation Proceeds
(Item 2 minus Item 3) $____________
5. Principal Balance of Mortgage Loan $____________
6. Loss, if any (Item 5 minus Item 4) $____________
</TABLE>
Exhibit E - Page 1
