<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 15, 1998
REGISTRATION NO.____-_____
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
(Exact name of registrant as specified in its charter)
----------------
DELAWARE APPLIED FOR
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 WEST MONROE STREET MARGARET E. GOVERN
CHICAGO, ILLINOIS 60661 C/O HELLER FINANCIAL COMMERCIAL
(312) 441-7000 MORTGAGE ASSET CORP.
---- 500 WEST MONROE STREET
CHICAGO, ILLINOIS 60661
(312) 441-7000
----
(Address, including zip code, (Name, address, including zip code,
and telephone number, including and telephone number, including area
area code, of registrant's code, of agent for service with
principal executive offices) respect to the Registrant)
------------------
Copies to:
KEVIN C. BLAUCH, ESQ.
LATHAM & WATKINS
885 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 906-1241
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement as
determined by market conditions and pursuant to Rule 415.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same 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 number of the earlier effective registration statement for the
same offering. [ ]
If delivery of the Prospectus Supplement is expected to be made pursuant
to Rule 434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
PROPOSED TITLE OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED UNIT (1) PRICE (1) FEE
- -------------------------------------------------------------------------------
Mortgage Pass-Through
Certificates......... $1,000,000 100% $1,000,000 $295.00
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee on the
basis of the proposed maximum offering price per unit.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===============================================================================
<PAGE>
EXPLANATORY NOTE
Immediately following this explanatory note there are eight sets of six
pages labeled in the upper right corner as follows: "Version 1: Multifamily
Properties", "Version 2: Office Properties", "Version 3: Retail Properties",
"Version 4: Hotel Properties", "Version 5: Health Care-Related Facilities",
"Version 6: Industrial Properties", "Version 7: Self-Storage Facilities" and
"Version 8: Manufactured Housing Communities." Each such "version" contains a
cover page to be substituted in the Prospectus and five pages with inserts to
the Prospectus and the Prospectus Supplement showing the text specific to
concentration in each of the eight types of properties contemplated by the
Registrant for purposes of the Registration Statement (i.e. multifamily
properties, office properties, retail properties, health care-related
facilities, industrial properties, self-storage facilities and manufactured
housing communities).
The above described eight "versions" of changes to the Prospectus and the
Prospectus Supplement are being filed with this Registration Statement for
purposes of identifying changes that will be made to the Prospectus and the
Prospectus Supplement as a result of concentrations in any specific
securitization transaction. Depending on the types of properties that involve
concentration in any particular transaction, the respective changes to the
Prospectus and the Prospectus Supplement from one or more of the above
described "versions" would be included in the Prospectus and the Prospectus
Supplement for that transaction. The Prospectus and the Prospectus Supplement
reflecting such changes would be filed at the time and in the manner provided
by Rule 424 under the Securities Act of 1933.
<PAGE>
Information contained hereto is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement become
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by 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.
VERSION 1: MULTIFAMILY PROPERTIES
PROSPECTUS
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
The mortgage pass-through certificates (the "Offered Certificates")
offered hereby and by supplements hereto (each, a "Prospectus Supplement") will
be offered from time to time in one or more series (each, a "Series"). The
Offered Certificates of any Series, together with any other mortgage
pass-through certificates of such Series, are collectively referred to herein
as the "Certificates". Each Series of Certificates will represent in the
aggregate the entire beneficial ownership interest in a trust fund (with
respect to any Series, the "Trust Fund") consisting of one or more segregated
pools of various types of multifamily or commercial mortgage loans (the
"Mortgage Loans"), mortgage participations, mortgage pass-through certificates
or other mortgage-backed securities evidencing interests in or secured by
multifamily or commercial mortgage loans (collectively, the "CMBS") or a
combination of Mortgage Loans and/or CMBS (with respect to any Series,
collectively, the "Mortgage Assets"). Multifamily properties consisting of five
or more rental or cooperatively owned dwellings will represent security for a
material concentration of the Mortgage Loans (or the mortgage loans underlying
the CMBS) in any Trust Fund, based on principal balance at the time such Trust
Fund is formed. If so specified in the related Prospectus Supplement, some or
all of the Mortgage Loans will include assignments of the leases of the related
Mortgaged Properties (as defined herein) and/or assignments of the rental
payments due from the lessees under such leases (each type of assignment, a
"Lease Assignment"). A significant or the sole source of payments on certain
Commercial Loans (as defined herein) and, therefore, of distributions on
certain Series of Certificates, will be such rental payments. If so specified
in the related Prospectus Supplement, the Trust Fund for a Series of
Certificates may include letters of credit, insurance policies, guarantees,
reserve funds or other types of credit support, or any combination thereof
(with respect to any Series, collectively, "Credit Support"), and currency or
interest rate exchange agreements and other financial assets, or any
combination thereof (with respect to any Series, collectively, "Cash Flow
Agreements"). See "Description of the Trust Funds," "Description of the
Certificates" and "Description of Credit Support."
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of the Offered Certificates of any Series unless
accompanied by the Prospectus Supplement for such Series.
(cover continued on next page)
--------------
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE
OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL
SERVICER, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON, EXCEPT TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS
SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT
OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND
SERVICING AGREEMENT OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN.
--------------
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 SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN AND SUCH INFORMATION AS MAY
BE SET FORTH UNDER THE CAPTION "RISK FACTORS" IN THE RELATED PROSPECTUS
SUPPLEMENT BEFORE PURCHASING ANY OFFERED CERTIFICATE.
Prior to issuance there will have been no market for the Certificates of
any Series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will
continue. This Prospectus may not be used to consummate sales of the Offered
Certificates of any Series unless accompanied by the Prospectus Supplement for
such Series.
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters as more fully
described under "Method of Distribution" herein and the related Prospectus
Supplement."
--------------
THE DATE OF THIS PROSPECTUS IS ________, 199_
<PAGE>
VERSION 1: MULTIFAMILY PROPERTIES
[The following to be inserted on PAGE ii of the PROSPECTUS SUPPLEMENT,
immediately following the second sentence of the first paragraph:]
Multifamily properties consisting of five or more rental or cooperatively owned
dwellings will represent security for a material concentration of the Mortgage
Loans in any Trust Fund, based on principal balance at the time such Trust Fund
is formed.
<PAGE>
VERSION 1: MULTIFAMILY PROPERTIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS,
immediately following "RISK FACTORS-RISKS ASSOCIATED WITH MORTGAGE LOANS AND
MORTGAGED PROPERTIES":]
Risks Particular to Multifamily Rental Properties.................[page no.]
<PAGE>
VERSION 1: MULTIFAMILY PROPERTIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS
SUPPLEMENT, immediately following "DESCRIPTION OF THE MORTGAGE POOL-GENERAL":]
Mortgage Loans Secured by Multifamily Rental Properties...........[page no.]
<PAGE>
VERSION 1: MULTIFAMILY PROPERTIES
[The following to be inserted in the PROSPECTUS under "RISK FACTORS,"
immediately following "RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED
PROPERTIES" and in the PROSPECTUS SUPPLEMENT under "RISK FACTORS," immediately
following "RISKS ASSOCIATED WITH CERTAIN OF THE MORTGAGE LOANS AND MORTGAGED
PROPERTIES":]
RISKS PARTICULAR TO MULTIFAMILY RENTAL PROPERTIES
Multifamily projects are part of a market that, in general, is
characterized by low barriers to entry. Thus, a particular apartment market
with historically low vacancies could experience substantial new construction,
and a resultant oversupply of units, in a relatively short period of time.
Since multifamily apartment units are typically leased on a short-term basis,
the tenants who reside in a particular project within such a market may easily
move to newer projects with better amenities. Adverse economic conditions,
either local or national, may limit the amount of rent that can be charged for
rental units, and may result in a reduction in timely rent payments or a
reduction in occupancy levels without a corresponding decrease in expenses.
Occupancy and rent levels may also be affected by local military base closings
and national and local politics, including, in the case of multifamily rental
properties, current or future rent stabilization and rent control laws and
agreements. In addition, the level of mortgage interest rates may encourage
tenants in multifamily rental properties to purchase single-family housing.
Further, the cost of operating a multifamily property may increase, including
the cost of utilities and the costs of required capital expenditures.
Furthermore, the rent limitations imposed on Mortgaged Properties eligible to
receive low-income housing tax credits pursuant to Section 42 of the Code
("Section 42 Properties") may adversely affect the ability of the applicable
borrowers to increase rents to maintain such Mortgaged Properties in proper
condition during periods of rapid inflation or declining market value of such
Mortgaged Properties. In addition, the income restrictions on tenants imposed
by Section 42 of the Code may reduce the number of eligible tenants in such
Mortgaged Properties and result in a reduction in occupancy rates applicable
thereto. Furthermore, some eligible tenants may not find any differences in
rents between the Section 42 Properties and other multifamily rental properties
in the same area to be a sufficient economic incentive to reside at a Section
42 Property, which may have fewer amenities or otherwise be less attractive as
a residence. Additionally, the characteristics of a neighborhood may change
over time or in relation to newer developments. All of these conditions and
events may increase the possibility that a borrower may be unable to meet its
obligations under its Mortgage Loan.
<PAGE>
VERSION 1: MULTIFAMILY PROPERTIES
[The following to be inserted in the PROSPECTUS under "DESCRIPTION OF THE TRUST
FUNDS," immediately following "MORTGAGE LOANS--GENERAL" and in the PROSPECTUS
SUPPLEMENT under "DESCRIPTION OF THE MORTGAGE POOL," immediately following
"GENERAL":]
MORTGAGE LOANS SECURED BY MULTIFAMILY RENTAL PROPERTIES
Significant factors determining the value and successful operation of a
multifamily property are the location of the property, the number of competing
residential developments in the local market (such as apartment buildings,
manufactured housing communities and site-built single family homes), the
physical attributes of the multifamily apartment building (such as its age and
appearance) and state and local regulations affecting such property. In
addition, the successful operation of an apartment building will depend upon
other factors such as its reputation, the ability of management to provide
adequate maintenance and insurance, and the types of services it provides.
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. Apartment building owners have been the
subject of suits under state "Unfair and Deceptive Practices Acts" and other
general consumer protection statutes for coercive, abusive or unconscionable
leasing and sales practices. A few states offer more significant protection.
For example, there are provisions that limit the basis on which a landlord may
terminate a tenancy or increase its rent or prohibit a landlord from
terminating a tenancy solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment
buildings. These ordinances may limit rent increases to fixed percentages, to
percentages of increases in the consumer price index, to increases set or
approved by a governmental agency, or to increases determined through mediation
or binding arbitration. In many cases, the rent control laws do not permit
vacancy decontrol. Local authority to impose rent control is pre-empted by
state law in certain states, and rent control is not imposed at the state level
in those states. In some states, however, local rent control ordinances are not
pre-empted for tenants having short-term or month-to-month leases, and
properties there may be subject to various forms of rent control with respect
to those tenants. Any limitations on a borrower's ability to raise property
rents may impair such borrower's ability to repay its Mortgage Loan from its
net operating income or the proceeds of a sale or refinancing of the related
Mortgaged Property.
Adverse economic conditions, either local or national, may limit the
amount of rent that can be charged and may result in a reduction in timely rent
payments or a reduction in occupancy levels. Occupancy and rent levels may also
be affected by construction of additional housing units, local military base
closings and national and local politics, including current or future rent
stabilization and rent control laws and agreements. In addition, the level of
mortgage interest rates may encourage tenants to purchase single-family
housing. The location and construction quality of a particular building may
affect the occupancy level as well as the rents that may be charged for
individual units. The characteristics of a neighborhood may change over time or
in relation to newer developments.
<PAGE>
Information contained hereto is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement become
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by 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.
VERSION 2: OFFICE PROPERTIES
PROSPECTUS
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
The mortgage pass-through certificates (the "Offered Certificates")
offered hereby and by supplements hereto (each, a "Prospectus Supplement") will
be offered from time to time in one or more series (each, a "Series"). The
Offered Certificates of any Series, together with any other mortgage
pass-through certificates of such Series, are collectively referred to herein
as the "Certificates". Each Series of Certificates will represent in the
aggregate the entire beneficial ownership interest in a trust fund (with
respect to any Series, the "Trust Fund") consisting of one or more segregated
pools of various types of multifamily or commercial mortgage loans (the
"Mortgage Loans"), mortgage participations, mortgage pass-through certificates
or other mortgage-backed securities evidencing interests in or secured by
multifamily or commercial mortgage loans (collectively, the "CMBS") or a
combination of Mortgage Loans and/or CMBS (with respect to any Series,
collectively, the "Mortgage Assets"). Office buildings will represent security
for a material concentration of the Mortgage Loans (or the mortgage loans
underlying the CMBS) in any Trust Fund, based on principal balance at the time
such Trust Fund is formed. If so specified in the related Prospectus
Supplement, some or all of the Mortgage Loans will include assignments of the
leases of the related Mortgaged Properties (as defined herein) and/or
assignments of the rental payments due from the lessees under such leases (each
type of assignment, a "Lease Assignment"). A significant or the sole source of
payments on certain Commercial Loans (as defined herein) and, therefore, of
distributions on certain Series of Certificates, will be such rental payments.
If so specified in the related Prospectus Supplement, the Trust Fund for a
Series of Certificates may include letters of credit, insurance policies,
guarantees, reserve funds or other types of credit support, or any combination
thereof (with respect to any Series, collectively, "Credit Support"), and
currency or interest rate exchange agreements and other financial assets, or
any combination thereof (with respect to any Series, collectively, "Cash Flow
Agreements"). See "Description of the Trust Funds," "Description of the
Certificates" and "Description of Credit Support."
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of the Offered Certificates of any Series unless
accompanied by the Prospectus Supplement for such Series.
(cover continued on next page)
--------------
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE
OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL
SERVICER, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON, EXCEPT TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS
SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT
OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND
SERVICING AGREEMENT OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN.
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 SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN AND SUCH INFORMATION AS MAY
BE SET FORTH UNDER THE CAPTION "RISK FACTORS" IN THE RELATED PROSPECTUS
SUPPLEMENT BEFORE PURCHASING ANY OFFERED CERTIFICATE.
Prior to issuance there will have been no market for the Certificates of
any Series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will
continue. This Prospectus may not be used to consummate sales of the Offered
Certificates of any Series unless accompanied by the Prospectus Supplement for
such Series.
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters as more fully
described under "Method of Distribution" herein and the related Prospectus
Supplement."
--------------
THE DATE OF THIS PROSPECTUS IS ________, 199_
<PAGE>
VERSION 2: OFFICE PROPERTIES
[The following to be inserted on page ii of the PROSPECTUS SUPPLEMENT,
immediately following the second sentence of the first paragraph:]
Office buildings will represent security for a material concentration of the
Mortgage Loans in any Trust Fund, based on principal balance at the time such
Trust Fund is formed.
<PAGE>
VERSION 2: OFFICE PROPERTIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS,
immediately following "RISK FACTORS--RISKS ASSOCIATED WITH MORTGAGE LOANS AND
MORTGAGED PROPERTIES":]
Risks Particular to Office Properties.............................[page no.]
<PAGE>
VERSION 2: OFFICE PROPERTIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS
SUPPLEMENT, immediately following "DESCRIPTION OF THE MORTGAGE POOL--GENERAL":]
Mortgage Loans Secured by Office Properties.......................[page no.]
<PAGE>
VERSION 2: OFFICE PROPERTIES
[The following to be inserted in the PROSPECTUS under "RISK FACTORS,"
immediately following "RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED
PROPERTIES" and in the PROSPECTUS SUPPLEMENT under "RISK FACTORS," immediately
following "RISKS ASSOCIATED WITH CERTAIN OF THE MORTGAGE LOANS AND MORTGAGED
PROPERTIES":]
RISKS PARTICULAR TO OFFICE PROPERTIES
Office properties generally require their owners to expend significant
amounts of cash to pay for general capital improvements, tenant improvements
and costs of re-leasing space. Office properties that are not equipped to
accommodate the needs of modern businesses may become functionally obsolete and
thus non-competitive. In addition to risks generally associated with real
estate, Mortgage Loans secured by office properties are also affected
significantly by adverse changes in population and employment growth (which
creates demand for office space), local competitive conditions (such as the
supply of office space or the existence or construction of new competitive
office buildings), the quality and management philosophy of management, the
attractiveness of the properties to tenants and their customers or clients, the
attractiveness of the surrounding neighborhood and the need to make major
repairs or improvements to satisfy the needs of major tenants. In addition,
office properties may be adversely affected by an economic decline in the
business operated by their tenants. Such decline may result in one or more
significant tenants ceasing operations at such locations (which may occur on
account of a voluntary decision not to renew a lease, bankruptcy or insolvency
of such tenants, such tenants' general cessation of business activities or for
other reasons). If office properties have a single tenant or if there is a
significant concentration of tenants in a particular business or industry, the
risk of such an economic decline increases.
<PAGE>
VERSION 2: OFFICE PROPERTIES
[The following to be inserted in the PROSPECTUS under "DESCRIPTION OF THE TRUST
FUNDS," immediately following "MORTGAGE LOANS--GENERAL" and in the PROSPECTUS
SUPPLEMENT under "DESCRIPTION OF THE MORTGAGE POOL," immediately following
"GENERAL":]
MORTGAGE LOANS SECURED BY OFFICE PROPERTIES
Significant factors affecting the value of office properties include,
without limitation, the quality of the tenants in the building, the physical
attributes of the building in relation to competing buildings, the location of
the building with respect to the central business district or population
centers, demographic trends within the metropolitan area to move away from or
towards the central business district, social trends combined with space
management trends (which may change towards options such as telecommuting or
hoteling to satisfy space needs), tax incentives offered to businesses by
cities or suburbs adjacent to or near the city where the building is located
and the strength and stability of the market area as a desirable business
location. Office properties may be adversely affected by an economic decline in
the business operated by their tenants. If office properties have a single
tenant or if there is a significant concentration of tenants in a particular
business or industry, the risk of such an economic decline increases.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a building's age,
condition, design (including floor sizes and layout), access to transportation,
availability of parking and ability to offer certain amenities to its tenants
(including sophisticated building systems, such as fiberoptic cables, satellite
communications or other base building technological features).
The success of an office property also depends on the local economy.
Factors such as labor cost and quality, tax environment and such quality of
life matters as schools and cultural amenities are generally considered in the
decision of a business to locate its headquarters in a particular area. A
central business district may have a substantially different economy from that
of a suburb. The local economy will affect an office property's ability to
attract stable tenants on a consistent basis. In addition, the cost of
refitting office space for a new tenant is often higher than for other property
types.
<PAGE>
Information contained hereto is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement become
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by 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.
VERSION 3: RETAIL PROPERTIES
PROSPECTUS
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
The mortgage pass-through certificates (the "Offered Certificates")
offered hereby and by supplements hereto (each, a "Prospectus Supplement") will
be offered from time to time in one or more series (each, a "Series"). The
Offered Certificates of any Series, together with any other mortgage
pass-through certificates of such Series, are collectively referred to herein
as the "Certificates". Each Series of Certificates will represent in the
aggregate the entire beneficial ownership interest in a trust fund (with
respect to any Series, the "Trust Fund") consisting of one or more segregated
pools of various types of multifamily or commercial mortgage loans (the
"Mortgage Loans"), mortgage participations, mortgage pass-through certificates
or other mortgage-backed securities evidencing interests in or secured by
multifamily or commercial mortgage loans (collectively, the "CMBS") or a
combination of Mortgage Loans and/or CMBS (with respect to any Series,
collectively, the "Mortgage Assets"). Retail properties will represent security
for a material concentration of the Mortgage Loans (or the mortgage loans
underlying the CMBS) in any Trust Fund, based on principal balance at the time
such Trust Fund is formed. If so specified in the related Prospectus
Supplement, some or all of the Mortgage Loans will include assignments of the
leases of the related Mortgaged Properties (as defined herein) and/or
assignments of the rental payments due from the lessees under such leases (each
type of assignment, a "Lease Assignment"). A significant or the sole source of
payments on certain Commercial Loans (as defined herein) and, therefore, of
distributions on certain Series of Certificates, will be such rental payments.
If so specified in the related Prospectus Supplement, the Trust Fund for a
Series of Certificates may include letters of credit, insurance policies,
guarantees, reserve funds or other types of credit support, or any combination
thereof (with respect to any Series, collectively, "Credit Support"), and
currency or interest rate exchange agreements and other financial assets, or
any combination thereof (with respect to any Series, collectively, "Cash Flow
Agreements"). See "Description of the Trust Funds," "Description of the
Certificates" and "Description of Credit Support."
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of the Offered Certificates of any Series unless
accompanied by the Prospectus Supplement for such Series.
(cover continued on next page)
--------------
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE
OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL
SERVICER, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON, EXCEPT TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS
SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT
OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND
SERVICING AGREEMENT OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN.
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 SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN AND SUCH INFORMATION AS MAY
BE SET FORTH UNDER THE CAPTION "RISK FACTORS" IN THE RELATED PROSPECTUS
SUPPLEMENT BEFORE PURCHASING ANY OFFERED CERTIFICATE.
Prior to issuance there will have been no market for the Certificates of
any Series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will
continue. This Prospectus may not be used to consummate sales of the Offered
Certificates of any Series unless accompanied by the Prospectus Supplement for
such Series.
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters as more fully
described under "Method of Distribution" herein and the related Prospectus
Supplement."
--------------
THE DATE OF THIS PROSPECTUS IS ________, 199_
<PAGE>
VERSION 3: RETAIL PROPERTIES
[The following to be inserted on PAGE ii of the PROSPECTUS SUPPLEMENT,
immediately following the second sentence of the first paragraph:]
Retail properties will represent security for a material concentration of the
Mortgage Loans in any Trust Fund, based on principal balance at the time such
Trust Fund is formed.
<PAGE>
VERSION 3: RETAIL PROPERTIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS,
immediately following "RISK FACTORS--RISKS ASSOCIATED WITH MORTGAGE LOANS AND
MORTGAGED PROPERTIES":]
Risks Particular to Retail Properties.............................[page no.]
<PAGE>
VERSION 3: RETAIL PROPERTIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS
SUPPLEMENT, immediately following "DESCRIPTION OF THE MORTGAGE POOL--GENERAL":]
Mortgage Loans Secured by Retail Properties....................... [page no.]
<PAGE>
VERSION 3: RETAIL PROPERTIES
[The following to be inserted in the PROSPECTUS under "RISK FACTORS,"
immediately following "RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED
PROPERTIES" and in the PROSPECTUS SUPPLEMENT under "RISK FACTORS," immediately
following "RISKS ASSOCIATED WITH CERTAIN OF THE MORTGAGE LOANS AND MORTGAGED
PROPERTIES":]
RISKS PARTICULAR TO RETAIL PROPERTIES
In addition to risks generally associated with real estate, Mortgage
Loans secured by retail properties are also affected significantly by adverse
changes in consumer spending patterns, local competitive conditions (such as
the supply of retail space or the existence or construction of new competitive
shopping centers or shopping malls), alternative forms of retailing (such as
direct mail, video shopping networks and selling through the Internet which
reduce the need for retail space by retail companies), the quality and
management philosophy of management, the attractiveness of the properties and
the surrounding neighborhood to tenants and their customers, the public
perception of the safety of customers at shopping malls and shopping centers,
and the need to make major repairs or improvements to satisfy the needs of
major tenants.
Retail properties may be adversely affected if a significant tenant
ceases operations at such locations (which may occur on account of a voluntary
decision not to renew a lease, bankruptcy or insolvency of such tenant, such
tenant's general cessation of business activities or for other reasons).
Significant tenants at a retail property play an important part in generating
customer traffic and making a retail property a desirable location for other
tenants at such property. In addition, certain tenants at retail properties may
be entitled to terminate their leases if an anchor tenant ceases operations at
such property. In such cases, there can be no assurance that any such anchor
tenants will continue to occupy space in the related shopping centers.
<PAGE>
VERSION 3: RETAIL PROPERTIES
[The following to be inserted in the PROSPECTUS under "DESCRIPTION OF THE TRUST
FUNDS," immediately following "MORTGAGE LOANS--GENERAL" and in the PROSPECTUS
SUPPLEMENT under "DESCRIPTION OF THE MORTGAGE POOL," immediately following
"GENERAL":]
MORTGAGE LOANS SECURED BY RETAIL PROPERTIES
Retail properties generally derive all or a substantial percentage of
their income from lease payments from commercial tenants. Income from and the
market value of retail properties is dependent on various factors including,
but not limited to, the ability to lease space in such properties, the ability
of tenants to meet their lease obligations, the possibility of a significant
tenant becoming a debtor in a bankruptcy case under the Bankruptcy Code, as
well as fundamental aspects of real estate such as location and market
demographics.
The correlation between the success of tenant businesses and property
value is more direct with respect to retail properties than other types of
commercial property because a significant component of the total rent paid by
retail tenants is often tied to a percentage of gross sales. Declines in sales
of tenants of retail properties will likely cause a corresponding decline in
percentage rents and such tenants may become unable to pay their rent or other
occupancy costs. The default by a tenant under its lease could result in delays
and costs in enforcing the lessor's rights. Repayment of the related mortgage
loans will be affected by the expiration of space leases and the ability of the
respective borrowers to renew or relet the space on comparable terms. Even if
vacated space is successfully relet, the costs associated with reletting,
including tenant improvements, leasing commissions and free rent, could be
substantial and could reduce cash flow from the retail properties.
Whether a retail property is "anchored" or "unanchored" is also a
relevant factor. Generally, retail properties that are anchored are perceived
to be less risky. A retail anchor tenant is normally understood to be
proportionately large in size and vital in attracting customers to the
property. Furthermore, the correlation between the success of tenant businesses
and property value is increased when the property is a single tenant property.
Unlike office or hotel properties, retail properties also face
competition from sources outside a given real estate market. Catalogue
retailers, home shopping networks, telemarketing, selling through the Internet,
and outlet centers all compete with more traditional retail properties for
consumer dollars. Continued growth of these alternative retail outlets (which
are often characterized by lower operating costs) could adversely affect the
rents collectible at retail properties.
<PAGE>
Information contained hereto is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement become
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by 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.
VERSION 4: HOTEL PROPERTIES
PROSPECTUS
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
The mortgage pass-through certificates (the "Offered Certificates")
offered hereby and by supplements hereto (each, a "Prospectus Supplement") will
be offered from time to time in one or more series (each, a "Series"). The
Offered Certificates of any Series, together with any other mortgage
pass-through certificates of such Series, are collectively referred to herein
as the "Certificates". Each Series of Certificates will represent in the
aggregate the entire beneficial ownership interest in a trust fund (with
respect to any Series, the "Trust Fund") consisting of one or more segregated
pools of various types of multifamily or commercial mortgage loans (the
"Mortgage Loans"), mortgage participations, mortgage pass-through certificates
or other mortgage-backed securities evidencing interests in or secured by
multifamily or commercial mortgage loans (collectively, the "CMBS") or a
combination of Mortgage Loans and/or CMBS (with respect to any Series,
collectively, the "Mortgage Assets"). Hotel properties will represent security
for a material concentration of the Mortgage Loans (or the mortgage loans
underlying the CMBS) in any Trust Fund, based on principal balance at the time
such Trust Fund is formed. If so specified in the related Prospectus
Supplement, some or all of the Mortgage Loans will include assignments of the
leases of the related Mortgaged Properties (as defined herein) and/or
assignments of the rental payments due from the lessees under such leases (each
type of assignment, a "Lease Assignment"). A significant or the sole source of
payments on certain Commercial Loans (as defined herein) and, therefore, of
distributions on certain Series of Certificates, will be such rental payments.
If so specified in the related Prospectus Supplement, the Trust Fund for a
Series of Certificates may include letters of credit, insurance policies,
guarantees, reserve funds or other types of credit support, or any combination
thereof (with respect to any Series, collectively, "Credit Support"), and
currency or interest rate exchange agreements and other financial assets, or
any combination thereof (with respect to any Series, collectively, "Cash Flow
Agreements"). See "Description of the Trust Funds," "Description of the
Certificates" and "Description of Credit Support."
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of the Offered Certificates of any Series unless
accompanied by the Prospectus Supplement for such Series.
(cover continued on next page)
--------------
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE
OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL
SERVICER, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON, EXCEPT TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS
SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT
OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND
SERVICING AGREEMENT OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN.
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 SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN AND SUCH INFORMATION AS MAY
BE SET FORTH UNDER THE CAPTION "RISK FACTORS" IN THE RELATED PROSPECTUS
SUPPLEMENT BEFORE PURCHASING ANY OFFERED CERTIFICATE.
Prior to issuance there will have been no market for the Certificates of
any Series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will
continue. This Prospectus may not be used to consummate sales of the Offered
Certificates of any Series unless accompanied by the Prospectus Supplement for
such Series.
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters as more fully
described under "Method of Distribution" herein and the related Prospectus
Supplement."
--------------
THE DATE OF THIS PROSPECTUS IS ________, 199_
<PAGE>
VERSION 4: HOTEL PROPERTIES
[The following to be inserted on PAGE ii of the PROSPECTUS SUPPLEMENT,
immediately following the second sentence of the first paragraph:]
Hotel properties will represent security for a material concentration of the
Mortgage Loans in any Trust Fund, based on principal balance at the time such
Trust Fund is formed.
<PAGE>
VERSION 4: HOTEL PROPERTIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS,
immediately following "RISK FACTORS--RISKS ASSOCIATED WITH MORTGAGE LOANS AND
MORTGAGED PROPERTIES":]
Risks Particular to Hotel Properties..............................[page no.]
<PAGE>
VERSION 4: HOTEL PROPERTIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS
SUPPLEMENT, immediately following "DESCRIPTION OF THE MORTGAGE POOL--GENERAL":]
Mortgage Loans Secured by Hotel Properties........................[page no.]
<PAGE>
VERSION 4: HOTEL PROPERTIES
[The following to be inserted in the PROSPECTUS under "RISK FACTORS,"
immediately following "RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED
PROPERTIES" and in the PROSPECTUS SUPPLEMENT under "RISK FACTORS," immediately
following "RISKS ASSOCIATED WITH CERTAIN OF THE MORTGAGE LOANS AND MORTGAGED
PROPERTIES":]
RISKS PARTICULAR TO HOTEL PROPERTIES
Various factors, including location, quality and franchise affiliation,
if any, affect the economic viability of a hotel. Like any income producing
property, the income generated by a hotel property is subject to several
factors such as local, regional and national economic conditions and
competition. Adverse economic conditions, either local, regional or national,
may limit the amount that can be charged for a room and may result in a
reduction in occupancy levels. The construction of competing hotels or motels
can have similar effects. Because hotel property income is primarily generated
by room occupancy and such occupancy is usually for short periods of time, the
level of such income may respond more quickly to adverse conditions such as
those described above. This daily mark-to-market also accentuates the highs and
lows of economic cycles. Moreover, as a result of relatively high operating
costs, relatively small decreases in revenue can cause significant stress on a
property's cash flow. Also, sensitivity to competition may require more
frequent improvements and renovations than other properties. Furthermore, the
financial strength and capabilities of the owner and operator of a hotel may
have an impact on such hotel's quality of service and economic viability.
Finally, the hotel industry is generally seasonal. This will result in
fluctuation in the income generated by hotel properties.
To the extent a hotel is affiliated to, or associated with, a regional,
national or international chain, changes in the public perception of such chain
may have an impact on the income generated by the related property. The
viability of any hotel property which is affiliated with a franchise depends in
part on the continued existence and financial strength of the franchisor, the
public perception of the franchise service mark and the duration of the
franchise licensing agreements. The transferability of franchise license
agreements may be restricted, and in the event of a foreclosure on any hotel
property, the purchaser of such hotel property would not have the right to use
the franchise license without the franchisor's consent. Further, in the event
of a foreclosure on a hotel property, it is unlikely that the Trustee (or
Master Servicer) or purchaser of such hotel property would be entitled to the
rights under any liquor license. Conversely, a lender may be unable to remove a
franchisor that it desires to replace following a foreclosure .
<PAGE>
VERSION 4: HOTEL PROPERTIES
[The following to be inserted in the PROSPECTUS under "DESCRIPTION OF THE TRUST
FUNDS," immediately following "MORTGAGE LOANS--GENERAL" and in the PROSPECTUS
SUPPLEMENT under "DESCRIPTION OF THE MORTGAGE POOL," immediately following
"GENERAL":]
MORTGAGE LOANS SECURED BY HOTEL PROPERTIES
Hotel properties may involve different types of hotels, including full
service hotels, limited service hotels, hotels associated with national
franchise chains, hotels associated with regional franchise chains and hotels
that are not affiliated with any franchise chain but may have their own brand
identity. Various factors, including location, quality and franchise
affiliation affect the economic performance of a hotel. Adverse economic
conditions, either local, regional or national, may limit the amount that can
be charged for a room and may result in a reduction in occupancy levels. The
construction of competing hotels can have similar effects. To meet competition
in the industry and to maintain economic values, continuing expenditures must
be made for modernizing, refurbishing, and maintaining existing facilities
prior to the expiration of their anticipated useful lives. Because hotel rooms
generally are rented for short periods of time, hotels tend to respond more
quickly to adverse economic conditions and competition than do other commercial
properties. Furthermore, the financial strength and capabilities of the owner
and operator of a hotel may have an impact on such hotel's quality of service
and economic performance. Additionally, the hotel and lodging industry is
generally seasonal in nature and this seasonality can be expected to cause
periodic fluctuations in room and other revenues, occupancy levels, room rates
and operating expenses. The demand for particular accommodations may also be
affected by changes in travel patterns caused by changes in energy prices,
strikes, relocation of highways, the construction of additional highways and
other factors.
The viability of any hotel property that is a franchise of a national or
a regional hotel chain depends in part on the continued existence and financial
strength of the franchisor, the public perception of the franchise service mark
and the duration of the franchise licensing agreement. The transferability of
franchise license agreements may be restricted and, in the event of a
foreclosure on any such hotel property, the consent of the franchisor for the
continued use the franchise license by the hotel property would be required.
Conversely, a lender may be unable to remove a franchisor that it desires to
replace following a foreclosure. Further, in the event of a foreclosure on a
hotel property, it is unlikely that the purchaser (or the trustee, servicer or
special servicer, as the case may be) of such hotel property may be entitled to
the rights under any liquor license for such hotel property, and such party
would be required to apply in its own right for such license or licenses. There
can be no assurance that a new license could be obtained or that it could be
obtained promptly.
<PAGE>
Information contained hereto is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement become
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by 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.
VERSION 5: HEALTH CARE-RELATED FACILITIES
PROSPECTUS
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
The mortgage pass-through certificates (the "Offered Certificates")
offered hereby and by supplements hereto (each, a "Prospectus Supplement") will
be offered from time to time in one or more series (each, a "Series"). The
Offered Certificates of any Series, together with any other mortgage
pass-through certificates of such Series, are collectively referred to herein
as the "Certificates". Each Series of Certificates will represent in the
aggregate the entire beneficial ownership interest in a trust fund (with
respect to any Series, the "Trust Fund") consisting of one or more segregated
pools of various types of multifamily or commercial mortgage loans (the
"Mortgage Loans"), mortgage participations, mortgage pass-through certificates
or other mortgage-backed securities evidencing interests in or secured by
multifamily or commercial mortgage loans (collectively, the "CMBS") or a
combination of Mortgage Loans and/or CMBS (with respect to any Series,
collectively, the "Mortgage Assets"). Health care-related facilities will
represent security for a material concentration of the Mortgage Loans (or the
mortgage loans underlying the CMBS) in any Trust Fund, based on principal
balance at the time such Trust Fund is formed. If so specified in the related
Prospectus Supplement, some or all of the Mortgage Loans will include
assignments of the leases of the related Mortgaged Properties (as defined
herein) and/or assignments of the rental payments due from the lessees under
such leases (each type of assignment, a "Lease Assignment"). A significant or
the sole source of payments on certain Commercial Loans (as defined herein)
and, therefore, of distributions on certain Series of Certificates, will be
such rent payments. If so specified in the related Prospectus Supplement, the
Trust Fund for a Series of Certificates may include letters of credit,
insurance policies, guarantees, reserve funds or other types of credit support,
or any combination thereof (with respect to any Series, collectively, "Credit
Support"), and currency or interest rate exchange agreements and other
financial assets, or any combination thereof (with respect to any Series,
collectively, "Cash Flow Agreements"). See "Description of the Trust Funds,"
"Description of the Certificates" and "Description of Credit Support."
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of the Offered Certificates of any Series unless
accompanied by the Prospectus Supplement for such Series.
(cover continued on next page)
--------------
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE
OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL
SERVICER, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON, EXCEPT TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS
SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT
OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND
SERVICING AGREEMENT OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN.
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 SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN AND SUCH INFORMATION AS MAY
BE SET FORTH UNDER THE CAPTION "RISK FACTORS" IN THE RELATED PROSPECTUS
SUPPLEMENT BEFORE PURCHASING ANY OFFERED CERTIFICATE.
Prior to issuance there will have been no market for the Certificates of
any Series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will
continue. This Prospectus may not be used to consummate sales of the Offered
Certificates of any Series unless accompanied by the Prospectus Supplement for
such Series.
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters as more fully
described under "Method of Distribution" herein and the related Prospectus
Supplement."
--------------
THE DATE OF THIS PROSPECTUS IS ________, 199_
<PAGE>
VERSION 5: HEALTH CARE-RELATED FACILITIES
[The following to be inserted on PAGE ii of the PROSPECTUS SUPPLEMENT,
immediately following the second sentence of the first paragraph:]
Health care-related facilities will represent security for a material
concentration of the Mortgage Loans in any Trust Fund, based on principal
balance at the time such Trust Fund is formed.
<PAGE>
VERSION 5: HEALTH CARE-RELATED FACILITIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS,
immediately following "RISK FACTORS--RISKS ASSOCIATED WITH MORTGAGE LOANS AND
MORTGAGED PROPERTIES":]
Risks Particular to Health Care-Related Facilities................ [page no.]
<PAGE>
VERSION 5: HEALTH CARE-RELATED FACILITIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS
SUPPLEMENT, immediately following "DESCRIPTION OF THE MORTGAGE POOL--GENERAL":]
Mortgage Loans Secured by Health Care-Related Properties..........[page no.]
<PAGE>
VERSION 5: HEALTH CARE-RELATED FACILITIES
[The following to be inserted in the PROSPECTUS under "RISK FACTORS,"
immediately FOLLOWING "RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED
PROPERTIES" and in the PROSPECTUS SUPPLEMENT under "RISK FACTORS," immediately
FOLLOWING "RISKS ASSOCIATED WITH CERTAIN OF THE MORTGAGE LOANS AND MORTGAGED
PROPERTIES":]
RISKS PARTICULAR TO HEALTH CARE-RELATED PROPERTIES
Certain types of health care-related facilities (including nursing homes)
typically receive a substantial portion of their revenues from government
reimbursement programs, primarily Medicaid and Medicare. Medicaid and Medicare
are subject to statutory and regulatory changes, retroactive rate adjustments,
administrative rulings, policy interpretations, delays by fiscal intermediaries
and government funding restrictions, all of which can adversely affect revenues
from operation. Moreover, governmental payors have employed cost-containment
measures that limit payments to health care providers and there are currently
under consideration various proposals for national health care relief that
could further limit these payments. In addition, providers of long-term nursing
care and other medical services are highly regulated by federal, state and
local law and are subject to, among other things, federal and state licensing
requirements, facility inspections, rate setting, reimbursement policies, and
laws relating to the adequacy of medical care, distribution of pharmaceuticals,
equipment, personnel operating policies and maintenance of and additions to
facilities and services, any or all of which factors can increase the cost of
operation, limit growth and in extreme cases, require or result in suspension
or cessation of operations.
Under applicable federal and state laws and regulations, Medicare and
Medicaid reimbursements are generally not permitted to be made to any person
other than the provider who actually furnished the related medical goods and
services. Accordingly, in the event of foreclosure on a Mortgaged Property that
is operated as a health care-related facility, none of the Trustee, the Special
Servicer or a subsequent lessee or operator of the Mortgaged Property would
generally be entitled to obtain from federal or state governments any
outstanding reimbursement payments relating to services furnished at the
respective Mortgaged Properties prior to such foreclosure. Furthermore, in the
event of foreclosure, there can be no assurance that the Trustee (or Special
Servicer) or purchaser in a foreclosure sale would be entitled to the rights
under any required licenses and regulatory approvals and such party may have to
apply in its own right for such licenses and approvals. There can be no
assurance that a new license could be obtained or that a new approval would be
granted. In addition, health care-related facilities are generally "special
purpose" properties that could not be readily converted to general residential,
retail or office use, and transfers of health care-related facilities are
subject to regulatory approvals under state, and in some cases federal, law not
required for transfers of other types of commercial operations and other types
of real estate, all of which may adversely affect the liquidation value.
<PAGE>
VERSION 5: HEALTH CARE-RELATED FACILITIES
[The following to be inserted in the PROSPECTUS under "DESCRIPTION OF THE TRUST
FUNDS," immediately following "MORTGAGE LOANS--GENERAL" and in the PROSPECTUS
SUPPLEMENT under "DESCRIPTION OF THE MORTGAGE POOL," immediately following
"GENERAL":]
MORTGAGE LOANS SECURED BY HEALTH CARE-RELATED PROPERTIES
The Mortgaged Properties may include Senior Housing, Assisted Living
Facilities, Skilled Nursing Facilities and Acute Care Facilities (any of the
foregoing, "Health Care-Related Facilities"). "Senior Housing" generally
consist of facilities with respect to which the residents are ambulatory,
handle their own affairs and typically are couples whose children have left the
home and at which the accommodations are usually apartment style. "Assisted
Living Facilities" are typically single or double room occupancy,
dormitory-style housing facilities which provide food service, cleaning and
some personal care and with respect to which the tenants are able to medicate
themselves but may require assistance with certain daily routines. "Skilled
Nursing Facilities" provide services to post trauma and frail residents with
limited mobility who require extensive medical treatment. "Acute Care
Facilities" generally consist of hospital and other facilities providing
short-term, acute medical care services.
Certain types of Health Care-Related Facilities, particularly Acute Care
Facilities, Skilled Nursing Facilities and some Assisted Living Facilities,
typically receive a substantial portion of their revenues from government
reimbursement programs, primarily Medicaid and Medicare. Medicaid and Medicare
are subject to statutory and regulatory changes, retroactive rate adjustments,
administrative rulings, policy interpretations, delays by fiscal intermediaries
and government funding restrictions. Moreover, governmental payors have
employed cost-containment measures that limit payments to health care
providers, and there exist various proposals for national health care reform
that could further limit those payments. Accordingly, there can be no assurance
that payments under government reimbursement programs will, in the future, be
sufficient to fully reimburse the cost of caring for program beneficiaries. If
such payments are insufficient, net operating income of those Health
Care-Related Facilities that receive revenues from those sources, and
consequently the ability of the related borrowers to meet their obligations
under any Mortgage Loans secured thereby, could be adversely affected.
Moreover, Health Care-Related Facilities are generally subject to federal
and state laws that relate to the adequacy of medical care, distribution of
pharmaceuticals, rate setting, equipment, personnel, operating policies and
additions to facilities and services. In addition, facilities where such care
or other medical services are provided are subject to periodic inspection by
governmental authorities to determine compliance with various standards
necessary to continued licensing under state law and continued participation in
the Medicaid and Medicare reimbursement programs. Providers of assisted living
services are also subject to state licensing requirements in certain states.
The failure of an operator to maintain or renew any required license or
regulatory approval could prevent it from continuing operations at a Health
Care-Related Facility or, if applicable, bar it from participation in
government reimbursement programs. Furthermore, under applicable federal and
state laws and regulations, Medicare and Medicaid reimbursements are generally
not permitted to be made to any person other than the provider who actually
furnished the related medical goods and services. Accordingly, in the event of
foreclosure, none of the Trustee, the Master Servicer, the Special Servicer or
a subsequent lessee or operator of any Health Care-Related Facility securing a
defaulted Mortgage Loan (a "Health Care-Related Mortgaged Property") would
generally be entitled to obtain from federal or state governments any
outstanding reimbursement payments relating to services furnished at such
property prior to such foreclosure. Any of the aforementioned events may
adversely affect the ability of the related borrowers to meet their Mortgage
Loan obligations.
<PAGE>
VERSION 5: HEALTH CARE-RELATED FACILITIES
Government regulation applying specifically to Acute Care Facilities,
Skilled Nursing Facilities and certain types of Assisted Living Facilities
includes health planning legislation, enacted by most states, intended, at
least in part, to regulate the supply of nursing beds. The most common method
of control is the requirement that a state authority first make a determination
of need, evidenced by its issuance of a Certificate of Need ("CON"), before a
long-term care provider can establish a new facility, add beds to an existing
facility or, in some states, take certain other actions (for example, acquire
major medical equipment, make major capital expenditures, add services,
refinance long-term debt, or transfer ownership of a facility). States also
regulate nursing bed supply in other ways. For example, some states have
imposed moratoria on the licensing of new beds, or on the certification of new
Medicaid beds, or have discouraged the construction of new nursing facilities
by limiting Medicaid reimbursements allocable to the cost of new construction
and equipment. In general, a CON is site specific and operator specific; it
cannot be transferred from one site to another, or to another operator, without
the approval of the appropriate state agency. Accordingly, if a Mortgage Loan
secured by a lien on such a Health Care-Related Mortgaged Property were
foreclosed upon, the purchaser at foreclosure might be required to obtain a new
CON or an appropriate exemption. In addition, compliance by a purchaser with
applicable regulations may in any case require the engagement of a new operator
and the issuance of a new operating license. Upon a foreclosure, a state
regulatory agency may be willing to expedite any necessary review and approval
process to avoid interruption of care to a facility's residents, but there can
be no assurance that any will do so or that any necessary licenses or approvals
will be issued.
Further government regulation applicable to Health Care-Related
Facilities is found in the form of federal and state "fraud and abuse" laws
that generally prohibit payment or fee-splitting arrangements between health
care providers that are designed to induce or encourage the referral of
patients to, or the recommendation of, a particular provider for medical
products or services. Violation of these restrictions can result in license
revocation, civil and criminal penalties, and exclusion from participation in
Medicare or Medicaid programs. The state law restrictions in this area vary
considerably from state to state. Moreover, the federal anti-kickback law
includes broad language that potentially could be applied to a wide range of
referral arrangements, and regulations designed to create "safe harbors" under
the law provide only limited guidance. Accordingly, there can be no assurance
that such laws will be interpreted in a manner consistent with the practices of
the owners or operators of the Health Care-Related Mortgaged Properties that
are subject to such laws.
The operators of Health Care-Related Facilities are likely to compete on
a local and regional basis with others that operate similar facilities, some of
which competitors may be better capitalized, may offer services not offered by
such operators, or may be owned by non-profit organizations or government
agencies supported by endowments, charitable contributions, tax revenues and
other sources not available to such operators. The successful operation of a
Health Care-Related Facility will generally depend upon the number of competing
facilities in the local market, as well as upon other factors such as its age,
appearance, reputation and management, the types of services it provides and,
where applicable, the quality of care and the cost of that care. The inability
of a Health Care-Related Mortgaged Property to flourish in a competitive market
may increase the likelihood of foreclosure on the related Mortgage Loan,
possibly affecting the yield on one or more classes of the related series of
Offered Certificates.
<PAGE>
Information contained hereto is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement become
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by 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.
VERSION 6: INDUSTRIAL PROPERTIES
PROSPECTUS
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.,
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
The mortgage pass-through certificates (the "Offered Certificates")
offered hereby and by supplements hereto (each, a "Prospectus Supplement") will
be offered from time to time in one or more series (each, a "Series"). The
Offered Certificates of any Series, together with any other mortgage
pass-through certificates of such Series, are collectively referred to herein
as the "Certificates". Each Series of Certificates will represent in the
aggregate the entire beneficial ownership interest in a trust fund (with
respect to any Series, the "Trust Fund") consisting of one or more segregated
pools of various types of multifamily or commercial mortgage loans (the
"Mortgage Loans"), mortgage participations, mortgage pass-through certificates
or other mortgage-backed securities evidencing interests in or secured by
multifamily or commercial mortgage loans (collectively, the "CMBS") or a
combination of Mortgage Loans and/or CMBS (with respect to any Series,
collectively, the "Mortgage Assets"). Industrial properties will represent
security for a material concentration of the Mortgage Loans (or the mortgage
loans underlying the CMBS) in any Trust Fund, based on principal balance at the
time such Trust Fund is formed. If so specified in the related Prospectus
Supplement, some or all of the Mortgage Loans will include assignments of the
leases of the related Mortgaged Properties (as defined herein) and/or
assignments of the rental payments due from the lessees under such leases (each
type of assignment, a "Lease Assignment"). A significant or the sole source of
payments on certain Commercial Loans (as defined herein) and, therefore, of
distributions on certain Series of Certificates, will be such rental payments.
If so specified in the related Prospectus Supplement, the Trust Fund for a
Series of Certificates may include letters of credit, insurance policies,
guarantees, reserve funds or other types of credit support, or any combination
thereof (with respect to any Series, collectively, "Credit Support"), and
currency or interest rate exchange agreements and other financial assets, or
any combination thereof (with respect to any Series, collectively, "Cash Flow
Agreements"). See "Description of the Trust Funds," "Description of the
Certificates" and "Description of Credit Support."
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of the Offered Certificates of any Series unless
accompanied by the Prospectus Supplement for such Series.
(cover continued on next page)
--------------
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE
OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL
SERVICER, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON, EXCEPT TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS
SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT
OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND
SERVICING AGREEMENT OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN.
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 SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN AND SUCH INFORMATION AS MAY
BE SET FORTH UNDER THE CAPTION "RISK FACTORS" IN THE RELATED PROSPECTUS
SUPPLEMENT BEFORE PURCHASING ANY OFFERED CERTIFICATE.
Prior to issuance there will have been no market for the Certificates of
any Series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will
continue. This Prospectus may not be used to consummate sales of the Offered
Certificates of any Series unless accompanied by the Prospectus Supplement for
such Series.
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters as more fully
described under "Method of Distribution" herein and the related Prospectus
Supplement."
--------------
THE DATE OF THIS PROSPECTUS IS ________, 199_
<PAGE>
VERSION 6: INDUSTRIAL PROPERTIES
[The following to be inserted on PAGE ii of the PROSPECTUS SUPPLEMENT,
immediately following the second sentence of the first paragraph:]
Industrial properties will represent security for a material concentration of
the Mortgage Loans in any Trust Fund, based on principal balance at the time
such Trust Fund is formed.
<PAGE>
VERSION 6: INDUSTRIAL PROPERTIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS,
immediately Following "RISK FACTORS--RISKS ASSOCIATED WITH MORTGAGE LOANS AND
MORTGAGED PROPERTIES":]
Risks Particular to Industrial Properties......................... [page no.]
<PAGE>
VERSION 6: INDUSTRIAL PROPERTIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS
SUPPLEMENT, immediately following "DESCRIPTION OF THE MORTGAGE POOL--GENERAL":]
Mortgage Loans Secured by Industrial Properties...................[page no.]
<PAGE>
VERSION 6: INDUSTRIAL PROPERTIES
[The following to be inserted in the PROSPECTUS under "RISK FACTORS,"
immediately Following "RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED
PROPERTIES" and in the PROSPECTUS SUPPLEMENT under "RISK FACTORS," immediately
following "RISKS ASSOCIATED WITH CERTAIN OF THE MORTGAGE LOANS AND MORTGAGED
PROPERTIES":]
RISKS PARTICULAR TO INDUSTRIAL PROPERTIES
Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment, and
an industrial property that suited the particular needs of its original tenant
may be difficult to relet to another tenant or may become functionally obsolete
relative to newer properties. Furthermore, industrial properties may be
adversely affected by the availability of labor sources or a change in the
proximity of supply sources.
<PAGE>
VERSION 6: INDUSTRIAL PROPERTIES
[The following to be inserted in the PROSPECTUS under "DESCRIPTION OF THE TRUST
FUNDS," immediately following "MORTGAGE LOANS--GENERAL" and in the PROSPECTUS
SUPPLEMENT under "DESCRIPTION OF THE MORTGAGE POOL," immediately following
"GENERAL":]
MORTGAGE LOANS SECURED BY INDUSTRIAL PROPERTIES
Significant factors determining the value of industrial properties are
the quality of tenants, building design and adaptability, the functionality of
the finish-out and the location of the property. Concerns about the quality of
tenants, particularly major tenants, are similar in both office properties and
industrial properties, although industrial properties are more frequently
dependent on a single tenant.
Aspects of building site, design and adaptability affect the value of an
industrial property. Site characteristics which are valuable to an industrial
property include clear heights, column spacing, number of bays and bay depths,
divisibility, floor loading capacities, truck turning radius and overall
functionality and accessibility. Nevertheless, site characteristics of an
industrial property suitable for one tenant may not be appropriate for other
potential tenants, which may make it difficult to relet the property.
Location is also important because an industrial property requires the
availability of labor sources, proximity to supply sources and customers and
accessibility to rail lines, major roadways and other distribution channels.
Further, industrial properties may be adversely affected by economic declines
in the industry segment of their tenants.
<PAGE>
Information contained hereto is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement become
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by 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.
VERSION 7: SELF-STORAGE FACILITIES
PROSPECTUS
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
The mortgage pass-through certificates (the "Offered Certificates")
offered hereby and by supplements hereto (each, a "Prospectus Supplement") will
be offered from time to time in one or more series (each, a "Series"). The
Offered Certificates of any Series, together with any other mortgage
pass-through certificates of such Series, are collectively referred to herein
as the "Certificates". Each Series of Certificates will represent in the
aggregate the entire beneficial ownership interest in a trust fund (with
respect to any Series, the "Trust Fund") consisting of one or more segregated
pools of various types of multifamily or commercial mortgage loans (the
"Mortgage Loans"), mortgage participations, mortgage pass-through certificates
or other mortgage-backed securities evidencing interests in or secured by
multifamily or commercial mortgage loans (collectively, the "CMBS") or a
combination of Mortgage Loans and/or CMBS (with respect to any Series,
collectively, the "Mortgage Assets"). Self-storage facilities will represent
security for a material concentration of the Mortgage Loans (or the mortgage
loans underlying the CMBS) in any Trust Fund, based on principal balance at the
time such Trust Fund is formed. If so specified in the related Prospectus
Supplement, some or all of the Mortgage Loans will include assignments of the
leases of the related Mortgaged Properties (as defined herein) and/or
assignments of the rental payments due from the lessees under such leases (each
type of assignment, a "Lease Assignment"). A significant or the sole source of
payments on certain Commercial Loans (as defined herein) and, therefore, of
distributions on certain Series of Certificates, will be such rental payments.
If so specified in the related Prospectus Supplement, the Trust Fund for a
Series of Certificates may include letters of credit, insurance policies,
guarantees, reserve funds or other types of credit support, or any combination
thereof (with respect to any Series, collectively, "Credit Support"), and
currency or interest rate exchange agreements and other financial assets, or
any combination thereof (with respect to any Series, collectively, "Cash Flow
Agreements"). See "Description of the Trust Funds," "Description of the
Certificates" and "Description of Credit Support."
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of the Offered Certificates of any Series unless
accompanied by the Prospectus Supplement for such Series.
(cover continued on next page)
--------------
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE
OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL
SERVICER, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON, EXCEPT TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS
SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT
OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND
SERVICING AGREEMENT OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN.
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 SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN AND SUCH INFORMATION AS MAY
BE SET FORTH UNDER THE CAPTION "RISK FACTORS" IN THE RELATED PROSPECTUS
SUPPLEMENT BEFORE PURCHASING ANY OFFERED CERTIFICATE.
Prior to issuance there will have been no market for the Certificates of
any Series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will
continue. This Prospectus may not be used to consummate sales of the Offered
Certificates of any Series unless accompanied by the Prospectus Supplement for
such Series.
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters as more fully
described under "Method of Distribution" herein and the related Prospectus
Supplement."
--------------
THE DATE OF THIS PROSPECTUS IS ________, 199_
<PAGE>
VERSION 7: SELF-STORAGE FACILITIES
[The following to be inserted on PAGE ii of the PROSPECTUS SUPPLEMENT,
immediately following the second sentence of the first paragraph:]
Self-storage facilities will represent security for a material concentration of
the Mortgage Loans in any Trust Fund, based on principal balance at the time
such Trust Fund is formed.
<PAGE>
VERSION 7: SELF-STORAGE FACILITIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS,
immediately following "RISK FACTORS--RISKS ASSOCIATED WITH MORTGAGE LOANS AND
MORTGAGED PROPERTIES":]
Risks Particular to Self-Storage Facilities.......................[page no.]
<PAGE>
VERSION 7: SELF-STORAGE FACILITIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS
SUPPLEMENT, immediately following "DESCRIPTION OF THE MORTGAGE POOL--GENERAL":]
Mortgage Loans Secured by Self-Storage Facilities.................[page no.]
<PAGE>
VERSION 7: SELF-STORAGE FACILITIES
[The following to be inserted in the PROSPECTUS under "RISK FACTORS,"
immediately following "RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED
PROPERTIES" and in the PROSPECTUS SUPPLEMENT under "RISK FACTORS," immediately
following "RISKS ASSOCIATED WITH CERTAIN OF THE MORTGAGE LOANS AND MORTGAGED
PROPERTIES":]
RISKS PARTICULAR TO SELF-STORAGE FACILITIES
Self-storage properties are considered vulnerable to competition because
both acquisition costs and break-even occupancy are relatively low. The
conversion of self-storage facilities to alternative uses would generally
require substantial capital expenditures. Thus, if the operation of any of the
self-storage Mortgaged Properties becomes unprofitable due to decreased demand,
competition, age of improvements or other factors such that the borrower
becomes unable to meet its obligation on the related Mortgage Loan, the
liquidation value of that self-storage Mortgaged Property may be substantially
less, relative to the amount owing on the Mortgage Loan, than would be the case
if the self-storage Mortgaged Property were readily adaptable to other uses.
Tenant privacy, anonymity and efficient access may heighten environmental
risks. The environmental assessments discussed herein did not include an
inspection of the contents of the self-storage units included in the
self-storage Mortgaged Properties and there is no assurance that all of the
units included in the self-storage Mortgaged Properties are free from hazardous
substances or other pollutants or contaminants or will remain so in the future;
however, substantially all of the lease agreements used in connection with such
Mortgaged Properties prohibit the storage of hazardous substances, pollutants
or contaminants.
<PAGE>
VERSION 7: SELF-STORAGE FACILITIES
[The following to be inserted in the PROSPECTUS under "DESCRIPTION OF THE TRUST
FUNDS," immediately following "MORTGAGE LOANS--GENERAL" and in the PROSPECTUS
SUPPLEMENT under "DESCRIPTION OF THE MORTGAGE POOL," immediately following
"GENERAL":]
MORTGAGE LOANS SECURED BY SELF-STORAGE FACILITIES
Because of relatively low acquisition costs and break-even occupancy
rates, self-storage facilities are considered vulnerable to competition.
Despite their low acquisition costs, and because of their particular building
characteristics, self-storage facilities would require substantial capital
investments in order to adapt them to alternative uses. Such constraint in
adaptability to other uses may substantially reduce the liquidation value of a
self-storage mortgaged property. In addition to competition, other factors that
affect the success of a self-storage facility, and thus the ability of the
borrower to meet its obligations on the related mortgage loan, include the
location and visibility of the facility, its proximity to apartment complexes
or commercial users, trends of apartment tenants in the area moving to
single-family homes, services provided (such as security and accessibility),
age of improvements, the appearance of the improvements and the quality of
management.
<PAGE>
Information contained hereto is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement become
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by 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.
VERSION 8: MANUFACTURED HOUSING COMMUNITIES
PROSPECTUS
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
The mortgage pass-through certificates (the "Offered Certificates")
offered hereby and by supplements hereto (each, a "Prospectus Supplement") will
be offered from time to time in one or more series (each, a "Series"). The
Offered Certificates of any Series, together with any other mortgage
pass-through certificates of such Series, are collectively referred to herein
as the "Certificates". Each Series of Certificates will represent in the
aggregate the entire beneficial ownership interest in a trust fund (with
respect to any Series, the "Trust Fund") consisting of one or more segregated
pools of various types of multifamily or commercial mortgage loans (the
"Mortgage Loans"), mortgage participations, mortgage pass-through certificates
or other mortgage-backed securities evidencing interests in or secured by
multifamily or commercial mortgage loans (collectively, the "CMBS") or a
combination of Mortgage Loans and/or CMBS (with respect to any Series,
collectively, the "Mortgage Assets"). Manufactured housing communities will
represent security for a material concentration of the Mortgage Loans (or the
mortgage loans underlying the CMBS) in any Trust Fund, based on principal
balance at the time such Trust Fund is formed. If so specified in the related
Prospectus Supplement, some or all of the Mortgage Loans will include
assignments of the leases of the related Mortgaged Properties (as defined
herein) and/or assignments of the rental payments due from the lessees under
such leases (each type of assignment, a "Lease Assignment"). A significant or
the sole source of payments on certain Commercial Loans (as defined herein)
and, therefore, of distributions on certain Series of Certificates, will be
such rental payments. If so specified in the related Prospectus Supplement, the
Trust Fund for a Series of Certificates may include letters of credit,
insurance policies, guarantees, reserve funds or other types of credit support,
or any combination thereof (with respect to any Series, collectively, "Credit
Support"), and currency or interest rate exchange agreements and other
financial assets, or any combination thereof (with respect to any Series,
collectively, "Cash Flow Agreements"). See "Description of the Trust Funds,"
"Description of the Certificates" and "Description of Credit Support."
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of the Offered Certificates of any Series unless
accompanied by the Prospectus Supplement for such Series.
(cover continued on next page)
--------------
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE
OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL
SERVICER, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON, EXCEPT TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS
SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT
OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND
SERVICING AGREEMENT OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN.
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 SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN AND SUCH INFORMATION AS MAY
BE SET FORTH UNDER THE CAPTION "RISK FACTORS" IN THE RELATED PROSPECTUS
SUPPLEMENT BEFORE PURCHASING ANY OFFERED CERTIFICATE.
Prior to issuance there will have been no market for the Certificates of
any Series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will
continue. This Prospectus may not be used to consummate sales of the Offered
Certificates of any Series unless accompanied by the Prospectus Supplement for
such Series.
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters as more fully
described under "Method of Distribution" herein and the related Prospectus
Supplement."
--------------
THE DATE OF THIS PROSPECTUS IS ________, 199_
<PAGE>
VERSION 8: MANUFACTURED HOUSING COMMUNITIES
[The following to be inserted on PAGE ii of the PROSPECTUS SUPPLEMENT,
immediately following the second sentence of the first paragraph:]
Manufactured housing communities will represent security for a material
concentration of the Mortgage Loans in any Trust Fund, based on principal
balance at the time such Trust Fund is formed.
<PAGE>
VERSION 8: MANUFACTURED HOUSING COMMUNITIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS,
immediately following "RISK FACTORS--RISKS ASSOCIATED WITH MORTGAGE LOANS AND
MORTGAGED PROPERTIES":]
Risks Particular to Manufactured Housing Communities.............. [page no.]
<PAGE>
VERSION 8: MANUFACTURED HOUSING COMMUNITIES
[The following to be inserted in the TABLE OF CONTENTS of the PROSPECTUS
SUPPLEMENT, immediately following "DESCRIPTION OF THE MORTGAGE POOL--GENERAL":]
Mortgage Loans Secured by Manufactured Housing Communities........[page no.]
<PAGE>
VERSION 8: MANUFACTURED HOUSING COMMUNITIES
[The following to be inserted in the PROSPECTUS under "RISK FACTORS,"
immediately following "RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED
PROPERTIES" and in the PROSPECTUS SUPPLEMENT under "RISK FACTORS," immediately
following "RISKS ASSOCIATED WITH CERTAIN OF THE MORTGAGE LOANS AND MORTGAGED
PROPERTIES":]
RISKS PARTICULAR TO MANUFACTURED HOUSING COMMUNITIES
The successful operation of a Mortgaged Property operated as a
manufactured housing community will generally depend upon the number of
competing manufactured housing communities and other residential developments
in the local market, as well as upon other factors such as its age, appearance,
reputation, management and the types of services it provides.
Manufactured housing communities are "special purpose" properties that
may not be readily converted to general residential, retail or office use.
Thus, if the operation of any of the Mortgaged Properties constituting
manufactured housing communities becomes unprofitable due to competition, age
of the improvements or other factors such that the borrower becomes unable to
meet its obligations on the related Mortgage Loan, the liquidation value of
that Mortgaged Property may be substantially less, relative to the amount owing
on the Mortgage Loan, than would be the case if the Mortgaged Property were
readily adaptable to other uses.
<PAGE>
VERSION 8: MANUFACTURED HOUSING COMMUNITIES
[The following to be inserted in the PROSPECTUS under "DESCRIPTION OF THE TRUST
FUNDS," immediately following "MORTGAGE LOANS--GENERAL" and in the PROSPECTUS
SUPPLEMENT under "DESCRIPTION OF THE MORTGAGE POOL," immediately following
"GENERAL":]
MORTGAGE LOANS SECURED BY MANUFACTURED HOUSING COMMUNITIES
For purposes of this discussion, manufactured housing communities may
include manufactured housing communities, recreational vehicle parks or
combinations thereof. Loans secured by liens on properties of these types are
affected by factors not associated with loans secured by liens on other types
of income-producing real estate. The successful operation of a manufactured
housing community will generally depend upon the number of competing
manufactured housing communities and other residential developments in the
local market (such as apartment buildings, other manufactured housing
communities and site-built single family homes), as well as upon other factors
such as its age, appearance, reputation, the ability of management to provide
adequate maintenance and insurance, and the types of services it provides.
Manufactured housing communities are "special purpose" properties that may not
be readily converted to general residential, retail or office use. Thus, if the
operation of a manufactured housing community becomes unprofitable due to
competition, age of the improvements or other factors such that the borrower
becomes unable to meet its obligations on the related mortgage loan, the
liquidation value of that manufactured housing community may be substantially
less, relative to the amount owing on the mortgage loan, than would be the case
if the manufactured housing community were readily adaptable to other uses.
Certain states regulate the relationship of a manufactured housing
community owner and its tenants. Commonly, these laws require a written lease,
good cause for eviction, disclosure of fees, and notification to residents of
changed land use, while prohibiting unreasonable rules, retaliatory evictions,
and restrictions on a resident's choice of unit vendors. Manufactured housing
community owners have been the subject of suits under state "Unfair and
Deceptive Practices Acts" and other general consumer protection statutes for
coercive, abusive or unconscionable leasing and sales practices. A few states
offer more significant protection. For example, there are provisions that limit
the basis on which a landlord may terminate a manufactured housing unit owner's
tenancy or increase its rent or prohibit a landlord from terminating a tenancy
solely by reason of the sale of the owner's manufactured housing unit. Certain
states also regulate changes in manufactured housing community use and require
that the landlord give written notice to its tenants a substantial period of
time prior to the projected change.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on manufactured
housing communities. These ordinances may limit rent increases to fixed
percentages, to percentages of increases in the consumer price index, to
increases set or approved by a governmental agency, or to increases determined
through mediation or binding arbitration. In many cases, the rent control laws
do not permit vacancy decontrol, or permit vacancy decontrol only in the
relatively rare event that the manufactured housing unit is removed from the
homesite. Local authority to impose rent control on manufactured housing
communities is pre-empted by state law in certain states, and rent control is
not imposed at the state level in those states. In some states, however, local
rent control ordinances are not pre-empted for tenants having short-term or
month-to-month leases, and properties there may be subject to various forms of
rent control with respect to those tenants. Any limitations on a borrower's
ability to raise property rents may impair such borrower's ability to repay its
mortgage loan from its net operating income or the proceeds of a sale or
refinancing of the related mortgaged property.
<PAGE>
Information contained hereto is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement become
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by 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 ____, 199_)
$
(APPROXIMATELY)
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 199 -
The Series 199 - Mortgage Pass-Through Certificates (the "Certificates")
will include the following classes of Certificates, designated as the Class A1,
Class A1X, Class A2, Class A2X, Class B, Class C, Class BCX, Class D and Class
E Certificates (the "Offered Certificates"). In addition to the Offered
Certificates, the Certificates will also include the Class F, Class G, Class
NR, Class R-I, Class R-II and Class R-III Certificates. Only the Offered
Certificates are offered hereby.
(cover continued on next page)
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 MORTGAGE LOANS. THE YIELD TO MATURITY ON EACH CLASS OF OFFERED
CERTIFICATES WILL BE SENSITIVE TO LOSSES DUE TO DEFAULTS ON THE MORTGAGE LOANS
(AND THE TIMING THEREOF), TO THE EXTENT THAT SUCH LOSSES ARE NOT COVERED BY ANY
CLASS OF CERTIFICATES HAVING A LOWER PAYMENT PRIORITY, AS DESCRIBED HEREIN. THE
YIELD TO INVESTORS ON THE INTEREST ONLY CERTIFICATES WILL BE SENSITIVE TO THE
RATE AND TIMING OF PREPAYMENTS, DEFAULTS AND LIQUIDATIONS ON THE MORTGAGE
LOANS. THE RATES OF PREPAYMENT, DEFAULTS AND LIQUIDATIONS ON THE RAPID RATE OF
PREPAYMENT, DEFAULTS AND LIQUIDATIONS ON THE MORTGAGE LOANS COULD RESULT IN THE
FAILURE OF INVESTORS IN THE INTEREST ONLY CERTIFICATES TO RECOVER THEIR INITIAL
INVESTMENTS. SEE "SUMMARY -- SPECIAL PRINCIPAL PAYMENT CONSIDERATIONS" AND "--
SPECIAL YIELD CONSIDERATIONS", AND "CERTAIN PREPAYMENT, MATURITY AND YIELD
CONSIDERATIONS" HEREIN AND "YIELD CONSIDERATIONS" IN THE PROSPECTUS.
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 should review the information appearing under the caption
"Risk Factors" beginning on pages __ herein and page __ in the Prospectus
before purchasing any Offered Certificates.
----------
INITIAL CLASS PASS-THROUGH RATE(2)
BALANCE(1)
Class A1........... $ %
Class A1X.......... $ Weighted Average Pass-Through Rate(3)
Class A2........... $ %
Class A2X.......... $ Weighted Average Pass-Throughc Rate(3)
Class B............ $ Weighted Average Pass-Through Rate
Class C............ $ Weighted Average Pass-Through Rate
Class BCX.......... $ (3)(4)
Class D............ $ Weighted Average Pass-Through Rate
Class E............ $ Weighted Average Pass-Through Rate
---------------------------
(1) Subject to a permitted variance of plus or minus ___%.
(2) In addition to distributions of interest and/or principal, holders of the
Certificates will be entitled to receive a portion of any Prepayment
Premiums as described herein.
(3) Based on the related Notional Amount as described herein.
(4)Calculated based on the Pass-Through Rates of two components. The
Pass-Through Rate on the Class BCX component B (as defined herein) is %
and on the Class BCX component C (as defined herein) is %.
---------------------------
The Offered Certificates will be purchased from the Depositor by
_______________ (the "Underwriter") and will be offered by the Underwriter from
time to time 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, before deducting expenses payable by the Depositor
estimated to be approximately $ , will be % of the initial aggregate principal
balance of the Offered Certificates as of , 199 (the "Cut-Off Date"), plus
accrued interest from the Cut-off Date. The Offered Certificates are offered by
the Underwriter subject to prior sale, when, as and if delivered to and
accepted by the Underwriter and subject to certain other conditions. It is
expected that the Offered Certificates will be delivered in book-entry form
through the Same-Day Funds Settlement System of DTC on or about , 199 (the
"Delivery Date"), against payment therefor in immediately available funds.
[UNDERWRITER]
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 199
<PAGE>
(continued from previous page)
The Certificates will represent in the aggregate the entire beneficial
interest in a trust fund (the "Trust Fund") to be established by Heller
Financial Commercial Mortgage Asset Corp., (the "Depositor"). The Trust Fund
will consist primarily of a pool (the "Mortgage Pool") of fixed rate mortgage
loans with original terms to maturity of not more than 300 months (such
mortgage loans are referred to collectively herein as the "Mortgage Loans"),
secured by first liens on fee simple or leasehold interests in multifamily,
retail, hotel, office, industrial, and other commercial properties. The
Mortgage Loans were originated by several institutions identified herein
(collectively, the "Originators"), acquired by an affiliate of the Depositor
and will be sold to the Depositor on or prior to the date of initial issuance
of the Certificates.
Distributions on the Certificates will be made, to the extent of
available funds, on the ____ day of each month or, if any such day is not a
business day, on the next succeeding business day, beginning in ___________
199___ (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 then applicable pass-through rate
(the "Pass-Through Rate") and the aggregate principal balance (the "Class
Balance") (or the related notional balance (the "Notional Amount") in the case
of the Class A1X and Class A2X Certificates and each component of the Class BCX
Certificates (each such class, the "Interest Only Certificates")) of such class
or component outstanding immediately prior to such Distribution Date. The
Pass-Through Rates applicable to the Class A1 and Class A2 Certificates and for
each component of the Class BCX Certificates will be as set forth above. The
Pass-Through Rates for the Class A1X, Class A2X, Class B, Class C, Class D and
Class E Certificates will be variable and will be calculated as set forth
herein. Distributions in respect of principal, if any, of the Certificates will
be made as described herein under "Description of the Certificates --
Distributions" and "--Priority of Distributions".
The Class A1, Class A2, Class A1X and Class A2X Certificates will
evidence approximately an initial ___% undivided interest in the Trust Fund.
The Class B and Class BCX component B (as defined herein) will evidence
approximately an initial ___% undivided interest in the Trust Fund. The Class C
and Class BCX component C (as defined herein) will evidence approximately an
initial ___% undivided interest in the Trust Fund. The Class D Certificates
will evidence approximately an initial ___% undivided interest in the Trust
Fund. The Class E Certificates will evidence approximately an initial ___%
undivided interest in the Trust Fund.
It is a condition of the issuance of the Class A1 and Class A2
Certificates that they be rated "____" by_____________________________________
("__________") and _______________________ ("____________"). It is a condition
of the issuance of the Class A1X and Class A2X Certificates that they be rated
"___" by ___________ and "____" by ___________________. It is a condition of
the issuance of the Class B Certificates that they be rated not lower than
"___" by ________________ and ________________ . It is a condition of the
issuance of the Class C Certificates that they be rated not lower than "___" by
________________ and "__" by ________________ . It is a condition of the
issuance of the Class BCX Certificates that they be rated not lower than "___"
by _____________. It is a condition of the issuance of the Class D Certificates
that they be rated not lower than "___" by ________________ and
________________ . It is a condition of the issuance of the Class E
Certificates that they be rated not lower than "____" by ________________ and
________________ . The ratings by ________________ on the Interest Only
Certificates do not address any prepayment or loss scenarios with respect to
the Mortgage Loans or the likelihood of receipt of Prepayment Premiums. See
"Rating" herein.
__________________ will act as master servicer (in such capacity, the
"Master Servicer") and as special servicer (in such capacity, the "Special
Servicer") of the Mortgage Loans. The obligations of the Master Servicer and
the Special Servicer with respect to the Certificates will be limited to their
contractual servicing obligations and the obligation under certain
circumstances to make P&I Advances (as defined herein) to the
Certificateholders. See "Servicing." It is possible that the Special Servicer
or one or more of its affiliates may purchase a portion of the Class NR
Certificates.
(continued on following page)
ii
<PAGE>
(continued from previous page)
As described herein, three separate "real estate mortgage investment
conduit" ("REMIC") elections will be made in connection with the Trust Fund for
federal income tax purposes. The Certificates, other than the Class R-I, Class
R- II and Class R-III Certificates, will constitute "regular interests" in the
related REMIC and the Class R-I, Class R-II and Class R-III Certificates will
constitute the sole class of "residual interest" in the related REMIC. See
"Federal Income Tax Consequences" herein and in the Prospectus.
The Offered Certificates initially will be represented by certificates
registered in the name of Cede & Co., as nominee of The Depository Trust
Company ("DTC"), as further described herein. The interests of beneficial
owners of the Offered Certificates will be represented by book entries on the
records of participating members of DTC. Definitive certificates will be
available for the Offered Certificates only under the limited circumstances
described herein. See "Description of the Certificates -- Book-Entry
Registration of the Offered Certificates" herein.
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS
ON THE OFFERED CERTIFICATES. THE OFFERED CERTIFICATES DO NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, THE MASTER SERVICER, THE SPECIAL
SERVICER, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR AFFILIATES. NEITHER THE
OFFERED CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE DEPOSITOR,
THE MASTER SERVICER, THE SPECIAL SERVICER, THE TRUSTEE, THE UNDERWRITER OR ANY
OF THEIR AFFILIATES.
See "Index of Principal Definitions" in the Prospectus for the location
of meanings of capitalized terms used but not defined herein. See "Index of
Principal Definitions" herein for location of meanings of other capitalized
terms used herein.
There is currently no secondary market for the Offered Certificates. The
Underwriter currently expects to make a secondary market in the Offered
Certificates, but has no obligation to do so. There can be no assurance that
such a market will develop or, if it does develop, that it will continue. See
"Method of Distribution" herein.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT
THE OFFERING OF THE OFFERED CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED
IN THE PROSPECTUS, DATED _____________, 199_ AND ATTACHED HERETO. PURCHASERS
ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL.
SALES OF THE CERTIFICATES OFFERED HEREBY MAY NOT BE CONSUMMATED UNLESS THE
PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
--------------
THE OFFERED 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 _________________, 199_, OF WHICH THIS
PROSPECTUS SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS PROSPECTUS
SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT INFORMATION REGARDING THIS
OFFERING WHICH IS NOT CONTAINED HEREIN, AND PROSPECTIVE INVESTORS ARE URGED TO
READ THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN FULL. SALES OF THE
OFFERED CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED
BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
UNTIL ______________, 199_, ALL DEALERS EFFECTING TRANSACTIONS IN THE
OFFERED CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS. THIS IS IN
ADDITION TO THE
iii
<PAGE>
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
--------------
FORWARD-LOOKING STATEMENTS
IF AND WHEN INCLUDED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS OR IN DOCUMENTS INCORPORATED HEREIN OR THEREIN BY REFERENCE, THE
WORDS "EXPECTS," "INTENDS," "ANTICIPATES," "ESTIMATES" AND ANALOGOUS
EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. ANY SUCH
STATEMENTS, WHICH MAY INCLUDE STATEMENTS CONTAINED IN "RISK FACTORS,"
INHERENTLY ARE SUBJECT TO A VARIETY OF RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. SUCH RISKS AND
UNCERTAINTIES INCLUDE, AMONG OTHERS, GENERAL ECONOMIC AND BUSINESS CONDITIONS,
COMPETITION, CHANGES IN FOREIGN POLITICAL, SOCIAL AND ECONOMIC CONDITIONS,
REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, CUSTOMER
PREFERENCES AND VARIOUS OTHER EVENTS, CONDITIONS AND CIRCUMSTANCES, MANY OF
WHICH ARE BEYOND THE DEPOSITOR'S CONTROL. THESE FORWARD-LOOKING STATEMENTS
SPEAK ONLY AS OF THE DATE OF THIS PROSPECTUS SUPPLEMENT. THE DEPOSITOR
EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY ANY
UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENT CONTAINED HEREIN TO
REFLECT ANY CHANGE IN THE DEPOSITOR'S EXPECTATIONS WITH REGARD THERETO OR ANY
CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS
BASED.
--------------
iv
<PAGE>
TABLE OF CONTENTS
SUMMARY OF PROSPECTUS SUPPLEMENT 1
RISK FACTORS 12
DESCRIPTION OF THE MORTGAGE POOL 17
General 17
Representations and Warranties 18
Certain Characteristics Of The Mortgage Loans 19
Related Borrowers and Other Issues 27
Escrows 27
Underwriting Guidelines 27
[DESCRIPTION OF UNDERWRITING GUIDELINES] 27
Additional Information 27
DESCRIPTION OF THE CERTIFICATES 27
General 27
Book-Entry Registration of the Offered Certificates 28
Distributions 29
Priority of Distributions 31
Other Certificates 32
Subordination 32
Advances 33
CERTAIN PREPAYMENT, MATURITY AND YIELD CONSIDERATIONS 34
Weighted Average Life of the Offered Certificates 35
Interest Only Certificates Yield Considerations 36
Class C, Class BCX, Class D and Class E Yield Considerations 38
SERVICING 39
Servicers 39
Responsibilities of Master Servicer 39
Responsibilities of Special Servicer 39
Extension Advisor 41
The Operating Adviser 41
Servicing and Other Compensation and Payment of Expenses 41
Conflicts of Interest 42
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT 42
General 42
Assignment Of The Mortgage Loans 42
Trustee 42
Collection Account and Certificate Account 43
Reports To Certificateholders 43
Voting Rights 43
Termination 43
USE OF PROCEEDS 44
FEDERAL INCOME TAX CONSEQUENCES 44
STATE TAX CONSIDERATIONS 45
ERISA CONSIDERATIONS 45
LEGAL INVESTMENT 46
METHOD OF DISTRIBUTION 47
LEGAL MATTERS 48
RATING 48
INDEX OF PRINCIPAL DEFINITIONS 3
iv
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary 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 Prospectus. See
"Index of Principal Definitions" herein and in the Prospectus.
Title of Certificates........ Mortgage Pass-Through Certificates, Series
199___-____ (the "Certificates").
Depositor.................... Heller Financial Commercial Mortgage Asset Corp.,
a ________ corporation (the "Depositor"). See
"The Depositor" in the Prospectus.
Originators.................. _____%, _____%, _____%, _____% and _____% of the
Mortgage Loans by outstanding principal balance
as of the Cut-off Date (as defined herein) were
originated, respectively, by:
____________________, a _______________;
_________________, a ____________________;
___________________, a _____________, and
_____________________, a ____________________.
Master Servicer.............. ______________, a ___________ corporation. See
"Servicing -- Servicers" and "Servicing --
Responsibilities of Master Servicer" herein.
Special Servicer............. ______________________________ will be the
Special Servicer with respect to all the Mortgage
Loans.
Trustee ..................... ______________________________, a
_________________ banking corporation.
Custodian.................... _______________________________, a _____________
banking corporation, in its capacity as custodian
for the Trustee (the "Custodian").
Cut-off Date ................ _________________ 1, 199___.
Delivery Date............... On or about _________________, 199____.
Distribution Dates........... Distributions on the Certificates will be made by
the Trustee, to the extent of available funds, on
the _____ day of each month or, if any such _____
day is not a business day, on the next succeeding
business day, beginning in ________ 199__ (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.
Rated Final Distribution
Date......................... ________________, 20___, which is the second
anniversary of the date at which all the Mortgage
Loans have zero balances, assuming no prepayments
and that the Mortgage Loans which are Balloon
Mortgage Loans fully amortize according to their
amortization schedule and no Balloon Payment is
made.
Registration of the Offered
Certificates................. The Offered Certificates (the "DTC Registered
Certificates") will be represented by one or more
global certificates registered in the name of
Cede & Co., as nominee of The Depository Trust
Company ("DTC"). No person acquiring an interest
in the DTC Registered Certificates (any such
person, a "Beneficial Owner") will be entitled to
receive a Certificate of such class in fully
registered, certificated form (a "Definitive
Certificate"), except under the limited
circumstances described in the Prospectus under
"Description of the Certificates
S-1
<PAGE>
-- Book-Entry Registration and Definitive
Certificates". Instead, DTC will effect payments
and transfers in respect of the DTC Registered
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 Certificates are
issued, the rights of Beneficial Owners may only
be exercised through DTC and its Participants and
will be subject to procedures established
thereby, except as otherwise specified herein.
See "Description of the Certificates -- General"
herein and "Description of the Certificates --
Book-Entry Registration and Definitive
Certificates" in the Prospectus.
Denominations................ The DTC Registered Certificates will be issuable
on the book-entry records of DTC and its
Participants in denominations of (except in the
case of the Interest Only Certificates) $_______
and integral multiples of $______ in excess
thereof. The Interest Only Certificates will be
issuable in denominations of $_______ Notional
Amount and integral multiples of $_____ Notional
Amount.
The Mortgage Pool............ The Trust Fund will consist of a pool (the
"Mortgage Pool") of ______ [fixed rate] [floating
rate] [partially fixed rate and partially
floating rate] mortgage loans (the "Mortgage
Loans") secured by first liens on fee simple or
leasehold interests in multifamily, retail,
hotel, health care-related, office, industrial
and other commercial properties (the "Mortgaged
Properties") located in ____ states. See "Risk
Factors -- Ground Leases and Other Leasehold
Interests" herein. The Mortgage Loans were
originated for sale to _________ and were
underwritten generally in conformity with certain
guidelines established by _________________. See
"Description of the Mortgage Pool -- General"
herein. The Mortgage Loans will be acquired by
the Depositor from _____ on or before the
Delivery Date. See "Description of the Mortgage
Pool -- Underwriting Guidelines" herein. The
Mortgage Loans will have an aggregate principal
balance as of the Cut-off Date of approximately
$__________ and individual principal balances as
of the Cut-off Date of at least $__________ but
not more than $__________ with an average
principal balance of approximately $__________.
The Mortgage Loans will have terms to maturity
from the Cut-off Date of not more than _____
months, and a weighted average remaining term to
maturity of approximately _____ months as of the
Cut-off Date. The Mortgage Loans will bear
interest at Mortgage Interest Rates of at least
________% per annum but not more than
___________% per annum, with a weighted average
Mortgage Interest Rate of approximately
___________% per annum as of the Cut- off Date.
The Mortgage Loans provide for scheduled payments
of principal and/or interest ("Monthly Payments")
to be due on the first day of each month (the
"Due Date").
Approximately ______% of the aggregate principal
balance of the Mortgage Loans as of the Cut-off
Date provide for monthly payments of principal
based on an amortization schedule longer, and in
some cases significantly longer, than the
remaining term of such Mortgage Loan (each, a
"Balloon Mortgage Loan"), thereby leaving a
substantial outstanding principal amount due and
payable (the "Balloon Payment") on its maturity
date, unless prepaid prior thereto.
Except in certain limited circumstances, each
Mortgage Loan either prohibits voluntary
prepayments during a certain number of years
following the origination thereof and/or allows
the borrower thereunder (the "Mortgagor") to
prepay the principal balance thereof in whole or
in part during a certain number of years
following the origination if accompanied by
payment of a premium (the "Prepayment Premium").
See Annex A hereto and the table entitled
S-2
<PAGE>
"Prepayment Lock-out/Prepayment Premium Analysis"
under "Description of the Mortgage Pool --
Certain Characteristics of the Mortgage Loans"
herein. Any Prepayment Premium collected on a
Mortgage Loan will be distributed to the holders
of the Certificates as described herein. See
"Special Principal Payment Considerations" below,
"Risk Factors -- Special Prepayment
Considerations", "Description of the Certificates
-- Distributions -- Interest Distributions on the
Certificates" and "Certain Prepayment, Maturity
and Yield Considerations" herein and "Yield
Considerations" in the Prospectus.
In connection with its acquisition of the
Mortgage Loans, the Depositor will obtain certain
representations from ____. ____ will covenant
with the Depositor to cure any breach of such
representations and warranties or to repurchase
any Mortgage Loan in connection with which there
has been a breach of a representation or warranty
which materially and adversely affects the
interest of the Certificateholders in such
Mortgage Loan. The Depositor will assign such
representations and warranties and covenants to
the Trustee under the Pooling and Servicing
Agreement (as defined below). The sole remedy
available to the Trustee or the
Certificateholders is the obligation of ____ to
cure any such breach or repurchase any such
Mortgage Loan.
For a further description of the Mortgage Loans,
see "Description of the Mortgage Pool" herein.
The Offered Certificates..... The Certificates will be issued pursuant to a
pooling and servicing agreement, to be dated as
of the Cut-off Date, among the Depositor, the
Master Servicer, the Special Servicer and the
Trustee (the "Pooling And Servicing Agreement").
The Offered Certificates will have the initial
Class Balances set forth on the cover hereof. The
Interest Only Certificates will not have Class
Balances. The Class BCX Certificates consist of
the following components: the Class BCX component
B and the Class BCX component C (each a
"Component"). The Class BCX component B and the
Class BCX component C are not separately
transferrable.
Pass-Through Rate on the
Certificates............... The Pass-Through Rates on the Class A1 and Class
A2 Certificates are fixed and are set forth on
the cover hereof. The Pass-Through Rates on the
Class A1X and Class A2X Certificates will be
equal to the weighted average of the Remittance
Rates in effect from time to time on the Mortgage
Loans minus the Pass-Through Rates on the Class
A1 and Class A2 Certificates, respectively. The
Pass-Through Rates on the Class B and Class C
Certificates will equal the weighted average of
the Remittance Rates in effect from time to time
on the Mortgage Loans minus the Pass- Through
Rates on the Class BCX component B and the Class
BCX component C, respectively. The Class BCX
Certificates will be entitled to interest at the
Pass- Through Rate on the components. The Pass-
Through Rate on the Class BCX component B is
______% per annum and on the Class BCX component
C is _______% per annum. The Pass- Through Rates
on the Class D and Class E Certificates will
equal the weighted average of the Remittance
Rates in effect from time to time on the Mortgage
Loans. The Remittance Rate in effect for any
Mortgage Loan as of any date of determination is
equal to the excess of the Mortgage Interest Rate
thereon (without giving effect to any
modification or reduction thereof following the
Cut-off Date) over the sum of the related
Servicing Fee Rate (as defined herein) and the
fee payable to the Trustee. The Mortgage Interest
Rate for each of the Mortgage Loans which provide
for the computation of interest other than on the
basis of a 360-day year consisting of twelve
30-day months (a "30/360 Basis")
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(that is the basis on which interest on the
Certificates accrues) will be adjusted to reflect
that difference.
Interest Distributions on
the Certificates............. Subject to the distribution of the Principal
Distribution Amount to the Holders of classes of
Certificates of a higher priority as described
under "Priority of Distributions" below, Holders
of each class of Offered Certificates will be
entitled to receive on each Distribution Date in
the order described herein, to the extent of the
Available Distribution Amount (as defined herein)
for such Distribution Date (net of any interest
accrued on any Collateral Value Adjustment
subsequently recovered and any Net Prepayment
Premium (both, as defined herein)) (the "Adjusted
Available Distribution Amount"), distributions
allocable to interest in an amount (the "Interest
Distribution Amount") equal to the interest
accrued during the period from and including the
first day of the month preceding the month of the
Distribution Date (or from the Cut-off Date, in
the case of the initial Distribution Date) to and
including the last day of the month preceding the
month of the Distribution Date (based on a
360-day year consisting of twelve 30-day months)
on the related Class Balance (or the related
Notional Amount, in the case of the Interest Only
Certificates, or any component thereof)
immediately prior to such Distribution Date at
the then-applicable Pass-Through Rate (the
"Interest Accrual Amount") less such class' (or
component's) pro rata share, by Interest Accrual
Amount, of any interest shortfall not related to
a Mortgagor delinquency or default, such as
Prepayment Interest Shortfalls to the extent not
offset as described herein, and shortfalls
associated with exemptions provided by the Relief
Act (as defined in the Prospectus). The Notional
Amount of the Class A1X Certificates will equal
the Class Balance of the Class A1 Certificates.
The Notional Amount of the Class A2X Certificates
will equal the Class Balance of the Class A2
Certificates. The Notional Amount of the Class
BCX component B will equal the Class Balance of
the Class B Certificates. The Notional Amount of
the Class BCX component C will equal the Class
Balance of the Class C Certificates. A Notional
Amount does not entitle the Interest Only
Certificates to any distributions of principal.
If the Adjusted Available Distribution Amount for
any Distribution Date is less than the Interest
Distribution Amount for such Distribution Date,
the shortfall will be part of the Interest
Distribution Amount distributable to holders of
Offered Certificates on subsequent Distribution
Dates, to the extent of available funds.
In addition to the related Interest Distribution
Amount, the Interest Only Certificates will
receive ____% of any Net Prepayment Premium and
the remaining Offered Certificates will receive
____% of any Net Prepayment Premium, as more
fully described herein, to the extent not
necessary to reimburse the Master Servicer for
reductions in its compensation due to Prepayment
Interest Shortfalls. See "-- Special Yield
Considerations" below and "Description of the
Certificates -- Distributions -- Interest
Distributions on the Certificates" herein.
The Available Distribution Amount for any
Distribution Date generally includes: (i)
scheduled payments on the Mortgage Loans due on
or prior to the related Due Date immediately
preceding, and collected as of, the related
Determination Date (to the extent not distributed
on previous Distribution Dates) and unscheduled
payments and other collections on the Mortgage
Loans collected during the related Remittance
Period, net of amounts payable or reimbursable to
the Master Servicer or the Special Servicer
therefrom and (ii) any P&I Advances made by the
Master Servicer or the Special Servicer for the
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related Distribution Date. The "Determination
Date" for any Distribution Date is the ____
business day preceding such Distribution Date.
The "Remittance Period" for any Distribution Date
is the period beginning after a Determination
Date in the immediately preceding month (or the
Cut-off Date, in the case of the first
Distribution Date) through the related
Determination Date. See "Description of the
Certificates -- Distributions -- Interest
Distributions on the Certificates" herein.
Principal Distributions on
the Certificates............. Holders of the Certificates will be entitled to
receive on each Distribution Date in reduction of
the related Class Balance in the order described
herein until the related Class Balance is reduced
to zero, to the extent of the balance of the
Adjusted Available Distribution Amount remaining
after the payment of the Interest Distribution
Amount for such Distribution Date for the classes
of Certificates with the highest priority of
payment for interest payments (as described under
"Priority of Distributions" below) distributions
in respect of principal in an amount (the
"Principal Distribution Amount") equal to the
aggregate of (i) all scheduled payments of
principal (other than Balloon Payments) due on
the Mortgage Loans on the related Due Date
whether or not received and all scheduled Balloon
Payments received, (ii) if the scheduled Balloon
Payment is not received, with respect to any
Balloon Mortgage Loans on and after the Maturity
Date thereof, the principal payment that would
need to be received in the related month in order
to fully amortize such Balloon Mortgage Loan with
level monthly payments by the end of the term
used to derive scheduled payments of principal
due prior to the related Maturity Date, (iii) to
the extent not previously advanced, any
unscheduled principal recoveries received during
the related Remittance Period in respect of the
Mortgage Loans, whether in the form of
liquidation proceeds, insurance proceeds,
condemnation proceeds or amounts received as a
result of the purchase of any Mortgage Loan out
of the Trust Fund to the extent not required to
be otherwise applied pursuant to the terms of the
related Mortgage Loan and (iv) any other portion
of the Adjusted Available Distribution Amount
remaining undistributed after payment of any
interest payable on the Certificates, including
any Prepayment Interest Excess (as defined
herein) not offset by any Prepayment Interest
Shortfall occurring during the related Remittance
Period or otherwise required to reimburse the
Master Servicer, as described herein, and
interest distributions on the Mortgage Loans, in
excess of interest distributions on the
Certificates, resulting from the application of
the amounts described in this clause (iv) to
principal distributions on the Certificates. See
"Description of the Certificates -- Distributions
-- Principal Distributions on the Offered
Certificates" herein. The Interest Only
Certificates do not have a Class Balance and are
therefore not entitled to any principal
distributions.
Priority of Distributions.... The Adjusted Available Distribution Amount for
any Distribution Date will be applied (a) first,
to distributions of interest on the classes of
Certificates outstanding with highest priority
for interest payment (as described below), (b)
second, to distributions of the Principal
Distribution Amount to the classes of
Certificates then entitled to distributions of
principal as described below, and (c) third, to
distributions of interest on each class of
Certificates other than the classes described in
clause (a) above, in the order of priority
described below; provided that on any
Distribution Date on which the Class Balance of a
class of Certificates is reduced to zero pursuant
to clause (b) above, interest distributions
pursuant to clause (a) above will be made to the
class of Certificates outstanding with the next
highest priority for interest payments prior to
making distributions of the Principal
Distribution Amount thereto pursuant to clause
(b) above. The
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<PAGE>
priority for interest payments for purposes of
clauses (a) and (c), above, is: first to
distributions of interest on the Class A1, Class
A1X, Class A2 and Class A2X Certificates, pro
rata, based on their respective Interest Accrual
Amounts; second, to the Class B and Class BCX
component B Certificates, pro rata, based on
their respective Interest Accrual Amounts; third,
to the Class C and the Class BCX component C
Certificates, pro rata, based on their respective
Interest Accrual Amounts; fourth, to the Class D
Certificates; fifth, to the Class E Certificates;
and then to the remaining classes of Certificates
up to their respective Interest Accrual Amounts,
all as described under "Interest Distributions on
the Certificates" above. The Principal
Distribution Amount for such Distribution Date
will be applied to the payment of principal of
the Class A1, Class A2, Class B, Class C, Class D
and Class E Certificates, in that order, and then
to the remaining classes of Certificates, until
their respective Class Balances have been reduced
to zero. Any Net Prepayment Premium for any
Distribution Date will be applied to reimburse
the Master Servicer for reductions in its
compensation due to Prepayment Interest
Shortfalls, as described herein, and then to
distributions on the Certificates, as described
herein. In addition, to the extent any amounts
corresponding to a Collateral Value Adjustment
are recovered on a Mortgage Loan, any interest
accrued on any class of Certificates and not paid
as a result of such Collateral Value Adjustment
shall be allocated to such classes as described
herein. See "Description of the Certificates --
Subordination" herein.
P&I Advances................. The Master Servicer and the Special Servicer
(each, a "Servicer") are required to make
advances ("P&I Advances") for delinquent Monthly
Payments on the Mortgage Loans, subject to the
limitations described herein. None of the
Servicers will be required to advance the full
amount of any Balloon Payment not made by the
related Mortgagor. To the extent a Servicer is
required to make a P&I Advance on and after the
Due Date for a Balloon Payment, such P&I Advance
shall not exceed an amount equal to the monthly
payment calculated by the Special Servicer
necessary to fully amortize the related Mortgage
Loan over the period used for purposes of
calculating the scheduled monthly payments
thereon prior to the related Maturity Date. As
more fully described herein, each Servicer making
a P&I Advance (or any other advance) will be
entitled to reimbursement thereof and interest
thereon at the prime rate determined in
accordance with the Pooling and Servicing
Agreement to the extent provided therein. See
"Description of the Certificates -- Advances"
herein and "Description of the Certificates --
Advances in Respect of Delinquencies" in the
Prospectus.
Other Certificates........... The Class F, Class G, Class NR, Class R-I, Class
R-II and Class R-III Certificates are not offered
hereby (the "Other Certificates"). The
Pass-Through Rates on the Class F, Class G and
Class NR Certificates will equal the weighted
average of the Remittance Rates in effect from
time to time on the Mortgage Loans. The Class
Balances on the Class F, Class G and Class NR
Certificates will equal $______________,
$_________________ and $________________,
respectively, and approximately $_____________,
in the aggregate. The Class R-I, Class R-II and
Class R- III Certificates will not have a
Pass-Through Rate or a Class Balance.
Subordination................ Neither the Offered Certificates nor the Mortgage
Loans are insured or guaranteed against losses
suffered on the Mortgage Loans by any government
agency or instrumentality or by the Depositor,
the Trustee, the Underwriter, the Master
Servicer, the Special Servicer or any affiliate
thereof.
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<PAGE>
Realized Losses and Collateral Valuation
Adjustments (as defined herein) on the Mortgage
Loans will be allocated, first, to the Other
Certificates, second, to the Class E
Certificates, third, to the Class D Certificates,
fourth, to the Class C Certificates, fifth to the
Class B Certificates, and thereafter, to the
Class A1 and Class A2 Certificates, on a pro rata
basis, based on Class Balance, in each case until
the related Class Balance is reduced to zero. Any
allocation of a Realized Loss or a Collateral
Valuation Adjustment to a class of Certificates
will result in a reduction of the related Class
Balance and the Notional Amount of any of the
Interest Only Certificates (or component thereof)
calculated by reference to such Class Balance. In
addition, the Adjusted Available Distribution
Amount will be applied in the order set forth
under "Priority of Distributions" above.
In addition to Realized Losses and Collateral
Valuation Adjustments, shortfalls may also occur
as a result of each Servicer's right to receive
payments of interest with respect to unreimbursed
advances, the Special Servicer's right to
compensation with respect to Mortgage Loans which
are or have been Specially Serviced Mortgage
Loans and as a result of other Trust Fund
expenses. Such shortfalls will be allocated to
the classes of Certificates with the lowest
payment priority for purposes of the application
of the Adjusted Available Distribution Amount in
the order described herein.
Optional Termination......... At its option, the Master Servicer, the Special
Servicer, any holder of a Class R-I Certificate
and the holders of an aggregate Percentage
Interest in excess of 50% of the Most Subordinate
Class of Certificates (as defined herein) may
purchase all of the Mortgage Loans, at the price
set forth under "Description of the Pooling and
Servicing Agreement -- Termination" herein, and
thereby effect termination of the Trust Fund and
early retirement of the then outstanding
Certificates, on any Distribution Date on which
the aggregate Stated Principal Balance (as
defined herein) of the Mortgage Loans remaining
in the Trust Fund is less than ____% of the
aggregate principal balance of the Mortgage Loans
as of the Cut-off Date. See "Description of the
Pooling and Servicing Agreement -- Termination"
herein and "Description of the Certificates --
Termination" in the Prospectus.
Special Principal Payment
Considerations............... The rate and timing of principal payments, if
any, on the Offered Certificates will depend,
among other things, on the rate and timing of
principal payments (including prepayments,
defaults, liquidations and purchases of Mortgage
Loans due to a breach of a representation and
warranty) on the Mortgage Loans. As described
herein, each of the Mortgage Loans prohibits,
and/or requires the payment of a Prepayment
Premium in connection with, any voluntary
prepayment during certain specified times. See
"The Mortgage Pool" above and "Description of the
Mortgage Pool" herein.
All classes of Offered Certificates entitled to
payments of principal are subject to priorities
for payment of principal as described herein.
Distributions of principal on classes having an
earlier priority of payment will be directly
affected by the rates of prepayments of the
Mortgage Loans. The timing of commencement of
principal distributions and the weighted average
lives of classes of Certificates with a later
priority of payment will be affected by the rates
of prepayments experienced both before and after
the commencement of principal distributions on
such classes.
In addition, a portion of collections on the
Mortgage Loan in excess of scheduled and
unscheduled principal distributions will be
allocated to the
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<PAGE>
classes of Certificates then entitled to
distributions of principal. Any such allocation
may result in a faster amortization of such class
of Certificates.
Special Yield Considerations. The yield to maturity on each class of the
Offered Certificates will depend on, among other
things, the rate and timing of principal payments
(including prepayments, defaults, liquidations
and purchases of Mortgage Loans due to breaches
of representations and warranties) on the
Mortgage Loans and the allocation thereof to
reduce the Class Balance or Notional Amount of
such class (or component thereof). The yield to
maturity on each class of the Offered
Certificates will also depend on the Pass-Through
Rate and the purchase price for such
Certificates. The yield to investors on any class
of Offered Certificates will be adversely
affected by any allocation thereto of Prepayment
Interest Shortfalls on the Mortgage Loans, which
may result from the distribution of interest only
to the date of a prepayment occurring during any
month following the related Determination Date
(rather than a full month's interest). See
"Description of the Certificates -- Distributions
-- Interest Distributions on the Certificates"
herein.
In general, if a class of Offered Certificates is
purchased at a premium and principal
distributions thereon 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 class of Offered Certificates is
purchased at a discount and principal
distributions thereon occur at a rate slower than
that assumed at the time of purchase, the
investor's actual yield to maturity will be lower
than that assumed at the time of purchase.
The multiple class structure of the Offered
Certificates causes the yield of certain classes
to be particularly sensitive to changes in the
rates of principal payments (including
prepayments, defaults, liquidations and purchases
of Mortgage Loans due to a breach of a
representation and warranty) of the Mortgage
Loans and other factors.
The yield to investors on the Interest Only
Certificates will be sensitive to the rate and
timing of prepayments, defaults and liquidations
on the Mortgage Loans. The rate of such
prepayments, defaults and liquidations on the
Mortgage Loans may fluctuate significantly over
time. A significantly faster than expected rate
of such prepayments, defaults and liquidations on
the Mortgage Pool will have a negative effect on
the yield to such investors and could result in
the failure of investors in the Interest Only
Certificates to recover their initial
investments. In addition, because holders of the
Class A1X and A2X Certificates have rights to
relatively larger portions of interest payments
on Mortgage Loans with higher Mortgage Interest
Rates than on Mortgage Loans with lower Mortgage
Interest Rates, and because Mortgage Loans with
higher Mortgage Interest Rates are generally
likely to prepay at a faster rate than Mortgage
Loans with lower Mortgage Interest Rates, the
yield on the Class A1X and A2X Certificates will
be materially adversely affected to a greater
extent than the yields on the other Offered
Certificates if the Mortgage Loans with higher
Mortgage Interest Rates prepay faster than the
Mortgage Loans with lower Mortgage Interest
Rates. See "Certain Prepayment, Maturity and
Yield Considerations," especially "--Interest
Only Certificate Yield Considerations" herein.
The yield to investors on any of the Certificates
will be sensitive to losses due to defaults on
the Mortgage Loans (and the timing thereof),
because the amount of such losses will be
allocable to such class to the extent such losses
are not covered by a subordinate class of
Certificates, as described herein. Furthermore,
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<PAGE>
as described herein, the timing of receipt of
principal and interest by any such class of
Certificates may be adversely affected by losses
even if such class does not ultimately bear such
loss.
Each Servicer making an advance will be entitled
to interest thereon at the prime rate determined
in accordance with the Pooling and Servicing
Agreement to the extent provided therein.
Therefore losses may be allocated to a class of
Offered Certificates with respect to any
delinquent Monthly Payment and certain other
expenses advanced by such Servicer.
The Special Servicer will be entitled to receive
compensation in the form of a percentage of
collections of any Mortgage Loan which is being
serviced or has been serviced by the Special
Servicer (a "Specially Serviced Mortgage Loan")
prior to the right of Certificateholders to
receive distributions on the Certificates. Such
compensation will result in shortfalls which will
be allocated to the classes of Certificates with
the lowest payment priority for purposes of
application of the Adjusted Available
Distribution Amount in the order described
herein. Consequently, it is possible that losses
will be allocated to the Offered Certificates
with respect to any Specially Serviced Mortgage
Loan notwithstanding the fact that such Mortgage
Loan is returned to a performing status. See
"Servicing -- Servicing and Other Compensation
and Payment of Expenses" herein.
See "Certain Prepayment, Maturity and Yield
Considerations," especially "--Class C, Class
BCX, Class D and Class E Yield Considerations"
herein, and "Yield Considerations" in the
Prospectus.
Federal Income Tax
Consequences................ Three separate real estate mortgage investment
conduit ("REMIC") elections will be made with
respect to the Trust Fund for federal income tax
purposes. Upon the issuance of the Offered
Certificates, Latham & Watkins, counsel to the
Depositor, will deliver its opinion generally to
the effect that, assuming compliance with all
provisions of the Pooling and Servicing
Agreement, for federal income tax purposes, the
REMIC I, REMIC II and REMIC III (each as defined
in the Pooling and Servicing Agreement) will each
qualify as a REMIC under Sections 860A through
860G of the Internal Revenue Code of 1986 (the
"Code").
For federal income tax purposes, the Class R-I
Certificates will be the sole class of "residual
interests" in REMIC I, the Class R-II
Certificates will be the sole class of "residual
interests" in REMIC II, the Offered Certificates
(or, in the case of the Class BCX Certificates,
each component thereof) and the Other
Certificates will be "regular interests" of REMIC
III and will generally be treated as debt
instruments of REMIC III, and the Class R-III
Certificates will be the sole class of "residual
interests" in REMIC III.
The Interest Only Certificates will and the other
Offered Certificates may be treated as having
been issued with original issue discount for
federal income tax purposes. For purposes of
computing the accrual of original issue discount,
market discount and premium, if any, for federal
income tax purposes it will be assumed that there
are no prepayments on the Mortgage Loans.
However, no representation is made that the
Mortgage Loans will not prepay at another rate.
For further information regarding the federal
income tax consequences of investing in the
Offered Certificates, see "Federal Income Tax
Consequences" herein and in the Prospectus.
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<PAGE>
ERISA Considerations......... A fiduciary of any employee benefit plan or other
retirement arrangement subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Code
and any entity whose underlying assets include
assets of such a plan by reason of any such
plan's investment in the entity should review
carefully with its legal advisors whether the
purchase or holding of any class of Offered
Certificates could give rise to a transaction
that is prohibited or is not otherwise permitted
either under ERISA or Section 4975 of the Code or
whether there exists any statutory or
administrative exemption applicable to an
investment therein. The U.S. Department of Labor
has issued an individual exemption, Prohibited
Transaction Exemption 90-24, to the Underwriter
that generally exempts from the application of
certain of the prohibited transaction provisions
of Section 406 of ERISA, and the excise taxes
imposed on certain prohibited transactions by
Sections 4975(a) and (b) of the Code and Section
502(i) of ERISA, transactions relating to the
purchase, sale and holding of pass-through
certificates underwritten by the Underwriter,
such as the Class A1, Class A1X, Class A2 and
Class A2X Certificates and the servicing and
operation of asset pools, provided that certain
conditions are satisfied. Purchasers using
insurance company general account funds to effect
such purchase should consider the availability of
Prohibited Transaction Class Exemption 95-60 (60
Fed. Reg. 35925, July 12, 1995) issued by the
U.S. Department of Labor. See "ERISA
Considerations" herein and in the Prospectus.
Rating....................... It is a condition to the issuance of the Class A1
and Class A2 Certificates that they be rated
"_______" by ________________ ("_____________")
and __________________ ("________________"). It
is a condition of the issuance of the Class A1X
and Class A2X Certificates that they be rated
"______" by ________________ and "_______" by
________________ . It is a condition of the
issuance of the Class B Certificates that they be
rated not lower than "____" by ________________
and ________________. It is a condition of the
issuance of the Class C Certificate that they be
rated not lower than "___" by ________________
and "____" by ________________. It is a condition
of the issuance of the Class BCX Certificates
that they be rated not lower than "____" by
________________. It is a condition of the
issuance of the Class D Certificates that they be
rated not lower than "_____" by ________________
and ________________. It is a condition of the
issuance of the Class E Certificates that they be
rated not lower than "________" by
________________ and ________________. A security
rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or
withdrawal at any time by the assigning rating
organization. A security rating does not address
the frequency or likelihood of prepayments
(whether voluntary or involuntary) of Mortgage
Loans, or the degree to which such prepayments
might differ from those originally anticipated,
or the likelihood of collection of Prepayment
Premiums, or the corresponding effect on yield to
investors. A rating of any of the Interest Only
Certificates does not address the possibility
that the holders of such Certificates may fail to
fully recover their initial investments due to a
rapid rate of prepayments, defaults or
liquidations. See "Certain Prepayment, Maturity
and Yield Considerations" herein, "Risk Factors,"
and "Rating" herein and in the Prospectus and
"Yield Considerations" in the Prospectus.
Legal Investment............. The Class ___, Class ___, Class ___, Class ___
and Class ___ Certificates will be "mortgage
related securities" within the meaning of the
Secondary Mortgage Market Enhancement Act of 1984
("SMMEA") so long as they are rated in one of the
two highest rating categories by at least one
nationally recognized
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<PAGE>
statistical rating organization. The Class ___,
Class ___ and Class ___ Certificates will not be
"mortgage related securities" within the meaning
of SMMEA. The appropriate characterization of the
Offered Certificates under various legal
investment restrictions, and thus the ability of
investors subject to these restrictions to
purchase any Class of Offered Certificates, may
be subject to significant interpretative
uncertainties.
In addition, institutions whose investment
activities are subject to review by certain
regulatory authorities may be or may become
subject to restrictions, which may be
retroactively imposed by such regulatory
authorities, on the investment by such
institutions in certain forms of mortgage-backed
securities. Furthermore, certain states have
enacted legislation overriding the legal
investment provisions of SMMEA. Accordingly,
investors should consult their own legal advisors
to determine whether and to what extent the
Offered Certificates constitute legal investments
for them. See "Legal Investment" herein and in
the Prospectus.
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<PAGE>
RISK FACTORS
[Description Will Depend On The Particulars Of The Mortgage Assets]
Prospective purchasers of the Offered Certificates should consider, among
other things, the following risk factors (as well as the risk factors set forth
under "Risk Factors" in the Prospectus) in connection with an investment in the
Offered Certificates.
Special Prepayment Considerations. 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 Mortgage Loans due to a breach of representation
and warranty) on the Mortgage Loans. The rate at which principal payments occur
on the Mortgage Pool will be affected by a variety of factors, including,
without limitation, the terms of the Mortgage Loans, the level of prevailing
interest rates, 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 Interest Rates on the
Mortgage Loans, 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. The rate of principal payments on the Offered
Certificates will correspond to the rate of principal payments on the Mortgage
Loans and is likely to be affected by the Lock-out Periods (as defined herein)
and Prepayment Premium provisions applicable to the Mortgage Loans and by the
extent to which a Servicer is able to enforce such provisions. Mortgage Loans
with a Lock-out Period or 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. See
"Description of the Mortgage Pool," "Description of the Certificates --
Distributions -- Priority of Distributions" and "Certain Prepayment, Maturity
and Yield Considerations" herein and "Yield Considerations" in the Prospectus.
Special Yield Considerations. The yield to maturity on each class of the
Offered Certificates will depend, among other things, on the rate and timing of
principal payments (including prepayments, defaults, liquidations and purchases
of Mortgage Loans due to a breach of representation and warranty) on the
Mortgage Pool and the allocation thereof to reduce the Class Balance of such
class. Mortgage Loans with higher Mortgage Interest Rates will have higher
Remittance Rates, and therefore, the yield on the Class A1X, Class A2X, Class
B, Class C, Class D and Class E Certificates could be adversely affected if
Mortgage Loans with higher Mortgage Interest Rates pay faster than the Mortgage
Loans with lower Mortgage Interest Rates. The yield to investors on the Offered
Certificates will be adversely affected by any allocation thereto of interest
shortfalls on the Mortgage Loans, such as Prepayment Interest Shortfalls.
Neither the Certificates nor the Mortgage Loans are guaranteed by any
governmental entity or instrumentality or any other entity.
In general, if a Certificate is purchased at a premium and principal
distributions thereon 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 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. See "Prepayment, Maturity and
Yield Considerations" herein and "Yield Considerations" in the Prospectus.
Risks Associated with Certain of the Mortgage Loans and Mortgaged
Properties. The Mortgage Loans are secured by a fee simple or leasehold
interest in multifamily, retail, hotel, health care-related, office, industrial
and other commercial properties. Commercial and multifamily lending is
generally viewed as exposing the lender to a greater risk of loss than one- to
four-family residential lending. Commercial and multifamily lending typically
involves larger loans to single borrowers or groups of related borrowers than
residential one- to four-family mortgage loans. In addition, and unlike the
case of loans made on the security of single-family residences, repayment of
loans made on the security of income-producing real property depends upon the
ability of that property (i) to generate rental income sufficient to pay
operating expenses, to make necessary repairs, tenant improvements and capital
improvements and to pay debt service and (ii) in the case of loans that do not
fully amortize over their terms, to retain sufficient value to permit the
borrower to pay off the loan at maturity by sale or
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<PAGE>
refinancing. A number of factors, many beyond the control of the property
owner, can affect the ability of an income-producing real estate project to
generate sufficient net operating income to pay debt service and/or to maintain
its value. Among these factors are economic conditions generally and in the
area of the project, the age, quality and design of the project and the degree
to which it competes with other projects in the area, changes or continued
weaknesses in specific industry segments, increases in operating costs, the
willingness and ability of the owner to provide capable property management and
maintenance and the degree to which the project's revenue is dependent upon a
single tenant or user, a small group of tenants, or tenants concentrated in a
particular business or industry. If leases are not renewed or replaced, if
tenants default, if rental rates fall and/or if operating expenses increase,
the borrower's ability to repay the loan may be impaired and the resale value
of the property, which is substantially dependent on the property's ability to
generate income, may decline. In addition, there are other factors, including
changes in zoning or tax laws, the availability of credit for financing, and
changes in interest rate levels that may adversely affect the value of a
project (and thus the borrower's ability to sell or refinance) without
necessarily affecting the ability to generate current income Commercial and
multifamily real estate can be affected significantly by the supply and demand
in the market for the type of property securing the loan and, therefore, may be
subject to adverse economic conditions.
Property Management. The successful operation of a real estate project is
also dependent on the performance and viability of the property manager of such
project. The property manager is responsible for responding to changes in the
local market, planning and implementing the rental structure, including
establishing appropriate rental rates, and advising the borrowers so that
maintenance and capital improvements can be carried out in a timely fashion.
There is no assurance regarding the performance of any operators and/or
managers or persons who may become operators and/or managers upon the
expiration or termination of leases or management agreements or following any
default or foreclosure under a Mortgage Loan.
Limitations of Appraisals. An appraisal or other market analysis was
conducted in respect of the Mortgaged Properties in connection with the
origination or acquisition of the related Mortgage Loan, and the resulting
estimates of value are the bases of the Cut-off Date LTV Ratios referred to
herein. However, those estimates represent the analysis and opinion of the
person performing the appraisal of market analysis and are not guarantees of
present or future values. Moreover, the values of the Mortgaged Properties may
have fluctuated significantly since the appraisal or market study was
performed. In addition, appraisals seek to establish the amount a typically
motivated buyer would pay a typically motivated seller. Such amount could be
significantly higher than the amount obtained from the sale of a Mortgaged
Property under a distress or liquidation sale.
Nonrecourse Mortgage Loans. Substantially all of the Mortgage Loans are
nonrecourse loans as to which, in the event of a default under any such
Mortgage Loan, recourse generally may be had only against the related Mortgaged
Property. Consequently, payment of each such Mortgage Loan prior to maturity is
dependent primarily on the sufficiency of the net operating income of the
related Mortgaged Property, and at maturity (whether at scheduled maturity or
in the event of a default upon the acceleration of such maturity after
default), upon the then market value of the related Mortgaged Property, or the
ability to refinance such Mortgage Loan.
Concentration of Mortgage Loans. The average principal balance of the
Mortgage Loans as of the Cut-off Date is approximately $____________, which is
equal to ____% of the aggregate principal balance as of the Cut-off Date of the
Mortgage Loans.
A mortgage pool consisting of fewer loans each having a relatively higher
outstanding principal balance may result in losses that are more severe,
relative to the size of the pool, than would be the case if the pool consisted
of a greater number of mortgage loans each having a relatively smaller
outstanding principal balance. In addition, the concentration of any mortgage
pool in one or more loans that have outstanding principal balances that are
substantially larger than the other mortgage loans in such pool can result in
losses that are substantially more severe, relative to the size of the pool,
than would be the case if the aggregate balance of the pool were more evenly
distributed among the loans in such pool. The Mortgage Loan secured by the
__________________________ represents______% of the aggregate principal balance
of the Mortgage Loans. No other Mortgage Loan represents more than ____% of the
aggregate principal balance as of the Cut-off Date of the Mortgage Loans.
Mortgage Loans with related Mortgagors represent in the aggregate _____% of the
aggregate principal balance as of the Cut-off Date
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of the Mortgage Loans but no single group of related Mortgagors represents in
excess of __% of the aggregate principal balance of the Mortgage Loans. See
"Description of the Mortgage Pool -- Certain Characteristics of the Mortgage
Loans -- Related Borrowers and Other Issues" herein.
Risks of Different Timing of Mortgage Loan Amortization. If and as
principal payments, property releases, or prepayments are made on a Mortgage
Loan, the remaining Mortgage Pool may be subject to more concentrated risk with
respect to the diversity of properties, types of properties and property
characteristics and with respect to the number of borrowers. See the table
entitled "Year of Scheduled Maturity" under "Description of the Mortgage Pool
- -- Certain Characteristics of the Mortgage Loans" for a description of the
respective maturity dates of the Mortgage Loans. Because principal on the
Offered Certificates is payable in sequential order, and no class receives
principal until the Class Balance of the preceding class or classes has been
reduced to zero, classes that have a lower sequential priority are more likely
to be exposed to the risk of concentration discussed under "--Concentration of
Mortgage Loans" above than classes with a higher sequential priority.
Geographic Concentration. __, __, __, __ and __ of the Mortgaged
Properties, representing approximately ____%, ____%, ____%, ____% and ____%,
respectively, of the aggregate principal balance of the Mortgage Loans as of
the Cut-off Date, are located in ______________, _________, __________,
_________ and _________, respectively. Except as indicated in the immediately
preceding sentence, no more than ___% of the Mortgage Loans, by aggregate
principal balance of the Mortgage Loans as of the Cut-off Date are secured by
Mortgaged Properties in any one state. Repayments by borrowers and the market
value of the Mortgaged Properties could be affected by economic conditions
generally or in regions where the borrowers and the Mortgaged Properties are
located, conditions in the real estate market where the Mortgaged Properties
are located, changes in governmental rules and fiscal policies, acts of nature,
including earthquakes (which may result in uninsured losses), and other factors
which are beyond the control of the borrowers.
Environmental Risks. Under various federal, state and local environmental
laws, ordinances and regulations, a current or previous owner or operator of
real property may be liable for the costs of removal and remediation of
hazardous or toxic substances on, under, adjacent to or in such property. Such
laws often impose liability whether or not the owner or operator knew of, or
was responsible for, the presence of such hazardous or toxic substances. The
cost of any required remediation and the owner's liability therefor as to any
property is generally not limited under such enactments and could exceed the
value of the property and/or the aggregate assets of the owner. In addition,
the presence of hazardous or toxic substances, or the failure to properly
remediate such property, may adversely affect the owner's or operator's ability
to borrow using such property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic substances may also be liable for
the costs of removal or remediation of such substances at the disposal or
treatment facility. Certain laws impose liability for release of asbestos
containing materials ("ACMs") into the air. Third parties may seek recovery
from owners or operators of real properties for personal injury and/or tort
damage associated with exposure to ACMs or other hazardous substances. The
presence of, or strong potential for contamination by, hazardous substances at,
on, under, adjacent to, or in a property can materially adversely affect the
value of the property and a borrower's ability to repay its mortgage loan).
Under some environmental laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), as well as certain state laws, a secured lender (such as the Trust
Fund) may be liable as an "owner" or "operator", for the costs of responding to
a release or threat of a release of hazardous substances on or from a
borrower's property, if agents or employees of a lender are deemed to have
participated in the management of the borrower's property. The Trust Fund's
potential exposure to liability for cleanup costs pursuant to CERCLA may
increase if the Trust Fund actually takes possession of a borrower's property,
or control of its day-to-day operations, as for example through the appointment
of a receiver.
An environmental site assessment ("ESA") of each of the Mortgaged
Properties was performed (or prior assessments were updated) in connection with
the initial underwriting and origination of the Mortgage Loans. In certain
cases, environmental testing in addition to the ESA was performed.
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<PAGE>
It is possible that the ESAs did not reveal all environmental
liabilities, that there are material environmental liabilities of which neither
___ nor the Depositor are aware. Moreover, there can be no assurance that
future laws, ordinances or regulations will not impose any material
environmental liability or that the environmental condition of the Mortgaged
Properties in the future could be affected by tenants and occupants or by third
parties unrelated to the Mortgagors, or by the condition of land or operations
in the vicinity of the Mortgaged Properties.
The Pooling and Servicing Agreement provides that the Special Servicer,
acting on behalf of the Trust Fund, may not acquire, through foreclosure or
deed in lieu thereof, title to a Mortgaged Property or take over its operation
unless the Special Servicer has previously determined, based on a report
prepared by a qualified person who regularly conducts environmental audits,
that (i) the Mortgaged Property is in compliance with applicable environmental
laws or that taking the actions necessary to comply with such laws is
reasonably likely to produce a greater recovery on a present value basis than
not taking such actions and (ii) there are no circumstances known to the
Special Servicer relating to the use of hazardous substances or petroleum-based
materials which require investigation or remediation, or that if such
circumstances exist, taking such remedial actions is reasonably likely to
produce a greater recovery on a present value basis than not taking such
actions. Although such requirement decreases the likelihood that the Trust Fund
will become liable for a material adverse environmental condition at a
Mortgaged Property, there can be no assurance that the requirements of the
Pooling and Servicing Agreement will effectively insulate the Trust Fund from
potential liability for a materially adverse environmental condition at any
Mortgaged Property.
Litigation. There may be legal proceedings pending and, from time to
time, threatened against the Mortgagors and the managers of the Mortgaged
Properties and their respective affiliates arising out of the ordinary business
of the Mortgagor, the managers and such affiliates. There can be no assurance
that such litigation may not have a material adverse effect on distributions to
Certificateholders.
Other Financings. Each Mortgagor is restricted from incurring any
indebtedness secured by the related Mortgaged Property other than the related
Mortgage Loan without the consent of the lender. With respect to ___ Mortgage
Loans representing ______% of the Mortgage Pool and which were made to single
purpose entities, the Mortgagor is restricted from incurring any indebtedness
other than the Mortgage Loan, normal trade accounts payable and certain
purchase financing debt, except that _____ of these Mortgagors representing
____% of the Mortgage Pool have unsecured subordinate debt that is subject to a
subordination and standstill agreement limiting the rights of the holder of
such additional indebtedness including limitations on its right to commence any
enforcement or foreclosure proceeding. In addition, ____ of the Mortgagors
representing __% of the Mortgage Pool have incurred indebtedness secured by
equity interests in such Mortgagors.
In cases where one or more junior liens are imposed on a Mortgaged
Property or the Mortgagor incurs other indebtedness, the Trust Fund is
subjected to additional risks, including, without limitation, the risks that
the Mortgagor may have greater incentives to repay the junior or unsecured
indebtedness first and that it may be more difficult for the Mortgagor to
refinance the Mortgage Loan or to sell the Mortgaged Property for purposes of
making the Balloon Payment upon the maturity of the Mortgage Loan.
Effect of Mortgagor Delinquencies and Defaults. The aggregate amount of
distributions on the Offered Certificates, the yield to maturity of the Offered
Certificates, the rate of principal payments on the Offered Certificates and
the weighted average lives of the Offered Certificates will be affected by the
rate and the timing of delinquencies and defaults on the Mortgage Loans. If a
purchaser of a class of Offered Certificates calculates its anticipated yield
based on an assumed rate of default and amount of losses on the Mortgage Loans
that is lower than the default rate and amount of losses actually experienced
and such additional losses are allocable to such class of Certificates, such
purchaser's actual yield to maturity will be lower than that so calculated and
could, under certain extreme scenarios, be negative. The timing of any loss on
a liquidated Mortgage Loan will also affect the actual yield to maturity of the
class of Offered Certificates to which a portion of such loss is allocable,
even if the rate of defaults and severity of losses are consistent with an
investor's expectations. In general, the earlier a loss borne by an investor
occurs, the greater is the effect on such investor's yield to maturity.
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As and to the extent described herein, each Servicer will be entitled to
receive interest on unreimbursed P&I Advances and unreimbursed advances of
servicing expenses until such advances (i) are recovered out of amounts
received on the Mortgage Loan as to which such advances were made pursuant to
the Pooling and Servicing Agreement, which amounts are in the form of late
payments, liquidation proceeds, insurance proceeds, condemnation proceeds or
amounts paid in connection with the purchase of such Mortgage Loan out of the
Trust Fund or (ii) are otherwise recovered following a determination that such
advance is a nonrecoverable advance. Each Servicer's right to receive such
payments of interest is prior to the rights of Certificateholders to receive
distributions on the Certificates and, consequently, is likely to result in
losses being allocated to the Offered Certificates that would not otherwise
have resulted absent the accrual of such interest.
The Special Servicer will be entitled to receive, with respect to each
Mortgage Loan which is or was at some time a Specially Serviced Mortgage Loan,
compensation in the form of a percentage of collections of any such Specially
Serviced Mortgage Loan prior to the right of Certificateholders to receive
distributions on the Certificates. Consequently, it is possible that shortfalls
will be allocated to the Offered Certificates with respect to any Mortgage Loan
which is or was at some time a Specially Serviced Mortgage Loan notwithstanding
the fact that such Mortgage Loan is returned to a performing status. See
"Servicing -- Servicing and Other Compensation and Payment of Expenses" herein.
Regardless of whether losses ultimately result, delinquencies and
defaults on the Mortgage Loans may significantly delay the receipt of payments
by the holder of a class of Offered Certificates, to the extent that P&I
Advances or the subordination of another class of Certificates does not fully
offset the effects of any such delinquency or default. The Special Servicer has
the ability to extend and modify Mortgage Loans that are in default or as to
which a payment default is imminent, including the ability to extend the date
on which a Balloon Payment is due, subject to certain conditions described in
the Pooling and Servicing Agreement. A Servicer's obligation to make P&I
Advances in respect of a Mortgage Loan that is delinquent as to its Balloon
Payment is limited, however, to the extent described under "Description of the
Certificates -- Advances." Until such time as any Mortgage Loan delinquent in
respect of its Balloon Payment is liquidated, the entitlement of the holders of
any class of Offered Certificates on each Distribution Date in respect of
principal of such Mortgage Loan will be limited to any payment made by the
related Mortgagor and any related P&I Advance made by a Servicer. Consequently,
any delay in the receipt of a Balloon Payment that is payable, in whole or in
part, to holders of the Offered Certificates will extend the weighted average
life of the Offered Certificates.
As described under "Description of the Certificates -- Distributions"
herein, if the portion of the Adjusted Available Distribution Amount
distributable in respect of interest on any class of Offered Certificates on
any Distribution Date is not sufficient to distribute the Interest Distribution
Amount then payable for such class, the shortfall will be distributable to
holders of such class of Certificates on subsequent Distribution Dates, to the
extent of available funds.
Balloon Payments. __________Mortgage Loans, representing_____% of the
aggregate principal balance of the Mortgage Loans as of the Cut-off Date, are
Balloon Mortgage Loans. Balloon Mortgage Loans involve a greater degree of risk
because the ability of a Mortgagor to make a Balloon Payment typically depends
on his ability either to refinance the loan or to sell the related Mortgaged
Property. See "Risk Factors -- Balloon Payments" in the Prospectus.
Leasehold Considerations. ____ Mortgage Loans, representing ___% of the
Initial Pool Balance, are secured solely by Mortgages on the borrowers'
leasehold interests under ground leases. In addition, ___ Mortgage Loans, which
represent ___% of the Initial Pool Balance, are each secured by a Mortgage on
both the borrower's leasehold interest in a portion of the related Mortgaged
Property and the borrower's fee simple interest in the remainder of the related
Mortgaged Property. Leasehold mortgage loans are subject to certain risks not
associated with mortgage loans secured by a lien on the fee estate of the
borrower. The most significant of these risks is that if the borrower's
leasehold were to be terminated upon a lease default, the leasehold mortgagee
would lose its security. However, in each of these cases, the related ground
lease requires the lessor to give the leasehold mortgagee notice of lessee
defaults and an opportunity to cure them, permits the leasehold estate to be
assigned to
S-16
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and by the leasehold mortgagee or the purchaser at a foreclosure sale, and
contains certain other protective provisions typically included in a
"mortgageable" ground lease.
Liquor License Considerations. _______ Mortgage Loans, representing
_____% of the aggregate principal balance of the Mortgage Loans as of the
Cut-off Date are secured by hotel properties. The liquor licenses for some of
such properties may be held by the property manager rather than by the related
Mortgagor. The applicable laws and regulations relating to such licenses
generally prohibit the transfer of such licenses to any person. In the event of
a foreclosure of a hotel property it is unlikely that the Trustee (or Special
Servicer) or purchaser in any such sale would be entitled to the rights under
the liquor license for such hotel property and such party would be required to
apply in its own right for such license.
Special Servicer Actions. In connection with the servicing of Specially
Serviced Mortgage Loans, the Special Servicer may take actions with respect to
such Mortgage Loans that could adversely affect the holders of some or all of
the classes of Offered Certificates. As described herein under "Servicing --
Responsibilities of Special Servicer," the actions of the Special Servicer will
be subject to review and may be rejected by a representative of the holders of
the Monitoring Certificates (as defined herein), who may have interests in
conflict with those of the holders of the other classes of Certificates. As a
result, it is possible that such representative may cause the Special Servicer
to take actions which conflict with the interests of certain classes of
Certificates.
Servicer May Purchase Certificates. The Special Servicer may purchase,
either directly or through an affiliate, a portion of the Class NR
Certificates. Such a purchase by the Special Servicer could cause a conflict
between the Special Servicer's duties pursuant to the Pooling and Servicing
Agreement and the Special Servicer's interest as a holder of a Certificate. The
Pooling and Servicing Agreement provides that each Servicer shall administer
the Mortgage Loans in accordance with the servicing standard set forth therein
without regard to ownership of any Certificate by such Servicer or any
affiliate of such Servicer.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Trust Fund will consist primarily of a pool of [fixed] [floating]
rate Mortgage Loans with an aggregate principal balance as of the Cut-off Date,
after deducting payments of principal due on such date, of approximately
$_____________. 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 fee simple or
leasehold interest in a multifamily, retail, hotel, office, industrial, or
other commercial property (a "Mortgaged Property"). All of the Mortgage Loans
are nonrecourse loans. Therefore, in the event of a 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. Except as otherwise indicated all percentages of the Mortgage
Loans described herein are approximate percentages by aggregate principal
balance as of the Cut-off Date.
Of the Mortgage Loans to be included in the Trust Fund _____% were
originated by ___, ______% by __________________, a ________________, ______%
by __________________, a ________________, and ___________% by ____________, a
______________. The originators of the Mortgage Loans are referred to herein as
the "Originators". The Depositor will acquire the Mortgage Loans from ____ on
or before the Delivery Date. The Depositor will cause the Mortgage Loans in the
Mortgage Pool to be assigned to the Trustee pursuant to the Pooling and
Servicing Agreement. ___ will be the Master Servicer and ____ will be the
Special Servicer with respect to all the Mortgage Loans. The Master Servicer
and the Special Servicer will service the Mortgage Loans pursuant to the
Pooling and Servicing Agreement.
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REPRESENTATIONS AND WARRANTIES
Under a loan sale agreement (the "Loan Sale Agreement"), ___ will make
certain representations and warranties to the Depositor. Pursuant to the terms
of the Loan Sale Agreement, ____ will be obligated to cure any breach of such
representations and warranties or to repurchase any Mortgage Loan from the
Depositor as to which there exists a breach of any such representation or
warranty that materially and adversely affects the interests of the
Certificateholders in such Mortgage Loan. ____ shall covenant with the
Depositor to repurchase any Mortgage Loan from the Depositor or cure any such
breach within 90 days of receiving notice thereof. Under the Pooling and
Servicing Agreement, the Depositor will assign its rights under the Loan Sale
Agreement to the Trustee for the benefit of the Certificateholders. The sole
remedy available to the Trustee or the Certificateholders is the obligation of
____ to cure or repurchase any Mortgage Loan in connection with which there has
been a breach of any such representation or warranty which materially and
adversely affects the interest of the Certificateholders in such Mortgage Loan.
____ has generally represented and warranted as of the Delivery Date with
respect to each Mortgage Loan, among other things, that:
(1) the information set forth in the schedule of the Mortgage Loans
attached to the Loan Sale Agreement is true and correct in all material
respects; (2) _____ owns the Mortgage Loan free and clear of any and all
pledges, liens and/or other encumbrances; (3) no scheduled payment of principal
and interest under the Mortgage Loan was 30 days or more past due as of the
Cut-off Date; (4) the related Mortgage constitutes a valid and, subject to
certain creditors' rights exceptions, enforceable first priority mortgage lien
(subject to certain permitted encumbrances) upon the related Mortgaged
Property; (5) the assignment of the related Mortgage in favor of the Trustee
constitutes a legal, valid and binding assignment; (6) the related assignment
of leases establishes and creates a valid and, subject to certain creditors'
rights exceptions, enforceable first priority lien in the related borrower's
interest in all leases of the Mortgaged Property; (7) the Mortgage has not been
satisfied, canceled, rescinded or subordinated in whole or in material part,
and the related Mortgaged Property has not been released from the lien of such
Mortgage, in whole or in material part; (8) except as set forth in a property
inspection report prepared in connection with the origination of the Mortgage
Loan, the related Mortgaged Property is, to ______'s knowledge, free and clear
of any damage that would materially and adversely affect its value as security
for the Mortgage Loan; (9) to _______'s knowledge, there is no proceeding
pending for the condemnation of all or any material portion of the related
Mortgaged Property; (10) the related Mortgaged Property is covered by an
American Land Title Association (or an equivalent form of) lender's title
insurance policy that insures that the related Mortgage is a valid, first
priority lien on such Mortgaged Property, subject only to the exceptions stated
therein; (11) the proceeds of the Mortgage Loan have been fully disbursed and
there is no obligation for future advances with respect thereto; (12) an
environmental site assessment was performed with respect to the related
Mortgaged Property in connection with the origination of the Mortgage Loan, a
report of each such assessment has been delivered to the Depositor, and there
is not to ____'s knowledge any material and adverse environmental condition or
circumstance affecting such Mortgaged Property that was not disclosed in such
report; (13) each Mortgage Note, Mortgage and other agreement that evidences or
secures the Mortgage Loan is, subject to certain creditors' rights and
exceptions and other exceptions of general application, the legal, valid and
binding obligation of the maker thereof, enforceable in accordance with its
terms; (14) the related Mortgaged Property is, and is required pursuant to the
related Mortgage to be, insured by casualty and liability insurance policies of
a type specified in the related Loan Sale Agreement; (15) there are no
delinquent or unpaid taxes, assessments or other outstanding charges affecting
the related Mortgaged Property that are or may become a lien of priority equal
to or higher than the lien of the related Mortgage; (16) the related borrower
is not, to _______'s knowledge, a debtor in any state or federal bankruptcy or
insolvency proceeding; (17) the related Mortgaged Property consists of the
related borrower's fee simple estate in real estate or, if the related Mortgage
encumbers the interest of the borrower as a lessee under a ground lease of the
Mortgaged Property (a) such ground lease or a memorandum thereof has been or
will be duly recorded and permits the interest of the lessee thereunder to be
encumbered by the related Mortgage; (b) the borrower's interest in such ground
lease is assignable to the Depositor and its successors and assigns upon notice
to, but without the consent of, the lessor thereunder; (c) such ground lease is
in full force and effect and, to the knowledge of _______, no material default
has occurred thereunder; (d) such ground lease, or estoppel letter related
thereto, requires the lessor under such ground lease to give notice of any
default by the lessee to the holder of the Mortgage (provided any required
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notice of the lien is given to the lessor), and further provides that no notice
of termination given under such ground lease is effective against such holder
unless a copy has been delivered to such holder; (e) the holder of the Mortgage
is permitted a reasonable opportunity (including, where necessary, sufficient
time to gain possession of the interest of the lessee under such ground lease)
to cure any default under such ground lease, which is curable after the receipt
of notice of any such default, before the lessor thereunder may terminate such
ground lease; and (f) such ground lease has an original term (including any
extension options set forth therein) which extends not less than ten years
beyond the scheduled maturity date of the Mortgage Loan; (18) the Mortgage Loan
is not cross-collateralized or cross-defaulted with any loan other than one or
more other Mortgage Loans; (19) the Mortgage does not require the holder
thereof to release all or any material portion of the related Mortgaged
Property from the lien thereof except, upon payment in full of the Mortgage
Loan or, in certain cases, upon (a) the satisfaction of certain legal and
underwriting requirements and (b) (i) except where the portion of the Mortgaged
Property permitted to be released was not considered by _____ in underwriting
the Mortgage Loan, the payment of a release price and prepayment consideration
in connection therewith or (ii) upon a defeasance of the related Mortgage Note
in accordance with the terms thereof; and (20) to _____'s knowledge, there
exists no material default, breach, violation or event of acceleration (and no
event which, with passage of time or the giving of notice, or both, would
constitute any of the foregoing) under the related Mortgage Note or Mortgage in
any such case to the extent the same materially and adversely affects the value
of the Mortgage Loan and the related Mortgaged Property.
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
All of the Mortgage Loans have Due Dates that occur on the first day of
each month. All of the Mortgage Loans are secured by first liens on fee simple
or leasehold interests in the related Mortgaged Properties. As of the Cut-off
Date, the Mortgage Loans had characteristics set forth below. The totals in the
following tables may not add due to rounding.
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<PAGE>
MORTGAGE INTEREST RATES AS OF THE CUT-OFF DATE
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Number of of Mortgage the as of the
Mortgage Rate Mortgage Loans Loans Cut-off Date Cut-off Date
- ------------- -------------- ----- ------------ ------------
Total
Weighted Average Mortgage Interest Rate: _______%
PRINCIPAL BALANCES AS OF THE CUT-OFF DATE
Percent by
Aggregate Aggregate
Percent by Principal Principal
Principal Balance Number Balance as of Balance
As of the Cut-Off Number of of Mortgage the as of the
Date Mortgage Loans Loans Cut-off Date Cut-off Date
---- -------------- ----- ------------ ------------
Total
Average Principal Balance as of the Cut-off Date: $_____________
ORIGINAL TERM TO MATURITY IN MONTHS
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Original Term in Number of of Mortgage the as of the
Months Mortgage Loans Loans Cut-off Date Cut-off Date
------ -------------- ----- ------------ ------------
Total
Weighted Average Original Term to Maturity in Months: ______
REMAINING TERM TO MATURITY IN MONTHS
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Remaining Term Number of of Mortgage the as of the
in Months Mortgage Loans Loans Cut-off Date Cut-off Date
--------- -------------- ----- ------------ ------------
Total
Weighted Average Remaining Term to Maturity in Months: _______
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<PAGE>
MONTH AND YEAR OF ORIGINATION
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Number of of Mortgage the as of the
Month/Year Mortgage Loans Loans Cut-off Date Cut-off Date
---------- -------------- ----- ------------ ------------
Total
YEAR OF SCHEDULED MATURITY
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Number of of Mortgage the as of the
Year Mortgage Loans Loans Cut-off Date Cut-off Date
---- -------------- ----- ------------ ------------
Total
__________ of the Mortgage Loans, representing ______% of the Mortgage
Loans, as a percentage of the aggregate Principal Balance as of the Cut-off
Date, are Balloon Mortgage Loans.
BALLOON MORTGAGE LOANS
ORIGINAL TERM TO MATURITY IN MONTHS
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Remaining Term Number of of Mortgage the as of the
In Months Mortgage Loans Loans Cut-off Date Cut-off Date
--------- -------------- ----- ------------ ------------
Total
Weighted Average Original Term to Maturity in Months: _____
BALLOON MORTGAGE LOANS
REMAINING TERM TO MATURITY IN MONTHS
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Remaining Number of of Mortgage the as of the
Terms In Months Mortgage Loans Loans Cut-off Date Cut-off Date
--------------- -------------- ----- ------------ ------------
Total
Weighted Average Remaining Term to Maturity in Months: _____
The following table sets forth the range of remaining amortization terms
of each Balloon Mortgage Loan. The remaining amortization term of a Balloon
Mortgage Loan represents the number of months required to fully amortize the
Cut-off Date Balance of each Balloon Mortgage Loan.
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<PAGE>
BALLOON MORTGAGE LOANS
REMAINING AMORTIZATION TERM
Percent by
Aggregate Aggregate
Percent by Principal Principal
Remaining Number Balance as of Balance
Amortization Number of of Mortgage the as of the
Terms in Months Mortgage Loans Loans Cut-off Date Cut-off Date
--------------- -------------- ----- ------------ ------------
Total
Weighted Average Remaining Amortization Term in Months: _____
The following two tables set forth the range of Cut-off Date LTV Ratios
and Maturity Date LTV Ratios of the Mortgage Loans. A "Cut-Off Date LTV Ratio"
is a fraction, expressed as a percentage, the numerator of which is the Cut-
off Date Balance of a Mortgage Loan, and the denominator of which is the
appraised value of the related Mortgaged Property as determined by an appraisal
thereof obtained in connection with the origination of such Mortgage Loan. A
"Maturity Date LTV Ratio" is a fraction, expressed as a percentage, the
numerator of which is the principal balance of a Mortgage Loan on the related
Maturity Date assuming all scheduled payments due prior thereto are made and
there are no principal prepayments, and the denominator of which is the
appraised value of the related Mortgaged Property as determined by an appraisal
thereof obtained in connection with the origination of such Mortgage Loan.
Because the value of Mortgaged Properties at the Maturity Date may be different
than such appraisal value, 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 Cut-off Date LTV Ratio or Maturity Date LTV
Ratio, notwithstanding any positive amortization of such Mortgage Loan. It is
also possible that the market value of a Mortgaged Property securing a Mortgage
Loan may decline between the origination thereof and the related Maturity Date.
An appraisal of each of the Mortgaged Properties was made between
__________ and ______________. It is possible that the market value of a
Mortgaged Property securing a Mortgage Loan has declined since the most recent
appraisal for such Mortgaged Property. All appraisals were obtained by the
related Originator in accordance with the requirements of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989, as amended
("FIRREA").
CUT-OFF DATE LTV RATIOS
Percent by
Aggregate Aggregate
Percent by Principal Principal
Remaining Number Balance as of Balance
Amortization Number of of Mortgage the as of the
Terms in Months Mortgage Loans Loans Cut-off Date Cut-off Date
--------------- -------------- ----- ------------ ------------
Total
Weighted Average Cut-off Date LTV Ratio: _________.
BALLOON MORTGAGE LOAN
MATURITY DATE LTV RATIOS
Percent by
Aggregate Aggregate
Percent by Principal Principal
Remaining Number Balance as of Balance
Amortization Number of of Mortgage the as of the
Terms in Months Mortgage Loans Loans Cut-off Date Cut-off Date
--------------- -------------- ----- ------------ ------------
Total
Weighted Average Maturity Date LTV Ratio: _________.
The following table sets forth the range of 199__ Debt Service Coverage
Ratios for the Mortgage Loans. The "Debt Service Coverage Ratio" or "DSCR" for
any Mortgage Loan for any period is the ratio of Net Operating Income produced
by
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the related Mortgaged Property for such period covered by the operating
statement for such period to the amounts of principal and interest due under
such Mortgage Loan for the same period. The DSCRs for 199__ are for periods of
12 months or annualized based upon periods that range from 1 to 11 months. The
DSCRs for 199__ and 199__ for each Mortgage Loan as set forth in Annex A hereto
are for the entire fiscal year. Generally, "Net Operating Income" for a
Mortgaged Property equals the operating revenues for such Mortgaged Property
minus its operating expenses and replacement reserves, but without giving
effect to debt service, depreciation, non-recurring capital expenditures,
tenant improvements, leasing commissions and similar items. The operating
statements for the Mortgaged Properties used in preparing the following table
were obtained from the respective Mortgagors. The information contained therein
was unaudited, and the Depositor has made no attempt to verify its accuracy.
The information derived from these sources was not uniform among the Mortgage
Loans. In some instances, adjustments were made to such operating statements
principally for real estate tax and insurance expenses resulting in increases
or decreases in net operating income stated therein based upon the Depositor's
evaluation that more appropriate information was available. In addition,
obvious capital expenditures were eliminated and replacement reserve estimates
were incorporated for each property based on ____'s standard underwriting
ranges considering property age and improvements. The following ranges were
utilized (by property type) in estimating the replacement reserve: office,
$____ to $____ per net rentable square foot; multifamily (except student
housing), $____ to $____ per unit; student housing, $____ to $____ per unit;
retail, $____ to $____ per net rentable square foot; industrial, $____ to $____
per net rentable square foot; hotel, _% to _% of gross income; self-storage,
$____ to $____ per net rentable square foot; health care-related, $____ to
$____ per bed; and manufactured housing community, $___ to $___ per pad.
199___ DEBT SERVICE COVERAGE RATIOS
Percent by
Aggregate Aggregate
Percent by Principal Principal
Remaining Number Balance as of Balance
Amortization Number of of Mortgage the as of the
Terms in Months Mortgage Loans Loans Cut-off Date Cut-off Date
--------------- -------------- ----- ------------ ------------
Total
Weighted Average Debt Service Coverage Ratio: _________.
[Information on certain characteristics of certain specific Mortgage
Loans to be provided here.]
The Mortgage Loans are secured by Mortgaged Properties located in ______
different states. The table below sets forth the states in which the Mortgaged
Properties are located:
GEOGRAPHIC DISTRIBUTION
Percent by
Aggregate Aggregate
Percent by Principal Principal
Remaining Number Balance as of Balance
Amortization Number of of Mortgage the as of the
Terms in Months Mortgage Loans Loans Cut-off Date Cut-off Date
--------------- -------------- ----- ------------ ------------
Total
PROPERTY TYPES
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Number of of Mortgage the as of the
Type Mortgage Loans Loans Cut-off Date Cut-off Date
---- -------------- ----- ------------ ------------
Multi-Family.......
Retail -- with
anchor tenant(1)
Hotel.............
Retail -- without
anchor tenant(1)
Health Care-
Related...........
Office.............
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Industrial.........
Manufactured
Housing Community
Self Storage.......
Total..............
(1) For purposes of this table, the properties with an anchor tenant are as
designated in Annex A. The anchor tenant, if any, is set forth in Annex
A.
YEARS SINCE THE MORTGAGED PROPERTIES WERE BUILT (1)
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Property Age Number of of Mortgage the as of the
In Years Mortgage Loans Loans Cut-off Date Cut-off Date
-------- -------------- ----- ------------ ------------
Total
Weighted Average Property Age in Years: _____
(1) See Annex A for the date on which the Mortgaged Property most recently
underwent some degree of capital improvements.
PHYSICAL OCCUPANCY PERCENTAGES (1)
MULTIFAMILY AND MANUFACTURED HOUSING COMMUNITIES
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Occupancy Number of of Mortgage the as of the
Percentage Mortgage Loans Loans Cut-off Date Cut-off Date
---------- -------------- ----- ------------ ------------
Total
Weighted Average Occupancy Percentage: ________%
(1) See Annex A for dates as of which occupancy percentages were calculated for
each Mortgaged Property.
PHYSICAL OCCUPANCY PERCENTAGES (1)
RETAIL
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Occupancy Number of of Mortgage the as of the
Percentage Mortgage Loans Loans Cut-off Date Cut-off Date
---------- -------------- ----- ------------ ------------
Total
Weighted Average Occupancy Percentage: __________%
(1) See Annex A for dates as of which occupancy percentages were calculated for
each Mortgaged Property.
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<PAGE>
PHYSICAL DAILY OCCUPANCY PERCENTAGES (1)
HOTEL
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Occupancy Number of of Mortgage the as of the
Percentage Mortgage Loans Loans Cut-off Date Cut-off Date
---------- -------------- ----- ------------ ------------
Total
Weighted Average Occupancy Percentage: ______%
(1) See Annex A for the period over which occupancy percentages were calculated
for each Mortgaged Property.
PHYSICAL OCCUPANCY PERCENTAGES (1)
OFFICE
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Occupancy Number of of Mortgage the as of the
Percentage Mortgage Loans Loans Cut-off Date Cut-off Date
---------- -------------- ----- ------------ ------------
Total
Weighted Average Occupancy Percentage: ___________%
(1) See Annex A for dates as of which occupancy percentages were calculated for
each Mortgaged Property.
PHYSICAL OCCUPANCY PERCENTAGES (1)
OTHER
Percent by
Aggregate Aggregate
Percent by Principal Principal
Number Balance as of Balance
Occupancy Number of of Mortgage the as of the
Percentage Mortgage Loans Loans Cut-off Date Cut-off Date
---------- -------------- ----- ------------ ------------
Total
Weighted Average Occupancy Percentage: ___________%
(1) See Annex A for dates as of which occupancy percentages were calculated for
each Mortgaged Property.
With certain limited exceptions relating to casualty and condemnation
proceeds, or other prepayments beyond the borrower's control, all of the
Mortgage Loans prohibit the prepayment thereof until a date specified in the
related Mortgage Note (such period, the "Lock-Out Period" and the date of
expiration thereof, the "Lock-Out Date") and/or provide that upon any voluntary
principal prepayment of a Mortgage Loan, the related Mortgagor will be required
to pay a prepayment premium or yield maintenance penalty (a "Prepayment
Premium"). The following table sets forth the percentage of the declining
aggregate balance of all the Mortgage Loans that on June 1 of each of the years
indicated will be within their related Lock-out Period and/or in which a
principal prepayment must be accompanied by a Prepayment Premium.
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<PAGE>
PREPAYMENT LOCK-OUT/PREPAYMENT PREMIUM ANALYSIS
PERCENTAGE OF MORTGAGE LOANS BY OUTSTANDING PRINCIPAL BALANCE
AS OF THE DATE INDICATED ASSUMING NO PREPAYMENTS
<TABLE>
<CAPTION>
CURRENT JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOCK-OUT................
Prepayment Premium
Yield Maintenance(1)....
7.00 - 7.99%(2) ...........
6.00 - 6.99%(2) ...........
5.00 - 5.99%(2) ...........
4.00 - 4.99%(2) ...........
3.00 - 3.99%(2) ...........
2.00 - 1.99%(2) ...........
1.00 - 1.99%(2) ...........
No Prepayment
Premium Total.............. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Aggregate Principal..........
Balance of the
Mortgage Loans(3)..........
Percentage of Cut-Off
Date Principal
Balance of the.............
MortgageLoans
Outstanding................ 100.0%
</TABLE>
(1) The Mortgage Loans generally require the payment of a Prepayment Premium
in connection with any principal prepayment, in whole or in part until
90-180 days prior to maturity. Any Prepayment Premium will equal the
present value, as of the date of prepayment, of the remaining Monthly
Payments from such date of prepayment through the related stated maturity
(including the Balloon Payment), determined by discounting such payments
at a U.S. Treasury rate specified therein, minus the then outstanding
balance, subject to a minimum Prepayment Premium equal to 1% of the
principal balance of such Mortgage Loan being prepaid.
(2) Mortgage Loan requires a Prepayment Premium equal to indicated percentage
of amount prepaid.
(3) Millions of dollars.
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<PAGE>
RELATED BORROWERS AND OTHER ISSUES
[Description of certain borrowers and issues.]
See Annex A for additional information on the Mortgage Loans.
ESCROWS
All of the Mortgage Loans except for _______ Mortgage Loans, representing
______% of the Mortgage Loans, provide for monthly escrows to cover property
taxes on the Mortgaged Properties. Monthly escrows to cover insurance premiums
on the Mortgaged Properties are generally not required.
___________ of the Mortgage Loans, which represent _______% of the
Mortgage Loans also require monthly escrows to cover ongoing replacements and
capital repairs.
_________ of the Mortgage Loans, which represent __________% of the
Mortgage Loans, also required upfront or monthly escrows for the full term or a
portion of the term of the related Mortgage Loan to cover anticipated releasing
costs, including tenant improvements and leasing commissions.
See Annex A for additional information on the monthly escrows on the
Mortgage Loans.
UNDERWRITING GUIDELINES
[DESCRIPTION OF UNDERWRITING GUIDELINES]
ADDITIONAL INFORMATION
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates and will be filed, together with the
Pooling and Servicing Agreement, with the Securities and Exchange Commission
within fifteen days after the initial issuance of the Offered Certificates.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will include the following nine classes of Offered Certificates
designated as the Class A1, Class A1X, Class A2, Class A2X, Class B, Class C,
Class BCX, Class D and Class E Certificates. In addition to the Offered
Certificates, the Certificates will also include the Class F, Class G, Class
NR, Class R-I, Class R-II and Class R-III Certificates. Only the Offered
Certificates are offered hereby. The Certificates represent in the aggregate
the entire beneficial ownership interest in a Trust Fund consisting of: (i) a
pool of fixed rate Mortgage Loans and all payments under and proceeds of the
Mortgage Loans 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, an "REO Property"); (iii) such funds or
assets as from time to time are deposited in the Collection or Distribution
Accounts or any account established in connection with REO Properties (the "REO
Account"); and (iv) the rights of the mortgagee under all insurance policies
with respect to the Mortgage Loans.
The Class A1, Class A1X, Class A2 and Class A2X Certificates will
evidence approximately an initial ___% undivided interest in the Trust Fund.
The Class B Certificates will evidence approximately an initial __% undivided
interest in the Trust Fund. The Class C Certificates will evidence
approximately an initial ___% undivided interest in the Trust Fund. The Class D
Certificates will evidence approximately an initial ____% undivided interest in
the Trust Fund. The Class E Certificates will evidence approximately an initial
___% undivided interest in the Trust Fund.
S-27
<PAGE>
The Class BCX Certificates consist of the following components: Class BCX
component B and Class BCX component C. The Class BCX component B and Class BCX
component C are not separately transferrable.
The Offered Certificates (the "DTC Registered Certificates") will be
issued, maintained and transferred on the book-entry records of The Depository
Trust Company ("DTC") and its Participants (as defined in the Prospectus). The
DTC Registered Certificates, other than the Interest Only Certificates, will be
issued in minimum denominations of $__________ and integral multiples of $____
in excess thereof. The Interest Only Certificates will be issued in
denominations of $100,000 Notional Amount and integral multiples of $_____
Notional Amount.
The DTC Registered Certificates will be represented by one or more
certificates registered in the name of the nominee of DTC. The Company has been
informed by DTC that DTC's nominee will be Cede & Co. ("Cede"). No person
acquiring an interest in the DTC Registered Certificates (a "Beneficial Owner")
will be entitled to receive a certificate representing such person's interest
(a "Definitive Certificate"), except as set forth below under "--Book-Entry
Registration of Certain of the Senior Certificates -- Definitive Certificates."
Unless and until Definitive Certificates are issued for the DTC Registered
Certificates under the limited circumstances described herein, all references
to actions by Certificateholders with respect to the DTC Registered
Certificates shall refer to actions taken by DTC upon instructions from its
Participants, and all references herein to distributions, notices, reports and
statements to Certificateholders with respect to the DTC Registered
Certificates shall refer to distributions, notices, reports and statements to
DTC or Cede, as the registered holder of the DTC Registered Certificates, for
distribution to Beneficial Owners by DTC in accordance with DTC procedures.
BOOK-ENTRY REGISTRATION OF THE OFFERED CERTIFICATES
General. Beneficial Owners that are not Participants or Intermediaries
(as defined in the Prospectus) but desire to purchase, sell or otherwise
transfer ownership of, or other interests in, the related DTC Registered
Certificates may do so only through Participants and Intermediaries. In
addition, Beneficial Owners will receive all distributions of principal of and
interest on the related DTC Registered Certificates from the Trustee through
DTC and Participants. Accordingly, Beneficial Owners may experience delays in
their receipt of payments. Unless and until Definitive Certificates are issued
for the related DTC Registered Certificates, it is anticipated that the only
registered Certificateholder of such DTC Registered Certificates will be Cede,
as nominee of DTC. Beneficial Owners will not be recognized by the Trustee or
the Master Servicer as Certificateholders, as such term is used in the Pooling
and Servicing Agreement; provided, however, that Beneficial Owners will be
permitted to request and receive information furnished to Certificateholders by
the Trustee subject to receipt by the Trustee of a certification in form and
substance acceptable to the Trustee stating that the person requesting such
information is a Beneficial Owner. Otherwise, the Beneficial Owners will be
permitted to receive information furnished to Certificateholders and to
exercise the rights of Certificateholders only indirectly through DTC, its
Participants and Intermediaries.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
of DTC Registered Certificates among Participants and to receive and transmit
distributions of principal of, and interest on, such DTC Registered
Certificates. Participants and Intermediaries with which Beneficial Owners have
accounts with respect to such DTC Registered Certificates similarly are
required to make book-entry transfers and receive and transmit such
distributions on behalf of their respective Beneficial Owners. Accordingly,
although Beneficial Owners will not possess physical certificates evidencing
their interests in the DTC Registered Certificates, the Rules provide a
mechanism by which Beneficial Owners, through their Participants and
Intermediaries, will receive distributions and will be able to transfer their
interests in the DTC Registered Certificates.
None of the Depositor or the Trustee will have any liability for any
actions taken by DTC or its nominee, including, without limitation, actions for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in the DTC Registered Certificates held by Cede, as nominee
for DTC, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
S-28
<PAGE>
Definitive Certificates. Definitive Certificates will be issued to
Beneficial Owners or their nominees, respectively, rather than to DTC or its
nominee, only under the limited conditions set forth in the Prospectus under
"Description of the Certificates -- Book-Entry Registration and Definitive
Certificates."
Upon the occurrence of an event described in the Prospectus in the
seventh paragraph under "Description of the Certificates -- Book-Entry
Registration and Definitive Certificates," the Trustee is required to notify,
through DTC, Participants who have ownership of DTC Registered Certificates as
indicated on the records of DTC of the availability of Definitive Certificates
for their DTC Registered Certificates. Upon surrender by DTC of the definitive
certificates representing the DTC Registered Certificates and upon receipt of
instructions from DTC for re-registration, the Trustee will reissue the DTC
Registered Certificates as Definitive Certificates issued in the respective
principal amounts owned by individual Beneficial Owners, and thereafter the
Trustee and the Master Servicer will recognize the holders of such Definitive
Certificates as Certificateholders under the Pooling and Servicing Agreement.
For additional information regarding DTC and the DTC Registered
Certificates, see "Description of the Certificates -- Book-Entry Registration
and Definitive Certificates" in the Prospectus.
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 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 Trustee
with wiring instructions as provided in the Pooling and Servicing Agreement and
is the registered holder of Certificates with an initial aggregate denomination
of at least $__________ or, otherwise, by check. 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 Certificate is
equal to the initial denomination thereof as of the Delivery Date, divided by
the initial Class Balance or Notional Amount, as applicable, 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 Collection
Account (as defined herein) as of the close of business on the related
Determination Date, which amount will include scheduled payments on the
Mortgage Loans due on or prior to the related Due Date immediately preceding,
and collected as of, such Determination Date (to the extent not distributed on
previous Distribution Dates) and unscheduled payments and other collections on
the Mortgage Loans collected during the related Remittance Period and (ii) the
aggregate amount of any P&I Advances made by each Servicer in respect of such
Distribution Date (not otherwise included in clause (i) above) net of (b) the
portion of the amount described in clause (a)(i) hereof that represents (i)
Monthly Payments due on a Due Date subsequent to the end of the related
Remittance Period, (ii) any amounts payable or reimbursable therefrom to any
Servicer or the Trustee or (iii) any servicing and trustee compensation.
Pass-Through Rate on the Certificates. the "Pass-Through Rates" on the
Class A1 and Class A2 Certificates are fixed and are set forth on the cover
hereof. The Pass-Through Rates on the Class A1X, Class A2X, Class B and Class C
Certificates will be equal to the weighted average of the Remittance Rates in
effect from time to time on the Mortgage Loans minus the Pass-Through Rates on
the Class A1 and Class A2 Certificates, respectively. The Class BCX
Certificates will be entitled to interest at the Pass-Through Rate on the
components. The Pass-Through Rate on the Class BCX component B is _______% per
annum and on the Class BCX component C is _______% per annum. The Pass-Through
Rates on the Class D and Class E Certificates will be equal to the
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<PAGE>
weighted average of the Remittance Rates in effect from time to time on the
Mortgage Loans. The "Remittance Rate" for any Mortgage Loan is equal to the
excess of the Mortgage Interest Rate thereon (without giving effect to any
modification or other reduction thereof following the Cut-off Date) over the
sum of the applicable Servicing Fee Rate and the fee payable to the Trustee.
The fee payable to the Trustee will be _______% per annum. The Mortgage
Interest Rate for each of the Mortgage Loans which provide for the computation
of interest other than on the basis of a 360-day year consisting of twelve
30-day Months (a "30/360 Basis") (that is the basis on which interest on the
Certificates accrues) will be adjusted to reflect that difference.
Interest Distributions on the Certificates. Subject to the distribution
of the Principal Distribution Amount to the Holders of classes of Certificates
of a higher priority, as described under "Priority of Distributions" below,
Holders of each class of Certificates will be entitled to receive on each
Distribution Date, to the extent of the Available Distribution Amount for such
Distribution Date (net of any interest accrued on any Collateral Value
Adjustment subsequently recovered and any Net Prepayment Premium) (the
"Adjusted Available Distribution Amount"), distributions allocable to interest
in an amount (the "Interest Distribution Amount") equal to the sum of interest
accrued during the period from and including the first day of the month
preceding the month of the Distribution Date) (or from the Cut-off Date in the
case of the initial Distribution Date) to and including the last day of the
month preceding the month of the Distribution Date (calculated on the basis of
a 360-day year consisting of twelve 30-day months) on the Class Balance (or the
Notional Amount, in the case of the Interest Only Certificates, or the related
components) of such class of Certificates or such components, as the case may
be, outstanding immediately prior to such Distribution Date, at the
then-applicable Pass-Through Rate (the "Interest Accrual Amount") less such
class' (or component's) pro rata share, by Interest Accrual Amount, of any
interest shortfall not related to a Mortgagor delinquency or default, such as
Prepayment Interest Shortfalls (as defined herein) and shortfalls associated
with exemptions provided by the Relief Act (as defined in the Prospectus). The
Notional Amount of the Class A1X Certificates will equal the Class Balance of
the Class A1 Certificates. The Notional Amount of the Class A2X Certificates
will equal the Class Balance of the Class A2 Certificates. The Notional Amount
of the Class BCX component B Certificates will equal the Class Balance of the
Class B Certificates. The Notional Amount of the Class BCX component C
Certificates will equal the Class Balance of the Class C Certificates. A
Notional Amount does not entitle the Interest Only Certificates (or any
component thereof) to any distributions of principal. If the Adjusted Available
Distribution Amount for any Distribution Date is less than the Interest
Distribution Amount for such Distribution Date, the shortfall will be part of
the Interest Distribution Amount distributable to holders of Certificates
affected by such shortfall on subsequent Distribution Dates, to the extent of
available funds. Any such shortfall will bear interest at the related
Pass-Through Rate.
To the extent not necessary to reimburse the Master Servicer for
reductions in its compensation to cover Prepayment Interest Shortfalls, in
addition to the related Interest Distribution Amount, the Interest Only
Certificates will receive _____%, and the remaining Offered Certificates will
receive ____%, of any Net Prepayment Premium paid with respect to the Mortgage
Loans. The Net Prepayment Premium payable to the Interest Only Certificates
will be paid to the holders of the Class A1X Certificates while the Class A1
Certificates are outstanding. On each Distribution Date after the Distribution
Date on which the Class Balances of the Class A1 Certificates has been reduced
to zero, any Net Prepayment Premium payable to the Interest Only Certificates
will be paid to the holders of the Class A2X Certificates while the Class A2
Certificates are outstanding. On each Distribution Date after the Distribution
Date on which the Class Balances of the Class A1 and Class A2 Certificates have
been reduced to zero, any Net Prepayment Premium payable to the Interest Only
Certificates will be paid to the holders of the Class BCX Certificates while
the Class B or Class C Certificates are outstanding. No portion of the Net
Prepayment Premium will be payable to the Interest Only Certificates after the
Distribution Date on which the Class Balances of the Class A1, Class A2, Class
B and Class C Certificates have been reduced to zero. On each Distribution
Date, the Net Prepayment Premium not payable to the Master Servicer or the
holders of the Interest Only Certificates will be paid the holders of the class
of Offered Certificates then outstanding with the highest principal payment
priority.
To the extent any Mortgage Loan is prepaid in full or in part between a
Determination Date and the related Due Date immediately following such
Determination Date, an interest shortfall may result on the second Distribution
Date following such
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<PAGE>
Determination Date because interest on prepayments in full or in part will only
accrue to the date of payment (such shortfall, a "Prepayment Interest
Shortfall"). To the extent any Mortgage Loan is prepaid in full or in part
between the related Due Date and the Determination Date immediately following
such Due Date, the interest on such prepayment will be included in the
Available Distribution Amount for the immediately succeeding Distribution Date
(the "Prepayment Interest Excess"). If a Mortgage Loan is prepaid in full or in
part during any Remittance Period, any related Prepayment Interest Shortfall
shall be offset to the extent of any Prepayment Interest Excess and any
Prepayment Premium collected during such Remittance Period. If the Prepayment
Interest Shortfall for any Remittance Period exceeds any Prepayment Interest
Excess and any Prepayment Premiums collected during such period, such shortfall
shall only be offset by an amount up to the portion of the Servicing Fee
payable to the Master Servicer on the related Distribution Date. To the extent
that any such shortfall shall have been offset by a portion of the Servicing
Fee, the Master Servicer shall be entitled to any excess of the Prepayment
Interest Excess and Prepayment Premiums over the Prepayment Interest Shortfall
for any subsequent period.
The "Net Prepayment Premium" with respect to any Distribution Date will
equal the excess of (a) the total amount of Prepayment Premiums received during
the related Remittance Period over (b) the Prepayment Interest Shortfall for
any Remittance Period over the Prepayment Interest Excess for any Remittance
Period.
The Pass-Through Rates on the Certificates with variable Pass-Through
Rates will not be affected by the deferral of interest or reduction of the
Mortgage Interest Rate on any Mortgage Loan by the Special Servicer or by the
occurrence of either such event in connection with any bankruptcy proceeding
involving the related borrower. The amount of any resulting interest shortfall
will be allocated to the Certificates, in the order described under
"Subordination" below.
Principal Distributions on the Offered Certificates. Holders of the
Certificates will be entitled to receive on each Distribution Date in reduction
of the related Class Balance in the order described herein until the related
Class Balance is reduced to zero, to the extent of the balance of the Adjusted
Available Distribution Amount remaining after the payment of the Interest
Distribution Amount for such Distribution Date for the classes of Certificates
with the highest priority for interest payments (as described under "Priority
of Distributions" below), distributions in respect of principal in an amount
(the "Principal Distribution Amount") equal to the aggregate of (i) all
scheduled payments of principal (other than Balloon Payments) due on the
Mortgage Loans on the related Due Date whether or not received and all
scheduled Balloon Payments received, (ii) if the scheduled Balloon Payment is
not received, with respect to any Balloon Mortgage Loans on and after the
Maturity Date thereof, the principal payment that would need to be received in
the related month in order to fully amortize such Balloon Mortgage Loan with
level monthly payments by the end of the term used to derive scheduled payments
of principal due prior to the related Maturity Date, (iii) to the extent not
previously advanced any unscheduled principal recoveries received during the
related Remittance Period in respect of the Mortgage Loans, whether in the form
of liquidation proceeds, insurance proceeds, condemnation proceeds or amounts
received as a result of the purchase of any Mortgage Loan out of the Trust Fund
and (iv) any other portion of the Adjusted Available Distribution Amount
remaining undistributed after payment of any interest payable on the
Certificates for the related or any prior Distribution Date, including any
Prepayment Interest Excess not offset by any Prepayment Interest Shortfall
occurring during the related Remittance Period or otherwise required to
reimburse the Master Servicer, as described herein, and interest distributions
on the Mortgage Loans, in excess of interest distributions on the Certificates,
resulting from the allocation of amounts described in this clause (iv) to
principal distributions on the Certificates. The Interest Only Certificates do
not have a Class Balance and are therefore not entitled to any principal
distributions.
PRIORITY OF DISTRIBUTIONS
The Adjusted Available Distribution Amount for each Distribution Date
will be applied (a) first to distributions of interest on the classes of
Certificates outstanding with the highest priority for interest payment (as
described below), (b) second to distributions of the Principal Distribution
Amount to the classes of Certificates then entitled to distribution of
principal as described below, and (c) third, to distributions of interest on
each class of Certificates other than the classes described in clause (a),
above, in the order of priority described below; provided that on any
Distribution Date on which the Class Balance of a class of Certificates is
reduced to zero pursuant to clause (b) above, interest distributions pursuant
to clause (a) above will be made to the class of Certificates outstanding with
the next highest priority for interest payments prior to making distributions
of the Principal Distribution Amount thereto pursuant to clause (b) above. The
priority for interest payments for purposes of clauses
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<PAGE>
(a) and (c), above, is: first to distributions of interest on the Class A1,
Class A1X, Class A2 and Class A2X Certificates, pro rata, based on their
respective Interest Accrual Amounts; second to distributions of interest on the
Class B and Class BCX component B Certificates, pro rata, based on their
respective Interest Accrual Amounts; third to distributions of interest on the
Class C and Class BCX component C Certificates, pro rata, based on their
respective Interest Accrual Amounts; fourth to distributions of interest on
the Class D Certificates; fifth to distributions of interest on the Class E
Certificates; and then to the remaining classes of Certificates up to their
respective Interest Accrual Amounts, all as described under "--Distributions
- -- Interest Distributions on the Certificates" above. The Principal
Distribution Amount for such Distribution Date will be applied to distributions
of principal of the Class A1, Class A2, Class B, Class C, Class D and Class E
Certificates, in that order, and then to distributions of principal of the
Other Classes of Certificates until their respective Class Balances have been
reduced to zero.
OTHER CERTIFICATES
The Class F, Class G, Class NR, Class R-I, Class R-II and Class R-III
Certificates are not offered hereby. The Pass-Through Rates on the Class F,
Class G and Class NR Certificates will equal the weighted average of the
Remittance Rates in effect from time to time on the Mortgage Loans. The Class
Balances on the Class F, Class G and Class NR Certificates will equal
$___________, $___________, and $___________, respectively, and approximately
$_____________, in the aggregate. The Class R-I, Class R-II and Class R-III
Certificates will not have a Pass-Through Rate or a Class Balance.
SUBORDINATION
Neither the Offered Certificates nor the Mortgage Loans are insured or
guaranteed against losses suffered on the Mortgage Loans by any government
agency or instrumentality or by the Depositor, the Trustee, the Master
Servicer, the Special Servicer or any affiliate thereof.
In addition to the payment priorities described under "--Priority of
Distributions" above, certain Certificates will be subordinated to other
Certificates with respect to the allocation of Realized Losses. Realized Losses
on the Mortgage Loans will be allocated, first, to the Other Certificates,
second, to the Class E Certificates, third, to the Class D Certificates,
fourth, to the Class C Certificates, fifth, to the Class B Certificates, in
each case until the related Class Balance is reduced to zero; and thereafter,
to the Class A1 and Class A2 Certificates. The Class Balance of a class of
Certificates will be reduced by the principal portion of any Realized Losses
allocated to such class.
In addition to Realized Losses, shortfalls will also occur as a result of
each Servicer's right to receive payments of interest with respect to
unreimbursed advances, the Special Servicer's right to compensation with
respect to Mortgage Loans which are or have been Specially Serviced Mortgage
Loans and as a result of other Trust Fund expenses. Such shortfalls will be
allocated as described above to the classes of Certificates with the lowest
payment priority for purposes of the application of Available Distribution
Amount in the order described herein.
Within 30 days after the earliest to occur of (i) 90 days after the date
on which an uncured delinquency occurs in respect of a Mortgage Loan, (ii) 60
days after the date on which a receiver is appointed (if such appointment
remains in effect during such 60-day period) in respect of a Mortgaged
Property, (iii) as soon as reasonably practical after the date on which a
Mortgaged Property becomes an REO Property or (iv) the date on which a change
in the payment rate, Mortgage Interest Rate, principal balance, amortization
terms or Maturity Date of any Specially Serviced Mortgage Loan becomes
effective, an appraisal will be obtained by the Special Servicer from an
independent MAI appraiser at the expense of the Trust Fund (except if an
appraisal has been conducted within the 12 month period preceding such event).
As a result of such appraisal, a Collateral Value Adjustment may result, which
Collateral Value Adjustment will be allocated, for purposes of determining
distributions of interest to the Certificates, in the manner and priority
described above with respect to Realized Losses. Notwithstanding the foregoing,
a Collateral Value Adjustment will be zero with respect to such a Mortgage Loan
if (i) the event giving rise to such Collateral Value Adjustment is the
extension of the maturity of such Mortgage Loan, (ii) the payments on such
Mortgage Loan were not delinquent during the twelve month period immediately
preceding such extension
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<PAGE>
and (iii) the payments on such Mortgage Loan are then current, provided, that
if at any later date there occurs a delinquency in payment with respect to such
Mortgage Loan, the Collateral Value Adjustment will be recalculated and applied
to the same extent as it would have been previously applied. In addition, in
any case, upon the occurrence of any event giving rise to a subsequent
Collateral Value Adjustment (including the delinquency referred to in the
immediately preceding sentence) more than twelve months after an appraisal was
obtained with respect to a Collateral Value Adjustment, the Special Servicer
will order a new appraisal as described above, within 30 days of the occurrence
of any such event giving rise to a subsequent Collateral Value Adjustment and
will adjust the amount of the Collateral Value Adjustment in accordance
therewith.
The "Collateral Value Adjustment" for any Distribution Date with respect
to any Mortgage Loan will be an amount equal to the excess of (a) the principal
balance of such Mortgage Loan over (b) the excess of (i) 90% of the current
appraised value of the related Mortgaged Property as determined by an
independent MAI appraisal of such Mortgaged Property over (ii) the sum of (A)
to the extent not previously advanced by a Servicer, all unpaid interest on
such Mortgage Loan at a per annum rate equal to the Mortgage Interest Rate, (B)
all unreimbursed Advances and interest thereon, and (C) any unpaid Servicing
and Trustee fees and (D) all currently due and delinquent real estate taxes and
assessments, insurance premiums and, if applicable, ground rents in respect of
such Mortgaged Property (net of any amount escrowed or otherwise available for
payment of the amount due on such Mortgage Loan). The excess of the principal
balance of any Mortgage Loan over the related Collateral Value Adjustment is
referred to herein as the "Adjusted Collateral Value". A Collateral Value
Adjustment shall result in a reduction of the Class Balance (or Notional
Amount) of any class of Certificates solely for the purposes specified herein
and shall not be a permanent reduction of the Class Balance (or Notional
Amount) of any class of Certificates prior to the occurrence of a Realized
Loss.
A "Realized Loss", in the case of any Mortgage Loan described in clause
(a) or clause (b) of the succeeding sentence, is equal to the sum of (a) the
Stated Principal Balance of any Loss Mortgage Loan, (b) interest thereon not
previously distributed to Certificateholders through the last day of the month
in which such Mortgage Loan became a Loss Mortgage Loan, (c) any advances made
by any Servicer which remain unreimbursed and (d) any interest accrued on such
advances (see "--Advances" below) as of such time, reduced by any amounts
recovered thereon as of such time and, in the case of any Mortgage Loan
described in clause (c) of the succeeding sentence, is the amount determined to
have been permanently forgiven as described in such clause (c). A "Loss
Mortgage Loan" is any Mortgage Loan (a) which is finally liquidated, (b) with
respect to which the Master Servicer or the Special Servicer has determined
that an advance which has been made or would otherwise be required to be made,
is not, or, if made, would not be, recoverable out of proceeds on such Mortgage
Loan or (c) with respect to which a portion of the principal balance thereof
has been permanently forgiven whether pursuant to a modification or a valuation
resulting from a proceeding initiated under the Bankruptcy Code. The "Stated
Principal Balance" of any Mortgage Loan as of any date of determination is the
principal balance as of the Cut-off Date minus the sum of (i) the principal
portion of each Monthly Payment due on such Mortgage Loan after the Cut-off
Date, to the extent received from the Mortgagor or advanced and distributed to
Certificateholders, and (ii) any unscheduled amounts of principal received with
respect to such Mortgage Loans, to the extent distributed to
Certificateholders.
To the extent any amount on a Mortgage Loan with respect to which a
Collateral Value Adjustment was required is recovered in excess of the Adjusted
Collateral Value (after giving effect to all other amounts previously collected
with respect thereto), such amount will be distributed to each holder of a
class of Certificates to which a Collateral Value Adjustment has been
allocated, in the order of payment described hereinabove up to an amount equal
to interest accrued on the sum of any Collateral Value Adjustment allocated to
such class of Certificates (or component) in reduction of the Class Balance (or
Notional Amount) thereof at the Pass-Through Rate in effect during such
applicable Collection Period from the date of such allocation to the end of the
Collection Period in which such an amount is recovered. The Class Balance (or
Notional Amount) of each such class (or component) shall be increased by the
amount of such excess over such interest payment in the order of payment
described hereinabove. Any reduction of the Class Balance (or Notional Amount)
of a class (or component) of Certificates following a Collateral Value
Adjustment and any increase thereof following an excess recovery will affect
the Percentage Interest and the calculation of any interest or voting right of
such class of Certificates.
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<PAGE>
ADVANCES
On the business day immediately preceding each Distribution Date, the
Master Servicer will be obligated to make advances out of its own funds or
funds held in the Collection Account (as defined herein) that are not required
to be part of the Available Distribution Amount for such Distribution Date or
to remit any advances made by the Special Servicer ("P&I Advances"), in an
amount equal to the excess of all Monthly Payments (net of the Servicing Fee)
due over the amount actually received, subject to the limitations described
herein. In addition, each Servicer will be required to advance certain property
related expenses. The Servicers generally may not advance any amounts, other
than P&I Advances, unless such advance is contemplated in the related Asset
Strategy Report (as defined herein) for the related Mortgage Loan or such
advance is for one of several purposes specified in the Pooling and Servicing
Agreement as "Property Protection Expenses". All such advances will be
reimbursable to the related Servicer from late payments, insurance proceeds,
liquidation proceeds, condemnation proceeds or amounts paid in connection with
the purchase of such Mortgage Loan or, as to any such advance that is deemed
not otherwise recoverable, from any amounts on deposit in the Collection
Account to the extent such amounts are not required to be otherwise applied
pursuant to the terms of the related Mortgage Loan. Notwithstanding the
foregoing, the Master Servicer will be obligated to make any such advance only
to the extent that it determines in its reasonable good faith judgment that
such advance, if made, would be recoverable out of net proceeds (including any
amounts escrowed with respect to the related Mortgage Loan net of any
reasonably anticipated expenses payable therefrom) on the related Mortgage
Loan. None of the Servicers will be required to advance the full amount of any
Balloon Payment not made by the related Mortgagor. To the extent a Servicer is
required to make a P&I Advance on and after the Due Date for such Balloon
Payment, such P&I Advance shall not exceed an amount equal to a monthly payment
calculated by the Special Servicer necessary to fully amortize the related
Mortgage Loan over the period used for purposes of calculating the scheduled
monthly payments thereon prior to the related Maturity Date. Any failure by the
Master Servicer to make an advance as required under the Pooling and Servicing
Agreement will constitute an event of default thereunder, in which case the
Trustee will be obligated to make any required advance, in accordance with the
terms of the Pooling and Servicing Agreement.
Each Servicer shall be entitled to interest on the aggregate amount of
all advances made by such Servicer at a per annum rate equal to the prime rate
reported in The Wall Street Journal. See "Risk Factors -- Effect of Mortgagor
Delinquencies and Defaults" herein.
CERTAIN PREPAYMENT, MATURITY AND YIELD CONSIDERATIONS
GENERAL
The yield to maturity on the Offered Certificates will be affected by the
rate of principal payments on the Mortgage Loans including, for this purpose,
prepayments, which may include amounts received by virtue of repurchase,
condemnation, casualty or foreclosure. The rate of principal payments on the
Offered Certificates will correspond to the rate of principal payments
(including prepayments) on the related Mortgage Loans.
Each Mortgage Loan either prohibits voluntary prepayments during a
certain number of years following the origination thereof and/or allows the
related Mortgagor to prepay the principal balance thereof in whole during a
certain number of years following the origination if accompanied by payment of
a Prepayment Premium. See Annex A hereto and the table entitled "Prepayment
Lock-out/Prepayment Premium Analysis" under "Description of the Mortgage Pool
- -- Certain Characteristics of the Mortgage Loans" herein. Any Net Prepayment
Premium collected on a Mortgage Loan will be distributed to the holders of the
Interest Only Certificates as described herein. See "Description of the
Certificates -- Distributions -- Interest Distributions on the Certificates"
and "Certain Prepayment, Maturity and Yield Considerations" herein, and "Yield
Considerations" in the Prospectus.
The yield to maturity on each class of the Offered Certificates will
depend on, among other things, the rate and timing of principal payments
(including prepayments, defaults, liquidations and purchases of Mortgage Loans
due to a breach of a representation and warranty) on the Mortgage Loans and the
allocation thereof to reduce the Class Balance or Notional Amount of such class
or its components. The yield to maturity on each class of the Offered
Certificates will also depend on the Pass-Through Rate and the purchase price
for such Certificates. The
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<PAGE>
yield to investors on any Class of Offered Certificates will be adversely
affected by any allocation thereto of Prepayment Interest Shortfalls on the
Mortgage Loans, which may result from the distribution of interest only to the
date of a prepayment occurring during any month following the related
Determination Date (rather than a full month's interest) to the extent any such
interest shortfall is not offset by Prepayment Premiums, any Prepayment
Interest Excess or the portion of the Servicing Fee for such Distribution Date
allocable to the Master Servicer.
In general, if a class of Offered Certificates is purchased at a premium
and principal distributions thereon 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 class of Offered
Certificates is purchased at a discount and principal distributions thereon
occur at a rate slower than that assumed at the time of purchase, the
investor's actual yield to maturity will be lower than that assumed at the time
of purchase.
If a Mortgage Loan becomes a Specially Serviced Mortgage Loan, the
Special Servicer may adopt a servicing strategy which affects the yield to
maturity of one or more classes of Offered Certificates.
The Rated Final Distribution Date for the Certificates will be
_____________, 20___ which is the second anniversary of the date at which all
the Mortgage Loans have zero balances, assuming no prepayments and that the
Mortgage Loans which are Balloon Loans fully amortize according to their
amortization schedule and no Balloon Mortgage Payment is made.
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 made pursuant
to any applicable policies of insurance) on the Mortgage Loans are made.
Principal payments on the Mortgage Loans may be in the form of scheduled
amortization or prepayments (for this purpose, the term "prepayment" includes
prepayments, partial prepayments and liquidations due to a default or other
dispositions of the Mortgage Loans).
The table of Percent of Initial Certificate Balance Outstanding for the
Class A1, Class A2, Class B, Class C, Class D and Class E Certificates at the
respective percentages of CPR set forth below indicates the weighted average
lives 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. The table has been
prepared on the basis of the characteristics of the Mortgage Loans set forth in
Annex A and on the basis of the following assumptions: (i) the Mortgage Loans
prepay at the indicated percentage of CPR when the Mortgage Loans are no longer
in their respective Lock-out Periods; (ii) the maturity date of each of the
Balloon Mortgage Loans is not extended; (iii) distributions on the Offered
Certificates are received in cash, on the ___ day of each month, commencing in
______________; (iv) no defaults or delinquencies in, or modifications, waivers
or amendments respecting, the payment by the Mortgagors of principal and
interest on the Mortgage Loans occur; (v) prepayments represent payment in full
of individual Mortgage Loans and are received on the respective Due Dates and
include a month's interest thereon; (vi) there are no repurchases of Mortgage
Loans due to breaches of any representation and warranty, or pursuant to an
optional termination as described under "Description of the Pooling and
Servicing Agreement -- Termination" herein or otherwise; and (vii) the Offered
Certificates are purchased on ______________.
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<PAGE>
Based on the foregoing assumptions, the table indicates the weighted
average lives of the Class A1, Class A2, Class B, Class C, Class D and Class E
Certificates and sets forth the percentages of the initial Class Balance of
each such class of Offered Certificates that would be outstanding after the
Distribution Date in _________ of each of the years indicated, at various
percentages of CPR. Neither CPR 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 Mortgage Loans included in the Mortgage Pool. Variations in the
actual prepayment experience and the balance of the Mortgage Loans that prepay
may increase or decrease the percentage of initial Class Balance (and weighted
average life) shown in the following table. Such variations may occur even if
the average prepayment experience of all such Mortgage Loans is the same as any
of the specified assumptions.
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<PAGE>
PERCENT OF INITIAL CLASS BALANCE OUTSTANDING
AT THE FOLLOWING PERCENTAGES OF CPR
<TABLE>
<CAPTION>
CLASS A CLASS A2 CLASS B
------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
-- -- -- -- -- -- -- -- -- -- -- --
DATE
Initial Percentage
</TABLE>
WAL(1)
<TABLE>
<CAPTION>
CLASS C CLASS D CLASS E
------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
-- -- -- -- -- -- -- -- -- -- -- --
DATE
Initial Percentage
</TABLE>
WAL(1)
(1) The weighted average life of a class of Offered 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.
INTEREST ONLY CERTIFICATES YIELD CONSIDERATIONS
The sensitivity of the yield to maturity on the Interest Only
Certificates to both the timing of receipt of prepayments and the overall rate
of principal prepayments and defaults on the Mortgage Loans will be offset to
some extent by the payment of a portion of any Net Prepayment Premium to the
Interest Only Certificates entitled thereto. No such offset is available
following a default on a Mortgage Loan.
The following tables indicate the sensitivity of the pre-tax yield to
maturity on the Interest Only Certificates to various constant rates of
prepayment on the Mortgage Loans by projecting the monthly aggregate payments
on the Interest Only Certificates and computing the corresponding pre-tax
yields to maturity on a corporate bond equivalent basis, based on the
assumptions described in clauses (i) through (vii) in the second paragraph
preceding the table entitled "Percent of Initial Class Balance Outstanding at
the Following Percentages of CPR" under the heading "Certain Prepayment,
Maturity and Yield Considerations -- Weighted Average Life of the Offered
Certificates" above, including the assumptions regarding the performance of the
Mortgage Loans which may differ from the actual performance thereof and
assuming the aggregate purchase prices and Pass-Through Rates set forth below
and assuming further that the initial Notional Amounts of the Interest Only
Certificates are as set forth herein. The yield maintenance calculations are
based on the market yield on ____________ of actively traded Treasury
securities of appropriate maturities. ____% of any Net Prepayment Premium will
be allocated to the Class A1X Certificates through the Distribution Date on
which the Class Balance of the Class A1 Certificates has been reduced to zero.
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<PAGE>
Thereafter, ____% of any Net Prepayment Premium will be allocated to the Class
A2X Certificates through the Distribution Date on which the Class Balance of
the Class A2 Certificates has been reduced to zero. Thereafter, ____% of any
Net Prepayment Premium will be allocated to the Class BCX Certificates through
the Distribution Date on which the Class Balances of the Class B and Class C
Certificates have been reduced to zero. Any differences between such
assumptions and the actual characteristics and performance of the Mortgage
Loans and of the Certificates may result in yields being different from those
shown in such tables. Discrepancies between assumed and actual characteristics
and performance underscore the hypothetical nature of the tables, which are
provided only to give a general sense of the sensitivity of yields in varying
prepayment scenarios.
PRE-TAX YIELD TO MATURITY OF THE CLASS A1X CERTIFICATES
Assumed Purchase Price
as a Percentage of the
Notional Amount Assumed Pass-Through Rate(1) CPR Prepayment Assumption
Rate
0% % % %
(1) Calculated based on the weighted average of the Remittance Rates of the
Mortgage Loans as of the Cut-off Date. The Pass-Through Rate on such
Certificates will be subject to adjustment on each Distribution Date.
PRE-TAX YIELD TO MATURITY OF THE CLASS A2X CERTIFICATES
Assumed Purchase Price
as a Percentage of the
Notional Amount Assumed Pass-Through Rate(1) CPR Prepayment Assumption
Rate
0% % % %
(1) Calculated based on the weighted average of the Remittance Rates of the
Mortgage Loans as of the Cut-off Date. The Pass-Through Rate on such
Certificates will be subject to adjustment on each Distribution Date.
PRE-TAX YIELD TO MATURITY OF THE CLASS BCX CERTIFICATES
Assumed Purchase Price
as a Percentage of the
Notional Amount Assumed Pass-Through Rate(1) CPR Prepayment Assumption
Rate
0% % % %
(1) Calculated based on the initial weighted average of the Pass-Through
Rates of the components. The Pass-Through Rate on the Class BCX
Certificates will be subject to adjustment on each Distribution Date.
Each pre-tax yield to maturity set forth in the preceding tables was
calculated by determining the monthly discount rate which, when applied to the
assumed stream of cash flows to be paid on the Interest Only Certificates would
cause the discounted present value of such assumed stream of cash flows to
equal the assumed purchase price listed in the corresponding table. Accrued
interest is included in the assumed purchase price of each class of Interest
Only Certificates
S-38
<PAGE>
and is used in computing the corporate bond equivalent yields shown. These
yields do not take into account the different interest rates at which investors
may be able to reinvest funds received by them as distributions on the Interest
Only Certificates, and thus do not reflect the return on any investment in the
Interest Only Certificates when, as applicable, any reinvestment rates other
than the discount rates set forth in the preceding tables are considered.
Notwithstanding the assumed prepayment rates reflected in the preceding
tables, it is highly unlikely that the Mortgage Loans will be prepaid according
to one particular pattern. For this reason and because the timing of cash flows
is critical to determining yields, the pre-tax yield to maturity on the
Interest Only Certificates is likely to differ from those shown in the tables,
even if all of the Mortgage Loans prepay at the indicated constant percentages
of CPR over any given time period or over the entire life of the Certificates.
There can be no assurance that the Mortgage Loans will prepay at any
particular rate or that the yield on the Interest Only Certificates will
conform to the yields described herein. Moreover, the various remaining terms
to maturity of the Mortgage Loans could produce slower or faster principal
distributions than indicated in the preceding tables at the various constant
percentages of CPR specified, even if the weighted average remaining term to
maturity of the Mortgage Loans is as assumed. Investors are urged to make their
investment decisions based on their determinations as to anticipated rates of
prepayment under a variety of scenarios. Investors in the Interest Only
Certificates should fully consider the risk that an extremely rapid rate of
prepayments on the Mortgage Loans could result in the failure of such investors
to fully recover their investments. In addition, holders of the Class A1X and
Class A2X Certificates generally have rights to relatively larger portions of
interest payments on Mortgage Loans with higher Mortgage Interest Rates; thus,
the yield on the Class A1X and Class A2X Certificates will be materially
adversely affected to a greater extent than on the other Interest Only
Certificates if the Mortgage Loans with higher Mortgage Interest Rates prepay
faster than the Mortgage Loans with lower Mortgage Rates.
For additional considerations relating to the yield on the Certificates,
see "Yield Considerations" in the Prospectus.
CLASS C, CLASS BCX, CLASS D AND CLASS E YIELD CONSIDERATIONS
If the Class Balances of the Other Certificates are reduced to zero, the
yield to maturity on the Class E Certificates will become extremely sensitive
to losses on the Mortgage Loans (and the timing thereof), because the entire
amount of such losses will be allocated to the Class E Certificates. The
aggregate initial Class Balance of the Other Certificates is equal to
approximately ____% of the aggregate principal balance of the Mortgage Loans as
of the Cut-off Date. If the Class Balances of the Other Certificates and the
Class E Certificates are reduced to zero, the yield to maturity on the Class D
Certificates will become extremely sensitive to losses on the Mortgage Loans
(and the timing thereof), because the entire amount of such losses will be
allocated to the Class D Certificates. The aggregate initial Class Balance of
the Class E and the Other Certificates is equal to approximately ____% of the
aggregate principal balance of the Mortgage Loans as of the Cut-off Date. If
the Class Balances of the Other Certificates, the Class E and the Class D
Certificates are reduced to zero, the yield to maturity on the Class C and
Class BCX Certificates will become extremely sensitive to losses on the
Mortgage Loans (and the timing thereof), because the entire amount of such
losses will be allocated to the Class C and Class BCX Certificates. The
aggregate initial Class Balance of the Class D, Class E and Other Certificates
is equal to approximately ____% of the aggregate principal balance of the
Mortgage Loans as of the Cut-off Date.
The Special Servicer will be entitled to receive, with respect to each
Specially Serviced Mortgage Loan compensation in the form of a percentage of
collections and a percentage of the outstanding principal balance of any
Specially Serviced Mortgage Loan which is returned to a performing status prior
to the right of Certificateholders to receive distributions on the
Certificates. Such compensation will result in shortfalls which will be
allocated to the Certificates in the manner provided for Realized Losses.
Consequently it is possible that shortfalls will be allocated to the Offered
Certificates with respect to any Specially Serviced Mortgage Loan
notwithstanding the fact that such Mortgage Loan is returned to a performing
status. See "Servicing -- Servicing and Other Compensation and Payment of
Expenses" herein.
The information set forth herein concerning the services has been
provided by the related Servicer. Neither the Depositor nor any other person
makes any representation or warranty as to the accuracy or completeness of such
information.
Investors are urged to make their investment decisions based on their
determinations as to anticipated rates of principal payments and Realized
Losses. Investors in the Class C and Class BCX Certificates and particularly
the Class D
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and Class E Certificates should fully consider to risk that Realized Losses on
the Mortgage Loans could result in a failure of such investors to fully recover
their investments. See "Yield Considerations" in the Prospectus.
SERVICING
SERVICERS
____________________. _________________________ ("_________"), a
__________ corporation, will serve as Master Servicer for all the Mortgage
Loans.
As of __________________, 199__, ____________ was responsible for
managing and servicing of approximately _______ assets, consisting of loans,
foreclosed real estate assets and other assets with a total principal balance
in excess of $____billion of which $_____billion is administered under special
servicing contracts. ________ has provided servicing in some capacity for ____
portfolios securing commercial mortgage backed securities.
_______________________, a __________ corporation ("_________"), will act
as Special Servicer with respect to the Mortgage Loans.
As of __________________, 199__, ____________ was responsible for
managing and servicing of approximately _______ assets, consisting of loans,
foreclosed real estate assets and other assets with a total principal balance
in excess of $____billion of which $_____billion is administered under special
servicing contracts. ________ has provided servicing in some capacity for ____
portfolios securing commercial mortgage backed securities.
The information set forth herein concerning the Servicers has been
provided by the related Servicer. Neither the Depositor nor any other person
makes any representation or warranty as to the accuracy or completeness of such
information.
RESPONSIBILITIES OF MASTER SERVICER
Under the Pooling and Servicing Agreement, the Master Servicer is
required to service and administer the Mortgage Loans solely on behalf of and
in the best interests of and for the benefit of the Certificateholders, in
accordance with the terms of the Pooling and Servicing Agreement and the
Mortgage Loans and to the extent consistent with such terms, with the higher of
(a) the standard of care, skill, prudence and diligence with which the Master
Servicer, service and administer mortgage loans that are held for other
portfolios that are similar to the Mortgage Loans and (b) the standard of care,
skill, prudence and diligence with which the Master Servicer services and
administers mortgage loans for its own portfolio and are similar to the
Mortgage Loans, giving due consideration to customary and usual standards of
practice of prudent institutional multifamily and commercial mortgage lenders,
loan servicers and asset managers.
RESPONSIBILITIES OF SPECIAL SERVICER
The servicing responsibility on a particular Mortgage Loan will be
transferred to the Special Servicer upon the occurrence of certain servicing
transfer events (each, a "Servicing Transfer Event"), including the following:
(i) the Mortgage Loan becomes a "Defaulted Mortgage Loan" because it is more
than 60 days delinquent in whole or in part in respect of any monthly payment
or is delinquent in whole or in part in respect of the related Balloon Payment;
(ii) the related Mortgagor has entered into or consented to bankruptcy,
appointment of a receiver or conservator or a similar insolvency or similar
proceeding, or the Mortgagor has become the subject of a decree or order for
such a proceeding which shall have remained in force undischarged or unstayed
for a period of 60 days; (iii) the Master Servicer shall have received notice
of the foreclosure or proposed foreclosure of any other lien on the Mortgaged
Property; (iv) in the judgment of the Master Servicer, a payment default has
occurred and is not likely to be cured by the related Mortgagor within 60 days;
(v) the related Mortgagor admits in writing its inability to pay its debts
generally as they become due, files a petition to take advantage of any
applicable insolvency or reorganization statute, makes an assignment for the
benefit of its creditors, or voluntarily suspends payment of its obligations;
(vi) any other material default has in the Master Servicer's judgment occurred
which is not reasonably susceptible to cure within the time periods and on the
conditions specified in the related mortgage; (vii) the related Mortgaged
Property becomes an REO Property; (viii) if for any reason, the Master Servicer
cannot enter into an assumption agreement upon the transfer by the related
Mortgagor of the mortgage; or (ix) an event has occurred which has
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materially and adversely affected the value of the related Mortgaged Property
in the reasonable judgment of the Master Servicer. A Mortgage Loan serviced by
the Special Servicer is referred to herein as a "Specially Serviced Mortgage
Loan". The Special Servicer will collect certain payments on such Specially
Serviced Mortgage Loans and make certain remittances to, and prepare certain
reports for the Master Servicer with respect to such Mortgage Loans. The Master
Servicer shall have no responsibility for the performance by the Special
Servicer of its duties under the Pooling and Servicing Agreement provided that
the Master Servicer continues to perform certain servicing functions on such
Specially Serviced Mortgage Loans and, based on the information provided to it
by the Special Servicer, prepares certain reports to the Trustee with respect
to such Specially Serviced Mortgage Loans. To the extent that any Mortgage
Loan, in accordance with its original terms or as modified in accordance with
the Pooling and Servicing Agreement, becomes a performing Mortgage Loan for a
least three consecutive months, the Special Servicer will return servicing of
such Mortgage Loan to the Master Servicer.
Under the Pooling and Servicing Agreement the Special Servicer is
required to service, administer and dispose of Specially Serviced Mortgage
Loans solely in the best interests of and for the benefit of the
Certificateholders, in accordance with the Pooling and Servicing Agreement and
the Mortgage Loans and to the extent consistent with such terms, with the
higher of (a) the standard of care, skill, prudence and diligence with which
the Special Servicer services, administers and disposes of, distressed mortgage
loans and related real property that are held for other portfolios that are
similar to the Mortgage Loans, Mortgaged Property and REO Property and (b) the
standard of care, skill, prudence and diligence with which the Special Servicer
services, administers and disposes of distressed mortgage loans and related
real property for its own portfolio and are similar to the Mortgage Loans,
Mortgage Property and REO Property, giving due consideration to customary and
usual standards of practice of prudent institutional multifamily and commercial
mortgage lenders, loan servicers and asset managers, so as to maximize the net
present value of recoveries on the Mortgage Loans.
The Special Servicer shall have full power and authority to do any and
all things in connection with servicing and administering a Mortgage Loan that
it may deem in its best judgment necessary or advisable, including, without
limitation, to execute and deliver on behalf of the Trust Fund any and all
instruments of satisfaction or cancellation or of partial release or full
release or discharge and all other comparable instruments, to reduce the
related Mortgage Interest Rate, and to defer or forgive payment of interest
and/or principal with respect to any Specially Serviced Mortgage Loan or any
Mortgaged Property. The Special Servicer may not permit a modification of any
Mortgage Loan to extend the scheduled maturity date of any Specially Serviced
Mortgage Loan more than three years beyond the scheduled maturity date thereof
as of the Cut-off Date without the consent of the Extension Advisor. See
"--Extension Advisor" below. Notwithstanding the forgoing, the Special Servicer
may not permit any such modification with respect to a Balloon Mortgage Loan if
it results in the extension of such maturity date beyond the amortization term
of such Balloon Mortgage Loan absent the related Balloon Payment. The Special
Servicer will prepare a report (an "Asset Strategy Report") for each Mortgage
Loan which becomes a Specially Serviced Mortgage Loan not later than thirty
(30) days after the servicing of such Mortgage Loan is transferred to the
Special Servicer. Each Asset Strategy Report will be delivered to each holder
of a Class F, Class G and Class NR Certificate upon request. The holders of the
fewest number of classes of Certificates representing the most subordinate
interests in the Trust Fund that equals at least a ___% interest therein (the
"Monitoring Certificateholders") will designate one Monitoring
Certificateholder pursuant to the Pooling and Servicing Agreement (the
"Directing Certificateholder"). Each Asset Strategy Report will be delivered to
the Directing Certificateholder. The Directing Certificateholder may object to
any Asset Strategy Report within 10 business days of receipt. If the Directing
Certificateholder does not disapprove an Asset Strategy Report within 10
business days, the Special Servicer shall implement the recommended action as
outlined in such Asset Strategy Report. If the Directing Certificateholder
disapproves such Asset Strategy Report and the Special Servicer has not made
the affirmative determination described below, the Special Servicer will revise
such Asset Strategy Report as soon as practicable. The Special Servicer will
revise such Asset Strategy Report until the Directing Certificateholder fails
to disapprove such revised Asset Strategy Report; provided, however, that the
Special Servicer shall implement the recommended action as outlined in such
Asset Strategy Report if it makes an affirmative determination that such
objection is not in the best interest of all Certificateholders. In connection
with making such affirmative determination, the Special Servicer may request a
vote by all the Certificateholders. Any Certificateholder may request and
obtain a copy of any Asset Strategy Report subject to delivery of a certificate
acknowledging certain possible limitations with respect to the use of such
report imposed by U.S. securities laws.
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EXTENSION ADVISOR
The Extension Advisor will be responsible for approving any proposed
Mortgage Loan modification that extends the maturity date of a Mortgage Loan by
more than three (3) years beyond the scheduled maturity date of such loan as of
the Cut-off Date. The initial Extension Advisor, acting on behalf of the
holders of the Offered Certificates, shall only grant such approvals if it
shall have determined that the decision of the Special Servicer to so modify
the Mortgage Loan is consistent with the Special Servicer standard set forth in
the Pooling and Servicing Agreement. Any subsequent Extension Advisor may grant
such approvals if it shall have determined that the decision of the Special
Servicer to so modify the Mortgage Loan is in the best interest of the Holders
of the Offered Certificates.
The initial Extension Advisor will be _______________. At any time, the
holders of a majority of the outstanding aggregate Certificate Principal
Balance of the Offered Certificates may remove the Extension Advisor. In such
event, the Trustee will so inform such Certificateholders, and a majority of
Certificate Principal Balance of the holders of such Certificates shall have
the right to appoint a replacement Extension Advisor.
THE OPERATING ADVISER
The Pooling and Servicing Agreement permits the holder (or holders) of
Certificates representing more than 50% of the aggregate Certificate Principal
Balance of the most subordinate class of Certificates at any time of
determination (or, if the aggregate Certificate Principal Balance of such class
of Certificates is less than 25% of the original aggregate Certificate
Principal Balance thereof, of the next most subordinate class of Certificates)
(in any event, the "Controlling Class") to appoint any person or entity to act
as the representative of the Controlling Class to the extent described below
(such person or entity, in such capacity, the "Operating Adviser").
If the Special Servicer is not the Operating Adviser, the Special
Servicer will notify the Operating Adviser prior to the Special Servicer's
taking any of the following actions: (i) any foreclosure or comparable
conversion (which may include acquisition of any REO Property) of any Mortgaged
Property; (ii) any modification of a money term of a Mortgage Loan other than a
modification consisting of the extension of the original maturity of the
Mortgage Loan for two years or less; (iii) any proposed sale of a defaulted
Mortgage Loan or REO Property (other than upon termination of the Trust Fund
pursuant to the Pooling and Servicing Agreement); (iv) any determination to
bring an REO Property into compliance with applicable environmental laws; and
(v) any acceptance of substitute or additional collateral for a Mortgage Loan.
The Operating Adviser may replace the Special Servicer, provided that
such replacement will be subject to, among other things, receipt from the
Rating Agencies of written confirmation that such replacement will not result
in a qualification, downgrade or withdrawal of any of the then-current ratings
assigned to any class of Certificates.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal compensation to be paid to the Master Servicer in respect
of its servicing activities will be the Servicing Fee. The Servicing Fee will
be payable monthly and will accrue at the applicable 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 Mortgage Loan is
computed. The Servicing Fee Rate for any Mortgage Loan will be the fee payable
to the Master Servicer as described below. The fee payable to the Master
Servicer with respect to the Mortgage Loans will equal _____% per annum.
The principal compensation to be paid to the Special Servicer in respect
of its special servicing activities will be the Special Servicing Fee. The
Special Servicing Fee will be payable monthly only from amounts received in
respect of each Specially Serviced Mortgage Loan. The Special Servicing Fee
will equal _____% of all amounts collected with respect to any Specially
Serviced Mortgage Loans and any Mortgage Loan which became a Specially Serviced
Mortgage Loan and was subsequently returned to a performing status.
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CONFLICTS OF INTEREST
The Special Servicer or its affiliates own and are in the business of
acquiring assets similar to the Mortgage Loans held by the Trust Fund. To the
extent that any mortgage loans owned and/or serviced by the Special Servicer or
its affiliates are similar to the Mortgage Loans held by the Trust Fund, the
mortgaged properties related to such mortgage loans may, depending upon certain
circumstances such as the location of the mortgaged property, compete with the
Mortgaged Properties related to the Mortgage Loans held by the Trust Fund for
tenants, purchasers, financing and similar resources.
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of ___________, 199__ (the "Pooling And Servicing
Agreement"), by and among the Depositor, the Master Servicer, the Special
Servicer and the Trustee. Following are summaries of certain provisions of the
Pooling and Servicing Agreement. 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 Pooling and Servicing Agreement. The Trustee 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 __________________________________________,
___________________________, Attention: Corporate Trust Department.
ASSIGNMENT OF THE MORTGAGE LOANS
On or prior to the Closing Date, _______ will assign the Mortgage Loans,
without recourse, to the Depositor, and the Depositor will assign all the
Mortgage Loans without recourse, to the Trustee for the benefit of the
Certificateholders. In connection with the foregoing, _______ is required in
accordance with the related Mortgage Loan Purchase Agreement to deliver the
following documents, among others, with respect to each Mortgage Loan so
assigned by it (such documents, collectively as to any Mortgage Loan, a
"Mortgage File") to the Trustee; (a) the original Mortgage Note, endorsed
(without recourse) to the order of the Trustee; (b) the original or a certified
copy of the related recorded Mortgage(s), together with originals or certified
copies of any intervening assignments of such document(s), in each case with
evidence of recording thereon (unless such document(s) have not been returned
by the applicable recorder's office); (c) the original or a copy of any related
recorded assignment(s) of rents and leases (if any such item is a document
separate from the Mortgage), together with originals or copies of any
intervening assignments of such document(s), in each case with evidence of
recording thereon (unless such document(s) have not been returned by the
applicable recorder's office); (d) an assignment of each related Mortgage in
favor of the Trustee, in recordable form; (e) an assignment of any related
assignment(s) of rents and leases (if any such item is a document separate from
the Mortgage) in favor of the Trustee, in recordable form; (f) an original or
copy of the related lender's title insurance policy (or, if a title insurance
policy has not yet been issued, a commitment for title insurance "marked-up" at
the closing of such Mortgage Loan); and (g) when relevant, the related ground
lease or a certified copy thereof. The Trustee will be required to review the
documents delivered by each Seller with respect to its Mortgage Loans within 90
days following the Closing Date, and the Trustee will hold the related
documents in trust.
Within 45 days following the Closing Date, pursuant to the Pooling and
Servicing Agreement, the assignments with respect to each Mortgage Loan
described in clauses (d) and (e) of the preceding paragraph are to be submitted
for recording in the real property records of the appropriate jurisdictions.
TRUSTEE
____________________ shall serve as Trustee under the Pooling and
Servicing Agreement pursuant to which the Certificates are being issued. Except
in circumstances such as those involving defaults (when it might request
assistance from other departments in the bank), its responsibilities as trustee
are carried out by its Corporate Trust Department. Its principal corporate
trust office is located at __________________________________.
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COLLECTION ACCOUNT AND CERTIFICATE ACCOUNT
The Master Servicer is required to deposit all amounts received with
respect to the Mortgage Loans, net of certain amounts retained by the Master
Servicer as additional servicing compensation, into a Collection Account (the
"Collection Account") maintained by the Master Servicer for the Trust Fund. The
Master Servicer is required to deposit on the business day preceding each
Distribution Date all amounts received with respect to the Mortgage Loans into
a separate account (the "Certificate Account") maintained with the Trustee.
Interest or other income earned on funds in the Collection Account will be paid
to the Master Servicer as additional servicing compensation. See "Description
of the Trust Funds -- Mortgage Loans" and "Description of the Agreements --
Accounts -- Distribution Account" in the Prospectus.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date the Trustee shall furnish to each
Certificateholder, to the Depositor and to each Rating Agency a statement
setting forth certain information with respect to the Mortgage Loans and the
Certificates required pursuant to the Pooling and Servicing Agreement and in
the form of Annex B hereto. In addition, within a reasonable period of time
after each calendar year, the Trustee 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.
Unless and until Definitive Certificates are issued, such statements or reports
will be furnished only to Cede & Co., as nominee for DTC; provided, however,
that the Trustee shall furnish a copy of any such statement or report to any
Beneficial Owner which requests such copy and certifies to the Trustee that it
is the Beneficial Owner of a Certificate. The Trustee shall furnish a copy of
any such statement or report to any person who requests it for a nominal
charge. Any person may call the Master Servicer at ______________ in order to
inquire as to how to obtain such statement or report. Such statement or report
may be available to Beneficial Owners upon request to DTC or their respective
Participant or Indirect Participants. Any Asset Strategy Report shall be
delivered by the Trustee upon request to any Beneficial Owner of an Offered
Certificate subject to the second preceding sentence and the receipt by the
Trustee of a certificate acknowledging certain limitations with respect to the
use of such statement or report. See "Description of the Certificates --
Reports to Certificateholders" in the Prospectus. The Directing
Certificateholder shall receive all reports prepared or received by the Master
Servicer or the Special Servicer. In addition, each other Certificateholder may
obtain all such reports at its expense as described in the Pooling and
Servicing Agreement.
VOTING RIGHTS
At all times during the term of this Agreement, _____% of all Voting
Rights shall be allocated among the classes of Certificates (other than the
Interest Only Certificates) in proportion to the respective Class Balances,
_____% of all Voting Rights shall be allocated to each class of Interest Only
Certificates and _______% of all Voting Rights shall be allocated to each class
of Residual Certificates. Voting Rights allocated to a class of Certificates
shall be allocated among the holders of such class in proportion to the
Percentage Interests evidenced by their respective Certificates.
As described under "Description of the Certificates -- Book-Entry
Registration and Definitive Certificates" in the Prospectus, unless and until
Definitive Certificates are issued, except as otherwise expressly provided
herein, Certificate Owners may only exercise their rights as owners of
Certificates indirectly through DTC or their respective Participant or Indirect
Participant.
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 Mortgage Loan or REO Property subject thereto, and (ii) the
purchase of all of the assets of the Trust Fund by any of the Master Servicer,
the Special Servicer, any holder of a Class R-I Certificate and the holders of
an aggregate Percentage Interest in excess of 50% of the Most Subordinate Class
of Certificates. The "Most Subordinate Class Of Certificates" at the time of
determination shall be the class of Certificates to which Realized Losses would
be allocated at such time as described under "Description of the Certificates
- -- Subordination" herein. 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
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notice of termination. Any such purchase of all the Mortgage Loans 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 Mortgage Loans and REO
Properties then included in the Trust Fund, determined pursuant to the Pooling
and Servicing Agreement, and (2) the aggregate Class Balance of all the
Certificates plus accrued and unpaid interest thereon. Such purchase will
effect early retirement of the then outstanding Certificates, but the right to
effect such termination is subject to the requirement that the aggregate Stated
Principal Balance of the Mortgage Loans then in the Trust Fund is less than
____% of the aggregate principal balance of the Mortgage Loans as of the
Cut-off Date.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be used by the
Depositor to pay the purchase price of the Mortgage Loans.
FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Offered Certificates
is based on the advice of Latham & Watkins, counsel to the Depositor. This
summary is based on laws, regulations, including the REMIC regulations
promulgated by the Treasury Department (the "REMIC Regulations"), rulings and
decisions now in effect or (with respect to regulations) proposed, all of which
are subject to change either prospectively or retroactively. This summary does
not address the federal income tax consequences of an investment in Offered
Certificates applicable to all categories of investors, some of which (for
example, banks and insurance companies) may be subject to special rules.
Prospective investors should consult their tax advisors regarding the federal,
state, local and any other tax consequences to them of the purchase, ownership
and disposition of Offered Certificates.
Three separate REMIC elections will be made with respect to the Trust
Fund for federal income tax purposes. Upon the issuance of the Certificates,
counsel to the Depositor, will deliver its opinion that, assuming compliance
with all provisions of the Pooling and Servicing Agreement, for federal income
tax purposes, REMIC I, REMIC II and REMIC III (each as defined in the Pooling
and Servicing Agreement) each will qualify as a REMIC under the Code.
For federal income tax purposes, the Class R-I Certificates will be the
sole class of "residual interests" in REMIC I, the Class R-II Certificates will
be the sole class of "residual interests" in REMIC II, the Offered Certificates
(or, in the case of the Class BCX Certificates, each component thereof) and the
Class F, Class G and Class NR Certificates will be "regular interests" of REMIC
III and will be treated as debt instruments of the REMIC III, and the Class
R-III Certificates will be the sole class of "residual interests" in REMIC III.
See "Federal Income Tax Consequences -- REMICs" in the Prospectus.
The Interest Only Certificates will, and the other classes of Offered
Certificates may, be treated as having been issued with original issue discount
for federal income tax reporting purposes. For purposes of computing the rate
of accrual of original issue discount, market discount and premium, if any, for
federal income tax purposes it will be assumed that there are no prepayments on
the Mortgage Loans. No representation is made that the Mortgage Loans will not
prepay at another rate. See "Federal Income Tax Consequences -- REMICs --
Taxation of Owners of REMIC Regular Certificates" and "--Original Issue
Discount and Premium" in the Prospectus.
Prepayment Premiums allocated to the Certificates will be taxable to the
holders of such Certificates on the date the amount of such premiums becomes
fixed.
The Offered Certificates may be treated for federal income tax purposes
as having been issued at a premium. Whether any holder of such a class of
Certificates will be treated as holding a certificate with amortizable bond
premium will depend on such Certificateholder's purchase price and the
distributions remaining to be made on such Certificate at the time of its
acquisition by such Certificateholder. Holders of such class of Certificates
should consult their own tax advisors regarding the possibility of making an
election to amortize such premium. See "Federal Income Tax Consequences --
REMICs -- Taxation of Owners of REMIC Regular Certificates" and "--Premium" in
the Prospectus.
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The Offered Certificates will be treated as "qualifying real property
loans" within the meaning of Section 593(d) of the Code and "real estate
assets" within the meaning of Section 856(c)(5)(B) of the Code generally in the
same proportion that the assets of the REMIC underlying such Certificates would
be so treated. In addition, interest (including original issue discount) on the
Offered Certificates will be interest described in Section 856(c)(3)(B) of the
Code to the extent that such Offered Certificates are treated as "real estate
assets" under Section 856(c)(5)(B) of the Code. Moreover, the Offered
Certificates will be "obligation[s]...which... [are] principally secured by an
interest in real property" within the meaning of Section 860G(a)(3)(A) of the
Code and will be "regular interests in a REMIC" which may qualify for treatment
as "permitted assets" of a FASIT within the meaning of Section 860L(c)(1)(G) of
the Code. The Offered Certificates will not be considered to represent an
interest in "loans...secured by an interest in real property" within the
meaning of Section 7701 (a)(19)(C)(v) of the Code except in the proportion that
the assets of the Trust Fund are represented by Mortgage Loans secured by
multifamily apartment buildings. See "Federal Income Tax Consequences -- REMICs
- -- Characterization of Investments in REMIC Certificates" 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.
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 Offered
Certificates. 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 tax
consequences of investments in the Offered Certificates.
ERISA CONSIDERATIONS
A fiduciary of any employee benefit plan or other retirement plan or
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, and any entity whose underlying
assets include assets of such a plan by reason of any such plan's investment in
the entity that is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975 of the Code (each, a "Plan") should
carefully review with its legal advisors whether the purchase or holding of any
Class of Offered Certificates could give rise to a transaction that is
prohibited or is not otherwise permitted either under ERISA or Section 4975 of
the Code.
The U.S. Department of Labor issued an individual exemption, Prohibited
Transaction Exemption _______ (the "Exemption"), to ________________, which
generally exempts from the application of certain prohibited transaction
provisions of Section 406 of ERISA, and the excise taxes imposed on such
prohibited transactions pursuant to Sections 4975(a) and (b) of the Code and
Section 502(i) of ERISA, certain transactions, among others, relating to the
servicing and operation of mortgage pools and the purchase, sale and holding of
mortgage pass-through certificates underwritten by an Underwriter (as
hereinafter defined), provided that certain conditions set forth in the
Exemption are satisfied. For purposes of this Section "ERISA Considerations",
the term "Underwriter" shall include (a) ________________, (b) any person
directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with _______________ and (c) any member
of the underwriting syndicate or selling group of which a person described in
(a) or with (b) is a manager or co-manager with respect to the Class A1, Class
A1X, Class A2 and Class A2X Certificates.
The Exemption sets forth six general conditions which must be satisfied
for a transaction involving the purchase, sale and holding of such Classes of
Offered Certificates to be eligible for exemptive relief thereunder. First, the
acquisition of such Classes of Offered Certificates by a Plan, must be on terms
(including the price) that are at least as favorable to the Plan as they would
be in an arm's-length transaction with an unrelated party. Second, the rights
and interests evidenced by such Classes of Offered Certificates must not be
subordinate to the rights and interests evidenced by the other certificates of
the same trust. Third, such Classes of Offered Certificates at the time of
acquisition by the Plan must be rated in one of the three highest generic
rating categories by Standard & Poor's Corporation, Moody's Investors Service,
Inc., Duff & Phelps Credit Rating Co. or Fitch Investors Service, Inc. Fourth,
the Trustee cannot be an affiliate of any member of the "Restricted Group,"
which consists of the Underwriter, the Depositor, the Master Servicer, the
Special Servicer and any Mortgagor with
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<PAGE>
respect to Mortgage Loans constituting more than 5% of the aggregate
unamortized principal balance of the Mortgage Loans as of the date of initial
issuance of such Classes of Offered Certificates. Fifth, the sum of all
payments made to and retained by the Underwriter must represent not more than
reasonable compensation for underwriting such Classes of Offered Certificates;
the sum of all payments made to and retained by the Depositor pursuant to the
assignment of the Mortgage Loans to the Trust Fund must represent not more than
the fair market value of such obligations; and the sum of all payments made to
and retained by the Master Servicer and the Special Servicer must represent not
more than reasonable compensation for such person's services under the
Agreements and reimbursement of such person's reasonable expenses in connection
therewith. Sixth, the investing Plan must be 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.
Because the Class A1, Class A1X, Class A2 and Class A2X Certificates are
not subordinate to any other class of Certificates, the second general
condition set forth above is satisfied with respect to such Certificates. It is
a condition of the issuance of such Classes of Certificates that they be rated
"______" by ________________ and either "____" or "____" by ________________. A
fiduciary of a Plan contemplating purchasing any such Class of Certificates in
the secondary market must make its own determination that at the time of such
acquisition, any such Class of Certificates continues to satisfy the third
general condition set forth above. The Depositor expects that the fourth
general condition set forth above will be satisfied with respect to each of
such Classes of Certificates. A fiduciary of a Plan contemplating purchasing
any such Class of Certificate must make its own determination that the first,
third, fifth and sixth general conditions set forth above will be satisfied
with respect to any such Class of Certificate.
The Class B, Class C, Class BCX, Class D and Class E do not satisfy the
second condition described above because they are subordinated to the Class A1,
Class A1X, Class A2 and Class A2X Certificates, and furthermore the Class D and
Class E Certificates are not expected to satisfy the third condition described
above.
Before purchasing any Class of Certificate, a fiduciary of a Plan should
itself confirm (a) that such Certificates constitute "certificates" for
purposes of the Exemption and (b) that the specific and general conditions of
the Exemption and the other requirements set forth in the Exemption would be
satisfied. In addition to making its own determination as to the availability
of the exemptive relief provided in the Exemption, the Plan fiduciary should
consider the availability of any other prohibited transaction exemptions.
Purchasers using insurance company general account funds to effect such
purchase should consider the availability of Prohibited Transaction Class
Exemption 95-60 (60 Fed. Reg. 35925, July 12, 1995) issued by the U.S.
Department of Labor.
Any Plan fiduciary considering whether to purchase any Class of
Certificate 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. See "ERISA Considerations"
in the Prospectus.
LEGAL INVESTMENT
The Class ___, Class ___, Class ___, Class ___ and Class ___ Certificates
will be "mortgage related securities" within the meaning 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 at least one nationally
recognized statistical rating organization. The Class ___, Class ___ and Class
___ Certificates will not be "mortgage related securities" within the meaning
of SMMEA.
In addition, institutions whose investment activities are subject to
review by certain regulatory authorities may be or may become subject to
restrictions, which may be retroactively imposed by such regulatory
authorities, on the investment by such institutions in certain forms of
mortgage-backed securities. Furthermore, certain states have enacted
legislation overriding the legal investment provisions of SMMEA.
The Depositor makes no representations as to the proper characterization
of the Offered Certificates for legal investment or other purposes, or as to
the ability of particular investors to purchase the Offered Certificates under
applicable legal investment restrictions. These uncertainties may adversely
affect the liquidity of the Offered Certificates. Accordingly, all institutions
whose investment activities are subject to legal investment laws and
regulations, regulatory capital
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<PAGE>
requirements or review by regulatory authorities should consult with their own
legal advisors in determining whether and to what extent the Offered
Certificates constitute a legal investment or are subject to investment,
capital or other restrictions.
See "Legal Investment" in the Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in an Underwriting
Agreement, dated _____________, 199___ (the "Underwriting Agreement"), the
Underwriter has agreed to purchase and the Depositor has agreed to sell to the
Underwriter the Offered Certificates. It is expected that delivery of the
Offered Certificates will be made only in book-entry form through the Same Day
Funds Settlement System of DTC on or about ______________, 199___, against
payment therefor in immediately available funds.
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all of the Offered
Certificates if any are purchased. In the event of default by the Underwriter,
the Underwriting Agreement provides that, in certain circumstances, the
underwriting may be terminated.
The Underwriting Agreement provides that the obligation of the
Underwriter to pay for and accept delivery of its Certificates is subject to,
among other things, the receipt of certain legal opinions and to the
conditions, among others, that no stop order suspending the effectiveness of
the Depositor's Registration Statement shall be in effect, and that no
proceedings for such purpose shall be pending before or threatened by the
Securities and Exchange Commission.
The distribution of the Offered Certificates by the Underwriter may be
effected from time to time in one or more 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, before deducting
expenses payable by the Depositor, will be approximately ____________% of the
aggregate principal balance of the Offered Certificates as of the Cut-off Date,
plus accrued interest from the Cut-off Date. The Underwriter may effect such
transactions by selling its Certificates to or through dealers, and such
dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Underwriter for whom they act as agent. In
connection with the sale of the Offered Certificates, the Underwriter may be
deemed to have received compensation from the Depositor in the form of
underwriting compensation. 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 profit on the resale of the Offered
Certificates positioned by them may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933, as amended.
The Underwriting Agreement provides that the Depositor will indemnify the
Underwriter, and that under limited circumstances the Underwriter will
indemnify the Depositor, against certain civil liabilities under the Securities
Act of 1933, as amended, or contribute to payments to be made in respect
thereof.
There can be no assurance that a secondary market for the Offered
Certificates will develop or, if it does develop, that it will continue. The
primary source of ongoing information available to investors concerning the
Offered Certificates will be the reports discussed herein under "Description of
the Pooling and Servicing Agreement -- Reports to Certificateholders." Except
as described herein under "Description of the Pooling and Servicing Agreement
- -- Reports to Certificateholders", there can be no assurance that any
additional information regarding the Offered Certificates will be available
through any other source. In addition, the Depositor is not aware of any source
through which price information about the Offered Certificates will be
generally available on an ongoing basis. The limited nature of such information
regarding the Offered Certificates may adversely affect the liquidity of the
Offered Certificates, even if a secondary market for the Offered Certificates
becomes available.
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<PAGE>
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by
_______________, ____________, ; and certain legal matters will be passed upon
for the Underwriter by __________________, _________________, ____________.
RATING
It is a condition of issuance of the Class A1 and Class A2 Certificates
be rated "____" by _____________ ("________________ ") and ________________
("________________ "). It is a condition of the issuance of the Class A1X and
Class A2X Certificates that they be rated "______" by ________________ and
"_____" by ________________. It is a condition of the issuance of the Class B
Certificates that they be rated not lower than "___" by ________________ and
________________. It is a condition of the issuance of the Class C Certificates
that they be rated not lower than "__" by ________________ and "___" by
________________. It is a condition to the issuance of the Class BCX
Certificates that they be rated not lower than "___" by ________________. It is
a condition of the issuance of the Class D Certificates that they be rated not
lower than "___" by ________________ and ________________. It is a condition to
the issuance of the Class E Certificates that they be rated not lower than
"______" by ________________ and ________________.
The ratings on mortgage pass-through certificates address the likelihood
of the receipt by holders thereof of payments to which they are entitled
including the receipt of all principal payments by the Rated Final Distribution
Date. Such ratings take into consideration the credit quality of the mortgage
pool, structural and legal aspects associated with the certificates, and the
extent to which the payment stream in the mortgage pool is adequate to make
payments required under the certificates. Such ratings on the Offered
Certificates do not, however, constitute a statement regarding frequency or
likelihood of prepayments (whether voluntary or involuntary) of the Mortgage
Loans, or the degree to which such prepayments might differ from those
originally anticipated, or the likelihood of the collection of Prepayment
Premiums, and do not address the possibility that Certificateholders might
suffer a lower than anticipated yield. The ratings of the Interest Only
Certificates does not address the possibility that the holders of such
Certificates may fail to fully recover their initial investments due to a rapid
rate of prepayments, defaults or liquidations. See "Risk Factors" herein.
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 ________________ or ________________ pursuant
to the Depositor's request.
The rating of the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating agency. Each security rating
should be evaluated independently of any other security rating. A security
rating does not address the frequency or likelihood of prepayments (whether
voluntary or involuntary) of Mortgage Loans, or the corresponding effect on the
yield to investors.
The ratings do not address the fact that the Pass-Through Rates on the
Offered Certificates, to the extent determined based on the Remittance Rates,
may be affected by changes therein.
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<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
30/360 Basis..............................................................3, 30
Adjusted Available Distribution Amount ...................................4, 30
Adjusted Collateral Value....................................................33
Asset Strategy Report........................................................41
Available Distribution Amount................................................29
Balloon Mortgage Loan.........................................................2
Balloon Payment...............................................................2
Beneficial Owner..........................................................1, 28
Cash Flow Agreements..........................................................3
Certificate Account..........................................................44
Certificates..................................................................i
Class Balance................................................................ii
CMBS..........................................................................3
Code..........................................................................9
Collateral Value Adjustment..................................................33
Collection Account...........................................................44
Component.....................................................................3
Controlling Class............................................................42
Credit Support................................................................3
Custodian.....................................................................1
Cut-Off Date..................................................................i
Cut-Off Date LTV Ratio.......................................................22
Debt Service Coverage Ratio..................................................22
Defaulted Mortgage Loan......................................................40
Definitive Certificate....................................................1, 28
Delivery Date.................................................................i
Depositor.................................................................ii, 1
Determination Date............................................................5
Directing Certificateholder..................................................41
Distribution Date.....................................................ii, 1, 29
DSCR.........................................................................22
DTC Registered Certificates...............................................1, 28
Due Date......................................................................2
Exemption....................................................................46
Interest Accrual Amount...................................................4, 30
Interest Distribution Amount..............................................4, 30
Interest Only Certificates...................................................ii
Lease Assignment..............................................................3
Loan Sale Agreement..........................................................18
Lock-Out Date................................................................25
Lock-Out Period..............................................................25
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<PAGE>
Loss Mortgage Loan...........................................................33
Master Servicer...........................................................ii, 1
Maturity Date LTV Ratio......................................................22
Monitoring Certificateholders................................................41
Mortgage.....................................................................17
Mortgage Assets...............................................................3
Mortgage File................................................................43
Mortgage Loans............................................................3, ii
Mortgage Note................................................................17
Mortgage Pool................................................................ii
mortgage related securities..............................................10, 11
Mortgaged Properties..........................................................2
Mortgage Property............................................................17
Mortgagor.....................................................................2
Most Subordinate Class Of Certificates ......................................44
Net Operating Income.........................................................23
Net Prepayment Premium.......................................................31
Notional Amount..............................................................ii
Offered Certificates.......................................................3, i
Operating Adviser............................................................42
Originators..............................................................ii, 17
Other Certificates............................................................6
Pass-Through Rate............................................................ii
Pass-Through Rates...........................................................29
Percentage Interest..........................................................29
Plan.........................................................................46
Pooling And Servicing Agreement...........................................3, 43
prepayment...................................................................35
Prepayment Interest Excess...................................................31
Prepayment Interest Shortfall................................................30
Prepayment Premium........................................................2, 25
Principal Distribution Amount.............................................5, 31
Property Protection Expenses.................................................34
Prospectus Supplement......................................................3, 9
Realized Loss................................................................33
Record Date...................................................................1
regular interests...........................................................iii
REMIC.......................................................................iii
REMIC Regulations............................................................45
Remittance Period.............................................................5
Remittance Rate..............................................................30
REO Account..................................................................27
REO Property.................................................................27
residual interest...........................................................iii
residual interests............................................................9
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<PAGE>
Rules .......................................................................28
Series ....................................................................3, 9
Servicer .....................................................................6
Servicing Transfer Event ....................................................40
Special Servicer ............................................................ii
Specially Serviced Mortgage Loan .........................................9, 41
Stated Principal Balance ....................................................33
Trust Fund ..................................................................ii
Underwriter ..............................................................i, 46
Underwriting Agreement ......................................................48
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<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS
OF THE MORTGAGE LOANS
[ANNEX A TO FOLLOW THIS PAGE]
A-1
<PAGE>
ANNEX B
FORM OF MONTHLY REPORT
[ANNEX B TO FOLLOW THIS PAGE]
B-1
<PAGE>
Information contained hereto is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement become
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by 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 JANUARY 15, 1998
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
The mortgage pass-through certificates (the "Offered Certificates")
offered hereby and by supplements hereto (each, a "Prospectus Supplement") will
be offered from time to time in one or more series (each, a "Series"). The
Offered Certificates of any Series, together with any other mortgage
pass-through certificates of such Series, are collectively referred to herein
as the "Certificates". Each Series of Certificates will represent in the
aggregate the entire beneficial ownership interest in a trust fund (with
respect to any Series, the "Trust Fund") consisting of one or more segregated
pools of various types of multifamily or commercial mortgage loans (the
"Mortgage Loan"), mortgage participations, mortgage pass-through certificates
or other mortgage-backed securities evidencing interests in or secured by
multifamily or commercial mortgage loans (collectively, the "CMBS") or a
combination or Mortgage Loan and /or CMBS (with respect to any Series,
collectively, the "Mortgage Assets"). If so specified in the related Prospectus
Supplement, some or all of the Mortgage Loans will include assignments of the
leases of the related Mortgaged Properties (as defined herein) and/or
assignments to the rental payments due from the lessees under such leases (each
type of assignment, a "Lease Assignment"). A significant or the sole source of
payments on certain Commercial Loans (as defined herein) and, therefore, of
distributions on certain Series of Certificates, will be such rent payments. If
so specified in the related Prospectus Supplement, the Trust Fund for a Series
of Certificates may include letters of credit, insurance policies, guarantees,
reserve funds or other types of credit support, or any combination thereof
(with respect to any Series, collectively, ("Credit Support"), and currency or
interest rate exchange agreements and other financial assets, or any
combination thereof (with respect to any Series, collectively, "Cash Flow
Agreements"). See "Description of the Trust Funds," "Description of the
Certificates" and " Description of Credit Support."
Retain this Prospectus for future reference. This Prospectus may not
be used to consummate sales of the Offered Certificates of any Series unless
accompanied by the Prospectus Supplement for such Series.
(cover continued on next page)
--------------
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE
OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL
SERVICER, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON, EXCEPT TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS
SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT
OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND
SERVICING AGREEMENT OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN.
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 SHOULD REVIEW THE INFORMATION APPEARING UNDER
THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN AND SUCH INFORMATION AS
MAY BE SET FORTH UNDER THE CAPTION "RISK FACTORS" IN THE RELATED PROSPECTUS
SUPPLEMENT BEFORE PURCHASING ANY OFFERED CERTIFICATE.
Prior to issuance there will have been no market for the Certificates
of any Series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will
continue. This Prospectus may not be used to consummate sales of the Offered
Certificates of any Series unless accompanied by the Prospectus Supplement for
such Series.
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters as more fully
described under "Method of Distribution" herein and the related Prospectus
Supplement."
--------------
The date of this Prospectus is ________, 199_
<PAGE>
Each Series of Certificates will consist of one or more classes of
Certificates that may (i) provide for the accrual of interest thereon based on
fixed, variable or floating rates; (ii) be senior or subordinate to one or more
other classes of Certificates in respect of certain distributions on the
Certificates; (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 Certificates 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 available funds,
in each case as described in the related Prospectus Supplement. Any such
classes may include classes of Offered Certificates. See "Description of the
Certificates."
Principal and interest with respect to Certificates 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
Certificates of any Series will be made only from the assets of the related
Trust Fund.
The yield on each class of Certificates of a Series will be affected by,
among other things, the rate of payment of principal (including prepayments,
repurchase and defaults) on the Mortgage Assets in the related Trust Fund and
the timing of receipt of such payments as described under the caption "Yield
Considerations" herein and under the caption "Certain Prepayment, Maturity and
Yield Considerations" in the related Prospectus Supplement. A Trust Fund may be
subject to early termination under the circumstances described herein and in
the related Prospectus Supplement.
All CMBS will have been acquired for inclusion in a Trust Fund in purely
secondary transactions from a seller other than the issuer thereof and any of
its affiliates. The factors considered by the Registrant in determining that
the CMBS have been acquired in purely secondary market transactions include the
following: the Depositor's historical relationship with the underlying issuer,
whether or not any distribution by the Depositor with respect to other
securities of that issuer is presently occurring or being considered, whether
the Depositor was involved in the initial distribution of the underlying
securities, and the period of time elapsed between initial distribution and the
securitization transaction.
If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund or a designated portion thereof as
a "real estate mortgage investment conduit" (each, a "REMIC") or a "financial
asset securitization investment trust" ("FASIT") for federal income tax
purposes. See "Federal Income Tax Consequences" herein.
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus and Prospectus
Supplement when acting as underwriters and with respect to their unsold
allotments or subscriptions.
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
Certificates or an offer of the Offered Certificates to any person in any state
or other jurisdiction in which such offer would be unlawful. The delivery of
this Prospectus at any time does not imply that information herein is correct
as of any time subsequent to its date; however, if any material change occurs
while this Prospectus is required by law to be delivered, this Prospectus will
be amended or supplemented accordingly.
<PAGE>
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement relating
to the Offered Certificates of each Series will, among other things, set forth
with respect to such Certificates, as appropriate: (i) a description of the
class or classes of Certificates, the payment provisions with respect to each
such class and the Pass-Through Rate or method of determining the Pass-Through
Rate with respect to each such class; (ii) the aggregate principal amount and
distribution dates relating to such Series and, if applicable, the initial and
final scheduled distribution dates for each class; (iii) information as to the
assets comprising the Trust Fund, including the general characteristics of the
assets included therein, including the Mortgage Assets and any Credit Support
and Cash Flow Agreements (with respect to the Certificates of 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 Certificates; (vi) whether one or more REMIC
elections and/or FASIT elections will be made and designation of the regular
interests and residual (or ownership) interests; (vii) the aggregate original
percentage ownership interest in the Trust Fund to be evidenced by each class
of Certificates; (viii) information as to any Master Servicer, any Special
Servicer (or provision for the appointment thereof) and the Trustee, as
applicable; (ix) information as to the nature and extent of subordination with
respect to any class of Certificates that is subordinate in right of payment to
any other class; and (x) whether such Certificates 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 (the "Securities Act"), with
respect to the Offered Certificates. This Prospectus and the Prospectus
Supplement relating to each Series of Certificates 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, Chicago, Illinois 60661; and Northeast
Regional Office, Seven World Trade Center, Suite 1300, New York, New York
10048. The Commission maintains a Web site at http://www.sec.gov containing
reports, proxy and information statements and other information regarding
registrants, including the Depositor, that file electronically with the
Commission.
To the extent described in the related Prospectus Supplement, some or all
of the Mortgage Loans may be secured by an assignment of the lessors' (i.e.,
the related Mortgagors') rights in one or more leases (each, a "Lease") on the
related Mortgaged Property. Unless otherwise specified in the related
Prospectus Supplement, no Series of Certificates will represent interests in or
obligations of any lessee (each, a "Lessee") under a Lease. If indicated,
however, in the Prospectus Supplement for a given Series, a significant or the
sole source of payments on the Mortgage Loans in such Series, and, therefore,
of distributions on such Certificates, will be rental payments due from the
Lessees under the Leases. Under such circumstances, prospective investors in
the related Series of Certificates may wish to consider publicly available
information, if any, concerning the Lessees. Reference should be made to the
related Prospectus Supplement for information concerning the Lessees and
whether any such Lessees are subject to the periodic reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
A Master Servicer or the Trustee will be required to mail to holders of
Definitive Certificates (as defined herein) of each Series periodic unaudited
reports concerning the related Trust Fund. Unless and until Definitive
Certificates are issued, or to the extent provided in the related Prospectus
Supplement, such reports will be sent on behalf of the related Trust Fund to
Cede & Co. ("Cede"), as nominee of The Depository Trust Company ("DTC") and
registered holder of the Offered Certificates, pursuant to the applicable
Agreement. Such reports may be available to Beneficial Owners (as defined
herein) in the Certificates upon request to their respective DTC
3
<PAGE>
Participants or Indirect Participants (as defined herein). See "Description of
the Certificates -- Reports to Certificateholders" and "Description of the
Agreements -- Evidence as to Compliance."
The Depositor will file or cause to be filed with the Commission such
periodic reports with respect to each Trust Fund as are required under the
Exchange Act, and the rules and regulations of the Commission thereunder. The
Depositor intends to make a written request to the staff of the Commission that
the staff either (i) issue an order pursuant to Section 12(h) of the Exchange
Act exempting the Depositor from certain reporting requirements under the
Exchange Act with respect to each Trust Fund or (ii) state that the staff will
not recommend that the Commission take enforcement action if the Depositor
fulfills its reporting obligations as described in its written request. If such
request is granted, the Depositor will file or cause to be filed with the
Commission as to each Trust Fund the periodic unaudited reports to holders of
the Offered Certificates referenced in the preceding paragraph; however,
because of the nature of the Trust Funds, it is unlikely that any significant
additional information will be filed. In addition, because of the limited
number of Certificateholders expected for each series, the Depositor
anticipates that a significant portion of such reporting requirements will be
permanently suspended following the first fiscal year for the related Trust
Fund.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of an offering of Offered Certificates evidencing interests therein. The
Depositor will provide or cause to be provided without charge to each person to
whom this Prospectus is delivered in connection with the offering of one or
more classes of Offered Certificates, upon written or oral request of such
person, a copy of any or all documents or reports incorporated herein by
reference, in each case to the extent such documents or reports relate to one
or more of such classes of such Offered Certificates, other than the exhibits
to such documents (unless such exhibits are specifically incorporated by
reference in such documents). Requests to the Depositor should be directed in
writing to Heller Financial Commercial Mortgage Asset Corp., 500 West Monroe
Street, Chicago, Illinois 60661, Attention: Margaret E. Govern. The Depositor
has determined that its financial statements are not material to the offering
of any Offered Certificates.
4
<PAGE>
TABLE OF CONTENTS
SUMMARY OF PROSPECTUS........................................................8
RISK FACTORS................................................................17
DESCRIPTION OF THE TRUST FUNDS..............................................24
GENERAL.....................................................................24
YIELD CONSIDERATIONS........................................................30
THE DEPOSITOR...............................................................34
DESCRIPTION OF THE CERTIFICATES.............................................34
DISTRIBUTIONS...............................................................34
AVAILABLE DISTRIBUTION AMOUNT...............................................35
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES...............................35
DISTRIBUTIONS OF PRINCIPAL CERTIFICATES.....................................36
COMPONENTS..................................................................36
DISTRIBUTIONS ON THE CERTIFICATES OF PREPAYMENT PREMIUMS OR IN
RESPECT OF EQUITY PARTICIPATIONS..........................................36
ALLOCATION OF LOSSES AND SHORTFALLS.........................................37
ADVANCES IN RESPECT OF DELINQUENCIES........................................37
REPORTS TO CERTIFICATEHOLDERS...............................................38
TERMINATION.................................................................40
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES.........................40
DESCRIPTION OF THE AGREEMENTS...............................................43
ASSIGNMENT OF ASSETS, REPURCHASES...........................................43
REPRESENTATIONS AND WARRANTIES, REPURCHASES.................................44
ACCOUNTS....................................................................46
DEPOSITS....................................................................46
DISTRIBUTION ACCOUNT........................................................48
OTHER COLLECTION ACCOUNTS...................................................48
COLLECTION AND OTHER SERVICING PROCEDURES...................................48
SUB-SERVICERS...............................................................49
SPECIAL SERVICER............................................................49
HAZARD INSURANCE POLICIES...................................................52
RENTAL INTERRUPTION INSURANCE POLICY........................................52
FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE...........................53
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS...............................53
RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES...........53
EVIDENCE AS TO COMPLIANCE...................................................54
CERTAIN MATTERS REGARDING EACH SERVICER AND THE DEPOSITOR...................54
EVENTS OF DEFAULT...........................................................55
RIGHTS UPON EVENT OF DEFAULT................................................55
AMENDMENT...................................................................56
THE TRUSTEE.................................................................56
DUTIES OF THE TRUSTEE.......................................................57
CERTAIN MATTERS REGARDING THE TRUSTEE.......................................57
RESIGNATION AND REMOVAL OF THE TRUSTEE......................................57
5
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DESCRIPTION OF CREDIT SUPPORT...............................................58
SUBORDINATE CERTIFICATES....................................................58
CROSS-SUPPORT PROVISIONS....................................................58
INSURANCE OR GUARANTEES WITH RESPECT TO THE WHOLE LOANS.....................59
LETTER OF CREDIT............................................................59
INSURANCE POLICIES AND SURETY BONDS.........................................59
RESERVE FUNDS...............................................................59
CREDIT SUPPORT WITH RESPECT TO CMBS.........................................60
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES..................60
TYPES OF MORTGAGE INSTRUMENTS...............................................60
INTEREST IN REAL PROPERTY...................................................61
LEASES AND RENTS............................................................61
PERSONALTY..................................................................61
COOPERATIVE LOANS...........................................................62
FORECLOSURE.................................................................63
BANKRUPTCY LAWS.............................................................67
ENVIRONMENTAL LEGISLATION...................................................70
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE..........................................72
SUBORDINATE FINANCING.......................................................73
DEFAULT INTEREST, PREPAYMENT CHARGES AND PREPAYMENTS........................73
ACCELERATION ON DEFAULT.....................................................73
APPLICABILITY OF USURY LAWS.................................................74
CERTAIN LAWS AND REGULATIONS; TYPES OF MORTGAGED PROPERTIES.................74
AMERICANS WITH DISABILITIES ACT.............................................74
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940.............................75
FORFEITURES IN DRUG AND RICO PROCEEDINGS....................................75
FEDERAL INCOME TAX CONSEQUENCES.............................................75
GRANTOR TRUST FUNDS.........................................................76
SINGLE CLASS OF GRANTOR TRUST CERTIFICATES..................................76
MULTIPLE CLASSES OF GRANTOR TRUST CERTIFICATES..............................79
SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE.............................83
NON-U.S. PERSONS............................................................83
INFORMATION REPORTING AND BACKUP WITHHOLDING................................85
REMICS......................................................................85
TAXATION OF OWNERS OF REMIC.................................................94
PROHIBITED TRANSACTIONS AND OTHER TAXES.....................................98
LIQUIDATION AND TERMINATION.................................................99
ADMINISTRATIVE MATTERS......................................................99
TAX-EXEMPT INVESTORS.......................................................100
RESIDUAL CERTIFICATE PAYMENTS TO NON-U.S. PERSONS..........................100
TAX-RELATED RESTRICTIONS ON TRANSFERS OF REMIC RESIDUAL CERTIFICATE........100
FASITS.....................................................................106
STATE TAX CONSIDERATIONS...................................................106
ERISA......................................................................106
PROHIBITED TRANSACTIONS....................................................106
REVIEW BY PLAN FIDUCIARIES.................................................107
LEGAL INVESTMENT...........................................................107
6
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METHOD OF DISTRIBUTION.....................................................110
LEGAL MATTERS..............................................................111
FINANCIAL INFORMATION......................................................111
RATING.....................................................................111
7
<PAGE>
SUMMARY OF PROSPECTUS
The following summary of certain pertinent information is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Prospectus and by reference to the information with respect to each Series
of Certificates contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of such "Series." An Index of
Principal Definitions is included at the end of this Prospectus.
Title of Certificates................ Mortgage Pass-Through Certificates,
issuable in Series (the "Certificates").
Depositor............................ Heller Financial Commercial Mortgage
Asset Corp. (the "Depositor"). See "The
Depositor."
Master Servicer...................... The master servicer (the "Master
Servicer"), if any, for each Series of
Certificates, which may be an affiliate
of the Depositor, will be named in the
related Prospectus Supplement. See
"Description of the Agreements --
Collection and Other Servicing
Procedures."
Special Servicer..................... The special servicer (the "Special
Servicer"), if any, for each Series of
Certificates, which may be an affiliate
of the Depositor, will be named, or the
circumstances in accordance with which a
Special Servicer will be appointed will
be described, in the related Prospectus
Supplement. See "Description of the
Agreements -- Special Servicers."
Trustee.............................. The trustee (the "Trustee") for each
Series of Certificates will be named in
the related Prospectus Supplement. See
"Description of the Agreements -- The
Trustee."
The Trust Assets..................... Each Series of Certificates will
represent in the aggregate the entire
beneficial ownership interest in a Trust
Fund consisting of:
(a) Mortgage Assets.................. The Mortgage Assets with respect to each
Series of Certificates will consist of a
pool of multifamily and/or commercial
mortgage loans (collectively, the
"Mortgage Loans") and/or mortgage
participations, mortgage pass-through
certificates or other mortgage-backed
securities evidencing interests in or
secured by Mortgage Loans (collectively,
the "CMBS") or a combination of Mortgage
Loans and CMBS. The Mortgage Loans will
not be guaranteed or insured by the
Depositor or any of its affiliates or,
unless otherwise provided in the
Prospectus Supplement, by any
governmental agency or instrumentality
or other person. The CMBS may be
guaranteed or insured by an affiliate of
the Depositor, the Federal Home Loan
Mortgage Corporation, the Federal
National Mortgage Association, the
Government National Mortgage
Association, or any other person
specified in the related Prospectus
Supplement. As more specifically
described herein, the Mortgage Loans
will be secured by first or junior liens
on, or security interests in, properties
consisting of (i) residential properties
consisting of
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<PAGE>
five or more rental or cooperatively
owned dwelling units (the "Multifamily
Properties") or (ii) office buildings,
retail properties (including
single-tenant retail properties), hotels
or motels, health care-related
facilities, industrial properties,
mini-warehouse facilities or
self-storage facilities, manufactured
housing communities, mixed use or other
types of commercial properties (the
"Commercial Properties"). The term
"Mortgaged Properties" shall refer to
Multifamily Properties or Commercial
Properties, or both.
To the extent described in the related
Prospectus Supplement, some or all of
the Mortgage Loans may also be secured
by an assignment of one or more leases
(each, a "Lease") of one or more lessees
(each, a "Lessee") of all or a portion
of the related Mortgaged Properties. To
the extent specified in the related
Prospectus Supplement, a significant or
the sole source of payments on certain
Commercial Loans (as defined herein)
will be the rental payments due under
the related Leases. In certain
circumstances, with respect to
Commercial Properties, the material
terms and conditions of the related
Leases may be set forth in the related
Prospectus Supplement. See "Description
of the Trust Funds -- Mortgage Loans --
Leases" and "Risk Factors -- Limited
Assets" herein.
The Mortgaged Properties may be located
in the United States or its territories.
All Mortgage Loans will have individual
principal balances at origination of not
less than $100,000 and original terms to
maturity of not more than 40 years. All
Mortgage Loans will have been originated
by persons other than the Depositor
(including affiliates of the Depositor),
and all Mortgage Assets will have been
purchased, either directly or
indirectly, by the Depositor on or
before the date of initial issuance of
the related Series of Certificates. The
related Prospectus Supplement will
indicate if any such persons are
affiliates of the Depositor.
Each Mortgage Loan may provide for no
accrual of interest or for accrual of
interest thereon at an interest rate (a
"Mortgage Interest Rate") that is fixed
over its term or that adjusts from time
to time, or is partially fixed and
partially floating or that may be
converted from a floating to a fixed
Mortgage Interest Rate, or from a fixed
to a floating Mortgage Interest Rate,
from time to time at the Mortgagor's
election, in each case as described in
the related Prospectus Supplement. The
floating Mortgage Interest Rates on the
Mortgage Loans in a Trust Fund may be
based on one or more indices. Each
Mortgage Loan may provide for scheduled
payments to maturity, payments that
adjust from time to time to accommodate
changes in the Mortgage Interest Rate or
to reflect the occurrence of certain
events, and may provide for negative
amortization or accelerated
amortization, in each case as
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<PAGE>
described in the related Prospectus
Supplement. Each Mortgage Loan may be
fully amortizing or require a balloon
payment due on its stated maturity date,
in each case as described in the related
Prospectus Supplement. Each Mortgage
Loan may contain prohibitions on
prepayment or require payment of a
premium or a yield maintenance penalty
in connection with a prepayment, in each
case as described in the related
Prospectus Supplement. The Mortgage
Loans may provide for payments of
principal, interest or both, on due
dates that occur monthly, quarterly,
semi-annually or at such other interval
as is specified in the related
Prospectus Supplement. See "Description
of the Trust Funds -- Assets."
(b) Collection Accounts.............. Each Trust Fund will include one or more
accounts established and maintained on
behalf of the Certificateholders 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 Mortgage
Assets and other assets in the Trust
Fund. Such an account may be maintained
as an interest bearing or a non-interest
bearing account, and funds held therein
may be held as cash or invested in
certain short-term, investment grade
obligations, in each case as described
in the related Prospectus Supplement.
See "Description of the Agreements --
Distribution Account and Other
Collection Accounts."
(c) Credit Support................... If so provided in the related Prospectus
Supplement, partial or full protection
against certain defaults and losses on
the Mortgage Assets in the related Trust
Fund may be provided to one or more
classes of Certificates of the related
Series in the form of subordination of
one or more other classes of
Certificates of such Series, which other
classes may include one or more classes
of Offered Certificates, or by one or
more other types of credit support, such
as a letter of credit, insurance policy,
guarantee, reserve fund or another type
of credit support, or a combination
thereof (any such coverage with respect
to the Certificates of any Series,
"Credit Support"). The amount and types
of coverage, the identification of the
entity providing the coverage (if
applicable) and related information with
respect to each type of Credit Support,
if any, will be described in the
Prospectus Supplement for a Series of
Certificates. The Prospectus Supplement
for any Series of Certificates
evidencing an interest in a Trust Fund
that includes CMBS will describe any
similar forms of credit support that are
provided by or with respect to, or are
included as part of the trust fund
evidenced by or providing security for,
such CMBS. See "Risk Factors -- Credit
Support Limitations" and "Description of
Credit Support."
(d) Cash Flow Agreement.............. If so provided in the related Prospectus
Supplement, the Trust Fund may include
guaranteed investment contracts pursuant
to which moneys held in the funds and
accounts established for the related
Series will be invested at a specified
rate. The Trust Fund may also include
certain other agreements, such as
interest rate exchange agreements,
interest rate cap or floor
10
<PAGE>
agreements, currency exchange agreements
or similar agreements provided to reduce
the effects of interest rate or currency
exchange rate fluctuations on the
Mortgage Assets of one or more classes
of Certificates. The principal terms of
any such guaranteed investment contract
or other agreement (any such agreement,
a "Cash Flow Agreement"), including,
without limitation, provisions relating
to the timing, manner and amount of
payments thereunder and provisions
relating to the termination thereof,
will be described in the Prospectus
Supplement for the related Series. In
addition, the related Prospectus
Supplement will provide certain
information with respect to the obligor
under any such Cash Flow Agreement. The
Prospectus Supplement for any Series of
Certificates evidencing an interest in a
Trust Fund that includes CMBS will
describe any cash flow agreements that
are included as part of the trust fund
evidenced by or providing security for
such CMBS. See "Description of the Trust
Funds -- Cash Flow Agreements."
Description of Certificates.......... Each Series of Certificates evidencing
an interest in a Trust Fund that
includes Mortgage Loans as part of its
assets will be issued pursuant to a
pooling and servicing agreement, and
each Series of Certificates evidencing
an interest in a Trust Fund that does
not include Mortgage Loans will be
issued pursuant to a trust agreement. To
the extent specified in the Prospectus
Supplement, the Mortgage Loans shall be
serviced pursuant to a pooling and
servicing agreement. Pooling and
servicing agreements and trust
agreements are referred to herein as the
"Agreements". Each Series of
Certificates will include one or more
classes. Each Series of Certificates
(including any class or classes of
Certificates of such Series not offered
hereby) will represent in the aggregate
the entire beneficial ownership interest
in the Trust Fund. Each class of
Certificates (other than certain
Stripped Interest Certificates, as
defined below) will have a stated
principal amount (a "Certificate
Balance") and (other than certain
Stripped Principal Certificates, as
defined below), will accrue interest
thereon based on a fixed, variable or
floating interest rate (a "Pass-Through
Rate"). The related Prospectus
Supplement will specify the Certificate
Balance, if any, and the Pass-Through
Rate, if any, for each class of
Certificates or, in the case of a
variable or floating Pass-Through Rate,
the method for determining the
Pass-Through Rate.
Distributions on Certificates........ Each Series of Certificates will consist
of one or more classes of Certificates
that may (i) provide for the accrual of
interest thereon based on fixed,
variable or floating rates; (ii) be
senior (collectively, "Senior
Certificates") or subordinate
(collectively, "Subordinate
Certificates") to one or more other
classes of Certificates in respect of
certain distributions on the
Certificates; (iii) be entitled to
principal distributions, with
disproportionately low, nominal or no
interest distributions (collectively,
"Stripped Principal Certificates"); (iv)
be entitled to interest distributions,
with disproportionately low, nominal
11
<PAGE>
or no principal distributions
(collectively, "Stripped Interest
Certificates"); (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 Certificates of such Series
(collectively, "Accrual Certificates");
(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, including a Stripped
Principal Certificate component and a
Stripped Interest Certificate component,
to the extent of available funds, in
each case as described in the related
Prospectus Supplement. Any such classes
may include classes of Offered
Certificates. With respect to
Certificates with two or more
components, references herein to
Certificate Balance, notional amount and
Pass-Through Rate refer to the principal
balance, if any, notional amount, if
any, and the Pass-Through Rate, if any,
for any such component.
The Certificates will not be guaranteed
or insured by the Depositor or any of
its affiliates, by any governmental
agency or instrumentality or by any
other person, unless otherwise provided
in the related Prospectus Supplement.
See "Risk Factors -- Limited Assets" and
"Description of the Certificates."
(a) Interest......................... Interest on each class of Offered
Certificates (other than Stripped
Principal Certificates and certain
classes of Stripped Interest
Certificates) of each Series will accrue
at the applicable Pass-Through Rate on
the outstanding Certificate Balance
thereof and will be distributed to
Certificateholders 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
Certificates 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 Certificates
may be reduced to the extent of certain
delinquencies, losses, prepayment
interest shortfalls, and other
contingencies described herein and in
the related Prospectus Supplement.
Stripped Principal Certificates with no
stated Pass-Through Rate will not accrue
interest. See "Risk Factors --
Prepayments and Effect on Average Life
of Certificates and Yields," "Yield
Considerations" and "Description of the
Certificates -- Distributions of
Interest on the Certificates."
(b) Principal........................ The Certificates of each Series
initially will have an aggregate
Certificate Balance no greater than the
outstanding principal balance of the
Mortgage Assets as of, unless the
related Prospectus Supplement provides
otherwise, the close of business on the
first day of the month of formation of
the related Trust Fund (the "Cut-Off
Date"), after application of
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<PAGE>
scheduled payments due on or before such
date, whether or not received. The
Certificate Balance of a Certificate
outstanding from time to time represents
the maximum amount that the holder
thereof is then entitled to receive in
respect of principal from future cash
flow on the assets in the related Trust
Fund. To the extent provided in the
related Prospectus Supplement,
distributions of principal will be made
on each Distribution Date to the class
or classes of Certificates entitled
thereto until the Certificate Balances
of such Certificates have been reduced
to zero. To the extent specified in the
related Prospectus Supplement,
distributions of principal of any class
of Certificates will be made on a pro
rata basis among all of the Certificates
of such class or by random selection, as
described in the related Prospectus
Supplement or otherwise established by
the related Trustee. Stripped Interest
Certificates with no Certificate Balance
will not receive distributions in
respect of principal. See "Description
of the Certificates -- Distributions of
Principal of the Certificates."
Advances............................. To the extent provided in the related
Prospectus Supplement, the Special
Servicer or the Master Servicer (each, a
"Servicer") will be obligated as part of
its servicing responsibilities to make
certain advances with respect to
delinquent scheduled payments on the
Whole Loans in such Trust Fund which it
deems recoverable. Any such advances
will be made under and subject to any
determinations or conditions set forth
in the related Prospectus Supplement.
Neither the Depositor nor any of its
affiliates will have any responsibility
to make such advances. Advances made by
a Master Servicer are reimbursable
generally from subsequent recoveries in
respect of such Whole Loans and
otherwise to the extent described herein
and in the related Prospectus
Supplement. If and to the extent
provided in the Prospectus Supplement
for any Series, each Servicer will be
entitled to receive interest on its
outstanding advances, payable from
amounts in the related Trust Fund. The
Prospectus Supplement for any Series of
Certificates evidencing an interest in a
Trust Fund that includes CMBS will
describe any corresponding advancing
obligation of any person in connection
with such CMBS. See "Description of the
Certificates -- Advances in Respect of
Delinquencies."
Termination.......................... If so specified in the related
Prospectus Supplement, a Series of
Certificates may be subject to optional
early termination through the repurchase
of the Mortgage 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
Certificate Balance of a specified class
or classes of Certificates by 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 Mortgage
Assets of the Trust Fund, or of a
sufficient
13
<PAGE>
portion of such Mortgage Assets to
retire such class or classes, or
purchase such Mortgage Assets at a price
set forth in the related Prospectus
Supplement. In addition, if so provided
in the related Prospectus Supplement,
certain classes of Certificates may be
purchased subject to similar conditions.
See "Description of the Certificates --
Termination."
Registration of Certificates......... If so provided in the related Prospectus
Supplement, one or more classes of the
Offered Certificates will initially be
represented by one or more Certificates
registered in the name of Cede & Co., as
the nominee of DTC. No person acquiring
an interest in Offered Certificates so
registered will be entitled to receive a
definitive certificate representing such
person's interest except in the event
that definitive certificates are issued
under the limited circumstances
described herein. See "Risk Factors --
Book-Entry Registration" and
"Description of the Certificates --
Book-Entry Registration and Definitive
Certificates."
Tax Status of the Certificates....... The Certificates of each Series will
constitute either (i) "regular
interests" ("REMIC Regular
Certificates") and a single class of
"residual interests" ("REMIC Residual
Certificates") in a Trust Fund or a
portion of a Trust Fund that is treated
as a real estate mortgage investment
conduit ("REMIC") under Sections 860A
through 860G of the Internal Revenue
Code of 1986, as amended (the "Code"),
(ii) interests ("Grantor Trust
Certificates") in a Trust Fund treated
as a grantor trust under applicable
provisions of the Code, or (iii)
"regular interests" ("FASIT Regular
Certificates") and a single class of
"ownership interests" ("FASIT Ownership
Certificates") in a Trust Fund or
portion of a Trust Fund treated as a
"financial asset securitization
investment trust" (a "FASIT") under
Sections 860H through 860L of the Code.
Additionally, the Trust Fund may elect
to be treated as a partnership (the
"Partnership) or, if the Trust Fund has
only one ownership interest, as a branch
of the sole owner of the Trust Fund's
assets for federal income tax purposes,
in which case the Certificates of such
Series will consist of debt securities
issued by the partnership (or sole
owner) (the "Notes") and partnership
interests ("Partnership Interest") in
the Partnership (or the ownership
interest in the Trust Fund).
(a) REMIC............................ REMIC Regular Certificates generally
will be treated as debt obligations of
the applicable REMIC for federal income
tax purposes. Certain REMIC Regular
Certificates may be issued with original
issue discount for federal income tax
purposes. See "Federal Income Tax
Consequences--REMICs" herein and in the
related Prospectus Supplement.
The Offered Certificates will be treated
as (i) assets described in section
7701(a)(19)(C) of the Code and (ii)
"real estate assets" within the meaning
of section 856(c)(5)(A) of the Code, in
each case to the extent described herein
and in the
14
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related Prospectus Supplement. See
"Federal Income Tax
Consequences--REMICs" herein and in the
related Prospectus Supplement.
(b) Grantor Trust.................... If no election is made to treat the
Trust Fund relating to a Series of
Certificates as a REMIC, a FASIT, a
partnership or a branch of the
Depositor, the Trust Fund will be
classified as a grantor trust and not as
an association taxable as a corporation
for federal income tax purposes, and
therefore holders of Certificates will
be treated as the owners of undivided
pro rata interests in the Mortgage Pool
or pool of securities and any other
assets held by the Trust Fund. See
"Federal Income Tax
Consequences--Grantors Trust" herein and
in the related Prospectus Supplement.
(c) FASIT............................ FASIT Regular Certificates will be
treated as debt obligations of the
issuing FASIT for federal income tax
purposes for each tax year a FASIT
election is in effect and the Trust Fund
or portion of the Trust Fund for which a
FASIT election has been made (the "Trust
FASIT") meets certain tests described in
Code sections 860H through 860L, the
legislative history of the Small
Business Job Protection Act of 1996 and
the Taxpayer Relief Act of 1997
pertaining thereto (the "FASIT
Provisions") and in any Treasury
regulations that may have been issued
under the FASIT Provisions that, by
reason of their effective date, would
apply to the Trust FASIT and the
Certificates. No Treasury regulations
have been issued in proposed, temporary
or final form, and no other Internal
Revenue Service guidance has been issued
under the FASIT Provisions to date. See
"Federal Income Tax
Consequences--FASITs" herein and in the
related Prospectus Supplement.
Prospective investors are urged to
consult their own tax advisors regarding
an investment in FASIT Certificates.
(d) Partnership...................... The Trust may elect to be treated for
federal income tax purposes as a
partnership (the "Trust Partnership") or
as a branch of the Depositor. The
material federal income tax consequences
of either such an election and of
ownership of Certificates of the related
Series will be described in the
Prospectus Supplement.
Investors are urged to consult their tax
advisors and to review "Federal Income
Tax Consequences" herein and in the
related Prospectus Supplement.
ERISA Considerations................. A fiduciary of an employee benefit plan
and certain other retirement plans and
arrangements, including individual
retirement accounts, annuities, Keogh
plans, and collective investment funds
and separate accounts in which such
plans, accounts, annuities or
arrangements are invested and any entity
whose underlying assets include assets
of such a plan by reason of any such
plan's investment in the entity, that is
subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code
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should carefully review with its legal
advisors whether the purchase or holding
of Offered Certificates could give rise
to a transaction that is prohibited or
is not otherwise permissible either
under ERISA or Section 4975 of the Code.
See "ERISA Considerations" herein and in
the related Prospectus Supplement.
Certain classes of Certificates may not
be transferred unless the Trustee and
the Depositor are furnished with a
letter of representations or an opinion
of counsel to the effect that such
transfer will not result in a violation
of the prohibited transaction provisions
of ERISA and the Code and will not
subject the Trustee, the Depositor or
the Master Servicer to additional
obligations. See "Description of the
Certificates -- General" and "ERISA
Considerations."
Legal Investment..................... The related Prospectus Supplement will
specify whether the Offered Certificates
will constitute "mortgage related
securities" for purposes of the
Secondary Mortgage Market Enhancement
Act of 1984. Investors whose investment
authority is subject to legal
restrictions should consult their own
legal advisors to determine whether and
to what extent the Offered Certificates
constitute legal investments for them.
See "Legal Investment" herein and in the
related Prospectus Supplement.
Rating............................... At the date of issuance, as to each
Series, each class of Offered
Certificates will be rated not lower
than investment grade by one or more
nationally recognized statistical rating
agencies (each, a "Rating Agency"). See
"Rating" herein and in the related
Prospectus Supplement.
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.
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RISK FACTORS
Investors should consider, in connection with the purchase of Offered
Certificates, among other things, the following factors and certain other
factors as may be set forth in "Risk Factors" in the related Prospectus
Supplement.
LIMITED LIQUIDITY
There can be no assurance that a secondary market for the Certificates of
any Series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Certificates of such Series
remain outstanding. Any such secondary market may provide less liquidity to
investors than any comparable market for securities evidencing interests in
single family mortgage loans. The market value of Certificates will fluctuate
with changes in prevailing rates of interest. Consequently, sale of
Certificates by a holder in any secondary market that may develop may be at a
discount from 100% of their original principal balance or from their purchase
price. Furthermore, secondary market purchasers may look only hereto, to the
related Prospectus Supplement and to the reports to Certificateholders
delivered pursuant to the related Agreement as described herein under the
heading "Description of the Certificates -- Reports to Certificateholders,"
"--Book-Entry Registration and Definitive Certificates" and "Description of the
Agreements -- Evidence as to Compliance" for information concerning the
Certificates. Except to the extent described herein and in the related
Prospectus Supplement, Certificateholders will have no redemption rights and
the Certificates are subject to early retirement only under certain specified
circumstances described herein and in the related Prospectus Supplement. See
"Description of the Certificates -- Termination."
LIMITED ASSETS
The Certificates will not represent an interest in or obligation of the
Depositor, any Servicer, or any of their affiliates. The only obligations with
respect to the Certificates or the Mortgage Assets will be the obligations (if
any) of the Depositor (or, if otherwise provided in the related Prospectus
Supplement, the person identified therein as the person making certain
representations and warranties with respect to the Mortgage Loans, as
applicable, the "Warranting Party") pursuant to certain limited representations
and warranties made with respect to the Mortgage Loans. Since certain
representations and warranties with respect to the Mortgage Assets may have
been made and/or assigned in connection with transfers of such Mortgage Assets
prior to the Closing Date, the rights of the Trustee and the Certificateholders
with respect to such representations or warranties will be limited to their
rights as an assignee thereof. Unless otherwise specified in the related
Prospectus Supplement, none of the Depositor, any Servicer or any affiliate
thereof will have any obligation with respect to representations or warranties
made by any other entity. Unless otherwise specified in the related Prospectus
Supplement, neither the Certificates nor the underlying Mortgage Assets will be
guaranteed or insured by any governmental agency or instrumentality, or by the
Depositor, any Servicer or any of their affiliates. Proceeds of the assets
included in the related Trust Fund for each Series of Certificates (including
the Mortgage Assets and any form of credit enhancement) will be the sole source
of payments on the Certificates, 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 Certificates.
Unless otherwise specified in the related Prospectus Supplement, a Series
of Certificates 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 Certificates, no other assets will be available for
payment of the deficiency. Additionally, certain amounts remaining in certain
funds or accounts, including the Distribution Account, the Collection Account
and any accounts maintained as Credit Support, may be withdrawn under certain
conditions, as described in the related Prospectus Supplement. In the event of
such withdrawal, such amounts will not be available for future payment of
principal of or interest on the Certificates. If so provided in the Prospectus
Supplement for a Series of Certificates consisting of one or more classes of
Subordinate Certificates, on any Distribution Date in respect of which losses
or shortfalls in collections on the Trust Assets have been incurred, the amount
of such losses or shortfalls will be borne first by one or more classes of the
Subordinate Certificates, and, thereafter, by the remaining classes of
Certificates in the priority and manner and subject to the limitations
specified in such Prospectus Supplement.
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PREPAYMENTS AND EFFECT ON AVERAGE LIFE OF CERTIFICATES AND YIELDS
Prepayments (including those caused by defaults) on the Mortgage Assets in
any Trust Fund generally will result in a faster rate of principal payments on
one or more classes of the related Certificates than if payments on such
Mortgage Assets were made as scheduled. Thus, the prepayment experience on the
Mortgage Assets may affect the weighted average life of each class of related
Certificates. Any changes in weighted average life may adversely affect the
yield to holders of the Certificates. Prepayments resulting in a shortening of
the weighted average life of a Class of Certificates may be made at a time of
low interest rates when a holder may be unable to reinvest the resulting
payments of principal on its Certificates at a rate comparable to the rate at
which interest is payable on such Certificates, while delays and extensions
resulting in a lengthening of such weighted average life may occur at a time of
high interest rates when a holder may have been able to reinvest principal
payments that would otherwise have been received by it at higher rates. 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, social, tax, legal and other factors. There can be no assurance as
to the rate of prepayment on the Mortgage Assets in any Trust Fund or that the
rate of payments will conform to any model described herein or in any
Prospectus Supplement. If prevailing interest rates fall significantly below
the applicable mortgage interest rates, principal prepayments are likely to be
higher than if prevailing rates remain at or above the rates borne by the
Mortgage Loans underlying or comprising the Mortgage Assets in any Trust Fund.
As a result, the actual maturity of any class of Certificates could occur
significantly earlier than expected. A Series of Certificates may include one
or more classes of Certificates with priorities of payment and, as a result,
yields on other classes of Certificates, including classes of Offered
Certificates, of such Series may be more sensitive to prepayments on Mortgage
Assets. A Series of Certificates may include one or more classes offered at a
significant premium or discount. Yields on such classes of Certificates will be
sensitive, and in some cases extremely sensitive, to prepayments on Mortgage
Assets and, where the amount of interest payable with respect to a class is
disproportionately high, as compared to the amount of principal, as with
certain classes of Stripped Interest Certificates, a holder might, in some
prepayment scenarios, fail to recoup its original investment. A Series of
Certificates may include one or more classes of Certificates, including classes
of Offered Certificates, that provide for distribution of principal thereof
from amounts attributable to interest accrued but not currently distributable
on one or more classes of Accrual Certificates and, as a result, yields on such
Certificates will be sensitive to (a) the provisions of such Accrual
Certificates relating to the timing of distributions of interest thereon and
(b) if such Accrual Certificates accrue interest at a variable or floating
Pass-Through Rate, changes in such rate. See "Yield Considerations" herein and,
if applicable, in the related Prospectus Supplement.
LIMITED NATURE OF RATINGS
Any rating assigned by a Rating Agency to a class of Certificates will
reflect such Rating Agency's assessment solely of the likelihood that holders
of Certificates of such class will receive payments to which such
Certificateholders are entitled under the related Agreement. Such rating will
not constitute an assessment of the likelihood that principal prepayments
(including those caused by defaults) on the related Mortgage Assets will be
made, the degree to which the rate of such prepayments might differ from that
originally anticipated or the likelihood of early optional termination of the
Series of Certificates. Such rating will not address the possibility that
prepayment at higher or lower rates than anticipated by an investor may cause
such investor to experience a lower than anticipated yield or that an investor
purchasing a Certificate at a significant premium might fail to recoup its
initial investment under certain prepayment scenarios. Each Prospectus
Supplement will identify any payment to which holders of Offered Certificates
of the related Series are entitled that is not covered by the applicable
rating.
The amount, type and nature of credit support, if any, established with
respect to a Series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating classes of such Series. Such criteria
are sometimes based upon an actuarial analysis of the behavior of mortgage
loans in a larger group. Such analysis is often the basis upon which each
Rating Agency determines the amount of credit support required with respect to
each such class. There can be no assurance that the historical data supporting
any such actuarial analysis will accurately reflect future experience nor any
assurance that the data derived from a large pool of mortgage loans accurately
predicts the delinquency, foreclosure or loss experience of any particular pool
of Mortgage Assets. No assurance can be given that values of any Mortgaged
Properties have remained or will remain at their levels on the respective dates
of origination of the related Mortgage Loans. Moreover, there is no assurance
that appreciation of
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<PAGE>
real estate values generally will limit loss experiences on the Mortgaged
Properties. If the commercial or multifamily residential real estate markets
should experience an overall decline in property values such that the
outstanding principal balances of the Mortgage Loans underlying or comprising
the Mortgage Assets in a particular Trust Fund and any secondary financing on
the related Mortgaged Properties become equal to or greater than the value of
the Mortgaged Properties, the rates of delinquencies, foreclosures and losses
could be higher than those now generally experienced by institutional lenders.
In addition, adverse economic conditions (which may or may not affect real
property values) may affect the timely payment by Mortgagors of scheduled
payments of principal and interest on the Mortgage Loans and, accordingly, the
rates of delinquencies, foreclosures and losses with respect to any Trust Fund.
To the extent that such losses are not covered by the Credit Support, if any,
described in the related Prospectus Supplement, such losses will be borne, at
least in part, by the holders of one or more classes of the Certificates of the
related Series. See "Description of Credit Support" and "Rating."
RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED PROPERTIES
Mortgage loans made with respect to multifamily or commercial property may
entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with single family
property. See "Description of the Trust Funds -- Assets." The ability of a
Mortgagor to repay a loan secured by an income-producing property typically is
dependent primarily upon the successful operation of such property rather than
any independent income or assets of the Mortgagor; thus, the value of an
income-producing property is directly related to the net operating income
derived from such property. In contrast, the ability of a Mortgagor to repay a
single family loan typically is dependent primarily upon the Mortgagor's
household income, rather than the capacity of the property to produce income;
thus, other than in geographical areas where employment is dependent upon a
particular employer or an industry, the Mortgagor's income tends not to reflect
directly the value of such property. A decline in the net operating income of
an income-producing property will likely affect both the performance of the
related loan as well as the liquidation value of such property, whereas a
decline in the income of a Mortgagor on a single family property will likely
affect the performance of the related loan but may not affect the liquidation
value of such property. Moreover, a decline in the value of a Mortgaged
Property will increase the risk of loss particularly with respect to any
related junior Mortgage Loan. See "--Junior Mortgage Loans."
The performance of a mortgage loan secured by an income-producing property
leased by the Mortgagor to tenants as well as the liquidation value of such
property may be dependent upon the business operated by such tenants in
connection with such property, the creditworthiness of such tenants or both;
the risks associated with such loans may be offset by the number of tenants or,
if applicable, a diversity of types of business operated by such tenants.
It is anticipated that a substantial portion of the Mortgage Loans
included in any Trust Fund will be nonrecourse loans or loans for which
recourse may be restricted or unenforceable, as to which, in the event of
Mortgagor default, recourse may be had only against the specific 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 its 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 of the related Mortgaged Property.
Further, the concentration of default, foreclosure and loss risks in
individual Mortgagors or Mortgage Loans in a particular Trust Fund or the
related Mortgaged Properties will generally be greater than for pools of single
family loans both because the Mortgage Assets in a Trust Fund will generally
consist of a smaller number of loans than would a single family pool of
comparable aggregate unpaid principal balance and because of the higher
principal balance of individual Mortgage Loans. Mortgage Assets in a Trust Fund
may consist of only a single or limited number of Mortgage Loans and/or relate
to Leases to only a single Lessee or a limited number of Lessees.
If applicable, certain legal aspects of the Mortgage Loans for a Series of
Certificates may be described in the related Prospectus Supplement. See also
"Certain Legal Aspects of the Mortgage Loans and the Leases" herein.
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<PAGE>
RISKS ASSOCIATED WITH COMMERCIAL LOANS AND LEASES
If so described in the related Prospectus Supplement, each Mortgagor under
a Commercial Loan may be an entity created by the owner or purchaser of the
related Commercial Property solely to own or purchase such property, in part to
isolate the property from the debts and liabilities of such owner or purchaser.
To the extent specified in the related Prospectus Supplement, each such
Commercial Loan will represent a nonrecourse obligation of the related
Mortgagor secured by the lien of the related Mortgage and the related Lease
Assignments. Whether or not such loans are recourse or nonrecourse obligations,
it is not expected that the Mortgagors will have any significant assets other
than the Commercial Properties and the related Leases, which will be pledged to
the Trustee under the related Agreement. Therefore, the payment of amounts due
on any such Commercial Loans, and, consequently, the payment of principal of
and interest on the related Certificates, will depend primarily or solely on
rental payments by the Lessees. Such rental payments will, in turn, depend on
continued occupancy by, and/or the creditworthiness of, such Lessees, which in
either case may be adversely affected by a general economic downturn or an
adverse change in their financial condition. Moreover, to the extent a
Commercial Property was designed for the needs of a specific type of tenant
(e.g., a nursing home, hotel or motel), the value of such property in the event
of a default by the Lessee or the early termination of such Lease may be
adversely affected because of difficulty in re-leasing the property to a
suitable substitute lessee or, if re-leasing to such a substitute is not
possible, because of the cost of altering the property for another more
marketable use. As a result, without the benefit of the Lessee's continued
support of the Commercial Property, and absent significant amortization of the
Commercial Loan, if such loan is foreclosed on and the Commercial Property is
liquidated following a lease default, the net proceeds might be insufficient to
cover the outstanding principal and interest owing on such loan, thereby
increasing the risk that holders of the Certificates will suffer some loss.
BALLOON PAYMENTS
Certain of the Mortgage Loans as of the Cut-off Date may not be fully
amortizing over their terms to maturity and, thus, will require substantial
principal payments (i.e., balloon payments) at their stated maturity (the
"Balloon Mortgage Loans"). Mortgage Loans with balloon payments involve a
greater degree of risk because the ability of a Mortgagor to make a balloon
payment typically will depend upon its ability either to timely refinance the
loan or to timely sell the related Mortgaged Property. The ability of a
Mortgagor to accomplish either of these goals will be affected by a number of
factors, including the level of available mortgage interest rates at the time
of sale or refinancing, the Mortgagor's equity in the related Mortgaged
Property, the financial condition and operating history of the Mortgagor and
the related Mortgaged Property, tax laws, rent control laws (with respect to
certain Multifamily Properties and manufactured housing communities),
reimbursement rates (with respect to certain nursing homes), renewability of
operating licenses, prevailing general economic conditions and the availability
of credit for commercial or multifamily real properties, as the case may be,
generally.
HYPER-AMORTIZATION LOANS
Certain of the Mortgage Loans (the "Hyper-Amortization Loans") as of the
Cut-Off Date may permit increases in the Mortgage Interest Rate and principal
amortization at a date (the "Hyper-Amortization Date") prior to stated
maturity, creating an incentive for the related borrower to prepay the loan.
Such prepayment may adversely affect the yield to maturity realized by an
investor on its Certificates. It is anticipated that Borrowers of
Hyper-Amortization Loans will prepay such loans on the Hyper-Amortization Date.
See "Yield Considerations" herein and, if applicable, in the related Prospectus
Supplement.
JUNIOR MORTGAGE LOANS
To the extent specified in the related Prospectus Supplement, certain of
the Mortgage Loans may be secured primarily by junior mortgages. In the case of
liquidation, Mortgage Loans secured by junior mortgages are entitled to
satisfaction from proceeds that remain from the sale of the related Mortgaged
Property after the mortgage loans senior to such Mortgage Loans have been
satisfied. If there are not sufficient funds to satisfy such junior Mortgage
Loans and senior mortgage loans, such Mortgage Loans would suffer a loss and,
accordingly, one or more classes of Certificates would bear such loss.
Therefore, any risks of deficiencies associated with first Mortgage Loans will
be greater with respect to junior Mortgage Loans. See "--Risks Associated with
Mortgage Loans and Mortgaged Properties."
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OBLIGOR DEFAULT
If so specified in the related Prospectus Supplement, in order to maximize
recoveries on defaulted Whole Loans, a Master Servicer or a Special Servicer
will be permitted (within prescribed parameters) to extend and modify Whole
Loans that are in default or as to which a payment default is imminent,
including in particular with respect to balloon payments. In addition, a Master
Servicer or a Special Servicer may receive a workout fee based on receipts from
or proceeds of such Whole Loans. While any such entity 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 or payment of a workout fee will increase the present value of
receipts from or proceeds of Whole Loans that are in default or as to which a
payment default is imminent. Additionally, if so specified in the related
Prospectus Supplement, certain of the Mortgage Loans included in the Mortgage
Pool for a Series may have been subject to workouts or similar arrangements
following periods of delinquency and default.
MORTGAGOR TYPE
Mortgage Loans made to partnerships, corporations or other entities may
entail risks of loss from delinquency and foreclosure that are greater than
those of Mortgage Loans made to individuals. The Mortgagor's sophistication and
form of organization may increase the likelihood of protracted litigation or
bankruptcy in default situations.
CREDIT SUPPORT LIMITATIONS
The Prospectus Supplement for a Series of Certificates will describe any
Credit Support in the related Trust Fund, which may include letters of credit,
insurance policies, guarantees, reserve funds or other types of credit support,
or combinations thereof. Use of Credit Support will be subject to the
conditions and limitations described herein and in the related Prospectus
Supplement. Moreover, such Credit Support may not cover all potential losses or
risks; for example, Credit Support may or may not cover fraud or negligence by
a mortgage loan originator or other parties.
A Series of Certificates may include one or more classes of Subordinate
Certificates (which may include Offered Certificates), if so provided in the
related Prospectus Supplement. Although subordination is intended to reduce the
risk to holders of Senior Certificates 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 Certificates 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 Certificates of such Series has been repaid. As a result, the impact
of significant losses and shortfalls on the Trust Assets may fall primarily
upon those classes of Certificates having a lower priority of payment.
Moreover, if a form of Credit Support covers more than one Series of
Certificates (each, a "Covered Trust"), holders of Certificates 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 Certificates, including the subordination of one or more classes of
Certificates, will be determined on the basis of criteria established by each
Rating Agency rating such classes of Certificates 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 Mortgage Assets will not
exceed such assumed levels. See "--Limited Nature of Ratings," "Description of
the Certificates" and "Description of Credit Support."
Regardless of the form of credit enhancement provided, the amount of
coverage will be limited in amount and in most cases will be subject to
periodic reduction in accordance with a schedule or formula. The Master
Servicer may be permitted to reduce, terminate or substitute all or a portion
of the credit enhancement for any Series of Certificates, if the applicable
Rating Agency indicates that the then-current rating thereof will not be
adversely affected. The rating of any Series of Certificates 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
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as a result of losses on the related Mortgage 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 enhancement, or to
take any other action to maintain any rating of any Series of Certificates.
ENFORCEABILITY
Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the Mortgage Loan if the Mortgagor sells, transfers
or conveys the related Mortgaged Property or its interest in the Mortgaged
Property. 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. The courts of all states will enforce clauses providing for
acceleration in the event of a material payment default. The equity courts of
any state, however, may refuse the foreclosure of a mortgage or deed of trust
when an acceleration of the indebtedness would be inequitable or unjust or the
circumstances would render the acceleration unconscionable.
If so specified in the related Prospectus Supplement, the Mortgage Loans
will be secured by an assignment of leases and rents pursuant to which the
Mortgagor typically assigns its right, title and interest as landlord under the
leases on the related Mortgaged Property and the income derived therefrom to
the lender as further security for the related Mortgage Loan, while retaining a
license to collect rents for so long as there is no default. In the event the
Mortgagor defaults, the license terminates and the lender is entitled to
collect rents. Such assignments are typically not perfected as security
interests prior to actual possession of the cash flows. Some state laws may
require that the lender take possession of the Mortgaged Property and obtain a
judicial appointment of a receiver before becoming entitled to collect the
rents. In addition, if bankruptcy or similar proceedings are commenced by or in
respect of the Mortgagor, the lender's ability to collect the rents may be
adversely affected. See "Certain Legal Aspects of the Mortgage Loans and the
Leases -- Leases and Rents."
ENVIRONMENTAL RISKS
Real property pledged as security for a mortgage loan 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 assure the costs of
cleanup. 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 ("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, if agents or employees
of the lender have become sufficiently involved in the operations of the
Mortgagor. A lender also risks such liability on foreclosure of the mortgage.
Unless otherwise specified in the related Prospectus Supplement, each Pooling
and Servicing Agreement will provide that no Servicer, acting on behalf of the
Trust Fund, may acquire title to a Mortgaged Property securing a Mortgage Loan
or take over its operation unless such Servicer has previously determined,
based upon a report prepared by a person who regularly conducts environmental
audits, that: (i) the Mortgaged Property is in compliance with applicable
environmental laws or, if not, that taking such actions as are necessary to
bring the Mortgaged Property in compliance therewith is likely to produce a
greater recovery on a present value basis, after taking into account any risks
associated therewith, than not taking such actions and (ii) there are no
circumstances present at the Mortgaged Property relating to the use, management
or disposal of any Hazardous Materials (as defined herein) for which
investigation, testing, monitoring, containment, cleanup or remediation could
be required under any federal, state or local law or regulation, or that, if
any Hazardous Materials are present for which such action would be required,
taking such actions with respect to the affected Mortgaged Property is
reasonably likely to produce a greater recovery on a present value basis, after
taking into account any risks associated therewith, than not taking such
actions. Any additional restrictions on acquiring title to a Mortgaged Property
may be set forth in the related Prospectus Supplement. See "Certain Legal
Aspects of the Mortgage Loans and the Leases -- Environmental Legislation."
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DELINQUENT AND NON-PERFORMING MORTGAGE LOANS
If so provided in the related Prospectus Supplement, the Trust Fund for a
particular series of Certificates may include Mortgage Loans that are past due
or are non-performing. To the extent described in the related Prospectus
Supplement, the servicing of such Mortgage Loans as to which a specified number
of payments are delinquent will be performed by the Special Servicer; however,
the same entity may act as both Master Servicer and Special Servicer. Credit
Support provided with respect to a particular series of Certificates may not
cover all losses related to such delinquent or nonperforming Mortgage Loans,
and investors should consider the risk that the inclusion of such Mortgage
Loans in the Trust Fund may adversely affect the rate of defaults and
prepayments on the Mortgage Assets in such Trust Fund and the yield on the
Certificates of such series. In such a case the Turst Fund may be structured to
qualify for federal income tax purposes as a partnership (or, if there would be
a single owner of Partnership Interests , as a branch or other entity that is
disregarded as separate from the sole owner for federal income tax purposes).
The related Prospectus Supplement for any such Series will describe the
material federal income tax consequences of an investment in Certificates
issued in either such arrangement.
ERISA CONSIDERATIONS
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of such plans. Due to the complexity of
regulations 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 Certificates of any
Series.
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING REMIC RESIDUAL CERTIFICATES
Holders of REMIC Residual Certificates will be required to report on their
federal income tax returns as ordinary income their pro rata share of the
taxable income of the REMIC, regardless of the amount or timing of their
receipt of cash payments, as described in "Federal Income Tax Consequences --
REMICs." Accordingly, under certain circumstances, holders of Offered
Certificates that constitute REMIC Residual Certificates may have taxable
income and tax liabilities arising from such investment during a taxable year
in excess of the cash received during such period. Individual holders of REMIC
Residual Certificates may be limited in their ability to deduct servicing fees
and other expenses of the REMIC. In addition, REMIC Residual Certificates are
subject to certain restrictions on transfer. Because of the special tax
treatment of REMIC Residual Certificates, the taxable income arising in a given
year on a REMIC Residual Certificate will not be equal to, and may be
substantially more than, the taxable income associated with investment in a
corporate bond or stripped instrument having similar cash flow characteristics
and pre-tax yield. Therefore, the after-tax yield on the REMIC Residual
Certificate may be significantly less than that of a corporate bond or stripped
instrument having similar cash flow characteristics. Additionally, prospective
purchasers of a REMIC Residual Certificate should be aware that under
applicable Treasury regulations REMIC residual interests cannot be
marked-to-market. See "Federal Income Tax Consequences -- REMICs."
CONTROL
Under certain circumstances, the consent or approval of the holders of a
specified percentage of the aggregate Certificate Balance of all outstanding
Certificates of a Series or a similar means of allocating decision-making under
the related Agreement ("Voting Rights") will be required to direct, and will be
sufficient to bind all Certificateholders of such Series to, certain actions,
including directing the Special Servicer or the Master Servicer with respect to
actions to be taken with respect to certain Mortgage Loans and REO Properties
and amending the related Agreement in certain circumstances. See "Description
of the Agreements -- Events of Default," "--Rights Upon Event of Default" and
"--Amendment."
BOOK-ENTRY REGISTRATION
If so provided in the Prospectus Supplement, one or more classes of the
Certificates will be initially represented by one or more certificates
registered in the name of Cede, the nominee for DTC, and will not be registered
in the names of the Beneficial Owners or their nominees. Because of this,
unless and until Definitive Certificates are issued, Beneficial Owners will not
be recognized by the Trustee as "Certificateholders" (as that term
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is to be used in the related Agreement). Hence, until such time, Beneficial
Owners will be able to exercise the rights of Certificateholders only
indirectly through DTC and its participating organizations. See "Description of
the Certificates -- Book-Entry Registration and Definitive Certificates."
DESCRIPTION OF THE TRUST FUNDS
ASSETS
The primary assets of each Trust Fund will include (i) one or more
multifamily and/or commercial mortgage loans (the "Mortgage Loans"), (ii)
mortgage participations, pass-through certificates or other mortgage-backed
securities evidencing interests in or secured by one or more Mortgage Loans or
other similar participations, certificates or securities (collectively, the
"CMBS"), or (iii) a combination of Mortgage Loans and CMBS. As used herein,
"Mortgage Loans" refers to both whole Mortgage Loans and Mortgage Loans
underlying CMBS. Mortgage Loans that secure, or interests in which are
evidenced by, CMBS are herein sometimes referred to as "Underlying Mortgage
Loans". Mortgage Loans that are not Underlying Mortgage Loans are sometimes
referred to as "Whole Loans". Any mortgage participations, pass-through
certificates or other asset-backed certificates in which an CMBS evidences an
interest or which secure an CMBS are sometimes referred to herein also as CMBS
or as "Underlying CMBS". Mortgage Loans and CMBS are sometimes referred to
herein as "Mortgage Assets". No CMBS originally issued in a private placement
will be included as an asset of a Trust Fund until the holding period provided
for under Rule 144(k) promulgated under the Securities Act has expired or such
CMBS has been registered under the Securities Act to the extent required under
federal securities law. The Mortgage Assets will not be guaranteed or insured
by Heller Financial Commercial Mortgage Asset Corp. (the "Depositor") or any of
its affiliates or, unless otherwise provided in the related Prospectus
Supplement, by any governmental agency or instrumentality or by any other
person. Each Mortgage Asset will be selected by the Depositor for inclusion in
a Trust Fund from among those purchased, either directly or indirectly, from a
prior holder thereof (an "Asset Seller"), which may be an affiliate of the
Depositor and, with respect to Mortgage Assets, which prior holder may or may
not be the originator of such Mortgage Loan or the issuer of such CMBS. To the
extent specified in the related Prospectus Supplement, the Certificates will be
entitled to payment only from the assets of the related Trust Fund and will not
be entitled to payments in respect of the assets of any other trust fund
established by the Depositor. If specified in the related Prospectus
Supplement, the assets of a Trust Fund will consist of certificates
representing beneficial ownership interests in another trust fund that contains
the Mortgage Assets.
MORTGAGE LOANS
General
The Mortgage Loans will be secured by liens on, or security interests in,
Mortgaged Properties consisting of (i) residential properties consisting of
five or more rental or cooperatively owned dwelling units in high-rise, mid-
rise or garden apartment buildings ("Multifamily Properties" and the related
loans, "Multifamily Loans") or (ii) office buildings, retail properties
(including single-tenant retail properties), hotels or motels, health
care-related facilities, industrial properties, mini-warehouse facilities or
self-storage facilities, manufactured housing communities, mixed use or other
types of commercial properties ("Commercial Properties" and the related loans,
"Commercial Loans") located, to the extent specified in the related Prospectus
Supplement, in any one of the fifty states, the District of Columbia or any
territories of the United States. To the extent specified in the related
Prospectus Supplement, the Mortgage Loans will be secured by first mortgages or
deeds of trust or other similar security instruments creating a first lien on
Mortgaged Property. Multifamily Properties may include mixed commercial and
residential structures and may include apartment buildings owned by private
cooperative housing corporations ("Cooperatives"). The Mortgaged Properties may
include leasehold interests in properties, the title to which is held by third
party lessors. The Prospectus Supplement will specify whether the term of any
such leasehold exceeds the term of the mortgage note by at least ten 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. The Mortgage Loans will be
evidenced by promissory notes (the "Mortgage Notes") secured by mortgages or
deeds of trust (the "Mortgages") creating a lien on the Mortgaged
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Properties. Mortgage Loans will generally also be secured by an assignment of
leases and rents and/or operating or other cash flow guarantees relating to the
Mortgage Loan.
Leases
To the extent specified in the related Prospectus Supplement, the
Commercial Properties may be leased to Lessees that respectively occupy all or
a portion of such properties. Pursuant to a Lease Assignment, the related
Mortgagor may assign its rights, title and interest as lessor under each Lease
and the income derived therefrom to the related mortgagee, while retaining a
license to collect the rents for so long as there is no default. If the
Mortgagor defaults, the license terminates and the mortgagee or its agent is
entitled to collect the rents from the related Lessee or Lessees for
application to the monetary obligations of the Mortgagor. State law may limit
or restrict the enforcement of the Lease Assignments by a mortgagee until it
takes possession of the related Mortgaged Property and/or a receiver is
appointed. See "Certain Legal Aspects of the Mortgage Loans and the Leases --
Leases and Rents." Alternatively, to the extent specified in the related
Prospectus Supplement, the Mortgagor and the mortgagee may agree that payments
under Leases are to be made directly to a Servicer.
To the extent described in the related Prospectus Supplement, the Leases
may require the Lessees to pay rent that is sufficient in the aggregate to
cover all scheduled payments of principal and interest on the related Mortgage
Loans and, in certain cases, their pro rata share of the operating expenses,
insurance premiums and real estate taxes associated with the Mortgaged
Properties. Certain of the Leases may require the Mortgagor to bear costs
associated with structural repairs and/or the maintenance of the exterior or
other portions of the Mortgaged Property or provide for certain limits on the
aggregate amount of operating expenses, insurance premiums, taxes and other
expenses that the Lessees are required to pay. If so specified in the related
Prospectus Supplement, under certain circumstances the Lessees may be permitted
to set off their rental obligations against the obligations of the Mortgagors
under the Leases. In those cases where payments under the Leases (net of any
operating expenses payable by the Mortgagors) are insufficient to pay all of
the scheduled principal and interest on the related Mortgage Loans, the
Mortgagors must rely on other income or sources (including security deposits)
generated by the related Mortgaged Property to make payments on the related
Mortgage Loan. To the extent specified in the related Prospectus Supplement,
some Commercial Properties may be leased entirely to one Lessee. In such cases,
absent the availability of other funds, the Mortgagor must rely entirely on
rent paid by such Lessee in order for the Mortgagor to pay all of the scheduled
principal and interest on the related Commercial Loan. To the extent specified
in the related Prospectus Supplement, certain of the Leases may expire prior to
the stated maturity of the related Mortgage Loan. In such cases, upon
expiration of the Leases the Mortgagors will have to look to alternative
sources of income, including rent payment by any new Lessees or proceeds from
the sale or refinancing of the Mortgaged Property, to cover the payments of
principal and interest due on such Mortgage Loans unless the Lease is renewed.
As specified in the related Prospectus Supplement, certain of the Leases may
provide that upon the occurrence of a casualty affecting a Mortgaged Property,
the Lessee will have the right to terminate its Lease, unless the Mortgagor, as
lessor, is able to cause the Mortgaged Property to be restored within a
specified period of time. Certain Leases may provide that it is the lessor's
responsibility, while other Leases provide that it is the Lessee's
responsibility, to restore the Mortgaged Property after a casualty to its
original condition. Certain Leases may provide a right of termination to the
related Lessee if a taking of a material or specified percentage of the leased
space in the Mortgaged Property occurs, or if the ingress or egress to the
leased space has been materially impaired.
Default and Loss Considerations with Respect to the Mortgage Loans
Mortgage loans secured by commercial and multifamily properties are
markedly different from owner-occupied single family mortgage loans. The
repayment of loans secured by commercial or multifamily properties is typically
dependent upon the successful operation of such property rather than upon the
liquidation value of the real estate. To the extent specified in the Prospectus
Supplement, the Mortgage Loans will be non-recourse loans, which means that,
absent special facts, the mortgagee may look only to the Net Operating Income
from the property for repayment of the mortgage debt, and not to any other of
the Mortgagor's assets, in the event of the Mortgagor's default. Lenders
typically look to the Debt Service Coverage Ratio of a loan secured by
income-producing property as an important measure of the risk of default on
such a loan. The "Debt Service Coverage Ratio" of a Mortgage Loan at any given
time is the ratio of the Net Operating Income for a twelve-month period to the
annualized
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scheduled payments on the Mortgage Loan. "Net Operating Income" means, for any
given period, to the extent specified in the related Prospectus Supplement, the
total operating revenues derived from a Mortgaged Property during such period,
minus the total operating expenses incurred in respect of such Mortgaged
Property during such period other than (i) non-cash items such as depreciation
and amortization, (ii) capital expenditures and (iii) debt service on loans
secured by the Mortgaged Property. The Net Operating Income of a Mortgaged
Property will fluctuate over time and may be sufficient or insufficient to
cover debt service on the related Mortgage Loan at any given time.
As the primary component of Net Operating Income, rental income (as well
as maintenance payments from tenant-stockholders of a Cooperative) is subject
to the vagaries of the applicable real estate market and/or business climate.
Properties typically leased, occupied or used on a short-term basis, such as
health care-related facilities, hotels and motels, and mini-warehouse and
self-storage facilities, tend to be affected more rapidly by changes in market
or business conditions than do properties leased, occupied or used for longer
periods, such as (typically) retail properties, office buildings and industrial
properties. Commercial Loans may be secured by owner-occupied Mortgaged
Properties or Mortgaged Properties leased to a single tenant. Accordingly, a
decline in the financial condition of the Mortgagor or single tenant, as
applicable, may have a disproportionately greater effect on the Net Operating
Income from such Mortgaged Properties than would be the case with respect to
Mortgaged Properties with multiple tenants.
Changes in the expense components of Net Operating Income due to the
general economic climate or economic conditions in a locality or industry
segment, such as increases in interest rates, real estate and personal property
tax rates and other operating expenses, including energy costs; changes in
governmental rules, regulations and fiscal policies, including environmental
legislation; and acts of God may also affect the risk of default on the related
Mortgage Loan. As may be further described in the related Prospectus
Supplement, in some cases leases of Mortgaged Properties may provide that the
Lessee rather than the Mortgagor, is responsible for payment of some or all of
these expenses; however, because leases are subject to default risks as well
when a tenant's income is insufficient to cover its rent and operating
expenses, the existence of such "net of expense" provisions will only temper,
not eliminate, the impact of expense increases on the performance of the
related Mortgage Loan. See "--Mortgage Loans -- Leases" above.
While the duration of leases and the existence of any "net of expense"
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities, the income
from which and the operating expenses of which are subject to state and/or
federal regulations, such as Medicare and Medicaid, and multifamily properties
and manufactured housing communities, which may be subject to state or local
rent control regulation and, in certain cases, restrictions on changes in use
of the property. Low- and moderate-income housing in particular may be subject
to legal limitations and regulations but, because of such regulations, may also
be less sensitive to fluctuations in market rents generally.
The Debt Service Coverage Ratio should not be relied upon as the sole
measure of the risk of default of any loan, however, since other factors may
outweigh a high Debt Service Coverage Ratio. With respect to a Balloon Mortgage
Loan, for example, the risk of default as a result of the unavailability of a
source of funds to finance the related balloon payment at maturity on terms
comparable to or better than those of such Balloon Mortgage Loans could be
significant even though the related Debt Service Coverage Ratio is high.
The liquidation value of any Mortgaged Property may be adversely affected
by risks generally incident to interests in real property, including declines
in rental or occupancy rates. Lenders generally use the Loan-to-Value Ratio
(defined below) of a mortgage loan as a measure of risk of loss if a property
must be liquidated upon a default by the Mortgagor. Where more than one of the
appraisal methods described in "--Loan-to-Value Ratio" below are used and
create significantly different results, or where a high Loan-to-Value Ratio
accompanies a high Debt Service Coverage Ratio (or vice versa), the analysis of
default and loss risks is even more difficult.
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While the Depositor believes that the foregoing considerations are
important factors that generally distinguish the Multifamily and Commercial
Loans from single family mortgage loans and provide insight to the risks
associated with income-producing real estate, there is no assurance that such
factors will in fact have been considered by the Originators of the Multifamily
and Commercial Loans, or that, for any of such Mortgage Loans, they are
complete or relevant. See "Risk Factors -- Risks Associated with Mortgage Loans
and Mortgaged Properties," " --Balloon Payments," " --Junior Mortgage Loans," "
- -Obligor Default" and " --Mortgagor Type."
Loan-to-Value Ratio
The "Loan-to-Value Ratio" of a Mortgage Loan at any given time is the
ratio (expressed as a percentage) of the then outstanding principal balance of
the Mortgage Loan to the Value of the related Mortgaged Property. The "Value"
of a Mortgaged Property, other than with respect to Refinance Loans, is
generally the lesser of (a) the appraised value determined in an appraisal
obtained by the originator at origination of such loan and (b) the sales price
for such property. "Refinance Loans" are loans made to refinance existing
loans. To the extent set forth in the related Prospectus Supplement, the Value
of the Mortgaged Property securing a Refinance Loan is the appraised value
thereof determined in an appraisal obtained at the time of origination of the
Refinance Loan. The Value of a Mortgaged Property as of the date of initial
issuance of the related Series of Certificates may be less than the value at
origination and will fluctuate from time to time based upon changes in economic
conditions and the real estate market.
Appraised values of income-producing properties may be based on the market
comparison method (recent resale value of comparable properties at the date of
the appraisal), the cost replacement method (the cost of replacing the property
at such date), the income capitalization method (a projection of value based
upon the property's projected net cash flow), or upon a selection from or
interpolation of the values derived from such methods. Each of these appraisal
methods presents analytical challenges. It is often difficult to find truly
comparable properties that have recently been sold; the replacement cost of a
property may have little to do with its current market value; and income
capitalization is inherently based on inexact projections of income and expense
and the selection of an appropriate capitalization rate.
Mortgage Loan Information in Prospectus Supplements
Each Prospectus Supplement will contain information, as of the date of
such Prospectus Supplement and to the extent then applicable and specifically
known to the Depositor, with respect to the Mortgage Loans, including (i) the
aggregate outstanding principal balance and the largest, smallest and average
outstanding principal balance of the Mortgage Loans as of the applicable
Cut-off Date, (ii) the type of property securing the Mortgage Loans (e.g.,
Multifamily Property or Commercial Property and the type of property in each
such category), (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 Interest Rates or range of
Mortgage Interest Rates and the weighted average Mortgage Interest Rate borne
by the Mortgage Loans, (vii) the state or states in which most of the Mortgaged
Properties are located, (viii) information with respect to the prepayment
provisions, if any, of the Mortgage Loans, (ix) the weighted average Retained
Interest, if any, (x) with respect to Mortgage Loans with floating Mortgage
Interest 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 Interest 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, (xi) the Debt Service Coverage Ratio
either at origination or as of a more recent date (or both) and (xii)
information regarding the payment characteristics of the Mortgage Loans,
including without limitation balloon payment and other amortization provisions.
The related Prospectus Supplement will also contain certain information
available to the Depositor with respect to the provisions of leases and the
nature of tenants of the Mortgaged Properties and other information referred to
in a general manner under "--Mortgage Loans -- Default and Loss Considerations
with Respect to the Mortgage Loans" above. If specific information respecting
the Mortgage Loans is not known to the Depositor at the time Certificates are
initially offered, more general information of the nature described above will
be provided in the Prospectus Supplement, and specific information will be set
forth in a report which will be available to purchasers of the related
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Certificates 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.
Payment Provisions of the Mortgage Loans
To the extent specified in the related Prospectus Supplement, all of the
Mortgage Loans will (i) have individual principal balances at origination of
not less than $100,000, (ii) have original terms to maturity of not more than
40 years and (iii) provide for payments of principal, interest or both, on due
dates that occur monthly, quarterly or semi-annually or at such other interval
as is specified in the related Prospectus Supplement. Each Mortgage Loan may
provide for no accrual of interest or for accrual of interest thereon at an
interest rate (a "Mortgage Interest Rate") that is fixed over its term or that
adjusts from time to time, or that is partially fixed and partially floating,
or that may be converted from a floating to a fixed Mortgage Interest Rate, or
from a fixed to a floating Mortgage Interest Rate, from time to time pursuant
to an election or as otherwise specified on the related Mortgage Note, in each
case as described in the related Prospectus Supplement. To the extent specified
in the related Prospectus Supplement, the documentation relating to certain
Mortgage Loans, (the "Hyper-Amortization Loans") may provide for increases in
the related Mortgage Interest Rate and principal amortization, creating an
incentive for the related Borrower to prepay the loan. Each Mortgage Loan may
provide for scheduled payments to maturity or payments that adjust from time to
time to accommodate changes in the Mortgage Interest Rate or to reflect the
occurrence of certain events, and may provide for negative amortization or
accelerated amortization, in each case as described in the related Prospectus
Supplement. Each Mortgage Loan may be fully amortizing or require a balloon
payment due on its stated maturity date, in each case as described in the
related Prospectus Supplement. To the extent specified in the related
Prospectus Supplement, the documentation relating to certain Mortgage Loans
(the "Hyper-Amortization Loans") may provide for increases in the related
Mortgage Interest Rate and principal amortization, creating an incentive for
the related borrower to prepay the loan. Each Mortgage Loan may contain
prohibitions on prepayment (a "Lock-out Period" and the date of expiration
thereof, a "Lock-out Date") or require payment of a premium or a yield
maintenance penalty (a "Prepayment Premium") in connection with a prepayment,
in each case as described in the related Prospectus Supplement. In the event
that holders of any class or classes of Offered Certificates 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. A Mortgage Loan may also contain
provisions entitling the mortgagee to a share of profits realized from the
operation or disposition of the Mortgaged Property ("Equity Participations"),
as described in the related Prospectus Supplement. In the event that holders of
any class or classes of Offered Certificates will be entitled to all or a
portion of an Equity Participation, the related Prospectus Supplement will
specify the terms and provisions of the Equity Participation and the method or
methods by which distributions in respect thereof will be allocated among such
Certificates. In addition, a Mortgage Loan may contain provisions allowing for
the substitution of certain securities for the Mortgaged Property securing the
related Mortgage Note upon the satisfaction of certain conditions set forth in
the related Pooling and Servicing Agreement.
CMBS
Any CMBS 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 "CMBS Agreement"). A seller (the "CMBS Issuer") and/or
servicer (the "CMBS Servicer") of the underlying Mortgage Loans (or Underlying
CMBS) will have entered into the CMBS Agreement with a trustee or a custodian
under the CMBS Agreement (the "CMBS Trustee"), if any, or with the original
purchaser of the interest in the underlying Mortgage Loans or CMBS evidenced by
the CMBS.
Distributions of any principal or interest, as applicable, will be made on
CMBS on the dates specified in the related Prospectus Supplement. The CMBS may
be issued in one or more classes with characteristics similar to the classes of
Certificates described in this Prospectus. Any principal or interest
distributions will be made on the CMBS by the CMBS Trustee or the CMBS
Servicer. The CMBS Issuer or the CMBS Servicer or another person specified in
the related Prospectus Supplement may have the right or obligation to
repurchase or substitute assets underlying the CMBS after a certain date or
under other circumstances specified in the related Prospectus Supplement.
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Enhancement in the form of reserve funds, subordination or other forms of
credit support similar to that described for the Certificates under
"Description of Credit Support" may be provided with respect to the CMBS. The
type, characteristics and amount of such credit support, if any, will be a
function of certain characteristics of the Mortgage Loans or Underlying CMBS
evidenced by or securing such CMBS and other factors and generally will have
been established for the CMBS on the basis of requirements of either any Rating
Agency that may have assigned a rating to the CMBS or the initial purchasers of
the CMBS.
The Prospectus Supplement for a Series of Certificates evidencing
interests in Mortgage Assets that include CMBS will specify, to the extent
available, (i) the aggregate approximate initial and outstanding principal
amount or notional amount, as applicable, and type of the CMBS to be included
in the Trust Fund, (ii) the original and remaining term to stated maturity of
the CMBS, if applicable, (iii) whether such CMBS is entitled only to interest
payments, only to principal payments or to both, (iv) the pass-through or bond
rate of the CMBS or formula for determining such rates, if any, (v) the
applicable payment provisions for the CMBS, including, but not limited to, any
priorities, payment schedules and subordination features, (vi) the CMBS Issuer,
CMBS Servicer and CMBS 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 CMBS or directly to such CMBS, (viii) the terms
on which the related Underlying Mortgage Loans or Underlying CMBS for such CMBS
or the CMBS may, or are required to, be purchased prior to their maturity, (ix)
the terms on which Mortgage Loans or Underlying CMBS may be substituted for
those originally underlying the CMBS, (x) the servicing fees payable under the
CMBS Agreement, (xi) to the extent available to the Depositor, the type of
information in respect of the Underlying Mortgage Loans described under
"--Mortgage Loans -- Mortgage Loan Information in Prospectus Supplements"
above, and the type of information in respect of the Underlying CMBS described
in this paragraph, (xii) the characteristics of any cash flow agreements that
are included as part of the trust fund evidenced or secured by the CMBS, (xiii)
whether the CMBS is in certificated form, book-entry form or held through a
depository such as The Depository Trust Company or the Participants Trust
Company and (xiv) whether any election will be made to treat all or a portion
of the assets included in the Trust Fund as a REMIC or a FASIT.
ACCOUNTS
Each Trust Fund will include one or more accounts established and
maintained on behalf of the Certificateholders 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 Mortgage Assets and other assets in
the Trust Fund. Such an account may be maintained as an interest bearing or a
non-interest bearing account, and funds held therein may be held as cash or
invested in certain short-term, investment grade obligations, in each case as
described in the related Prospectus Supplement. See "Description of the
Agreements -- Accounts -- Distribution Account" and "--Accounts -- 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 in the
related Trust Fund may be provided to one or more classes of Certificates in
the related Series in the form of subordination of one or more other classes of
Certificates in such Series or by one or more other types of credit support,
such as a letter of credit, insurance policy, guarantee, reserve fund or
another type of credit support, or a combination thereof (any such coverage
with respect to the Certificates of any Series, "Credit Support"). The amount
and types of coverage, the identification of the entity providing the coverage
(if applicable) and related information with respect to each type of Credit
Support, if any, will be described in the Prospectus Supplement for a Series of
Certificates. See "Risk Factors -- Credit Support Limitations" and "Description
of Credit Support."
CASH FLOW AGREEMENTS
If so provided in the related Prospectus Supplement, the Trust Fund may
include guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related Series will be invested at a
specified rate. The Trust Fund may also include certain other agreements, such
as interest rate exchange agreements, interest rate cap or floor agreements,
currency exchange
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agreements or similar agreements provided to reduce the effects of interest
rate or currency exchange rate fluctuations on the Mortgage Assets or on one or
more classes of Certificates. The principal terms of any such guaranteed
investment contract or other agreement (any such agreement, a "Cash Flow
Agreement"), including, without limitation, provisions relating to the timing,
manner and amount of payments thereunder and provisions relating to the
termination thereof, will be described in the Prospectus Supplement for the
related Series. In addition, the related Prospectus Supplement will provide
certain information with respect to the obligor under any such Cash Flow
Agreement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor to the purchase of Trust Assets and to pay for certain
expenses incurred in connection with such purchase of Trust Assets and sale of
Certificates. The Depositor expects to sell the Certificates from time to time,
but the timing and amount of offerings of Certificates will depend on a number
of factors, including the volume of Mortgage Assets acquired by the Depositor,
prevailing interest rates, availability of funds and general market conditions.
YIELD CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate, the receipt and
timing of receipt of distributions on the Certificate and the weighted average
life of the Mortgage Assets in the related Trust Fund (which may be affected by
prepayments, defaults, liquidations or repurchases). See "Risk Factors."
PASS-THROUGH RATE
Certificates of any class within a Series may have fixed, variable or
floating Pass-Through Rates, which may or may not be based upon the interest
rates borne by the Mortgage Assets in the related Trust Fund. The Prospectus
Supplement with respect to any Series of Certificates will specify the
Pass-Through Rate for each class of such Certificates or, in the case of a
variable or floating Pass-Through Rate, the method of determining the
Pass-Through Rate; the effect, if any, of the prepayment of any Mortgage Asset
on the Pass-Through Rate of one or more classes of Certificates; and whether
the distributions of interest on the Certificates 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 Certificates entitled to
payments of interest may be below that otherwise produced by the applicable
Pass-Through Rate and purchase price of such Certificate because, while
interest may accrue on each Mortgage Asset during a certain period, the
distribution of such interest will be made on a day which may be several days,
weeks or months following the period of accrual.
TIMING OF PAYMENT OF INTEREST
Each payment of interest on the Certificates (or addition to the
Certificate Balance of a class of Accrual Certificates) on a Distribution Date
will include interest accrued during the Interest Accrual Period for such
Distribution Date. As indicated above under "--Pass-Through 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 Certificates 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 Certificates may be calculated on the assumption that distributions
of principal (and additions to the Certificate Balance of Accrual Certificates)
and allocations of losses on the Mortgage 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 Certificates will be described in the related Prospectus
Supplement.
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PAYMENTS OF PRINCIPAL; PREPAYMENTS
The yield to maturity on the Certificates will be affected by the rate of
principal payments on the Mortgage Assets (including principal prepayments on
Mortgage Loans resulting from voluntary prepayments by the Mortgagors,
insurance proceeds, condemnations and involuntary liquidations). Such payments
may be directly dependent upon the payments on Leases underlying such Mortgage
Loans. The rate at which principal prepayments occur on the Mortgage Loans 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 Interest Rates on the Mortgage Loans comprising or
underlying the Mortgage Assets in a particular Trust Fund, such Mortgage Loans
are likely to be the subject of higher principal prepayments than if prevailing
rates remain at or above the rates borne by such Mortgage Loans. In this
regard, it should be noted that certain Mortgage Assets may consist of Mortgage
Loans with different Mortgage Interest Rates and the stated pass-through or
pay-through interest rate of certain CMBS 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 Certificates of a Series
will correspond to the rate of principal payments on the Mortgage Assets in the
related Trust Fund and is likely to be affected by the existence of Lock-out
Periods and Prepayment Premium provisions of the Mortgage Loans underlying or
comprising such Mortgage Assets, and by the extent to which the servicer of any
such Mortgage Loan is able to enforce such provisions. Mortgage Loans with a
Lock-out Period or a Prepayment Premium provision, to the extent enforceable,
generally would be expected to experience a lower rate of principal prepayments
than otherwise identical Mortgage Loans without such provisions, with shorter
Lock-out Periods or with lower Prepayment Premiums.
If the purchaser of a Certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Mortgage Assets,
the actual yield to maturity will be lower than that so calculated. Conversely,
if the purchaser of a Certificate offered at a premium calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is slower than that actually experienced on the Mortgage Assets,
the actual yield to maturity will be lower than that so calculated. In either
case, if so provided in the Prospectus Supplement for a Series of Certificates,
the effect on yield on one or more classes of the Certificates of such Series
of prepayments of the Mortgage Assets in the related Trust Fund may be
mitigated or exacerbated by any provisions for sequential or selective
distribution of principal to such classes.
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. To the extent specified in the related Prospectus Supplement, the
effect of prepayments in full will be to reduce the amount of interest paid in
the following month to holders of Certificates 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. To the
extent specified in the related Prospectus Supplement, 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, to the extent specified in the related
Prospectus Supplement, the effect of a partial prepayment on a Mortgage Loan
will be to reduce the amount of interest passed through to holders of
Certificates 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 on
the prepaid amount.
The timing of changes in the rate of principal payments on the Mortgage
Assets may significantly affect an investor's actual yield to maturity, even if
the average rate of distributions of principal is consistent with an investor's
expectation. In general, the earlier a principal payment is received on the
Mortgage Assets and distributed on a Certificate, 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.
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PREPAYMENTS--MATURITY AND WEIGHTED AVERAGE LIFE
The rates at which principal payments are received on the Mortgage Assets
included in or comprising a Trust Fund and the rate at which payments are made
from any Credit Support or Cash Flow Agreement for the related Series of
Certificates may affect the ultimate maturity and the weighted average life of
each class of such Series. Prepayments on the Mortgage Loans comprising or
underlying the Mortgage Assets in a particular Trust Fund will generally
accelerate the rate at which principal is paid on some or all of the classes of
the Certificates of the related Series.
If so provided in the Prospectus Supplement for a Series of Certificates,
one or more classes of Certificates may have a final scheduled Distribution
Date, which is the date on or prior to which the Certificate Balance thereof is
scheduled to be reduced to zero, calculated on the basis of the assumptions
applicable to such Series set forth therein.
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. The weighted average life of a
class of Certificates of a Series will be influenced by the rate at which
principal on the Mortgage Loans comprising or underlying the Mortgage Assets is
paid to such class, which may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayment" includes prepayments, in
whole or in part, and liquidations due to default).
In addition, the weighted average life of the Certificates may be affected
by the varying maturities of the Mortgage Loans comprising or underlying the
CMBS. If any Mortgage Loans comprising or underlying the Mortgage Assets in a
particular Trust Fund have actual terms to maturity of less than those assumed
in calculating final scheduled Distribution Dates for the classes of
Certificates of the related Series, one or more classes of such Certificates
may be fully paid prior to their respective final scheduled Distribution Dates,
even in the absence of prepayments. Accordingly, the prepayment experience of
the Mortgage Assets will, to some extent, be a function of the mix of Mortgage
Interest Rates and maturities of the Mortgage Loans comprising or underlying
such Mortgage Assets. See "Description of the Trust Funds."
Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment
model. 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.
Neither CPR 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 underlying or comprising the Mortgage Assets. Moreover, CPR was developed
based upon historical prepayment experience for single family loans. Thus, it
is likely that prepayment of any Mortgage Loans comprising or underlying the
Mortgage Assets for any Series will not conform to any particular level of CPR.
The Depositor is not aware of any meaningful publicly available prepayment
statistics for multifamily or commercial mortgage loans.
The Prospectus Supplement with respect to each Series of Certificates will
contain tables, if applicable, setting forth the projected weighted average
life of each class of Offered Certificates of such Series and the percentage of
the initial Certificate Balance of each such class that would be outstanding on
specified Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions that prepayments on the Mortgage Loans
comprising or underlying the related Mortgage Assets are made at rates
corresponding to various percentages of CPR 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 Certificates 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 Certificates. It is unlikely that prepayment of any Mortgage Loans
comprising or underlying the Mortgage Assets for any Series will conform to any
particular level of CPR or any other rate specified in the related Prospectus
Supplement.
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OTHER FACTS AFFECTING WEIGHTED AVERAGE LIFE
Type of Mortgage Asset
A number of Mortgage Loans may have balloon payments due at maturity, and
because the ability of a Mortgagor to make a balloon payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that a number of Mortgage Loans having
balloon payments may default at maturity, or that the servicer may extend the
maturity of such a Mortgage Loan in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things,
bankruptcy of the Mortgagor or adverse conditions in the market where the
property is located. In order to minimize losses on defaulted Mortgage Loans,
the servicer may, to the extent and under the circumstances set forth in the
related Prospectus Supplement, be permitted to modify Mortgage Loans that are
in default or as to which a payment default is imminent. Any defaulted balloon
payment or modification that extends the maturity of a Mortgage Loan will tend
to extend the weighted average life of the Certificates, thereby lengthening
the period of time elapsed from the date of issuance of a Certificate until it
is retired. Conversely, Mortgage Loans (the "Hyper-Amortization Loans") that
permit increases in the Mortgage Interest Rate and principal amortization at a
date prior to stated maturity (the "Hyper-Amortization Date") create an
incentive for the related borrower to prepay the loan, which will tend to
shorten the weighted average life of the Certificates to the extent an
investor's calculation of the weighted average life of the Certificates does
not assume prepayment of such loans on the related Hyper-Amortization Date.
Foreclosures and Payment Plans
The number of foreclosures and the principal amount of the Mortgage Loans
comprising or underlying the Mortgage Assets 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
comprising or underlying the Mortgage Assets and that of the related Series of
Certificates. Servicing decisions made with respect to the Mortgage Loans,
including the use of payment plans prior to a demand for acceleration and the
restructuring of Mortgage Loans in bankruptcy proceedings, may also have an
effect upon the payment patterns of particular Mortgage Loans and thus the
weighted average life of the Certificates.
Due-on-Sale and Due-on-Encumbrance Clauses
Acceleration of mortgage payments as a result of certain transfers of or
the creation of encumbrances upon underlying Mortgaged Property is another
factor affecting prepayment rates that may not be reflected in the prepayment
standards or models used in the relevant Prospectus Supplement. A number of the
Mortgage Loans comprising or underlying the Mortgage Assets may include
"due-on-sale" clauses or "due-on-encumbrance" clauses that allow the holder of
the Mortgage Loans to demand payment in full of the remaining principal balance
of the Mortgage Loans upon sale or certain other transfers of or the creation
of encumbrances upon the related Mortgaged Property. With respect to any Whole
Loans, to the extent provided in the related Prospectus Supplement, the Master
Servicer, on behalf of the Trust Fund, will be required to exercise (or waive
its right to exercise) any such right that the Trustee may have as mortgagee to
accelerate payment of the Whole Loan in a manner consistent with the Servicing
Standard. See "Certain Legal Aspects of the Mortgage Loans and the Leases --
Due-on-Sale and Due-on-Encumbrance" and "Description of the Agreements --
Due-on-Sale and Due-on -Encumbrance Provisions."
Single Mortgage Loan or Single Mortgagor
The Mortgage Assets in a particular Trust Fund may consist of a single
Mortgage Loan or obligations of a single Mortgagor or related Mortgagors as
specified in the related Prospectus Supplement. Assumptions used with respect
to the prepayment standards or models based upon analysis of the behavior of
mortgage loans in a larger group will not necessarily be relevant in
determining prepayment experience on a single Mortgage Loan or with respect to
a single Mortgagor.
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THE DEPOSITOR
Heller Financial Commercial Mortgage Asset Corp., the Depositor, is a
direct wholly-owned subsidiary of Heller Financial, Inc. and was incorporated
in the State of Delaware on January 7, 1998. The principal executive offices of
the Depositor are located at 500 West Monroe Street, Chicago, Illinois 60661.
Its telephone number is (312) 441-7000.
The Depositor does not have, nor is it expected in the future to have,
any significant assets.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates of each Series (including any class of Certificates not
offered hereby) will represent the entire beneficial ownership interest in the
Trust Fund created pursuant to the related Agreement. Each Series of
Certificates will consist of one or more classes of Certificates that may (i)
provide for the accrual of interest thereon based on fixed, variable or
floating rates; (ii) be senior (collectively, "Senior Certificates") or
subordinate (collectively, "Subordinate Certificates") to one or more other
classes of Certificates in respect of certain distributions on the
Certificates; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions (collectively,
"Stripped Principal Certificates"); (iv) be entitled to interest distributions,
with disproportionately low, nominal or no principal distributions
(collectively, "Stripped Interest Certificates"); (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 Certificates of
such Series (collectively, "Accrual Certificates"); (vi) provide for payments
of principal sequentially, based on specified payment schedules, from only a
portion of the Trust Assets in such Trust Fund or based on specified
calculations, to the extent of available funds, in each case as described in
the related Prospectus Supplement; and/or (vii) provide for distributions based
on a combination of two or more components thereof with one or more of the
characteristics described in this paragraph including a Stripped Principal
Certificate component and a Stripped Interest Certificate component. Any such
classes may include classes of Offered Certificates.
Each class of Offered Certificates of a Series will be issued in minimum
denominations corresponding to the Certificate Balances or, in case of Stripped
Interest Certificates, notional amounts or percentage interests specified in
the related Prospectus Supplement. The transfer of any Offered Certificates may
be registered and such Certificates 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 Certificates of a Series may be issued in definitive form
("Definitive Certificates") or in book-entry form ("Book-Entry Certificates"),
as provided in the related Prospectus Supplement. See "Risk Factors --
Book-Entry Registration" and "Description of the Certificates -- Book-Entry
Registration and Definitive Certificates." Definitive Certificates will be
exchangeable for other Certificates of the same class and Series of a like
aggregate Certificate Balance, notional amount or percentage interest but of
different authorized denominations. See "Risk Factors -- Limited Liquidity" and
"--Limited Assets."
DISTRIBUTIONS
Distributions on the Certificates of each Series will be made by or on
behalf of the Trustee on each Distribution Date as specified in the related
Prospectus Supplement from the Available Distribution Amount for such Series
and such Distribution Date. Except as otherwise specified in the related
Prospectus Supplement, distributions (other than the final distribution) will
be made to the persons in whose names the Certificates 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 Certificates on each Distribution
Date will be allocated pro rata among the outstanding
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Certificates in such class or by random selection, as described in the related
Prospectus Supplement or otherwise established by the related Trustee. Payments
will be made either by wire transfer in immediately available funds to the
account of a Certificateholder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder 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 Certificates in the requisite amount specified
therein), or by check mailed to the address of the person entitled thereto as
it appears on the Certificate Register; provided, however, that the final
distribution in retirement of the Certificates (whether Definitive Certificates
or Book-Entry Certificates) will be made only upon presentation and surrender
of the Certificates at the location specified in the notice to
Certificateholders of such final distribution.
AVAILABLE DISTRIBUTION AMOUNT
All distributions on the Certificates of each Series on each Distribution
Date will be made from the Available Distribution Amount described below, in
accordance with the terms described in the related Prospectus Supplement.
Unless provided otherwise in the related Prospectus Supplement, the "Available
Distribution Amount" for each Distribution Date equals the sum of the following
amounts:
(i) the total amount of all cash on deposit in the related
Distribution Account as of the corresponding Determination Date, including
Servicer advances, net of any scheduled payments due and payable after such
Distribution Date;
(ii) interest or investment income on amounts on deposit in the
Distribution Account, including any net amounts paid under any Cash Flow
Agreements; and
(iii) to the extent not on deposit in the related Distribution Account
as of the corresponding Determination Date, any amounts collected under, from
or in respect of any Credit Support with respect to such Distribution Date.
As described below, the entire Available Distribution Amount will be
distributed among the related Certificates (including any Certificates not
offered hereby) on each Distribution Date, and accordingly will be released
from the Trust Fund and will not be available for any future distributions.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates (other than classes of Stripped Principal
Certificates that have no Pass-Through Rate) may have a different Pass-Through
Rate, which will be a fixed, variable or floating rate at which interest will
accrue on such class or a component thereof (the "Pass-Through Rate"). The
related Prospectus Supplement will specify the Pass-Through Rate for each class
or component or, in the case of a variable or floating Pass-Through Rate, the
method for determining the Pass-Through Rate. To the extent specified in the
related Prospectus Supplement, interest on the Certificates will be calculated
on the basis of a 360-day year consisting of twelve 30-day months.
Distributions of interest in respect of the Certificates of any class will
be made on each Distribution Date (other than any class of Accrual
Certificates, 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
Certificates that are not entitled to any distributions of interest) based on
the Accrued Certificate 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 Certificates, the amount of Accrued
Certificate Interest otherwise distributable on such class will be added to the
Certificate Balance thereof on each Distribution Date. With respect to each
class of Certificates and each Distribution Date (other than certain classes of
Stripped Interest Certificates), "Accrued Certificate Interest" will be equal
to interest accrued for a specified period on the outstanding Certificate
Balance thereof
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immediately prior to the Distribution Date, at the applicable Pass-Through
Rate, reduced as described below. To the extent provided in the Prospectus
Supplement, Accrued Certificate Interest on Stripped Interest Certificates 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, reduced as described below. The method of determining the
notional amount for any class of Stripped Interest Certificates 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. To the extent provided in the
related Prospectus Supplement, the Accrued Certificate Interest on a Series of
Certificates 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 Mortgage 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 Certificates of that Series will
be specified in the related Prospectus Supplement.
The related Prospectus Supplement will also describe the extent to which
the amount of Accrued Certificate Interest that is otherwise distributable on
(or, in the case of Accrual Certificates, that may otherwise be added to the
Certificate Balance of) a class of Offered Certificates 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
Mortgage Assets in the related Trust Fund. To the extent provided in the
related Prospectus Supplement, any reduction in the amount of Accrued
Certificate Interest otherwise distributable on a class of Certificates by
reason of the allocation to such class of a portion of any deferred interest on
the Mortgage Loans comprising or underlying the Mortgage Assets in the related
Trust Fund will result in a corresponding increase in the Certificate Balance
of such class. See " Risk Factors -- Prepayments and Effect on Average Life of
Certificates and Yields" and "Yield Considerations."
DISTRIBUTIONS OF PRINCIPAL CERTIFICATES
The Certificates of each Series, other than certain classes of Stripped
Interest Certificates, will have a "Certificate 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 Mortgage Assets and
other assets included in the related Trust Fund. The outstanding Certificate
Balance of a Certificate 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 Mortgage Assets, may be increased in respect of deferred
interest on the related Mortgage Loans to the extent provided in the related
Prospectus Supplement and, in the case of Accrual Certificates prior to the
Distribution Date on which distributions of interest are required to commence,
will be increased by any related Accrued Certificate Interest. Unless otherwise
provided in the related Prospectus Supplement, the initial aggregate
Certificate Balance of all classes of Certificates of a Series will not be
greater than the outstanding aggregate principal balance of the related
Mortgage Assets as of the applicable Cut-off Date. The initial aggregate
Certificate Balance of a Series and each class thereof will be specified in the
related Prospectus Supplement. To the extent provided in the related Prospectus
Supplement, distributions of principal will be made on each Distribution Date
to the class or classes of Certificates entitled thereto in accordance with the
provisions described in such Prospectus Supplement until the Certificate
Balance of such class has been reduced to zero. Stripped Interest Certificates
with no Certificate Balance are not entitled to any distributions of principal.
COMPONENTS
To the extent specified in the related Prospectus Supplement, distribution
on a class of Certificates 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 on the Certificates"
and "--Distributions of Principal of the Certificates" above also relate to
components of such a class of Certificates. In such case, reference in such
sections to Certificate Balance and Pass-Through Rate refer to the principal
balance, if any, of any such component and the Pass- Through Rate, if any, on
any such component, respectively.
DISTRIBUTIONS ON THE CERTIFICATES OF PREPAYMENT PREMIUMS OR IN RESPECT OF
EQUITY PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment Premiums
or payments in respect of Equity Participations that are collected on the
Mortgage Assets in the related Trust Fund will be distributed on each
Distribution Date to the class or classes of Certificates entitled thereto in
accordance with the provisions described in such Prospectus Supplement.
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ALLOCATION OF LOSSES AND SHORTFALLS
If so provided in the Prospectus Supplement for a Series of Certificates
consisting of one or more classes of Subordinate Certificates, on any
Distribution Date in respect of which losses or shortfalls in collections on
the Mortgage Assets have been incurred, the amount of such losses or shortfalls
will be borne first by a class of Subordinate Certificates 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 shortfalls on Mortgage Assets comprising
such Trust Fund.
ADVANCES IN RESPECT OF DELINQUENCIES
With respect to any Series of Certificates evidencing an interest in a
Trust Fund, to the extent provided in the related Prospectus Supplement, a
Servicer or another entity described therein will be required as part of its
servicing responsibilities to advance on or before each Distribution Date its
own funds or funds held in the Distribution Account that are not included in
the Available Distribution Amount for such Distribution Date, 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 Whole Loans in such Trust Fund and were delinquent on the
related Determination Date, subject to such Servicer's (or another entity's)
good faith determination that such advances will be reimbursable from Related
Proceeds (as defined below). In the case of a Series of Certificates that
includes one or more classes of Subordinate Certificates and if so provided in
the related Prospectus Supplement, each Servicer's (or another entity's)
advance obligation may be limited only to the portion of such delinquencies
necessary to make the required distributions on one or more classes of Senior
Certificates and/or may be subject to such Servicer's (or another entity's)
good faith determination that such advances will be reimbursable not only from
Related Proceeds but also from collections on other Trust Assets otherwise
distributable on one or more classes of such Subordinate Certificates. See
"Description of Credit Support."
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. To the extent
provided in the related Prospectus Supplement, advances of a Servicer's (or
another entity's) funds will be reimbursable only out of related recoveries on
the Mortgage Loans (including amounts received under any form of Credit
Support) respecting which such advances were made (as to any Mortgage Loan,
"Related Proceeds") and, if so provided in the Prospectus Supplement, out of
any amounts otherwise distributable on one or more classes of Subordinate
Certificates of such Series; provided, however, that any such advance will be
reimbursable from any amounts in the Distribution Account prior to any
distributions being made on the Certificates to the extent that a Servicer (or
such other entity) shall determine in good faith that such advance (a
"Nonrecoverable Advance") is not ultimately recoverable from Related Proceeds
or, if applicable, from collections on other Trust Assets otherwise
distributable on such Subordinate Certificates. If advances have been made by a
Servicer from excess funds in the Distribution Account, such Servicer is
required to replace such funds in the Distribution Account on any future
Distribution Date to the extent that funds in the Distribution Account on such
Distribution Date are less than payments required to be made to
Certificateholders on such date. If so specified in the related Prospectus
Supplement, the obligations of a 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.
If and to the extent so provided in the related Prospectus Supplement, a
Servicer (or another entity) will be entitled to receive interest at the rate
specified therein on its outstanding advances and will be entitled to pay
itself such interest periodically from general collections on the Trust Assets
prior to any payment to Certificateholders or as otherwise provided in the
related Agreement and described in such Prospectus Supplement. The Prospectus
Supplement for any Series of Certificates evidencing an interest in a Trust
Fund that includes CMBS will describe any corresponding advancing obligation of
any person in connection with such CMBS.
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REPORTS TO CERTIFICATEHOLDERS
To the extent provided in the Prospectus Supplement, with each
distribution to holders of any class of Certificates of a Series, the Master
Servicer or the Trustee, as provided in the related Prospectus Supplement, will
forward or cause to be forwarded to each such holder, to the Depositor and to
such other parties as may be specified in the related Agreement, a statement
setting forth, in each case to the extent applicable and available:
(i) the amount of such distribution to holders of Certificates of such
class applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of Certificates of such
class allocable to Accrued Certificate Interest;
(iii) the amount of such distribution allocable to (a) Prepayment Premiums
and (b) payments on account of Equity Participations;
(iv) the amount of related servicing compensation received by each Servicer
and such other customary information as any such Master Servicer or the
Trustee deems necessary or desirable, or that a Certificateholder
reasonably requests, to enable Certificateholders to prepare their tax
returns;
(v) the aggregate amount of advances included in such distribution, and the
aggregate amount of any unreimbursed advances at the close of business on
such Distribution Date;
(vi) the aggregate principal balance of the Mortgage Assets at the close of
business on such Distribution Date;
(vii) the number and aggregate principal balance of Whole Loans 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 each Whole Loan that is delinquent two or more
months, (a) the loan number thereof, (b) the unpaid balance thereof, (c)
whether the delinquency is in respect of any balloon payment, (d) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof, (e) if applicable, the aggregate amount of any
interest accrued and payable on related servicing expenses and related
advances assuming such Mortgage Loan is subsequently liquidated through
foreclosure, (f) whether a notice of acceleration has been sent to the
Mortgagor and, if so, the date of such notice, (g) whether foreclosure
proceedings have been commenced and, if so, the date so commenced and (h)
if such Mortgage Loan is more than three months delinquent and foreclosure
has not been commenced, the reason therefor;
(ix) with respect to any Whole Loan liquidated during the related Due
Period (other than by payment in full), (a) the loan number thereof, (b)
the manner in which it was liquidated and (c) the aggregate amount of
liquidation proceeds received;
(x) with respect to any Whole Loan liquidated during the related Due
Period, (a) the portion of such liquidation proceeds payable or
reimbursable to each Servicer (or any other entity) in respect of such
Mortgage Loan and (b) the amount of any loss to Certificateholders;
(xi) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Due Period, (a) the
loan number of the related Mortgage Loan and (b) the date of acquisition;
(xii) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Due Period, (a) the
book value, (b) the principal balance of the related Mortgage Loan
immediately following such Distribution Date (calculated as if such
Mortgage Loan were still outstanding
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taking into account certain limited modifications to the terms thereof
specified in the Agreement), (c) the aggregate amount of unreimbursed
servicing expenses and unreimbursed advances in respect thereof and (d) if
applicable, the aggregate amount of interest accrued and payable on related
servicing expenses and related advances;
(xiii) with respect to any such REO Property sold during the related Due
Period (a) the loan number of the related Mortgage Loan, (b) the aggregate
amount of sale proceeds, (c) the portion of such sales proceeds payable or
reimbursable to each Servicer in respect of such REO Property or the
related Mortgage Loan and (d) the amount of any loss to Certificateholders
in respect of the related Mortgage Loan;
(xiv) the aggregate Certificate Balance or notional amount, as the case may
be, of each class of Certificates (including any class of Certificates not
offered hereby) at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance due to the
allocation of any loss and increase in the Certificate Balance of a class
of Accrual Certificates in the event that Accrued Certificate Interest has
been added to such balance;
(xv) the aggregate amount of principal prepayments made during the related
Due Period;
(xvi) the aggregate Accrued Certificate Interest and unpaid Accrued
Certificate Interest, if any, on each class of Certificates at the close of
business on such Distribution Date;
(xvii) in the case of Certificates with a variable Pass-Through Rate, the
Pass-Through 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;
(xviii) in the case of Certificates with a floating Pass-Through Rate, for
statements to be distributed in any month in which an adjustment date
occurs, the floating Pass-Through 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;
(xix) as to any Series which includes Credit Support, the amount of
coverage of each instrument of Credit Support included therein as of the
close of business on such Distribution Date; and
(xx) 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.
In the case of information furnished pursuant to subclauses (i)-(iv)
above, the amounts shall be expressed as a dollar amount per minimum
denomination of Certificates or for such other specified portion thereof. In
addition, in the case of information furnished pursuant to subclauses (i),
(ii), (xiv), (xvi) and (xvii) above, such amounts shall also be provided with
respect to each component, if any, of a class of Certificates. The Master
Servicer or the Trustee, as specified in the related Prospectus Supplement,
will forward or cause to be forwarded to each holder of any class of
Certificates, 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 CMBS. The
Prospectus Supplement for each Series of Offered Certificates will describe any
additional information to be included in reports to the holders of such
Certificates.
Within a reasonable period of time after the end of each calendar year,
the Master Servicer or the Trustee, as provided in the related Prospectus
Supplement, shall furnish to each person who at any time during the calendar
year was a holder of a Certificate a statement containing the information set
forth in subclauses (i)-(iv) above, aggregated for such calendar year or the
applicable portion thereof during which such person was a Certificateholder.
Such obligation of the Master Servicer or the Trustee shall be deemed to have
been satisfied to the extent that substantially comparable information shall be
provided by the Master Servicer or the Trustee pursuant to any requirements of
the Code as are from time to time in force.
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Unless and until Definitive Certificates are issued, or to the extent
provided in the related Prospectus Supplement, such statements or reports will
be forwarded by the Master Servicer or the Trustee to Cede. Such statements or
reports may be available to Beneficial Owners upon request to DTC or their
respective Participant or Indirect Participant. In addition, the Trustee shall
furnish a copy of any such statement or report to any Beneficial Owner which
requests such copy and certifies to the Trustee or the Master Servicer, as
applicable, that it is the Beneficial Owner of a Certificate. See "--Book-Entry
Registration and Definitive Certificates."
TERMINATION
The obligations created by the Agreements for each Series of Certificates
will terminate upon the payment to Certificateholders of that Series of all
amounts held in the Distribution Account or by any Servicer, if any, or the
Trustee and required to be paid to them pursuant to such Agreements following
the earlier of (i) the final payment or other liquidation of the last Mortgage
Asset subject thereto or the disposition of all property acquired upon
foreclosure of any Whole Loan subject thereto and (ii) the purchase of all of
the assets of the Trust Fund by the party entitled to effect such termination,
under the circumstances and in the manner set forth in the related Prospectus
Supplement. In no event, however, will the trust created by the Agreements
continue beyond the date specified in the related Prospectus Supplement.
Written notice of termination of the Agreements will be given to each
Certificateholder, and the final distribution will be made only upon
presentation and surrender of the Certificates at the location to be specified
in the notice of termination.
If so specified in the related Prospectus Supplement, a Series of
Certificates 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
Certificate Balance of a specified class or classes of Certificates by a
specified percentage or amount, the party specified therein will solicit bids
for the purchase of all assets of the Trust Fund, or of a sufficient portion of
such assets to retire such class or classes or purchase such class or classes
at a price set forth in the related Prospectus Supplement, in each case, under
the circumstances and in the manner set forth therein. In such an event, the
applicable purchase price will be sufficient to pay the aggregate Certificate
Balance and any undistributed shortfall in interest of such class or classes of
Certificates. Further, in such an event, there will be no continuing direct or
indirect liability of the related trust or Certificateholders as sellers of
such assets in connection with any such sale.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the related Prospectus Supplement, one or more classes
of the Offered Certificates of any Series will be issued as Book-Entry
Certificates, and each such class will be represented by one or more single
Certificates registered in the name of a nominee for the depository, The
Depository Trust Company ("DTC").
If so provided in the related Prospectus Supplement, holders of Book-Entry
Certificates may hold their Certificates through DTC (in the United States) or
CEDEL or Euroclear (in Europe) if they are Participants of such system, or
indirectly through organizations that are participants in such systems. CEDEL
and Euroclear will hold omnibus positions on behalf of the CEDEL Participants
and the Euroclear Participants, respectively, through customers' securities
accounts in CEDEL's and Euroclear's names on the books of their respective
depositories (collectively, the "Depositaries"), which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC. DTC is a limited purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the Uniform Commercial Code (the "UCC") and a "clearing
agency" registered pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities for its Participants and
to facilitate the clearance and settlement of securities transactions through
electronic computerized book-entries, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers,
banks, trust companies and clearing corporations. Indirect access to the DTC
system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
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Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between CEDEL Participants and Euroclear Participants will
occur in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through CEDEL Participants or
Euroclear Participants, on the other, will be effected in DTC in accordance
with DTC rules on behalf of the relevant European international clearing system
by its Depositary; however, such cross-market transactions will require
delivery of instructions to the relevant European international clearing system
by the counterparty in such system in accordance with its rules and procedures
and within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC,
and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing day, dated the business
day following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the relevant
CEDEL Participant or Euroclear Participant on such business day. Cash received
in CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the business day following
settlement in DTC.
The beneficial owners of Book-Entry Certificates that are not Participants
or Indirect Participants but desire to purchase, sell or otherwise transfer
ownership of, or other interest in, Book-Entry Certificates may do so only
through Participants and Indirect Participants. In addition, beneficial owners
of Book-Entry Certificates will receive all distributions of principal and
interest from the Trustee through the Participants who in turn will receive
them from DTC. Under a book-entry format, beneficial owners of Book-Entry
Certificates may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to Cede & Co., ("Cede") as nominee
for DTC. DTC will forward such payments to its Participants, which thereafter
will forward them to Indirect Participants or beneficial owners of Book-Entry
Certificates.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Book-Entry Certificates among Participants on whose behalf it acts with respect
to the Book-Entry Certificates and to receive and transmit distributions of
principal of, and interest on, the Book-Entry Certificates. Participants and
Indirect Participants with which the beneficial owners of Book-Entry
Certificates have accounts with respect to the Book-Entry Certificates
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective beneficial owners of Book-Entry
Certificates. Accordingly, although the beneficial owners of Book-Entry
Certificates will not possess the Book-Entry Certificates, the Rules provide a
mechanism by which Participants will receive payments on Book-Entry
Certificates and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants, the ability of a holder of Book-Entry
Certificates to pledge such Certificates to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a beneficial owner of a Book-Entry Certificate under the Pooling and
Servicing Agreement only at the direction of one or more Participants to whose
accounts with DTC the Book-Entry Certificates are credited. DTC may take
conflicting actions with respect to other undivided interests to the extent
that such actions are taken on behalf of Participants whose holdings include
such undivided interests.
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Except as required by law, none of the Depositor, the Master Servicer, the
Trustee or the Fiscal Agent will have any liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Book-Entry Certificates held by Cede, as nominee for DTC, or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes
in accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. CEDEL provides to its CEDEL Participants, among other
things, services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. CEDEL
interfaces with domestic markets in several countries. As a professional
depositary, CEDEL is subject to regulation by the Luxembourg Monetary
Institute. CEDEL Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the underwriters. Indirect access to CEDEL is also available to others,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a CEDEL Participant, either directly or
indirectly.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear system ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. The Euroclear system includes various other services,
including securities lending and borrowing and interfaces with domestic markets
in several countries generally similar to the arrangements for cross-market
transfers with DTC described above. Euroclear is operated by Morgan Guaranty
Trust Company of New York, Brussels office (the "Euroclear Operator"), under
contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear system on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries.
Indirect access to the Euroclear system is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
The information contained herein concerning DTC, CEDEL and Euroclear and
their book-entry systems has been obtained from sources believed to be
reliable, but none of the Depositor, the Master Servicer, the Trustee or the
Fiscal Agent take any responsibility for the accuracy or completeness thereof.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form to Beneficial Owners or their nominees
("Definitive Certificates"), 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
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 Certificates for the Beneficial Owners.
Upon surrender by DTC of the certificate or certificates representing the
Book-Entry Certificates, together with instructions for reregistration, the
Trustee will issue (or cause to be issued) to the Beneficial Owners identified
in such instructions the Definitive Certificates to which they are entitled,
and thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Agreement.
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DESCRIPTION OF THE AGREEMENTS
The Certificates of each Series evidencing interests in a Trust Fund
including Whole Loans will be issued pursuant to a Pooling and Servicing
Agreement among the Depositor, a Master Servicer, if specified in the related
Prospectus Supplement, a Special Servicer and the Trustee. The Certificates of
each Series evidencing interests in a Trust Fund not including Whole Loans will
be issued pursuant to a Trust Agreement between the Depositor and a Trustee.
The Master Servicer, any Special Servicer and the Trustee with respect to any
Series of Certificates will be named in the related Prospectus Supplement. In
lieu of appointing a Master Servicer, a servicer may be appointed pursuant to
the Pooling and Servicing Agreement for any Trust Fund. The Mortgage Loans
shall be serviced pursuant to the terms of the Pooling and Servicing Agreement.
A manager or administrator may be appointed pursuant to the Trust Agreement for
any Trust Fund to administer such Trust Fund. The provisions of each Agreement
will vary depending upon the nature of the Certificates to be issued thereunder
and the nature of the related Trust Fund. A form of a Pooling and Servicing
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. Any Trust Agreement will generally conform to the
form of Pooling and Servicing Agreement filed herewith, but will not contain
provisions with respect to the servicing and maintenance of Whole Loans. The
following summaries describe certain provisions that may appear in each
Agreement. The Prospectus Supplement for a Series of Certificates will describe
any provision of the Agreements relating to such Series that materially differs
from the description thereof contained in this Prospectus. The summaries do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Agreements 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 "Certificate" refers to all of
the Certificates of that Series, whether or not offered hereby and by the
related Prospectus Supplement, unless the context otherwise requires. The
Depositor will provide a copy of the Agreements (without exhibits) relating to
any Series of Certificates without charge upon written request of a holder of a
Certificate of such Series addressed to the Trustee specified in the related
Prospectus Supplement.
ASSIGNMENT OF ASSETS, REPURCHASES
At the time of issuance of any Series of Certificates, the Depositor will
assign (or cause to be assigned) to the designated Trustee the Trust Assets to
be included in the related Trust Fund, 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 Certificates to the Depositor in exchange for the Trust
Assets and the other assets comprising the Trust Fund for such Series. Each
Mortgage Asset will be identified in a schedule appearing as an exhibit to the
related Agreement. To the extent provided in the related Prospectus Supplement,
such schedule will include detailed information (i) in respect of each Whole
Loan included in the related Trust Fund, including without limitation, the
address of the related Mortgaged Property and type of such property, the
Mortgage Interest Rate and, if applicable, the applicable index, margin,
adjustment date and any rate cap information, the original and remaining term
to maturity, the original and outstanding principal balance and balloon
payment, if any, the Value, Loan-to-Value Ratio and the Debt Service Coverage
Ratio as of the date indicated and payment and prepayment provisions, if
applicable, and (ii) in respect of each CMBS included in the related Trust
Fund, including without limitation, the CMBS Issuer, CMBS Servicer and CMBS
Trustee, the pass-through or bond rate or formula for determining such rate,
the issue date and original and remaining term to maturity, if applicable, the
original and outstanding principal amount and payment provisions, if
applicable.
With respect to each Whole Loan, the Depositor will deliver or cause to be
delivered to the Trustee (or to the custodian hereinafter referred to) certain
loan documents, which to the extent specified in the related Prospectus
Supplement will include the original Mortgage Note endorsed, without recourse,
in blank or to the order of the Trustee, the original Mortgage (or a 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 Company 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. To the extent provided
in the
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related Prospectus Supplement, the related Agreements will require that the
Depositor or another party specified therein 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 Whole Loan against the claim of any subsequent
transferee or any successor to or creditor of the Depositor, the Master
Servicer, the relevant Asset Seller or any other prior holder of the Whole
Loan.
The Trustee (or a custodian) will review such Whole 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
Certificateholders. To the extent specified in the related Prospectus
Supplement, if any such document is found to be missing or defective in any
material respect, the Trustee (or such custodian) shall immediately notify the
Depositor. If the Depositor cannot cure the omission or defect within a
specified number of days after receipt of such notice, then to the extent
specified in the related Prospectus Supplement, the Depositor will be
obligated, within a specified number of days of receipt of such notice, to
repurchase the related Whole Loan from the Trustee at the Purchase Price or
substitute for such Mortgage Loan. To the extent specified in the related
Prospectus Supplement, this repurchase or substitution obligation constitutes
the sole remedy available to the Certificateholders or the Trustee for omission
of, or a material defect in, a constituent document. To the extent specified in
the related Prospectus Supplement, in lieu of curing any omission or defect in
the Mortgage Asset or repurchasing or substituting for such Mortgage Asset, the
Depositor may agree to cover any losses suffered by the Trust Fund as a result
of such breach or defect.
If so provided in the related Prospectus Supplement, the Depositor will,
as to some or all of the Mortgage Loans, assign or cause to be assigned to the
Trustee the related Lease Assignments. In certain cases, the Trustee, or Master
Servicer, as applicable, may collect all moneys under the related Leases and
distribute amounts, if any, required under the Lease for the payment of
maintenance, insurance and taxes, to the extent specified in the related Lease
agreement. The Trustee, or if so specified in the Prospectus Supplement, the
Master Servicer, as agent for the Trustee, may hold the Lease in trust for the
benefit of the Certificateholders.
With respect to each CMBS 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 CMBS together with bond power
or other instruments, certifications or documents required to transfer fully
such CMBS to the Trustee for the benefit of the Certificateholders. With
respect to each CMBS 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 CMBS to be registered directly or on the books of such
clearing corporation or of a financial intermediary in the name of the Trustee
for the benefit of the Certificateholders. To the extent provided in the
related Prospectus Supplement, the related Agreement will require that either
the Depositor or the Trustee promptly cause any CMBS 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
To the extent provided in the related Prospectus Supplement the Depositor
will, with respect to each Whole Loan, make or assign representations and
warranties, as of a specified date (the person making such representations and
warranties, the "Warranting Party") covering, by way of example, the following
types of matters: (i) the accuracy of the information set forth for such Whole
Loan on the schedule of Mortgage Assets appearing as an exhibit to the related
Agreement; (ii) the existence of title insurance insuring the lien priority of
the Whole Loan; (iii) the authority of the Warranting Party to sell the Whole
Loan; (iv) the payment status of the Whole 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.
Any Warranting 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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Representations and warranties made in respect of a Whole Loan may have
been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between such date and the date of initial
issuance of the related Series of Certificates evidencing an interest in such
Whole Loan. To the extent specified in the related Prospectus Supplement, in
the event of a breach of any such representation or warranty, the Warranting
Party will be obligated to reimburse the Trust Fund for losses caused by any
such breach or either cure such breach or repurchase or replace the affected
Whole Loan as described below. Since the representations and warranties may not
address events that may occur following the date as of which they were made,
the Warranting Party will have a reimbursement, cure, repurchase or
substitution obligation in connection with a breach of such a representation
and warranty only if the relevant event that causes such breach occurs prior to
such date. Such party would have no such obligations if the relevant event that
causes such breach occurs after such date.
To the extent provided in the related Prospectus Supplement, the
Agreements will provide that the Master Servicer and/or Trustee will be
required to notify promptly the relevant Warranting Party of any breach of any
representation or warranty made by it in respect of a Whole Loan that
materially and adversely affects the value of such Whole Loan or the interests
therein of the Certificateholders. If such Warranting Party cannot cure such
breach within a specified period following the date on which such party was
notified of such breach, then such Warranting Party will be obligated to
repurchase such Whole Loan from the Trustee within a specified period from the
date on which the Warranting Party was notified of such breach, at the Purchase
Price therefor. As to any Whole Loan, unless otherwise specified in the related
Prospectus Supplement, the "Purchase Price" is equal to the sum of the unpaid
principal balance thereof, plus unpaid accrued interest thereon at the Mortgage
Interest 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 each Servicer. If so provided in
the Prospectus Supplement for a Series, a Warranting Party, rather than
repurchase a Whole Loan as to which a breach has occurred, will have the
option, within a specified period after initial issuance of such Series of
Certificates, to cause the removal of such Whole Loan from the Trust Fund and
substitute in its place one or more other Whole Loans, in accordance with the
standards described in the related Prospectus Supplement. If so provided in the
Prospectus Supplement for a Series, a Warranting Party, rather than repurchase
or substitute a Whole Loan as to which a breach has occurred, will have the
option to reimburse the Trust Fund or the Certificateholders for any losses
caused by such breach. To the extent specified in the related Prospectus
Supplement, this reimbursement, repurchase or substitution obligation will
constitute the sole remedy available to holders of Certificates or the Trustee
for a breach of representation by a Warranting Party.
Neither the Depositor (except to the extent that it is the Warranting
Party) nor any Servicer will be obligated to purchase or substitute for a Whole
Loan if a Warranting Party defaults on its obligation to do so, and no
assurance can be given that Warranting Parties will carry out such obligations
with respect to Whole Loans.
To the extent provided in the related Prospectus Supplement the Warranting
Party will, with respect to a Trust Fund that includes CMBS, make or assign
certain representations or warranties, as of a specified date, with respect to
such CMBS, covering (i) the accuracy of the information set forth therefor on
the schedule of Mortgage Assets appearing as an exhibit to the related
Agreement and (ii) the authority of the Warranting Party to sell such Mortgage
Assets. The related Prospectus Supplement will describe the remedies for a
breach thereof.
Each Servicer will make certain representations and warranties regarding
its authority to enter into, and its ability to perform its obligations under,
the related Agreement. A breach of any such representation in a Pooling and
Servicing Agreement of a Master Servicer or Special Servicer which materially
and adversely affects the interests of the Certificateholders and which
continues unremedied for thirty days after the giving of written notice of such
breach to such Servicer by the Trustee or the Depositor, or to such Servicer,
the Depositor and the Trustee by the holders of Certificates evidencing not
less than 25% of the Voting Rights (unless otherwise specified in the related
Prospectus Supplement), will constitute an Event of Default under such Pooling
and Servicing Agreement. A breach of any such representation in a Servicing
Agreement of a Servicer which continues unremedied for thirty days after giving
notice of such breach to such Servicer will constitute an Event of Default
under such Servicing Agreement. See "Events of Default" and "Rights Upon Event
of Default."
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ACCOUNTS
General
Each 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 Mortgage Assets
(collectively, the "Accounts"), which must be either (i) an account or accounts
the deposits in which are insured by the Bank Insurance Fund or the Savings
Association Insurance Fund of the Federal Deposit Insurance Corporation
("FDIC") (to the limits established by the FDIC) and the uninsured deposits in
which are otherwise secured such that the Certificateholders have a claim with
respect to the funds an 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 such
Account is maintained or (ii) otherwise maintained with a bank or trust
company, and in a manner, satisfactory to the Rating Agency or Agencies rating
any class of Certificates of such Series. The collateral eligible to secure
amounts in an Account is limited to United States government securities and
other investment grade obligations specified in the Agreement ("Permitted
Investments"). An 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.
To the extent provided in the related Prospectus Supplement, any interest or
other income earned on funds in an Account will be paid to a Servicer or its
designee as additional servicing compensation. An Account may be maintained
with an institution that is an affiliate of a Servicer provided that such
institution meets the standards imposed by the Rating Agency or Agencies. If
permitted by the Rating Agency or Agencies and so specified in the related
Prospectus Supplement, an Account may contain funds relating to more than one
Series of mortgage pass-through certificates and may contain other funds
respecting payments on mortgage loans belonging to a Servicer or serviced or
master serviced by it on behalf of others.
DEPOSITS
To the extent provided in the related Prospectus Supplement, the Master
Servicer will deposit or cause to be deposited in an Account on a daily basis,
to the extent provided in the related Agreement, the following payments and
collections received, or advances made, by the Master Servicer:
(i) all payments on account of principal, including principal prepayments,
on the Mortgage Assets;
(ii) all payments on account of interest on the Mortgage Assets, including
any default interest collected, in each case net of any portion thereof
retained by a Servicer as its servicing compensation;
(iii) all proceeds of the hazard, business interruption and general
liability insurance policies to be maintained in respect of each Mortgaged
Property securing a Whole Loan in the Trust Fund (to the extent such
proceeds are not applied to the restoration of the property or released to
the Mortgagor in accordance with the normal servicing procedures of a
Servicer, subject to the terms and conditions of the related Mortgage and
Mortgage Note) and all proceeds of rental interruption policies, if any,
insuring against losses arising from the failure of Lessees under a Lease
to make timely rental payments because of certain casualty events
(collectively, "Insurance Proceeds") and all other amounts received and
retained in connection with the liquidation of defaulted Mortgage Loans in
the Trust Fund, by foreclosure, condemnation or otherwise together with the
net proceeds on a monthly basis with respect to any Mortgaged Properties
acquired for the benefit of Certificateholders by foreclosure or by deed in
lieu of foreclosure or otherwise;
(iv) any advances made as described under "Description of the Certificates
-- Advances in Respect of Delinquencies";
(v) any amounts representing Prepayment Premiums;
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(vi) any amounts received from a Special Servicer; but excluding any REO
Proceeds and penalties or modification fees which may be retained by the
Master Servicer. REO Proceeds shall be maintained in an Account by the
Special Servicer.
The Special Servicer will remit funds on deposit in the Account it
maintains together with any P&I Advances to the Master Servicer for deposit in
an Account maintained by the Master Servicer.
Withdrawals
A Servicer may, from time to time, to the extent provided in the related
Agreement and described in the related Prospectus Supplement, make withdrawals
from an Account for each Trust Fund for any of the following purposes:
(i) to reimburse a Servicer for unreimbursed amounts advanced as described
under "Description of the Certificates -- Advances in Respect of
Delinquencies," such reimbursement to be made out of amounts received which
were identified and applied by such Servicer as late collections of
interest on and principal of the particular Whole Loans with respect to
which the advances were made;
(ii) to reimburse a Servicer for unpaid servicing fees earned and certain
unreimbursed servicing expenses incurred with respect to Whole Loans and
properties acquired in respect thereof, such reimbursement to be made out
of amounts that represent Liquidation Proceeds and Insurance Proceeds
collected on the particular Whole Loans and properties, and net income
collected on the particular properties, with respect to which such fees
were earned or such expenses were incurred;
(iii) to reimburse a Servicer for any advances described in clause (i)
above and any servicing expenses described in clause (ii) above which, in
the Master Servicer's good faith judgment, will not be recoverable from the
amounts described in clauses (i) and (ii), respectively, such reimbursement
to be made from amounts collected on other Trust Assets or, if and to the
extent so provided by the related Agreement and described in the related
Prospectus Supplement, just from that portion of amounts collected on other
Trust Assets that is otherwise distributable on one or more classes of
Subordinate Certificates, if any, remain outstanding, and otherwise any
outstanding class of Certificates, of the related Series;
(iv) if and to the extent described in the related Prospectus Supplement,
to pay a Servicer interest accrued on the advances described in clause (i)
above and the servicing expenses described in clause (ii) above while such
remain outstanding and unreimbursed;
(v) to the extent provided in the related Prospectus Supplement, to pay a
Servicer, as additional servicing compensation, interest and investment
income earned in respect of amounts held in the Account; and
(vi) to make any other withdrawals permitted by the related Agreement and
described in the related Prospectus Supplement.
If and to the extent specified in the Prospectus Supplement amounts may be
withdrawn from any Account to cover additional costs, expenses or liabilities
associated with: the preparation of environmental site assessments with respect
to, and for containment, clean-up or remediation of hazardous wastes and
materials, the proper operation, management and maintenance of any Mortgaged
Property acquired for the benefit of Certificateholders by foreclosure or by
deed in lieu of foreclosure or otherwise, such payments to be made out of
income received on such property; if one or more elections have been made to
treat the Trust Fund or designated portions thereof as a REMIC or FASIT, 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 -- REMIC -- Prohibited Transactions and Other Taxes" in the case
of REMIC, or to the extent described in the related Prospectus Supplement in
the case of FASIT; retaining an independent appraiser or other expert in real
estate matters to determine a fair sale price for a defaulted Whole Loan or a
property acquired in respect thereof in connection with the liquidation of such
Whole Loan or
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property; and obtaining various opinions of counsel pursuant to the related
Agreement for the benefit of Certificateholders.
Distribution Account
To the extent specified in the related Prospectus Supplement, 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
from the Master Servicer immediately preceding each Distribution Date (the
"Distribution Account"). The Trustee will also deposit or cause to be deposited
in a Distribution Account the following amounts:
(i) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related Series of Certificates as
described under "Description of Credit Support";
(ii) any amounts paid under any Cash Flow Agreement, as described under
"Description of the Trust Funds -- Cash Flow Agreements";
(iii) all proceeds of any Trust Asset or, with respect to a Whole Loan,
property acquired in respect thereof purchased by the Depositor, any Asset
Seller or any other specified person, and all proceeds of any Mortgage
Asset purchased as described under "Description of the Certificates --
Termination" (also, Liquidation Proceeds); and
(iv) any other amounts required to be deposited in the Distribution
Account as provided in the related Agreement and described in the related
Prospectus Supplement.
The Trustee may, from time to time, to the extent provided in the related
Agreements and described in the related Prospectus Supplement, make a
withdrawal from a Distribution Account to make distributions to the
Certificateholders on each Distribution Date.
OTHER COLLECTION ACCOUNTS
Notwithstanding the foregoing, if so specified in the related Prospectus
Supplement, the Agreement for any Series of Certificates may provide for the
establishment and maintenance of a separate collection account into which the
Master Servicer or Special Servicer will deposit on a daily basis the amounts
described under "--Accounts -- Deposits" above for one or more Series of
Certificates. Any amounts on deposit in any such collection account will be
withdrawn therefrom and deposited into the appropriate Distribution 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 Distribution Account as described under "--Accounts -- 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
Master Servicer
The Master Servicer is required under each Pooling and Servicing Agreement
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 Pooling and Servicing Agreement, (ii)
applicable law and (iii) the general servicing standard specified in the
related Prospectus Supplement or, if no such standard is so specified, its
normal servicing practices (in either case, the "Servicing Standard").
The Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining (or causing
the Mortgagor or Lessee on each Mortgage or Lease to maintain) hazard,
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business interruption and general liability insurance policies (and, if
applicable, rental interruption 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 an Mortgagor pursuant to 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 shall monitor the actions of the Special Servicer to
confirm compliance with the Agreements.
To the extent specified in the related Prospectus Supplement, a Master
Servicer, as servicer of the Mortgage Loans, on behalf of itself, the Trustee
and the Certificateholders, 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. See "Description of Credit Support."
If a Master Servicer or its designee recovers payments under any
instrument of Credit Support with respect to any defaulted Mortgage Loan, the
Master Servicer will be entitled to withdraw or cause to be withdrawn from the
Distribution Account out of such proceeds, prior to distribution thereof to
Certificateholders, amounts representing its normal servicing compensation on
such Mortgage Loan, unreimbursed servicing expenses incurred with respect to
the Mortgage Loan and any unreimbursed advances of delinquent payments made
with respect to the Mortgage Loan. See "--Hazard Insurance Policies" and
"Description of Credit Support."
Sub-Servicers
A Master Servicer may delegate its servicing obligations in respect of
the Whole 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 be consistent with the terms of the related
Agreement and must provide that, if for any reason the Master Servicer for the
related series of Certificates is no longer acting in such capacity, the
Trustee or any successor Master Servicer may assume the Master Servicer's
rights and obligations under such Sub-Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the
Master Servicer will be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Master Servicer's compensation
pursuant to the related Agreement is sufficient to pay such fees. However, a
Sub-Servicer may be entitled to a Retained Interest in certain Whole Loans.
Each Sub-Servicer will be reimbursed by the Master Servicer for certain
expenditures which it makes, generally to the same extent the Master Servicer
would be reimbursed under an Agreement. See "Retained Interest, Servicing
Compensation and Payment of Expenses."
Special Servicer
A Mortgagor's failure to make required payments may reflect inadequate
income or the diversion of that income from the service of 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. To the extent provided in the related Prospectus
Supplement, upon the occurrence of any of the following events (each a
"Servicing Transfer Event") with respect to a Mortgage Loan, servicing for such
Mortgage Loan (thereafter, a "Specially Serviced Mortgage Loan") will be
transferred from the Master Servicer to the Special Servicer:
a) such Mortgage Loan becomes a defaulted Mortgage Loan,
b) the occurrence of certain events indicating the possible insolvency of
the Mortgagor,
c) the receipt by the Master Servicer of a notice of foreclosure of any
other lien on the related Mortgaged Property,
d) the Master Servicer determines that a payment default is imminent,
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e) with respect to a Balloon Mortgage Loan, no assurances have been given
as to the ability of the Mortgagor to make the final payment thereon, or
f) the occurrence of certain other events constituting defaults under the
terms of such Mortgage Loan.
The Special Servicer is required to monitor any Mortgage Loan which is 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 Special Servicer
is able to assess the success of such corrective action or the need for
additional initiatives.
The time within which the Special 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 Certificateholders, 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 Special 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 the Mortgage Loans
and the Leases."
Any Agreement relating to a Trust Fund that includes Mortgage Loans may
grant to the Master Servicer and/or the holder or holders of certain classes of
Certificates a right of first refusal to purchase from the Trust Fund at a
predetermined purchase price any such Mortgage Loan as to which a specified
number of scheduled payments thereunder are delinquent. Any such right granted
to the holder of an Offered Certificate 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."
The Special Servicer may agree to modify, waive or amend any term of any
Specially Serviced 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 Special 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, unless otherwise provided in the related Prospectus
Supplement, - (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 with respect to the Mortgage Loan on a present value basis than would
liquidation. The Special Servicer is required to notify the Trustee in the
event of any modification, waiver or amendment of any Mortgage Loan.
The Special 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 the Servicing Standard and a default on such Mortgage
Loan has occurred or, in the Special Servicer's judgment, is imminent. Unless
otherwise specified in the related Prospectus Supplement, the Special Servicer
may not acquire title to any related Mortgaged Property or take any other
action that would cause the Trustee, for the benefit of Certificateholders, or
any other specified person to be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or an "operator" of such
Mortgaged Property within the meaning of certain federal environmental laws,
unless the Special Servicer has previously determined, based on a report
prepared by a person who regularly conducts environmental audits (which report
will be an expense of the Trust Fund), that:
(i) the Mortgaged Property is in compliance with applicable environmental
laws; or if not, that taking such actions as are necessary to bring the
Mortgaged Property in compliance therewith is reasonably likely to
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produce a greater recovery on a present value basis, after taking into
account any risks associated therewith, than not taking such actions; and
(ii) and there are no circumstances present at the Mortgaged Property
relating to the use, management or disposal of any hazardous substances,
hazardous materials, wastes, or petroleum-based materials for which
investigation, testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or regulation or
that, if any such materials are present, taking such action with respect
to the affected Mortgaged Property is reasonably likely to produce a
greater recovery on a present value basis, after taking into account any
risks associated therewith, than not taking such actions.
To the extent provided in the related Prospectus Supplement, if title to
any Mortgaged Property is acquired by a Trust Fund as to which a REMIC election
has been made, the Special Servicer, on behalf of the Trust Fund, will be
required to sell the Mortgaged Property within two years of acquisition, unless
(i) the Internal Revenue Service grants an extension of time to sell such
property or (ii) the Trustee receives an opinion of independent counsel to the
effect that the holding of the property by the Trust Fund by the close of the
third taxable year following the taxable year of the property's acquisition
will not result in the imposition of a tax on the Trust Fund or cause the Trust
Fund to fail to qualify as a REMIC under the Code at any time that any
Certificate is outstanding. Subject to the foregoing, the Special 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.
If the Trust Fund acquires title to any Mortgaged Property, the Special
Servicer, on behalf of the Trust Fund, may retain an independent contractor to
manage and operate such property. The retention of an independent contractor,
however, will not relieve the Special Servicer of any of its obligations with
respect to the management and operation of such Mortgaged Property. To the
extent specified in the related Prospectus Supplement, any such property
acquired by the Trust Fund will be managed in a manner consistent with the
management and operation of similar property by a prudent lending institution.
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 operations and ownership of any Mortgaged Property acquired
on behalf of the Trust Fund may result in the recovery of an amount less than
the amount that would otherwise be recovered. See "Certain Legal Aspects of the
Mortgage Loans and the Leases -- Foreclosure."
If recovery on a defaulted Mortgage Loan under any related instrument of
Credit Support is not available, the Special Servicer nevertheless will be
obligated to follow or cause to be followed such normal practices and
procedures as it deems necessary or advisable to realize upon the defaulted
Mortgage Loan. If the proceeds of any liquidation of the property securing the
defaulted Mortgage Loan are less than the outstanding principal balance of the
defaulted Mortgage Loan plus interest accrued thereon at the Mortgage Interest
Rate plus the aggregate amount of expenses incurred by the Special Servicer in
connection with such proceedings and which are reimbursable under the
Agreement, the Trust Fund will realize a loss in the amount of such difference.
The Special Servicer will be entitled to withdraw or cause to be withdrawn from
a related Account out of the Liquidation Proceeds recovered on any defaulted
Mortgage Loan, prior to the distribution of such Liquidation Proceeds to
Certificateholders, amounts representing its normal servicing compensation on
the Mortgage Loan, unreimbursed servicing expenses incurred with respect to the
Mortgage Loan and any unreimbursed advances of delinquent payments made with
respect to the Mortgage Loan.
If 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
the related instrument of Credit Support, if any, the Special Servicer is not
required to expend its own funds to restore the damaged property unless it
determines (i) that such restoration will increase the proceeds to
Certificateholders on liquidation of the 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.
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HAZARD INSURANCE POLICIES
To the extent specified in the related Prospectus Supplement, each
Agreement for a Trust Fund that includes Whole Loans will require the Master
Servicer to cause the Mortgagor on each Whole Loan to maintain a hazard
insurance policy providing for such coverage as is required under the related
Mortgage. To the extent specified in the related Prospectus Supplement, such
coverage will be in general in an amount equal to the amount necessary to fully
compensate for any damage or loss to the improvements on the Mortgaged Property
on a replacement cost basis, but 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 a related Account.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies relating to the Whole Loans will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by respective state laws, and
most such policies typically do not cover any physical damage resulting from
war, revolution, governmental actions, floods and other water-related causes,
earth movement (including earthquakes, landslides and mudflows), wet or dry
rot, vermin, domestic animals and certain other kinds of uninsured risks.
The hazard insurance policies covering the Mortgaged Properties securing
the Whole Loans will typically contain a co-insurance clause that in effect
requires the insured at all times to carry insurance of a specified percentage
(generally 80% to 90%) of the full replacement value of the improvements on the
property in order to recover the full amount of any partial loss. If the
insured's coverage falls below this specified percentage, such clause generally
provides that the insurer's liability in the event of partial loss does not
exceed the lesser of (i) the replacement cost of the improvements less physical
depreciation and (ii) such proportion of the loss as the amount of insurance
carried bears to the specified percentage of the full replacement cost of such
improvements.
The Agreements for a Trust Fund that includes Whole Loans will require the
Master Servicer to cause the Mortgagor on each Whole Loan, or, in certain
cases, the related Lessee, to maintain all such other insurance coverage with
respect to the related Mortgaged Property as is consistent with the terms of
the related Mortgage, which insurance may typically include flood insurance (if
the related Mortgaged Property was located at the time of origination in a
federally designated flood area).In addition, to the extent required by the
related Mortgage, the Master Servicer may require the Mortgagor or related
Lessee to maintain other forms of insurance including, but not limited to, loss
of rent endorsements, business interruption insurance and comprehensive public
liability insurance. Any cost incurred by the Master Servicer in maintaining
any such insurance policy will be added to the amount owing under the Mortgage
Loan where the terms of the Mortgage Loan so permit; provided, however, that
the addition of such cost will not be taken into account for purposes of
calculating the distribution to be made to Certificateholders. Such costs may
be recovered by a Servicer from a related Account, with interest thereon, as
provided by the Agreements.
RENTAL INTERRUPTION INSURANCE POLICY
If so specified in the related Prospectus Supplement, the Master Servicer
or the Mortgagors will maintain rental interruption insurance policies in full
force and effect with respect to some or all of the Leases. Although the terms
of such policies vary to some degree, a rental interruption insurance policy
typically provides that, to the extent that a Lessee fails to make timely
rental payments under the related Lease due to a casualty event, such losses
will be reimbursed to the insured. If so specified in the related Prospectus
Supplement, the Master Servicer will be required to pay from its servicing
compensation the premiums on the rental interruption policy on a timely basis.
If
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so specified in the Prospectus Supplement, if such rental interruption policy
is canceled or terminated for any reason (other than the exhaustion of total
policy coverage), the Master Servicer will exercise its best reasonable efforts
to obtain from another insurer a replacement policy comparable to the rental
interruption policy with a total coverage that is equal to the then existing
coverage of the terminated rental interruption policy; provided that if the
cost of any such replacement policy is greater than the cost of the terminated
rental interruption policy, the amount of coverage under the replacement policy
will, to the extent specified in the related Prospectus Supplement, be reduced
to a level such that the applicable premium does not exceed, by a percentage
that may be set forth in the related Prospectus Supplement, the cost of the
rental interruption policy that was replaced. Any amounts collected by the
Master Servicer under the rental interruption policy in the nature of insurance
proceeds will be deposited in a related Account.
FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE
To the extent specified in the related Prospectus Supplement, the
Agreements will require that the Servicers 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
such Servicer. The related Agreements will allow a Servicer to self-insure
against loss occasioned by the errors and omissions of the officers, employees
and agents of the Master Servicer or the Special Servicer so long as certain
criteria set forth in the Agreements are met.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Whole Loans may contain clauses requiring the consent of
the mortgagee to any sale or other transfer of the related Mortgaged Property,
or due-on-sale clauses entitling the mortgagee to accelerate payment of the
Whole Loan upon any sale or other transfer of the related Mortgaged Property.
Certain of the Whole Loans may contain clauses requiring the consent of the
mortgagee to the creation of any other lien or encumbrance on the Mortgaged
Property or due-on-encumbrance clauses entitling the mortgagee to accelerate
payment of the Whole Loan upon the creation of any other lien or encumbrance
upon the Mortgaged Property. To the extent provided in the related Prospectus
Supplement, the Master Servicer, on behalf of the Trust Fund, will exercise any
right the Trustee may have as mortgagee to accelerate payment of any such Whole
Loan or to withhold its consent to any transfer or further encumbrance. To the
extent specified in the related Prospectus Supplement, any fee collected by or
on behalf of the Master Servicer for entering into an assumption agreement will
be retained by or on behalf of the Master Servicer as additional servicing
compensation. See "Certain Legal Aspects of the Mortgage Loans and the Leases
- -- Due-on-Sale and Due-on-Encumbrance."
RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a Series of Certificates will specify
whether there will be any Retained Interest in the Mortgage Assets, and, if so,
the initial owner thereof. If so, the Retained Interest will be established on
a loan-by-loan basis and will be specified on an exhibit to the related
Agreement. A "Retained Interest" in a Mortgage 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.
To the extent specified in the related Prospectus Supplement, each
Servicer's primary servicing compensation with respect to a Series of
Certificates will come from the periodic payment to it of a portion of the
interest payment on each Mortgage Asset. Since any Retained Interest and a
Servicer's primary compensation are percentages of the principal balance of
each Mortgage Asset, such amounts will decrease in accordance with the
amortization of the Mortgage Assets. The Prospectus Supplement with respect to
a Series of Certificates evidencing interests in a Trust Fund that includes
Whole Loans may provide that, as additional compensation, a Servicer may retain
all or a portion of assumption fees, modification fees, late payment charges or
Prepayment Premiums collected from Mortgagors and any interest or other income
which may be earned on funds held in a related Account.
The Master Servicer may, to the extent provided in the related Prospectus
Supplement, pay from its servicing compensation certain expenses incurred in
connection with its servicing and managing of the Mortgage
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Assets, including, without limitation, payment of the fees and disbursements of
the Trustee and independent accountants, payment of expenses incurred in
connection with distributions and reports to Certificateholders, and payment of
any other expenses described in the related Prospectus Supplement. Certain
other expenses, including certain expenses relating to defaults and
liquidations on the Whole Loans and, to the extent so provided in the related
Prospectus Supplement, interest thereon at the rate specified therein, and the
fees of any Special Servicer, may be borne by the Trust Fund.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement will provide that on or before a
specified date in each year, beginning on a date specified therein, 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 was
conducted in compliance with the terms of such agreements except for any
exceptions the Uniform Single Attestation Program for Mortgage Bankers requires
it to report.
The Pooling and Servicing Agreement will also provide for delivery to the
Trustee, on or before a specified date in the Master year, of an annual
statement signed by an officer of the Master Servicer to the effect that the
Master Servicer has fulfilled its obligations under the Pooling and Servicing
Agreement throughout the preceding calendar year or other specified
twelve-month period.
To the extent provided in the related Prospectus Supplement, copies of
such annual accountants' statement and such statements of officers will be
obtainable by Certificateholders and Beneficial Owners without charge upon
written request to the Master Servicer or the Trustee at the address set forth
in the related Prospectus Supplement; provided that such Beneficial Owner shall
have certified to the Master Servicer or the Trustee that it is the Beneficial
Owner of a Certificate.
CERTAIN MATTERS REGARDING EACH SERVICER AND THE DEPOSITOR
The Master Servicer and the Special Servicer, or a servicer for
substantially all the Whole Loans under each Agreement will be named in the
related Prospectus Supplement. Each entity serving as 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 a Servicer shall be deemed to be to the servicer of
substantially all of the Whole Loans, if applicable.
To the extent specified in the related Prospectus Supplement, the related
Agreement will provide that any Servicer may resign from its obligations and
duties thereunder only with the consent of the Trustee, which may not be
unreasonably withheld or upon a determination that its duties under the
Agreement are no longer permissible under applicable law. No such resignation
will become effective until a successor servicer has assumed such Servicer's
obligations and duties under the Pooling and Servicing Agreement. To the extent
specified in the related Prospectus Supplement, the Pooling and Servicing
Agreement will further provide that none of the Servicers, or any officer,
employee, or agent thereof will be under any liability to the related Trust
Fund or Certificateholders for any action taken, or for refraining from the
taking of any action in accordance with the servicing standards set forth in
the Pooling and Servicing Agreement, in good faith; provided, however, that no
Servicer nor any such person will be protected against any breach of a
representation or warranty 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 negligence in the
performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. To the extent specified in the related
Prospectus Supplement, the Depositor shall be liable only to the extent of its
obligations specifically imposed upon and undertaken by the Depositor. To the
extent specified in the related Prospectus Supplement, the Pooling and
Servicing Agreement will further provide that each Servicer will be entitled to
indemnification by the related Trust Fund against any loss, liability or
expense incurred in connection with any legal action relating to the Pooling
and Servicing Agreement or the Mortgage Loans; provided, however, that such
indemnification will not extend to any loss, liability or expense incurred by
reason of misfeasance, bad faith or negligence in the performance of
obligations or duties thereunder, or by reason of reckless disregard of such
obligations or duties. In addition, the Pooling and Servicing Agreement will
provide
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that no Servicer will be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its responsibilities under the
Pooling and Servicing Agreement and which in its opinion may involve it in any
expense or liability. Any Servicer may, however, with the consent of the
Trustee undertake any such action which it may deem necessary or desirable with
respect to the Agreement and the rights and duties of the parties thereto and
the interests of the Certificateholders thereunder. In such event, the legal
expenses and costs of such action and any liability resulting therefrom will be
expenses, costs and liabilities of the Certificateholders, and the Servicer
will be entitled to be reimbursed therefor.
Any person into which a Servicer or the Depositor may be merged or
consolidated, or any person resulting from any merger or consolidation to which
a Servicer or the Depositor is a party, or any person succeeding to the
business of a Servicer or the Depositor will be the successor of such Servicer
or the Depositor, as applicable, under the related Agreements.
EVENTS OF DEFAULT
To the extent provided in the related Prospectus Supplement for a Trust
Fund that includes Whole Loans, "Event of Default" with respect to a Servicer
under the related Agreements will include (i) any failure by such Servicer to
distribute or cause to be distributed to the Trustee, another Servicer or the
Certificateholders, any required payment on the date due or within a specified
grace period; (ii) any failure by such Servicer to timely deliver a report that
continues unremedied for a certain number days after receipt of notice of such
failure has been given to such Servicer by the Trustee or another Servicer;
(iii) any failure by such Servicer duly to observe or perform in any material
respect any of its other covenants or obligations under the Agreement which
continues unremedied for a specified number of days after written notice of
such failure has been given to such Servicer; (iv) any breach of a
representation or warranty made by such Servicer under the Agreement which
materially and adversely affects the interests of Certificateholders and which
continues unremedied for a specified number of days after written notice of
such breach has been given to such Servicer; (v) certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings and certain actions by or on behalf of such Servicer indicating its
insolvency or inability to pay its obligations; and (vi) any failure by such
Servicer to maintain a required license to do business or service the Mortgage
Loans pursuant to the related Agreements. Material variations to the foregoing
Events of Default will be specified in the related Prospectus Supplement. To
the extent specified in the related Prospectus Supplement, the Trustee shall,
not later than the later of a specified number of days after the occurrence of
any event which constitutes or, with notice or lapse of time or both, would
constitute an Event of Default and a specified number of days after certain
officers of the Trustee become aware of the occurrence of such an event,
transmit by mail to the Depositor and all Certificateholders of the applicable
Series notice of such occurrence, unless such default shall have been cured or
waived.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under an Agreement remains unremedied, the
Depositor or the Trustee may, and at the direction of holders of Certificates
evidencing not less than a percentage of the Voting Rights specified in the
related Prospectus Supplement, the Trustee shall, terminate all of the rights
and obligations of the related Servicer under the Agreement and in and to the
Mortgage Loans (other than as a Certificateholder or as the owner of any
Retained Interest), whereupon the Master Servicer (or if such Servicer is the
Master Servicer, the Trustee) will succeed to all of the responsibilities,
duties and liabilities of such Servicer under the Agreements (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. To the extent specified
in the related Prospectus Supplement, in the event that the Trustee is
unwilling or unable so to act, it may or, at the written request of the holders
of Certificates entitled to a percentage of the Voting Rights specified in the
related Prospectus Supplement, it shall appoint, or petition a court of
competent jurisdiction for the appointment of, a loan servicing institution
acceptable to the Rating Agency with a net worth at the time of such
appointment as specified in the related Prospectus Supplement to act as
successor to the Master Servicer under the Agreement. Pending such appointment,
the Trustee is obligated to act in such capacity. The Trustee and any such
successor may agree upon the servicing compensation to be paid, which, to the
extent so specified in the related Prospectus Supplement, may be no greater
than the compensation payable to the Master Servicer under the Agreement.
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To the extent described in the related Prospectus Supplement, the holders
of Certificates representing the percentage of the Voting Rights specified in
such Prospectus Supplement 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 (i)
under "--Events of Default" may be waived only by all of the
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 the Agreement.
No Certificateholder will have the right under any Agreement to institute
any proceeding with respect thereto unless such holder previously has given to
the Trustee written notice of default and unless the holders of Certificates
evidencing not less than the percentage of the Voting Rights specified in the
related Prospectus Supplement 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 a specified
number of 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 Agreement or to make any investigation of matters
arising thereunder or to institute, conduct or defend any litigation thereunder
or in relation thereto at the request, order or direction of any of the holders
of Certificates covered by such Agreement, unless such Certificateholders have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby.
As described under "Description of the Certificates -- Book-Entry
Registration and Definitive Certificates," unless and until Definitive
Certificates are issued, Beneficial Owners may only exercise their rights as
owners of Certificates indirectly through DTC, or their respective Participants
and Indirect Participants.
AMENDMENT
Each Agreement may be amended by the parties thereto, without the consent
of any of the holders of Certificates covered by the Agreement, (i) to cure any
ambiguity, (ii) to correct, modify or supplement any provision therein which
may be inconsistent with any other provision therein, (iii) to make any other
provisions with respect to matters or questions arising under the Agreement
which are not 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 by an opinion of counsel to such effect) adversely affect in any
material respect the interests of any holder of Certificates covered by the
Agreement. To the extent specified in the related Prospectus Supplement, each
Agreement may also be amended by the Depositor, the Master Servicer, if any,
and the Trustee, with the consent of the holders of Certificates affected
thereby evidencing not less than 51% of the Voting Rights, for any purpose;
provided, however, that to the extent specified in the related Prospectus
Supplement, no such amendment may (i) reduce in any manner the amount of or
delay the timing of, payments received or advanced on Mortgage Loans 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
interests of the holders of any class of Certificates in a manner other than as
described in (i), without the consent of the holders of all Certificates of
such class or (iii) modify the provisions of such Agreement described in this
paragraph without the consent of the holders of all Certificates covered by
such Agreement then outstanding. However, with respect to any Series of
Certificates as to which a REMIC election is to be made, the Trustee will not
consent to any amendment of the Agreement unless it shall first have received
an opinion of counsel to the effect that such amendment will not result in the
imposition of a tax on the related Trust Fund or cause the related Trust Fund
to fail to qualify as a REMIC at any time that the related Certificates are
outstanding.
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.
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DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or sufficiency
of any Agreement, the Certificates or any Trust Asset or related document and
is not accountable for the use or application by or on behalf of any Servicer
of any funds paid to such Servicer or its designee in respect of the
Certificates or the Trust Assets, or deposited into or withdrawn from any
Account or any other account by or on behalf of any 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 Agreements. 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 Agreements.
CERTAIN MATTERS REGARDING THE TRUSTEE
To the extent specified in the related Prospectus Supplement, the Trustee
and any director, officer, employee or agent of the Trustee shall be entitled
to indemnification out of the Distribution 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
Certificateholders during the continuance of an Event of Default, (ii)
defending or prosecuting any legal action in respect of the related Agreement
or Series of 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 related Series of Certificates entitled to
not less than 25% (or such higher percentage as is specified in the related
Agreement with respect to any particular matter) of the Voting Rights for such
Series; provided, however, that such indemnification will not extend to any
loss, liability or expense that constitutes a specific liability of the Trustee
pursuant to the related Agreement, or to any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence on the part
of the Trustee in the performance of its obligations and duties thereunder, or
by reason of its reckless disregard of such obligations or duties, or as may
arise from a breach of any representation, warranty or covenant of the Trustee
made therein.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trustee may at any time resign from its obligations and duties under
an Agreement by giving written notice thereof to the Depositor, the Master
Servicer, if any, and all Certificateholders. Upon receiving such notice of
resignation, the Depositor is required promptly to appoint a successor trustee
acceptable to the Master Servicer, if any. If no successor trustee shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible to continue as such
under the related Agreements, 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 Certificates 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.
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DESCRIPTION OF CREDIT SUPPORT
General
For any Series of Certificates, Credit Support may be provided with
respect to one or more classes thereof or the related Mortgage Assets. Credit
Support may be in the form of the subordination of one or more classes of
Certificates, letters of credit, insurance policies, guarantees, the
establishment of one or more reserve funds or another method of Credit Support
described in the related Prospectus Supplement, or any combination of the
foregoing. If so provided in the related Prospectus Supplement, any form of
Credit Support may be structured so as to be drawn upon by more than one Series
to the extent described therein.
Unless otherwise provided in the related Prospectus Supplement for a
Series of Certificates, the Credit Support will not provide protection against
all risks of loss and will not guarantee repayment of the entire Certificate
Balance of the Certificates and interest thereon. If losses or shortfalls occur
that exceed the amount covered by Credit Support or that are not covered by
Credit Support, Certificateholders will bear their allocable share of
deficiencies. Moreover, if a form of Credit Support covers more than one Series
of Certificates (each, a "Covered Trust"), holders of Certificates evidencing
interests in any of such Covered Trusts will be subject to the risk that such
Credit Support will be exhausted by the claims of other Covered Trusts prior to
such Covered Trust receiving any of its intended share of such coverage.
If Credit Support is provided with respect to one or more classes of
Certificates of a Series, or the related Mortgage Assets, the related
Prospectus Supplement will include a description of (a) the nature and amount
of coverage under such Credit Support, (b) any conditions to payment thereunder
not otherwise described herein, (c) the conditions (if any) under which the
amount of coverage under such Credit Support may be reduced and under which
such Credit Support may be terminated or replaced and (d) the material
provisions relating to such Credit Support. Additionally, the related
Prospectus Supplement will set forth certain information with respect to the
obligor under any instrument of Credit Support, including (i) a brief
description of its principal business activities, (ii) its principal place of
business, place of incorporation and the jurisdiction under which it is
chartered or licensed to do business, (iii) if applicable, the identity of
regulatory agencies that exercise primary jurisdiction over the conduct of its
business and (iv) its total assets, and its stockholders' or policyholders'
surplus, if applicable, as of the date specified in the Prospectus Supplement.
See "Risk Factors -- Credit Support Limitations."
SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more classes
of Certificates of a Series may be Subordinate Certificates. To the extent
specified in the related Prospectus Supplement, the rights of the holders of
Subordinate Certificates to receive distributions of principal and interest
from the Distribution Account on any Distribution Date will be subordinated to
such rights of the holders of Senior Certificates. If so provided in the
related Prospectus Supplement, the subordination of a class may apply only in
the event of (or may be limited to) certain types of losses or shortfalls. The
related Prospectus Supplement will set forth information concerning the amount
of subordination of a class or classes of Subordinate Certificates in a Series,
the circumstances in which such subordination will be applicable and the
manner, if any, in which the amount of subordination will be effected.
CROSS-SUPPORT PROVISIONS
If the Mortgage Assets for a Series are divided into separate groups, each
supporting a separate class or classes of Certificates of a Series, credit
support may be provided by cross-support provisions requiring that
distributions be made on Senior Certificates evidencing interests in one group
of Mortgage Assets prior to distributions on Subordinate Certificates
evidencing interests in a different group of Mortgage Assets within the Trust
Fund. The Prospectus Supplement for a Series that includes a cross-support
provision will describe the manner and conditions for applying such provisions.
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INSURANCE OR GUARANTEES WITH RESPECT TO THE WHOLE LOANS
If so provided in the Prospectus Supplement for a Series of Certificates,
the Whole Loans in the related Trust Fund will be covered for various default
risks by insurance policies or guarantees. A copy of any such material
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
Certificates of the related Series.
LETTER OF CREDIT
If so provided in the Prospectus Supplement for a Series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more letters of credit, issued by a
bank or financial institution specified in such Prospectus Supplement (the "L/C
Bank"). Under a letter of credit, the L/C Bank will be obligated to honor draws
thereunder in an aggregate fixed dollar amount, net of unreimbursed payments
thereunder, generally equal to a percentage specified in the related Prospectus
Supplement of the aggregate principal balance of the Mortgage Assets on the
related Cut-off Date or of the initial aggregate Certificate Balance of one or
more classes of Certificates. If so specified in the related Prospectus
Supplement, the letter of credit may permit draws in the event of only certain
types of losses and shortfalls. The amount available under the letter of credit
will, in all cases, be reduced to the extent of the unreimbursed payments
thereunder and may otherwise be reduced as described in the related Prospectus
Supplement. The obligations of the L/C Bank under the letter of credit for each
Series of Certificates will expire at the earlier of the date specified in the
related Prospectus Supplement or the termination of the Trust Fund. A copy of
any such letter of credit 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 Certificates of the related Series.
INSURANCE POLICIES AND SURETY BONDS
If so provided in the Prospectus Supplement for a Series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by insurance policies and/or surety bonds
provided by one or more insurance companies or sureties. Such instruments may
cover, with respect to one or more classes of Certificates of the related
Series, timely distributions of interest and/or full distributions of principal
on the basis of a schedule of principal distributions set forth in or
determined in the manner specified in the related Prospectus Supplement. 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 with the Commission within
15 days of issuance of the Certificates of the related Series.
RESERVE FUNDS
If so provided in the Prospectus Supplement for a Series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more reserve funds in which cash, a
letter of credit, Permitted Investments, a demand note or a combination thereof
will be deposited, in the amounts so specified in such Prospectus Supplement.
The reserve funds for a Series may also be funded over time by depositing
therein a specified amount of the distributions received on the related Trust
Assets as specified in the related Prospectus Supplement.
Amounts on deposit in any reserve fund for a Series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. A
reserve fund may be provided to increase the likelihood of timely distributions
of principal of and interest on the Certificates. If so specified in the
related Prospectus Supplement, reserve funds may be established to provide
limited protection against only certain types of losses and shortfalls.
Following each Distribution Date amounts in a reserve fund in excess of any
amount required to be maintained therein may be released from the reserve fund
under the conditions and to the extent specified in the related Prospectus
Supplement and will not be available for further application to the
Certificates.
Moneys deposited in any Reserve Funds will be invested in Permitted
Investments, except as otherwise specified in the related Prospectus
Supplement. To the extent specified in the related Prospectus Supplement, any
reinvestment income or other gain from such investments will be credited to the
related Reserve Fund for such
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Series, and any loss resulting from such investments will be charged to such
Reserve Fund. However, such income may be payable to any related Master
Servicer or another service provider as additional compensation. The Reserve
Fund, if any, for a Series will not be a part of the Trust Fund unless
otherwise specified in the related Prospectus Supplement.
Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such
Reserve Fund, the balance required to be maintained in the Reserve Fund, the
manner in which such required balance will decrease over time, the manner of
funding such Reserve Fund, the purposes for which funds in the Reserve Fund may
be applied to make distributions to Certificateholders and use of investment
earnings from the Reserve Fund, if any.
CREDIT SUPPORT WITH RESPECT TO CMBS
If so provided in the Prospectus Supplement for a Series of Certificates,
the CMBS in the related Trust Fund and/or the Mortgage Loans underlying such
CMBS may be covered by one or more of the types of Credit Support described
herein. The related Prospectus Supplement will specify as to each such form of
Credit Support the information indicated above with respect thereto, to the
extent such information is material and available.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties
that are general in nature. Because such legal aspects are governed by
applicable state law (which laws may differ substantially), the summaries do
not purport to be complete nor to reflect the laws of any particular state, nor
to encompass the laws of all states in which the security for the Mortgage
Loans is situated. The summaries are qualified in their entirety by reference
to the applicable federal and state laws governing the Mortgage Loans. See
"Description of the Trust Funds -- Assets."
GENERAL
All of the Mortgage Loans are loans evidenced by a note or bond and
secured by instruments granting a security interest in real property which may
be mortgages, deeds of trust, security deeds or deeds to secure debt, depending
upon the prevailing practice and law in the state in which the Mortgaged
Property is located. Mortgages, deeds of trust and deeds to secure debt are
herein collectively referred to as "mortgages." Any of the foregoing types of
mortgages will create a lien upon, or grant a title interest in, the subject
property, the priority of which will depend on the terms of the particular
security instrument, as well as separate, recorded, contractual arrangements
with others holding interests in the mortgaged property, the knowledge of the
parties to such instrument as well as the order of recordation of the
instrument in the appropriate public recording office. However, recording does
not generally establish priority over governmental claims for real estate taxes
and assessments and other charges imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
A mortgage either creates a lien against or constitutes a conveyance of
real property between two parties -- a Mortgagor (the borrower and usually the
owner of the subject property) and a mortgagee (the lender). In contrast, a
deed of trust is a three-party instrument, among a trustor (the equivalent of a
Mortgagor), a trustee to whom the mortgaged property is conveyed, and a
beneficiary (the lender) for whose benefit the conveyance is made. As used in
this Prospectus, unless the context otherwise requires, "Mortgagor" includes
the trustor under a deed of trust and a grantor under a security deed or a deed
to secure debt. Under 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
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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.
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 Seller will make certain representations and
warranties in the Agreement with respect to the Mortgage Loans which are
secured by an interest in a leasehold estate. Such representation and
warranties will be set forth in the Prospectus Supplement if applicable.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the Mortgagor assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to the lender, while the Mortgagor retains a revocable license to
collect the rents for so long as there is no default. Under such assignments,
the Mortgagor typically assigns its right, title and interest as lessor under
each lease and the income derived therefrom to the mortgagee, while retaining a
license to collect the rents for so long as there is no default under the
mortgage loan documentation. The manner of perfecting the mortgagee's interest
in rents may depend on whether the Mortgagor's assignment was absolute or one
granted as security for the loan. Failure to properly perfect the mortgagee's
interest in rents may result in the loss of substantial pool of funds, which
could otherwise serve as a source of repayment for such loan. If the Mortgagor
defaults, the license terminates and the lender is entitled to collect the
rents. Local law may require that the lender take possession of the property
and/or obtain a court-appointed receiver before becoming entitled to collect
the rents. In most states, hotel and motel room rates are considered accounts
receivable under the UCC; generally these rates are either assigned by the
Mortgagor, which remains entitled to collect such rates absent a default, or
pledged by the Mortgagor, as security for the loan. In general, the lender must
file financing statements in order to perfect its security interest in the
rates and must file continuation statements, generally every five years, to
maintain perfection of such security interest. Even if the lender's security
interest in room rates is perfected under the UCC, the lender will generally be
required to commence a foreclosure or otherwise take possession of the property
in order to collect the room rates after a default.
Even after a foreclosure, the potential rent payments from the property
may be less than the periodic payments that had been due under the mortgage.
For instance, the net income that would otherwise be generated from the
property may be less than the amount that would have been needed to service the
mortgage debt if the leases on the property are at below-market rents, or as
the result of excessive maintenance, repair or other obligations which a lender
succeeds to as landlord.
Lenders that actually take possession of the property, however, may incur
potentially substantial risks attendant to being a mortgagee in possession.
Such risks include liability for environmental clean-up costs and other risks
inherent in property ownership. See "Environmental Legislation" below.
PERSONALTY
Certain types of Mortgaged Properties, such as hotels, motels and
industrial plants, are likely to derive a significant part of their value from
personal property which does not constitute "fixtures" under applicable state
real
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property law and, hence, would not be subject to the lien of a mortgage. Such
property is generally pledged or assigned as security to the lender under the
UCC. In order to perfect its security interest therein, the lender generally
must file UCC financing statements and, to maintain perfection of such security
interest, file continuation statements generally every five years.
COOPERATIVE LOANS
If specified in the Prospectus Supplement relating to a Series of Offered
Certificate, the Mortgage Loans may also consist of cooperative apartment loans
("Cooperative Loans") secured by security interests in shares issued by a
cooperative housing corporation (a "Cooperative") and in the related
proprietary leases or occupancy agreements granting exclusive rights to occupy
specific dwelling units in the cooperatives' buildings. The security agreement
will create a lien upon, or grant a title interest in, the property which it
covers, the priority of which will depend on the terms of the particular
security agreement as well as the order of recordation of the agreement in the
appropriate recording office. Such a lien or title interest is not prior to the
lien for real estate taxes and assessments and other charges imposed under
governmental police powers.
Each cooperative owns in fee or has a leasehold interest in all the real
property and owns in fee or leases the building and all separate dwelling units
therein. The cooperative is directly responsible for property management and,
in most cases, payment of real estate taxes, other governmental impositions and
hazard and liability insurance. If there is a blanket mortgage or mortgages on
the cooperative apartment building or underlying land, as is generally the
case, or an underlying lease of the land, as is the case in some instances, the
cooperative, as property Mortgagor, or lessee, as the case may be, is also
responsible for meeting these mortgage or rental obligations. A blanket
mortgage is ordinarily incurred by the cooperative in connection with either
the construction or purchase of the cooperative's apartment building or
obtaining of capital by the cooperative. The interest of the occupant under
proprietary leases or occupancy agreements as to which that cooperative is the
landlord are generally subordinate to the interest of the holder of a blanket
mortgage and to the interest of the holder of a land lease. If the cooperative
is unable to meet the payment obligations (i) arising under a blanket mortgage,
the mortgagee holding a blanket mortgage could foreclose on that mortgage and
terminate all subordinate proprietary leases and occupancy agreements or (ii)
arising under its land lease, the holder of the landlord's interest under the
land lease could terminate it and all subordinate proprietary leases and
occupancy agreements. Also, a blanket mortgage on a cooperative may provide
financing in the form of a mortgage that does not fully amortize, with a
significant portion of principal being due in one final payment at maturity.
The inability of the cooperative to refinance a mortgage and its consequent
inability to make such final payment could lead to foreclosure by the
mortgagee. Similarly, a land lease has an expiration date and the inability of
the cooperative to extend its term or, in the alternative, to purchase the land
could lead to termination of the cooperative's interest in the property and
termination of all proprietary leases and occupancy agreement. In either event,
a foreclosure by the holder of a blanket mortgage or the termination of the
underlying lease could eliminate or significantly diminish the value of any
collateral held by whomever financed the purchase by an individual tenant
stockholder of cooperative shares or, in the case of the Mortgage Loans, the
collateral securing the Cooperative Loans.
The cooperative is owned by tenant-stockholders who, through ownership of
stock or shares in the corporation, receive proprietary lease or occupancy
agreements which confer exclusive rights to occupy specific units. Generally, a
tenant-stockholder of a cooperative must make a monthly payment to the
cooperative representing such tenant-stockholder's pro rata share of the
cooperative's payments for its blanket mortgage, real property taxes,
maintenance expenses and other capital or ordinary expenses. An ownership
interest in a cooperative and accompanying occupancy rights are financed
through a cooperative share loan evidenced by a promissory note and secured by
an assignment of and a security interest in the occupancy agreement or
proprietary lease and a security interest in the related cooperative shares.
The lender generally takes possession of the share certificate and a
counterpart of the proprietary lease or occupancy agreement and a financing
statement covering the proprietary lease or occupancy agreement and the
cooperative shares is filed in the appropriate state and local offices to
perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue for
judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral or tenant-stockholder
as an individual as provided in the security
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agreement covering the assignment of the proprietary lease or occupancy
agreement and the pledge of cooperative shares. See "--Foreclosure --
Cooperative Loans" below.
Foreclosure
General
Foreclosure is a legal procedure that allows the mortgagee to recover its
mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the Mortgagor defaults in payment or performance of its
obligations under the note or mortgage, the mortgagee has the right to
institute foreclosure proceedings to sell the mortgaged property at public
auction to satisfy the indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage vary
from state to state. Two primary methods of foreclosing a mortgage are judicial
foreclosure and non-judicial foreclosure pursuant to a power of sale granted in
the mortgage instrument. There are several other foreclosure procedures
available in some states that are either infrequently used or available only in
certain limited circumstances, such as strict foreclosure.
Judicial Foreclosure
A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. Generally, the action is initiated by
the service of legal pleadings upon all parties having a subordinate interest
of record in the real property and all parties in possession of the property,
under leases or otherwise, whose interests are subordinate to the mortgage.
Delays in completion of the foreclosure may occasionally result from
difficulties in locating defendants. When the lender's right to 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.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses are raised or counterclaims are interposed, and
sometimes require several years to complete. Moreover, as discussed below, a
non- collusive, regularly conducted foreclosure sale may be challenged as a
fraudulent conveyance, regardless of the parties' intent, if a court determines
that the sale was for less than fair consideration and such sale occurred while
the Mortgagor was insolvent (or the Mortgagor was rendered insolvent as a
result of such sale) and within one year (or within the state statute of
limitations if the trustee in bankruptcy elects to proceed under state
fraudulent conveyance law) of the filing of bankruptcy.
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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 have the obligation to pay debt service on any senior
mortgages, to pay taxes, obtain casualty insurance and to make such repairs at
its own expense as are necessary to render the property suitable for sale.
Frequently, the lender employs a third party management company to manage and
operate the property. The costs of operating and maintaining a commercial or
multifamily residential property may be significant and may be greater than the
income derived from that property. The costs of management and operation of
those mortgaged properties which are hotels, motels, restaurants, nursing or
convalescent homes or hospitals may be particularly significant because of the
expertise, knowledge and, with respect to nursing or convalescent homes or
hospitals, regulatory compliance, required to run such operations and the
effect which foreclosure and a change in ownership may have on the public's and
the industry's (including franchisors') perception of the quality of such
operations. The lender will commonly obtain the services of a real estate
broker and pay the broker's commission in connection with the sale of the
property. Depending upon market conditions, the ultimate proceeds of the sale
of the property may not equal the lender's investment in the property.
Moreover, a lender commonly incurs substantial legal fees and court costs in
acquiring a mortgaged property through contested foreclosure and/or bankruptcy
proceedings. Furthermore, a few states require that any environmental
contamination at certain types of properties be cleaned up before a property
may be resold. In addition, a lender may be responsible under federal or state
law for the cost of cleaning up a mortgaged property that is environmentally
contaminated. See "Environmental Legislation." Generally state law controls the
amount of foreclosure expenses and costs, including attorneys' fees, that may
be recovered by a lender. A junior mortgagee may not foreclose on the property
securing the junior mortgage unless it forecloses subject to senior mortgages
and any other prior liens, in which case it may be obliged to make payments on
the senior mortgages to avoid their foreclosure. In addition, in the event that
the foreclosure of a junior mortgage triggers the enforcement of a
"due-on-sale" clause contained in a senior mortgage, the junior mortgagee may
be required to pay the full amount of the senior mortgage to avoid its
foreclosure. Accordingly, with respect to those
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Mortgage Loans which are junior mortgage loans, if the lender purchases the
property the lender's title will be subject to all senior mortgages, prior
liens and certain governmental liens.
The proceeds received by the referee or trustee from the sale are 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.
In connection with a Series of Certificates for which an election is made
to qualify the Trust Fund, or a portion thereof, as a REMIC, the REMIC
Provisions and the Agreement may require the Master Servicer to hire an
independent contractor to operate any foreclosed property relating to Whole
Loans.
Rights of Redemption
The purposes of a foreclosure action are to enable the mortgagee to
realize upon its security and to bar the Mortgagor, and all persons who have an
interest in the property which is subordinate to the mortgage being foreclosed,
from exercise of their "equity of redemption." The doctrine of equity of
redemption provides that, until the property covered by a mortgage has been
sold in accordance with a properly conducted foreclosure and foreclosure sale,
those having an interest which is subordinate to that of the foreclosing
mortgagee have an equity of redemption and may redeem the property by paying
the entire debt with interest. In addition, in some states, when a foreclosure
action has been commenced, the redeeming party must pay certain costs of such
action. Those having an equity of redemption must generally be made parties and
joined in the foreclosure proceeding in order for their equity of redemption to
be cut off and terminated.
The equity of redemption is a common-law (non-statutory) right which
exists prior to completion of the foreclosure, is not waivable by the
Mortgagor, must be exercised prior to foreclosure sale and should be
distinguished from the post-sale statutory rights of redemption. In some
states, after sale pursuant to a deed of trust or foreclosure of a mortgage,
the Mortgagor and foreclosed junior lienors are given a statutory period in
which to redeem the property from the foreclosure sale. In some states,
statutory redemption may occur only upon payment of the foreclosure sale price.
In other states, redemption may be authorized if the former Mortgagor pays only
a portion of the sums due. The effect of a statutory right of redemption is to
diminish the ability of the lender to sell the foreclosed property. The
exercise of a right of redemption would defeat the title of any purchaser from
a foreclosure sale or sale under a deed of trust. Consequently, the practical
effect of the redemption right is to force the lender to maintain the property
and pay the expenses of ownership until the redemption period has expired. In
some states, a post-sale statutory right of redemption may exist following a
judicial foreclosure, but not following a trustee's sale under a deed of trust.
Under the REMIC Provisions and FASIT Provisions currently in effect,
property acquired by foreclosure generally must not be held beyond the close of
the third taxable year following the taxable year the property was acquired. To
the extent provided in the related Prospectus Supplement, with respect to a
Series of Certificates 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 longer than the permitted period 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 or FASIT
Provisions, as applicable. This grace period may be reduced for foreclosed
property other than real property or personal property incident to real
property by Treasury regulations under the FASIT Provisions (which have not yet
been issued). To the extent any such property may be acquired by a Trust Fund
making a FASIT election, the related Prospectus Supplement will specify the
applicable grace period beyond which the Trust FASIT may not hold such
foreclosed property.
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Anti-Deficiency Legislation
Some or all of the Mortgage Loans may be nonrecourse loans, as to which
recourse may be had only against the specific property securing the related
Mortgage Loan and a personal money judgment may not be obtained against the
Mortgagor. Even if a mortgage loan by its terms provides for recourse to the
Mortgagor, some states impose prohibitions or limitations on such recourse. For
example, statutes in some states limit the right of the lender to obtain a
deficiency judgment against the Mortgagor following foreclosure or sale under a
deed of trust. A deficiency judgment would be a personal judgment against the
former Mortgagor equal to the difference between the net amount realized upon
the public sale of the real property and the amount due to the lender. Some
states require the lender to exhaust the security afforded under a mortgage by
foreclosure in an attempt to satisfy the full debt before bringing a personal
action against the Mortgagor. In certain other states, the lender has the
option of bringing a personal action against the Mortgagor on the debt without
first exhausting such security; however, in some of these states, the lender,
following judgment on such personal action, may be deemed to have elected a
remedy and may be precluded from exercising remedies with respect to the
security. In some cases, a lender will be precluded from exercising any
additional rights under the note or mortgage if it has taken any prior
enforcement action. Consequently, the practical effect of the election
requirement, in those states permitting such election, is that lenders will
usually proceed against the security first rather than bringing a personal
action against the Mortgagor. Finally, other statutory provisions limit any
deficiency judgment against the former Mortgagor following a judicial sale to
the excess of the outstanding debt over the fair market value of the property
at the time of the public sale. The purpose of these statutes is generally to
prevent a lender from obtaining a large deficiency judgment against the former
Mortgagor as a result of low or no bids at the judicial sale.
Leasehold Risks
Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold
mortgages are subject to certain risks not associated with mortgage loans
secured by the fee estate of the Mortgagor. The most significant of these risks
is that the ground lease creating the leasehold estate could terminate, leaving
the leasehold mortgagee without its security. The ground lease may terminate
if, among other reasons, the ground lessee breaches or defaults in its
obligations under the ground lease or there is a bankruptcy of the ground
lessee or the ground lessor. This risk may be minimized if the ground lease
contains certain provisions protective of the mortgagee, but the ground leases
that secure Mortgage Loans may not contain some of these protective provisions,
and mortgages may not contain the other protections discussed in the next
paragraph. Protective ground lease provisions include the right of the
leasehold mortgagee to receive notices from the ground lessor of any defaults
by the Mortgagor; the right to cure such defaults, with adequate cure periods;
if a default is not susceptible of cure by the leasehold mortgagee, the right
to acquire the leasehold estate through foreclosure or otherwise; the ability
of the ground lease to be assigned to and by the leasehold mortgagee or
purchaser at a foreclosure sale and for the concomitant release of the ground
lessee's liabilities thereunder; and the right of the leasehold mortgagee to
enter into a new ground lease with the ground lessor on the same terms and
conditions as the old ground lease in the event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may
require that the ground lease or leasehold mortgage prohibit the ground lessee
from treating the ground lease as terminated in the event of the ground
lessor's bankruptcy and rejection of the ground lease by the trustee for the
debtor-ground lessor. As further protection, a leasehold mortgage may provide
for the assignment of the debtor-ground lessee's right to reject a lease
pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as amended (Title
11 of the United States Code) (the "Bankruptcy Code"), although the
enforceability of such clause has not been established. Without the protections
described above, a leasehold mortgagee may lose the collateral securing its
leasehold mortgage. In addition, terms and conditions of a leasehold mortgage
are subject to the terms and conditions of the ground lease. Although certain
rights given to a ground lessee can be limited by the terms of a leasehold
mortgage, the rights of a ground lessee or a leasehold mortgagee with respect
to, among other things, insurance, casualty and condemnation will be governed
by the provisions of the ground lease.
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Cooperative Loans
The cooperative shares owned by the tenant-stockholder and pledged to the
lender are, in almost all cases, subject to restrictions on transfer as set
forth in the Cooperative's Certificate of Incorporation and By-laws, as well as
the proprietary lease or occupancy agreement, and may be cancelled by the
cooperative for failure by the tenant- stockholder to pay rent or other
obligations or charges owed by such tenant-stockholder, including mechanics'
liens against the cooperative apartment building incurred by such
tenant-stockholder. The proprietary lease or occupancy agreement generally
permits the Cooperative to terminate such lease or agreement in the event an
obligor fails to make payments or defaults in the performance of covenants
required thereunder. Typically, the lender and the Cooperative enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder under the
proprietary lease or occupancy agreement will usually constitute a default
under the security agreement between the lender and the tenant-stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement is terminated, the Cooperative will recognize the lender's lien
against proceeds from the sale of the Cooperative apartment, subject, however,
to the Cooperative's right to sums due under such proprietary lease or
occupancy agreement. The total amount owed to the Cooperative by the
tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the value of the collateral below the outstanding
principal balance of the Cooperative Loan and accrued and unpaid interest
thereon.
Recognition agreements also provide that in the event of a foreclosure on
a Cooperative Loan, the lender must obtain the approval or consent of the
Cooperative as required by the proprietary lease before transferring the
Cooperative shares or assigning the proprietary lease. Generally, the lender is
not limited in any rights it may have to dispossess the tenant-stockholders.
In some states, foreclosure on the Cooperative shares is accomplished by a
sale in accordance with the provisions of Article 9 of the UCC and the security
agreement relating to those shares. Article 9 of the UCC requires that a sale
be conducted in a "commercially reasonable" manner. Whether a foreclosure sale
has been conducted in a "commercially reasonable" manner will depend on the
facts in each case. In determining commercial reasonableness, a court will look
to the notice given the debtor and the method, manner, time, place and terms of
the foreclosure. Generally, a sale conducted according to the usual practice of
banks selling similar collateral will be considered reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be
applied first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to reimbursement
is subject to the right of the Cooperatives to receive sums due under the
proprietary lease or occupancy agreement. If there are proceeds remaining, the
lender must account to the tenant-stockholder for the surplus. Conversely, if a
portion of the indebtedness remains unpaid, the tenant-stockholder is generally
responsible for the deficiency.
In the case of foreclosure on a building which was converted from a rental
building to a building owned by a Cooperative under a non-eviction plan, some
states require that a purchaser at a foreclosure sale take the property subject
to rent control and rent stabilization laws which apply to certain tenants who
elected to remain in the building was so converted.
BANKRUPTCY LAWS
The Bankruptcy Code and related state laws may interfere with or affect
the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings) are
automatically stayed upon the filing of the bankruptcy petition and, usually,
no interest or principal payments are made and no interest accrues during the
course of the bankruptcy case. The delay and the consequences thereof caused by
such automatic stay can be significant. Also, under the Bankruptcy Code, the
filing of a petition in bankruptcy by or on behalf of a junior lienor may stay
the senior lender from taking action to foreclose out such junior lien.
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Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage secured
by property of the debtor may be modified under certain circumstances. In some
circumstances, the outstanding amount of the loan secured by the real property
may be reduced to the then-current value of the property pursuant to a
confirmed plan or lien avoidance proceeding, thus leaving the lender with a
general unsecured claim for the difference between such value and the
outstanding balance of the loan. Other modifications may include the reduction
in the amount of each scheduled payment, which reduction may result from a
reduction in the rate of interest and/or the alteration of the repayment
schedule (with or without affecting the unpaid principal balance of the loan),
and/or an extension (or reduction) of the final maturity date. It is possible
that a bankruptcy court would confirm a plan of reorganization, based on the
particular facts of the reorganization case, that provided for the curing of a
mortgage loan default through payment of arrearages over a number of years.
Also, under federal bankruptcy law, a bankruptcy court may permit a debtor
through its plan of reorganization to de-accelerate a secured loan and to
reinstate the loan even though the lender accelerated the mortgage loan and
final judgment of foreclosure had been entered in state court (provided no sale
of the property had yet occurred) prior to the filing of the debtor's petition.
Federal bankruptcy law provides generally that rights and obligation under
an unexpired lease of the debtor may not be terminated or modified at any time
after the commencement of a case under the Bankruptcy Code solely on the basis
of a provision in the lease that is conditioned upon the commencement of the
bankruptcy case or certain other similar events. This prohibition on so-called
"ipso facto clauses" could limit the ability of the Trustee for a Series of
Certificates to exercise certain contractual remedies with respect to the
Leases.
In addition, Section 362 of the Bankruptcy Code operates as an automatic
stay of, among other things, any act to obtain possession of property from a
debtor's estate, which may delay a Trustee's exercise of such remedies for a
related Series of Certificates in the event that a related Lessee or a related
Mortgagor becomes the subject of a proceeding under the Bankruptcy Code. For
example, a mortgagee would be stayed from enforcing a Lease Assignment by a
Mortgagor related to a Mortgaged Property if the related Mortgagor were in a
bankruptcy proceeding. The legal proceedings necessary to resolve the issues
could be time-consuming and might result in significant delays in the receipt
of the assigned rents. Similarly, the filing of a petition in bankruptcy by or
on behalf of a Lessee of a Mortgaged Property would result in a stay against
the commencement or continuation of any state court proceeding for past due
rent, for accelerated rent, for damages or for a summary eviction order with
respect to a default under the Lease that occurred prior to the filing of the
Lessee's petition. An assignment of rents and other proceeds of a Mortgage Loan
may not be respected in bankruptcy if the assignment is not fully and timely
perfected under state law prior to commencement of the bankruptcy proceeding.
See "--Leases and Rents" above.
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume a lease
and retain it or assign it to a third party or (b) reject the lease. If a lease
under which the debtor is a lessee is assumed, the trustee in bankruptcy on
behalf of the lessee, or the lessee as debtor-in-possession, or the assignee,
if applicable, must cure any defaults under the lease, compensate the lessor
for its losses and provide the lessor with "adequate assurance" of future
performance. Such remedies may be insufficient, however, as the lessor may be
forced to continue under the lease with a lessee that is a poor credit risk or
an unfamiliar tenant if the lease was assigned, and any assurances provided to
the lessor may, in fact, be inadequate. If the lease is rejected, such
rejection generally constitutes a breach of the lease immediately before the
date of the filing of the petition. As a consequence, the other party or
parties to such lease, such as the Mortgagor, as lessor under a Lease, would
have only an unsecured claim against the debtor for damages resulting from such
breach, which could adversely affect the security for the related Mortgage
Loan. In addition, pursuant to Section 502(b)(6) of the Bankruptcy Code, a
lessor's damages for lease rejection in respect of future rent installments are
limited to the rent reserved by the lease, without acceleration, for the
greater of one year or 15%, not to exceed three years, of the remaining term of
the lease.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as
debtor-in-possession, rejects an unexpired lease of real property, the lessee
may generally treat such lease as terminated by such rejection or, in the
alternative, the lessee may retain its rights under the lease (including
possession) for the balance of such term and for any renewal or extension of
such term to the extent such rights are enforceable by the lessee under
applicable nonbankruptcy law. The Bankruptcy Code provides that if a lessee
elects to remain in possession after such a
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rejection of a lease, the lessee may offset against rents reserved under the
lease for the balance of the term after the date of rejection of the lease, and
any renewal or extension thereof, any damages caused by the nonperformance
after such date of any obligation of the lessor under the lease. To the extent
provided in the related Prospectus Supplement, the Lessee will agree under
certain Leases to pay all amounts owing thereunder to the Master Servicer
without offset. To the extent that such a contractual obligation remains
enforceable against the Lessee, the Lessee would not be able to avail itself of
the rights of offset generally afforded to lessees of real property under the
Bankruptcy Code in the event their lessors become the subject of bankruptcy
proceedings.
In a bankruptcy or similar proceeding of a Mortgagor, action may be taken
seeking the recovery, as a preferential transfer or on other grounds, of any
payments made by the Mortgagor, or made directly by the related Lessee, under
the related Mortgage Loan to the Trust Fund. Payments on long-term debt may be
protected from recovery as preferences if they are payments in the ordinary
course of business made on debts incurred in the ordinary course of business.
Whether any particular payment would be protected depends upon the facts
specific to a particular transaction.
A trustee in bankruptcy or debtor in possession, in some cases, may be
entitled to collect its costs and expenses in preserving or selling the
mortgaged property ahead of payment to the lender. In certain circumstances, a
bankruptcy court may authorize the granting of liens senior to the lien of a
mortgage, and certain state statutes and general principles of equity may also
provide a Mortgagor with means to halt a foreclosure proceeding or sale and to
force a restructuring of a mortgage loan on terms a lender would not otherwise
accept. Moreover, the laws of certain states also give priority to certain tax
liens over the lien of a mortgage or deed of trust. In addition, under the
Bankruptcy Code, if the court finds that the mortgagee engaged in inequitable
conduct, the mortgagee's claim may be subordinated to the claims of unsecured
creditors.
To the extent described in the related Prospectus Supplement, certain of
the Mortgagors may be partnerships. The laws governing limited partnerships in
certain states provide that the commencement of a case under the Bankruptcy
Code with respect to a general partner will cause a person to cease to be a
general partner of the limited partnership, unless otherwise provided in
writing in the limited partnership agreement. This provision may be construed
as an "ipso facto" clause and, in the event of the general partner's
bankruptcy, may not be enforceable. To the extent described in the related
Prospectus Supplement, certain limited partnership agreements of the Mortgagors
may provide that the commencement of a case under the Bankruptcy Code with
respect to the related general partner constitutes an event of withdrawal
(assuming the enforceability of the clause is not challenged in bankruptcy
proceedings or, if challenged, is upheld) that might trigger the dissolution of
the limited partnership, the winding up of its affairs and the distribution of
its assets, unless (i) at the time there was at least one other general partner
and the written provisions of the limited partnership agreement permit the
business of the limited partnership to be carried on by the remaining general
partner, and the general partner does so or (ii) the written provisions of the
limited partnership agreement permit the limited partners to agree within a
specified time frame (often 60 days) after such withdrawal to continue the
business of the limited partnership and to appoint one or more general partners
and the limited partners do so. In addition, the laws governing general
partnerships in certain states provide that the commencement of a case under
the Bankruptcy Code or state insolvency laws with respect to a general partner
of such partnerships triggers the dissolution of such partnership, the winding
up of its affairs and the distribution of its assets. Such state laws, however,
may not be enforceable or effective in a bankruptcy case. The dissolution of a
Mortgagor, the winding up of its affairs and the distribution of its assets
could result in an acceleration of its payment obligation under a related
Mortgage Loan, which may reduce the yield on the related Series of Certificates
in the same manner as a principal prepayment.
In addition, the bankruptcy of the general partner of a Mortgagor that is
a partnership may provide the opportunity for a trustee in bankruptcy for such
general partner, such general partner as a debtor-in-possession, or a creditor
of such general partner to obtain an order from a court consolidating the
assets and liabilities of the general partner with those of the Mortgagor
pursuant to the doctrine of substantive consolidation. In such a case, the
respective Mortgaged Property, for example, would become property of the estate
of such bankrupt general partner. Not only would the Mortgaged Property be
available to satisfy the claims of creditors of such general partner, but an
automatic stay would apply to any attempt by the Trustee to exercise remedies
with respect to such Mortgaged
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Property. However, such an occurrence should not affect the Trustee's status as
a secured creditor with respect to the Mortgagor or its security interest in
the Mortgaged Property.
ENVIRONMENTAL LEGISLATION
Real property pledged as security to a lender may be subject to unforeseen
environmental liabilities. Of particular concern may be those Mortgaged
Properties which are, or have been, the site of manufacturing, industrial or
disposal activity or that are in close proximity to such properties. Such
environmental liabilities may give rise to (i) a diminution in value of
property securing any Mortgage Loan, (ii) limitation on the ability to
foreclose against such property or (iii) in certain circumstances as more fully
described below, liability for clean up costs or other remedial actions, which
liability could exceed the value of the principal balance of the related
Mortgage Loan or of such Mortgaged Property.
Under the laws of many states and to some degree under Federal law,
contamination on a property may give rise to a lien on the property for cleanup
costs. In several states, such a lien has priority over all existing liens (a
"superlien") including those of existing mortgages; in these states, the lien
of a mortgage contemplated by this transaction may lose its priority to such a
superlien.
The presence of hazardous or toxic substances, or the failure to remediate
such property properly, may adversely affect the market value of the property,
as well as the owner's ability to sell or use the real estate or to borrow
using the real estate as collateral. In addition, certain environmental laws
and common law principles govern the responsibility for the removal,
encapsulation or disturbance of asbestos containing materials ("ACMs") when
these ACMs are in poor condition or when a property with ACMs is undergoing
repair, renovation or demolition. Such laws could also be used to impose
liability upon owners and operators of real properties for release of ACMs into
the air that cause personal injury or other damage. In addition to cleanup and
natural resource damages actions brought by federal, state, and local agencies
and private parties, the presence of hazardous substances on a property may
lead to claims of personal injury, property damage, or other claims by private
plaintiffs.
Under the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), a lender may be liable either to
the government or to private parties for cleanup costs on a property securing a
loan, even if the lender does not cause or contribute to the contamination.
CERCLA imposes strict, as well as joint and several, liability on several
classes of potentially responsible parties, including current owners and
operators of the property, regardless of whether they caused or contributed to
the contamination. Many states have laws similar to CERCLA.
Lenders may be held liable under CERCLA as owners or operators. Excluded
from CERCLA's definition of "owner or operator," however, is a person "who
without participating in the management of the facility, holds indicia of
ownership primarily to protect his security interest." This exemption for
holders of a security interest such as a secured lender applies only in
circumstances where the lender acts to protect its security interest in the
contaminated facility or property. Thus, if a lender's activities encroach on
the actual management of such facility or property, the lender faces potential
liability as an "owner or operator" under CERCLA. Similarly, when a lender
forecloses and takes title to a contaminated facility or property (whether it
holds the facility or property as an investment or leases it to a third party),
the lender may incur potential CERCLA liability.
A decision in May 1990 of the United States Court of Appeals for the
Eleventh Circuit in United States v. Fleet Factors Corp. very narrowly
construed CERCLA's secured-creditor exemption. The court held that a lender
need not have involved itself in the day-to-day operations of the facility or
participated in decisions relating to hazardous waste to be liable under
CERCLA; rather, liability could attach to a lender if its involvement with the
management of the facility is broad enough to support the inference that the
lender had the capacity to influence the borrower's treatment of hazardous
waste. The court added that a lender's capacity to influence such decision
could be inferred from the extent of its involvement in the facility's
financial management.
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On April 29, 1992, in response to the decision in Fleet Factors Corp., the
United States Environmental Protection Agency (the "EPA") adopted a rule
interpreting and delineating CERCLA's secured-creditor exemption in EPA
enforcement proceedings. The rule attempted to define and specify the range of
permissible actions that may be undertaken by a foreclosing lender/holder of a
contaminated facility without exceeding the bounds of the secured- creditor
exemption. The rule also attempted to specify the circumstances under which
governmental or government-appointed entities that acquire possession or
control of contaminated facilities as conservators or receivers will be
considered "involuntary" owners for purposes of CERCLA's "innocent landowner"
defense to liability. Issuance of this rule by the EPA under CERCLA did not
necessarily affect the potential for liability in actions by either a state or
a private party under CERCLA or in actions under other federal or state laws
which may impose liability on "owners or operators" but did not incorporate the
secured-creditor exemption.
The validity of the EPA rule was challenged in the U.S. Court of Appeals
for the District of Columbia in Kelley v. EPA. In an opinion issued on February
4, 1994, the D.C. Circuit Court invalidated EPA's lender liability rule,
holding that EPA exceeded its authority in enacting the rule. The U.S. Supreme
Court denied certiorari on January 17, 1995. In response, the Department of
Justice ("DOJ") and the Agency issued a policy statement entitled "The Effect
of Superfund on Lenders That Hold Security Interests in Contaminated Property,"
published in the Federal Register in Volume 60, Number 237, at pages 63517 to
63519 (December 11, 1995). That policy statement directed parties to the voided
rule as the Agency's definitive view on CERCLA's secured creditor exemption,
and stated that EPA and DOJ will generally follow the approach of the Lender
Liability Rule and its preamble when exercising their enforcement discretion
with respect to lenders.
Under the Kelley case, the secured-creditor exemption under CERCLA will be
subject to existing case law interpretations. Some of those cases have
interpreted the exemption extremely narrowly, but most of the cases since
promulgation of the EPA rule have held that a lender is entitled to the
protection of the secured-creditor exemption provided that a lender complies
with the provisions set out in the EPA rule and does not itself (or through its
agents) cause or contribute to contamination. As a result of Kelley, the cases
applying the EPA rule have little, if any, precedential value and, thus,
lenders expected a return to the narrower interpretations of the exemption. In
fact, recent judicial opinions indicate that a court facing lender liability
issues is likely to apply principles and rationale that are consistent with EPA
and DOJ's Lender Policy. See, e.g., United States v. Wallace, 893 F. Supp. 627
(N.D. Tex. 1995); Z & Z Leasing, Inc. v. Graying Reel, Inc., 873 F. Supp. 51
(E.D. Mich. 1995); Kemp Industries, Inc. v. Safety Light Corp., 857 F. Supp.
373 (D.N.J. 1994).
Finally, as part of the Omnibus Consolidated Appropriations Bill for
Fiscal Year 1997 signed by President Clinton on September 30, 1996, Congress
enacted the Asset Conservation, Lender Liability, and Deposit Insurance
Protection Act of 1996 ("the Act"). The Act includes lender and fiduciary
liability amendments to CERCLA, amendments to the secured creditor exemption
set forth in Subtitle I of RCRA, and validation of the portion of the CERCLA
Lender Liability Rule that addresses involuntary acquisitions by government
entities. The amendments made by the Act apply to all claims not finally
adjudicated as of September 30, 1996, which include all cases that are in the
process of being settled, and are generally based on the CERCLA Lender
Liability Rule. However, the amendments do not explicitly describe the steps a
lender can take to avoid liability after foreclosure.
The secured-creditor exemption does not protect a lender from liability
under CERCLA in cases where the lender arranges for disposal of hazardous
substances or for transportation of hazardous substances. The definition of
"hazardous substances" under CERCLA specifically excludes petroleum products,
and the secured-creditor exemption does not govern liability for cleanup costs
under federal laws other than CERCLA, in particular Subtitle I of the federal
Resource Conservation and Recovery Act ("RCRA"), which regulates underground
petroleum (other than heating oil) storage tanks. However, the EPA adopted a
lender liability rule for underground storage tanks under Subtitle I of RCRA.
Under such rule, a holder of a security interest in an underground storage tank
or real property containing an underground storage tank is not considered an
operator of the underground storage tank as long as petroleum is not added to,
stored in or dispensed from the tank. It should be noted, however, that
liability for cleanup of petroleum contamination may be governed by state law,
which may not provide for any specific protections for secured creditors.
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In a few states, transfer of some types of properties is conditioned upon
clean up of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed-in-lieu of
foreclosure or otherwise, may be required to cleanup the contamination before
selling or otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law
causes of action (for example, actions based on nuisance or on toxic tort
resulting in death, personal injury or damage to property) related to hazardous
environmental conditions on a property. While it may be more difficult to hold
a lender liable in such cases, unanticipated or uninsurable liabilities of the
borrower may jeopardize the borrower's ability to meet its loan obligations.
If a lender is or becomes liable, it may bring an action for contribution
against the owner or operator who created the environmental hazard, but that
person or entity may be bankrupt or otherwise judgment proof. It is possible
that cleanup costs could become a liability of the Trust Fund and occasion a
loss to Certificateholders in certain circumstances described above if such
remedial costs were incurred.
The related Agreement will provide that the Special Servicer, acting on
behalf of the Trustee, may not acquire title to a Mortgaged Property or take
over its operation unless the Special Servicer has previously determined, based
on a report prepared by a person who regularly conducts environmental
assessments, that: (i) such Mortgaged Property is in compliance with applicable
environmental laws, or, if not, that taking such actions as are necessary to
bring the Mortgaged Property in compliance therewith is likely to produce a
greater recovery on a present value basis, after taking into account any risks
associated therewith, than not taking such actions and (ii) there are no
circumstances present at the Mortgaged Property relating to the use, management
or disposal of any Hazardous Materials for which investigation, testing,
monitoring, containment, clean-up or remediation could be required under any
federal, state or local law or regulation. This requirement effectively
precludes enforcement of the security for the related Mortgage Note until a
satisfactory environmental inquiry is undertaken, or that, if any Hazardous
Materials are present for which such action could be required, taking such
actions with respect to the affected Mortgaged Property is reasonably likely to
produce a greater recovery on a present value basis, after taking into account
any risks associated therewith, than not taking such actions, reducing the
likelihood that a given Trust Fund will become liable for any condition or
circumstance that may give rise to any environmental claim (an "Environmental
Hazard Condition") affecting a Mortgaged Property, but making it more difficult
to realize on the security for the Mortgage Loan. However, there can be no
assurance that any environmental assessment obtained by the Special Servicer
will detect all possible Environmental Hazard Conditions, that any estimate of
the costs of effecting compliance at any Mortgaged Property and the recovery
thereon will be correct, or that the other requirements of the Agreement, even
if fully observed by the Master Servicer or Special Servicer, as the case may
be, will in fact insulate a given Trust Fund from liability for Environmental
Hazard Conditions. Any additional restrictions on acquiring titles to a
Mortgaged Property may be set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the
Depositor generally will not have determined whether environmental assessments
have been conducted with respect to the Mortgaged Properties relating to the
Mortgage Loans included in the Mortgage Pool for a Series, and it is likely
that any environmental assessments which would have been conducted with respect
to any of the Mortgaged Properties would have been conducted at the time of the
origination of the related Mortgage Loans and not thereafter.
"Hazardous Materials" are generally defined under several federal and
state statutes, and include dangerous toxic or hazardous pollutants, chemicals,
wastes or substances, including, without limitation, those so identified
pursuant to CERCLA, and specifically including, asbestos and asbestos
containing materials, polychlorinated biphenyls, radon gas, petroleum and
petroleum products and urea formaldehyde.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
Certain of the Mortgage Loans may contain due-on-sale and
due-on-encumbrance clauses. These clauses generally provide that the lender may
accelerate the maturity of the loan if the Mortgagor sells or otherwise
transfers or encumbers the mortgaged property. Certain of these clauses may
provide that, upon an attempted breach thereof
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by the Mortgagor of an otherwise non-recourse loan, the Mortgagor becomes
personally liable for the mortgage debt. The enforceability of due-on-sale
clauses has been the subject of legislation or litigation in many states and,
in some cases, the enforceability of these clauses was limited or denied.
However, with respect to certain loans the Garn-St Germain Depository
Institutions Act of 1982 preempts state constitutional, statutory and case law
that prohibits the enforcement of due-on-sale clauses and permits lenders to
enforce these clauses in accordance with their terms subject to certain limited
exceptions. To the extent provided in the related Prospectus Supplement, the
Master Servicer on behalf of the Trust Fund, will determine whether to exercise
any right the Trustee may have as mortgagee to accelerate payment of any such
Mortgage Loan or to withhold its consent to any transfer or further encumbrance
in a manner consistent with the Servicing Standard.
In addition, under federal bankruptcy laws, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances, be
eliminated in any modified mortgage resulting from such bankruptcy proceeding.
SUBORDINATE FINANCING
Where the Mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the Mortgagor
may have difficulty servicing and repaying multiple loans. In addition, if the
junior loan permits recourse to the Mortgagor (as junior loans often do) and
the senior loan does not, a Mortgagor may be more likely to repay sums due on
the junior loan than those on the senior loan. Second, acts of the senior
lender that prejudice the junior lender or impair the junior lender's security
may create a superior equity in favor of the junior lender. For example, if the
Mortgagor and the senior lender agree to an increase in the principal amount of
or the interest rate payable on the senior loan, the senior lender may lose its
priority to the extent any existing junior lender is harmed or the Mortgagor is
additionally burdened. Third, if the Mortgagor defaults on the senior loan
and/or any junior loan or loans, the existence of junior loans and actions
taken by junior lenders can impair the security available to the senior lender
and can interfere with or delay the taking of action by the senior lender.
Moreover, the bankruptcy of a junior lender may operate to stay foreclosure or
similar proceedings by the senior lender.
DEFAULT INTEREST, PREPAYMENT CHARGES AND PREPAYMENTS
Forms of notes and mortgages used by lenders may contain provisions
obligating the Mortgagor to pay a late charge or additional interest if
payments are not timely made, and in some circumstances may provide for
prepayment fees or yield maintenance penalties if the obligation is paid prior
to maturity or prohibit such prepayment for a specified period. In certain
states, there are or may be specific limitations upon the late charges which a
lender may collect from a Mortgagor for delinquent payments. Certain states
also limit the amounts that a lender may collect from a Mortgagor as an
additional charge if the loan is prepaid. The enforceability, under the laws of
a number of states of provisions providing for prepayment fees or penalties
upon, or prohibition of, an involuntary prepayment is unclear, and no assurance
can be given that, at the time a Prepayment Premium is required to be made on a
Mortgage Loan in connection with an involuntary prepayment, the obligation to
make such payment, or the provisions of any such prohibition, will be
enforceable under applicable state law. The absence of a restraint on
prepayment, particularly with respect to Mortgage Loans having higher Mortgage
Interest Rates, may increase the likelihood of refinancing or other early
retirements of the Mortgage Loans.
ACCELERATION ON DEFAULT
To the extent specified in the related Prospectus Supplement, some of the
Mortgage Loans included in the Mortgage Pool for a Series will include a
"debt-acceleration" clause, which permits the lender to accelerate the full
debt upon a monetary or nonmonetary default of the Mortgagor. The courts of all
states will enforce clauses providing for acceleration in the event of a
material payment default after giving effect to any appropriate notices. The
equity courts of the state, however, may refuse to foreclose a mortgage or deed
of trust when an acceleration of the indebtedness would be inequitable or
unjust or the circumstances would render the acceleration unconscionable.
Furthermore, in some states, the Mortgagor may avoid foreclosure and reinstate
an accelerated loan by paying only the defaulted amounts and the costs and
attorneys' fees incurred by the lender in collecting such defaulted payments.
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APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential (including
multifamily but not other commercial) first mortgage loans originated by
certain lenders after March 31, 1980. A similar federal statute was in effect
with respect to mortgage loans made during the first three months of 1980. The
statute authorized any state to reimpose interest rate limits by adopting,
before April 1, 1983, a law or constitutional provision that expressly rejects
application of the federal law. In addition, even where Title V is not so
rejected, any state is authorized by the law to adopt a provision limiting
discount points or other charges on mortgage loans covered by Title V. Certain
states have taken action to reimpose interest rate limits and/or to limit
discount points or other charges.
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.
The Depositor has been advised by counsel 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.
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 borrower 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 borrower to cancel the recorded mortgage or
deed of trust without any payment or prohibiting the lender from foreclosing.
CERTAIN LAWS AND REGULATIONS; TYPES OF MORTGAGED PROPERTIES
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in material
diminution in the value of a Mortgage Property which could, together with the
possibility of limited alternative uses for a particular Mortgaged Property
(e.g., a nursing or convalescent home or hospital), result in a failure to
realize the full principal amount of the related Mortgage Loan. Mortgages on
Mortgaged Properties which are owned by the Mortgagor under a condominium form
of ownership are subject to the declaration, by-laws and other rules and
regulations of the condominium association. Mortgaged Properties which are
hotels or motels may present additional risk in that hotels and motels are
typically operated pursuant to franchise, management and operating agreements
which may be terminable by the operator, and the transferability of the hotel's
operating, liquor and other licenses to the entity acquiring the hotel either
through purchases or foreclosure is subject to the vagaries of local law
requirements. In addition, Mortgaged Properties which are multifamily
residential properties may be subject to rent control laws, which could impact
the future cash flows of such properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which are
structural in nature from existing places of public accommodation to the extent
"readily achievable." In addition, under the ADA, alterations to a place of
public accommodation or a
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commercial facility are to be made so that, to the maximum extent feasible,
such altered portions are readily accessible to and usable by disabled
individuals. The "readily achievable" standard takes into account, among other
factors, the financial resources of the affected site, owner, landlord or other
applicable person. In addition to imposing a possible financial burden on the
Mortgagor in its capacity as owner or landlord, the ADA may also impose such
requirements on a foreclosing lender who succeeds to the interest of the
Mortgagor as owner of landlord. Furthermore, since the "readily achievable"
standard may vary depending on the financial condition of the owner or
landlord, a foreclosing lender who is financially more capable than the
Mortgagor of complying with the requirements of the ADA may be subject to more
stringent requirements than those to which the Mortgagor is subject.
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, unless otherwise specified in the
related Prospectus Supplement, any form of Credit Support provided in
connection with such Certificates. In addition, the Relief Act imposes
limitations that would impair the ability of the servicer to foreclose on an
affected Mortgage Loan during the Mortgagor's period of active duty status,
and, under certain circumstances, during an additional three month period
thereafter. Thus, in the event that such a Mortgage Loan goes into default,
there may be delays and losses occasioned thereby.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("Rico") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the "Crime
Control Act"), the government may seize the property even before conviction.
The government must publish notice of the forfeiture proceeding and may give
notice to all parties "known to have an alleged interest in the property,"
including the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
Rico activities.
FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Offered Certificates
is based on the advice of Latham & Watkins, counsel to the Depositor. This
summary is based on laws, regulations, including the REMIC regulations
promulgated by the Treasury Department (the "REMIC Regulations"), rulings and
decisions now in effect or (with respect to regulations) proposed, all of which
are subject to change either prospectively or retroactively. Latham & Watkins
will deliver an opinion to the Depositor that the information set forth under
this caption, "Federal Income Tax Consequences," to the extent that it
constitutes matters of law or legal conclusions, is correct in all material
respects.
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This summary does not address the federal income tax consequences of an
investment in Certificates applicable to all categories of investors, some of
which (for example, banks and insurance companies) may be subject to special
rules or, except as expressly indicated, to investors that do not acquire
Certificates in an initial offering. Prospective investors should consult their
tax advisors regarding the federal, state, local and any other tax consequences
to them of the purchase, ownership and disposition of Certificates.
GENERAL
The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust Fund, or a
segregated portion thereof, relating to a particular Series of Certificates as
a REMIC or a FASIT under the Code. The Prospectus Supplement for each Series of
Certificates will specify whether a REMIC election or a FASIT election will be
made.
GRANTOR TRUST FUNDS
If a REMIC election or a FASIT election is not made and the related
Prospectus Supplement indicates that the Trust Fund will be treated as a
grantor trust, Latham & Watkins will deliver its opinion that the Trust Fund
will not be classified as an association taxable as a corporation and that each
such Trust Fund will be classified as a grantor trust under subpart E, Part I
of subchapter J of the Code. In this case, owners of Certificates will be
treated for federal income tax purposes as owners of a portion of the Trust
Fund's assets as described below.
A. SINGLE CLASS OF GRANTOR TRUST CERTIFICATES
Characterization. The Trust Fund may be created with one class of Grantor
Trust Certificates. In this case, each Grantor Trust Certificateholder will be
treated as the owner of a pro rata undivided interest in the interest and
principal portions of the Trust Fund represented by the Grantor Trust
Certificates and will be considered the equitable owner of a pro rata undivided
interest in each of the Mortgage Assets in the Pool. In general, any amounts
received by a Grantor Trust Certificateholder in lieu of amounts due with
respect to any Mortgage Asset because of a default or delinquency in payment
will be treated for federal income tax purposes as having the same character as
the payments they replace.
Tax Treatment of Income and Expense. Each Grantor Trust Certificateholder
will be required to report on its federal income tax return in accordance with
such Grantor Trust Certificateholder's method of accounting its pro rata share
of the entire income from the Mortgage Loans in the Trust Fund represented by
Grantor Trust Certificates, including interest, original issue discount
("OID"), if any, prepayment fees, assumption fees, any gain recognized upon an
assumption and late payment charges received by the Master Servicer. Under Code
Sections 162 or 212 each Grantor Trust Certificateholder will be entitled to
deduct its pro rata share of servicing fees, prepayment fees, assumption fees,
any loss recognized upon an assumption and late payment charges retained by the
Master Servicer, provided that such amounts are reasonable compensation for
services rendered to the Trust Fund. Grantor Trust Certificateholders that are
individuals, estates or trusts will be entitled to deduct their share of
expenses as itemized deductions only to the extent such expenses plus all other
Code Section 212 expenses exceed two percent of their adjusted gross income. In
addition, the amount of itemized deductions otherwise allowable for the taxable
year for an individual whose adjusted gross income exceeds the applicable
amount under Code Section 68(b) (which amount will be adjusted for inflation)
will be reduced by the lesser of (i) 3% of the excess of adjusted gross income
over the applicable amount or (ii) 80% of the amount of itemized deductions
otherwise allowable for such taxable year. In general, a Grantor Trust
Certificateholder using the cash method of accounting must take into account
its pro rata share of income as and when collected by or paid to the Master
Servicer, or, with respect to original issue discount or certain other income
items for which the Certificateholder has made an election, as such amounts are
accrued by the Trust Fund on a constant interest basis, and will be entitled to
claim its pro rata share of deductions (subject to the foregoing limitations)
when such amounts are paid or such Certificateholder would otherwise be
entitled to claim such deductions had it held the Mortgage Assets directly. A
Grantor Trust Certificateholder using an accrual method of accounting generally
must take into account its pro rata share of income as payment becomes due or
is made to the Master Servicer, whichever is earlier and may deduct its pro
rata share of expense items (subject to the foregoing limitations) when such
amounts are paid or would otherwise be deductible had the Certificateholder
held the Mortgage Assets directly. If the servicing fees paid to the Master
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Servicer are deemed to exceed reasonable servicing compensation, the amount of
such excess could be considered as an ownership interest retained by the Master
Servicer (or any person to whom the Master Servicer assigned for value all or a
portion of the servicing fees) in a portion of the interest payments on the
Mortgage Assets. The Mortgage Assets would then be subject to the "coupon
stripping" rules of the Code discussed below.
Treatment of Certain Owners. Unless otherwise specified in the related
Prospectus Supplement, as to each Series of Certificates evidencing an interest
in a Trust Fund comprised of Mortgage Loans, counsel to the Depositor will have
advised the Depositor that, except as described below under "B. Multiple
Classes of Grantor Trust Certificates -- Treatment of Certain Owners":
(i) a Grantor Trust Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a)(19) representing
principal and interest payments on Mortgage Assets will be considered to
represent "loans . . . secured by an interest in real property which is .
. . residential property" within the meaning of Code Section
7701(a)(19)(C)(v), to the extent that the Mortgage Assets represented by
that Grantor Trust Certificate are of a type described in such Code
section;
(ii) a Grantor Trust Certificate owned by a real estate investment trust
representing an interest in Mortgage Assets will be considered to
represent "real estate assets" within the meaning of Code Section
856(c)(4)(A), and interest income on the Mortgage Assets will be
considered "interest on obligations secured by mortgages on real property"
within the meaning of Code Section 856(c)(3)(B), to the extent that the
Mortgage Assets represented by that Grantor Trust Certificate are of a
type described in such Code section; and
(iii) a Grantor Trust Certificate owned by a REMIC will represent an
"obligation . . . which is principally secured by an interest in real
property" within the meaning of Code Section 860G(a)(3).
Stripped Bonds and Coupons. Certain Trust Funds may consist of Government
Securities which constitute "stripped bonds" or "stripped coupons" as those
terms are defined in Section 1286 of the Code, and, as a result, such assets
would be subject to the stripped bond provisions of the Code. Under these
rules, such Government Securities are treated as having OID based on the
purchase price and the stated redemption price at maturity of each Government
Security. As such, Grantor Trust Certificateholders would be required to
include in income their pro rata share of the OID on each Government Security
recognized in any given year on an economic accrual basis even if the Grantor
Trust Certificateholder is a cash method taxpayer. Accordingly, the sum of the
income includible to the Grantor Trust Certificateholder in any taxable year
may exceed amounts actually received by the Certificateholder during such year.
Premium. The price paid for a Grantor Trust Certificate by a holder will
be allocated to such holder's undivided interest in each Mortgage Asset based
on each Mortgage Asset's relative fair market value, so that such holder's
undivided interest in each Mortgage Asset will have its own tax basis. A
Grantor Trust Certificateholder that is treated as acquiring an interest in
Mortgage Assets at a premium may elect to amortize such premium under a
constant interest method, provided that the underlying mortgage loans with
respect to such Mortgage Assets were originated after September 27, 1985.
Premium allocable to mortgage loans originated on or before September 27, 1985
should be allocated among the principal payments on such mortgage loans and
allowed as an ordinary deduction as principal payments are made. Amortizable
bond premium will be treated as an offset to interest income on such Grantor
Trust Certificate. The basis for such Grantor Trust Certificate will be reduced
to the extent that amortizable premium is applied to offset interest payments.
It is not clear whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable under Code Section 171. A
Certificateholder that makes this election for a Mortgage Asset or any other
debt instrument that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Certificateholder holds during the year of
the election or thereafter.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate representing an interest
in a Mortgage Loan or a Mortgage Asset acquired at a premium should recognize a
loss if a Mortgage Loan (or an underlying mortgage loan with respect to a
Mortgage Asset)
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prepays in full, equal to the amount by which the portion of the prepaid
principal amount of such Mortgage Loan (or underlying mortgage loan) that is
allocable to the Certificate is less than the portion of the adjusted basis of
the Certificate that is allocable to such Mortgage Loan (or underlying mortgage
loan), if any. If a reasonable prepayment assumption is used to amortize such
premium, it appears that such a loss would be available, if at all, only if
prepayments have occurred at a rate faster than the reasonable assumed
prepayment rate. It is not clear whether any other adjustments would be
required to reflect differences between an assumed prepayment rate and the
actual rate of prepayments.
On December 30, 1997, the IRS issued final regulations (the "Amortizable
Bond Premium Regulations") dealing with amortizable bond premium. These
regulations generally will be effective for bonds issued or acquired on or
after March 2, 1998 (or, for holders making an election for the taxable year
that includes March 2, 1998 or any subsequent taxable year, shall apply to
bonds held on or after the first day of the taxable year of such election). The
Amortizable Bond Premium Regulations specifically do not apply to prepayable
debt instruments or any pool of debt instruments, such as the Trust Fund, the
yield on which may be affected by prepayments subject to Code Section
1272(a)(6)(C). Absent further guidance from the IRS, the Trustee intends to
account for amortizable bond premium in the manner described above. Prospective
purchasers of Certificates should consult their tax advisors regarding the
possible application of the Amortizable Bond Premium Regulations.
Original Issue Discount. The Internal Revenue Service (the "IRS") has
stated in published rulings that, in circumstances similar to those described
herein, the special rules of the Code relating to OID (currently Code Sections
1271 through 1273 and 1275) and Treasury regulations issued on January 27,
1994, as amended on June 14, 1996, under such Sections (the "OID Regulations"),
will be applicable to a Grantor Trust Certificateholder's interest in those
Mortgage Assets meeting the conditions necessary for these sections to apply.
Rules regarding periodic inclusion of OID income are applicable to mortgages of
corporations originated after May 27, 1969, mortgages of noncorporate
Mortgagors (other than individuals) originated after July 1, 1982, and
mortgages of individuals originated after March 1, 1984. Such OID could arise
by the financing of points or other charges by the originator of the mortgages
in an amount greater than a statutory de minimis exception to the extent that
the points are not currently deductible under applicable Code provisions or are
not for services provided by the lender. OID generally must be reported as
ordinary gross income as it accrues under a constant interest method. See
"--Grantor Trust Funds -- Multiple Classes of Grantor Trust Certificates --
Accrual of Original Issue Discount" below.
Market Discount. A Grantor Trust Certificateholder that is treated as
acquiring an undivided interest in Mortgage Assets may be subject to the market
discount rules of Code Sections 1276 through 1278 to the extent an undivided
interest in a Mortgage Asset is considered to have been purchased at a "market
discount." Generally, the amount of market discount is equal to the excess of
the portion of the principal amount of such Mortgage Asset allocable (or, if
such Mortgage Asset has OID, of such Mortgage Asset's revised issue price) to
such holder's undivided interest over such holder's tax basis in such interest.
Market discount with respect to a Grantor Trust Certificate will be considered
to be zero if the amount allocable to the Grantor Trust Certificate is less
than 0.25% of the Grantor Trust Certificate's stated redemption price at
maturity multiplied by the weighted average maturity remaining after the date
of purchase. Treasury regulations implementing the market discount rules have
not yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278. The Code provides
that any principal payment (whether a scheduled payment or a prepayment) or any
gain on disposition of a market discount bond acquired by the taxpayer after
October 22, 1986 shall be treated as ordinary income to the extent that it does
not exceed the accrued market discount at the time of such payment. The amount
of accrued market discount for purposes of determining the tax treatment of
subsequent principal payments or dispositions of the market discount bond is to
be reduced by the amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described
in the relevant legislative history will apply. Under those rules, the holder
of a market discount bond may elect to accrue market discount either on the
basis of a constant interest rate or according to one of the following methods.
If a Grantor Trust Certificate is issued with OID, the amount of market
discount that accrues during any accrual period would be equal to the product
of (i)
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the total remaining market discount and (ii) a fraction, the numerator of which
is the OID accruing during the period and the denominator of which is the total
remaining OID at the beginning of the accrual period. For Grantor Trust
Certificates issued without OID, the amount of market discount that accrues
during a period is equal to the product of (i) the total remaining market
discount and (ii) a fraction, the numerator of which is the amount of stated
interest paid during the accrual period and the denominator of which is the
total amount of stated interest remaining to be paid at the beginning of the
accrual period. For purposes of calculating market discount under any of the
above methods in the case of instruments (such as the Grantor Trust
Certificates) that provide for payments that may be accelerated by reason of
prepayments of other obligations securing such instruments, the same prepayment
assumption applicable to calculating the accrual of OID will apply. Because the
regulations described above have not been issued, it is impossible to predict
what effect those regulations might have on the tax treatment of a Grantor
Trust Certificate purchased at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount
also may be required to defer a portion of the excess of the interest paid or
incurred for the taxable year attributable to any indebtedness incurred or
continued to purchase or carry such Grantor Trust Certificate purchased with
market discount over the interest distributable thereon. For these purposes,
the de minimis rule referred to above applies. Any such deferred excess
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includible in income. The amount of any
remaining deferred deduction is to be taken into account in the taxable year in
which the Grantor Trust Certificate matures or is disposed of in a taxable
transaction. In the case of a disposition in which gain or loss is not
recognized in whole or in part, any remaining deferred deduction will be
allowed to the extent of gain recognized on the disposition. If such holder
elects to include market discount in income currently as it accrues on all
market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market discount or OID) and premium in income as interest, based on a
constant yield method. If such an election were to be made with respect to a
Grantor Trust Certificate with market discount, the Certificateholder would be
deemed to have made an election to include in income currently market discount
with respect to all other debt instruments having market discount that such
Certificateholder acquires during the year of the election or thereafter.
Similarly, a Certificateholder that makes this election for a Certificate that
is acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such Certificateholder owns or acquires. See "--Grantor Trust
Funds -- Single Class of Grantor Trust Certificates -- Premium." The election
to accrue interest, discount and premium on a constant yield method with
respect to a Certificate is irrevocable except with the approval of the IRS.
Anti-abuse Rule. The Internal Revenue Service can apply or depart from the
rules contained in the OID Regulations as necessary or appropriate to achieve a
reasonable result where a principal purpose in structuring a Mortgage Asset,
Mortgage Loan or Grantor Trust Certificate or applying the otherwise applicable
rules is to achieve a result that is unreasonable in light of the purposes of
the applicable statutes (which generally are intended to achieve the clear
reflection of income for both issuers and holders of debt instruments).
B. MULTIPLE CLASSES OF GRANTOR TRUST CERTIFICATES
STRIPPED BONDS AND STRIPPED COUPONS. Pursuant to Code Section 1286, the
separation of ownership of the right to receive some or all of the interest
payments on an obligation from ownership of the right to receive some or all of
the principal payments results in the creation of "stripped bonds" with respect
to principal payments and "stripped coupons" with respect to interest payments.
For purposes of Code Sections 1271 through 1288, Code Section 1286 treats a
stripped bond or a stripped coupon as an obligation issued on the date that
such stripped interest is created. If a Trust Fund is created with two classes
of Grantor Trust Certificates, one class of Grantor Trust Certificates may
represent the right to principal and interest, or principal only, on all or a
portion of the Mortgage Assets (the "Stripped Bond Certificates"), while the
second class of Grantor Trust Certificates may represent the right to some or
all of the interest on such portion (the "Stripped Coupon Certificates").
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Servicing fees in excess of reasonable servicing fees ("excess servicing")
will be treated under the stripped bond rules. If the excess servicing fee is
less than 100 basis points (i.e., 1% interest on the Mortgage Asset principal
balance) or the Certificates are initially sold with a de minimis discount
(assuming no prepayment assumption is required), any discount that is not de
minimis arising from a subsequent transfer of the Certificates should be
treated as market discount. The IRS appears to require that reasonable
servicing fees be calculated on a Mortgage Asset by Mortgage Asset basis, which
could result in some Mortgage Assets being treated as having more than 100
basis points of interest stripped off.
Although not entirely clear, a Stripped Bond Certificate generally should
be treated as an interest in Mortgage Assets issued on the day such Certificate
is purchased for purposes of calculating any OID. Generally, if the discount on
a Mortgage Asset is larger than a de minimis amount (as calculated for purposes
of the OID rules) a purchaser of such a Certificate will be required to accrue
the discount under the OID rules of the Code. See "--Grantor Trust Funds --
Single Class of Grantor Trust Certificates -- Original Issue Discount."
However, a purchaser of a Stripped Bond Certificate will be required to account
for any discount on the Mortgage Assets as market discount rather than OID if
either (i) the amount of OID with respect to the Mortgage Assets is treated as
zero under the OID de minimis rule when the Certificate was stripped or (ii) no
more than 100 basis points (including any amount of servicing fees in excess of
reasonable servicing fees) is stripped off of the Trust Fund's Mortgage Assets.
The precise tax treatment of Stripped Coupon Certificates is substantially
uncertain. The Code could be read literally to require that OID computations be
made for each payment from each Mortgage Asset. Unless otherwise specified in a
related Prospectus Supplement payments from a Mortgage Asset underlying a
Stripped Coupon Certificate will be treated as a single installment obligation
subject to the OID rules of the Code, in which case, all payments from such
Mortgage Asset would be included in the Mortgage Asset's stated redemption
price at maturity for purposes of calculating income on such Certificate under
the OID rules of the Code.
It is unclear under what circumstances, if any, the prepayment of Mortgage
Assets will give rise to a loss to the holder of a Stripped Bond Certificate
purchased at a premium or a Stripped Coupon Certificate. If such Certificate is
treated as a single instrument (rather than an interest in discrete mortgage
loans) and the effect of prepayments is taken into account in computing yield
with respect to such Grantor Trust Certificate, it appears that no loss will be
available as a result of any particular prepayment unless prepayments occur at
a rate faster than the assumed prepayment rate. However, if such Certificate is
treated as an interest in discrete Mortgage Assets, or if no prepayment
assumption is used, then when a Mortgage Asset is prepaid, the holder of such
Certificate should be able to recognize a loss equal to the portion of the
adjusted issue price of such Certificate that is allocable to such Mortgage
Asset.
Holders of Stripped Bond Certificates and Stripped Coupon Certificates are
urged to consult with their own tax advisors regarding the proper treatment of
these Certificates for federal income tax purposes.
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Treatment of Certain Owners. Several Code sections provide beneficial
treatment to certain taxpayers that invest in Mortgage Assets of the type that
make up the Trust Fund. With respect to these Code sections, no specific legal
authority exists regarding whether the character of the Grantor Trust
Certificates, for federal income tax purposes, will be the same as that of the
underlying Mortgage Assets. While Code Section 1286 treats a stripped
obligation as a separate obligation for purposes of the Code provisions
addressing OID, it is not clear whether such characterization would apply with
regard to these other Code sections. Although the issue is not free from doubt,
each class of Grantor Trust Certificates, unless otherwise specified in the
related Prospectus Supplement, should be considered to represent "real estate
assets" within the meaning of Code Section 856(c)(4)(A) and interest income
attributable to Grantor Trust Certificates should be considered to represent
"interest on obligations secured by mortgages on real property" within the
meaning of Code Section 856(c)(3)(B), provided that in each case the underlying
Mortgage Assets and interest on such Mortgage Assets qualify for such
treatment. Prospective purchasers to which such characterization of an
investment in Certificates is material should consult their own tax advisors
regarding the characterization of the Grantor Trust Certificates and the income
therefrom. Grantor Trust Certificates will be "obligation[s] . . . which [are]
principally secured by an interest in real property" within the meaning of Code
Section 860G(a)(3). Grantor Trust Certificates generally will be "loans . . .
secured by an interest in real property which is . . . residential real
property" within the meaning of Code Section 7701(a)(19)(C)(v) only to the
extent the underlying Mortgage Assets are secured by multifamily, nursing home,
or congregate care properties.
Grantor Trust Certificates Representing Interests in Loans Other Than ARM
Loans. The OID rules of Code Sections 1271 through 1275 will be applicable to a
Certificateholder's interest in those Mortgage Assets as to which the
conditions for the application of those sections are met. Rules regarding
periodic inclusion of OID in income are applicable to mortgages of corporations
originated after May 27, 1969, mortgages of noncorporate Mortgagors (other than
individuals) originated after July 1, 1982, and mortgages of individuals
originated after March 1, 1984. Under the OID Regulations, such OID could arise
by the charging of points by the originator of the mortgage in an amount
greater than the statutory de minimis exception, including a payment of points
that is currently deductible by the borrower under applicable Code provisions,
or under certain circumstances, by the presence of "teaser" rates on the
Mortgage Assets. OID on each Grantor Trust Certificate must be included in the
owner's ordinary income for federal income tax purposes as it accrues, in
accordance with a constant interest method that takes into account the
compounding of interest, in advance of receipt of the cash attributable to such
income. The amount of OID required to be included in an owner's income in any
taxable year with respect to a Grantor Trust Certificate representing an
interest in Mortgage Assets other than Mortgage Assets with interest rates that
adjust periodically ("ARM Loans") likely will be computed as described below
under "--Accrual of Original Issue Discount." The following discussion is based
in part on the OID Regulations and in part on the provisions of the Tax Reform
Act of 1986 (the "1986 Act"). The OID Regulations generally are effective for
debt instruments issued on or after April 4, 1994, but may be relied upon as
authority with respect to debt instruments, such as the Grantor Trust
Certificates, issued after December 21, 1992. Alternatively, proposed Treasury
regulations issued December 21, 1992 may be treated as authority for debt
instruments issued after December 21, 1992 and prior to April 4, 1994, and
proposed Treasury regulations issued in 1986 and 1991 may be treated as
authority for instruments issued before December 21, 1992. In applying these
dates, the issue date of the Mortgage Assets should be used, or, in the case of
Stripped Bond Certificates or Stripped Coupon Certificates, the date such
Certificates are acquired. The holder of a Certificate should be aware,
however, that neither the proposed OID Regulations nor the OID Regulations
adequately address certain issues relevant to prepayable securities.
Under the Code, the Mortgage Assets underlying the Grantor Trust
Certificate will be treated as having been issued on the date they were
originated with an amount of OID equal to the excess of such Mortgage Asset's
stated redemption price at maturity over its issue price. The issue price of a
Mortgage Asset is generally the amount lent to the mortgagee, which may be
adjusted to take into account certain loan origination fees. The stated
redemption price at maturity of a Mortgage Asset is the sum of all payments to
be made on such Mortgage Asset other than payments that are treated as
qualified stated interest payments. The accrual of this OID, as described below
under "--Accrual of Original Issue Discount," will, unless otherwise specified
in the related Prospectus Supplement, utilize the original yield to maturity of
the Grantor Trust Certificate calculated based on a reasonable assumed
prepayment rate for the mortgage loans underlying the Grantor Trust
Certificates (the "Prepayment Assumption"), and will take into account events
that occur during the calculation period. The Prepayment
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Assumption will be determined in the manner prescribed by regulations that have
not yet been issued. The legislative history of the 1986 Act (the "Legislative
History") provides, however, that the regulations will require that the
Prepayment Assumption be the prepayment assumption that is used in determining
the offering price of such Certificate. No representation is made that any
Certificate will prepay at the Prepayment Assumption or at any other rate. The
prepayment assumption contained in the Code literally applies only to debt
instruments collateralized by other debt instruments that are subject to
prepayment, and to pooled debt instruments that are subject to prepayment,
rather than direct ownership interests in such debt instruments, such as the
Certificates represent. However, no other legal authority provides guidance
with regard to the proper method for accruing OID on obligations that are
subject to prepayment, and, until further guidance is issued, the Master
Servicer intends to calculate and report OID under the method described below.
Accrual of Original Issue Discount. Generally, the owner of a Grantor
Trust Certificate must include in gross income the sum of the "daily portions,"
as defined below, of the OID on such Grantor Trust Certificate for each day on
which it owns such Certificate, including the date of purchase but excluding
the date of disposition. In the case of an original owner, the daily portions
of OID with respect to each component generally will be determined as set forth
under the OID Regulations. A calculation will be made by the Master Servicer or
such other entity specified in the related Prospectus Supplement of the portion
of OID that accrues during each successive monthly accrual period (or shorter
period from the date of original issue) that ends on the day in the calendar
year corresponding to each of the Distribution Dates on the Grantor Trust
Certificates (or the day prior to each such date). This will be done, in the
case of each full month accrual period, by (i) adding (a) the present value at
the end of the accrual period (determined by using as a discount factor the
original yield to maturity of the respective component under the Prepayment
Assumption) of all remaining payments to be received under the Prepayment
Assumption on the respective component and (b) any payments included in the
stated redemption price at maturity received during such accrual period, and
(ii) subtracting from that total the "adjusted issue price" of the respective
component at the beginning of such accrual period. The adjusted issue price of
a Grantor Trust Certificate at the beginning of the first accrual period is its
issue price; the adjusted issue price of a Grantor Trust Certificate at the
beginning of a subsequent accrual period is the adjusted issue price at the
beginning of the immediately preceding accrual period plus the amount of OID
allocable to that accrual period reduced by the amount of any payment other
than a payment of qualified stated interest made at the end of or during that
accrual period. The OID accruing during such accrual period will then be
divided by the number of days in the period to determine the daily portion of
OID for each day in the period. With respect to an initial accrual period
shorter than a full monthly accrual period, the daily portions of OID must be
determined according to an appropriate allocation under any reasonable method.
OID generally must be reported as ordinary gross income as it accrues
under a constant interest method that takes into account the compounding of
interest as it accrues rather than when received. However, the amount of OID
includible in the income of a holder of an obligation is reduced when the
obligation is acquired after its initial issuance at a price greater than the
sum of the original issue price and the previously accrued OID, less prior
payments of principal. Accordingly, if such Mortgage Assets treated as acquired
by a Certificateholder are purchased at a price equal to the then unpaid
principal amount of such Mortgage Asset, no OID attributable to the difference
between the issue price and the original principal amount of such Mortgage
Asset (i.e., points) will be includible by such holder. Other OID on the
Mortgage Assets (e.g., that arising from a "teaser" rate) would still need to
be accrued.
Grantor Trust Certificates Representing Interests in ARM Loans. The OID
Regulations do not address the treatment of instruments such as Grantor Trust
Certificates that represent interests in ARM Loans. Additionally, the IRS has
not issued guidance under the Code's coupon stripping rules with respect to
such instruments. In the absence of any authority, the Master Servicer will
report OID on Grantor Trust Certificates attributable to ARM Loans ("Stripped
ARM Obligations") to holders in a manner it believes is consistent with the
rules described above under "--Grantor Trust Funds -- Multiple Classes of
Grantor Trust Certificates -- Grantor Trust Certificates Representing Interests
in Loans Other Than ARM Loans" and with the OID Regulations. In general,
application of these rules may require inclusion of income on a Stripped ARM
Obligation in advance of the receipt of cash attributable to such income.
Further, the addition of interest deferred by reason of negative amortization
("Deferred Interest") to the principal balance of an ARM Loan may require the
inclusion of such amount in the income of the Grantor Trust Certificateholder
when such amount accrues. Furthermore, the addition of Deferred Interest to the
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Grantor Trust Certificate's principal balance will result in additional income
(including possibly OID income) to the Grantor Trust Certificateholder over the
remaining life of such Grantor Trust Certificates.
Because the treatment of Stripped ARM Obligations is uncertain, investors
are urged to consult their tax advisors regarding how income will be includible
with respect to such Certificates.
C. SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE
Sale or exchange of a Grantor Trust Certificate prior to its maturity will
result in gain or loss equal to the difference, if any, between the amount
received (other than amounts attributable to accrued but unpaid interest) and
the owner's adjusted basis in the Grantor Trust Certificate. Such adjusted
basis generally will equal the seller's purchase price for the Grantor Trust
Certificate, increased by the OID included in the seller's gross income with
respect to the Grantor Trust Certificate, and reduced by principal payments on
the Grantor Trust Certificate previously received by the seller. Such gain or
loss will be capital gain or loss to an owner for which a Grantor Trust
Certificate is a "capital asset" within the meaning of Code Section 1221, and
will be long-term or short-term depending on whether the Grantor Trust
Certificate has been owned for the long-term capital gain holding period
(currently more than one year).
The Taxpayer Relief Act of 1997 (the "Act") 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). The
capital gains rate for capital assets held by individual taxpayers for more
than twelve months but not more than eighteen months was not changed by the Act
("mid-term rate"). The Act does not change the capital gain rates for
corporations. Prospective investors should consult their own tax advisors
concerning these tax law changes.
It is possible that capital gain realized by holders of one or more
classes of Grantor Trust Certificates could be considered gain realized upon
the disposition of property that was part of a "conversion transaction." A sale
of a Grantor Trust Certificate will be part of a "conversion transaction" if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and (i) the holder entered the contract
to sell the Grantor Trust Certificate substantially contemporaneously with
acquiring the Grantor Trust Certificate, (ii) the Grantor Trust Certificate is
part of a straddle, (iii) the Grantor Trust Certificate is marketed or sold as
producing capital gains, or (iv) other transactions to be specified in Treasury
Regulations that have not yet been issued. If the sale or other disposition of
a Grantor Trust Certificate is part of a conversion transaction, all or any
portion of the gain realized upon the sale or other disposition would be
treated as ordinary income instead of capital gain.
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Code Section 582(c)(1), so that gain or loss recognized from the
sale of a Grantor Trust Certificate by a bank or a thrift institution to which
such section applies will be treated as ordinary income or loss.
D. NON-U.S. PERSONS
Generally, in the case of a Grantor Trust Certificateholder that is not a
"U.S. Person" (as defined below) and that is not holding its Certificate in
connection with a United States trade or business of such Certificateholder, to
the extent that a Grantor Trust Certificate evidences ownership in underlying
Mortgage Assets that were issued on or before July 18, 1984, interest or OID
paid by the person required to withhold tax under Code Section 1441 or 1442 to
(i) an owner that is not a U.S. Person (as defined below) or (ii) a Grantor
Trust Certificateholder holding on behalf of an owner that is not a U.S. Person
will be subject to federal income tax, collected by withholding, at a rate of
30% or such lower rate as may be provided for interest by an applicable tax
treaty. Accrued OID recognized by the owner on the sale or exchange of such a
Grantor Trust Certificate also will be subject to federal income tax at the
same rate. Generally, such payments would not be subject to withholding to the
extent that a Grantor Trust Certificate evidences ownership in Mortgage Assets
issued after July 18, 1984, by natural persons if such Grantor Trust
Certificateholder complies with certain identification requirements (including
delivery of a statement, signed by the Grantor Trust Certificateholder under
penalties of perjury, certifying that such Grantor Trust Certificateholder is
not a U.S. Person and providing the name and address of such Grantor Trust
Certificateholder)
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except to the extent such payments are payments of "contingent interest" or are
otherwise ineligible for the portfolio interest exemption. Additional
restrictions apply to Mortgage Assets where the Mortgagor is not a natural
person in order to qualify for the exemption from withholding. Generally, a
Grantor Trust Certificateholder that is not a U.S. Person will not be subject
to federal income tax on any amount that constitutes capital gain upon the
retirement or disposition of a Grantor Trust Certificate or a Mortgage Asset,
provided the gain is not effectively connected with the conduct of a trade or
business in the U.S. by such Certificateholder or, in the case of a
Certificateholder who is a nonresident alien individual and hold the
Certificate as a capital asset, such holder is present in the U.S. for 183 days
or more in the taxable year and certain other requirements are met. Special
rules apply also to certain former citizens and residents of the U.S.
Interest paid to a Grantor Trust Certificateholder that is not a U.S.
Person that is effectively connected with a United States trade or business of
such Certificateholder will be taxed at graduated rates as if such Grantor
Trust Certificateholder were a U.S. Person, and will not be subject to
withholding if the Certificateholder gives an appropriate statement to that
effect to the Trustee in advance of such payment. In addition to the graduated
tax, effectively connected interest income received by a non-U.S. Person that
is a corporation may also be subject to an additional branch profits tax at a
rate of 30% (or such lower rate as may be specified in an applicable income tax
treaty). If capital gain derived from the sale, retirement or disposition of a
Grantor Trust Certificate is effectively connected with a U.S. trade or
business of a Grantor Trust Certificateholder that is not a U.S. Person, such
Certificateholder will be taxed on the net gain under the graduated United
States federal income tax rates applicable to U.S. Persons (and, with respect
to corporate Grantor Trust Certificateholders, may also be subject to branch
profits tax).
If the Trust Fund acquires a United States real property interest
through foreclosure, deed in lieu of foreclosure or otherwise on a Mortgage
Asset secured by such an interest (which for this purpose includes real
property located in the United States and the Virgin Islands), a Grantor Trust
Certificateholder that is not a U.S. person will potentially be subject to
federal income tax on any gain attributable to such real property interest that
is allocable to such holder upon the earlier of the Trust Fund's disposition of
the property or such a holder's disposition of its Grantor Trust Certificate.
The amount of gain subject to tax should not exceed the amount by which the
value of the acquired property increased during the period such property was
held by the Trust Fund. The Grantor Trust Certificateholder's allocable share
of the gain generally would be taxed as though the gain were effectively
connected with a U.S. trade or business of such holder, and the purchaser would
withhold 10% of the gross amount realized on the disposition that is allocable
to the Non-U.S. Certificateholder's interest. Such amount withheld is
creditable against such Certificateholder's actual tax liability. Additionally,
to the extent a Grantor Trust Certificateholder that is not a U.S. person is
treated as owning an interest in real property acquired by foreclosure, deed in
lieu of foreclosure or otherwise, such Certificateholder would be subject to
United States federal income tax withholding at a rate of 30% (subject to
reduction under an applicable income tax treaty), on income from the property
unless such Certificateholder has in effect an election to be taxed at ordinary
U.S. tax rates on net income from all U.S. real property owned by it. An
interest in foreclosed property deemed to be acquired by a Non-U.S. Person that
owns a Grantor Trust Certificate would be includable in such individual's
estate for U.S. estate tax purposes. In addition, depending on the Trust Fund's
level of activities, its realization of gain and how long it held the
foreclosed property, such a Certificateholder may be deemed to be engaged in a
U.S. trade or business and may be required to file U.S. and state tax returns.
Non-U.S. Persons should consult their tax advisors regarding the application to
them of the foregoing rules.
As used herein, a "U.S. Person" means an individual who is a citizen of
the United States or is treated as a resident of the United States for United
States federal income tax purposes, an entity organized in or under the laws of
the United States or any political subdivision thereof treated as a corporation
or a partnership for such purposes, an estate the income of which from sources
outside the United States is includible in gross income for such purposes
regardless of its connection with the conduct of a trade or business within the
United States 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 persons have authority to control all substantial decisions
of the trust (and, to the extent provided in applicable Treasury regulations, a
trust that was in existence as of August 20, 1996 that elects to be treated as
a U.S. Person).
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E. INFORMATION REPORTING AND BACKUP WITHHOLDING
The Master Servicer or Trustee will furnish or make available, within a
reasonable time after the end of each calendar year, to each person who was a
Certificateholder at any time during such year, certain information to assist
in preparing federal income tax returns of Certificateholders or other
beneficial owners. If a holder, beneficial owner, financial intermediary or
other recipient of a payment on behalf of a beneficial owner fails to supply a
certified taxpayer identification number or if the Secretary of the Treasury
determines that such person has not reported all interest and dividend income
required to be shown on its federal income tax return, 31% backup withholding
may be required with respect to any payments to registered owners who are not
"exempt recipients." In addition, upon the sale of a Grantor Trust Certificate
to (or through) a broker, the broker must withhold 31% of the entire purchase
price, unless either (i) the broker determines that the seller is a corporation
or other exempt recipient or (ii) the seller provides, in the required manner,
certain identifying information and, in the case of a non-U.S. Person,
certifies that such seller is a Non-U.S. Person, and certain other conditions
are met. Such a sale must also be reported by the broker to the IRS, unless
either (a) the broker determines that the seller is an exempt recipient or (b)
the seller certifies its non-U.S. Person status (and certain other conditions
are met). Certification of the registered owner's non-U.S. Person status would
normally be made on IRS Form W-8 under penalties of perjury, although in
certain cases it may be possible to submit other documentary evidence. Any
amounts deducted and withheld from a distribution to a recipient would be
allowed as a credit against such recipient's federal income tax liability.
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above for non-U.S.
Persons. The New Regulations attempt to unify certification requirements and
modify reliance standards. The New Regulations will generally be effective for
payments made after December 31, 1998, subject to certain transition rules.
Prospective investors are urged to consult their own tax advisors regarding the
New Regulations.
REMICS
The Trust Fund relating to a Series of Certificates may elect to be
treated as a REMIC. Qualification as a REMIC requires ongoing compliance with
certain conditions. The REMIC must fulfill an asset test, which requires that
no more than a de minimis amount of the assets of the REMIC, as of the close of
the third calendar month beginning after the "Startup Day" (which for purposes
of this discussion is the date of issuance of the Certificates by the REMIC
(the "REMIC Certificates") and at all times thereafter, may consist of assets
other than "qualified mortgages" and "permitted investments." A "qualified
mortgage" for REMIC purposes is any obligation (including certificates of
participation in such an obligation) that is principally secured by an interest
in real property and that is transferred to the REMIC within a prescribed time
period in exchange for regular or residual interests in the REMIC. The REMIC
Regulations provide a "safe harbor" pursuant to which the de minimis
requirement will be met if at all times the aggregate adjusted basis of any
nonqualified assets (i.e., assets other than qualified mortgages and permitted
investments) is less than 1% of the aggregate adjusted basis of all the REMIC's
assets. Although a REMIC is not generally subject to federal income tax (see,
however "--REMICs -- Taxation of Owners of REMIC Residual Certificates" and
"--Prohibited Transactions and Other Taxes" below), if a Trust Fund with
respect to which a REMIC election is made fails to comply with one or more of
the ongoing requirements of the Code for REMIC status during any taxable year,
including the implementation of restrictions on the purchase and transfer of
the residual interests in a REMIC as described below under "--REMICs --
Taxation of Owners of REMIC Residual Certificates," the Code provides that a
Trust Fund will not be treated as a REMIC for such year and thereafter. In that
event, the classification of the REMIC for federal income tax purposes is
uncertain. The REMIC might be entitled to treatment as a grantor trust under
the rules described above under "--Grantor Trust Funds". In that case, no
entity-level tax would be imposed on the REMIC. Alternatively, the REMIC
Regular Certificates may continue to be treated as debt instruments for federal
income tax purposes; but the REMIC pool could be treated as a taxable mortgage
pool (a "TMP"). If the REMIC is treated as a TMP, any residual income of the
REMIC (i.e., income from the Mortgage Loans less interest and OID expense
allocable to the REMIC Regular Certificates and any administrative expenses of
the REMIC to the extent deductible) would be subject to corporate income tax at
the entity level. If such entity is taxable as a separate corporation, the
related Certificates may not be accorded the status or given the tax treatment
described below. While the Code authorizes the Treasury Department to issue
regulations providing relief in the event of an inadvertent termination of the
status of a trust fund as a REMIC, no such regulations have been issued. Any
such relief, moreover, may be accompanied by sanctions, such as the imposition
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of a corporate tax on all or a portion of the REMIC's income for the period in
which the requirements for such status are not satisfied. With respect to each
Trust Fund that elects REMIC status, Latham & Watkins will deliver its opinion
generally to the effect that, under then existing law and assuming compliance
with all provisions of the related Pooling and Servicing Agreement, such Trust
Fund will qualify as one or more REMICs, and the related Certificates will be
considered to be regular interests ("REMIC Regular Certificates") or residual
interests ("REMIC Residual Certificates") in a REMIC. The related Prospectus
Supplement for each Series of Certificates will indicate whether the Trust Fund
will make a REMIC election and whether a class of Certificates will be treated
as a regular or residual interest in the REMIC.
In general, with respect to each Series of Certificates for which a REMIC
election is made, (i) Certificates held by a thrift institution taxed as a
"domestic building and loan association" will constitute assets described in
Code Section 7701(a)(19)(C)(ix) only to the extent provided in the related
Prospectus Supplement (generally, to the extent the Mortgage Assets are secured
by residential real property, such as multifamily, nursing home or congregate
care properties); (ii) Certificates held by a real estate investment trust will
constitute "real estate assets" within the meaning of Code Section 856(c)(4)(A)
and (c)(5)(B); and (iii) interest on Certificates held by a real estate
investment trust will be considered "interest on obligations secured by
mortgages on real property" within the meaning of Code Section 856(c)(3)(B). If
less than 95% of the REMIC's assets are assets qualifying under any of the
foregoing Code sections, the Certificates will be assets described in the
foregoing Code Sections only to the extent that the REMIC's assets are
qualifying assets described in such section. In addition, payments on Mortgage
Assets held pending distribution on the REMIC Certificates will be considered
to be "real estate assets" for purposes of Code Section 856(c). REMIC
Certificates held by a regulated investment company will not constitute
"government securities" within the meaning of Code Section 851(b)(4)(A)(i).
REMIC Certificates held by certain financial institutions will constitute an
"evidence of indebtedness" within the meaning of Code Section 582(c)(1). REMIC
Regular Certificates acquired by another REMIC on its Startup Day in exchange
for regular or residual interests in the REMIC will constitute "qualified
mortgages" within the meaning of Code Section 860G(a)(3). REMIC Regular
Certificates also will qualify as "regular interests in a REMIC" for purposes
of Code Section 860L(c)(1)(G), and may constitute a "permitted asset" of a
financial asset securitization investment trust ("FASIT").
Tiered REMIC Structures. For certain Series of Certificates, two or more
separate elections may be made to treat designated portions of the related
Trust Fund as REMICs (respectively, the "Subsidiary REMIC" or "Subsidiary
REMICs" and the "Master REMIC") for federal income tax purposes. Upon the
issuance of any such Series of Certificates, Latham & Watkins, counsel to the
Depositor, will deliver its opinion generally to the effect that, assuming
compliance with all provisions of the related Agreement, the Master REMIC as
well as any Subsidiary REMIC will each qualify as a REMIC, and the REMIC
Certificates issued by the Master REMIC and Subsidiary REMIC, respectively,
will be considered to evidence ownership of the regular interests or residual
interest in the related REMIC within the meaning of the REMIC provisions.
Other than the residual interest in a Subsidiary REMIC, only REMIC
Certificates issued by the Master REMIC will be offered hereunder. The
Subsidiary REMIC and the Master REMIC will be treated as one REMIC solely for
purposes of determining whether (i) the REMIC Certificates will be "real estate
assets" within the meaning of Section 856(c)(4)(A) of the Code; (ii) the REMIC
Certificates will be "loans secured by an interest in real property" under
Section 7701(a)(19)(C) of the Code; and (iii) whether the income on such
Certificates is interest described in Section 856(c)(3)(B) of the Code.
Moreover, the REMIC Regulations provide that, for purposes of Code Section
856(c)(4)(A), payments of principal and interest on the mortgage loans that are
reinvested pending distribution to holders of REMIC Certificates constitute
qualifying assets for such entities. Where two or more REMIC Pools are part of
a tiered structure they will be treated as one REMIC for purposes of the test
described above respecting asset ownership of more or less than 95%.
Notwithstanding the foregoing, however, REMIC income received by a real estate
investment trust ("REIT") owning a residual interest in a REMIC could be
treated in part as non-qualifying REIT income if the REMIC holds mortgage loans
with respect to which income is contingent on mortgagor profits or property
appreciation. In addition, if the assets of the REMIC include buy-down mortgage
loans, it is possible that the percentage of such assets constituting
"qualifying real property loans" or "loans . . . secured by an interest in real
property" for purposes of Code Section 7701(a)(19)(C)(v), may be required to be
reduced by the amount of the related buy-down funds.
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A. TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt
instruments issued by the REMIC and not as ownership interests in the REMIC or
its assets. However, holders of REMIC Regular Certificates that otherwise
report income under a cash method of accounting will be required to report
income with respect to REMIC Regular Certificates under an accrual method.
Original Issue Discount and Premium. The REMIC Regular Certificates may be
issued with OID. Generally, such OID, if any, will equal the difference between
the "stated redemption price at maturity" of a REMIC Regular Certificate and
its "issue price." Holders of any Class of Certificates issued with OID will be
required to include such OID in gross income for federal income tax purposes as
it accrues, in accordance with a constant interest method based on the
compounding of interest as it accrues rather than in accordance with receipt of
the interest payments. The following discussion is based in part on the OID
Regulations and in part on the provisions of the 1986 Act and Legislative
History. REMIC Regular Certificateholders should be aware, however, that the
OID Regulations do not adequately address certain issues relevant to prepayable
securities, such as the REMIC Regular Certificates.
Rules governing OID are set forth in Code Sections 1271 through 1273 and
1275. These rules require that the amount and rate of accrual of OID be
calculated based on the Prepayment Assumption and the anticipated reinvestment
rate, if any, relating to the REMIC Regular Certificates and prescribe a method
for adjusting the amount and rate of accrual of such discount where the actual
prepayment rate differs from the Prepayment Assumption. Under the Code, the
Prepayment Assumption must be determined in the manner prescribed by
regulations, which regulations have not yet been issued. The Legislative
History provides, however, that Congress intended the regulations to require
that the Prepayment Assumption be the prepayment assumption that is used in
determining the initial offering price of such REMIC Regular Certificates. The
Prospectus Supplement for each Series of REMIC Regular Certificates will
specify the Prepayment Assumption to be used for the purpose of determining the
amount and rate of accrual of OID. No representation is made that the REMIC
Regular Certificates will prepay at the Prepayment Assumption or at any other
rate. Moreover, the OID Regulations include an anti-abuse rule allowing the IRS
to apply or depart from the OID Regulations where necessary or appropriate to
ensure a reasonable tax result in light of the applicable statutory provisions.
A tax result will not be considered unreasonable under the anti-abuse rule in
the absence of a substantial effect on the present value of a taxpayer's tax
liability. Investors are advised to consult their own tax advisors as to the
discussion herein and the appropriate method for reporting interest and
original issue discount with respect to the REMIC Regular Certificates.
In general, each REMIC Regular Certificate will be treated as a single
installment obligation issued with an amount of OID equal to the excess of its
"stated redemption price at maturity" over its "issue price." The issue price
of a REMIC Regular Certificate is the first price at which a substantial amount
of REMIC Regular Certificates of that class are first sold to the public
(excluding bond houses, brokers, underwriters or wholesalers). If less than a
substantial amount of a particular class of REMIC Regular Certificates is sold
for cash on or prior to the date of their initial issuance (the "Closing
Date"), the issue price for such class will be treated as the fair market value
of such class on the Closing Date. The issue price of a REMIC Regular
Certificate also includes the amount paid by an initial Certificateholder for
accrued interest that relates to a period prior to the issue date of the REMIC
Regular Certificate. The stated redemption price at maturity of a REMIC Regular
Certificate includes the original principal amount of the REMIC Regular
Certificate, but generally will not include distributions of interest if such
distributions constitute "qualified stated interest." Qualified stated interest
generally means interest payable at a single fixed rate or qualified variable
rate (as described below) provided that such interest payments are
unconditionally payable at intervals of one year or less during the entire term
of the REMIC Regular Certificate. Interest is payable at a single fixed rate
only if the rate appropriately takes into account the length of the interval
between payments. Distributions of interest on REMIC Regular Certificates with
respect to which Deferred Interest will accrue will not constitute qualified
stated interest payments, and the stated redemption price at maturity of such
REMIC Regular Certificates includes all distributions of interest as well as
principal thereon.
Where the interval between the issue date and the first Distribution Date
on a REMIC Regular Certificate is longer than the interval between subsequent
Distribution Dates, the greater of any OID (disregarding the rate in the
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first period) and any interest foregone during the first period is treated as
the amount by which the stated redemption price at maturity of the Certificate
exceeds its issue price for purposes of the de minimis rule described below.
The OID Regulations suggest that all interest on a long first period REMIC
Regular Certificate that is issued with non-de minimis OID, as determined under
the foregoing rule, will be treated as OID. Where the interval between the
issue date and the first Distribution Date on a REMIC Regular Certificate is
shorter than the interval between subsequent Distribution Dates, interest due
on the first Distribution Date in excess of the amount that accrued during the
first period would be added to the stated redemption price at maturity of the
Certificates. REMIC Regular Certificateholders should consult their own tax
advisors to determine the issue price and stated redemption price at maturity
of a REMIC Regular Certificate.
Under the de minimis rule, OID on a REMIC Regular Certificate will be
considered to be zero if such OID is less than 0.25% of the stated redemption
price at maturity of the REMIC Regular Certificate multiplied by the weighted
average maturity of the REMIC Regular Certificate. For this purpose, the
weighted average maturity of the REMIC Regular Certificate is computed as the
sum of the amounts determined by multiplying the number of full years (i.e.,
rounding down partial years) from the issue date until each distribution in
reduction of stated redemption price at maturity is scheduled to be made by a
fraction, the numerator of which is the amount of each distribution included in
the stated redemption price at maturity of the REMIC Regular Certificate and
the denominator of which is the stated redemption price at maturity of the
REMIC Regular Certificate. Although currently unclear, it appears that the
schedule of such distributions should be determined in accordance with the
Prepayment Assumption. The Prepayment Assumption with respect to a Series of
REMIC Regular Certificates will be set forth in the related Prospectus
Supplement. Holders generally must report de minimis OID pro rata as principal
payments are received, and such income will be capital gain if the REMIC
Regular Certificate is held as a capital asset. However, accrual method holders
may elect to accrue all de minimis OID as well as market discount under a
constant interest method.
The Prospectus Supplement with respect to a Trust Fund may provide for
certain REMIC Regular Certificates to be issued at prices significantly
exceeding their principal amounts or based on notional principal balances (the
"Super-Premium Certificates"). The income tax treatment of such REMIC Regular
Certificates is not entirely certain. For information reporting purposes, the
Trust Fund intends to take the position that the stated redemption price at
maturity of such REMIC Regular Certificates is the sum of all payments to be
made on such REMIC Regular Certificates determined under the Prepayment
Assumption, with the result that such REMIC Regular Certificates would be
issued with OID. The calculation of income in this manner could result in
negative OID (which delays future accruals of OID rather than being immediately
deductible) when prepayments on the Mortgage Assets exceed those estimated
under the Prepayment Assumption. If the Super Premium Certificates were treated
as contingent payment obligations, it is unclear how holders of those
Certificates would report income or recover their basis. The OID Regulations,
as they relate to the treatment of contingent interest, are by their terms not
applicable to Regular Certificates. However, if final regulations dealing with
contingent interest with respect to Regular Certificates apply the same
principles as the OID Regulations, such regulations may lead to different
timing of income inclusion and different characterization of any gain on the
sale of a Super-Premium Certificate than discussed above. In the alternative,
the IRS could assert that the stated redemption price at maturity of such REMIC
Regular Certificates should be limited to their principal amount (subject to
the discussion below under "--REMICs -- Taxation of Owners of REMIC Regular
Certificates -- Accrued Interest Certificates"), so that such REMIC Regular
Certificates would be considered for federal income tax purposes to be issued
at a premium. If such a position were to prevail, the rules described below
under "-- REMICs -- Taxation of Owners of REMIC Regular Certificates --
Premium" would apply. It is unclear when a loss may be claimed for any
unrecovered basis for a Super-Premium Certificate. It is possible that a holder
of a Super-Premium Certificate may claim a loss only when its remaining basis
exceeds the maximum amount of future payments, assuming no further prepayments
or when the final payment is received with respect to such Super-Premium
Certificate. Investors should consult their tax advisors regarding the
appropriate treatment of Super-Premium Certificates.
Under the REMIC Regulations, if the issue price of a REMIC Regular
Certificate (other than a REMIC Regular Certificate based on a notional amount)
does not exceed 125% of its actual principal amount, the interest rate is not
considered disproportionately high. Accordingly, such REMIC Regular Certificate
generally should not be treated as a Super-Premium Certificate and the rules
described below under "--REMICs -- Taxation of Owners of
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REMIC Regular Certificates -- Premium" should apply. However, it is possible
that holders of REMIC Regular Certificates issued at a premium, even if the
premium is less than 25% of such Certificate's actual principal balance, will
be required to amortize the premium under an OID method or contingent interest
method even though no election under Code Section 171 is made to amortize such
premium.
Generally, a REMIC Regular Certificateholder must include in gross income
the "daily portions," as determined below, of the OID that accrues on a REMIC
Regular Certificate for each day a Certificateholder holds the REMIC Regular
Certificate, including the purchase date but excluding the disposition date. In
the case of an original holder of a REMIC Regular Certificate, a calculation
will be made of the portion of the OID that accrues during each successive
period ("an accrual period") that ends on the day in the calendar year
corresponding to a Distribution Date (or if Distribution Dates are on the first
day or first business day of the immediately preceding month, interest may be
treated as payable on the last day of the immediately preceding month) and
begins on the day after the end of the immediately preceding accrual period (or
on the issue date in the case of the first accrual period). This will be done,
in the case of each full accrual period, by (i) adding (a) the present value at
the end of the accrual period (determined by using as a discount factor the
original yield to maturity of the REMIC Regular Certificates as calculated
under the Prepayment Assumption) of all remaining payments to be received on
the REMIC Regular Certificates under the Prepayment Assumption and (b) any
payments included in the stated redemption price at maturity received during
such accrual period, and (ii) subtracting from that total the adjusted issue
price of the REMIC Regular Certificates at the beginning of such accrual
period. The adjusted issue price of a REMIC Regular Certificate at the
beginning of the first accrual period is its issue price; the adjusted issue
price of a REMIC Regular Certificate at the beginning of a subsequent accrual
period is the adjusted issue price at the beginning of the immediately
preceding accrual period plus the amount of OID allocable to that accrual
period and reduced by the amount of any payment other than a payment of
qualified stated interest made at the end of or during that accrual period. The
OID accrued during an accrual period will then be divided by the number of days
in the period to determine the daily portion of OID for each day in the accrual
period. The calculation of OID under the method described above will cause the
accrual of OID to either increase or decrease (but never below zero) in a given
accrual period to reflect the fact that prepayments are occurring faster or
slower than under the Prepayment Assumption. With respect to an initial accrual
period shorter than a full accrual period, the daily portions of OID may be
determined according to an appropriate allocation under any reasonable method.
A subsequent purchaser of a REMIC Regular Certificate issued with OID who
purchases the REMIC Regular Certificate at a cost less than the remaining
stated redemption price at maturity will also be required to include in gross
income the sum of the daily portions of OID on that REMIC Regular Certificate.
In computing the daily portions of OID for such a purchaser (as well as an
initial purchaser that purchases at a price higher than the adjusted issue
price but less than the stated redemption price at maturity), however, the
daily portion is reduced by the amount that would be the daily portion for such
day (computed in accordance with the rules set forth above) multiplied by a
fraction, the numerator of which is the amount, if any, by which the price paid
by such holder for that REMIC Regular Certificate exceeds the following amount:
(a) the sum of the issue price plus the aggregate amount of OID that would have
been includible in the gross income of an original REMIC Regular
Certificateholder (who purchased the REMIC Regular Certificate at its issue
price), less (b) any prior payments included in the stated redemption price at
maturity, and the denominator of which is the sum of the daily portions for
that REMIC Regular Certificate for all days beginning on the date after the
purchase date and ending on the maturity date computed under the Prepayment
Assumption. A holder who pays an acquisition premium instead may elect to
accrue OID by treating the purchase as a purchase at original issue.
Variable Rate REMIC Regular Certificates. REMIC Regular Certificates may
provide for interest based on a variable rate. Interest based on a variable
rate will constitute qualified stated interest and not contingent interest if,
generally, (i) such interest is unconditionally payable at least annually, (ii)
the issue price of the debt instrument does not exceed the total noncontingent
principal payments and (iii) interest is based on a "qualified floating rate,"
an "objective rate," a combination of a single fixed rate and one or more
"qualified floating rates," one "qualified inverse floating rate," or a
combination of "qualified floating rates" that do not operate in a manner that
significantly accelerates or defers interest payments on such REMIC Regular
Certificate.
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The amount of OID with respect to a REMIC Regular Certificate bearing a
variable rate of interest will accrue in the manner described above under
"--REMICs -- Taxation of Owners of REMIC Regular Certificates -- Original Issue
Discount and Premium" by assuming generally that the index used for the
variable rate will remain fixed throughout the term of the Certificate.
Appropriate adjustments are made for the actual variable rate.
Although unclear at present and unless otherwise specified in the related
Prospectus Supplement, the Depositor intends to treat interest on a REMIC
Regular Certificate that is a weighted average of the net interest rates on
Mortgage Loans as qualified stated interest. In such case, the weighted average
rate used to compute the initial pass-through rate on the REMIC Regular
Certificates will be deemed to be the index in effect through the life of the
REMIC Regular Certificates. It is possible, however, that the IRS may treat
some or all of the interest on REMIC Regular Certificates with a weighted
average rate as taxable under rules similar to those relating to obligations
providing for contingent payments. Such treatment may affect the timing of
income accruals on such REMIC Regular Certificates.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market discount or OID) and premium in income as interest, based on a
constant yield method. If such an election were to be made with respect to a
REMIC Regular Certificate with market discount, the Certificateholder would be
deemed to have made an election to include in income currently market discount
with respect to all other debt instruments having market discount that such
Certificateholder acquires during the year of the election or thereafter.
Similarly, a Certificateholder that makes this election for a Certificate that
is acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such Certificateholder owns or acquires. See "--REMICs -- Taxation
of Owners of REMIC Regular Certificates -- Premium" below. The election to
accrue interest, discount and premium on a constant yield method with respect
to a Certificate is irrevocable except with the approval of the IRS.
Market Discount. A purchaser of a REMIC Regular Certificate may also be
subject to the market discount provisions of Code Sections 1276 through 1278.
Under these provisions and the OID Regulations, "market discount" equals the
excess, if any, of (i) the REMIC Regular Certificate's stated principal amount
or, in the case of a REMIC Regular Certificate with OID, the adjusted issue
price (determined for this purpose as if the purchaser had purchased such REMIC
Regular Certificate from an original holder) over (ii) the price for such REMIC
Regular Certificate paid by the purchaser. A Certificateholder that purchases a
REMIC Regular Certificate at a market discount will recognize income upon
receipt of each distribution representing amounts included in such
certificate's stated redemption price at maturity. In particular, under Section
1276 of the Code such a holder generally will be required to allocate each such
distribution first to accrued market discount not previously included in
income, and to recognize ordinary income to that extent, regardless of whether
the holder is a cash-basis or an accrual basis taxpayer. A Certificateholder
may elect to include market discount in income currently as it accrues rather
than including it on a deferred basis in accordance with the foregoing. If
made, such election will apply to all market discount bonds acquired by such
Certificateholder on or after the first day of the first taxable year to which
such election applies.
Market discount with respect to a REMIC Regular Certificate will be
considered to be zero if the amount allocable to the REMIC Regular Certificate
is less than 0.25% of such REMIC Regular Certificate's stated redemption price
at maturity multiplied by such REMIC Regular Certificate's weighted average
maturity remaining after the date of purchase. If market discount on a REMIC
Regular Certificate is considered to be zero under this rule, the actual amount
of market discount must be allocated to the remaining principal payments on the
REMIC Regular Certificate, and gain equal to such allocated amount will be
recognized when the corresponding principal payment is made. Treasury
regulations implementing the market discount rules have not yet been issued;
therefore, investors should consult their own tax advisors regarding the
application of these rules and the advisability of making any of the elections
allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond acquired
by the taxpayer after October 22, 1986, shall be treated as ordinary income to
the extent that it does not exceed the accrued market discount at the time of
such payment. The
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amount of accrued market discount for purposes of determining the tax treatment
of subsequent principal payments or dispositions of the market discount bond is
to be reduced by the amount so treated as ordinary income.
The Code also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury, rules described in
the Legislative History will apply. Under those rules, the holder of a market
discount bond may elect to accrue market discount either on the basis of a
constant interest method rate or according to one of the following methods. For
REMIC Regular Certificates issued with OID, the amount of market discount that
accrues during a period is equal to the product of (i) the total remaining
market discount and (ii) a fraction, the numerator of which is the OID accruing
during the period and the denominator of which is the total remaining OID at
the beginning of the period. For REMIC Regular Certificates issued without OID,
the amount of market discount that accrues during a period is equal to the
product of (a) the total remaining market discount and (b) a fraction, the
numerator of which is the amount of stated interest paid during the accrual
period and the denominator of which is the total amount of stated interest
remaining to be paid at the beginning of the period. For purposes of
calculating market discount under any of the above methods in the case of
instruments (such as the REMIC Regular Certificates) that provide for payments
that may be accelerated by reason of prepayments of other obligations securing
such instruments, the same Prepayment Assumption applicable to calculating the
accrual of OID will apply.
A holder who acquired a REMIC Regular Certificate at a market discount
also may be required to defer a portion of the excess of the interest paid or
incurred for the taxable year attributable to any indebtedness incurred or
continued to purchase or carry such Certificate purchased with market discount
over the interest distributable thereon. For these purposes, the de minimis
rule referred to above applies. Any such deferred excess interest expense would
not exceed the market discount that accrues during such taxable year and is, in
general, allowed as a deduction not later than the year in which such market
discount is includible in income. The amount of any remaining deferred
deduction is to be taken into account in the taxable year in which the
Certificate matures or is disposed of in a taxable transaction. In the case of
a disposition in which gain or loss is not recognized in whole or in part, any
remaining deferred deduction will be allowed to the extent of gain recognized
on the disposition. If such holder elects to include market discount in income
currently as it accrues on all market discount instruments acquired by such
holder in that taxable year or thereafter, the interest deferral rule described
above will not apply.
Premium. A purchaser of a REMIC Regular Certificate that purchases the
REMIC Regular Certificate at a cost (not including accrued qualified stated
interest) greater than its remaining stated redemption price at maturity will
be considered to have purchased the REMIC Regular Certificate at a premium and
may elect to amortize such premium under a constant yield method. A
Certificateholder that makes this election for a Certificate that is acquired
at a premium will be deemed to have made an election to amortize bond premium
with respect to all debt instruments having amortizable bond premium that such
Certificateholder holds during the year of the election or thereafter. It is
not clear whether the Prepayment Assumption would be taken into account in
determining the life of the REMIC Regular Certificate for this purpose.
However, the Legislative History states that the same rules that apply to
accrual of market discount (which rules require use of a Prepayment Assumption
in accruing market discount with respect to REMIC Regular Certificates without
regard to whether such Certificates have OID) will also apply in amortizing
bond premium under Code Section 171. The Code provides that amortizable bond
premium will be allocated among the interest payments on such REMIC Regular
Certificates and will be applied as an offset against such interest payment. On
June 27, 1996, the IRS published in the Federal Register proposed regulations
on the amortization of bond premium. The foregoing discussion is based in part
on such proposed regulations. The proposed regulations, with certain
modifications, were published in the Federal Register in final form on December
31, 1997, and such final regulations generally will be effective for bonds
acquired on or after March 2, 1998 or, for bondholders making an election to
amortize bond premium as described above for the taxable year that includes
March 2, 1998 or any subsequent taxable year, will apply to bonds held on or
after the first day of the taxable year in which the election is made. Neither
the proposed regulations nor the final regulations, by their express terms,
apply to prepayable securities described in Section 1272(a)(6)(C) of the Code,
such as the REMIC Regular Certificates. Certificateholders should consult their
tax advisors regarding the possibility of making an election to amortize any
such bond premium.
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Deferred Interest. Certain classes of REMIC Regular Certificates may
provide for the accrual of Deferred Interest with respect to one or more ARM
Loans. Any Deferred Interest that accrues with respect to a class of REMIC
Regular Certificates will constitute income to the holders of such Certificates
prior to the time distributions of cash with respect to such Deferred Interest
are made. It is unclear, under the OID Regulations, whether any of the interest
on such Certificates will constitute qualified stated interest or whether all
or a portion of the interest payable on such Certificates must be included in
the stated redemption price at maturity of the Certificates and accounted for
as OID (which could accelerate such inclusion). Interest on REMIC Regular
Certificates must in any event be accounted for under an accrual method by the
holders of such Certificates and, therefore, applying the latter analysis may
result only in a slight difference in the timing of the inclusion in income of
interest on such REMIC Regular Certificates.
Effects of Defaults and Delinquencies. Certain Series of Certificates may
contain one or more classes of Subordinated Certificates, and in the event
there are defaults or delinquencies on the Mortgage Assets, amounts that would
otherwise be distributed on the Subordinated Certificates may instead be
distributed on the Senior Certificates. Subordinated Certificateholders
nevertheless will be required to report income with respect to such
Certificates under an accrual method without giving effect to delays and
reductions in distributions on such Subordinated Certificates attributable to
defaults and delinquencies on the Mortgage Assets, except to the extent that it
can be established that such amounts are uncollectible. As a result, the amount
of income reported by a Subordinated Certificateholder in any period could
significantly exceed the amount of cash distributed to such holder in that
period. The holder will eventually be allowed a loss (or will be allowed to
report a lesser amount of income) to the extent that the aggregate amount of
distributions on the Subordinated Certificate is reduced as a result of
defaults and delinquencies on the Mortgage Assets. Timing and characterization
of such losses is discussed in "--REMICs -- Taxation of Owners of REMIC Regular
Certificates -- Treatment of Realized Losses" below.
Sale, Exchange or Redemption. If a REMIC Regular Certificate is sold,
exchanged, redeemed or retired, the seller will generally recognize gain or
loss equal to the difference between the amount realized on the sale, exchange,
redemption, or retirement (other than amounts attributable to qualified stated
interest) and the seller's adjusted basis in the REMIC Regular Certificate.
Such adjusted basis generally will equal the cost of the REMIC Regular
Certificate to the seller, increased by any OID and market discount included in
the seller's gross income with respect to the REMIC Regular Certificate, and
reduced (but not below zero) by payments included in the stated redemption
price at maturity previously received by the seller and by any amortized
premium. Similarly, a holder who receives a payment that is part of the stated
redemption price at maturity of a REMIC Regular Certificate will recognize gain
equal to the excess, if any, of the amount of the payment over the holder's
adjusted basis in the REMIC Regular Certificate. A REMIC Regular
Certificateholder who receives a final payment that is less than the holder's
adjusted basis in the REMIC Regular Certificate will generally recognize a
loss. Except as provided in the following paragraph and as provided under
"--REMICs -- Taxation of Owners of REMIC Regular Certificates -- Market
Discount" above, any such gain or loss will be capital gain or loss, provided
that the REMIC Regular Certificate is held as a "capital asset" (generally,
property held for investment) within the meaning of Code Section 1221.
Gain from the sale or other disposition of a REMIC Regular Certificate
that might otherwise be capital gain will be treated as ordinary income (i) if
a REMIC Regular Certificate is held as part of a "conversion transaction" as
defined in Code Section 1258(c), up to the amount of interest that would have
accrued on the REMIC Regular Certificateholder's net investment in the
conversion transaction at 120% of the appropriate applicable Federal rate under
Code Section 1274(d) in effect at the time the taxpayer entered into the
transaction minus any amount previously treated as ordinary income with respect
to any prior disposition of property that was held as part of such transaction,
(ii) in the case of a non-corporate taxpayer, to the extent such taxpayer has
made an election under Code Section 163(d)(4) to have net capital gains taxed
as investment income at ordinary income rates, or (iii) in the case of a REMIC
Regular Certificate to the extent that such gain does not exceed the excess, if
any, of (i) the amount that would have been includible in such holder's income
with respect to the REMIC Regular Certificate had income accrued thereon at a
rate equal to 110% of the AFR as defined in the Code Section 1274(d) determined
as of the date of purchase of such REMIC Regular Certificate, over (ii) the
amount actually includible in such holder's income.
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The Certificates will be "evidences of indebtedness" within the meaning of
Code Section 582(c)(1), so that gain or loss recognized from the sale of a
REMIC Regular Certificate by a bank or a thrift institution to which such
Section applies will be ordinary income or loss.
The REMIC Regular Certificate information reports will include a statement
of the adjusted issue price of the REMIC Regular Certificate at the beginning
of each accrual period. In addition, the reports will include information
necessary to compute the accrual of any market discount that may arise upon
secondary trading of REMIC Regular Certificates. Because exact computation of
the accrual of market discount on a constant yield method would require
information relating to the holder's purchase price which the REMIC may not
have, it appears that the information reports will only require information
pertaining to the appropriate proportionate method of accruing market discount.
Accrued Interest Certificates. Certain of the REMIC Regular Certificates
("Payment Lag Certificates") may provide for payments of interest based on a
period that corresponds to the interval between Distribution Dates but that
ends prior to each such Distribution Date. The period between the Closing Date
for Payment Lag Certificates and their first Distribution Date may or may not
exceed such interval. Purchasers of Payment Lag Certificates for which the
period between the Closing Date and the first Distribution Date does not exceed
such interval could pay upon purchase of the REMIC Regular Certificates accrued
interest in excess of the accrued interest that would be paid if the interest
paid on the Distribution Date were interest accrued from Distribution Date to
Distribution Date. If a portion of the initial purchase price of a REMIC
Regular Certificate is allocable to interest that has accrued prior to the
issue date ("pre-issuance accrued interest") and the REMIC Regular Certificate
provides for a payment of stated interest on the first payment date (and the
first payment date is within one year of the issue date) that equals or exceeds
the amount of the pre-issuance accrued interest, then the REMIC Regular
Certificates' issue price may be computed by subtracting from the issue price
the amount of pre-issuance accrued interest, rather than as an amount payable
on the REMIC Regular Certificate. However, it is unclear under this method how
the OID Regulations treat interest on Payment Lag Certificates. Therefore, in
the case of a Payment Lag Certificate, unless otherwise specified in the
related Prospectus Supplement the Trust Fund intends to include accrued
interest in the issue price and report interest payments made on the first
Distribution Date as interest to the extent such payments represent interest
for the number of days that the Certificateholder has held such Payment Lag
Certificate during the first accrual period.
Investors should consult their own tax advisors concerning the treatment
for federal income tax purposes of Payment Lag Certificates.
Non-Interest Expenses of the REMIC. Under temporary Treasury regulations,
if the REMIC is considered to be a "single-class REMIC," a portion of the
REMIC's servicing, administrative and other non-interest expenses will be
allocated as a separate item to those REMIC Regular Certificateholders that are
"pass-through interest holders." Certificateholders that are pass-through
interest holders should consult their own tax advisors about the impact of
these rules on an investment in the REMIC Regular Certificates. See "--REMICs
- -- Taxation of Owners of REMIC Residual Certificates -- Pass- Through of
Non-Interest Expenses of the REMIC" below.
Treatment of Realized Losses. Although not entirely clear, it appears that
holders of REMIC Regular Certificates that are corporations should in general
be allowed to deduct as an ordinary loss any loss sustained during the taxable
year on account of any such Certificates becoming wholly or partially
worthless, and that, in general, holders of Certificates that are not
corporations should be allowed to deduct as a short-term capital loss any loss
sustained during the taxable year on account of any such Certificates becoming
wholly worthless. Although the matter is not entirely clear, non-corporate
holders of Certificates may be allowed a bad debt deduction at such time that
the principal balance of any such Certificate is reduced to reflect realized
losses resulting from any liquidated Mortgage Assets. The Internal Revenue
Service, however, could take the position that non-corporate holders will be
allowed a bad debt deduction to reflect realized losses only after all Mortgage
Assets remaining in the related Trust Fund have been liquidated or the
Certificates of the related Series have been otherwise retired. Potential
investors and holders of the Certificates are urged to consult their own tax
advisors regarding the appropriate timing, amount and character of any loss
sustained with respect to such Certificates, including any loss resulting from
the failure to recover previously accrued interest or discount income. Special
loss rules are applicable to banks and thrift
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institutions, including rules regarding reserves for bad debts. Such taxpayers
are advised to consult their tax advisors regarding the treatment of losses on
Certificates.
Non-U.S. Persons. Generally, payments of interest (including any payment
with respect to accrued OID) on the REMIC Regular Certificates to a REMIC
Regular Certificateholder who is not a U.S. Person (a "Non-U.S. REMIC Regular
Certificateholder") and is not engaged in a trade or business within the United
States will not be subject to federal withholding tax if (i) such REMIC Regular
Certificateholder does not actually or constructively own 10 percent or more of
the combined voting power of all classes of equity in the Issuer; (ii) such
REMIC Regular Certificateholder is not a controlled foreign corporation (within
the meaning of Code Section 957) related to the Issuer; and (iii) such REMIC
Regular Certificateholder complies with certain identification requirements
(including delivery of a statement, signed by the REMIC Regular
Certificateholder under penalties of perjury, certifying that such REMIC
Regular Certificateholder is a foreign person and providing the name and
address of such REMIC Regular Certificateholder). If a non-U.S. REMIC Regular
Certificateholder is not exempt from withholding, distributions of interest to
such holder, including distributions in respect of accrued OID, may be subject
to a 30% withholding tax, subject to reduction under any applicable tax treaty.
If the interest on a REMIC Regular Certificate is effectively connected with
the conduct by the Non-U.S. REMIC Regular Certificateholder of a trade or
business within the United States, then the Non-U.S. REMIC Regular
Certificateholder will be subject to U.S. income tax at regular graduated
rates. Such a Non-U.S. REMIC Regular Certificateholder that is a corporation
for U.S. federal income tax purposes may also be subject to the branch profits
tax.
Further, a REMIC Regular Certificate will not be included in the estate of
a nonresident alien individual and will not be subject to United States estate
taxes. However, Certificateholders who are non-resident alien individuals
should consult their tax advisors concerning this question.
REMIC Regular Certificateholders who are not U.S. Persons and persons
related to such holders should not acquire any REMIC Residual Certificates, and
holders of REMIC Residual Certificates (the "REMIC Residual
Certificateholders") and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates without consulting their tax
advisors as to the possible adverse tax consequences of doing so.
Information Reporting and Backup Withholding. The Master Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a REMIC Regular Certificateholder at any
time during such year, certain information to assist REMIC Regular
Certificateholders in preparing their federal income tax returns, or to enable
holders to make such information available to beneficial owners or financial
intermediaries that hold such REMIC Regular Certificates on behalf of
beneficial owners. If a holder, beneficial owner, financial intermediary or
other recipient of a payment on behalf of a beneficial owner fails to supply a
certified taxpayer identification number or if the Secretary of the Treasury
determines that such person has not reported all interest and dividend income
required to be shown on its federal income tax return, 31% backup withholding
may be required with respect to any payments. Any amounts deducted and withheld
from a distribution to a recipient would be allowed as a credit against such
recipient's federal income tax liability. In addition, upon the sale of a
Grantor Trust Certificate to (or through) a broker, the broker must withhold
31% of the entire purchase price, unless either (i) the broker determines that
the seller is a corporation or other exempt recipient or (ii) the seller
provides, in the required manner, certain identifying information and, in the
case of a non-U.S. Person, certifies that such seller is a Non-U.S. Person, and
certain other conditions are met. Such a sale must also be reported by the
broker to the IRS, unless either (a) the broker determines that the seller is
an exempt recipient or (b) the seller certifies its Non-U.S. Person status (and
certain other conditions are met). Certification of the registered owner's
Non-U.S. Person status would normally be made on IRS Form W-8 under penalties
of perjury, although in certain cases it may be possible to submit other
documentary evidence. Any amounts deducted and withheld from a distribution to
a recipient would be allowed as a credit against such recipient's federal
income tax liability.
B. TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
Allocation of the Income of the REMIC to the REMIC Residual Certificates.
The REMIC will not be subject to federal income tax except with respect to
income from prohibited transactions and certain other transactions. See
"--Prohibited Transactions and Other Taxes" below. Instead, each original
holder of a REMIC
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Residual Certificate will report on its federal income tax return, as ordinary
income, its share of the taxable income of the REMIC for each day during the
taxable year on which such holder owns any REMIC Residual Certificates. The
taxable income of the REMIC for each day will be determined by allocating the
taxable income of the REMIC for each calendar quarter ratably to each day in
the quarter. Such a holder's share of the taxable income of the REMIC for each
day will be based on the portion of the outstanding REMIC Residual Certificates
that such holder owns on that day. The taxable income of the REMIC will be
determined under an accrual method and will be taxable to the holders of REMIC
Residual Certificates without regard to the timing or amounts of cash
distributions by the REMIC. Ordinary income derived from REMIC Residual
Certificates will be "portfolio income" for purposes of the taxation of
taxpayers subject to the limitations on the deductibility of "passive losses."
As residual interests, the REMIC Residual Certificates will be subject to tax
rules, described below, that differ from those that would apply if the REMIC
Residual Certificates were treated for federal income tax purposes as direct
ownership interests in the Certificates or as debt instruments issued by the
REMIC.
A REMIC Residual Certificateholder may be required to include taxable
income from the REMIC Residual Certificate in excess of the cash distributed.
For example, a structure where principal distributions are made serially on
regular interests (that is, a fast-pay, slow-pay structure) may generate such a
mismatching of income and cash distributions (that is, "phantom income"). This
mismatching may be caused by the use of certain required tax accounting methods
by the REMIC, variations in the prepayment rate of the underlying Mortgage
Assets and certain other factors. Depending upon the structure of a particular
transaction, the aforementioned factors may significantly reduce the after-tax
yield of a REMIC Residual Certificate to a REMIC Residual Certificateholder.
Investors should consult their own tax advisors concerning the federal income
tax treatment of a REMIC Residual Certificate and the impact of such tax
treatment on the after-tax yield of a REMIC Residual Certificate.
A subsequent REMIC Residual Certificateholder also will report on its
federal income tax return amounts representing a daily share of the taxable
income of the REMIC for each day that such REMIC Residual Certificateholder
owns such REMIC Residual Certificate. Those daily amounts generally would equal
the amounts that would have been reported for the same days by an original
REMIC Residual Certificateholder, as described above. The Legislative History
indicates that certain adjustments may be appropriate to reduce (or increase)
the income of a subsequent holder of a REMIC Residual Certificate that
purchased such REMIC Residual Certificate at a price greater than (or less
than) the adjusted basis such REMIC Residual Certificate would have in the
hands of an original REMIC Residual Certificateholder. See "--REMICs --
Taxation of Owners of REMIC Residual Certificates -- Sale or Exchange of REMIC
Residual Certificates" below. It is not clear, however, whether such
adjustments will in fact be permitted or required and, if so, how they would be
made. The REMIC Regulations do not provide for any such adjustments.
Taxable Income of the REMIC Attributable to Residual Interests. The
taxable income of the REMIC will reflect a netting of (i) the income from the
Mortgage Assets and the REMIC's other assets and (ii) the deductions allowed to
the REMIC for interest and OID on the REMIC Regular Certificates and, except as
described above under "--REMICs -- Taxation of Owners of REMIC Regular
Certificates -- Non-Interest Expenses of the REMIC," other expenses. REMIC
taxable income is generally determined in the same manner as the taxable income
of an individual using the accrual method of accounting, except that (i) the
limitations on deductibility of investment interest expense and expenses for
the production of income do not apply, (ii) all bad loans will be deductible as
business bad debts, and (iii) the limitation on the deductibility of interest
and expenses related to tax-exempt income will apply. The REMIC's gross income
includes interest, OID income, and market discount income, if any, on the
Mortgage Loans, reduced by amortization of any premium on the Mortgage Loans,
plus income on reinvestment of cash flows and reserve assets, plus any
cancellation of indebtedness income upon allocation of realized losses to the
REMIC Regular Certificates. Note that the timing of cancellation of
indebtedness income recognized by REMIC Residual Certificateholders resulting
from defaults and delinquencies on Mortgage Assets may differ from the time of
the actual loss on the Mortgage Asset. The REMIC's deductions include interest
and OID expense on the REMIC Regular Certificates, servicing fees on the
Mortgage Loans, other administrative expenses of the REMIC and realized losses
on the Mortgage Loans. The requirement that REMIC Residual Certificateholders
report their pro rata share of taxable income or net loss of the REMIC will
continue until there are no Certificates of any class of the related Series
outstanding.
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For purposes of determining its taxable income, the REMIC will have an
initial aggregate tax basis in its assets equal to the sum of the issue prices
of the REMIC Regular Certificates and the REMIC Residual Certificates (or, if a
class of Certificates is not sold initially, its fair market value). Such
aggregate basis will be allocated among the Mortgage Assets and other assets of
the REMIC in proportion to their respective fair market value. A Mortgage Asset
will be deemed to have been acquired with discount or premium to the extent
that the REMIC's basis therein is less than or greater than its principal
balance, respectively. Any such discount (whether market discount or OID) will
be includible in the income of the REMIC as it accrues, in advance of receipt
of the cash attributable to such income, under a method similar to the method
described above for accruing OID on the REMIC Regular Certificates. The REMIC
expects to elect under Code Section 171 to amortize any premium on the Mortgage
Assets. Premium on any Mortgage Asset to which such election applies would be
amortized under a constant yield method. It is not clear whether the yield of a
Mortgage Asset would be calculated for this purpose based on scheduled payments
or taking account of the Prepayment Assumption. Additionally, such an election
would not apply to the yield with respect to any underlying mortgage loan
originated on or before September 27, 1985. Instead, premium with respect to
such a mortgage loan would be allocated among the principal payments thereon
and would be deductible by the REMIC as those payments become due.
The REMIC will be allowed a deduction for interest and OID on the REMIC
Regular Certificates. The amount and method of accrual of OID will be
calculated for this purpose in the same manner as described above with respect
to REMIC Regular Certificates except that the 0.25% per annum de minimis rule
and adjustments for subsequent holders described therein will not apply.
A REMIC Residual Certificateholder will not be permitted to amortize the
cost of the REMIC Residual Certificate as an offset to its share of the REMIC's
taxable income. However, REMIC taxable income will not include cash received by
the REMIC that represents a recovery of the REMIC's basis in its assets, and,
as described above, the issue price of the REMIC Residual Certificates will be
added to the issue price of the REMIC Regular Certificates in determining the
REMIC's initial basis in its assets. See "--REMICs -- Taxation of Owners of
REMIC Residual Certificates -- Sale or Exchange of REMIC Residual Certificates"
below. For a discussion of possible adjustments to income of a subsequent
holder of a REMIC Residual Certificate to reflect any difference between the
actual cost of such REMIC Residual Certificate to such holder and the adjusted
basis such REMIC Residual Certificate would have in the hands of an original
REMIC Residual Certificateholder, see "--REMICs -- Taxation of Owners of REMIC
Residual Certificates -- Allocation of the Income of the REMIC to the REMIC
Residual Certificates" above.
Net Losses of the REMIC. The REMIC will have a net loss for any calendar
quarter in which its deductions exceed its gross income. Such net loss would be
allocated among the REMIC Residual Certificateholders in the same manner as the
REMIC's taxable income. The net loss allocable to any REMIC Residual
Certificate will not be deductible by the holder to the extent that such net
loss exceeds such holder's adjusted basis in such REMIC Residual Certificate.
Any net loss that is not currently deductible by reason of this limitation may
only be used by such REMIC Residual Certificateholder to offset its share of
the REMIC's taxable income in future periods (but not otherwise). The ability
of REMIC Residual Certificateholders that are individuals or closely held
corporations to deduct net losses may be subject to additional limitations
under the Code.
Mark to Market Rules. A REMIC Residual Certificate acquired after January
3, 1995 cannot be marked-to-market.
Pass-Through of Non-Interest Expenses of the REMIC. As a general rule, all
of the fees and expenses of a REMIC will be taken into account by holders of
the REMIC Residual Certificates. In the case of a single class REMIC, however,
the expenses and a matching amount of additional income will be allocated,
under temporary Treasury regulations, among the REMIC Regular
Certificateholders and the REMIC Residual Certificateholders on a daily basis
in proportion to the relative amounts of income accruing to each
Certificateholder on that day. In general terms, a single class REMIC is one
that either (i) would qualify, under existing Treasury regulations, as a
grantor trust if it were not a REMIC (treating all interests as ownership
interests, even if they would be classified as debt for federal income tax
purposes) or (ii) is similar to such a trust and is structured with the
principal purpose of avoiding the single class REMIC rules. Unless otherwise
stated in the applicable Prospectus Supplement, the
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expenses of the REMIC will be allocated to holders of the related REMIC
Residual Certificates in their entirety and not to holders of the related REMIC
Regular Certificates.
In the case of individuals (or trusts, estates or other persons that
compute their income in the same manner as individuals) who own an interest in
a REMIC Regular Certificate or a REMIC Residual Certificate directly or through
a pass-through interest holder that is required to pass miscellaneous itemized
deductions through to its owners or beneficiaries (e.g., a partnership, an S
corporation or a grantor trust), such expenses will be deductible under Code
Section 67 only to the extent that such expenses, plus other "miscellaneous
itemized deductions" of the individual, exceed 2% of such individual's adjusted
gross income. In addition, Code Section 68 provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a certain amount (the "Applicable Amount") will be reduced by the
lesser of (i) 3% of the excess of the individual's adjusted gross income over
the Applicable Amount or (ii) 80% of the amount of itemized deductions
otherwise allowable for the taxable year. The amount of additional taxable
income recognized by REMIC Residual Certificateholders who are subject to the
limitations of either Code Section 67 or Code Section 68 may be substantial.
Further, holders (other than corporations) subject to the alternative minimum
tax may not deduct miscellaneous itemized deductions in determining such
holders' alternative minimum taxable income. The REMIC is required to report to
each pass-through interest holder and to the IRS such holder's allocable share,
if any, of the REMIC's non-interest expenses. The term "pass-through interest
holder" generally refers to individuals, entities taxed as individuals and
certain pass-through entities, but does not include real estate investment
trusts. REMIC Residual Certificateholders that are pass-through interest
holders should consult their own tax advisors about the impact of these rules
on an investment in the REMIC Residual Certificates.
Excess Inclusions. A portion of the income on a REMIC Residual Certificate
(referred to in the Code as an "excess inclusion") for any calendar quarter
will be subject to federal income tax in all events. Thus, for example, an
excess inclusion (i) may not be offset by any unrelated losses, deductions or
loss carryovers of a REMIC Residual Certificateholder; (ii) will be treated as
"unrelated business taxable income" within the meaning of Code Section 512 if
the REMIC Residual Certificateholder is a pension fund or any other
organization that is subject to tax only on its unrelated business taxable
income (see "--Tax-Exempt Investors" below); and (iii) is not eligible for any
reduction in the rate of withholding tax in the case of a REMIC Residual
Certificateholder that is a foreign investor. See "--Non-U.S. Persons" below.
Except as discussed in the following paragraph, with respect to any REMIC
Residual Certificateholder, the excess inclusions for any calendar quarter is
the excess, if any, of (i) the income of such REMIC Residual Certificateholder
for that calendar quarter from its REMIC Residual Certificate over (ii) the sum
of the "daily accruals" (as defined below) for all days during the calendar
quarter on which the REMIC Residual Certificateholder holds such REMIC Residual
Certificate. For this purpose, the daily accruals with respect to a REMIC
Residual Certificate are determined by allocating to each day in the calendar
quarter its ratable portion of the product of the "adjusted issue price" (as
defined below) of the REMIC Residual Certificate at the beginning of the
calendar quarter and 120 percent of the "Federal long-term rate" in effect at
the time the REMIC Residual Certificate is issued. For this purpose, the
"adjusted issue price" of a REMIC Residual Certificate at the beginning of any
calendar quarter equals the issue price of the REMIC Residual Certificate,
increased by the amount of daily accruals for all prior quarters, and decreased
(but not below zero) by the aggregate amount of payments made on the REMIC
Residual Certificate before the beginning of such quarter. The "Federal
long-term rate" is an average of current yields on Treasury securities with a
remaining term of greater than nine years, computed and published monthly by
the IRS.
As an exception to the general rule described above, the Treasury
Department has authority to issue regulations that would treat the entire
amount of income accruing on a REMIC Residual Certificate as excess inclusions
if the REMIC Residual Certificates in the aggregate are considered not to have
"significant value." The Small Business Job Protection Act ("SBJPA") of 1996
has eliminated the special rule permitting Section 593 institutions ("Thrift
Institutions") to use net operating losses and other allowable deductions to
offset their excess inclusion income from REMIC Residual Certificates that have
"significant value" within the meaning of the REMIC Regulations, effective for
taxable years beginning after December 31, 1995, except with respect to REMIC
Residual Certificates continuously held by thrift institutions since November
1, 1995.
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In addition, the SBJPA of 1996 provides three rules for determining the
effect of excess inclusions on the alternative minimum taxable income of a
REMIC Residual Certificateholder. First, alternative minimum taxable income for
a REMIC Residual Certificateholder is determined without regard to the special
rule, discussed above, that taxable income cannot be less than excess
inclusions. Second, a REMIC Residual Certificateholder's alternative minimum
taxable income for a taxable year cannot be less than the excess inclusions for
the year. Third, the amount of any alternative minimum tax net operating loss
deduction must be computed without regard to any excess inclusions. These rules
are effective for taxable years beginning after December 31, 1986, unless a
REMIC Residual Certificateholder elects to have such rules apply only to
taxable years beginning after August 20, 1996.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Code Section 857(b)(2),
excluding any net capital gain), will be allocated among the shareholders of
such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Regulated investment companies, common trust funds and certain
cooperatives are subject to similar rules.
Payments. Any distribution made on a REMIC Residual Certificate to a REMIC
Residual Certificateholder will be treated as a non-taxable return of capital
to the extent it does not exceed the REMIC Residual Certificateholder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
exceeds such adjusted basis, it will be treated as gain from the sale of the
REMIC Residual Certificate.
Sale or Exchange of REMIC Residual Certificates. If a REMIC Residual
Certificate is sold or exchanged, the seller will generally recognize gain or
loss equal to the difference between the amount realized on the sale or
exchange and its adjusted basis in the REMIC Residual Certificate (except that
the recognition of loss may be limited under the "wash sale" rules described
below). A holder's adjusted basis in a REMIC Residual Certificate generally
equals the cost of such REMIC Residual Certificate to such REMIC Residual
Certificateholder, increased by the taxable income of the REMIC that was
included in the income of such REMIC Residual Certificateholder with respect to
such REMIC Residual Certificate, and decreased (but not below zero) by the net
losses that have been allowed as deductions to such REMIC Residual
Certificateholder with respect to such REMIC Residual Certificate and by the
distributions received thereon by such REMIC Residual Certificateholder. In
general, any such gain or loss will be capital gain or loss provided the REMIC
Residual Certificate is held as a capital asset. However, REMIC Residual
Certificates will be "evidences of indebtedness" within the meaning of Code
Section 582(c)(1), so that gain or loss recognized from sale of a REMIC
Residual Certificate by a bank or thrift institution to which such Section
applies would be ordinary income or loss.
Except as provided in Treasury regulations yet to be issued, if the seller
of a REMIC Residual Certificate reacquires such REMIC Residual Certificate, or
acquires any other REMIC Residual Certificate, any residual interest in another
REMIC or similar interest in a "taxable mortgage pool" (as defined in Code
Section 7701(i)) during the period beginning six months before, and ending six
months after, the date of such sale, such sale will be subject to the "wash
sale" rules of Code Section 1091. In that event, any loss realized by the REMIC
Residual Certificateholder on the sale will not be deductible, but instead will
increase such REMIC Residual Certificateholder's adjusted basis in the newly
acquired asset.
C. PROHIBITED TRANSACTIONS AND OTHER TAXES
The Code imposes a tax on REMICs equal to 100% of the net income derived
from "prohibited transactions" (the "Prohibited Transactions Tax"). In general,
subject to certain specified exceptions, a prohibited transaction means the
disposition of a Mortgage Asset, the receipt of income from a source other than
a Mortgage Asset or certain other permitted investments, the receipt of
compensation for services, or gain from the disposition of an asset purchased
with the payments on the Mortgage Assets for temporary investment pending
distribution on the Certificates. It is not anticipated that the Trust Fund for
any Series of Certificates will engage in any prohibited transactions in which
it would recognize a material amount of net income.
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In addition, certain contributions to a Trust Fund as to which an election
has been made to treat such Trust Fund as a REMIC made after the day on which
such Trust Fund issues all of its interests could result in the imposition of a
tax on the Trust Fund equal to 100% of the value of the contributed property
(the "Contributions Tax"). No Trust Fund for any Series of Certificates will
accept contributions that would subject it to such tax.
In addition, a Trust Fund as to which an election has been made to treat
such Trust Fund as a REMIC may also be subject to federal income tax at the
highest corporate rate on "net income from foreclosure property," determined by
reference to the rules applicable to real estate investment trusts. "Net income
from foreclosure property" generally means income from foreclosure property
other than qualifying income for a real estate investment trust.
Where any Prohibited Transactions Tax, Contributions Tax, tax on net
income from foreclosure property or state or local income or franchise tax that
may be imposed on a REMIC relating to any Series of Certificates arises out of
or results from (i) a breach of the related Servicer's, Trustee's or
Depositor's obligations, as the case may be, under the related Agreement for
such Series, such tax will be borne by such Servicer, Trustee or Depositor, as
the case may be, out of its own funds or (ii) the Depositor's obligation to
repurchase a Mortgage Loan, such tax will be borne by the Depositor. In the
event that such Servicer, Trustee or Depositor, as the case may be, fails to
pay or is not required to pay any such tax as provided above, such tax will be
payable out of the Trust Fund for such Series and will result in a reduction in
amounts available to be distributed to the Certificateholders of such Series.
D. LIQUIDATION AND TERMINATION
If the REMIC adopts a plan of complete liquidation, within the meaning of
Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in the
REMIC's final tax return a date on which such adoption is deemed to occur, and
sells all of its assets (other than cash) within a 90-day period beginning on
such date, the REMIC will not be subject to any Prohibited Transaction Tax,
provided that the REMIC credits or distributes in liquidation all of the sale
proceeds plus its cash (other than the amounts retained to meet claims) to
holders of Regular and REMIC Residual Certificates within the 90-day period.
The REMIC will terminate shortly following the retirement of the REMIC
Regular Certificates. If a REMIC Residual Certificateholder's adjusted basis in
the REMIC Residual Certificate exceeds the amount of cash distributed to such
REMIC Residual Certificateholder in final liquidation of its interest, then it
would appear that the REMIC Residual Certificateholder would be entitled to a
loss equal to the amount of such excess. It is unclear whether such a loss, if
allowed, will be a capital loss or an ordinary loss.
E. ADMINISTRATIVE MATTERS
Solely for the purpose of the administrative provisions of the Code, the
REMIC generally will be treated as a partnership and the REMIC Residual
Certificateholders will be treated as the partners. Certain information will be
furnished quarterly to each REMIC Residual Certificateholder who held a REMIC
Residual Certificate on any day in the previous calendar quarter.
Each REMIC Residual Certificateholder is required to treat items on its
return consistently with their treatment on the REMIC's return, unless the
REMIC Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC. The IRS may assert a deficiency resulting
from a failure to comply with the consistency requirement without instituting
an administrative proceeding at the REMIC level. The REMIC does not intend to
register as a tax shelter pursuant to Code Section 6111 because it is not
anticipated that the REMIC will have a net loss for any of the first five
taxable years of its existence. Any person that holds a REMIC Residual
Certificate as a nominee for another person may be required to furnish the
REMIC, in a manner to be provided in Treasury regulations, with the name and
address of such person and other information.
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F. TAX-EXEMPT INVESTORS
Any REMIC Residual Certificateholder that is a pension fund or other
entity that is subject to federal income taxation only on its "unrelated
business taxable income" within the meaning of Code Section 512 will be subject
to such tax on that portion of the distributions received on a REMIC Residual
Certificate that is considered an excess inclusion. See "--REMICs -- Taxation
of Owners of REMIC Residual Certificates -- Excess Inclusions" above.
G. RESIDUAL CERTIFICATE PAYMENTS TO NON-U.S. PERSONS
Amounts paid to REMIC Residual Certificateholders who are not U.S. Persons
(see "--REMICs -- Taxation of Owners of REMIC Regular Certificates -- Non-U.S.
Persons" above) are treated as interest for purposes of the 30% (or lower
treaty rate) United States withholding tax. Amounts distributed to holders of
REMIC Residual Certificates should qualify as "portfolio interest," subject to
the conditions described in "--REMICs -- Taxation of Owners of REMIC Regular
Certificates" above, but only to the extent that the underlying mortgage loans
were originated after July 18, 1984. Furthermore, the rate of withholding on
any income on a REMIC Residual Certificate that is excess inclusion income will
not be subject to reduction under any applicable tax treaties. See "--REMICs --
Taxation of Owners of REMIC Residual Certificates -- Excess Inclusions" above.
If the portfolio interest exemption is unavailable, such amount will be subject
to United States withholding tax when paid or otherwise distributed (or when
the REMIC Residual Certificate is disposed of) under rules similar to those for
withholding upon disposition of debt instruments that have OID. The Code,
however, grants the Treasury Department authority to issue regulations
requiring that those amounts be taken into account earlier than otherwise
provided where necessary to prevent avoidance of tax (for example, where the
REMIC Residual Certificates do not have significant value). See "--REMICs --
Taxation of Owners of REMIC Residual Certificates -- Excess Inclusions" above.
In addition, payments to REMIC Residual Certificateholders of amounts that are
"contingent interest" are ineligible for the portfolio interest exemption. If
the amounts paid to REMIC Residual Certificateholders that are not U.S. persons
are effectively connected with their conduct of a trade or business within the
United States, the 30% (or lower treaty rate) withholding will not apply.
Instead, the amounts paid to such non-U.S. Person will be subject to U.S.
federal income taxation at regular graduated rates. For special restrictions on
the transfer of REMIC Residual Certificates, see "--Tax-Related Restrictions on
Transfers of REMIC Residual Certificates" below.
REMIC Regular Certificateholders and persons related to such holders
should not acquire any REMIC Residual Certificates, and REMIC Residual
Certificateholders and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates, without consulting their tax
advisors as to the possible adverse tax consequences of such acquisition.
H. TAX-RELATED RESTRICTIONS ON TRANSFERS OF REMIC RESIDUAL CERTIFICATES
Disqualified Organizations. An entity may not qualify as a REMIC unless
there are reasonable arrangements designed to ensure that residual interests in
such entity are not held by "disqualified organizations" (as defined below).
Further, a tax is imposed on the transfer of a residual interest in a REMIC to
a "disqualified organization." The amount of the tax equals the product of (A)
an amount (as determined under the REMIC Regulations) equal to the present
value of the total anticipated "excess inclusions" with respect to such
interest for periods after the transfer and (B) the highest marginal federal
income tax rate applicable to corporations. The tax is imposed on the
transferor unless the transfer is through an agent (including a broker or other
middleman) for a disqualified organization, in which event the tax is imposed
on the agent. The person otherwise liable for the tax shall be relieved of
liability for the tax if the transferee furnished to such person an affidavit
that the transferee is not a disqualified organization and, at the time of the
transfer, such person does not have actual knowledge that the affidavit is
false. A "disqualified organization" means (A) the United States, any State,
possession or political subdivision thereof, any foreign government, any
international organization or any agency or instrumentality of any of the
foregoing (provided that such term does not include an instrumentality if all
its activities are subject to tax and, except for FHLMC, a majority of its
board of directors is not selected by any such governmental agency), (B) any
organization (other than certain farmers' cooperatives) generally exempt from
federal income taxes unless such
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organization is subject to the tax on "unrelated business taxable income" and
(C) a rural electric or telephone cooperative.
A tax is imposed on a "pass-through entity" (as defined below) holding a
residual interest in a REMIC if at any time during the taxable year of the
pass-through entity a disqualified organization is the record holder of an
interest in such entity. The amount of the tax is equal to the product of (A)
the amount of excess inclusions for the taxable year allocable to the interest
held by the disqualified organization and (B) the highest marginal federal
income tax rate applicable to corporations. The pass-through entity otherwise
liable for the tax, for any period during which the disqualified organization
is the record holder of an interest in such entity, will be relieved of
liability for the tax if such record holder furnishes to such entity an
affidavit that such record holder is not a disqualified organization and, for
such period, the pass-through entity does not have actual knowledge that the
affidavit is false. For this purpose, a "pass-through entity" means (i) a
regulated investment company, real estate investment trust or common trust
fund, (ii) a partnership, trust or estate and (iii) certain cooperatives.
Except as may be provided in Treasury regulations not yet issued, any person
holding an interest in a pass-through entity as a nominee for another will,
with respect to such interest, be treated as a pass-through entity. Electing
large partnerships (generally, non-service partnerships with 100 or more
members electing to be subject to simplified IRS reporting provisions under
Code Sections 771 through 777) will be taxable on excess inclusion income as if
all partners were disqualified organizations.
In order to comply with these rules, the Agreement will provide that no
record or beneficial ownership interest in a REMIC Residual Certificate may be
purchased, transferred or sold, directly or indirectly, without the express
written consent of the Master Servicer. The Master Servicer will grant such
consent to a proposed transfer only if it receives the following: (i) an
affidavit from the proposed transferee to the effect that it is not a
disqualified organization and is not acquiring the REMIC Residual Certificate
as a nominee or agent for a disqualified organization and (ii) a covenant by
the proposed transferee to the effect that the proposed transferee agrees to be
bound by and to abide by the transfer restrictions applicable to the REMIC
Residual Certificate.
Noneconomic REMIC Residual Certificates. The REMIC Regulations disregard,
for federal income tax purposes, any transfer of a Noneconomic REMIC Residual
Certificate to a "U.S. Person," as defined above, unless no significant purpose
of the transfer is to enable the transferor to impede the assessment or
collection of tax. A Noneconomic REMIC Residual Certificate is any REMIC
Residual Certificate (including a REMIC Residual Certificate with a positive
value at issuance) unless, at the time of transfer, taking into account the
Prepayment Assumption and any required or permitted clean up calls or required
liquidation provided for in the REMIC's organizational documents, (i) the
present value of the expected future distributions on the REMIC Residual
Certificate at least equals the product of the present value of the anticipated
excess inclusions and the highest corporate income tax rate in effect for the
year in which the transfer occurs and (ii) the transferor reasonably expects
that the transferee will receive distributions from the REMIC at or after the
time at which taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. A significant purpose to impede the
assessment or collection of tax exists if the transferor, at the time of the
transfer, either knew or should have known that the transferee would be
unwilling or unable to pay taxes due on its share of the taxable income of the
REMIC. A transferor is presumed not to have such knowledge if (i) the
transferor conducted a reasonable investigation of the transferee and (ii) the
transferee acknowledges to the transferor that the residual interest may
generate tax liabilities in excess of the cash flow and the transferee
represents that it intends to pay such taxes associated with the residual
interest as they become due. If a transfer of a Noneconomic REMIC Residual
Certificate is disregarded, the transferor would continue to be treated as the
owner of the REMIC Residual Certificate and would continue to be subject to tax
on its allocable portion of the net income of the REMIC. The Pooling and
Servicing Agreement will require the transferee of a REMIC Residual Certificate
to state as part of the affidavit described above under "--Tax-Related
Restrictions on Transfers of REMIC Residual Certificates--Disqualified
Organizations" that such transferee (i) has historically paid its debts as they
come due, (ii) intends to continue to pay its debts as they come due in the
future; (iii) understands that, as the holder of a noneconomic REMIC Residual
Certificate, it may incur tax liabilities in excess of any cash flows generated
by the REMIC Residual Certificate as they become due. The transferor must have
no reason to believe that such statement is untrue.
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Foreign Investors. The REMIC Regulations provide that the transfer of a
REMIC Residual Certificate that has a "tax avoidance potential" to a "foreign
person" will be disregarded for federal income tax purposes. This rule appears
to apply to a transferee who is not a U.S. Person unless such transferee's
income in respect of the REMIC Residual Certificate is effectively connected
with the conduct of a United States trade or business. A REMIC Residual
Certificate is deemed to have a tax avoidance potential unless, at the time of
transfer, the transferor reasonably expects that the REMIC will distribute to
the transferee amounts that will equal at least 30 percent of each excess
inclusion, and that such amounts will be distributed at or after the time the
excess inclusion accrues and not later than the end of the calendar year
following the year of accrual. If the non-U.S. Person transfers the REMIC
Residual Certificate to a U.S. Person, the transfer will be disregarded, and
the foreign transferor will continue to be treated as the owner, if the
transfer has the effect of allowing the transferor to avoid tax on accrued
excess inclusions. The Agreement will provide that no record of beneficial
ownership interest in a REMIC Residual Certificate may be transferred, directly
or indirectly, to a non-U.S. Person unless such person provides the Trustee
with a duly completed I.R.S. Form 4224 or applicable successor I.R.S. Form and
the Trustee consents to such transfer in writing.
Any attempted transfer or pledge in violation of the transfer restrictions
shall be absolutely null and void and shall vest no rights in any purported
transferee. Investors in REMIC Residual Certificates are advised to consult
their own tax advisors with respect to transfers of the REMIC Residual
Certificates and, in addition, pass-through entities are advised to consult
their own tax advisors with respect to any tax which may be imposed on a
pass-through entity.
FASITS
General. The FASIT provisions of the Code were enacted by the Small
Business Job Protection Act of 1996 and create a new elective statutory vehicle
for the issuance of mortgage-backed and asset-backed securities. Although the
FASIT provisions of the Code became effective on September 1, 1997, no Treasury
regulations or other administrative guidance has been issued with respect to
those provisions. Accordingly, definitive guidance cannot be provided with
respect to many aspects of the tax treatment of FASIT Certificateholders.
Investors also should note that the FASIT discussions contained herein
constitute only a summary of the federal income tax consequences to holders of
FASIT Certificates. With respect to each Series of FASIT Certificates, the
related Prospectus Supplement will provide a detailed discussion regarding the
federal income tax consequences associated with the particular transaction.
FASIT Certificates will be classified as either FASIT Regular
Certificates, which generally will be treated as debt for federal income tax
purposes, or FASIT Ownership 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 Series. The
Prospectus Supplement for each Series of Certificates will indicate whether one
or more FASIT elections will be made for the Trust Fund (or designated pool of
assets) underlying that Series and which Classes of Certificates of such Series
will be designated as Regular Certificates, and which will be designated as
Ownership Certificates. Certain Series may include Classes of Regular
Certificates that will be treated as "high yield interests", which are subject
to special rules under the FASIT provisions of the Code. The Prospectus
Supplement for each Series of FASIT Certificates will specify which Classes of
Certificates, if any, will be considered "high yield interests" and provide a
discussion of the tax consequences associated with ownership of such
Certificates.
A. QUALIFICATION AS A FASIT.
The Trust Fund underlying a Series (or one of more designated pools of
assets held in the Trust Fund) will qualify under the Code as a FASIT in which
the FASIT Regular Certificates and the FASIT Ownership Certificates will
constitute the "regular interests" and the "ownership interests," respectively,
if (i) a FASIT election is properly made and in effect for the Trust Fund (or
designated pool of assets) (ii) certain tests concerning (A) the composition of
the FASIT's assets and (B) the nature of the Certificateholders' interests in
the FASIT are met on a continuing basis, and (iii) the Trust Fund is not a
regulated investment company as defined in Section 851(a) of the Code.
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Asset Composition. In order for a Trust Fund (or one or more
designated pools of assets held by a Trust Fund) to be eligible for FASIT
status, substantially all of the assets of the Trust Fund (or the designated
pool) must consist of "permitted assets" as of the close of the third month
beginning after the closing date and at all times thereafter (the "FASIT
Qualification Test"). Permitted assets include (i) cash or cash equivalents,
(ii) debt instruments under which interest payments (or other similar amounts),
if any, at or before maturity are payable based on a fixed rate or a variable
rate that would be a permitted variable rate for a REMIC regular interest, or
consists of a fixed specified portion (as defined in the REMIC provisions of
interest payments on permitted assets, (iii) foreclosure property, (iv) certain
hedging instruments (generally, interest and currency rate swaps and credit
enhancement contracts) that are reasonably required to guarantee or hedge
against the FASIT's risks associated with being the obligor on FASIT interests,
(v) contract rights to acquire qualifying debt instruments or qualifying
hedging instruments, (vi) regular interests in another FASIT, and (vii) REMIC
regular interests. Permitted assets do not include any debt instruments (other
than certain cash equivalents or other investments to be specified in Treasury
regulations) issued by the holder of the FASIT's ownership interest or by any
person related to such holder.
Interests in a FASIT. In addition to the foregoing asset qualification
requirements, the interests in a FASIT also must meet certain requirements. All
of the interests in a FASIT must be either of the following: (i) one or more
classes or regular interests or (ii) a single class of ownership interest that
is held by a fully taxable domestic corporation. In the case of Series that
include FASIT Ownership Certificates, the ownership interest will be
represented by the FASIT Ownership Certificates.
A FASIT interest generally qualifies as a regular interest if (i) it
is designated as a regular interest, (ii) it has a stated maturity no greater
than thirty years, (iii) it entitles its holder to a specified principal
amount, (iv) the issue price of the interest does not exceed 125% of its stated
principal amount, (v) the yield to maturity of the interest is less than the
applicable Treasury rate published by the IRS plus 5%, and (vi) if it pays
interest, such interest is payable at either a fixed rate or qualifying
variable rate with respect to the principal amount of the regular interest;
qualifying variable rates for FASIT regular interests are the same as those
that would be qualifying variable rates for REMIC regular interests issued by
the FASIT if the FASIT were a REMIC (generally, certain qualified floating
rates and weighted average rates and a combination of fixed rates). See
"Certain Federal Income Tax Consequences--REMICS - Taxation of Owners of REMIC
Regular Certificates - Variable Rate REMIC Regular Certificates.
If a FASIT Certificate fails to meet one or more of the requirements
set out in clauses (iii), (iv) or (v) above, but otherwise meets the above
requirements, it may still qualify as a type of regular interest known as a
"High-Yield Interest." In addition, if a FASIT Certificate fails to meet the
requirements of clause (vi), but the interest payable on the Certificate
consists of a specified portion of the interest payments on permitted assets
and that portion does not vary over the life of the Certificate, the
Certificate also will qualify as a High-Yield Interest. A High-Yield Interest
may be held only by domestic corporations that are fully subject to corporate
income tax ("Eligible Corporations"), other FASITs and dealers in securities
who acquire such interests as inventory, rather than for investment. In
addition, holders of High-Yield Interests are subject to limitations on offset
of income derived from such interest. See "Certain Federal Income Tax
Consequences--FASIT Certificates--Tax Treatment of FASIT Regular
Certificates--Treatment of High-Yield Interests."
Consequences of Disqualification. If a Series of FASIT Certificates
fails to comply with one or more of the Code's ongoing requirements for FASIT
status during any taxable year, the Code provides that its FASIT status may be
lost for that year and thereafter. If FASIT status is lost, the treatment of
the former FASIT and the interests therein for federal income tax purposes is
uncertain. The former FASIT might be treated as a grantor trust, as a separate
association taxed as a corporation, or as a partnership. The FASIT Regular
Certificates could be treated as debt instruments for federal income tax
purposes or as equity interests. Although the Code authorizes the Treasury to
issue regulations that address situations where a failure to meet the
requirements for FASIT status occurs inadvertently and in good faith, such
regulations have not yet been issued. It is possible that disqualification
relief might be accompanied by sanctions, such as the imposition of a corporate
tax on all or a portion of the FASIT's income for a period of time in which the
requirements for FASIT status are not satisfied.
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B. TAX TREATMENT OF FASIT REGULAR CERTIFICATES.
General. Payments received by holders of FASIT Regular Certificates
generally should be accorded the same tax treatment under the Code as payments
received on other taxable corporate debt instruments and on REMIC Regular
Certificates. As in the case of holders of REMIC Regular Certificates, holders
of FASIT Regular Certificates must report income from such Certificates under
an accrual method of accounting, even if they otherwise would have used the
cash receipts and disbursements method. Except in the case of FASIT Regular
Certificates issued with original issue discount or acquired with market
discount or premium, interest paid or accrued on a FASIT Regular Certificate
generally will be treated as ordinary income to the Certificateholder and a
principal payment on such Certificate will be treated as a return of capital to
the extent that the Certificateholder's basis is allocable to that payment.
FASIT Regular Certificates issued with original issue discount or acquired with
market discount or premium generally will treat interest and principal payments
on such Certificates in the same manner in the described for REMIC Regular
Certificates. See "Certain Federal Income Tax Consequences--REMIC Taxation of
Owners of REMIC Regular Certificates-- Original Issue Discount and Premium" and
"--Market Discount" above. High-Yield Certificates may be held only by fully
taxable domestic corporations, other FASITs, and certain securities dealers.
Holders of High-Yield Certificates are subject to limitations on their ability
to use current losses or net operating loss carryforwards or carrybacks to
offset any income derived from those Certificates.
Sale, Exchange or Default. If a FASIT Regular Certificate is sold or
exchanged, the Certificateholder generally will recognize gain or loss upon the
sale in the manner described above for dispositions of REMIC Regular
Certificates. See "Certain Federal Income Tax Consequences--REMICs-- Taxation
of Owners of REMIC Regular Certificates--Sale, Exchange or Redemption." In
addition, if a FASIT Regular Certificate becomes wholly or partially worthless
as a result of Default and Delinquencies of the underlying Assets, the holder
of such Certificate should be allowed to deduct the loss sustained (or
alternatively be able to report a lesser amount of income). See "Certain
Federal Income Tax Consequences--REMIC--Taxation of Owners of REMIC Regular
Certificates"--Effects of Default and Delinquencies" and "Treatment of Realized
Losses."
Treatment for Certain Owners. FASIT Regular Certificates held by a
REIT will qualify as "real estate assets" within the meaning of section
856(c)(5) of the Code, and interest on such Certificates will be considered
Qualifying REIT Interest to the same extent that REMIC Certificates would be so
considered. FASIT Regular Certificates held by a Thrift Institution taxed as a
"domestic building and loan association" will represent qualifying assets for
purposes of the qualification requirements set forth in Code Section
7701(a)(19) to the same extent that REMIC Certificates would be so considered.
See "Certain Federal Income Tax Consequences--REMICs Certificates--Status as
Real Property Loans." In addition, FASIT Regular Certificates held by a
financial institution to which Section 585 of the Code applies will be treated
a evidences of indebtedness for purposes of Section 582(c)(1) of the Code.
FASIT Certificates will not qualify as "government securities" for either REIT
or RIC qualification purposes.
Treatment of High-Yield Interests. High-Yield Interests are subject to
special rules regarding the eligibility of holders of such interests, and the
ability of such holders to offset income derived from their FASIT Certificate
with losses. High-Yield Interests may be held only by Eligible Corporations,
other FASITs, and dealers in securities who acquire such interests as
inventory. If a securities dealer (other than an Eligible Corporation)
initially acquires a High-Yield Interest as inventory, but later begins to hold
it for investment, the dealer will be subject to an excise tax equal to the
income from the High-Yield Interest multiplied by the highest corporate income
tax rate. In addition, transfers of High-Yield Interests to disqualified
holders will be disregarded for federal income tax purposes, and the transferor
still will be treated as the holder of the High-Yield Interest.
A holder of a High-Yield Interest may not use non-FASIT current losses
or net operating loss carryforwards or carrybacks to offset any income derived
from the High-Yield Interest (including gains from sales and exchanges of such
Interests), for either regular Federal income tax purposes or for alternative
minimum tax purposes. In addition, the FASIT provisions contain an anti-abuse
rule that imposes an excise tax at the highest corporate income tax rate on
income derived from a FASIT Regular Certificate that is held by a pass-through
entity (other than another FASIT) that issues debt or equity securities backed
by the FASIT Regular Certificate and that
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have the same features as High-Yield Interests with a principal purpose of
avoiding the rule that high yield debt instruments must be held by C
corporations.
C. TAX TREATMENT OF FASIT OWNERSHIP CERTIFICATES.
The single Class of FASIT Ownership Certificates represents the
residual equity interest in a FASIT. As such, the holder of a FASIT Ownership
Certificate determines its taxable income by taking into account its allocable
percentage of all assets, liabilities and items of income, gain, deduction,
loss and credit of a FASIT. In general, the character of the income to the
holder of a FASIT Ownership Interest will be the same as the character of such
income of the FASIT, except that any tax-exempt interest income taken into
account by the holder of a FASIT Ownership Interest is treated as ordinary
income. In determining that taxable income, the holder of a FASIT Ownership
Certificate must determine the amount of interest, original issue discount,
market discount and premium recognized with respect to the FASIT's assets and
the FASIT Regular Certificates issued by the FASIT according to a constant
yield methodology and under an accrual method of accounting. In addition,
holders of FASIT Ownership Certificates are subject to the same limitations on
their ability to use losses to offset income from their FASIT Certificate as
are the holders of High-Yield Interests. See "Federal Income Tax
Certificates--Treatment of High-Yield Interests."
Rules similar to the wash sale rules applicable to REMIC Residual
Certificates also will apply to FASIT Ownership Certificates. Accordingly,
losses on dispositions of FASIT Ownership Certificates generally will be
disallowed where, within six months before or after the disposition, the seller
of such Certificates acquires any other FASIT Ownership Certificate or, in the
case of a FASIT holding mortgage assets, any interest in a Taxable Mortgage
Pool that is economically comparable to a FASIT Ownership Certificate. In
addition, if any security that is sold or contributed to a FASIT by the holder
of the related FASIT Ownership Certificate was required to be marked-to-market
under Section 475 of the Code by such holder, then Section 475 of the Code will
continue to apply to such security, except that the amount realized under the
mark-to-market rules will be a greater of the security's value under present
law or the security's value after applying special valuation rules contained in
the FASIT provisions. Those special valuation rules generally require that the
value of debt instruments that are not traded on an established securities
market be determined by calculating the present value of the reasonably
expected payments under the instrument using a discount rate of 120% of the
applicable Federal rate, compounded semiannually.
Prohibited Transaction Taxes. The holder of a FASIT Ownership
Certificate will be subject to a tax equal to 100% of the net income derived by
the FASIT from any "prohibited transactions." Prohibited transactions include
(i) the receipt of income derived from assets that are not permitted assets,
(ii) certain dispositions of permitted assets, (iii) the receipt of any income
derived from any loan originated by the FASIT, and (iv) in certain cases, the
receipt of income representing a servicing fee or other compensation. It is
anticipated that any Series for which a FASIT election will be made generally
will be structured in order to avoid application of the prohibited transaction
tax.
D. BACKUP WITHHOLDING, INFORMATION REPORTING AND TAX ADMINISTRATION.
Holders of FASIT Regular Certificates will be subject to backup
withholding to the same extent holders of REMIC Regular Certificates would be
subject. See "Certain Federal Income Tax Consequences--REMICs--Taxation of
Owners of REMIC Regular Certificates--Information Reporting and Backup
Withholding." For purposes of information reporting and tax administration,
holders of record of FASIT Certificates generally will be treated in the same
manner as holders of REMIC Regular Certificates.
DUE TO THE COMPLEXITY OF THE FEDERAL INCOME TAX RULES APPLICABLE TO
CERTIFICATEHOLDERS AND THE CONSIDERABLE UNCERTAINTY THAT EXISTS WITH RESPECT TO
MANY ASPECTS OF THOSE RULES, POTENTIAL INVESTORS SHOULD CONSULT THEIR OWN TAX
ADVISORS RESPECTING THE PURCHASE, OWNERSHIP OR DISPOSITION OF AN INVESTMENT IN
CERTIFICATES.
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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 Offered
Certificates. 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 tax
consequences of investments in the Offered Certificates.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans subject to ERISA and on
any entity whose underlying assets include assets of such a plan by reason of
any such plan's investment in the entity ("ERISA Plans") and on persons who are
parties in interest or disqualified persons ("parties in interest") with
respect to such ERISA Plans. Section 4975 of the Code imposes substantially
similar prohibited transaction restrictions on tax qualified retirement plans
described in Section 401(a) of the Code and on individual retirement accounts
described in Section 408 of the Code ("Qualified Plans" and together with ERISA
Plans, "Plans"). Certain employee benefit plans, such as governmental plans and
church plans (if no election has been made under Section 410(d) of the Code),
are not subject to the restrictions of ERISA, and assets of such plans may be
invested in the Certificates without regard to the ERISA considerations
described below, subject to other applicable federal and state law. However,
any such governmental or church plan which is qualified under Section 401(a) of
the Code and exempt from taxation under Section 501(a) of the Code is subject
to the prohibited transaction rules set forth in Section 503 of the Code.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that an ERISA Plan's investments be made in
accordance with the documents governing the ERISA Plan.
PROHIBITED TRANSACTIONS
General
Section 406 of ERISA prohibits parties in interest with respect to an
ERISA Plan from engaging in certain transactions involving an ERISA Plan and
its assets unless a statutory or administrative exemption applies to the
transaction. Section 4975 of the Code imposes certain excise taxes (and, in
some cases, a civil penalty may be assessed pursuant to Section 502(i) of
ERISA) on parties in interest which engage in nonexempt prohibited
transactions.
The United States Department of Labor ("Labor") has issued a final
regulation (29 C.F.R. Section 2510.3-101) containing rules for determining what
constitutes the assets of a Plan. This regulation provides that, as a general
rule, the underlying assets and properties of corporations, partnerships,
trusts and certain other entities in which a Plan makes an "equity investment"
will be deemed for purposes of ERISA to be assets of the Plan unless certain
exceptions apply.
Under the terms of the regulation, the Trust may be deemed to hold plan
assets by reason of a Plan's investment in a Certificate; such plan assets
would include an undivided interest in the Mortgage Loans and any other assets
held by the Trust. In such an event, the Depositor, the Servicers, the Trustee
and other persons, in providing services with respect to the assets of the
Trust, may be parties in interest, subject to the fiduciary responsibility
provisions of Title I of ERISA, including the prohibited transaction provisions
of Section 406 of ERISA (and of Section 4975 of the Code), with respect to
transactions involving such assets unless such transactions are subject to a
statutory or administrative exemption.
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The regulations contain a de minimis safe-harbor rule that exempts any
entity from plan assets status as long as the aggregate equity investment in
such entity by Plans is not significant. For this purpose, equity participation
in the entity will be significant if immediately after any acquisition of any
equity interest in the entity, "benefit plan investors" in the aggregate, own
at least 25% of the value of any class of equity interest. "Benefit plan
investors" are defined as Plans as well as employee benefit plans not subject
to ERISA (e.g., governmental plans). The 25% limitation must be met with
respect to each class of certificates, regardless of the portion of total
equity value represented by such class, on an ongoing basis.
Availability of Underwriter's Exemption for Certificates
As specified in the related Prospectus Supplement, Labor has granted to
the Underwriter a Prohibited Transaction Exemption (the "Exemption"), which
exempts from the application of the prohibited transaction rules transactions
relating to: (1) the acquisition, sale and holding by Plans of certain
certificates representing an undivided interest in certain asset-backed
pass-through trusts, with respect to which the Underwriter or any of its
affiliates is the sole underwriter or the manager or co-manager of the
underwriting syndicate; and (2) the servicing, operation and management of such
asset-backed pass-through trusts, provided that the general conditions and
certain other conditions set forth in the Exemption and specified in the
related Prospectus Supplement are satisfied.
Before purchasing a Certificate, a fiduciary of a Plan should itself
confirm (a) that the Certificates constitute "certificates" for purposes of the
Exemption and (b) that the specific and general conditions set forth in the
Exemption and the other requirements set forth in the Exemption would be
satisfied.
REVIEW BY PLAN FIDUCIARIES
Any Plan fiduciary considering whether to purchase any Certificates on
behalf of a Plan should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA and
the Code to such investment. Among other things, before purchasing any
Certificates, a fiduciary of a Plan subject to the fiduciary responsibility
provisions of ERISA or an employee benefit plan subject to the prohibited
transaction provisions of the Code should make its own determination as to the
availability of the exemptive relief provided in the Exemption, and also
consider the availability of any other prohibited transaction exemptions. The
Prospectus Supplement with respect to a Series of Certificates may contain
additional information regarding the application of the Exemption, PTCE 83-1,
or any other exemption, with respect to the Certificates offered thereby.
LEGAL INVESTMENT
The Prospectus Supplement for each Series of Offered Certificates will
identify those classes of Offered Certificates, if any, which constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). Such classes will constitute "mortgage
related securities" for so long as they are rated in one of the two highest
rating categories by at least one nationally recognized statistical rating
organization (the "SMMEA Certificates"). As "mortgage related securities," the
SMMEA Certificates will constitute legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business entities
(including, but not limited to, state chartered savings banks, commercial
banks, savings and loan associations and insurance companies, as well as
trustees and state government employee retirement systems) created pursuant to
or existing under the laws of the United States or of any state (including the
District of Columbia and Puerto Rico) whose authorized investments are subject
to state regulation to the same extent that, under applicable law, obligations
issued by or guaranteed as to principal and interest by the United States or
any agency or instrumentality thereof constitute legal investments for such
entities. Alaska, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia,
Illinois, Kansas, Maryland, Michigan, Missouri, Nebraska, New Hampshire, New
York, North Carolina, Ohio, South Dakota, Utah, Virginia and West Virginia
enacted legislation, on or before the October 4, 1991 cutoff established by
SMMEA for such enactments, limiting to varying extents the ability of certain
entities (in particular, insurance companies) to invest in mortgage related
securities, in most cases by requiring the affected investors to rely solely
upon existing state law, and not SMMEA. In addition, pursuant to the Riegle
Community Development and Regulatory Improvement Act of 1994 (the "1994
Amendment"), Congress expanded the definition of securities
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entitled to the benefits of SMMEA to include those evidencing ownership of, or
secured by, notes secured by a first lien on one or more parcels of real
estate, upon which is located one or more commercial structures. The terms of
this amendment permit states to prohibit or limit, by specific legislation, the
authority of persons, trusts, corporations, partnerships, associations,
business trusts or business entities to purchase, hold or invest, in securities
evidencing ownership of, or secured by, such notes to the extent predicated on
the expansion of SMMEA. The 1994 Amendment permits enactment of such
restrictions until September 23, 2001. It provides, however, that no enactment
will affect the validity of a contractual commitment to purchase, hold or
invest in securities made before such enactment, or require sale of any
securities previously acquired. The Prospectus Supplement for each Series will
identify the states, if any, that have enacted any such limitations through the
date of the Prospectus Supplement. Enactment of such restrictions could
adversely affect the liquidity of any Offered Certificates entitled to the
benefits of SMMEA solely by reason of the 1994 Amendment. Accordingly, the
investors affected by such legislation will be authorized to invest in SMMEA
Certificates only to the extent provided in such legislation. Accordingly,
investors whose investment authority is subject to legal restrictions should
consult their own legal advisors to determine whether and to what extent the
Offered Certificates constitute legal investments for them.
SMMEA also amended the legal investment authority of federally chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal with "mortgage
related securities" without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in such securities, and
national banks may purchase such securities for their own account without
regard to the limitations generally applicable to investment securities set
forth in 12 U.S.C. 24 (Seventh), subject in each case to such regulations as
the applicable federal regulatory authority may prescribe.
Institutions where investment activities are subject to legal investment
laws or regulations or review by certain regulatory authorities may be subject
to restrictions on investment in certain classes of Offered Certificates. Any
financial institution which is subject to the jurisdiction of the Comptroller
of the Currency, the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation ("FDIC"), the Office of Thrift
Supervision ("OTS"), the National Credit Union Administration ("NCUA") or other
federal or state agencies with similar authority should review any applicable
rules, guidelines and regulations prior to purchasing any Offered Certificate.
The Federal Financial Institutions Examination Council, for example, has issued
a Supervisory Policy Statement on Securities Activities effective February 10,
1992 (the "Policy Statement"). The Policy Statement has been adopted by the
Comptroller of the Currency, the Federal Reserve Board, the FDIC, the OTS and
the NCUA (with certain modifications), with respect to the depository
institutions that they regulate. The Policy Statement prohibits depository
institutions from investing in certain "high-risk mortgage securities"
(including securities such as certain classes of Offered Certificates), except
under limited circumstances, and sets forth certain investment practices deemed
to be unsuitable for regulated institutions. The NCUA issued final regulations
effective December 2, 1991 that restrict and in some instances prohibit the
investment by federal credit unions in certain types of mortgage related
securities.
In September 1993 the National Association of Insurance Commissioners
released a draft model investment law (the "Model Law") which sets forth model
investment guidelines for the insurance industry. Institutions subject to
insurance regulatory authorities may be subject to restrictions on investment
similar to those set forth in the Model Law and other restrictions.
If specified in the related Prospectus Supplement, other classes of
Offered Certificates offered pursuant to this Prospectus will not constitute
"mortgage related securities" under SMMEA. The appropriate characterization of
these Offered Certificates under various legal investment restrictions, and
thus the ability of investors subject to these restrictions to purchase such
Offered Certificates, may be subject to significant interpretive uncertainties.
Notwithstanding SMMEA, there may be other restrictions on the ability of
certain investors, including depository institutions, either to purchase any
Offered Certificates or to purchase Offered Certificates representing more than
a specified percentage of the investors' assets.
Except as to the status of SMMEA Certificates identified in the Prospectus
Supplement for a Series as "mortgage related securities" under SMMEA, the
Depositor will make no representations as to the proper
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characterization of the Certificates for legal investment or financial
institution regulatory purposes, or as to the ability of particular investors
to purchase any Offered Certificates under applicable legal investment
restrictions. The uncertainties described above (and any unfavorable future
determinations concerning legal investment or financial institution regulatory
characteristics of the Certificates) may adversely affect the liquidity of the
Certificates.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits and provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying."
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Offered Certificates or
to purchase Offered Certificates 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 the Offered Certificates constitute
legal investments for such investors.
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METHOD OF DISTRIBUTION
The Certificates offered hereby and by the related Prospectus Supplements
will be offered in series through one or more of the methods described below.
The Prospectus Supplement prepared for each series will describe the method of
offering being utilized for that series and will state the net proceeds to the
Depositor from such sale.
The Depositor intends that Offered Certificates will be offered through
the following methods from time to time and that offerings may be made
concurrently through more than one of these methods or that an offering of the
Offered Certificates of a particular series may be made through a combination
of two or more of these methods. Such methods are as follows:
1. By negotiated firm commitment or best efforts underwriting and public
re-offering by underwriters;
2. By placements by the Depositor with institutional investors through
dealers; and
3. By direct placements by the Depositor with institutional investors.
In addition, if specified in the related Prospectus Supplement, the
Offered Certificates of a series may be offered in whole or in part to the
seller of the related Mortgage Assets that would comprise the Trust Fund for
such Certificates.
If underwriters are used in a sale of any Offered Certificates (other than
in connection with an underwriting on a best efforts basis), such Certificates
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices to be
determined at the time of sale or at the time of commitment therefor. Such
underwriters may be broker-dealers affiliated with the Depositor whose
identities and relationships to the Depositor will be as set forth in the
related Prospectus Supplement. The managing underwriter or underwriters with
respect to the offer and sale of Offered Certificates of a particular series
will be set forth on the cover of the Prospectus Supplement relating to such
series and the members of the underwriting syndicate, if any, will be named in
such Prospectus Supplement.
In connection with the sale of Offered Certificates, underwriters may
receive compensation from the Depositor or from purchasers of the Offered
Certificates in the form of discounts, concessions or commissions. Underwriters
and dealers participating in the distribution of the Offered Certificates may
be deemed to be underwriters in connection with such Certificates, and any
discounts or commissions received by them from the Depositor and any profit on
the resale of Offered Certificates by them may be deemed to be underwriting
discounts and commissions under the Securities Act.
It is anticipated that the underwriting agreement pertaining to the sale
of the Offered Certificates of any series will provide that the obligations of
the underwriters will be subject to certain conditions precedent, that the
underwriters will be obligated to purchase all such Certificates if any are
purchased (other than in connection with an underwriting on a best efforts
basis) and that, in limited circumstances, the Depositor will indemnify the
several underwriters and the underwriters will indemnify the Depositor against
certain civil liabilities, including liabilities under the Securities Act or
will contribute to payments required to be made in respect thereof.
The Prospectus Supplement with respect to any series offered by placements
through dealers will contain information regarding the nature of such offering
and any agreements to be entered into between the Depositor and purchasers of
Offered Certificates of such series.
The Depositor anticipates that the Certificates offered hereby will be
sold primarily to institutional investors. Purchasers of Offered Certificates,
including dealers, may, depending on the facts and circumstances of such
purchases, be deemed to be "underwriters" within the meaning of the Securities
Act in connection with reoffers
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and sales by them of Offered Certificates. Holders of Offered Certificates
should consult with their legal advisors in this regard prior to any such
reoffer or sale.
LEGAL MATTERS
Certain legal matters in connection with the Certificates, including
certain federal income tax consequences, will be passed upon for the Depositor
by Latham & Watkins, New York, New York or by Katten, Muchin & Zavis, Chicago,
Illinois.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each Series of
Certificates 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
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of any class of Offered Certificates
that they shall have been rated not lower than investment grade, that is, in
one of the four highest rating categories, by a Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the guarantor, if any. Ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood of
principal prepayments by Mortgagors 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 interest certificates in extreme cases might fail to recoup their
initial 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.
111
<PAGE>
INDEX OF DEFINED TERMS
Accounts..................................................................46
Accrual Certificates..................................................12, 34
Act.......................................................................82
Agreements................................................................11
ARM Loans.................................................................27
Asset Seller..............................................................24
Balloon Mortgage Loans....................................................20
Book-Entry Certificates...................................................34
Cash Flow Agreement.......................................................10
CEDE.......................................................................3
CERCLA................................................................22, 70
Certificate Balance...................................................11, 12
Certificateholders........................................................23
Certificates...............................................................8
CMBS...................................................................8, 24
CMBS Agreement............................................................28
CMBS Issuer...............................................................28
CMBS Trustee..............................................................28
Collection Accounts.......................................................10
Commercial Loans..........................................................24
Commercial Properties..................................................9, 24
Cooperatives..............................................................24
Cut-Off Date..............................................................12
Definitive Certificates...................................................34
Depositor..................................................................8
Determination Date........................................................34
Distribution Account......................................................48
Distribution Date.........................................................12
DTC....................................................................3, 40
Equity Participations.....................................................28
ERISA................................................................15, 104
Grantor Trust Certificates................................................14
Insurance Proceeds........................................................46
Lease......................................................................9
Lessee..................................................................3, 9
Loan-to-Value Ratio.......................................................27
Lock-out Date.............................................................28
Lock-out Period...........................................................28
Master Servicer............................................................8
Mortgage Assets...........................................................24
Mortgage Interest Rate.....................................................9
Mortgage Loans.............................................................8
112
<PAGE>
Mortgage Notes............................................................24
Mortgaged Properties.......................................................9
Mortgages.................................................................24
Multifamily Loans.........................................................24
Multifamily Properties.....................................................9
New Regulations...........................................................83
Nonrecoverable Advance....................................................37
Offered Certificates......................................................14
Originator................................................................24
Pass-Through Rate.....................................................11, 12
Permitted Investments.....................................................46
Prepayment Premium........................................................28
Qualified mortgage........................................................83
Rating Agency.............................................................16
Record Date...............................................................34
Related Proceeds..........................................................37
REMIC..............................................................2, 14, 23
REMIC Regular Certificates................................................14
REMIC Residual Certificates...............................................14
Senior Certificates...................................................11, 34
Servicing Transfer Event..................................................49
Special Servicer...........................................................8
Specially Serviced Mortgage Loan..........................................49
Stripped Interest Certificates....................................11, 12, 34
Stripped Principal Certificates...........................................11
Subordinate Certificates..............................................11, 34
Subsidiary REMIC..........................................................84
Trustee....................................................................8
Underlying CMBS...........................................................24
Underlying Mortgage Loans.................................................24
Voting Rights.............................................................23
Warranting Party..........................................................17
Whole Loans...............................................................24
113
<PAGE>
===============================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRE$ENTATIONS NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DEPOSITOR OR BY THE
UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED
HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF (APPROXIMATE)US
SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SINCE THE DATE OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS.
____________________
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT
Summary of Prospectus Supplement ..........................................
Risk Factors...............................................................
Description of the Mortgage Pool ..........................................
Description of the Certificates ...........................................
Certain Prepayment, Maturity and Yield Considerations......................
Servicing..................................................................
Description of the Pooling and Servicing Agreement.........................
Use of Proceeds............................................................
Federal Income Tax Consequences State Tax Considerations ERISA
Considerations...........................................................
Legal Investment...........................................................
Method of Distribution.....................................................
Legal Matters..............................................................
Rating.....................................................................
Index of Principal Definitions ............................................
Annex A: Certain Characteristics of The
Mortgage Loans........................
Annex B: Form of Monthly Report
PROSPECTUS
Prospectus Supplement......................................................
Available Information......................................................
Incorporation of Certain Information by Reference..........................
Summary of Prospectus......................................................
Risk Factors...............................................................
Description of the Trust Funds Use of Proceeds.............................
Yield Considerations.......................................................
The Depositor..............................................................
Description of the Certificates............................................
Description of the Agreements..............................................
Description of Credit Support..............................................
Certain Legal Aspects of Mortgage Loans and the Leases.....................
Federal Income Tax Consequences............................................
State Tax Considerations...................................................
ERISA Considerations.......................................................
Legal Investment...........................................................
Method of Distribution.....................................................
Legal Matters..............................................................
Financial Information......................................................
Rating.....................................................................
Index of Principal Definitions.............................................
===============================================================================
===============================================================================
$
(APPROXIMATE)
HELLER FINANCIAL
COMMERCIAL
MORTGAGE ASSET
CORP.
-----------
CLASS A1, CLASS A1X, CLASS A2,
CLASS A2X, CLASS B, CLASS C,
CLASS BCX, CLASS D AND CLASS E
MORTGAGE PASS-THROUGH
CERTIFICATES
SERIES 199 -
-------------------
PROSPECTUS SUPPLEMENT
-------------------
, 199
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED TO BE IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Estimated expenses in connection with the issuance and distribution of the
securities, other than underwriting discounts and commissions*, are as follows:
Registration Fee -- Securities and Exchange Commissio$ **
Printing and Engraving Expenses **
Accounting Fees and Expenses **
Legal Fees and Expenses.......................... **
Trustee Fees and Expenses........................ **
Rating Agency Fees............................... **
Miscellaneous Expenses........................... **
---------
Total.................................. $ **
=========
- ----------
* To be provided for each Series of Securities on the cover page of the
related Prospectus Supplement.
** To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the proposed form of Underwriting Agreement to be filed as Exhibit
1.1 hereto, the Underwriter will be obligated under certain circumstances to
indemnify officers and directors of Heller Financial Commercial Mortgage Asset
Corp. (the "Company") who sign the Registration Statement, and certain
controlling persons of the Company, against certain liabilities, including
liabilities under the Securities Act of 1933, as amended and the Securities
Exchange Act of 1934, as amended.
The Company's Certificate of Incorporation provides for indemnification of
directors and officers of the Company to the full extent permitted by Delaware
law.
Section 145 of the Delaware General Corporation Law provides, in
substance, that Delaware corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents in
connection with actions, suits or proceedings brought against them by a third
party or in the right of the corporation, by reason of the fact that they are
or were such directors, officers, employees or agents, against expenses,
judgments, fines and amounts paid in settlement actually and reasonably
incurred in any such action, suit or proceeding. The Delaware General
Corporation Law also provides that the Registrant may purchase insurance on
behalf of any such director, officer, employee or agent.
II-1
<PAGE>
The Pooling and Servicing Agreement will provide that no director,
officer, employee or agent of the Company will be liable to the Trust Fund or
the Certificateholders for any action taken or for refraining from the taking
of any action pursuant to the Pooling and Servicing Agreement, except for such
person's own misfeasance, bad faith or gross negligence in the performance of
duties. The Pooling and Servicing Agreement will provide further that, with the
exceptions stated above, the Company and any director, officer, employee or
agent of the Company will be indemnified and held harmless by the Trust Fund
against any loss, liability or expense incurred in connection with any legal
action relating to the Pooling and Servicing Agreement or the Certificates,
other than any loss, liability or expense (i) related to any specific Mortgage
Loan or Mortgage Loans (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to the Pooling and Servicing Agreement), (ii)
incurred in connection with any violation by him or her of any state or federal
securities law or (iii) imposed by any taxing authority if such loss, liability
or expense is not specifically reimbursable pursuant to the terms of the
Pooling and Servicing Agreement.
II-2
<PAGE>
ITEM 16. EXHIBITS
Exhibit
Number
1.1 -- Form of Underwriting Agreement
3.1 -- Certificate of Incorporation of the Company
3.2 -- By-Laws of the Company
4.1 -- Form of Pooling and Servicing Agreement
5.1 -- Opinion of Latham & Watkins regarding the legality
of the Certificates*
5.2 -- Opinion of Katten, Muchin & Zavis regarding the legality
of the Certificates*
8.1 -- Opinion of Latham & Watkins regarding tax matters*
8.2 -- Opinion of Katten, Muchin & Zavis regarding tax matters*
23.1 -- Consent of Latham & Watkins (included as part of Exhibits 5.1
and 8.1 hereto)*
23.2 -- Consent of Katten, Muchin & Zavis (included as part of Exhibits
5.2 and 8.2 hereto)*
24.1 -- Power of Attorney (included on page II-5)
- ----------
* To be filed by amendment.
ITEM 17. 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 (the
"Securities Act"); (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; (iii) to include any material information with respect
to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement; provided, however, that no such post-effective amendment shall be
required if the information which would be required by clauses (i) and (ii) is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") that
are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, 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 that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in this registration statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such
II-3
<PAGE>
indemnification is against public policy as expressed in the Securities 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 of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this to Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Chicago, State of Illinois, on the 15th day of
January 1998.
HELLER FINANCIAL COMMERCIAL
MORTGAGE ASSET CORP.
By: /s/ David J. Friedman
--------------------------------
Name: David J. Friedman
Title: Chief Executive Officer
and President
Each person whose signature appears below does hereby make, constitute and
appoint Thomas J. Bax and Margaret E. Govern and each of them his true and
lawful attorney with full power of substitution to execute, deliver and file
with the Securities and Exchange Commission, for and on his behalf and in his
capacity or capacities as stated below, any amendment (including post-effective
amendments) to the Registration Statement with all exhibits thereto, making
such changes on the Registration Statement as the Registrant deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Lauralee E. Martin Director (Chairman of January 15, 1998
- ----------------------------- the Board of Directors)
Name: Lauralee E. Martin
/s/ Michael P. Goldsmith Director January 15, 1998
- -----------------------------
Name: Michael P. Goldsmith
/s/ Dick Rai Director January 15, 1998
- -----------------------------
Name: Dick Rai
/s/ David J. Friedman Chief Executive Officer January 15, 1998
- ----------------------------- (Principal Executive
Name: David J. Friedman Officer) and President
/s/ Thomas J. Bax Vice President and Chief January 15,1998
- ----------------------------- Financial Officer (Principal
Name: Thomas J. Bax Financial Officer)
/s/ Margaret E. Govern Assistant Vice President January 15, 1998
- ----------------------------- and Controller (Principal
Name: Margaret E. Govern Accounting Officer)
II-5
<PAGE>
EXHIBIT 1.1
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 199_-_
UNDERWRITING AGREEMENT
as of _________, 199_
Underwriter
[address]
Ladies and Gentlemen:
Heller Financial Commercial Mortgage Asset Corp., a Delaware
corporation (the "Depositor"), proposes to sell to you (the "Underwriter") the
Mortgage Pass-Through Certificates identified on Schedule I hereto (the
"Certificates") pursuant to this Underwriting Agreement, dated as of ________,
199_ (this "Agreement"), between the Depositor and the Underwriter. The
Certificates will evidence beneficial ownership interests in a trust fund (the
"Trust Fund") to be formed by the Depositor and consisting primarily of a pool
(the "Mortgage Pool") of multifamily and commercial mortgage loans (the
"Mortgage Loans").
The Mortgage Loans will be acquired by the Depositor from ___________
(the "Mortgage Loan Seller") pursuant to the mortgage loan purchase agreement,
dated as of _____________, 199_ (the "Mortgage Loan Purchase Agreement"),
between the Depositor and the Mortgage Loan Seller. Capitalized terms not
otherwise defined herein shall have the meanings set forth in the Mortgage Loan
Purchase Agreement.
The Depositor has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (No. 033-______) on Form S-3 for
the registration of the Certificates under the Securities Act of 1933, as
amended (the "1933 Act"), which registration statement has become effective and
copies of which have heretofore been delivered to the Underwriter. The
Depositor proposes to file with the Commission pursuant to Rule 424(b) under
the 1933 Act a supplement to the form of prospectus included in such
registration statement relating to the Certificates and the plan of
distribution thereof. Such registration statement, including the exhibits
thereto, as amended at the date hereof, is hereinafter called the "Registration
Statement"; the prospectus included in the Registration Statement, at the time
<PAGE>
the Registration Statement, as amended, became effective, or as subsequently
filed with the Commission pursuant to Rule 424(b) under the 1933 Act, is
hereinafter called the "Basic Prospectus"; such form of supplement to the form
of prospectus relating to the Certificates, in the form in which it shall be
first filed with the Commission pursuant to Rule 424 (including the Basic
Prospectus as so supplemented) is hereinafter called the "Prospectus
Supplement"; and the Basic Prospectus and the Prospectus Supplement, together,
are hereinafter called the "Prospectus". Any preliminary form of the Prospectus
that has heretofore been filed pursuant to Rule 424(b) is hereinafter called a
"Preliminary Prospectus".
SECTION 1. Representations and Warranties.
(a) The Depositor represents and warrants to the Underwriter as
follows:
(i) The Registration Statement has become effective, and the
Registration Statement as of the effective date thereof (the "Effective Date"),
and the Prospectus, as of the date of the Prospectus Supplement, complied in
all material respects with the applicable requirements of the 1933 Act and the
rules and regulations thereunder (the "1933 Act Regulations"); and the
information in the Registration Statement, as of the Effective Date, did not
contain any untrue statement of a material fact and did not omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading and the information in the Prospectus, as of the date of
the Prospectus Supplement, did not, and as of the Closing Date (as hereinafter
defined) will not, contain an untrue statement of a material fact and did not
and will not omit to state a material fact necessary in order to make the
information therein, in the light of the circumstances under which they were
made, not misleading, provided, however, that the Depositor makes no
representations, warranties or agreements as to (A) 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
Depositor by the Underwriter specifically for use in connection with the
preparation of the Prospectus or any revision or amendment thereof or
supplement thereto (the "Underwriter Information"), or (B) any information
contained in or omitted from any Computational Materials or ABS Term Sheets
(each as hereinafter defined) required to be provided by the Underwriter to the
Depositor pursuant to Section 4, and provided, further, that the Depositor
makes no representations or warranties as to any information contained in or
omitted from the portions of the Prospectus Supplement under the headings
"________________________________", or contained in or omitted from Appendix
__, Appendix __, Appendix ___ or Appendix __ to the Prospectus Supplement (the
"Mortgage Loan Seller Information") and provided, further, that the Depositor
makes no representations or warranties regarding untrue statements or omissions
in the portions of the Prospectus Supplement under the headings "___________"
and "_______________" that arise out of or are based upon untrue statements or
omissions in the Mortgage Loan Seller Information.
(ii) The Depositor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware with corporate power and authority to own, lease and operate its
properties and to conduct its business as now conducted
2
<PAGE>
by it, and to enter into and perform its obligations under this Agreement and
the Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"),
dated as of ____________, 199_, among the Depositor, _______________, as master
servicer, _________, as special servicer and __________________, as trustee.
(iii) The execution, delivery and performance of this Agreement
and the Pooling and Servicing Agreement and the consummation of the
transactions contemplated herein and therein and compliance by the Depositor
with its obligations hereunder and thereunder have been duly authorized by all
necessary corporate action and will not contravene any provision of applicable
law or the certificate of incorporation or by-laws of the Depositor or conflict
with or constitute a breach of or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Depositor pursuant to, any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Depositor is a party or by which
it may be bound or to which any of the property or assets of the Depositor is
subject.
(iv) The Certificates have been duly authorized for issuance and
sale (or will have been so authorized prior to the issuance thereof) pursuant
to this Agreement and the Pooling and Servicing Agreement. When issued,
authenticated and delivered pursuant to the provisions of this Agreement and of
the Pooling and Servicing Agreement against payment of the consideration
therefor in accordance with this Agreement, the Certificates will be duly and
validly issued and outstanding and entitled to the benefits provided by the
Pooling and Servicing Agreement, except as enforcement thereof may be limited
by bankruptcy, insolvency or other laws relating to or affecting enforcement of
creditors' rights or by general equity principles. The Certificates and the
Pooling and Servicing Agreement conform in all material respects to all
statements relating thereto contained in the Prospects.
(v) No authorization, approval or consent of any court or
governmental authority or agency is necessary in connection with the offering,
issuance or sale of the Certificates hereunder, except such as have been, or as
of the Closing Date will have been, obtained or such as may otherwise be
required under applicable state securities laws in connection with the purchase
and offer and sale of the Certificates by the Underwriter and any recordation
of the respective assignments of the Mortgage Loans to the Trustee pursuant to
the Pooling and Servicing Agreement that have not yet been completed.
(vi) This Agreement has been, and as of the Closing Date the
Pooling and Servicing Agreement will be, duly authorized, executed and
delivered by the Depositor. This Agreement constitutes, and as of the Closing
Date the Pooling and Servicing Agreement will constitute, a legal, valid and
binding agreement enforceable against the Depositor in accordance with its
terms, except as such enforceability may be limited by (A) bankruptcy,
insolvency, reorganization, receivership, moratorium or other similar laws
affecting the enforcement of the rights of creditors generally, (B) general
principles of equity, whether enforcement is sought in a proceeding in equity
or at law, and (C) public policy considerations underlying the securities laws,
to the extent that such public policy considerations limit the enforceability
of
3
<PAGE>
the provisions of this Agreement that purport or are construed to provide
indemnification from securities law liabilities.
(vii) At the time of the execution and delivery of the Pooling
and Servicing Agreement, the Depositor (A) will convey to the Trustee, or cause
to be conveyed to the Trustee, good title to the Mortgage Loans being
transferred to the Trustee pursuant to the Pooling and Servicing Agreement,
free and clear of any lien, mortgage, pledge, charge, encumbrance, adverse
claim or other security interest (collectively "Liens") granted by or imposed
upon the Depositor, (B) will not have assigned to any person any of its right,
title or interest in the Mortgage Loans or in the Pooling and Servicing
Agreement or the Certificates, and (C) will have the power and authority to
transfer or cause to be transferred the Mortgage Loans to the Trustee and to
sell the Certificates to the Underwriter. Upon execution and delivery of the
Pooling and Servicing Agreement by the Trustee, the Trustee will have acquired
ownership of all of the Depositor's right, title and interest in and to the
Mortgage Loans except to the extent disclosed in the Prospectus, and upon
delivery to the Underwriter of the Certificates pursuant hereto, the
Underwriter will have good title to the Certificates purchased by the
Underwriter, in each case free of Liens.
(viii) The Depositor is not, and the issuance and sale of the
Certificates in the manner contemplated by the Prospectus will not cause the
Depositor or the Trust Fund to be, subject to registration or regulation as an
"investment company" under the Investment Company Act of 1940, as amended (the
"1940 Act").
(ix) Under generally accepted accounting principles ("GAAP") and
for federal income tax purposes, the Depositor will report the transfer of the
Mortgage Loans to the Trustee in exchange for the Certificates and the sale of
the Certificates to the Underwriter pursuant to this Agreement as a sale of the
interest in the Mortgage Loans evidenced by the Certificates. The consideration
received by the Depositor upon the sale of the Certificates to the Underwriter
will constitute reasonably equivalent value and fair consideration for the
Certificates. The Depositor will be solvent at all relevant times prior to, and
will not be rendered insolvent by, the sale of the Certificates to the
Underwriter. The Depositor is not selling the Certificates to the Underwriter
with any intent to hinder, delay or defraud any of the creditors of the
Depositor.
(x) At the Closing Date, the respective classes of Certificates
shall have been assigned ratings no lower than those set forth in Schedule I
hereto by the nationally recognized statistical rating organizations identified
in Schedule I hereto (the "Rating Agencies").
(xi) Any taxes, fees and other governmental charges in connection
with the execution, delivery and issuance of this Agreement, the Pooling and
Servicing Agreement and the Certificates payable by the Depositor (other than
income taxes) have been paid or will be paid at or prior to the Closing Date.
4
<PAGE>
(xii) None of the Depositor or any of its affiliates does
business with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes;
(b) The Underwriter represents and warrants to the Depositor that, as
of the date hereof and as of the Closing Date, the Underwriter has complied
with all of its obligations hereunder.
SECTION 2. Purchase and Sale.
Subject to the terms and conditions herein set forth and in reliance
upon the representations and warranties herein contained, the Depositor shall
sell to the Underwriter, and the Underwriter shall purchase from the Depositor,
at the related purchase price set forth on Schedule I hereto, Certificates of
each class thereof having an actual or notional amount as set forth on Schedule
I hereto. There will be added to the purchase price of the Certificates an
amount equal to interest accrued thereon pursuant to the terms thereof from the
Cut-off Date to but excluding the Closing Date.
SECTION 3. Delivery and Payment.
Payment of the aggregate purchase price for, and delivery of, the
Certificates shall be made at 10:00 a.m. New York City time on _________, 199_,
which date and time may be postponed by agreement between the Underwriter and
the Depositor (such time and date of payment and delivery, the "Closing Date").
Payment shall be made to the Depositor in immediately available Federal funds
wired to such bank as may be designated by the Depositor, against delivery of
the Certificates. Delivery of the Certificates will be made in book-entry form
through the facilities of The Depository Trust Company ("DTC"). Each class of
Certificates will be represented by one or more definitive global Certificates
to be deposited by or on behalf of the Depositor with DTC. The Certificates
will be made available for examination by the Underwriter not later than 10:00
a.m. New York City time on the last business day prior to the Closing Date. The
closing of the transactions contemplated hereby shall be made at the offices of
___________________________, or at such other place as shall be agreed upon by
the Underwriter and the Depositor.
SECTION 4. Offering by Underwriter.
(a) The Underwriter shall provide written information to the Depositor
expressly for use in the Preliminary Prospectus and the Prospectus (the
"Underwriter Information").
(b) It is understood that the Underwriter proposes to offer the
Certificates for sale as set forth in the Prospectus. It is further understood
that the Depositor, in reliance upon a Policy Statement 105, has not and will
not file an offering statement pursuant to Section 352-c of the General
Business Law of the State of New York with respect to the Certificates. The
Underwriter therefore agrees that sales of the Certificates made by the
Underwriter in and from
5
<PAGE>
the State of New York will be made only to institutional investors within the
meaning of Policy Statement 105.
(c) In connection with the offering of the Certificates, the
Underwriter may prepare and provide to prospective investors (i) computational
materials ("Computational Materials") 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, as
made applicable to other issuers and underwriters by the Commission in response
to the request of the Public Securities Association dated May 24, 1994, as well
as the PSA Letter referred to below and (ii) ABS term sheets ("ABS Term
Sheets"), each as defined in the No-Action Letter of February 17, 1995 issued
by the Commission to the Public Securities Association (the "PSA Letter"),
subject to the following conditions:
(i) All Computational Materials and ABS Term Sheets provided to
prospective investors that are required to be filed pursuant to the No-Action
Letters shall bear a legend substantially in the form attached hereto as
Exhibit A. The Depositor shall have the right to require additional specific
legends or notations to appear on any Computational Materials or ABS Term
Sheets, the right to require changes regarding the use of terminology and the
right to determine the types of information appearing therein. Notwithstanding
the foregoing, this subsection (i) will be satisfied if all Computational
Materials and ABS Term Sheets referred to herein bear a legend in a form
previously approved in writing by the Depositor.
(ii) The Underwriter shall provide the Depositor with
representative forms of all Computational Materials and ABS Term Sheets prior
to their first use, to the extent such forms have not previously been approved
by the Depositor for use by the Underwriter. The Underwriter shall provide to
the Depositor, for filing on Form 8-K as provided in Section 5(j), copies (in
such format as required by the Depositor) of all Computational Materials and
ABS Term Sheets that are required to be filed with the Commission pursuant to
the No-Action Letters. The Underwriter may provide copies of the foregoing in a
consolidated or aggregated form including all information required to be filed
if filing in such format is permitted by the No-Action Letters. All
Computational Materials and ABS Term Sheets described in this subsection (ii)
must be provided to the Depositor not later than 10:00 a.m. New York City time
one business day before filing thereof is required pursuant to the terms of
this Agreement and in accordance with the No-Action Letters. The Underwriter
shall not provide to any investor or prospective investor in the Certificates
any Computational Materials or ABS Term Sheets on or after the day on which
Computational Materials or ABS Term Sheets are required to be provided to the
Depositor pursuant to this subsection (ii) (other than copies of Computational
Materials or ABS Term Sheets previously submitted to the Depositor in
accordance with this subsection (ii) for filing pursuant to Section 5(j),
unless such Computational Materials or ABS Term Sheets are preceded or
accompanied by the delivery of a Prospectus to such investor or prospective
investor.
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(iii) 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 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 Mortgage Pool that differ from the final mortgage pool information
reflected in the Mortgage Loan Seller Information in any material respect or on
Certificate structuring terms that were revised in any material respect prior
to the printing of the Prospectus, the Underwriter shall prepare revised
Computational Materials or ABS Term Sheets, as the case may be, based on the
Mortgage Loan Seller Information and structuring assumptions used in the
Prospectus, circulate such revised Computational Materials and ABS Term Sheets
to all recipients of the preliminary versions thereof that indicated orally to
the Underwriter they would purchase all or any portion of the Certificates, and
include such revised Computational Materials and ABS Term Sheets (marked, "as
revised") in the materials delivered to the Depositor pursuant to subsection
(ii) above.
(iv) The Depositor shall not be obligated to file any
Computational Materials or ABS Term Sheets that have been determined to contain
any material error or omission, provided that, at the request of the
Underwriter, the Depositor 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." If, within the period during which
the Prospectus relating to the Certificates is required to be delivered under
the 1933 Act, any Computational Materials or ABS Term Sheets are determined, in
the reasonable judgment of the Depositor or the Underwriter, to contain a
material error or omission, the Underwriter shall prepare a corrected version
of such Computational Materials or ABS Term Sheets, shall circulate such
corrected Computational Materials or ABS Term Sheets to all recipients of the
prior versions thereof that either indicated orally to the Underwriter they
would purchase all or any portion of the Certificates, or actually purchased
all or any portion thereof, and shall deliver copies of such corrected
Computational Materials or ABS Term Sheets (marked, "as corrected") to the
Depositor for filing with the Commission in a subsequent Form 8-K submission
(subject to the Depositor's obtaining an accountant's comfort letter in respect
of such corrected Computational Materials and ABS Term Sheets, which the
parties acknowledge shall be at the expense of the Mortgage Loan Seller. As of
the date that the Underwriter disseminates any Computational Materials or ABS
Term Sheets, the Underwriter shall not have any knowledge or reason to believe
that such Computational Materials or ABS Term Sheets contained any material
error or omission and will promptly notify the Depositor of any such material
error or omission of which the Underwriter becomes aware.
(v) The Underwriter shall be deemed to have represented, as of
the Closing Date, that, except for Computational Materials and ABS Term Sheets
provided to the Depositor pursuant to subsection (ii) above, the Underwriter
did not provide any prospective investors
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with any information in written or electronic form in connection with the
offering of the Certificates that is required to be filed with the Commission
in accordance with the No-Action Letters, and the Underwriter shall provide the
Depositor with a certification to that effect on the Closing Date.
(vi) In the event of any delay in the delivery by the Underwriter
to the Depositor of all Computational Materials and ABS Term Sheets required to
be delivered in accordance with subsection (ii) above, or in the delivery of
the accountant's comfort letter in respect thereof pursuant to Section 5(j),
the Depositor shall have the right to delay the release of the Prospectus to
investors or to the Underwriter, to delay the Closing Date and to take other
appropriate actions in each case as necessary in order to allow the Depositor
to comply with its agreement set forth in Section 5(j) to file the
Computational Materials and ABS Term Sheets by the time specified therein.
(d) The Underwriter further represents and warrants that, if and to
the extent it has provided any prospective investors with any Computational
Materials or ABS Terms Sheets prior to the date hereof in connection with the
offering of the Certificates, all of the conditions set forth in clause (c)
above have been satisfied with respect thereto.
SECTION 5. Covenants of the Depositor.
The Depositor covenants with the Underwriter as follows:
(a) The Depositor will give the Underwriter notice of its intention to
file or prepare (i) any amendment to the Registration Statement at any time
prior to the Closing Date or (ii) any amendment or supplement to the Prospectus
(including any revised prospectus that the Depositor proposes for use by the
Underwriter in connection with the offering of the Certificates and that
differs from the prospectus on file at the Commission at the time the
Registration Statement became effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the 1933 Act Regulations) at
any time during the period when a prospectus relating to the Certificates is
required to be delivered under the 1933 Act and the Depositor, will furnish the
Underwriter with copies of any such amendment or supplement a reasonable amount
of time prior to such proposed filing or use, as the case may be, and will not
file any such amendment or supplement or use any such prospectus to which the
Underwriter shall reasonably object.
(b) The Depositor will cause the Prospectus to be transmitted to the
Commission for filing pursuant to Rule 424(b) under the 1933 Act by means
reasonably calculated to result in filing with the Commission pursuant to said
rule.
(c) The Depositor will deliver to the Underwriter a copy of the
Registration Statement as originally filed and of each amendment thereto prior
to the date hereof (including exhibits filed therewith or incorporated by
reference therein).
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(d) The Depositor will furnish to the Underwriter, from time to time
during the period when a prospectus relating to the Certificates is required to
be delivered under the 1933 Act, such number of copies of the Prospectus (as
amended or supplemented) as the Underwriter may reasonably request for the
purposes contemplated by the 1933 Act or the 1934 Act or the respective
applicable rules and regulations of the Commission thereunder.
(e) If, during the period after the first date of the public offering
of the Certificates in which a prospectus relating to the Certificates is
required to be delivered under the 1933 Act, any event shall occur as a result
of which it is necessary to amend or supplement the Prospectus in order to make
the Prospectus not misleading in the light of the circumstances existing at the
time it is delivered to a purchaser, the Depositor will forthwith amend or
supplement the Prospectus so that, as so amended or supplemented, the
Prospectus will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a purchaser,
not misleading, and the Depositor will furnish to the Underwriter a reasonable
number of copies of such amendment or supplement.
(f) The Depositor will endeavor to arrange for the qualification of
the Certificates for sale under the applicable securities laws of such states
and other jurisdictions of the United States as the Underwriter may reasonably
designate and will maintain such qualification in effect so long as required
for the initial distribution of Certificates; provided, however, that the
Depositor shall not be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified.
(g) The Depositor will use the net proceeds received by it from the
sale of the Certificates in the manner specified in the Prospectus under "Use
of Proceeds".
(h) If the transactions contemplated by this Agreement are
consummated, the Depositor will pay or cause to be paid all expenses incident
to the performance of the obligations of the Depositor under this Agreement.
Except as herein provided, the Underwriter shall be responsible for the payment
of all costs and expenses incurred by it, including, without limitation, (i)
the fees and disbursements of counsel of the Underwriter and (ii) such
additional costs arising out of any Computational Materials and ABS Term Sheets
prepared and/or distributed by the Underwriter, in connection with the purchase
and sale of the Certificates.
(i) If, during the period after the Closing Date in which a prospectus
relating to the Certificates is required to be delivered under the 1933 Act,
the Depositor receives notice that a stop order suspending the effectiveness of
the Registration Statement or preventing the offer and sale of the Certificates
is in effect, the Depositor will immediately advise the Underwriter of the
issuance of such stop order.
(j) The Depositor will file with the Commission within fifteen days of
the issuance of the Certificates a report on Form 8-K setting forth specific
information concerning the Certificates and the Mortgage Pool to the extent
that such information is not set forth in the
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Prospectus. The Depositor will also file with the Commission a report on Form
8-K setting forth all Computational Materials and ABS Term Sheets (as such
terms are defined herein) provided to the Depositor by the Underwriter and
identified by it as such within the time period allotted for such filing
pursuant to the No-Action Letters; provided, however, that prior to such filing
of the Computational Materials and ABS Term Sheets by the Depositor, the
Underwriter must comply with its obligations pursuant to Section 4 and the
Depositor must receive a letter from ____________________, certified public
accountants, satisfactory in form and substance to the Depositor, to the effect
that such accountants have performed certain specified procedures, all of which
have been agreed to by the Depositor, as a result of which they have determined
that the information included in the Computational Materials and ABS Term
Sheets (if any), provided by the Underwriter to the Depositor for filing on
Form 8-K pursuant to Section 4 and this subsection (j), and that the
accountants have examined in accordance with such agreed upon procedures, is
accurate except as to such matters that are not deemed by the Depositor to be
material. The Depositor shall file any corrected Computational Materials or ABS
Term Sheets described in Section 4(c)(iv) as soon as practicable following
receipt thereof.
SECTION 6. Conditions of Underwriter's Obligations.
The Underwriter's obligation to purchase the Certificates allocated to
it as set forth on Schedule I hereto shall be subject to the accuracy in all
material respects of the representations and warranties on the part of the
Depositor contained herein as of the date hereof and as of the Closing Date, to
the performance by the Depositor in all material respects of its obligations
hereunder and to the following 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 Depositor's knowledge, threatened by the Commission and the
Prospectus Supplement shall have been filed or transmitted for filing by means
reasonably calculated to result in a filing with the Commission pursuant to
Rule 424(b) under the Act.
(b) On the Closing Date, the Underwriter shall have received:
(i) One or more opinions, dated the Closing Date, of counsel to
the Depositor, in form and substance satisfactory to the Underwriter,
substantially to the effect that:
(A) The Depositor is a corporation in good standing under
the laws of the State of Delaware.
(B) The Depositor has corporate power and authority to enter
into and perform its obligations under this Agreement and the Pooling
and Servicing Agreement.
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(C) Each of this Agreement and the Pooling and Servicing
Agreement has been duly authorized, executed and delivered by the
Depositor. Upon due authorization, execution and delivery by the other
parties thereto, the Pooling and Servicing Agreement will constitute a
valid, legal and binding agreement of the Depositor, enforceable
against the Depositor in accordance with its terms, except as
enforceability may be limited by (1) bankruptcy, insolvency,
liquidation, receivership, moratorium, reorganization or other similar
laws affecting the enforcement of the rights of creditors generally
and (2) general principles of equity, whether enforcement is sought in
a proceeding in equity or at law.
(D) The Certificates, when duly and validly executed,
authenticated and delivered in accordance with the Pooling and
Servicing Agreement and paid for in accordance with this Agreement,
will be entitled to the benefits of the Pooling and Servicing
Agreement.
(E) The Registration Statement is effective under the 1933
Act and, to the best of such counsel's knowledge and information, no
stop order suspending the effectiveness of the Registration Statement
has been issued under the 1933 Act and not withdrawn, and no
proceedings for that purpose have been initiated or threatened by the
Commission.
(F) At the time it became effective, the Registration
Statement (other than any financial or statistical information
included or incorporated by reference therein, as to which no opinion
need be rendered) complied as to form in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations.
(G) To such counsel's knowledge and information, there are
no material contracts, indentures, or other documents of the Depositor
required to be described or referred to in the Registration Statement
or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits
thereto.
(H) The Pooling and Servicing Agreement is not required to
be qualified under the Trust Indenture Act of 1939, as amended, and
the issuance and sale of the Certificates in the manner contemplated
by the Prospectus will not cause the Depositor or the Trust Fund to be
subject to registration or regulation as an "investment company" under
the Investment Company Act of 1940, as amended.
(I) No consent, approval, authorization, or order of any
State of New York or federal court or governmental agency or body is
required for the consummation by the Depositor of the transactions
contemplated herein, except (1) such as have been obtained, (2) such
as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and sale of the Certificates by the
Underwriter, as to which no opinion need be expressed and (3) any
recordation of the assignments of the
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Mortgage Loans to the Trustee pursuant to the Pooling and Servicing
Agreement that has not yet been completed.
(J) Neither the sale of the Certificates to the Underwriter
pursuant to this Agreement, nor the consummation by the Depositor of
any other of the transactions contemplated by, or the fulfillment by
the Depositor of the terms of, this Agreement or the Pooling and
Servicing Agreement, will conflict with or result in a breach or
violation of any term or provision of, or constitute a default (or an
event which with the passing of time or notification or both, would
constitute a default) under, the certificate of incorporation or
by-laws of the Depositor or, to the knowledge of such counsel, any
material indenture or other material agreement or material instrument
to which the Depositor is a party or by which it is bound, or any
State of New York or federal statute or regulation applicable to the
Depositor or, to the knowledge of such counsel, any order of any New
York or federal court, regulatory body, administrative agency or
governmental body having jurisdiction over the Depositor.
(ii) An opinion, dated the Closing Date, of counsel to the
Underwriter, reasonably acceptable to the Underwriter.
(iii) In giving their opinions required by the foregoing
subsections (i) and (ii) of this Section, counsel to the Depositor and
the Underwriter, respectively, shall in each case additionally state
that nothing has come to such counsel's attention that would lead it
to believe that the Prospectus (other than any financial statements
and supporting schedules and statistical and/or accounting information
included therein, as to which no opinion need be rendered), as of the
date thereof or as of the Closing Date, contained an untrue statement
of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. Such statement shall be based
upon conferences and telephone conversations with representatives of
the parties hereto, the Mortgage Loan Seller, the Master Servicer, the
Special Servicer and the Trustee and such opinion may be qualified
that, with limited exception, such counsel will not have reviewed any
loan documents.
Such opinion(s) may express its (their) reliance as to factual
matters on the representations and warranties made by, and on
certificates or other documents furnished by officers and/or
authorized representatives of, the parties to this Agreement and the
Pooling and Servicing Agreement and on certificates furnished by
public officials. Such opinion(s) may assume the due authorization,
execution and delivery of the instruments and documents referred to
therein by the parties thereto other than the party on behalf of which
such opinion is being rendered. Such opinion(s) may be qualified as an
opinion only on the General Corporation Law of the State of Delaware,
the laws of the State of New York and the federal law of the United
States.
(c) On the Closing Date, the Underwriter shall have received a
favorable opinion, dated the Closing Date, of special tax and ERISA counsel to
the Depositor (i) regarding the
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qualification of each of [REMIC I, REMIC II and REMIC III] as a real estate
mortgage investment conduit within the meaning of Sections 860A through 860G of
the Internal Revenue Code of 1986 and (ii) to the effect that the statements in
the Basic Prospectus and the Prospectus Supplement under the headings "Certain
Federal Income Tax Consequences" and "ERISA Considerations", to the extent that
they constitute matters of State of New York or federal law or legal
conclusions with respect thereto, while not purporting to discuss all possible
consequences of investment in the Certificates, are correct in all material
respects with respect to those consequences or matters that are discussed
therein. Such opinion(s) may express its (their) reliance as to factual matters
on the representations and warranties made by, and on certificates or other
documents furnished by officers and/or authorized representatives of, the
parties to this Agreement and the Pooling and Servicing Agreement and on
certificates furnished by public officials. Such opinion(s) may assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the party on behalf of which such
opinion is being rendered. Such opinion(s) may be qualified as an opinion only
on the federal tax and ERISA law of the United States.
(d) The Depositor shall have delivered to the Underwriter a
certificate, dated the Closing Date, of the President, a Senior Vice President
or a Vice President of the Depositor to the effect that the signer of such
certificate has examined, or has relied upon an examination conducted by
appropriate persons authorized by him of, this Agreement, the Prospectus, the
Pooling and Servicing Agreement and various other closing documents, and that,
to the best of his or her knowledge after reasonable investigation:
(i) the representations and warranties of the Depositor in this
Agreement and the Pooling and Servicing Agreement are true and correct
in all material respects;
(ii) the Depositor has, in all material respects, complied with
all the agreements and satisfied all the conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date;
(iii) since ___________, 199_, there has been no material adverse
change in the financial condition of the Depositor; and
(iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been initiated or threatened by the Commission.
(e) The Depositor and the Underwriter shall have received from
_______________, certified public accountants, a letter dated the Closing Date,
in form and substance satisfactory to the Underwriter, stating in effect that:
(i) they have performed certain specified procedures as a result
of which they have determined that certain information of an accounting,
financial or statistical nature set
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forth in the Prospectus Supplement agrees with the data sheet or computer tape
prepared by or on behalf of the Mortgage Loan Seller, unless otherwise noted in
such letter; and
(ii) they have compared the data contained in the data sheet or
computer tape referred to in the immediately preceding clause (i) to
information contained in an agreed upon sampling of the Mortgage Loan files and
in such other sources as shall be specified by them, and found such data and
information to be in agreement, unless otherwise noted in such letter.
(f) The Underwriter shall have delivered the certification specified
in Section 4(c)(v) and received the accountants' letters specified in Section
5(j).
(g) The Underwriter shall have received, with respect to each of the
Master Servicer, the Special Servicer and the Trustee, a favorable opinion of
counsel, dated the Closing Date, addressing the valid existence of such party
under the laws of the jurisdiction of its organization, the due authorization,
execution and delivery of the Pooling and Servicing Agreement by such party
and, subject to the same limitations as set forth in Section 6(b)(i)(C), the
enforceability of the Pooling and Servicing Agreement against such party. Such
opinion may express its reliance as to factual matters on representations and
warranties made by, and on certificates or other documents furnished by,
officers and/or authorized representatives of parties to, the Pooling and
Servicing Agreement and on certificates furnished by public officials. 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 party on behalf of which such opinion is being rendered.
(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 Depositor which the Underwriter concludes, in the
reasonable judgment of the Underwriter after consultation with the Depositor,
materially impairs the investment quality of the Certificates so as to make it
impractical or inadvisable to proceed with the public offering or the delivery
of the Certificates as contemplated by the Prospectus.
(i) The Certificates shall have been assigned ratings no less than
those set forth on Schedule I and such ratings shall not have been rescinded.
SECTION 7. Indemnification.
(a) The Depositor shall indemnify and hold harmless the Underwriter,
its directors and officers and each person, if any, who controls the
Underwriter within the meaning of either Section 15 of the 1933 Act or Section
20 of the Securities Exchange Act of 1934, as amended (the "1934 Act"), from
and against any and all expenses, losses, claims, damages and other liabilities
(including without limitation the reasonable costs of investigation and legal
defense) (the "Liabilities") caused by any untrue statement or alleged untrue
statement of any material fact contained in the Prospectus or any omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in light of the circumstances under which they
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were made, not misleading; provided that, insofar as the Liabilities are caused
by any such untrue statement or omission or alleged untrue statement or
omission with respect to any information in the Prospectus as to which the
Underwriter has agreed to indemnify the Depositor pursuant to Section 7(b), the
Depositor shall have no obligation to so indemnify and hold harmless; and
provided, further, that the Depositor shall have no obligation to so indemnify
and hold harmless to the extent that the Liabilities arise out of or are based
upon an untrue statement or omission or an alleged untrue statement or omission
with respect to the Mortgage Loan Seller Information or any other factual
information contained in the Prospectus regarding the Mortgage Loans.
(b) The Underwriter shall indemnify and hold harmless the Depositor,
its directors and each person, if any, who controls the Depositor within the
meaning of either Section 15 or Section 20 of the 1933 Act or Section 20 of the
1934 Act against any and all Liabilities as incurred, but only with respect to
(i) untrue statements or alleged untrue statements, or omissions or alleged
omissions to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, in the
Underwriter Information and (ii) untrue statements or alleged untrue statements
in the Computational Materials or ABS Term Sheets delivered to purchasers of
the Certificates by the Underwriter, to the extent that such Computation
Materials and ABS Terms Sheets were prepared by the Underwriter and
incorporated by reference into the Registration Statement or the Prospectus as
a result of any filing pursuant to Section 5(j), except to the extent that such
losses, claims, damages or other liabilities arise from factual errors in the
Mortgage Loan Seller Information and/or the Master Tape.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this Agreement. If any action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party may participate at its own
expense in the defense of any such action. To the extent that it may elect by
written notice delivered to the indemnified parry promptly after receiving the
aforesaid notice from the indemnified party, the indemnifying party may elect
to assume the defense thereof, with counsel satisfactory to such indemnified
party. 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 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. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances. Unless it shall assume the defense of any
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proceeding, an indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent. However, if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party shall indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. If an indemnifying party
assumes the defense of any proceeding, it shall be entitled to settle such
proceeding with the consent of the indemnified party or, if such settlement
provides for release of the indemnified party in connection with all matters
relating to the proceeding that have been asserted against the indemnified
party in such proceeding by the other parties to such settlement, without the
consent of the indemnified party.
(d) If the indemnification provided for in this Section 7 is due in
accordance with its terms but is for any reason held by a court to be
unavailable to an indemnified party under subsection (a) or (b) on grounds of
public policy or otherwise, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Depositor on the one hand and the Underwriter on the
other from the offer and sale of the Certificates pursuant hereto or (ii) if
the allocation provided by clause (i) above is nor 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 Depositor on
the one hand and of the Underwriter on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or other
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Depositor on the one hand, and the
Underwriter on the other, in connection with the offering of the Certificates
shall be deemed to be in the same respective proportions that the total
proceeds from the sale of the Certificates (before deducting expenses) received
by the Depositor and the total underwriting discounts and commissions received
by the Underwriter in connection with the offering of the Certificates, bear to
the aggregate offering price of the Certificates. The relative fault of the
Depositor on the one hand and of the Underwriter on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Depositor or by
the Underwriter, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The parties hereto agree that it would not be just and equitable
if contribution were determined by pro rata allocation or by any other method
of allocation that does not take account of the considerations referred to in
subsection (d) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or other liabilities referred to in this
Section 7 shall be deemed to include any legal fees and disbursements or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such claim. In the event that any expenses so
paid by the indemnifying party are subsequently determined to not be required
to be borne by the indemnifying party hereunder, the party which received such
payment shall promptly refund the amount so paid to the party which made such
payment. Notwithstanding the provisions of this subsection (e),
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the Underwriter shall not be required to contribute any amount in excess of the
amount by which the total underwriting discounts and commissions received by
the Underwriter in connection with the offering of the Certificates exceeds the
amount of damages that the Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 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 that may otherwise be available to any indemnified party at law or in
equity.
(f) The indemnity and contribution agreements contained in this
Section 7 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by the
Depositor, the Underwriter, any of their respective directors or officers, or
any person controlling the Depositor or the Underwriter, and (iii) acceptance
of and payment for any of the Certificates.
SECTION 8. Representations and Warranties to Survive Delivery.
All representations and warranties of the Depositor contained in this
Agreement shall remain operative and in full force and effect, regardless of
any investigation made by or on behalf of the Underwriter or any controlling
person in respect of the Underwriter, and shall survive delivery of the
Certificates to the Underwriter.
SECTION 9. Termination of Agreement.
(a) The Underwriter may terminate its obligations under this
Agreement, by notice to the Depositor, at any time at or prior to the Closing
Date if the sale of the Certificates provided for herein is not consummated
because of any failure or refusal on the part of the Depositor to comply with
the terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Depositor shall be unable to perform its obligations under this
Agreement.
(b) The Underwriter may terminate its obligations under this Agreement
in the absolute discretion of the Underwriter, by notice given to the
Depositor, 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
Depositor 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 State of New York 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 Underwriter, is material and adverse and (B) in the case of any of the
events specified in clauses (A)(i) through (iv) above, such event singly or
together with any other such event,
17
<PAGE>
makes it, in the judgment of the Underwriter, impracticable to market the
Certificates on the terms and in the manner contemplated in the Prospectus.
(c) If the Underwriter terminates its obligations under this Agreement
in accordance with Section 9(a), the Depositor shall reimburse the Underwriter
for all reasonable out-of pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been reasonably incurred by the
Underwriter in connection with the proposed purchase and sale of the
Certificates.
SECTION 10. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed duly given if sent by facsimile or delivered by courier, in
either case with appropriate confirmation of receipt. Notices to the
Underwriter shall be directed to __________ ____________________, Attention:
______________; to the Depositor shall be directed to
______________________________________, Attention: ________________, with a
copy to the treasurer and the general counsel; and as to any party, to such
other address as may hereafter be furnished by such party to the others in
writing.
SECTION 11. Parties.
This Agreement shall inure to the benefit of and be binding upon the
Underwriter and the Depositor and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person or entity, other than the Underwriter and the Depositor and
their respective successors and the controlling persons and officers and
directors referred to in Sections 7 and 8 and their respective successors,
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriter and the Depositor and their
respective successors, and said controlling persons and officers and directors
and their respective successors, heirs and legal representatives, and for the
benefit of no other person or entity. No purchaser of Certificates from the
Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 12. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed in said State.
SECTION 13. Miscellaneous.
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 amended, waived, discharged or terminated except by
a writing signed by the party against
18
<PAGE>
whom enforcement of such amendment, waiver, discharge or termination is sought.
This Agreement may be signed in any number of duplicate originals, each of
which shall be deemed an original, which taken together shall constitute one
and the same instrument.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Depositor a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriter and the Depositor in accordance with its
terms.
Very truly yours,
HELLER FINANCIAL COMMERCIAL
Mortgage Asset Corp.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
CONFIRMED AND ACCEPTED, as of the date first above written:
[Underwriter]
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
19
<PAGE>
EXHIBIT A
FORM OF LEGEND TO
COMPUTATIONAL MATERIALS AND ABS TERM SHEETS
This information has been prepared in connection with the issuance of the
securities referenced above and is based in part on information provided by the
Mortgage Loan Sellers with respect to the expected characteristics of the
Mortgage Loans in which these securities will represent undivided beneficial
interests. The actual characteristics and performance of the Mortgage Loans
will differ from the assumptions used in preparing these materials, which are
hypothetical in nature. Changes in the assumptions may have a material impact
on the information set forth in these materials. No representation is made that
any performance or return hypothesized herein will be achieved. For example, it
is very unlikely that the Mortgage Loans will prepay at a constant rate or
follow a predictable pattern. NO REPRESENTATION IS MADE AS TO THE
APPROPRIATENESS, USEFULNESS, ACCURACY OR COMPLETENESS OF THESE MATERIALS OR THE
ASSUMPTIONS ON WHICH THEY ARE BASED. Additional information is available upon
request. These materials do not constitute an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument in any
jurisdiction or to participate in any particular trading strategy. ANY SUCH
OFFER TO BUY OR SELL ANY SECURITY WOULD BE MADE ONLY PURSUANT TO A DEFINITIVE
PROSPECTUS AND PROSPECTUS SUPPLEMENT OR PRIVATE PLACEMENT MEMORANDUM PREPARED
BY THE ISSUER WHICH WOULD CONTAIN MATERIAL INFORMATION NOT CONTAINED IN THESE
MATERIALS. SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT OR PRIVATE PLACEMENT
MEMORANDUM WILL CONTAIN ALL MATERIAL INFORMATION IN RESPECT OF ANY SUCH
SECURITY OFFERED THEREBY AND ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD
BE MADE SOLELY IN RELIANCE UPON SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT OR
PRIVATE PLACEMENT MEMORANDUM. ANY CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN
ARE TO BE READ IN CONJUNCTION WITH SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT OR
PRIVATE PLACEMENT MEMORANDUM. In the event of any such offering, these
materials, including any description of the Mortgage Loans contained herein,
shall be deemed superseded in their entirety by such Prospectus and Prospectus
Supplement or Private Placement Memorandum. To our Readers Worldwide: In
addition, please note that this information has been provided by
________________________ and approved by ______________________. We recommend
that investors obtain the advice of their ______________________ representative
about the investment concerned. NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS
DEFINED BY THE U.K. SECURITIES AND FUTURES AUTHORITY.
20
<PAGE>
SCHEDULE 1
Underwriting Agreement, dated as of _______________, 199_.
Cut-Off Date: ________________, 199_
As used in this Agreement, the term "Registration Statement" refers to the
registration statement No. 033-_______ filed by Heller Financial Commercial
Mortgage Asset Corp. on Form S-3 and declared effective by the Commission.
CERTIFICATES:
Heller Assets Capital, Inc.
Mortgage Pass-Through Certificates, Series 199_-______,
Class ____
<TABLE>
<CAPTION>
=============================================================================================================
Initial Aggregate
Principal (or, in the case of Class IO, Initial
Class Notional) Pass-Through Purchase
Designation Amount of Class(1) Rate Price(2) Rating(3)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ % -----%
- -------------------------------------------------------------------------------------------------------------
$ % -----%
- -------------------------------------------------------------------------------------------------------------
$ % -----%
- -------------------------------------------------------------------------------------------------------------
$ % -----%
- -------------------------------------------------------------------------------------------------------------
$ % -----%
- -------------------------------------------------------------------------------------------------------------
$ % -----%
- -------------------------------------------------------------------------------------------------------------
$ % -----%
- -------------------------------------------------------------------------------------------------------------
$ % -----%
=============================================================================================================
</TABLE>
(1) Subject to a variance of plus or minus 5.0%
(2) Expressed as a percentage of the aggregate stated or notional amount, as
applicable, of the relevant class of Certificates to be purchased. [The
purchase price for each class of the Certificates will include accrued
interest at the initial Pass-Through Rate therefor on the aggregate stated
or notional amount, as applicable, thereof to be purchased from the
Cut-Off Date to but not including the Closing Date.]
(3) By each of __________ ("______") and ________________ ("_______").
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
-----------
FIRST: The name of the corporation shall be:
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
SECOND: Its registered office in the State of Delaware is to be
located at 1013 Centre Road, in the City of Wilmington, County of New Castle
and its registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD: The purpose or purposes of the corporation shall be:
To engage in any lawful act of activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which this corporation is
authorized to issue is:
One thousand (1,000) shares of Common Stock with a par value of one
($1.00) dollar.
FIFTH: The name and address of the incorporator are as follows:
Susan M. Prevost
33 North LaSalle Street
Chicago, IL 60602
SIXTH: The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.
SEVENTH: No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director
shall be liable to the extent provided by applicable law, (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
<PAGE>
or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware
General Corporation Law of (iv) for any transaction from which the director
derived an improper personal benefit. No amendment to or repeal of this Article
Seventh shall apply to or have any effect on the liability or alleged liability
of any director of the Corporation for or with respect to any acts or omissions
of such director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator
hereinbefore named, has executed, signed and acknowledged this Certificate of
Incorporation on this 7th day of January A.D. 1998.
Signed on January 7, 1998.
/s/ Susan M. Prevost
- ----------------------------------
Susan M. Prevost, Incorporator
<PAGE>
EXHIBIT 3.2
* * * * *
BY-LAWS
OF
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
* * * * *
ARTICLE I
OFFICES
Section 1.01. Registered Office. The registered office shall be in
the City of Wilmington, County of New Castle, State of Delaware.
Section 1.02. Other Offices. The corporation may also have offices at
such other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01. Date, Place and Time of Annual Meetings. All meetings of
the stockholders for the election of directors shall be held in the City of
Chicago, State of Illinois, at such place as may be fixed from time to time by
the board of directors, or at such other place either within or without the
State of Delaware as shall be designated from time to time by the board of
directors and stated in the notice of the meeting. Meetings of stockholders for
any other purpose may be held at such time and place, 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 thereof. Annual meetings of stockholders, commencing
with the year 1998, shall be held on the 2nd Wednesday in May if not a legal
holiday, and if a legal holiday, then on the next secular day following, at
2:00 P.M., or at such other date and time as shall be designated from time to
time by the board of directors and stated in the notice of the 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.
Section 2.02. Notice of Meetings. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
Section 2.03. Special Meetings. 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 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
<PAGE>
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 2.04. Notice of Special Meetings. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting, to each
stockholder entitled to vote at such meeting. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice.
Section 2.05. Quorum and Adjournments. 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 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 which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. 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 statutes or of the certificate of incorporation, a
different vote is required in which case such express provision shall govern
and control the decision of such question.
Section 2.06. Vote of Stockholders. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 2.07. Proxy. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to
2
<PAGE>
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.
Section 2.08. Action Without a Meeting. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such 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
be 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
DIRECTORS
Section 3.01. Number, Term of Office and Election. The number of
directors which shall constitute the whole board shall be not less than one (1)
nor more than ten (10). The first board shall consist of three (3) directors.
Thereafter, within the limits above specified, the number of directors shall be
determined by resolution of the board of directors or by the stockholders at
the annual meeting. The directors shall be elected at the annual meeting of the
stockholders, except as provided hereafter in this Article, and each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 3.02. Powers. The business of the corporation shall be managed by
or under the direction of 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 certificate of incorporation or by these by-laws directed or
required to be exercised or done by the stockholders.
Section 3.03. Vacancies. 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, or by
a sole remaining director, 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. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at the
time of filling any vacancy or any newly created directorship, the directors
then in office shall constitute less than a majority of the whole board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten
percent (10%) of the total number of the shares at the time outstanding having
the right to vote for such directors, summarily order an election to be held to
fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office.
3
<PAGE>
Section 3.04. Removal. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
Section 3.05. Annual Meetings. 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 no notice of such
meeting shall be necessary to the newly elected directors 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.
Section 3.06. Regular Meetings. Regular meetings of the board of
directors may be held without notice at such time and at such place, either
within or without the State of Delaware, as shall from time to time be
determined by the board.
Section 3.07. Special Meetings. Special meetings of the board may be
called by the president, either within or without the State of Delaware, on
three (3) days' notice to each director, either personally or by mail or by
telegram; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two (2) directors
unless the board consists of only one (1) director; in which case special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of the sole director.
Section 3.08. Notice. Whenever, under the provisions of the statutes or
of the certificate of incorporation or of these by-laws, notice is required to
be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the records of
the corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram.
Section 3.09. Waiver of Notice. Whenever any notice is required to be
given under the provisions of the statutes or of the certificate of
incorporation or of these by-laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
Section 3.10. Manner of Acting. Unless otherwise restricted by the
certificate of incorporation or these by-laws, members of the board of
directors, or any committee
4
<PAGE>
designated by the board of directors, may participate in a meeting of the board
of directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
Section 3.11. Quorum. At all meetings of the board a majority of the
directors 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 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 3.12. Action Without a Meeting. Unless otherwise restricted by
the certificate of incorporation or these by-laws, 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 all members of the board
or committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the board or
committee.
Section 3.13. 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 one or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the board
of directors, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, (except
that a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) of the Delaware General Corporation Law fix any
of the preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation) adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and
5
<PAGE>
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. 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 3.14. Directors' Fees. Unless otherwise restricted by the
certificate of incorporation or these By-laws, the board of directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the board of
directors and may be paid 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
OFFICERS
Section 4.01. Officers. The officers of the corporation shall be chosen
by the board of directors and shall be a president, a vice-president, a
secretary and a treasurer. The board of directors may also choose executive
vice-presidents, a general counsel, senior vice-presidents, assistant vice
presidents, additional vice-presidents, and one or more assistant secretaries
and assistant treasurers. Any number of offices may be held by the same person,
unless the certificate of incorporation or these by-laws otherwise provide.
Section 4.02. Election and Term of Office. The board of directors at its
first meeting after each annual meeting of stockholders shall choose a
president, one or more vice-presidents, a secretary and a treasurer. The board
of directors may appoint such other officers and agents as it shall deem
necessary who 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
board.
Section 4.03. Compensation. The salaries of all officers and agents
of the corporation shall be fixed by the board of directors.
Section 4.04. Removal. 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 vacancy occurring in any office of
the corporation shall be filled by the board of directors.
6
<PAGE>
Section 4.05. 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.
He shall execute certificates, contracts, bonds, mortgages, notes,
guaranties and other instruments and documents requiring a seal, under the seal
of the corporation, except where required or permitted by law to be otherwise
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 4.06. Executive Vice Presidents. The executive vice president
shall be authorized to execute certificates, contracts, bonds, mortgages,
notes, guaranties and other instruments and documents for and on behalf of the
corporation and under the seal of the corporation. They shall also be
authorized to perform all duties as may from time to time be prescribed by the
board of directors or the president.
Section 4.07. General Counsel. The general counsel shall have the
responsibility for supervision and management of all legal functions of the
corporation in such manner as he shall determine and shall manage their
services; shall cause to be negotiated and documented all transactions entered
into or involving the corporation; shall render to the president and the board
of directors at meetings of the board of directors or whenever else it may be
required, an account of all legal matters of or affecting the corporation and
shall perform all other duties and exercise all other powers usually pertaining
to the office of general counsel of a corporation and shall perform such other
duties and exercise such other powers as may be assigned by the board of
directors, the chairman of the board or the president.
Section 4.08. Senior Vice Presidents. The senior vice president shall be
authorized to execute certificates, contracts, bonds, mortgages, notes,
guaranties and other instruments and documents for and on behalf of the
corporation and under the seal of the corporation. They shall also be
authorized to perform all duties that from time to time may be prescribed by
the board of directors or the president.
Section 4.09. Vice Presidents and Assistant Vice Presidents. Vice
presidents and assistant vice presidents of the corporation shall have the
power and authority to execute certificates, contracts, bonds, mortgages,
notes, guaranties and other instruments and documents which relate to the
consummation of transactions for and on behalf of the corporation and under the
seal of the corporation where so required, and shall, in addition, perform
duties that from time to time may be prescribed by the Board of Directors or
the president.
Section 4.10. Secretary and Assistant Secretary. 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
7
<PAGE>
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 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 (or if there be
no such determination, then in the order of their election) shall, in the
absence of the secretary or in the event of his inability or refusal to act,
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.
The secretary and assistant secretary, in addition to their other powers
and duties, shall have the authority to execute powers of attorneys on behalf
of the corporation.
Section 4.11. 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.
He 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. If required by the
board of directors, he shall give the corporation a bond (which shall be
renewed every six years) in such sum and with such surety or sureties as shall
be satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
8
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Section 4.12. Voting Corporation's Securities. Unless otherwise ordered
by the Board of Directors, the President or his designee for this specific
purpose has full power and authority on behalf of the Corporation to attend,
and to act and to vote at, all meetings of security holders of the corporations
in which the Corporation may hold securities, and at those meetings possess and
may exercise any and all rights and powers incident to the ownership of the
securities, and which as the owner thereof, the Corporation may have possessed
and exercised, if present. The Board of Directors by resolution from time to
time may confer powers upon any other person or persons.
ARTICLE V
CERTIFICATES FOR SHARES
Section 5.01. Form; Signature. The shares of the corporation shall be
represented by a certificate or shall be uncertificated. Certificates shall be
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.
Within a reasonable time after the issuance or transfer of uncertificated
stock, the corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the Delaware
General Corporation Law or a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Section 5.02. Lost, Stolen or Destroyed Stock Certificates. The board of
directors may direct a new certificate or certificates or uncertificated shares
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 making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate
or certificates or uncertificated shares, 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 certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct 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 5.03. Transfers of Shares. Upon surrender to the corporation or
the transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertificated shares such uncertificated shares shall
be cancelled and issuance of new equivalent
9
<PAGE>
uncertificated shares or certificated shares shall be made to the person
entitled thereto and the transaction shall be recorded upon the books of the
corporation.
Section 5.04. Record Date. In order that the corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the board of directors may fix,
in advance, a record date, which shall not be more than sixty (60) nor less
than ten (10) days before the date of such meeting, nor more than sixty (60)
days prior to any other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the board of directors
may fix a new record date for the adjourned meeting.
Section 5.05. Registered Stock. 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 share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
Section 5.06. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the 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 capital stock, subject to the provisions of the 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 directors
from time to time, in their absolute discretion, think 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 directors shall think conducive to the interest of the corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
ARTICLE VI
INDEMNIFICATION
Section 6.01. Indemnification. The corporation shall indemnify its
officers, directors, employees and agents to the extent permitted by the
General Corporation Law of Delaware.
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ARTICLE VII
MISCELLANEOUS
Section 7.01. Financials. All checks or demands for money and notes of
the corporation shall be signed by such officer or officers or such other
person or persons as the board of directors may from time to time designate.
Section 7.02. Fiscal Year. The fiscal year of the corporation shall
be fixed by resolution of the board of directors.
Section 7.03. 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.
Section 7.04. Power To Amend. These by-laws may be altered, amended or
repealed or new by-laws may be adopted by the stockholders or by the board of
directors, when such power is conferred upon the board of directors by the
certificate of incorporation 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, amendment, repeal or adoption
of new by-laws be contained in the notice of such special meeting. If the power
to adopt, amend or repeal by-laws is conferred upon the board of directors by
the certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
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EXHIBIT 4.1
===============================================================================
HELLER FINANCIAL COMMERCIAL MORTGAGE ASSET CORP.
Depositor
--------------------------------
Servicer/Special Servicer
--------------------------------
Trustee
and
-----------------------------------------------,
Fiscal Agent
--------------------------------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of _____________, 199_
------------------------------------------------------
MORTGAGE PASS-THROUGH CERTIFICATES
Series 199_-_
===============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS..................................................3
SECTION 1.1. Defined Terms...........................................3
SECTION 1.2. Certain Calculations...................................42
SECTION 1.3. Certain Constructions..................................43
ARTICLE II. CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF
CERTIFICATES................................................43
SECTION 2.1. Conveyance of Mortgage Loans; Assignment of
Mortgage Loan Purchase and Sale Agreement..............43
SECTION 2.2. Acceptance by Custodian and the Trustee................46
SECTION 2.3. Representations and Warranties of the Depositor........47
SECTION 2.4. Representations, Warranties and Covenants of the
Servicer and Special Servicer..........................52
SECTION 2.5. Execution and Delivery of Certificates; Issuance
of Lower-Tier Regular Interests........................55
SECTION 2.6. Miscellaneous REMIC and Grantor Trust Provisions.......55
ARTICLE III. ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS...........56
SECTION 3.1. Servicer to Act as Servicer; Administration of
the Mortgage Loans....................................56
SECTION 3.2. Liability of the Servicer..............................58
SECTION 3.3. Collection of Certain Mortgage Loan Payments...........58
SECTION 3.4. Collection of Taxes, Assessments and Similar
Items; Escrow Accounts.................................59
SECTION 3.5. Collection Account; Distribution Account;
Upper-Tier Distribution Account; Default Interest
Distribution Account; and Excess Interest
Distribution Account...................................60
SECTION 3.6. Permitted Withdrawals from the Collection Account......62
SECTION 3.7. Investment of Funds in the Collection Account, the
REO Account, the Lock-Box Accounts, the Cash
Collateral Accounts, the Interest Reserve Account
and the Reserve Accounts...............................64
SECTION 3.8. Maintenance of Insurance Policies and Errors and
Omissions and Fidelity Coverage........................66
SECTION 3.9. Enforcement of Due-On-Sale Clauses; Assumption
Agreements; Defeasance Provisions......................69
SECTION 3.10. Appraisals; Realization Upon Defaulted Mortgage
Loans..................................................72
SECTION 3.11. Trustee to Cooperate; Release of Mortgage Files........76
<PAGE>
SECTION 3.12. Servicing Fees, Trustee Fees and Special Servicing
Compensation...........................................76
SECTION 3.13. Reports to the Trustee; Collection Account
Statements.............................................78
SECTION 3.14. Annual Statement as to Compliance......................79
SECTION 3.15. Annual Independent Public Accountants' Servicing
Report.................................................79
SECTION 3.16. Access to Certain Documentation........................80
SECTION 3.17. Title and Management of REO Properties and REO
Account Properties.....................................80
SECTION 3.18. Sale of Specially Serviced Mortgage Loans and REO
Properties.............................................83
SECTION 3.19. Additional Obligations of the Servicer and Special
Servicer; Inspections..................................85
SECTION 3.20. Authenticating Agent...................................86
SECTION 3.21. Appointment of Custodians..............................86
SECTION 3.22. Reports to the Securities and Exchange Commission;
Available Information..................................87
SECTION 3.23. Lock-Box Accounts, Cash Collateral Accounts,
Escrow Accounts and Reserve Accounts...................91
SECTION 3.24. Property Advances......................................91
SECTION 3.25. Appointment of Special Servicer........................92
SECTION 3.26. Transfer of Servicing Between Servicer and Special
Servicer; Record Keeping...............................93
SECTION 3.27. Interest Reserve Account...............................94
SECTION 3.28. Limitations on and Authorizations of the Servicer
and Special Servicer with Respect to Certain
Mortgage Loans.........................................95
SECTION 3.29. Residual Trigger Date..................................97
SECTION 3.30. Modification, Waiver, Amendment and Consents...........97
ARTICLE IV. DISTRIBUTIONS TO CERTIFICATEHOLDERS........................104
SECTION 4.1. Distributions.........................................104
SECTION 4.2. Statements to Certificateholders; Available
Information; Information Furnished to Financial
Market Publisher......................................108
SECTION 4.3. Compliance with Withholding Requirements..............111
SECTION 4.4. REMIC Compliance......................................111
SECTION 4.5. Imposition of Tax on the Trust Fund...................113
SECTION 4.6. Remittances; P&I Advances.............................114
SECTION 4.7. Grantor Trust Reporting...............................117
SECTION 4.8. Special Distribution Date.............................117
ARTICLE V. THE CERTIFICATES...........................................118
SECTION 5.1. The Certificates......................................118
SECTION 5.2. Registration of Transfer and Exchange of
Certificates..........................................119
SECTION 5.3. Mutilated, Destroyed, Lost or Stolen Certificates.....122
SECTION 5.4. Persons Deemed Owners.................................122
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ARTICLE VI. THE DEPOSITOR, THE SERVICER AND THE SPECIAL SERVICER.......123
SECTION 6.1. Liability of the Depositor, the Servicer and the
Special Servicer......................................123
SECTION 6.2. Merger or Consolidation of the Servicer...............123
SECTION 6.3. Limitation on Liability of the Depositor, the
Servicer and Others...................................123
SECTION 6.4. Limitation on Resignation of the Servicer and the
Special Servicer; Termination of the Servicer and
the Special Servicer..................................124
SECTION 6.5. Rights of the Depositor and the Trustee in Respect
of the Servicer and the Special Servicer..............125
SECTION 6.6. Servicer or Special Servicer as Owner of a
Certificate...........................................126
ARTICLE VII. DEFAULT....................................................127
SECTION 7.1. Events of Default.....................................127
SECTION 7.2. Trustee to Act; Appointment of Successor..............130
SECTION 7.3. Notification to Certificateholders....................131
SECTION 7.4. Other Remedies of Trustee.............................132
SECTION 7.5. Waiver of Past Events of Default; Termination.........132
ARTICLE VIII. CONCERNING THE TRUSTEE.....................................132
SECTION 8.1. Duties of Trustee.....................................132
SECTION 8.2. Certain Matters Affecting the Trustee.................134
SECTION 8.3. Trustee and Fiscal Agent Not Liable for
Certificates or Mortgage Loans........................136
SECTION 8.4. Trustee and Fiscal Agent May Own Certificates.........137
SECTION 8.5. Payment of Trustee's Fees and Expenses;
Indemnification.......................................137
SECTION 8.6. Eligibility Requirements for Trustee..................139
SECTION 8.7. Resignation and Removal of the Trustee................140
SECTION 8.8. Successor Trustee and Fiscal Agent....................141
SECTION 8.9. Merger or Consolidation of Trustee....................142
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.........142
SECTION 8.11. Fiscal Agent Appointed; Concerning the Fiscal
Agent.................................................143
ARTICLE IX. TERMINATION................................................144
SECTION 9.1. Termination...........................................144
ARTICLE X. MISCELLANEOUS PROVISIONS...................................147
SECTION 10.1. Counterparts..........................................147
SECTION 10.2. Limitation on Rights of Certificateholders............147
SECTION 10.3. Governing Law.........................................148
SECTION 10.4. Notices...............................................148
SECTION 10.5. Severability of Provisions............................150
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SECTION 10.6. Notice to the Depositor and Each Rating Agency........150
SECTION 10.7. Amendment.............................................152
SECTION 10.8. Confirmation of Intent................................154
SECTION 10.09. No Intended Third-Party Beneficiaries.................154
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TABLE OF EXHIBITS
Exhibit A-1 [Form of Certificates]
Exhibit B Mortgage Loan Schedule
Exhibit C Form of Transferor Certificate
Exhibit D Form of Investment Letter - Qualified Institutional Buyer
Exhibit E Form of Investment Letter - Institutional Accredited Investor
Exhibit F-1 Form of Transfer Affidavit
Exhibit F-2 Form of Transferor Certificate
Exhibit G Form of Request for Release
Exhibit H Form of Agreement Report
Exhibit I Securities Legend
Exhibit J Form of Mortgage Loan Purchase and Sale Agreement
Exhibit K Form of Summary Report
Exhibit L Schedule of Replacement Reserve Amounts
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Pooling and Servicing Agreement, dated as of _________, 199_, among Heller
Financial Commercial Mortgage Asset Corp., as Depositor, _________________, as
Servicer and Special Servicer, _________________, as Trustee, and
_________________, as Fiscal Agent.
PRELIMINARY STATEMENT:
(Terms used but not defined in this Preliminary Statement shall
have the meanings specified in Article I hereof)
[Confirm to Structure of Securities Tranches]
The Depositor intends to sell pass-through certificates to be issued
hereunder in multiple Classes which in the aggregate will evidence the entire
beneficial ownership interest in the Trust Fund consisting primarily of the
Mortgage Loans. As provided herein, the Trustee will elect that the Trust Fund,
exclusive of the Lock-Box Accounts, Cash Collateral Accounts, Reserve Accounts,
the Default Interest, the Default Interest Distribution Account, the Excess
Interest and the Excess Interest Distribution Account (such portion of the
Trust Fund, the "Trust REMICs"), be treated for federal income tax purposes as
two separate real estate mortgage investment conduits (each, a "REMIC" or, in
the alternative, the "Lower-Tier REMIC" and the "Upper-Tier REMIC,"
respectively). The Class ______, Class ______, Class ______, Class ______,
Class _____, Class _____, Class _____, Class _____, Class _____, Class _____,
Class _____, Class _____, Class _____, Class _____ and Class ______
Certificates constitute "regular interests" in the Upper-Tier REMIC and the
Class R Certificates constitute the sole Class of "residual interests" in the
Upper-Tier REMIC for purposes of the REMIC Provi The Class LR Certificates
constitute the sole Class of "residual interests" in the Lower-Tier REMIC for
purposes of the REMIC Provisions. There are also ______ Classes of
uncertificated Lower-Tier Regular Interests issued under this Agreement (the
Class ______, Class ______, Class _____, Class ______, Class _____, Class
______, Class _____, Class _____, Class _____, Class _____, Class _____, Class
_____ and Class _____ Interests), each of which will constitute a regular
interest in the Lower-Tier REMIC. All such Lower-Tier Regular Interests will be
held by the Trustee as assets of the Upper-Tier REMIC. The parties intend that
the portions of the Trust Fund representing the Default Interest, the Default
Interest Distribution Account, the Excess Interest and the Excess Interest
Distribution Account will be treated as a grantor trust under Subpart E of Part
1 of Subchapter J of the Code, that the Class V-1 Certificates represent pro
rata undivided beneficial interests in the portion of the Trust Fund consisting
of the Default Interest and the Default Interest Distribution Account and that
the Class V-2 Certificates represent pro rata undivided beneficial interests in
the portion of the Trust Fund consisting of the Excess Interest and the Excess
Interest Distribution Account.
The following table sets forth the designation and aggregate initial
Certificate Balance (or, with respect to the Class _____ and Class _____
Certificates, Notional Balance) for each Class of Certificates comprising
interests in the Upper-Tier REMIC.
Class Certificate Balance or Notional Balance
- ----- ---------------------------------------
Class ____ $__________.00
Class ____ __________.00
Class ____ __________.00
<PAGE>
Class ____ __________.00
Class ____ __________.00
Class ____ __________.00
Class ____ __________.00
Class ____ __________.00
Class ____ __________.00
Class ____ __________.00
Class ____ __________.00
Class ____ __________.00
Class ____ __________.00
Class ____ __________.00
Class ____ __________.00
(1) The Class ______ Certificates are composed of one Strip Component: the
Class _____ Strip Component. The Class ______ Strip Component has an initial
Component Balance of $__________ which is equal to the initial Certificate
Balance of the Class ____ Certificates.
(2) The Class ______ Certificates are composed of ____ Strip Components: the
Class _____ Strip Component, the Class _____ Strip Component, the Class ____
Strip Component, Class ____ Strip Component, Class ____ Strip Component, the
Class ____ Strip Component and the Class ____ Strip Component. The Class ____
Strip Component has an initial Component Balance of $_______.00, which is equal
to the initial Certificate Balance of the Class A-1B Certificates. The Class
____ Strip Component has an initial Component Balance of $_______.00, which is
equal to the initial Certificate Balance of the Class _____ Certificates. The
Class _____ Strip Component has an initial Component Balance of $_______.00,
which is equal to the Certificate Balance of the Class _____ Certificates. The
Class ____ Strip Component has an initial Component Balance of $________.00,
which is equal to the initial Certificate Balance of the Class _____
Certificates. The Class ____ Strip Component has an initial Component Balance
of $________.00, which is equal to the initial Certificate Balance of the Class
_____ Certificates. The Class ____ Strip Component has an initial Component
Balance of $________.00, which is equal to the initial Certificate Balance of
the Class _____ Certificates. The Class _____ Strip Component has an initial
Component Balance of $________.00, which is equal to the initial Certificate
Balance of the Class _____ Certificates.
The initial Certificate Balance of each of the Class V-1, Class V-2,
Class R and Class LR Certificates is zero. Additionally, the Class V-1, Class
V-2, Class R and Class LR Certificates do not have a Notional Balance. The
Certificate Balance of any Class of Certificates outstanding at any time
represents the maximum amount which holders thereof are entitled to receive as
distributions allocable to principal from the cash flow on the Mortgage Loans
and the other assets in the Trust Fund; provided, however, that in the event
that amounts previously allocated as Realized Losses to a Class of Certificates
in reduction of the Certificate Balance thereof are recovered subsequent to the
reduction of the Certificate Balance of such Class to zero, such Class may
receive distributions in respect of such recoveries in accordance with the
priorities set forth in Section 4.01.
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As of the Cut-off Date, the Mortgage Loans have an aggregate Stated
Principal Balance equal to approximately $________.00.
In consideration of the mutual agreements herein contained, the
Depositor, the Servicer, the Special Servicer, the Trustee and the Fiscal Agent
agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. Defined Terms.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the meanings specified in this
Article.
"Act": The Securities Act of 1933, as it may be amended from time to
time.
"Actual/360 Mortgage Loans": The Mortgage Loans indicated as such in
the Mortgage Loan Schedule.
"Additional Servicing Fee": With respect to each Mortgage Loan and for
any Distribution Date, an amount per Interest Accrual Period equal to the
product of (i) one-twelfth of the Additional Servicing Fee Rate and (ii) the
Stated Principal Balance of such Mortgage Loan as of the Due Date (after giving
effect to all payments of principal on such Mortgage Loan on such Due Date) in
the month preceding the month in which such Distribution Date occurs.
"Additional Servicing Fee Rate": A rate equal to ____% per annum.
"Advance": Any P&I Advance or Property Advance.
"Advance Interest Amount": Interest at the Advance Rate on the aggregate
amount of P&I Advances and Property Advances for which the Servicer, the
Special Servicer, the Trustee or the Fiscal Agent, as applicable, have not been
reimbursed and Servicing Fees, Trustee Fees or Special Servicing Compensation
for which the Servicer, the Trustee or the Special Servicer, as applicable, has
not been timely paid or reimbursed for the number of days from the date on
which such Advance was made or such Servicing Fees, Trustee Fees or Special
Servicing Compensation were due through the date of payment or reimbursement of
the related Advance or other such amount, less any amount of interest
previously paid on such Advance or Servicing Fees, Trustee Fees or Special
Servicing Compensation; provided, that, with respect to a P&I Advance, in the
event that the related Borrower makes payment of the amount in respect of which
such P&I Advance was made with interest at the Default Rate, the Advance
Interest Amount payable to the Servicer, the Trustee or the Fiscal Agent shall
be paid (i) first from the amount of Default Interest paid by the Borrower and
(ii) to the extent such amounts are insufficient therefor, from amounts on
deposit in the Collection Account.
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"Advance Rate": A per annum rate equal to the sum of (i) the Prime Rate
(as most recently published in the "Money Rates" section of The Wall Street
Journal, New York edition, on or before the related Record Date) plus (ii) 1%,
compounded monthly as of each Servicer Remittance Date. Interest at the Advance
Rate will accrue from (and including) the date on which the related Advance is
made or the related expense incurred to (but excluding) the first Servicer
Remittance Date after the date on which such amounts are recovered out of
amounts received on the Mortgage Loan as to which such Advances were made or
servicing expenses incurred or the first Servicer Remittance Date after a
determination of non-recoverability, as the case may be, is made, provided that
such interest at the Advance Rate will continue to accrue to the extent funds
are not available in the Collection Account for such reimbursement of such
Advance.
"Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. The Trustee may obtain
and rely on an Officers' Certificate of the Servicer, the Special Servicer, or
the Depositor to determine whether any Person is an Affiliate of such party.
"Affiliated Person": Any Person (other than a Rating Agency) involved in
the organization or operation of the Depositor or an affiliate, as defined in
Rule 405 of the Act, of such Person.
"Agent Member": Members of, or participants in, the Depository.
"Agreement": This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
"Allocated Loan Amount": With respect to each Mortgaged Property, the
portion of the principal amount of the related Mortgage Loan allocated to such
Mortgaged Property in the applicable Mortgage or Loan Agreement.
"Annual Compliance Report": A report consisting of an annual statement of
compliance required be Section 3.14 hereof and an annual report of an
Independent accountant required pursuant to Section 3.15 hereof.
"Anticipated Repayment Date": With respect to any Mortgage Loan that is
indicated on the Mortgage Loan Schedule as having a Revised Mortgage Rate, the
date upon which such Mortgage Loan commences accruing interest at such Revised
Rate.
"Anticipated Termination Date": Any Distribution Date on which it is
anticipated that the Trust Fund will be terminated pursuant to Section 9.01(c).
"Applicable Monthly Payment": As defined in Section 4.06(a).
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"Appraisal Reduction Amount": For any Distribution Date and for any
Mortgage Loan as to which an Appraisal Reduction Event has occurred, an amount
equal to the excess, if any, of (a) the Stated Principal Balance of such
Mortgage Loan over (b) the excess of (i) 90% of the sum of the appraised values
of the Mortgaged Properties as determined by Updated Appraisals obtained by the
Servicer of the Mortgaged Properties securing such Mortgage Loan over (ii) the
sum of (A) to the extent not previously advanced by the Servicer, the Trustee
or the Fiscal Agent, all unpaid interest on such Mortgage Loan at a per annum
rate equal to its Mortgage Rate, (B) all unreimbursed Advances, with interest
thereon at the Advance Rate, in respect of such Mortgage Loan and (C) all due
and unpaid real estate taxes, ground rents and assessments and insurance
premiums and all other amounts due and unpaid with respect to such Mortgage
Loan (which taxes, premiums and other amounts have not been the subject of an
Advance by the Servicer, the Trustee or the Fiscal Agent, as applicable). If no
Updated Appraisal has been obtained within the last 12 months prior to the
first Distribution Date on or after an Appraisal Reduction Event has occurred,
the Servicer shall estimate the value of the related Mortgaged Properties (the
"Servicer's Appraisal Estimate") and such estimate shall be used for purposes
of determining the Appraisal Reduction Amount for such Distribution Date.
Within 30 days after the Servicer receives notice or is otherwise aware of the
Appraisal Reduction Event, the Servicer shall obtain an Updated Appraisal. On
the first Distribution Date occurring on or after the delivery of such
appraisal, the Servicer shall adjust the Appraisal Reduction Amount to take
into account such appraisal (regardless of whether the Updated Appraisal is
higher or lower than the Servicer's Appraisal Estimate). Each Appraisal
Reduction Amount shall also be adjusted to take into account any subsequent
Updated Appraisal and annual letter updates, as of the date of each such
subsequent Updated Appraisal or letter update.
"Appraisal Reduction Event": With respect to any Mortgage Loan, the
earliest of (i) the third anniversary of the date on which an extension of the
Maturity Date of such Mortgage Loan becomes effective as a result of a
modification of such Mortgage Loan by the Special Servicer pursuant to the
terms hereof, which extension does not change the amount of Monthly Payments on
the Mortgage Loan, (ii) 90 days after an uncured Delinquency (without regard to
the application of any grace period) occurs in respect of such Mortgage Loan,
(iii) immediately after the date on which a reduction in the amount of Monthly
Payments on such Mortgage Loan, or a change in any other material economic term
of such Mortgage Loan (other than an extension of the Maturity Date), becomes
effective as a result of a modification of such Mortgage Loan by the Special
Servicer, (iv) immediately after a receiver has been appointed, (v) immediately
after a borrower declares bankruptcy, (vi) immediately after a Mortgage Loan
becomes an REO Mortgage Loan, (vii) upon a default in the payment of a Balloon
Payment and (viii) immediately upon the occurrence of an event for which a
Property Protection Advance would be required to be made by the Servicer or any
other event which, in the discretion of the Servicer and of which the Servicer
becomes aware in performing its obligations hereunder, in accordance with the
Servicing Standard, would materially and adversely impair the value of a
Mortgaged Property and security for the related Mortgage Loan. The Special
Servicer shall notify the Servicer promptly upon the occurrence of any of the
foregoing events.
"Assignment of Leases, Rents and Profits": With respect to any Mortgaged
Property, any assignment of leases, rents and profits or similar agreement
executed by the Borrower, assigning to the mortgagee all of the income, rents
and profits derived from the ownership, operation, leasing or
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disposition of all or a portion of such Mortgaged Property, in the form which
was duly executed, acknowledged and delivered, as amended, modified, renewed or
extended through the date hereof and from time to time hereafter.
"Assignment of Mortgage": An assignment of Mortgage without recourse,
notice of transfer or equivalent instrument, in recordable form, which is
sufficient under the laws of the jurisdiction in which the related Mortgaged
Property is located to reflect of record the sale of the Mortgage, which
assignment, notice of transfer or equivalent instrument may be in the form of
one or more blanket assignments covering Mortgages encumbering Mortgaged
Properties located in the same jurisdiction, if permitted by law and acceptable
for recording; provided, however, that none of the Trustee, the Custodian and
the Servicer shall be responsible for determining whether any assignment is
legally sufficient or in recordable form.
"Assumed Maturity Date": With respect to any Mortgage Loan that is not a
Balloon Loan, the maturity date of such Mortgage Loan. With respect to any
Balloon Loan, the date on which such Mortgage Loan would be deemed to mature in
accordance with its original amortization schedule absent its Balloon Payment.
"Assumed Scheduled Payment": With respect to any Mortgage Loan that is
delinquent in respect of its Balloon Payment (including any REO Mortgage Loan
as to which the Balloon Payment would have been past due), an amount equal to
the sum of (a) the principal portion of the Monthly Payment that would have
been due on such Mortgage Loan on the related Due Date (or portion thereof not
received), based on the constant Monthly Payment that would have been due on
such Mortgage Loan on the related Due Date based on the constant payment
required by the related Note or the amortization or payment schedule thereof
(as calculated with interest at the related Mortgage Rate) (if any), assuming
such Balloon Payment had not become due, after giving effect to any prior
modification, and (b) interest at the applicable Mortgage Pass-Through Rate.
"Assumption Fees": Any fees collected by the Servicer or Special Servicer
in connection with an assumption or modification of a Mortgage Loan or
substitution of a Borrower thereunder permitted to be executed under the
provisions of this Agreement.
"Authenticating Agent": Any authenticating agent appointed by the
Trustee pursuant to Section 3.20.
"Available Funds": For a Distribution Date, the sum of (i) all previously
undistributed Monthly Payments, Minimum Defaulted Monthly Payments or other
receipts on account of principal and interest (including Unscheduled Payments
and any REO Proceeds transferred from an REO Account pursuant to Section
3.17(b)) on or in respect of the Mortgage Loans, received by the Servicer in
the Collection Period relating to such Distribution Date, (ii) all other
amounts received by the Servicer in such Collection Period and required to be
placed in the Collection Account by the Servicer pursuant to Section 3.05
allocable to such Mortgage Loans, and including all P&I Advances made by the
Servicer, the Trustee or the Fiscal Agent in respect of such Distribution Date,
(iii) for the Distribution Date occurring in each March, the Withheld Amounts
remitted to the Distribution Account pursuant to Section 3.27(b), (iv) any late
payments of Monthly Payments received after the end of the Collection Period
relating to such Distribution Date but prior to the
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related Servicer Remittance Date and (v) any amounts deposited into the
Collection Account by the Servicer pursuant to Section 3.05(a) attributable to
Servicer Prepayment Interest Shortfalls, but excluding the following:
(a) amounts permitted to be used to reimburse the Servicer, the Special
Servicer, the Trustee or the Fiscal Agent for previously unreimbursed Advances
(including Subordinate Class Advance Amounts applied in reimbursement for the
P&I Advance, if any, with respect to such Distribution Date in accordance with
Section 4.06(d) hereof) and interest thereon as described in Section 3.06(ii)
and (iii);
(b) those portions of each payment of interest which represent the
applicable Servicing Fee, Additional Servicing Fee and Trustee Fee and an
amount representing any applicable Special Servicing Compensation, including
interest thereon at the Advance Rate as provided in this Agreement;
(c) all amounts in the nature of late fees, loan modification fees,
extension fees, loan service transaction fees, demand fees, beneficiary
statement charges, Assumption Fees and similar fees, which the Servicer or
Special Servicer is entitled to retain as Servicing Compensation or Special
Servicing Compensation, respectively;
(d) all amounts representing scheduled Monthly Payments due after the
related Due Date;
(e) that portion of Net Liquidation Proceeds or Net Insurance Proceeds
with respect to a Mortgage Loan which represents any unpaid Servicing Fee,
Trustee Fee and Special Servicing Compensation, including interest thereon at
the Advance Rate as provided in this Agreement, to which the Servicer, Trustee
and the Special Servicer, respectively, are entitled;
(f) all amounts representing certain expenses reimbursable to the
Servicer, the Special Servicer, the Trustee or the Fiscal Agent and other
amounts permitted to be retained by the Servicer or withdrawn by the Servicer
from the Collection Account to the extent expressly set forth in this Agreement
(including, without limitation, as provided in Section 3.06), including
interest thereon as provided in this Agreement;
(g) any interest or investment income on funds on deposit in the
Collection Account, the Upper-Tier Distribution Account, the Distribution
Account, the Default Interest Distribution Account, the Excess Interest
Distribution Account, the Interest Reserve Account, any Cash Collateral
Account, any Lock-Box Account, any Reserve Account or any REO Account or in
Permitted Investments in which such funds may be invested;
(h) [with respect to the Interest Reserve Loan and any Distribution Date
relating to each Interest Accrual Period occurring in each January or any
December occurring in a year immediately preceding a year which is not a leap
year, an amount equal to one day of interest on the Stated Principal Balance of
such Mortgage Loan as of the Due Date in the month preceding the month in which
such Distribution Date occurs at the related Mortgage Rate to the extent such
amounts are to
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be deposited in the Interest Reserve Account and held for future distribution
pursuant to Section 3.27;]
(i) all amounts received with respect to each Mortgage Loan previously
purchased or repurchased pursuant to Sections 2.03(d), 2.03(e), 3.18 or 9.01(c)
during the related Collection Period and subsequent to the date as of which the
amount required to effect such purchase or repurchase was determined;
(j) the amount reasonably determined by the Trustee to be necessary to
pay any applicable federal, state or local taxes imposed on the Upper-Tier
REMIC or the Lower-Tier REMIC under the circumstances and to the extent
described in Section 4.05;
(k) Prepayment Premiums;
(l) Default Interest;
(m) Excess Interest;
(n) Any amounts distributed on any Special Distribution Date; and
(o) Any Subordinate Class Advance Recoveries.
"Balloon Loan": Any Mortgage Loan that requires a payment of principal on
the maturity date in excess of its constant Monthly Payment.
"Balloon Payment": With respect to each Mortgage Loan, the scheduled
payment of principal due on the Maturity Date (less principal included in the
applicable amortization schedule or scheduled Monthly Payment).
"Beneficial Owner": With respect to a Global Certificate, the Person who
is the beneficial owner of such Certificate as reflected on the books of the
Depository or on the books of a Person maintaining an account with such
Depository (directly as a Depository Participant or indirectly through a
Depository Participant, in accordance with the rules of such Depository). Each
of the Trustee and the Servicer shall have the right to require, as a condition
to acknowledging the status of any Person as a Beneficial Owner under this
Agreement, that such Person provide evidence at its expense of its status as a
Beneficial Owner hereunder.
"Book-Entry Certificate": Any Certificate registered in the name of
the Depository or its nominee.
"Borrower": With respect to any Mortgage Loan, any obligor or obligors
on any related Note or Notes.
"Borrower Account": As defined in Section 3.07(a).
"Business Day": Any day other than a Saturday, a Sunday or any day on
which banking institutions in the City of New York, New York, the City of
______________, the State of
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____________ or the State of ____________ are authorized or obligated by law,
executive order or governmental decree to be closed.
"Cash Collateral Account": With respect to any Mortgage Loan that has a
Lock-Box Account, any account or accounts created pursuant to the related
Mortgage, Loan Agreement, Cash Collateral Account Agreement or other loan
document into which the Lock-Box Account monies are swept on a regular basis
for the benefit of the Trustee as successor to the Mortgage Loan Seller. Any
Cash Collateral Account shall be beneficially owned for federal income tax
purposes by the Person who is entitled to receive all reinvestment income or
gain thereon in accordance with the terms and provisions of the related
Mortgage Loan and Section 3.07, which Person shall be taxed on all reinvestment
income or gain thereon. The Servicer shall be permitted to make withdrawals
therefrom for deposit into the Collection Account. To the extent not
inconsistent with the terms of the related Mortgage Loan, each such Cash
Collateral Account shall be an Eligible Account.
"Cash Collateral Account Agreement": With respect to any Mortgage Loan,
the cash collateral account agreement, if any, between the Originator and the
related Borrower, pursuant to which the related Cash Collateral Account, if
any, may have been established.
"Cash Deposit": An amount equal to all cash payments of principal and
interest received by the Mortgage Loan Seller in respect of the Mortgage Loans
prior to or on the Closing Date that are due after the Cut-off Date.
"Certificate": Any Class [________________], Certificate issued,
authenticated and delivered hereunder.
"Certificate Balance": With respect to any Class of Certificates or
Lower-Tier Regular Interests (other than the Class _____, Class _____, Class
____, Class ____, Class ____ and Class _____ Certificates and the Related
Lower-Tier Regular Interests) (a) on or prior to the first Distribution Date,
an amount equal to the aggregate initial Certificate Balance of such Class, as
specified in the Preliminary Statement hereto, (b) as of any date of
determination after the first Distribution Date (other than following a Special
Distribution Date), the Certificate Balance of such Class of Certificates or
Lower-Tier Regular Interests on the Distribution Date immediately prior to such
date of determination after application of the distributions and Realized
Losses allocable to principal made thereon on such prior Distribution Date and
(c) as of any date of determination after a Special Distribution Date, the
Certificate Balance of such Class of Certificates or Lower-Tier Regular
Interests as of the last day of the Interest Accrual Period in which such
Special Distribution Date occurs, after application of the distributions and
Realized Losses allocable to principal made thereon on the prior Distribution
Date and such Special Distribution Date, as applicable. With respect to any
Class of Lower-Tier Regular Interests, an amount equal to the Certificate
Balance of the Related Certificates.
"Certificate Custodian": Initially, ____________, thereafter any other
Certificate Custodian acceptable to the Depository and selected by the
Trustee.
"Certificate Owner": With respect to a Book-Entry Certificate, the Person
who is the beneficial owner of such Certificate as reflected on the books of an
indirect participating brokerage
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firm for which a Depository Participant acts as agent, if any, and otherwise on
the books of a Depository Participant, if any, and otherwise on the books of
the Depository.
"Certificate Register" and "Certificate Registrar": The register
maintained and the registrar appointed pursuant to Section 5.02.
"Certificateholder": The Person whose name is registered in the
Certificate Register subject to the following:
(xvi) except as provided in clause (ii), for the purpose of giving any
consent or taking any action pursuant to this Agreement, any Certificate
beneficially owned by the Depositor, the Servicer, the Special Servicer, the
Trustee, a Manager or a Borrower or any Person known to a Responsible Officer
of the Certificate Registrar to be an Affiliate of any thereof shall be deemed
not to be outstanding and the Voting Rights to which it is entitled shall not
be taken into account in determining whether the requisite percentage of Voting
Rights necessary to effect any such consent or take any such action has been
obtained;
(xvii) for purposes of obtaining the consent of Certificateholders to an
amendment of the Pooling and Servicing Agreement, any Certificates beneficially
owned by the Servicer or the Special Servicer or an Affiliate thereof shall be
deemed to be outstanding, unless such amendment relates to compensation of the
Servicer or the Special Servicer or benefits the Servicer or the Special
Servicer (in its capacity as such) or any Affiliate thereof (other than solely
in its capacity as Certificateholder) in any material respect, in which case
such Certificates shall be deemed not to be outstanding;
(xviii) except as provided in clause (iv) below, for purposes of
obtaining the consent of Certificateholders to any action proposed to be taken
by the Special Servicer with respect to a Mortgage Loan, any Certificates
beneficially owned by the Special Servicer or an Affiliate thereof shall be
deemed not to be outstanding;
(xix) for purposes of Section 3.30 (for purposes of determining who the
Directing Holders are), Certificates owned by the Special Servicer or an
Affiliate shall be deemed to be outstanding; and
(xx) for purposes of providing or distributing any reports, statements or
other information required or permitted to be provided to a Certificateholder
hereunder, a Certificateholder shall include any Beneficial Owner, or any
Person identified by a Beneficial Owner as a prospective transferee of a
Certificate beneficially owned by such Beneficial Owner, but only if the
Trustee or another party hereto furnishing such report, statement or
information has been provided with the name of the Beneficial Owner of the
related Certificate or the Person identified as a prospective transferee
thereof. For purposes of the foregoing, the Depositor, the Servicer, the
Special Servicer, the Trustee, the Paying Agent, the Fiscal Agent or other such
Person may rely, without limitation, on a participant listing from the
Depository or statements furnished by a Person that on their face appear to be
statements from a participant in the Depository to such Person indicating that
such Person beneficially owns Certificates.
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"Class": With respect to the Certificates or Lower-Tier Regular
Interests, all of the Certificates or Lower-Tier Regular Interests bearing the
same alphabetical and numerical Class designation.
"Class Certificate": [List and describe each certificate class and each
certificate class Pass-Through Rate].
"Class Interest Distribution Amount": With respect to any Distribution
Date and the Class of Certificates other than the Class _____ and Class _____
Certificates, an amount equal to the Interest Accrual Amount thereof; with
respect to any Distribution Date and the Class _____ and Class _____
Certificates, an amount equal to the sum of the Interest Accrual Amounts of the
related Strip Components of each such Class.
"Class Interest Shortfall": On any Distribution Date for any Class and/or
Strip Component of such Class, as applicable, of Certificates, the amount of
interest (other than Net Default Interest, Excess Interest, Reduction Interest
Distribution Amounts or Reduction Interest Shortfalls) required to be
distributed to the Holders of such Class and/or in respect of such Strip
Component pursuant to Section 4.01(b) on such Distribution Date minus the
amount of interest (other than Net Default Interest, Excess Interest, Reduction
Interest Distribution Amounts or Reduction Interest Shortfalls) actually
distributed to such Holders pursuant to such Section, if any.
"Class LR Certificate": Any Certificate executed and authenticated by the
Trustee or the Authenticating Agent on behalf of the Depositor in substantially
the form set forth in Exhibit A-18 hereto. The Class LR Certificates have no
Pass-Through Rate, Certificate Balance or Notional Balance.
"Class R Certificate": Any Certificate executed and authenticated by the
Trustee or the Authenticating Agent on behalf of the Depositor in substantially
the form set forth in Exhibit A-19 hereto. The Class R Certificates have no
Pass-Through Rate, Certificate Balance or Notional Balance.
"Class V-1 Certificate": Any one of the Certificates executed and
authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit A-16 hereto. The Class
V-1 Certificates have no Pass-Through Rate, Certificate Balance or Notional
Balance.
"Class V-2 Certificate": Any one of the Certificates executed and
authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibits A-17 hereto. The
Class V-2 Certificates have no Pass-Through Rate, Certificate Balance or
Notional Balance.
"Closing Date": _____________.
"Code": The Internal Revenue Code of 1986, as amended from time to time,
any successor statute thereto, and any temporary or final regulations of the
United States Department of the Treasury promulgated pursuant thereto.
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"Collateral Account": As defined in Section 3.30(e) The Collateral
Account shall be maintained as an Eligible Account.
"Collection Account": The trust account or accounts created and
maintained by the Servicer pursuant to Section 3.05(a), which shall be entitled
_________________________ in trust for ___________________, as Trustee, in
trust for Holders of Heller Financial Commercial Mortgage Asset Corp., Mortgage
Pass-Through Certificates, Series 199_-_, Collection Account" and which must be
an Eligible Account.
"Collection Period": With respect to a Distribution Date, the period
beginning on the day after the Due Date, in the month preceding the month in
which such Distribution Date occurs (or, in the case of the Distribution Date
occurring in November 1996, on the day after the Cut-off Date) and ending at
the close of business on the Due Date, in the month in which such Distribution
Date occurs.
"Commission": The Securities and Exchange Commission.
"Component Balance": [Describe if applicable]
"Corporate Trust Office": The principal office of the Trustee located at
__________________________ or the principal trust office of any successor
trustee qualified and appointed pursuant to Section 8.08.
"Cross-over Date": means the Distribution Date on which the Certificate
Balance of each Class of Certificates other than the Class ____, Class _____
and Class _____ Certificates have been reduced to zero.
"Custodial Agreement": The Custodial Agreement, if any, from time to time
in effect between the Custodian named therein and the Trustee, substantially in
the form of Exhibit H hereto, as the same may be amended or modified from time
to time in accordance with the terms thereof.
"Custodian": Any Custodian appointed pursuant to Section 3.21 and, unless
the Trustee is Custodian, named pursuant to any Custodial Agreement. The
Custodian may (but need not) be the Trustee or the Servicer or any Affiliate of
the Trustee or the Servicer, but may not be the Depositor or any Affiliate
thereof.
"Cut-off Date": ____________.
["DCR": Duff & Phelps Credit Rating Co., or its successor in interest.]
"Default Interest": With respect to any Mortgage Loan, interest accrued
on such Mortgage Loan at the excess of the Default Rate over the Mortgage Rate
(plus the Excess Rate to the extent required by the applicable Mortgage Loan).
The Default Interest shall not be an asset of the Lower-Tier REMIC or the
Upper-Tier REMIC formed hereunder.
"Default Interest Distribution Account": The trust account or accounts
created and maintained as a separate trust account or accounts by the Trustee
pursuant to Section 3.05(d), which
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shall be entitled _______________, as Trustee, in trust for Holders of Heller
Financial Commercial Mortgage Asset Corp., Commercial Mortgage Pass-Through
Certificates, Series 199_-_, Default Interest Distribution Account and which
must be an Eligible Account. The Default Interest Distribution Account shall
not be an asset of the Lower-Tier REMIC or the Upper-Tier REMIC formed
hereunder.
"Default Rate": With respect to each Mortgage Loan, the per annum rate at
which interest accrues on such Mortgage Loan following any event of default on
such Mortgage Loan, including a default in the payment of a Monthly Payment or
a Balloon Payment, as such rate is set forth on the Mortgage Loan Schedule.
"Definitive Certificate": Any certificated, fully registered
certificate.
"Delinquency": Any failure of a Borrower to make a scheduled payment
on a Due Date.
"Delinquency Reduction Amount": In connection with a Delinquency, an
amount equal to the scheduled payment due on the related Due Date (adjusted to
the applicable Net Mortgage Pass-Through Rate with respect to the interest
portion) and not received from a Borrower under any Mortgage Loan.
"Denomination": As defined in Section 5.01(a).
"Depositor": _____________, a __________ corporation, and its
successors and assigns.
"Depository": ____________ or a successor appointed by the Certificate
Registrar (which appointment shall be at the direction of the Depositor if
the Depositor is legally able to do so).
"Depository Participant": A Person for whom, from time to time, the
Depository effects book-entry transfers and pledges of securities deposited
with the Depository.
"Directing Holders": As defined in Section 3.30(d).
"Directly Operate": With respect to any REO Property, the furnishing or
rendering of services to the tenants thereof that are not customarily provided
to tenants in connection with the rental of space for occupancy only within the
meaning of Treasury Regulations Section 1.512(h)-1(c)(5), the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers in the ordinary course of a trade or business, any use of
such REO Property in a trade or business conducted by the Trust Fund, or the
performing of any construction work on the REO Property other than through an
Independent Contractor; provided, however, that the Special Servicer, on behalf
of the Trust Fund, shall not be considered to Directly Operate an REO Property
solely because the Special Servicer, on behalf of the Trust Fund, establishes
rental terms, chooses tenants, enters into or renews leases, deals with taxes
and insurance, makes decisions as to repairs or capital expenditures with
respect to such REO Property or takes other actions consistent with Section
1.856-4(b)(5)(ii) of the regulations of the United States Department of the
Treasury.
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"Discount Rate": With respect to any Class of Certificates, the rate
determined by the Trustee, in its good faith, to be the rate (interpolated and
rounded to the nearest one-thousandth of a percent, if necessary) in the
secondary market for United States Treasury securities with a maturity equal to
the then computed weighted average life (or in the case of the Class _______
and Class _____ Certificates, the weighted average life of the interest
payments) of such Class (rounded to the nearest month), without taking into
account the related prepayment of principal.
"Disqualified Non-U.S. Person": With respect to a Class R or Class LR
Certificate, any Non-U.S. Person or agent thereof other than (i) a Non-U.S.
Person that holds the Class R or Class LR Certificate in connection with the
conduct of a trade or business within the United States and has furnished the
transferor and the Certificate Registrar with an effective IRS Form 4224 or
(ii) a Non-U.S. Person that has delivered to both the transferor and the
Certificate Registrar an opinion of a nationally recognized tax counsel to the
effect that the transfer of the Class R or Class LR Certificate to it is in
accordance with the requirements of the Code and the regulations promulgated
thereunder and that such transfer of the Class R or Class LR Certificate will
not be disregarded for federal income tax purposes.
"Disqualified Organization": Either (a) the United States, a State or any
political subdivision thereof, any possession of the United States, or any
agency or instrumentality of any of the foregoing (other than an
instrumentality that is a corporation if all of its activities are subject to
tax and a majority of its board of directors is not selected by any such
governmental unit), (b) a foreign government, International Organization or
agency or instrumentality of either of the foregoing, (c) an organization that
is exempt from tax imposed by Chapter 1 of the Code (including the tax imposed
by Code Section 511 on unrelated business taxable income) on any excess
inclusions (as defined in Code Section 860E(c)(1)) with respect to the Class R
or Class LR Certificates (except certain farmers' cooperatives described in
Code Section 521), (d) rural electric and telephone cooperatives described in
Code Section 1381(a)(2), or (e) any other Person so designated by the
Certificate Registrar based upon an Opinion of Counsel to the effect that any
Transfer to such Person may cause the Upper-Tier REMIC or Lower-Tier REMIC to
be subject to tax or to fail to qualify as a REMIC at any time that the
Certificates are outstanding. The terms "United States," "State" and
"International Organization" shall have the meanings set forth in Code Section
7701 or successor provisions.
"Distribution Account": The trust account or accounts created and
maintained as a separate trust account or accounts by the Trustee pursuant to
Section 3.05(b), which shall be entitled _______________, as Trustee, in trust
for Holders of Heller Financial Commercial Mortgage Asset Corp., Mortgage
Pass-Through Certificates, Series 199_-_, Distribution Account" and which must
be an Eligible Account.
"Distribution Date": The ____th day of each month, or if such ____th day
is not a Business Day, the Business Day immediately following such ___th day,
commencing in _________ 199__.
"Due Date": With respect to any Distribution Date and/or any Mortgage
Loan, as the case may be, the __th day of the month (or in the case of certain
of the Mortgage Loans, if the __th day
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is not a business day, as defined in the related Loan Documents, either the
next business day or the first preceding business day) in which such
Distribution Date occurs.
"Early Termination Notice Date": Any date as of which the aggregate
Stated Principal Balance of the Mortgage Loans is less than 1.0% of the
aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off
Date.
"Eligible Account": Either (i) (A) an account or accounts maintained with
a depository institution or trust company the long term unsecured debt
obligations or commercial paper of which are rated by any two of the Rating
Agencies in its highest rating category at all times (or, in the case of the
Collection Account, Interest Reserve Account and Escrow Accounts, the long term
unsecured debt obligations of which are rated at least "AA" by any two of the
Rating Agencies or, if the funds in such account are to be held in such account
for less than 30 days, the short term obligations of which are rated by any two
of the Rating Agencies in its highest rating category at all times, or (B) as
to which the Trustee has received written confirmation from each of the Rating
Agencies that holding funds in such account would not cause any Rating Agency
to requalify, withdraw or downgrade any of its ratings on the Certificates or
(ii) a segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or
trust company is subject to regulations substantially similar to 12 C.F.R.
Section 9.10(b), having in either case a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by federal and
state authority, or otherwise acceptable (as evidenced by a written
confirmation from each Rating Agency that such account would not, in and of
itself, cause a downgrade, qualification or withdrawal of the then current
ratings assigned to the Certificates) to each Rating Agency, which may be an
account maintained with the Trustee or the Servicer. Eligible Accounts may bear
interest.
"Eligible Investor": Any of (i) a Qualified Institutional Buyer that is
purchasing for its own account or for the account of a Qualified Institutional
Buyer to whom notice is given that the offer, sale or transfer is being made in
reliance on Rule 144A or (ii) an Institutional Accredited Investor.
"Environmental Report": The environmental audit report or reports with
respect to each Mortgaged Property delivered to the Mortgage Loan Seller in
connection with the related Mortgage.
"ERISA": The Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
"Escrow Account": As defined in Section 3.04(b). Any Escrow Account
may be a sub-account of the related Cash Collateral Account.
"Escrow Payment": Any payment made by any Borrower to the Servicer
pursuant to the related Mortgage, Cash Collateral Agreement, Lock-Box Agreement
or Loan Agreement for the account of such Borrower for application toward the
payment of taxes, insurance premiums, assessments and similar items in respect
of the related Mortgaged Property.
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["Euroclear": Morgan Guaranty Trust Company of New York, Brussels
Office, as operator of the Euroclear System, or its successor in such
capacity.]
"Event of Default": A Servicer Event of Default or Special Servicer
Event of Default, as applicable.
"Excess Interest": With respect to each of the Mortgage Loans indicated
on the Mortgage Loan Schedule as having a Revised Rate, interest accrued on
such Mortgage Loan allocable to the Excess Rate. The Excess Interest shall not
be an asset of the Lower-Tier REMIC or the Upper-Tier REMIC formed hereunder.
"Excess Interest Distribution Account": The trust account or accounts
created and maintained as a separate trust account or accounts by the Trustee
pursuant to Section 3.05(e), which shall be entitled _________________, as
Trustee, in trust for Holders of Heller Financial Commercial Mortgage Asset
Corp., Mortgage Pass-Through Certificates, Series 199_-_, Excess Interest
Distribution Account" and which must be an Eligible Account. The Excess
Interest Distribution Account shall not be an asset of the Lower-Tier REMIC or
the Upper-Tier REMIC formed hereunder.
"Excess Rate": With respect to each of the Mortgage Loans indicated on
the Mortgage Loan Schedule as having a Revised Rate, the excess of (i) the
applicable Revised Rate over (ii) the applicable Mortgage Rate, each as set
forth in the Mortgage Loan Schedule.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Exchange Act Report": A Monthly Distribution Statement, Special Event
Report, Summary Report or Annual Compliance Report to be filed with the
Commission, under cover of the related form required by the Exchange Act.
"FDIC": The Federal Deposit Insurance Corporation, or any successor
thereto.
"FHA": The Federal Housing Administration.
"FHLMC": The Federal Home Loan Mortgage Corporation, or any successor
thereto.
"Final Recovery Determination": With respect to any Specially Serviced
Mortgage Loan or Mortgage Loan subject to repurchase by the Depositor or the
Mortgage Loan Seller pursuant to Sections 2.03(d) or 2.03(e), the recovery of
all Insurance Proceeds, Liquidation Proceeds, the related Repurchase Price and
other payments or recoveries (including proceeds of the final sale of any REO
Property) which the Servicer (or in the case of a Specially Serviced Mortgage
Loan, the Special Servicer), in its reasonable judgment as evidenced by a
certificate of a Servicing Officer delivered to the Trustee and the Custodian
(and the Servicer, if the Certificate is from the Special Servicer), expects to
be finally recoverable. The Servicer shall maintain records, prepared by a
Servicing Officer, of each Final Recovery Determination until the earlier of
(i) its termination as Servicer hereunder and the transfer of such records to a
successor servicer and (ii) five years following the termination of the Trust
Fund.
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["Financial Market Publisher": Bloomberg Financial Service.]
["Fiscal Agent": ______________, in its capacity as fiscal agent of
the Trustee, or its successor in interest, or any successor fiscal agent
appointed as herein provided.]
["Fitch": Fitch IBCA, Inc., or its successor in interest.]
"Form 8-K": A Current Report on Form 8-K under the Exchange Act, or such
successor form as the Commission may specify from time to time.
"FNMA": The Federal National Mortgage Association, or any successor
thereto.
"Global Certificates": The Class _____, Class ____, Class ____, Class
____, Class _____, Class _____, Class _____, Class _____, Class ____ and Class
____ Certificates.
"Hazardous Materials": Any dangerous, toxic or hazardous pollutants,
chemicals, wastes, or substances, including, without limitation, those so
identified pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 9601 et seq., or any other environmental
laws now existing, and specifically including, without limitation, asbestos and
asbestos-containing materials, polychlorinated biphenyls ("PCBs"), radon gas,
petroleum and petroleum products, urea formaldehyde and any substances
classified as being "in inventory", "usable work in process" or similar
classification which would, if classified as unusable, be included in the
foregoing definition.
"Holder": With respect to any Certificate, a Certificateholder; with
respect to any Lower-Tier Regular Interest, the Trustee.
"Indemnified Party": As defined in Section 8.05(c).
"Independent": When used with respect to any specified Person, any such
Person who (i) does not have any direct financial interest, or any material
indirect financial interest, in any of the Depositor, the Trustee, the
Servicer, the Special Servicer, any Borrower or Manager or any Affiliate
thereof, and (ii) is not connected with any such Person thereof as an officer,
employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.
"Independent Contractor": Either (i) any Person that would be an
"independent contractor" with respect to the Trust Fund within the meaning of
Section 856(d)(3) of the Code if the Trust Fund were a real estate investment
trust (except that the ownership tests set forth in that section shall be
considered to be met by any Person that owns, directly or indirectly, 35% or
more of any Class or 35% or more of the aggregate value of all Classes of
Certificates), provided that the Trust Fund does not receive or derive any
income from such Person and the relationship between such Person and the Trust
Fund is at arm's length, all within the meaning of Treasury Regulations Section
1.856-4(b)(5) (except neither the Servicer nor the Special Servicer shall be
considered to be an Independent Contractor under the definition in this clause
(i) unless an Opinion of Counsel (at the expense of the party seeking to be
deemed an Independent) addressed to the Servicer and the Trustee has been
delivered to the Trustee to that effect) or (ii) any other Person (including
the
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Servicer and the Special Servicer) if the Servicer, on behalf of itself and the
Trustee, has received an Opinion of Counsel (at the expense of the party
seeking to be deemed an Independent Contractor) to the effect that the taking
of any action in respect of any REO Property by such Person, subject to any
conditions therein specified, that is otherwise herein contemplated to be taken
by an Independent Contractor will not cause such REO Property to cease to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code (determined without regard to the exception applicable for purposes of
Section 860D(a) of the Code) or cause any income realized in respect of such
REO Property to fail to qualify as Rents from Real Property (provided that such
income would otherwise so qualify).
"Individual Certificate": Any Certificate in definitive, fully
registered physical form without interest coupons.
"Institutional Accredited Investor": An entity meeting the requirements
of Rule 501(a)(1), (2), (3) or (7) of Regulation D, or an entity in which all
the equity owners meet such requirements.
"Instructions": As defined in Section 3.30(d).
"Insurance Proceeds": Proceeds of any fire and hazard insurance policy,
title policy or other insurance policy relating to a Mortgage Loan (including
any amounts paid by the Servicer pursuant to Section 3.08).
"Interest Accrual Amount": [Conform] With respect to any Distribution
Date and any Class of Certificates (other than the Class _____, Class ____,
Class V-1, Class V-2, Class R and Class LR Certificates), an amount equal to
interest for the related Interest Accrual Period at the Pass-Through Rate for
such Class on the related Certificate Balance (provided, that for interest
accrual purposes any distributions in reduction of Certificate Balance or
reductions in Certificate Balance as a result of allocations of Realized Losses
on the Distribution Date or Special Distribution Date occurring in an Interest
Accrual Period will be deemed to have been made on the first day of such
Interest Accrual Period). With respect to any Distribution Date and each of the
Class ____, Class _____ and the Class ____ Strip Components, an amount equal to
interest for the related Interest Accrual Period at the Pass-Through Rate for
such Strip Component on the Component Balance of such Strip Component
(provided, that any reductions in Component Balances of the Class ____ Strip
Component, Class _____ Strip Component and Class _____ Strip Component as a
result of distributions in reduction of the Certificate Balance of the Class
____, Class _____ and Class _____ Certificates or allocations of Realized
Losses to the Certificate Balance of the Class ______, Class ______ and Class
_____ Certificates on the Distribution Date or Special Distribution Date
occurring in an Interest Accrual Period, will be deemed to have occurred on the
first day of such Interest Accrual Period). With respect to any Distribution
Date and each of the Class _____ Class _____, Class ____, Class ____ and Class
____ Strip Components, an amount equal to interest for the related Interest
Accrual Period at the Pass-Through Rate for such Strip Component for such
Interest Accrual Period on the Component Balance of such Strip Component
(provided, that, (i) any reductions in Component Balance as a result of (A)
distributions of principal to the related Class of Certificates, (B)
allocations of Realized Losses to the Certificate Balance of the related Class
of Certificates or (C) allocations of Appraisal Reduction
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Amounts or Delinquency Reduction Amounts to the Component Balance of the
related Class of Certificates and (ii) any increases in Component Balance as a
result of reversals of reductions resulting from Appraisal Reduction Events and
Delinquencies, in each case, on the Distribution Date or Special Distribution
Date occurring in such Interest Accrual Period will be deemed to have occurred
on the first day of such Interest Accrual Period). With respect to any Lower-
Tier Regular Interest and any Distribution Date, an amount equal to interest
for the related Interest Accrual Period at the Lower-Tier Pass-Through Rate for
such Interest Accrual Period on the Certificate Balance of such Lower-Tier
Regular Interest, provided that, for such purpose, (i) any distributions in
reduction of Certificate Balance and (ii) reductions of Certificate Balance as
a result of allocations of Realized Losses on the Distribution Date or Special
Distribution Date occurring in such Interest Accrual Period shall be deemed to
have been made as of the first day of such Interest Accrual Period. With
respect to a Special Distribution Date and any Class of Certificates (other
than the Class _____, Class ______, Class V-1, Class V-2, Class R and Class LR
Certificates), an amount of interest for the period commencing on the first day
of the related Interest Accrual Period through the date on which the related
prepayment on the _____________ Loan occurs, at (i) with respect to any Class
that bears interest at a fixed rate, the Pass-Through Rate for such Class or
(ii) with respect to any Class that bears interest at a variable rate, a rate
per annum equal to the Mortgage Rate of the ______________ Loan minus the
aggregate of the Servicing Fee Rate, the Trustee Fee Rate, the Additional
Servicing Fee Rate and, if applicable, the pass-through rate of the related
Strip Component on the amount of _________ Principal distributed to such Class
on such Special Distribution Date. With respect to a Special Distribution Date
and the Class ______ and Class ______ Certificates, an amount of interest for
the period commencing on the first day the related Interest Accrual Period
through the date on which the related prepayment on the _________________ Loan
occurs, at (i) with respect to any Strip Component that bears interest at a
fixed rate, the Pass-Through Rate for such Strip Component or (ii) with respect
to any Strip Component that bears interest at a variable rate, a rate per annum
equal to the Mortgage Rate of the _________________ Loan minus the aggregate of
the Servicing Fee Rate, the Trustee Fee Rate, the Additional Servicing Fee Rate
and, if applicable, the Pass-Through Rate of the Related Certificates on the
amount of ___________ Principal distributed to the Related Certificates on such
Special Distribution Date.
"Interest Accrual Period": With respect to any Distribution Date, the
period which commences on the [fifteenth] day of the month preceding the month
in which such Distribution Date occurs and ends on the [fourteenth] day of the
month in which such Distribution Date occurs, provided that the Interest
Accrual Period with respect to the Distribution Date occurring in _______ 199__
shall be assumed to consist of ________ days. Interest for each Interest
Accrual Period, other than the Interest Accrual Period with respect to the
Distribution Date occurring in ________ 199__, is calculated based on a 360-day
year consisting of twelve 30-day months.
"Interest Reserve Account": The trust account created and maintained by
the Servicer pursuant to Section 3.27, which shall be entitled
"_______________, in trust for _____________, as Trustee, in trust for Holders
of Heller Financial Commercial Mortgage Asset Corp., Mortgage Pass-Through
Certificates, Series 199_-_, Interest Reserve Account" and which must be an
Eligible Account.
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["Interest Reserve Loan": The Mortgage Loan identified as the ________
loan on the Mortgage Loan Schedule.]
"Interest Shortfall": On any Distribution Date for any Lower-Tier Regular
Interest, any shortfall in the amount of interest required to be distributed to
such Lower-Tier Regular Interest on the Certificate Balance or Component
Balance thereof, as the case may be, on such Distribution Date.
"Interested Person": As of any date of determination, the Depositor, the
Servicer, Special Servicer, the Trustee, the Fiscal Agent, any Borrower, any
manager of a Mortgaged Property, any Independent Contractor engaged by the
Special Servicer pursuant to Section 3.17, or any Person known to a Responsible
Officer of the Trustee to be an Affiliate of any of them.
"Investment Account": As defined in Section 3.07(a).
"IRS": The Internal Revenue Service.
"Liquidation Expenses": Expenses incurred by the Servicer, the Special
Servicer and the Trustee in connection with the liquidation of any Mortgage
Loan or property acquired in respect thereof (including, without limitation,
legal fees and expenses, committee or referee fees, and, if applicable,
brokerage commissions, and conveyance taxes) and any Property Protection
Expenses incurred with respect to such Mortgage Loan or such property including
interest thereon at the Advance Rate not previously reimbursed from collections
or other proceeds therefrom.
"Liquidation Proceeds": The amount (other than Insurance Proceeds)
received in connection with (i) the taking of a Mortgaged Property (or portion
thereof) by exercise of the power of eminent domain or condemnation, (ii) the
liquidation of a Specially Serviced Mortgage Loan through a trustee's sale,
foreclosure sale or otherwise or (iii) a sale of a Mortgage Loan or an REO
Property in accordance with Section 3.18 or Section 9.01.
"Loan Agreement": With respect to any Mortgage Loan, the loan agreement,
if any, between the Originator and the Borrower, pursuant to which such
Mortgage Loan was made.
"Loan Documents": With respect to any Mortgage Loan, the documents
executed or delivered in connection with the origination of such Mortgage Loan
or subsequently added to the related Mortgage File.
"Loan Number": With respect to any Mortgage Loan, the loan number by
which such Mortgage Loan was identified on the books and records of the
Depositor or any sub-servicer for the Depositor, as set forth in the Mortgage
Loan Schedule.
"Lock-Box Account": With respect to any Mortgaged Property, if
applicable, any account created pursuant to any documents relating to a
Mortgage Loan to receive income therefrom. Any Lock-Box Account shall be
beneficially owned for federal income tax purposes by the Person who is
entitled to receive the reinvestment income or gain thereon in accordance with
the terms and provisions of the related Mortgage Loan and Section 3.07, which
Person shall be taxed on all
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reinvestment income or gain thereon. The Servicer shall be permitted to make
withdrawals therefrom for deposit into the related Cash Collateral Accounts.
"Lock-Box Agreement": With respect to any Mortgage Loan, the lock-box
agreement, if any, between the Originator or the Mortgage Loan Seller and the
Borrower, pursuant to which the related Lock-Box Account, if any, may have been
established.
"Lock-out Period" With respect to any Mortgage Loan, the period of time
specified in the related Loan Documents during which voluntary prepayments by
the related Borrower are prohibited.
"Lower Rate": As defined in the definition of Minimum Defaulted
Monthly Payment.
"Lower-Tier Pass-Through Rate": With respect to any Distribution Date and
any Class of Lower-Tier Regular Interests, a per annum rate equal to the
Weighted Average Net Mortgage Pass-Through Rate.
"Lower-Tier Regular Interests": The Class _____, Class _____, Class
_____, Class _____, Class _____, Class _____, Class _____, Class ____, Class
____, Class ____, Class ____, Class ______ and Class _____Interests.
"Lower-Tier REMIC": A segregated asset pool within the Trust Fund
consisting of the Mortgage Loans (exclusive of Default Interest and Excess
Interest), collections thereon, any REO Property acquired in respect thereof
and amounts held from time to time in the Collection Account and the
Distribution Account.
"LTV": With respect to any Mortgage Loan and any date of determination,
the outstanding principal balance of such Mortgage Loan as of such date divided
by the appraised value of the Mortgaged Properties securing such Mortgage Loan
as evidenced by an Updated Appraisal obtained by the Servicer or an update
thereto.
"MAI": Member of the Appraisal Institute.
"Management Agreement": With respect to any Mortgage Loan, the Management
Agreement, if any, by and between the Manager and the related Borrower, or any
successor Management Agreement between such parties.
"Manager": With respect to any Mortgage Loan, any property manager for
the related Mortgaged Properties.
"Maturity Date": With respect to each Mortgage Loan, the Maturity Date
as set forth on the Mortgage Loan Schedule.
"Minimum Defaulted Monthly Payment": With respect to any extension of a
Mortgage Loan that is delinquent in respect of its Balloon Payment, an amount
equal to (a) the principal portion of the Monthly Payment that would have been
due on such Mortgage Loan on the related Due Date based on the original
amortization schedule thereof, or, if there is no amortization
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schedule, the principal portion of the constant Monthly Payment that would have
been due (in each case calculated with interest at the Mortgage Rate), assuming
such Balloon Payment had not become due, after giving effect to any
modification, and (b) interest at the applicable Default Rate; provided,
however, that the Special Servicer may, in its discretion, agree that the
Minimum Defaulted Monthly Payments may include interest at a rate lower than
the related Default Rate (but in no event lower than the related Mortgage Rate)
(the "Lower Rate"); provided that if, after notice to all Certificateholders,
Holders of Certificates evidencing at least 66-2/3% of the Voting Rights of
each Class, (or, that in the event that the Special Servicer is not the
Servicer and the Servicer would not agree to the Lower Rate, Certificateholders
representing greater than (a) 50% of the aggregate Voting Rights of all
Certificateholders and (b) 66-2/3% of the aggregate Voting Rights of all
Certificateholders who respond to such notice within 30 Business Days of the
delivery of such notice), direct the Special Servicer not to agree to permit
payments to include interest at the Lower Rate, the Special Servicer shall not
agree to payments with interest at the Lower Rate, provided, further, that, if
the Minimum Defaulted Monthly Payment is to include interest at the Lower Rate,
the Special Servicer may agree that interest on such Mortgage Loan accrues at
the Lower Rate if, after notice to all Certificateholders, holders of
Certificates evidencing at least 66-2/3% of the Voting Rights of each Class
direct the Special Servicer that such Mortgage Loan shall accrue interest at
the related Default Rate, then such Mortgage Loan will continue to accrue
interest at the Default Rate thereof and the excess of interest accrued on such
Mortgage Loan over the amount included in the Minimum Defaulted Monthly
Payments (i.e., interest at the Lower Rate) shall be added to the outstanding
principal balance of such Mortgage Loan. Notwithstanding the foregoing, if the
Directing Holders have given Instructions to the Special Servicer to extend,
the Special Servicer shall be required to follow the Directing Holders'
Instructions with respect to interest so long as the Minimum Defaulted Monthly
Payment is at least equal to the Lower Rate.
"Monthly Distribution Statement": A monthly distribution statement
prepared by the Trustee pursuant to Section 4.02(a) hereof.
"Monthly Payment": With respect to any Mortgage Loan (other than any REO
Mortgage Loan) and any Due Date, the scheduled monthly payment of principal, if
any, and interest at the Mortgage Rate, excluding any Balloon Payment (but not
excluding any constant Monthly Payment), which is payable by the related
Borrower on such Due Date under the related Note. With respect to an REO
Mortgage Loan, the monthly payment that would otherwise have been payable on
the related Due Date had the related Note not been discharged, determined as
set forth in the preceding sentence and on the assumption that all other
amounts, if any, due thereunder are paid when due.
["Moody's": Moody's Investors Service, Inc., or its successor in
interest.]
"Mortgage": The mortgage, deed of trust or other instrument creating a
first lien on or first priority ownership interest in a Mortgaged Property
securing a Note.
"Mortgage File": With respect to any Mortgage Loan, the mortgage
documents listed in Section 2.01(i) through (xv) pertaining to such particular
Mortgage Loan and any additional
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documents required to be added to such Mortgage File pursuant to the express
provisions of this Agreement.
"Mortgage Loan": Each of the mortgage loans transferred and assigned to
the Trustee pursuant to Section 2.01 and from time to time held in the Trust
Fund, the mortgage loans originally so transferred, assigned and held being
identified on the Mortgage Loan Schedule as of the Cut-off Date. Such term
shall include (i) any REO Mortgage Loan, Specially Serviced Mortgage Loan or
any Mortgage Loan that has been defeased in whole or in part and (ii) with
respect to describing the rights and obligations of the parties hereto.
"Mortgage Loan Purchase and Sale Agreement": The Mortgage Loan Purchase
and Sale Agreement dated as of the Cut-off Date, by and between the Depositor
and the Mortgage Loan Seller, a copy of which is attached hereto as Exhibit J.
"Mortgage Loan Schedule": The list of Mortgage Loans included in the
Trust Fund as of the Closing Date being attached hereto as Exhibit B, which
list shall set forth the following information with respect to each Mortgage
Loan:
(u) the Loan Number;
(v) the property name, city and state where each related Mortgaged
Property is located;
(w) the Monthly Payment in effect as of the Cut-off Date;
(x) the Mortgage Rate;
(y) the Maturity Date;
(z) the Stated Principal Balance as of the Cut-off Date and, as
applicable, the allocation of such balance to each related Mortgaged Property;
(aa) the Originator of such Mortgage Loan; and
(bb) whether the Mortgage Loan is an Actual/360 Mortgage Loan.
The Mortgage Loan Schedule shall also set forth the total of the amounts
described under clause (c) and (f) above for all of the Mortgage Loans. The
Mortgage Loan Schedule may also set forth, for selected Mortgage Loans, the net
operating income or debt service coverage ratio. The Mortgage Loan Schedule may
be in the form of more than one list, collectively setting forth all of the
information required.
"Mortgage Loan Seller": ____________, a ________ corporation, and its
successors in interest.
"Mortgage Pass-Through Rate": [With respect to the Mortgage Loans that
provide for calculations of interest based on twelve months of 30 days each,
the Mortgage Pass-Through Rate for any Interest Accrual Period is equal to the
Mortgage Rate thereof. The Mortgage Pass-Through
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Rate with respect to the Actual/360 Mortgage Loans for any Interest Accrual
Period, is equal to the Mortgage Rate thereof multiplied by a fraction the
numerator of which is the actual number of days in such Interest Accrual Period
and the denominator of which is 30.] [The Mortgage Pass-Through Rate with
respect to the Interest Reserve Loan for any Distribution Date (a) relating to
any Interest Accrual Period commencing in any January, February, April, June,
September and November and in any December occurring in a year immediately
preceding any year which is not a leap year, is the Mortgage Rate thereof, and
(b) relating to any Interest Accrual Period commencing in any March, May, July,
August and October and in any December occurring in a year immediately
preceding a year which is a leap year, is equal to the Mortgage Rate thereof
multiplied by a fraction the numerator of which is the actual number of days in
such Interest Accrual Period and the denominator of which is 30.]
"Mortgage Rate": With respect to each Mortgage Loan, the annual rate, not
including any Excess Rate, at which interest accrues on such Mortgage Loan (in
the absence of a default), as set forth on the Mortgage Loan Schedule. The
Mortgage Rate for purposes of calculating the Weighted Average Net Mortgage
Pass-Through Rate shall be the Mortgage Rate of such Mortgage Loan without
taking into account any reduction in the interest rate by a bankruptcy court
pursuant to a plan of reorganization or pursuant to any of its equitable powers
or a reduction in interest or principal due to a modification pursuant to
Section 3.30 hereof.
"Mortgaged Property": The underlying property securing a Mortgage Loan,
including any REO Property, consisting of a fee simple estate, and, with
respect to certain Mortgage Loans, a leasehold estate or both a leasehold
estate and fee estate, or a leasehold estate in a portion of the property and a
fee simple estate in the remainder, in a parcel of land improved by a
commercial property, together with any personal property, fixtures, leases and
other property or rights pertaining thereto.
"Net Default Interest": As defined in Section 3.05(d).
"Net Insurance Proceeds": Insurance Proceeds, to the extent such proceeds
are not to be applied to the restoration of the related Mortgaged Property or
released to the Borrower in accordance with the express requirements of the
Mortgage or Note or other documents included in the Mortgage File or in
accordance with prudent and customary servicing practices.
"Net Liquidation Proceeds": The Liquidation Proceeds received with
respect to any Mortgage Loan net of the amount of (i) Liquidation Expenses
incurred with respect thereto and, (ii) with respect to proceeds received in
connection with the taking of a Mortgaged Property (or portion thereof) by the
power of eminent domain in condemnation, amounts required to be applied to the
restoration or repair of the related Mortgaged Property.
"Net Mortgage Pass-Through Rate": With respect to any Mortgage Loan and
any Distribution Date, the per annum rate equal to the Mortgage Pass-Through
Rate for such Mortgage Loan, minus the aggregate of the applicable Servicing
Fee Rate, Additional Servicing Fee Rate and Trustee Fee Rate.
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"Net REO Proceeds": With respect to each REO Property, REO Proceeds with
respect to such REO Property net of any insurance premiums, taxes, assessments
and other costs and expenses permitted to be paid therefrom pursuant to Section
3.17(b) of this Agreement.
"New Lease": Any lease of REO Property entered into on behalf of the
Trust Fund, including any lease renewed or extended on behalf of the Trust Fund
if the Trust Fund has the right to renegotiate the terms of such lease.
"Nonrecoverable Advance": Any portion of an Advance proposed to be made
or previously made which has not been previously reimbursed to the Servicer,
the Special Servicer, the Trustee or the Fiscal Agent, as applicable, and
which, in the good faith business judgment of the Servicer, the Special
Servicer, the Trustee or the Fiscal Agent, as applicable, will not or, in the
case of a proposed Advance, would not be ultimately recoverable from late
payments, Insurance Proceeds, Liquidation Proceeds and other collections on or
in respect of the related Mortgage Loan. The judgment or determination by the
Servicer, the Special Servicer, the Trustee or the Fiscal Agent that it has
made a Nonrecoverable Advance or that any proposed Advance, if made, would
constitute a Nonrecoverable Advance shall be evidenced in the case of the
Servicer or Special Servicer, by a certificate of a Servicing Officer delivered
to the Trustee, the Fiscal Agent, the Depositor and, in the case of the Special
Servicer, to the Servicer, and in the case of the Trustee or the Fiscal Agent,
by a certificate of a Responsible Officer of the Trustee or Fiscal Agent, as
applicable, delivered to the Depositor (and the Trustee if the Certificate is
from the Fiscal Agent), which in each case sets forth such judgment or
determination and the procedures and considerations of the Servicer, Special
Servicer, the Trustee or Fiscal Agent, as applicable, forming the basis of such
determination (including, but not limited to, information selected by the
Person making such judgment or determination in its good faith discretion, such
as related income and expense statements, rent rolls, occupancy status,
property inspections, Servicer, Special Servicer, Trustee or Fiscal Agent
inquiries, third party engineering and environmental reports, and an appraisal
or any Updated Appraisal thereof conducted within the past 12 months). Any
determination of non-recoverability made by the Servicer may be made without
regard to any value determination made by the Special Servicer. Notwithstanding
the above, the Trustee and the Fiscal Agent shall be entitled to rely upon any
determination by the Servicer that any Advance previously made is a
Nonrecoverable Advance or that any proposed Advance would, if made, constitute
a Nonrecoverable Advance (and with respect to a proposed P&I Advance, the
Trustee and the Fiscal Agent, as applicable, shall rely on the Servicer's
determination that the Advance would be a Nonrecoverable Advance if the Trustee
or Fiscal Agent, as applicable, determines that it does not have sufficient
time to make such a determination).
"Non-U.S. Person": A person that is not a citizen or resident of the
United States, a corporation, partnership, or other entity created or organized
in or under the laws of the United States or any political subdivision thereof,
an estate whose income is subject to United States federal income tax
regardless of its source, or a trust if (A) for taxable years beginning after
December 31, 1996 (or for taxable years ending after August 20, 1996, if the
trustee has made an applicable election) a court within the United States is
able to exercise primary supervision over the administration of such trust, and
one or more United States fiduciaries have the authority to control
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all substantial decisions of such trust, or (B) for all other taxable years,
such trust is subject to United States federal income tax regardless of the
source of its income.
"Note": With respect to any Mortgage Loan as of any date of
determination, the note or other evidence of indebtedness and/or agreements
evidencing the indebtedness of a Borrower under such Mortgage Loan, including
any amendments or modifications, or any renewal or substitution notes, as of
such date.
"Notice of Termination": Any of the notices given to the Trustee by the
Servicer or any Holder of a Class LR Certificate pursuant to Section 9.01(c).
"Notional Amount" or "Notional Balance": [With respect to each of the
Class ______ and Class ____ Certificates, (a) on or prior to the Distribution
Date occurring in _________ 199__, an amount equal to the aggregate initial
Notional Balance of such Class, as specified in the Preliminary Statement
hereto, and (b) as of any date of determination after the Distribution Date
occurring in __________ 199__, the Notional Balance of the Class _____
Certificates will equal the Component Balance of the Class ______ Strip
Component and the Notional Balance of the Class ______ Certificates will equal
the sum of the Component Balances of the Class _____ Strip Component, Class
_____ Strip Component, Class _____ Component, Class _____ Strip Component,
Class ____ Strip Component, Class ____ Strip Component and Class _____ Strip
Component.
"Officers' Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or a Vice President
(however denominated) and by the Treasurer, the Secretary, one of the Assistant
Treasurers or Assistant Secretaries, any Trust Officer or other officer of the
Servicer customarily performing functions similar to those performed by any of
the above designated officers and also with respect to a particular matter, any
other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject, or an authorized
officer of the Depositor, and delivered to the Depositor, the Trustee or the
Servicer, as the case may be.
"Opinion of Counsel": A written opinion of counsel, who may, without
limitation, be counsel for the Depositor, the Special Servicer or the Servicer,
as the case may be, acceptable to the Trustee, except that any opinion of
counsel relating to (a) qualification of the Upper-Tier REMIC or Lower-Tier
REMIC as a REMIC or the imposition of tax under the REMIC Provisions on any
income or property of either REMIC, (b) compliance with the REMIC Provisions
(including application of the definition of "Independent Contractor") or (c) a
resignation of the Servicer pursuant to Section 6.04, must be an opinion of
counsel who is Independent of the Depositor and the Servicer.
"Original Purchase Agreement": With respect to any Mortgage Loan not
originated by the Mortgage Loan Seller, the agreement between the Mortgage Loan
Seller and the related Originator pursuant to which the Mortgage Loan Seller
acquired such Mortgage Loan.
"Originator": ____________________.
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"Ownership Interest": As to any Certificate, any ownership or security
interest in such 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.
"P&I Advance": As to any Mortgage Loan, any advance made by the Servicer,
the Trustee, or the Fiscal Agent pursuant to Section 4.06. Each reference to
the payment or reimbursement of a P&I Advance shall be deemed to include,
whether or not specifically referred to, payment or reimbursement of interest
thereon at the Advance Rate from and including the date of the making of such
P&I Advance through and including the date of payment or reimbursement.
"Pass-Through Rate": With respect to each Class of Certificates (other
than the Class V-1, Class V-2, Class R and Class LR Certificates) or Strip
Component of a Class of Certificates, the Pass-Through Rate for such Class or
Strip Component are set forth below:
Class/Strip Component Pass-Through Rate
[List]
"Paying Agent": The paying agent appointed pursuant to Section 5.04.
"Percentage Interest": As to any Certificate, the percentage interest
evidenced thereby in distributions required to be made with respect to the
related Class. With respect to any Certificate (except the Class V-1, Class V-
2, Class R and Class LR Certificates), the percentage interest is equal to the
initial denomination of such Certificate divided by the initial Certificate
Balance or Notional Balance, as applicable, of such Class of Certificates. With
respect to any Class V-1, Class V-2, Class R or Class LR Certificate, the
percentage interest is set forth on the face thereof.
"Permitted Investments": Any one or more of the following obligations or
securities payable on demand or having a scheduled maturity on or before the
Business Day preceding the date upon which such funds are required to be drawn,
regardless of whether issued by the Depositor, the Servicer, the Trustee or any
of their respective Affiliates and having at all times the required ratings, if
any, provided for in this definition, unless each Rating Agency shall have
confirmed in writing to the Servicer that a lower rating would not, in and of
itself, result in a downgrade, qualification or withdrawal of the then current
ratings assigned to the Certificates:
(xxix) obligations of, or obligations fully guaranteed as to payment of
principal and interest by, the United States or any agency or instrumentality
thereof provided such obligations are backed by the full faith and credit of
the United States of America including, without limitation, obligations of: the
U.S. Treasury (all direct or fully guaranteed obligations), the Farmers Home
Administration (certificates of beneficial ownership), the General Services
Administration (participation certificates), the U.S. Maritime Administration
(guaranteed Title XI financing), the Small Business Administration (guaranteed
participation certificates and guaranteed pool certificates), the U.S.
Department of Housing and Urban Development (local authority bonds) and the
Washington Metropolitan Area Transit Authority (guaranteed transit bonds);
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(xxx) Federal Housing Administration debentures;
(xxxi) obligations of the following United States government sponsored
agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit
System (consolidated systemwide bonds and notes), the Federal Home Loan Banks
(consolidated debt obligations), the Federal National Mortgage Association
(debt obligations), the Student Loan Marketing Association (debt obligations),
the Financing Corp. (debt obligations), and the Resolution Funding Corp. (debt
obligations);
(xxxii) federal funds, unsecured certificates of deposit, time or similar
deposits, bankers' acceptances and repurchase agreements, with maturities of
not more than 365 days, of any bank, the short term obligations of which are
rated in the highest short term rating category by any two Rating Agencies;
(xxxiii) fully Federal Deposit Insurance Corporation-insured demand and
time deposits in, or certificates of deposit of, or bankers' acceptances issued
by, any bank or trust company, savings and loan association or savings bank,
the short term obligations of which are rated in the highest short term rating
category by any two Rating Agencies (or, if not rated by ______, ______ or
______, otherwise acceptable to ____, _____ or ______, as applicable, as
confirmed in writing by any two of them that such investment would not, in and
of itself, result in a downgrade, qualification or withdrawal of the then
current ratings assigned to the Certificates);
(xxxiv) debt obligations, with maturities of not more than 365 days,
rated by any two Rating Agencies (or, if not rated by ______, _______ or
_______, otherwise acceptance to ______, _______ or _____, as applicable, as
confirmed in writing by any two of them that such investment would not, in and
of itself, result in a downgrade, qualification or withdrawal of the then
current ratings assigned to the Certificates) in its highest long-term
unsecured rating category;
(xxxv) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of issuance thereof), with
maturities of not more than 365 days and that is rated by any two Rating
Agencies (or, if not rated by ______, ______ or _____, otherwise acceptable to
DCR, Moody's or Fitch, as applicable, as confirmed in writing by any two of
them that such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to the
Certificates) in its highest short-term unsecured debt rating;
(xxxvi) the Federated Prime Obligation Money Market Fund (the "Fund") so
long as the Fund is rated by any two Rating Agencies in its highest short-term
unsecured debt rating (or, if not rated by ____, _____ or _____, otherwise
acceptable to ______, ______ or _____, as applicable, as confirmed in writing
by any two of them that such investment would not, in and of itself, result in
a downgrade, qualification or withdrawal of the then current ratings assigned
to the Certificates); and
(xxxvii) any other demand, money market or time deposit, demand
obligation or any other obligation, security or investment, provided that any
two Rating Agencies have confirmed in writing to the Servicer, Special Servicer
or Trustee, as applicable, that such investment would not,
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in and of itself, result in a downgrade, qualification or withdrawal of the
then current ratings assigned to the Certificates;
provided, however, that, in the judgment of the Servicer, such instrument
continues to qualify as a "cash flow investment" pursuant to Code Section
860G(a)(6) earning a passive return in the nature of interest and that no
instrument or security shall be a Permitted Investment if (i) such instrument
or security evidences a right to receive only interest payments or (ii) the
right to receive principal and interest payments derived from the underlying
investment provides a yield to maturity in excess of 120% of the yield to
maturity at par of such underlying investment.
"Permitted Transferee": With respect to a Class R or Class LR
Certificate, any Person or agent thereof that is a Qualified Institutional
Buyer, an Affiliated Person or, prior to the Residual Trigger Date, an
Institutional Accredited Investor, other than (a) a Disqualified Organization,
(b) any other Person so designated by the Certificate Registrar based upon an
Opinion of Counsel (provided at the expense of such Person or the Person
requesting the Transfer) to the effect that the Transfer of an Ownership
Interest in any Class R or Class LR Certificate to such Person may cause the
Upper-Tier REMIC or Lower-Tier REMIC to fail to qualify as a REMIC at any time
that the Certificates are outstanding, (c) a Person that is a Disqualified Non-
U.S. Person and (d) a Plan or any Person investing the assets of a Plan.
"Person": Any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Plan": As defined in Section 5.02(c).
"Prepayment Assumption": The assumption that each Mortgage Loan with an
Anticipated Repayment Date prepays on such date and that each other Mortgage
Loan does not prepay prior to its respective Maturity Date.
"Prepayment Interest Shortfall": With respect to any Distribution Date,
the amount of any shortfall in collections of interest (adjusted to the
applicable Net Mortgage Pass-Through Rate) resulting from a Principal
Prepayment on such Mortgage Loan during the related Collection Period and prior
to the related Due Date other than Prepayment Interest Shortfalls relating to
(a) a Special Distribution Date or (b) any Specially Serviced Mortgage Loan.
"Prepayment Premium": Payments received on a Mortgage Loan as the result
of a Principal Prepayment thereon, not otherwise due thereon in respect of
principal or interest, other than an amount paid in connection with the release
of the related Mortgaged Property through defeasance, which are intended to
compensate the holder of the related Note for prepayment.
"Principal Distribution Amount": For any Distribution Date will be
equal to the sum of:
(xxxviii) the principal component of all scheduled Monthly Payments
(other than Balloon Payments) which become due (if received or advanced,
including any Subordinate Class
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Advance Amounts allocable to principal payments on any Class other than the
most subordinate Class) on the Mortgage Loans on the related Due Date;
(xxxix) the principal component of all Assumed Scheduled Payments or
Minimum Defaulted Monthly Payments, as applicable, deemed to become due (if
received or advanced, including, without duplication, any Subordinate Class
Advance Amounts allocable to principal payments on any Class other than the
most subordinate Class) on the related Due Date with respect to any Mortgage
Loan that is delinquent in respect of its Balloon Payment;
(xl) the Stated Principal Balance of each Mortgage Loan that was, during
the related Collection Period, repurchased from the Trust Fund in connection
with the breach of a representation or warranty pursuant to Section 2.03 or
purchased from the Trust Fund pursuant to Section 9.01;
(xli) the portion of Unscheduled Payments allocable to principal of any
Mortgage Loan that was liquidated during the related Collection Period;
(xlii) the principal component of all Balloon Payments and, to the extent
not included in the preceding clauses, any other principal payment on any
Mortgage Loan received on or after the Maturity Date thereof, to the extent
received during the related Collection Period;
(xliii) to the extent not included in the preceding clauses (iii) or
(iv), all other Principal Prepayments received in the related Collection
Period; and
(xliv) to the extent not included in the preceding clauses, any other
full or partial recoveries in respect of principal, including Insurance
Proceeds, Liquidation Proceeds and Net REO Proceeds;
less (i) any amounts received on a Mortgage Loan which represent Subordinate
Class Advance Recoveries allocable to principal and (ii) any amounts
distributed to Certificateholders on any Special Distribution Date.
"Principal Prepayment": Any payment of principal made by the Borrower on
a Mortgage Loan which is received in advance of its scheduled Due Date and
which is not accompanied by an amount of interest representing the full amount
of scheduled interest due on any date or dates in any month or months
subsequent to the month of prepayment other than any amount paid in connection
with the release of the related Mortgaged Property through defeasance.
"Principal Recovery Fee": An amount equal to 1.00% of all amounts
received in respect of a Specially Serviced Mortgage Loan and allocable as a
recovery of principal which shall be payable when the Mortgage Loan or REO
Property is sold or liquidated or when the Specially Serviced Mortgage Loan
ceases to be a Specially Serviced Mortgage Loan pursuant to the definition of
Specially Serviced Mortgage Loan.
"Property Advance": As to any Mortgage Loan, any advance made by the
Servicer, Special Servicer, the Trustee or the Fiscal Agent in respect of
Property Protection Expenses or any
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expenses incurred to protect and preserve the security for a Mortgage Loan or
taxes and assessments or insurance premiums, pursuant to Section 3.04 or
Section 3.24, as applicable. Each reference to the payment or reimbursement of
a Property Advance shall be deemed to include, whether or not specifically
referred to, payment or reimbursement of interest thereon at the Advance Rate
from and including the date of the making of such Advance through and including
the date of payment or reimbursement.
"Property Protection Expenses": Any costs and expenses incurred by the
Servicer or the Special Servicer pursuant to Sections 3.04, 3.08, 3.10(b),
3.10(e), 3.10(f), 3.10(g), 3.10(h), 3.10(k), 3.17(b) and 3.18 or indicated
herein as being a cost or expense of the Trust Fund or the Lower-Tier REMIC or
Upper-Tier REMIC to be advanced by the Servicer or the Special Servicer, as
applicable.
["Public Global Certificate": Each of the Class A-1A, Class A-1B, Class
A-1C, Class A-1D, Class A-CS1, Class A-2, Class A-3, Class A-4 and Class A-5
Certificates so long as any such Class of Certificates is registered in the
name of a nominee of the Depository.]
"Qualified Institutional Buyer": A qualified institutional buyer
within the meaning of Rule 144A.
"Qualified Insurer": As used in Section 3.08, (i) an insurance company or
security or bonding company qualified to write the related insurance policy in
the relevant jurisdiction which shall have a claims paying ability of "AA" or
better by Fitch (or, if such company is not rated by Fitch, is rated at least
A-1X by A.M. Best's Key Rating Guide) and "Baa3" or better by Moody's and "A"
or better by DCR (or, if such company is not rated by DCR, is rated at least in
an equivalent category by at least two nationally recognized statistical
ratings organizations), (ii) in the case of public liability insurance policies
required to be maintained with respect to REO Properties in accordance with
Section 3.08(a), shall have a claims paying ability of "A" or better by Fitch
(or, if such company is not rated by Fitch, is rated at least A-1X by A.M.
Best's Key Rating Guide) and DCR (or, if such company is not rated by DCR, is
rated at least in an equivalent category by at least two nationally recognized
statistical ratings organizations) and "Baa3" or better by Moody's and (iii) in
the case of the fidelity bond and the errors and omissions insurance required
to be maintained pursuant to Section 3.08(c), shall have a claims paying
ability rated by each Rating Agency no lower than two ratings categories
(without regard to pluses or minuses or numeric qualifications) lower than the
highest rating of any outstanding Class of Certificates from time to time (or
if such company is not rated by DCR, is rated at least in an equivalent
category by at least two nationally recognized statistical ratings
organizations and, if such company is not rated by Fitch, is rated at least A-
VIII by A.M. Best's Key Rating Guide), but in no event lower than "BBB" by
Fitch and DCR and "Baa3" by Moody's, unless in any such case each of the Rating
Agencies has confirmed in writing that obtaining the related insurance from an
insurance company that is not rated by each of the Rating Agencies (subject to
the foregoing exceptions) or that has a lower claims-paying ability than such
requirements shall not result, in and of itself, in a downgrade, qualification
or withdrawal of the then current ratings by such Rating Agency to any Class of
Certificates.
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"Qualified Mortgage": A Mortgage Loan that is a "qualified mortgage"
within the meaning of Code Section 860G(a)(3) of the Code (but without regard
to the rule in Treasury Regulations 1.860G-2(f)(2) that treats a defective
obligation as a qualified mortgage, or any substantially similar successor
provision).
"Rated Final Distribution Date": _________________, the next
Distribution Date occurring after the latest Assumed Maturity Date of any of
the Mortgage Loans.
"Rating Agency": Any of ________________________.,
_______________________ or _________________________. References herein to the
highest long-term unsecured debt rating category of a Rating Agency shall mean
_____ with respect to _____ and ______ and ______ with respect to ___________
and in the case of any other rating agency shall mean such highest rating
category or better without regard to any plus or minus or numerical
qualification.
"Real Property": Land or improvements thereon such as buildings or other
inherently permanent structures thereon (including items that are structural
components of the buildings or structures), in each such case as such terms are
used in the REMIC Provisions.
"Realized Loss": With respect to any Distribution Date shall mean the
amount, if any, by which the aggregate Certificate Balance of the Certificates
after giving effect to distributions made on such Distribution Date exceeds the
aggregate Stated Principal Balance of the Mortgage Loans in the month in which
such Distribution Date occurs
"Reassignment of Assignment of Leases, Rents and Profits": As defined
in Section 2.01(viii).
"Record Date": With respect to each Distribution Date, the close of
business on the [tenth] day of the month in which such Distribution Date occurs
or, if such day is not a Business Day, the preceding Business Day; provided,
however, that with respect to the first Distribution Date, for all purposes
other than receipt of the distribution pursuant to Section 4.01 on such
Distribution Date, the Record Date shall be the Closing Date.
"Reduction Interest Distribution Amount": With respect to any
Distribution Date for any Strip Component (other than the Class A-1A, Class A-
1B and Class A-1C Strip Components), the amount of interest accrued for the
Interest Accrual Period at the Pass-Through Rate on such Strip Component for
such Interest Accrual Period on the aggregate amount of Appraisal Reduction
Amounts and Delinquency Reduction Amounts allocated thereto as of such
Distribution Date as set forth in Section 4.01(i).
"Reduction Interest Shortfalls": With respect to any Distribution Date,
for any Strip Component (other than the Class _____ Strip Component, Class
_____ Strip Component, and Class _____ Strip Component) any shortfall in the
amount of Reduction Interest Distribution Amounts required to be distributed to
the Class _____ Certificates with respect to such Strip Component on such
Distribution Date.
"Regular Certificates": [List] Certificates.
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"Regular Servicing Period": Any Interest Accrual Period other than a
Special Servicing Period.
"Regulation D": Regulation D under the Act.
"Related Certificate" and "Related Lower-Tier Regular Interest": For any
Class or Classes of Lower-Tier Regular Interests, the related Class of
Certificates set forth below and for any Class of Certificates, the related
Class or Classes of Lower-Tier Regular Interest set forth below:
Related Lower-Tier Related Certificate
Regular Interest
[List] [List]
"REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at Section 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations (including any applicable proposed regulations) and rulings
promulgated thereunder, as the foregoing may be in effect from time to time.
"Rents from Real Property": With respect to any REO Property, gross
income of the character described in Section 856(d) of the Code, which income,
subject to the terms and conditions of that Section of the Code in its present
form, does not include:
(xlv) except as provided in Section 856(d)(4) or (6) of the Code, any
amount received or accrued, directly or indirectly, with respect to such REO
Property, if the determination of such amount depends in whole or in part on
the income or profits derived by any Person from such property (unless such
amount is a fixed percentage or percentages of receipts or sales and otherwise
constitutes Rents from Real Property);
(xlvi) any amount received or accrued, directly or indirectly, from any
Person if the Trust Fund owns directly or indirectly (including by attribution)
a ten percent or greater interest in such Person determined in accordance with
Sections 856(d)(2)(B) and (d)(5) of the Code;
(xlvii) any amount received or accrued, directly or indirectly, with
respect to such REO Property if any Person Directly Operates such REO Property;
(xlviii) any amount charged for services that are not customarily
furnished in connection with the rental of property to tenants in buildings of
a similar class in the same geographic market as such REO Property within the
meaning of Treasury Regulations Section 1.856-4(b)(1) (whether or not such
charges are separately stated); and
(xlix) rent attributable to personal property unless such personal
property is leased under, or in connection with, the lease of such REO Property
and, for any taxable year of the Trust Fund,
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such rent is no greater than 15 percent of the total rent received or accrued
under, or in connection with, the lease.
"REO Account": As defined in Section 3.17(b).
"REO Mortgage Loan": Any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property.
"REO Proceeds": With respect to any REO Property and the related REO
Mortgage Loan, all revenues received by the Special Servicer with respect to
such REO Property or REO Mortgage Loan which do not constitute Liquidation
Proceeds.
"REO Property": A Mortgaged Property title to which has been acquired by
the Special Servicer on behalf of the Trust Fund through foreclosure, deed in
lieu of foreclosure or otherwise.
"Repurchase Price": With respect to any Mortgage Loan to be repurchased
pursuant to Section 2.03(d), 2.03(e) or 9.01, or any Specially Serviced
Mortgage Loan or any REO Mortgage Loan to be sold or repurchased pursuant to
Section 3.18, an amount, calculated by the Servicer, equal to:
(l) the unpaid principal balance of such Mortgage Loan as of the Due Date
as to which a payment was last made by the Borrower (less any Advances
previously made on account of principal); plus
(li) unpaid accrued interest from the Due Date as to which interest was
last paid by the Borrower up to the Due Date in the month following the month
in which the purchase or repurchase occurred at a rate equal to the Mortgage
Rate on the unpaid principal balance of such Mortgage Loan (less any Advances
previously made on account of interest); plus
(lii) any unreimbursed Advances and unpaid Servicing Fees, Trustee Fees
and Special Servicing Compensation allocable to such Mortgage Loan together
with interest thereon at the Advance Rate; plus
(liii) in the event that the Mortgage Loan is required to be repurchased
pursuant to Sections 2.03(d) or 2.03(e), expenses reasonably incurred or to be
incurred by the Servicer, the Special Servicer or the Trustee in respect of the
breach or defect giving rise to the repurchase obligation, including any
expenses arising out of the enforcement of the repurchase obligation.
"Request for Release": A request for a release signed by a Servicing
Officer, substantially in the form of Exhibit G hereto.
"Reserve Accounts": With respect to any Mortgage Loan, reserve accounts,
if any, established pursuant to the Mortgage or the Loan Agreement and any
Escrow Account. Any Reserve Account may be a sub-account of a related Cash
Collateral Account. Any Reserve Account shall be beneficially owned for federal
income tax purposes by the Person who is entitled to receive the reinvestment
income or gain thereon in accordance with the terms and provisions of
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the related Mortgage Loan and Section 3.07, which Person shall be taxed on all
reinvestment income or gain thereon. The Servicer shall be permitted to make
withdrawals therefrom for deposit into the related Cash Collateral Account, if
applicable, or the Collection Account or for the purposes set forth under the
related Mortgage Loan.
"Residual Certificate": Any of the Class R or Class LR Certificates.
"Residual Transfer Opinion": An opinion of counsel to the Depositor
acceptable to the Trustee and the Certificate Registrar to the effect that the
continued ownership after the Residual Trigger Date of an Ownership Interest by
an Institutional Accredited Investor shall not cause the Trust Fund to be
required to be registered as an investment company under the Investment Company
Act of 1940, as amended.
"Residual Trigger Date": The date on which more than 20% of the aggregate
then outstanding principal balance of the Mortgage Loans is secured by U.S.
government obligations pursuant to the release of Mortgaged Properties through
defeasance.
"Responsible Officer": Any officer of the _________________ Department of
the Trustee [or the Fiscal Agent] (and, in the event that the Trustee is the
Certificate Registrar or the Paying Agent, of the Certificate Registrar or the
Paying Agent, as applicable) assigned to the Corporate Trust Office with direct
responsibility for the administration of this Agreement and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject, and, in the case of any certification required to be signed by a
Responsible Officer, such an officer whose name and specimen signature appears
on a list of corporate trust officers furnished to the Servicer by the Trustee
[and the Fiscal Agent], as such list may from time to time be amended.
"Revised Rate": With respect to the Mortgage Loans, the increased
interest rate after the Anticipated Repayment Date (in the absence of a
default) for each applicable Mortgage Loan, as calculated and as set forth in
the related Mortgage Loan.
"Rule 144A": Rule 144A under the Act.
"Scheduled Final Distribution Date": As to each Class of Certificates,
_________, 20__, the next Distribution Date occurring after the latest maturity
date of any Mortgage Loan.
"Securities Legend": With respect to each Residual Certificate or any
Individual Certificate the legend set forth in, and substantially in the form
of, Exhibit I hereto.
"Servicer": ______________________, a _______ corporation, or its
successor in interest, or any successor Servicer appointed as herein
provided.
"Servicer Event of Default": As defined in Section 7.01(a).
"Servicer Prepayment Interest Shortfall": With respect to any Prepayment
Interest Shortfall occurring on any Distribution Date, the amount equal to (i)
the sum of the Servicing Fee payable on
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such Distribution Date and the investment income payable to the Servicer in
accordance with Section 3.07 with respect to all Principal Prepayments during
the related Collection Period, less (ii) the aggregate of all Prepayment
Interest Shortfalls for such Distribution Date, provided, that, if the result
of the foregoing is less than zero then the amount of the Servicer Prepayment
Interest Shortfall for such Distribution Date shall be zero.
"Servicer Remittance Date": With respect to any Distribution Date, the
Business Day preceding such Distribution Date.
"Servicer Remittance Report": A report prepared by the Servicer and/or
the Special Servicer in such media as may be agreed upon by the Servicer, the
Special Servicer and the Trustee containing such information regarding the
Mortgage Loans as will permit the Trustee to calculate the amounts to be
distributed pursuant to Section 4.01 and to furnish statements to
Certificateholders pursuant to Section 4.02, including information on the
outstanding principal balances of each Mortgage Loan specified therein, and
containing such additional information as the Servicer, the Special Servicer
and the Trustee may from time to time agree.
"Servicer's Appraisal Estimate": As defined in the definition of
Appraisal Reduction Amount.
"Servicing Compensation": With respect to any Distribution Date, the
related Servicing Fee and any other fees, charges or other amounts payable to
the Servicer on such Distribution Date.
"Servicing Fee": With respect to each Mortgage Loan for any Distribution
Date, an amount per Interest Accrual Period equal to the product of (i)
one-twelfth of the Servicing Fee Rate and (ii) the Stated Principal Balance of
such Mortgage Loan as of the Due Date (after giving effect to all payments of
principal on such Mortgage Loan on such Due Date) in the month preceding the
month in which such Distribution Date occurs.
"Servicing Fee Rate": A rate equal to ____% per annum.
"Servicing Officer": Any officer or employee of the Servicer or the
Special Servicer, as applicable, involved in, or responsible for, the
administration and servicing of the Mortgage Loans or this Agreement and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's or employee's knowledge of and familiarity
with the particular subject, and, in the case of any certification required to
be signed by a Servicing Officer, such an officer or employee whose name and
specimen signature appears on a list of servicing officers furnished to the
Trustee by the Servicer or the Special Servicer, as applicable, as such list
may from time to time be amended.
"Servicing Standard": With respect to the Servicer or Special Servicer
shall mean the servicing of the Mortgage Loans by the Servicer or Special
Servicer solely in the best interests of and for the benefit of all of the
Certificateholders (as determined by the Servicer or Special Servicer as the
case may be, in its reasonable judgment) and in accordance with applicable law,
the specific terms of the respective Mortgage Loans and this Agreement and to
the extent not inconsistent with the foregoing, in the same manner in which,
and with the same care, skill, prudence and diligence
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with which, it (i) services and administers similar mortgage loans for other
third-party portfolios or (ii) administers mortgage loans for its own account,
whichever standard is higher, but in any case without regard to:
(liv) any known relationship that the Servicer, the Special Servicer, any
subservicer or any Affiliate of the Servicer, the Special Servicer or any
subservicer may have with any Borrower;
(lv) the ownership of any Certificate by the Servicer, the Special
Servicer or any Affiliate;
(lvi) the Servicer's or Special Servicer's obligation to make P&I
Advances, Property Advances or to incur servicing expenses with respect to the
Mortgage Loans;
(lvii) the Servicer's, Special Servicer's or any sub-servicer's
right to receive compensation for its services hereunder or with respect to
any particular transaction; or
(lviii) the ownership, or servicing or management for others, by
the Servicer, Special Servicer or any sub-servicer, of any other mortgage
loans or property.
"Special Distribution Date": The Business Day that is two Business Days
after any date, other than a Due Date, on which a prepayment is made on the
_____________ Loan after the expiration of the related Lock-out Period for such
loan.
"Special Event Report": As defined in Section 3.22(b) hereof.
"Special Servicer": __________________, a _______ corporation, or any
successor Special Servicer appointed as provided in Section 3.25. In the event
that at any time the Servicer is the Special Servicer and the Servicer is
terminated or resigns as the Servicer hereunder, the Servicer shall be
terminated as the Special Servicer hereunder.
"Special Servicer Event of Default": As defined in Section 7.01(b).
"Special Servicing Compensation": With respect to any Mortgage Loan, any
of the Additional Servicing Fee, Special Servicing Fee and Principal Recovery
Fee which shall be due to the Special Servicer.
"Special Servicing Fee": With respect to each Specially Serviced Mortgage
Loan and any Distribution Date, an amount per Special Servicing Period equal to
the product of (i) one-twelfth of the Special Servicing Fee Rate and (ii) the
Stated Principal Balance of such Specially Serviced Mortgage Loan as of the Due
Date (after giving effect to all payments of principal on such Specially
Serviced Mortgage Loan on such Due Date) in the month preceding the month in
which such Distribution Date occurs.
"Special Servicing Fee Rate": A rate equal to 0.___% per annum.
"Special Servicing Period": Any Interest Accrual Period during which a
Mortgage Loan is at any time a Specially Serviced Mortgage Loan.
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"Specially Serviced Mortgage Loan": Subject to Section 3.26, any
Mortgage Loan with respect to which:
(lix) the related Borrower has not made two consecutive Monthly
Payments;
(lx) the Servicer, the Trustee or the Fiscal Agent, individually or
collectively, have made four consecutive P&I Advances (regardless of whether
such P&I Advances have been reimbursed);
(lxi) the related Borrower has expressed to the Servicer an inability
to pay or a hardship in paying the Mortgage Loan in accordance with its terms;
(lxii) the Servicer has received notice that the Borrower has become the
subject of any bankruptcy, insolvency or similar proceeding, admitted in
writing the inability to pay its debts as they come due or made an assignment
for the benefit of creditors;
(lxiii) the Servicer has received notice of a foreclosure or
threatened foreclosure of any lien on the Mortgage Property securing the
Mortgage Loan;
(lxiv) a default of which (A) the Servicer has notice (other than a
failure by the Borrower to pay principal or interest) and (B) which materially
and adversely affects the interests of the Certificateholders has occurred and
remained unremedied for the applicable grace period specified in the Mortgage
Loan (or, if no grace period is specified, 60 days); provided, that a default
requiring a Property Advance shall be deemed to materially and adversely affect
the interests of the Certificateholders;
(lxv) the Special Servicer proposes to commence foreclosure or other
workout arrangements;
(lxvi) the related Borrower has failed to make a Balloon Payment as and
when due; or
(lxvii) in the opinion of the Servicer (consistent with the Servicing
Standard) a default under a Mortgage Loan is imminent and such Mortgage Loan
deserves the attention of the Special Servicer.
provided, however, that a Mortgage Loan will cease to be a Specially Serviced
Mortgage Loan:
(ppp) with respect to the circumstances described in clause (i) above, if
the earlier of such Monthly Payments is received prior to the next due date
under such Mortgage Loan;
(qqq) with respect to the circumstances described in clause (i) or (ii)
or (viii) above, when the Borrower thereunder has brought the Mortgage Loan
current (or, with respect to the circumstances described in clause (viii),
pursuant to any work-out implemented by the Special Servicer) and thereafter
made three consecutive full and timely Monthly Payments (including pursuant to
any workout of the Mortgage Loan);
(rrr) with respect to the circumstances described in clause (iii), (iv),
(v) and (vii) above, when such circumstances cease to exist in the good faith
judgment of the Servicer; or
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(sss) with respect to the circumstances described in clause (vi) above,
when such default is cured;
provided, further, that at that time no circumstance identified in clauses (i)
through (vii) above exists that would cause the Mortgage Loan to continue to be
characterized as a Specially Serviced Mortgage Loan.
"Spread Rate": The Spread Rate for each Class of Certificates is as
set forth below:
Class Spread Rate
[List]...........................[List]
"Startup Day": The day designated as such pursuant to Section 2.06(a)
hereof.
"Stated Principal Balance": With respect to any Mortgage Loan, at any
date of determination, an amount equal to (a) the principal balance as of the
Cut-off Date of such Mortgage Loan, minus (b) the sum of (i) the principal
portion of each Monthly Payment due on such Mortgage Loan after the Cut-off
Date up to such date of determination, if received from the Borrower or
advanced by the Servicer, Trustee, Fiscal Agent or the most subordinate Class
of Certificates (with respect to any Subordinate Class Advance Amount), (ii)
all voluntary and involuntary principal prepayments and other unscheduled
collections of principal received with respect to such Mortgage Loan and (iii)
any principal forgiven by the Special Servicer or Interest Shortfalls resulting
from reductions or deferrals of interest resulting from modifications made
pursuant to Section 3.30 hereof. The Stated Principal Balance of a Mortgage
Loan with respect to which title to the related Mortgaged Property has been
acquired is equal to the principal balance thereof outstanding on the date on
which such title is acquired less any Net REO Proceeds allocated to principal
on such Mortgage Loan. The Stated Principal Balance of a Specially Serviced
Mortgage Loan with respect to which the Servicer or Special Servicer has made a
Final Recovery Determination is zero.
"Strip Component": With respect to the Class _____ Certificates, the
Class _____ Strip Component. With respect to the Class _____ Certificates, the
Class _____ Strip Component, Class _____ Strip Component, Class _____ Strip
Component, Class ____ Strip Component, Class _____ Strip Component, Class _____
Strip Component and the Class _____ Strip Component.
"Subordinate Class Advance Amount": As defined in Section 4.06(d).
"Subordinate Class Advance Recovery": With respect to any Mortgage Loan
for which a Subordinate Class Advance Amount has been advanced, an amount equal
to all Subordinate Class Advance Amounts relating to such Mortgage Loan minus
the sum of all Delinquencies on such Mortgage Loan that have not been cured. In
no event shall a Subordinate Class Advance Recovery include any Net Liquidation
Proceeds, Net Insurance Proceeds or proceeds from any condemnation with respect
to a related Mortgaged Property.
"Successor Manager": As defined in Section 3.19(b) below.
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"Summary Report": A quarterly report or annual summary of quarterly
reports setting forth the information with respect to the Borrowers and
Mortgaged Properties, substantially in the form of Exhibit K hereto.
"Tax Returns": The federal income tax return on IRS Form 1066, U.S. Real
Estate Mortgage Investment Conduit Income Tax Return, including Schedule Q
thereto, Quarterly Notice to Residual Interest Holders of REMIC Taxable Income
or Net Loss Allocation, or any successor forms, to be filed on behalf of each
of the Upper-Tier REMIC or Lower-Tier REMIC under the REMIC Provisions,
together with any and all other information, reports or returns that may be
required to be furnished to the Certificateholders or filed with the IRS or any
other governmental taxing authority under any applicable provisions of federal,
state or local tax laws.
"Terminated Party": As defined in Section 7.01(c).
"Terminating Party": As defined in Section 7.01(c).
"Termination Date": The Distribution Date on which the Trust Fund is
terminated pursuant to Section 9.01.
"Transfer": Any direct or indirect transfer or other form of assignment
of any Ownership Interest in a Class R or Class LR Certificate.
"Trust Fund": The corpus of the trust created hereby and to be
administered hereunder, consisting of: (i) such Mortgage Loans as from time to
time are subject to this Agreement, together with the Mortgage Files relating
thereto; (ii) all scheduled or unscheduled payments on or collections in
respect of the Mortgage Loans due after the Cut-off Date; (iii) any REO
Property; (iv) all revenues received in respect of any REO Property; (v) the
Servicer's, the Special Servicer's and the Trustee's rights under the insurance
policies with respect to the Mortgage Loans required to be maintained pursuant
to this Agreement and any proceeds thereof; (vi) any Assignments of Leases,
Rents and Profits and any security agreements; (vii) any indemnities or
guaranties given as additional security for any Mortgage Loans; (viii) all
assets deposited in the Lock-Box Accounts, Cash Collateral Accounts, Escrow
Accounts and Reserve Accounts (to the extent such assets in such accounts are
not assets of the respective Borrowers), the Collection Account, the
Distribution Account, the Upper-Tier Distribution Account, the Excess Interest
Distribution Account, Interest Reserve Account and the Default Interest
Distribution Account, including reinvestment income; (ix) any environmental
indemnity agreements relating to the Mortgaged Properties; (x) the rights and
remedies under the Mortgage Loan Purchase and Sale Agreement and Original
Purchase Agreements; and (xi) the proceeds of any of the foregoing (other than
any interest earned on deposits in the Lock-Box Accounts, Cash Collateral
Accounts, Escrow Accounts and any Reserve Accounts, to the extent such interest
belongs to the related Borrower).
"Trust REMICs": The Lower-Tier REMIC and the Upper-Tier REMIC.
"Trustee": __________________, in its capacity as trustee, or its
successor in interest, or any successor trustee appointed as herein provided.
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"Trustee Fee": With respect to each Mortgage Loan and for any
Distribution Date, an amount per Interest Accrual Period equal to the product
of (i) one-twelfth of the Trustee Fee Rate multiplied by (ii) the Stated
Principal Balance of such Mortgage Loan as of the Due Date (after giving effect
to all payments of principal on such Mortgage Loan on such Due Date) in the
month preceding the month in which such Distribution Date occurs.
"Trustee Fee Rate": A rate equal to ____% per annum.
"Underwriter":_____________________________.
"Unrestricted Date": The day immediately following the last day of the
Restricted Period.
"Unscheduled Payments": With respect to a Mortgage Loan and a Collection
Period, all Net Liquidation Proceeds and Net Insurance Proceeds payable under
such Mortgage Loan, the Repurchase Price of any Mortgage Loan that is
repurchased or purchased pursuant to Sections 2.03(d), 2.03(e) or 9.01, and any
other payments under or with respect to such Mortgage Loan not scheduled to be
made, including Principal Prepayments received by the Servicer, but excluding
Prepayment Premiums, during such Collection Period.
"Updated Appraisal": An appraisal of a Mortgaged Property or REO
Property, as the case may be, conducted subsequent to any appraisal performed
on or prior to the Cut-off Date and in accordance with MAI standards, the costs
of which shall be paid as a Property Advance by the Servicer. Updated
Appraisals shall be conducted by an MAI appraiser selected by the Servicer
after consultation with the Special Servicer.
"Upper-Tier Distribution Account": The trust account or accounts created
and maintained as a separate trust account or accounts by the Trustee pursuant
to Section 3.05(c), which shall be entitled "_____________, as Trustee, in
trust for Holders of Heller Financial Commercial Mortgage Asset Corp., Mortgage
Pass-Through Certificates, Series 199_-_, Upper-Tier Distribution Account" and
which must be an Eligible Account.
"Upper-Tier REMIC": A segregated asset pool within the Trust Fund
consisting of the Lower-Tier Regular Interests and amounts held from time to
time in the Upper-Tier Distribution Account.
"Voting Rights": The portion of the voting rights of all of the
Certificates that is allocated to any Certificate or Class of Certificates. At
all times during the term of this Agreement, the percentage of the Voting
Rights assigned to each Class shall be (a) 0%, in the case of the Class V-1,
Class V-2, Class R and Class LR Certificates, (b) 0.4% in the case of the Class
______ Certificates, __% in the case of the Class ______Certificates (the sum
of such percentages for each such Class outstanding is the "Fixed Voting Rights
Percentage"), (c) in the case of any of the Class _____, Class_____, [etc.]
Certificates, a percentage equal to the product of (i) 100% minus the Fixed
Voting Rights Percentage multiplied by (ii) a fraction, the numerator of which
is equal to the aggregate outstanding Certificate Balance of any such Class and
the denominator of which is equal to the aggregate outstanding Certificate
Balances of all Classes of Certificates. The Class _____ and Class _____
Certificates shall not be entitled to vote with respect to proposed extensions
of a
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Specially Serviced Mortgage Loan. The Voting Rights of any Class of
Certificates shall be allocated among Holders of Certificates of such Class in
proportion to their respective Percentage Interests. The aggregate Voting
Rights of Holders of more than one Class of Certificates shall be equal to the
sum of the products of each such Holder's Voting Rights and the percentage of
Voting Rights allocated to the related Class of Certificates. Any
Certificateholder may transfer its Voting Rights without transferring its
ownership interest in the related Certificates provided that such
Certificateholder provides notice of such transfer to the Trustee prior to the
effectiveness of such transfer. The Fixed Voting Right Percentage of the Class
_____ and Class _____ Certificates will be proportionally reduced upon the
allocation of Appraisal Reduction Amounts with respect to any component of such
Classes based on the amount of such reduction.
"Weighted Average Net Mortgage Pass-Through Rate": With respect to any
Distribution Date, a per annum rate equal to a fraction (expressed as a
percentage) the numerator of which is the sum of the products of (i) the Net
Mortgage Pass-Through Rate and (ii) the Stated Principal Balance of each
Mortgage Loan and the denominator of which is the sum of the Stated Principal
Balances of each Mortgage Loan as of the Due Date occurring in the month
preceding the month in which such Distribution Date occurs or, with respect to
any Distribution Date occurring after a Special Distribution Date and any Class
that received a distribution on such Special Distribution Date, as of the last
day of the related Interest Accrual Period.
"Withheld Amounts": As defined in Section 3.27(a).
SECTION 1.2. Certain Calculations.
Unless otherwise specified herein, the following provisions shall apply:
(a) All calculations of interest with respect to the Mortgage Loans
(other than the Actual/360 Mortgage Loans) and of Advances provided for herein
shall be made on the basis of a 360-day year consisting of twelve 30-day
months. All calculations of interest with respect to the Actual/360 Mortgage
Loans and of Advances provided for herein shall be made as set forth in such
Mortgage Loans with respect to the calculation of the related Mortgage Rate.
(b) Any Mortgage Loan payment is deemed to be received on the date such
payment is actually received by the Servicer, Special Servicer or the Trustee;
provided, however, that for purposes of calculating distributions on the
Certificates, Principal Prepayments with respect to any Mortgage Loan are
deemed to be received on the date they are applied in accordance with Section
3.01(b) to reduce the outstanding principal balance of such Mortgage Loan on
which interest accrues.
(c) Any amounts received in respect of a Mortgage Loan as to which a
default has occurred and is continuing in excess of Monthly Payments shall be
applied to Default Interest and other amounts due on such Mortgage Loan prior
to the application to late fees.
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SECTION 1.3. Certain Constructions.
For purposes of the definitions of "Minimum Defaulted Monthly Payment",
"Special Servicing Fee", Section 3.19, Section 3.12, Section 3.25, Section 3.30
and Section 4.06(d), references to the most or next most subordinate Class of
Certificates (or Lower-Tier Regular Interests) outstanding at any time shall
mean the most or next most subordinate Class of Certificates (or Lower-Tier
Regular Interests) then outstanding as among the [Class_____, Class_____,
Class_____, Class_____, [Etc.] Certificates (and the Classes of Related Lower-
Tier Regular Interests). For such purposes, the Class _____ and Class _____
Certificates (and the Classes of Related Lower-Tier Regular Interests) together
shall be considered to be one Class and the Class _____, Class_____,
Class_____, Class _____ and Class _____ Certificates (and the Classes of
Related Lower-Tier Regular Interests) collectively shall be considered to be
one Class. For purposes of this Agreement, each Class of Certificates other
than the Class V-1, Class V-2, Class LR and Class R Certificates shall be
deemed to be outstanding only to the extent its respective Certificate Balance
has not been reduced to zero. For purposes of this Agreement, the Class V-1
Certificates shall be deemed to be outstanding so long as there are any Notes
outstanding, the Class V-2 Certificates shall be deemed outstanding so long as
there are any Notes outstanding that provide for the payment of Excess
Interest, the Class _____Certificates and the Class _____ Interest shall be
deemed to be outstanding so long as there are any Notes outstanding that
provide for payments of Prepayment Premiums in connection with voluntary or
involuntary prepayments and the Class R and Class LR Certificates shall be
deemed to be outstanding so long as the Trust Fund has not been terminated
pursuant to Section 9.01. For purposes of this Agreement, the Class _____and
Class _____ Certificates shall be deemed to be outstanding until their
respective Notional Balances have been reduced to zero.
ARTICLE II.
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.1. Conveyance of Mortgage Loans; Assignment of Mortgage Loan
Purchase and Sale Agreement.
The Depositor, concurrently with the execution and delivery hereof, does
hereby sell, transfer, assign, set over and otherwise convey to the Trustee
without recourse (except to the extent herein provided) all the right, title
and interest of the Depositor in and to the Mortgage Loans, including all
rights to payment in respect thereof, except as set forth below, and any
security interest thereunder (whether in real or personal property and whether
tangible or intangible) in favor of the Depositor, and all Reserve Accounts,
Lock-Box Accounts, Cash Collateral Accounts and all other assets included or to
be included in the Trust Fund for the benefit of the Certificateholders. Such
transfer and assignment includes all interest and principal due on or with
respect to the Mortgage Loans after the Cut-off Date. In connection with such
transfer and assignment, the Depositor shall make a cash deposit to the
Collection Account in an amount equal to the Cash Deposit. The Depositor,
concurrently with execution and delivery hereof, does also hereby transfer,
assign, set over and otherwise convey to the Trustee without recourse (except
to the extent provided
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herein) all the right, title and interest of the Depositor in, to and under the
Mortgage Loan Purchase and Sale Agreement and, in, to and under each Original
Purchase Agreement as assignee of the Mortgage Loan Seller's rights thereunder
to the extent related to any Mortgage Loan. The Servicer, Special Servicer or
the Trustee shall notify the Mortgage Loan Seller and the Depositor upon such
party's becoming aware of any breach of the representations and warranties
contained in this Agreement or the Mortgage Loan Purchase and Sale Agreement
that gives rise to a cure or repurchase obligation; provided, that the failure
of the Servicer, Special Servicer or Trustee to give such notification shall
not constitute a waiver of any cure or repurchase obligation. The Depositor
shall cause the Reserve Accounts, Cash Collateral Accounts and Lock-Box
Accounts to be transferred to and held in the name of the Servicer on behalf of
the Trustee as successor to the Mortgage Loan Seller and the Originators.
In connection with such transfer and assignment, the Depositor does
hereby deliver to, and deposit with, the Custodian (on behalf of the Trustee),
with copies to the Servicer and the Special Servicer, the following documents
or instruments with respect to each Mortgage Loan so assigned (provided,
however, the documents specified in item (ix) shall be delivered only to the
Servicer):
(i) the original of the Note, endorsed without recourse to the
order of the Trustee in the following form: "Pay to the order of
_________________, as Trustee, without recourse" which Note and all
endorsements thereon shall, unless the Mortgage Loan was originated by the
Mortgage Loan Seller (as indicated on the Mortgage Loan Schedule), show a
complete chain of endorsement from the Originator to the Trustee;
(ii) the original recorded Mortgage or counterpart thereof showing
the Originator as mortgagee or, if any such original Mortgage has not been
returned from the applicable public recording office, a copy thereof certified
to be a true and complete copy of the original thereof submitted for recording;
(iii) an executed Assignment of Mortgage in suitable form for
recordation in the jurisdiction in which the Mortgaged Property is located in
the following form: "________________, as Trustee for Heller Financial
Commercial Mortgage Asset Corp. Mortgage Pass-Through Certificate Series
199_- _, without recourse";
(iv) if the related security agreement is separate from the
Mortgage, the original executed version or counterpart thereof of such security
agreement and the assignment thereof to Trustee;
(v) a copy of the UCC-1 financing statement, together with an
original executed UCC-2 or UCC-3 financing statement, in a form suitable for
filing, disclosing the assignment to the Trustee of the security interest in
the personal property (if any) constituting security for repayment of the
Mortgage Loan;
(vi) the original of the Loan Agreement or counterpart thereof
relating to such Mortgage Loan, if any;
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(vii) the original lender's title insurance policy (or the original
pro forma title insurance policy), together with any endorsements thereto;
(viii) if any related Assignment of Leases, Rents and Profits is
separate from the Mortgage, the original executed version or counterpart
thereof, together with an executed reassignment of such instrument to the
Trustee (a "Reassignment of Assignment of Leases, Rents and Profits") in
suitable form for recordation in the jurisdiction in which the Mortgaged
Property is located (which reassignment, however, may be included in the
Assignment of Mortgage and need not be a separate instrument);
(ix) copies of the original Environmental Reports of the Mortgaged
Properties made in connection with origination of the Mortgage Loans, if any;
(x) a copy of the related ground lease, as amended, for the
Mortgaged Property, if any;
(xi) if the related assignment of contracts is separate from the
Mortgage, the original executed version of such assignment of contracts and the
assignment thereof to the Trustee;
(xii) if any related Lock-Box Agreement or Cash Collateral
Agreement is separate from the Mortgage or Loan Agreement, a copy thereof; with
respect to the Reserve Accounts, Cash Collateral Accounts and Lock-Box
Accounts, if any, a copy of the UCC-1 financing statements, if any, submitted
for filing with respect to the Mortgage Loan Seller's security interest in the
Reserve Accounts, Cash Collateral Accounts and Lock-Box Accounts and all funds
contained therein (and UCC-3 financing statements assigning such security
interest to the Trustee on behalf of the Certificateholders);
(xiii) any and all amendments, modifications and supplements
to, and waivers related to, any of the foregoing; and
(xiv) any other written agreements related to the Mortgage Loan.
On or promptly following the Closing Date, the Servicer shall, to the
extent possession thereof has been delivered to it, at the expense of the
Depositor, (1) record, (a) each Assignment of Mortgage referred to in Section
2.01(iii) which has not yet been submitted for recording and (b) each
Reassignment of Assignment of Leases, Rents and Profits referred to in Section
2.01(viii) (if not otherwise included in the related Assignment of Mortgage)
which has not yet been submitted for recordation; and (2) file, each UCC-2 or
UCC-3 financing statement referred to in Section 2.01(v) or (xii) which has not
yet been submitted for filing. The Servicer shall upon delivery promptly submit
(and in no event later than five Business Days following the receipt of the
related documents in the case of clause 1(a) above and 60 days following the
Closing Date in the case of clauses 1(b) and 2 above) for recording or filing,
as the case may be, in the appropriate public recording office, each such
document. In the event that any such document is lost or returned unrecorded
because of a defect therein, the Servicer, at the expense of the Depositor,
shall use its best efforts to promptly prepare a substitute document for
signature by the Depositor, and thereafter the Servicer shall cause each such
document to be duly recorded. The Servicer shall, promptly
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upon receipt of the original recorded copy (and in no event later than five
Business Days following such receipt) deliver such original to the Custodian.
Notwithstanding anything to the contrary contained in this Section 2.01, in
those instances where the public recording office retains the original
Mortgage, Assignment of Mortgage or Reassignment of Assignment of Leases, Rents
and Profits, if applicable, after any has been recorded, the obligations
hereunder of the Depositor shall be deemed to have been satisfied upon delivery
to the Custodian of a copy of such Mortgage, Assignment of Mortgage or
Reassignment of Assignment of Leases, Rents and Profits, if applicable,
certified by the public recording office to be a true and complete copy of the
recorded original thereof. If a pro forma title insurance policy has been
delivered to the Custodian in lieu of an original title insurance policy, the
Depositor will promptly deliver to the Custodian the related original title
insurance policy upon receipt thereof. The Depositor shall promptly cause the
UCC-1's referred to in Section 2.01(v) to be filed in the applicable public
recording office and upon filing will promptly deliver to the Custodian the
related UCC-1, with evidence of filing thereon. The Depositor shall reimburse
the Servicer for all out-of-pocket expenses incurred and filing fees paid by
the Servicer in connection with its obligations under this paragraph. Copies of
recorded or filed Assignments, Reassignments, UCC-1's and UCC-3's shall be
delivered to the Trustee by the Depositor or Servicer, as applicable.
All original documents relating to the Mortgage Loans which are not
delivered to the Custodian are and shall be held by the Depositor, the Trustee
or the Servicer, as the case may be, in trust for the benefit of the
Certificateholders. In the event that any such original document is required
pursuant to the terms of this Section to be a part of a Mortgage File, such
document shall be delivered promptly to the Custodian.
SECTION 2.2. Acceptance by Custodian and the Trustee.
If the Depositor cannot deliver any original or certified recorded
document described in Section 2.01 on the Closing Date, the Depositor shall use
its best efforts, promptly upon receipt thereof and in any case not later than
45 days from the Closing Date, to deliver such original or certified recorded
documents to the Custodian (unless the Depositor is delayed in making such
delivery by reason of the fact that such documents shall not have been returned
by the appropriate recording office in which case it shall notify the Custodian
and the Trustee in writing of such delay and shall deliver such documents to
the Custodian promptly upon the Depositor's receipt thereof). By its execution
and delivery of this Agreement, the Trustee acknowledges the assignment to it
of the Mortgage Loans in good faith without notice of adverse claims and
declares that the Custodian holds and will hold such documents and all others
delivered to it constituting the Mortgage File (to the extent the documents
constituting the Mortgage File are actually delivered to the Custodian) for any
Mortgage Loan assigned to the Trustee hereunder in trust, upon the conditions
herein set forth, for the use and benefit of all present and future
Certificateholders. With the exception of any Notes listed by the Trustee on an
exception report and delivered to the Depositor on the Closing Date, the
Trustee hereby acknowledges the receipt of the Notes. The Trustee agrees to
review each Mortgage File within 45 days after the later of (a) the Trustee's
receipt of such Mortgage File or (b) execution and delivery of this Agreement,
to ascertain that all documents (other than documents referred to in clause
(ix) of Section 2.01 which shall be delivered to the Servicer) referred to in
Section 2.01 above (in the case of the documents referred to in Section
2.01(iv), (v), (vi), (vii) (in the case of any
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endorsement thereto), (viii) and (x) through (xv), as identified to it in
writing by the Depositor) and any original recorded documents referred to in
the first sentence of this Section included in the delivery of a Mortgage File
have been received, have been executed, appear to be what they purport to be,
purport to be recorded or filed (as applicable) and have not been torn,
mutilated or otherwise defaced, and that such documents relate to the Mortgage
Loans identified in the Mortgage Loan Schedule. In so doing, the Trustee may
rely on the purported due execution and genuineness of any such document and on
the purported genuineness of any signature thereon. If at the conclusion of
such review any document or documents constituting a part of a Mortgage File
have not been executed or received, have not been recorded or filed (if
required), are unrelated to the Mortgage Loans identified in the Mortgage Loan
Schedule, appear not to be what they purport to be or have been torn, mutilated
or otherwise defaced, the Trustee shall promptly so notify the Depositor and
the Mortgage Loan Seller by providing a written report, setting forth for each
affected Mortgage Loan, with particularity, the nature of the defective or
missing document. The Depositor shall, or shall cause the Mortgage Loan Seller
to, deliver an executed, recorded or undamaged document, as applicable, or, if
the failure to deliver such document in such form has a material adverse effect
on the security provided by the related Mortgaged Property, the Depositor
shall, or shall cause the Mortgage Loan Seller to, repurchase the related
Mortgage Loan in the manner provided in Section 2.03. None of the Servicer, the
Special Servicer and Trustee shall be responsible for any loss, cost, damage or
expense to the Trust Fund resulting from any failure to receive any document
constituting a portion of a Mortgage File noted on such a report or for any
failure by the Depositor to use its best efforts to deliver any such document.
In reviewing any Mortgage File pursuant to the preceding paragraph or
Section 2.01, the Servicer shall have no responsibility to cause the Trustee
to, and the Trustee will have no responsibility to, determine whether any
document or opinion is legal, valid, binding or enforceable, whether the text
of any assignment or endorsement is in proper or recordable form (except, if
applicable, to determine if the Trustee is the assignee or endorsee), whether
any document has been recorded in accordance with the requirements of any
applicable jurisdiction, whether a blanket assignment is permitted in any
applicable jurisdiction, or whether any Person executing any document or
rendering any opinion is authorized to do so or whether any signature thereon
is genuine.
The Trustee shall hold that portion of the Trust Fund delivered to the
Trustee consisting of "instruments" (as such term is defined in Section 9-
105(i) of the Uniform Commercial Code as in effect in ________ on the date
hereof) in ____________ and, except as otherwise specifically provided in this
Agreement, shall not remove such instruments from __________________, as
applicable, unless it receives an Opinion of Counsel (obtained and delivered at
the expense of the Person requesting the removal of such instruments from
__________________) that in the event the transfer of the Mortgage Loans to the
Trustee is deemed not to be a sale, after such removal, the Trustee will
possess a first priority perfected security interest in such instruments.
SECTION 2.3. Representations and Warranties of the Depositor.
(a) The Depositor hereby represents and warrants that:
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(i) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of ___________;
(ii) The Depositor has taken all necessary action to authorize the
execution, delivery and performance of this Agreement by it, and has the power
and authority to execute, deliver and perform this Agreement and all the
transactions contemplated hereby, including, but not limited to, the power and
authority to sell, assign and transfer the Mortgage Loans in accordance with
this Agreement;
(iii) This Agreement has been duly and validly authorized, executed
and delivered by the Depositor and assuming the due authorization, execution
and delivery of this Agreement by each other party hereto, this Agreement and
all of the obligations of the Depositor hereunder are the legal, valid and
binding obligations of the Depositor, enforceable in accordance with the terms
of this Agreement, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, liquidation, receivership, moratorium or other laws
relating to or affecting creditors' rights generally, or by general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(iv) The execution and delivery of this Agreement and the
performance of its obligations hereunder by the Depositor will not conflict
with any provision of its certificate of incorporation or bylaws, or any law or
regulation to which the Depositor is subject, or conflict with, result in a
breach of or constitute a default under (or an event which with notice or lapse
of time or both would constitute a default under) any of the terms, conditions
or provisions of any agreement or instrument to which the Depositor is a party
or by which it is bound, or any order or decree applicable to the Depositor, or
result in the creation or imposition of any lien on any of the Depositor's
assets or property, which would materially and adversely affect the ability of
the Depositor to carry out the transactions contemplated by this Agreement. The
Depositor has obtained any consent, approval, authorization or order of any
court or governmental agency or body required for the execution, delivery and
performance by the Depositor of this Agreement;
(v) The certificate of incorporation of the Depositor provides that
the Depositor is permitted to engage in only the following activities:
(A) to acquire, own, hold, sell, transfer, assign, pledge, finance,
refinance and otherwise deal with loans or credit agreements secured by
mortgages, deeds of trust, long-term leaseholds, or similar liens on real
property or shares issued by corporations or partnerships formed for the
purpose of cooperative ownership of real estate and, either directly or
indirectly, to acquire, own, hold, sell, transfer, assign, pledge, finance,
refinance and otherwise deal with certificates, participation interest, bonds,
notes or other instruments evidencing interest in or secured by Mortgage Loans
or other similar certificates, participation interest, bonds, notes or
instruments (collectively, "Mortgage Backed Instruments");
(B) to acquire, own, hold, service, sell, assign, pledge, finance,
refinance and otherwise deal with collateral securing Mortgage Loans, related
insurance policies, related agreements with affiliates, agreements with
originators or servicers of Mortgage Loans and any proceeds or further rights
associated therewith;
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(C) to sell, assign, pledge or otherwise transfer Mortgage Loans,
Mortgage Backed Instruments and rights and properties referred to in paragraph
(b) above to trusts or to affiliates of the Corporation;
(D) to create trusts to acquire, own, hold, assign, pledge and
otherwise deal with Mortgage Loans, Mortgage Backed Instruments and related
collateral;
(E) to authorize, offer, issue, sell, transfer and deliver or
participate in the issuance of one or more series, classes or subclasses of
participation certificates or other evidences of interest, bonds, notes or debt
issued by trusts;
(F) to authorize, issue, sell and deliver bonds or other evidences
of indebtedness ("Bonds") that are secured by a pledge or other assignment of
Mortgage Loans, Mortgage Backed Instruments and related collateral, reserve
funds, guaranteed investment contracts, letters of credit, insurance contracts
or surety bonds;
(G) to hold, and enjoy all of the rights and privileges as a holder
of, any instruments listed under (E) above or Bonds;
(H) to negotiate, authorize, execute, deliver, assume the
obligations under, and perform, any agreement or instrument or document
relating to the activities set forth in clauses (a) through (g) above,
including but not limited to any trust agreement, sale and servicing agreement,
pooling and servicing agreement, indenture, reimbursement agreement, credit
support agreement, insurance agreements, purchase agreement, indemnification
agreement, placement agreement or underwriting agreement; and
(I) to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of __________
that are related or incidental to the foregoing and necessary, suitable or
convenient to accomplish the foregoing.
Capitalized terms defined in this clause (v) shall apply only to such
clause.
(vi) There is no action, suit or proceeding pending against the
Depositor in any court or by or before any other governmental agency or
instrumentality which would materially and adversely affect the ability of the
Depositor to carry out its obligations under this Agreement; and
(vii) The Trustee, if not the owner of the related Mortgage Loan,
will have a valid and perfected security interest of first priority in each of
the Mortgage Loans and any proceeds thereof.
(b) The Depositor hereby represents and warrants with respect to each
Mortgage Loan that:
(i) Immediately prior to the transfer and assignment to the
Trustee, the Note and the Mortgage were not subject to an assignment or pledge,
and the Depositor had good title to, and was the sole owner of, the Mortgage
Loan and had full right to transfer and sell the Mortgage
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Loan to the Trustee free and clear of any encumbrance, equity, lien, pledge,
charge, claim or security interest;
(ii) The Depositor is transferring such Mortgage Loan free and
clear of any and all liens, pledges, charges or security interests of any
nature encumbering such Mortgage Loan;
(iii) The related Assignment of Mortgage constitutes the legal,
valid and binding assignment of such Mortgage from the Depositor to the
Trustee, and any related Reassignment of Assignment of Leases, Rents and
Profits constitutes the legal, valid and binding assignment from the Depositor
to the Trustee;
(iv) No claims have been made by the Depositor under the lender's
title insurance policy, and the Depositor has not done, by act or omission,
anything which would impair the coverage of such lender's title insurance
policy;
(v) All of the representations and warranties of the Mortgage Loan
Seller contained in the Mortgage Loan Purchase and Sale Agreement are true and
correct as of the Cut-off Date;
(vi) (1) Such Mortgage Loan is directly secured by a Mortgage on a
commercial property or multifamily residential property, and (2) either (i)
substantially all of the proceeds of such Mortgage Loan were used to acquire or
improve or protect an interest in real property that, at the origination date,
was the only security for the Mortgage Loan (in the case of a Mortgage Loan
that has not been modified in a manner that constituted a deemed exchange under
Section 1001 of the Code at a time when the Mortgage Loan was not in default or
default with respect thereto was not reasonably foreseeable) or (ii) the fair
market value of such real property was at least equal to 80% of the principal
amount of the Mortgage Loan (a) at origination (or, if the Mortgage Loan has
been modified in a manner that constituted a deemed exchange under Section 1001
of the Code at a time when the Mortgage Loan was not in default or default with
respect thereto was not reasonably foreseeable, the date of the last such
modification) or (b) at the Closing Date; provided that for purposes of this
clause (ii) the fair market value of the real property interest must first be
reduced by (A) the amount of any lien on the real property interest that is
senior to the Mortgage Loan (unless such senior lien also secures a Mortgage
Loan, in which event the computation described in (a) and (b) of this clause
(ii) shall be made on an aggregate basis) and (B) a proportionate amount of any
lien that is in parity with the Mortgage Loan (unless such other lien secures a
Mortgage Loan that is cross-collateralized with such Mortgage Loan, in which
event the computation described in (a) and (b) of this clause (ii) shall be
made on an aggregate basis); and
(vii) The information set forth with respect to such Mortgage Loan
on the Mortgage Loan Schedule is true and correct in all material respects as
of the dates respecting which such information is given, or if no date is
specified, as of the Cut-off Date.
(c) It is understood and agreed that the representations and warranties
set forth in this Section 2.03 shall survive delivery of the respective
Mortgage Files to the Trustee until the termination of this Agreement, and
shall inure to the benefit of the Certificateholders and the Servicer.
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(d) Upon discovery by the Custodian, the Servicer, the Special Servicer
or the Trustee of a breach of the representation and warranty set forth in
Section 2.03(b)(vi) or that any Mortgage Loan otherwise fails to constitute a
Qualified Mortgage, such Person shall give prompt notice thereof to the
Depositor and the Depositor shall correct such condition or repurchase or cause
the Mortgage Loan Seller to repurchase such Mortgage Loan at the Repurchase
Price within 90 days of discovery of such failure; it being understood and
agreed that none of such Persons has an obligation to conduct any investigation
with respect to such matters. It is understood and agreed that the obligations
of the Depositor set forth in this Section 2.03(d) to cure or repurchase a
Mortgage Loan which fails to constitute a Qualified Mortgage shall be the sole
remedies available to the Trustee respecting, in the case of a Mortgage Loan, a
breach of a representation or warranty set forth in Section 2.03(b)(vi).
(e) Upon discovery by the Custodian, the Servicer, the Special Servicer
or the Trustee of a breach of any representation or warranty of the Mortgage
Loan Seller in the Mortgage Loan Purchase and Sale Agreement with respect to
any Mortgage Loan, or that any document required to be included in the Mortgage
File does not conform to the requirements of Section 2.01, such Person shall
give prompt notice thereof to the Mortgage Loan Seller and the Mortgage Loan
Seller shall, to the extent the Mortgage Loan Seller is obligated to cure or
repurchase the related Mortgage Loan under the terms of the Mortgage Loan
Purchase and Sale Agreement, either cure such breach or repurchase said
Mortgage Loan at the Repurchase Price within 90 days of the receipt of notice
of the breach as provided in the Mortgage Loan Purchase and Sale Agreement; it
being understood and agreed that none of the Custodian, the Servicer and the
Trustee has an obligation to conduct any investigation with respect to such
matters (except, in the case of the Mortgage Files, to the extent provided in
Section 2.01); provided, however, that in the event that such breach is capable
of being cured as determined by the Servicer or the Special Servicer, as
applicable, but not within such 90 day period and the Mortgage Loan Seller has
commenced and is diligently proceeding with the cure of such breach within such
90 day period (other than a breach that is also a breach of Section 2.03(b)(vi)
or 2.03(d)), the Mortgage Loan Seller shall have an additional 90 days to
complete such cure; provided, further, that with respect to such additional 90
day period the Mortgage Loan Seller shall have delivered an officer's
certificate to the Trustee and the Servicer setting forth the reason such
breach is not capable of being cured within the initial 90 day period and what
actions the Mortgage Loan Seller is pursuing in connection with the cure
thereof and stating that the Mortgage Loan Seller anticipates that such breach
will be cured within the additional 90 day period; and, provided, further, that
in the event the Mortgage Loan Seller fails to cure such breach within such
additional 90-day period, the Repurchase Price shall include interest on any
Advances made in respect of the related Mortgage Loan during such period.
(f) Upon receipt by the Servicer from the Depositor or Mortgage Loan
Seller of the Repurchase Price for the repurchased Mortgage Loan, the Servicer
shall deposit such amount in the Collection Account, and the Trustee, pursuant
to Section 3.11, shall, upon receipt of a certificate of a Servicing Officer
certifying as to the receipt by the Servicer of the Repurchase Price and the
deposit of the Repurchase Price into the Collection Account pursuant to this
Section 2.03(f), release or cause to be released to the Depositor or the
Mortgage Loan Seller the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment, in each case without recourse,
representation or warranty, as shall be prepared by the Servicer to vest in the
Depositor or the
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Mortgage Loan Seller any Mortgage Loan released pursuant hereto, and any rights
of the Depositor in, to and under the Mortgage Loan Purchase and Sale Agreement
as it related to such Mortgage Loan that were initially transferred to the
Trust Fund under Section 2.01, and if applicable any rights of the Mortgage
Loan Seller or Depositor in, to and under the related Original Purchase
Agreement as it related to such Mortgage Loan that were initially transferred
to the Trust Fund under Section 2.01, and the Trustee and the Servicer shall
have no further responsibility with regard to such Mortgage File.
(g) In the event that the Mortgage Loan Seller incurs any expense in
connection with curing a breach of a representation or warranty pursuant to
Section 2.03(e) which also constitutes a default under the related Mortgage
Loan, the Mortgage Loan Seller shall have a right, subrogated to that of the
Trustee, as successor to the mortgagee, to recover the amount of such expenses
from the related Borrower. The Servicer shall use reasonable efforts in
recovering, or assisting the Mortgage Loan Seller in recovering, from the
related Borrower the amount of any such expenses.
(h) In the event that any litigation is commenced which alleges facts
which, in the judgment of the Depositor, could constitute a breach of any of
the Depositor's representations and warranties relating to the Mortgage Loans,
the Depositor hereby reserves the right to conduct the defense of such
litigation at its expense.
(i) If for any reason the Mortgage Loan Seller or the Depositor fails to
fulfill its obligations under this Section 2.03 with respect to any Mortgage
Loan, the Servicer shall use reasonable efforts in enforcing any obligation of
the Originator to cure or repurchase such Mortgage Loan under the terms of the
related Original Purchase Agreement.
SECTION 2.4. Representations, Warranties and Covenants of the Servicer
and Special Servicer.
(a) The Servicer, as Servicer, and if it is also the Special Servicer, as
the Special Servicer, hereby represents, warrants and covenants that as of the
Closing Date or as of such date specifically provided herein:
(i) The Servicer is a corporation, duly organized, validly existing
and in good standing under the laws of the State of ______ and has all licenses
necessary to carry on its business as now being conducted or is in compliance
with the laws of each state in which any Mortgaged Property is located to the
extent necessary to comply with its duties and responsibilities hereunder with
respect to each Mortgage Loan in accordance with the terms of this Agreement;
(ii) The Servicer has the full corporate power, authority and legal
right to execute and deliver this Agreement and to perform in accordance
herewith; the execution and delivery of this Agreement by the Servicer and its
performance and compliance with the terms of this Agreement will not violate
the Servicer's charter or by-laws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under, or
result in the breach of, any material contract, agreement or other instrument
to which the Servicer is a party or which may be applicable to the Servicer or
any of its assets;
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(iii) This Agreement has been duly and validly authorized, executed
and delivered by the Servicer and, assuming due authorization, execution and
delivery by the other parties hereto, constitutes a legal, valid and binding
obligation of the Servicer, enforceable against it in accordance with the terms
of this Agreement, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, liquidation, receivership, moratorium or other laws
relating to or affecting creditors' rights generally, or by general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law), and all requisite corporate action has been
taken by the Servicer to make this Agreement and all agreements contemplated
hereby valid and binding upon the Servicer in accordance with their terms;
(iv) The Servicer is not in violation of, and the execution and
delivery of this Agreement by the Servicer and its performance and compliance
with the terms of this Agreement will not constitute a violation with respect
to, any order or decree of any court binding on the Servicer or any order or
regulation of any federal, state, municipal or governmental agency having
jurisdiction, or result in the creation or imposition of any lien, charge or
encumbrance which, in any such event, would have consequences that would
materially and adversely affect the condition (financial or otherwise) or
operation of the Servicer or its properties or impair the ability of the Trust
Fund to realize on the Mortgage Loans;
(v) There is no action, suit, proceeding or investigation pending
or threatened against the Servicer which, either in any one instance or in the
aggregate, would result in any material adverse change in the business,
operations, financial condition, properties or assets of the Servicer, or in
any material impairment of the right, or would, if adversely determined,
materially impair the ability of the Servicer, to carry on its business
substantially as now conducted, or in any material liability on the part of the
Servicer, or which would draw into question the validity of this Agreement or
the Mortgage Loans or of any action taken or to be taken in connection with the
obligations of the Servicer contemplated herein, or which would be likely to
impair materially the ability of the Servicer to perform under the terms of
this Agreement; and
(vi) No consent, approval, authorization or order of, or
registration or filing with, or notice to any court or governmental agency or
body, is required for the execution, delivery and performance by the Servicer
of or compliance by the Servicer with this Agreement, or if required, such
approval has been obtained prior to the Cut-off Date.
(b) The Special Servicer, as Special Servicer, hereby represents,
warrants and covenants that as of the Closing Date or as of such date
specifically provided herein:
(i) The Special Servicer is corporation, duly organized, validly
existing and in good standing under the laws of the State of _______ and has
all licenses necessary to carry on its business as now being conducted or will
be in compliance with the laws of each state in which any Mortgaged Property is
located to the extent necessary to comply with its duties and responsibilities
hereunder with respect to each Mortgage Loan in accordance with the terms of
this Agreement, provided, that the breach of such representation, warranty and
covenant shall have no effect unless such breach has a material adverse effect
on the ability of the Special Servicer to fulfill its obligations hereunder;
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(ii) The Special Servicer has the full power, authority and legal
right to execute and deliver this Agreement and to perform in accordance
herewith; the execution and delivery of this Agreement by the Special Servicer
and its performance and compliance with the terms of this Agreement will not
violate the Special Servicer's charter or by-laws or constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in the breach of, any material contract, agreement or
other instrument to which the Special Servicer is a party or which may be
applicable to the Special Servicer or any of its assets;
(iii) This Agreement has been duly and validly authorized, executed
and delivered by the Special Servicer and, assuming due authorization,
execution and delivery by the other parties hereto, constitutes a legal, valid
and binding obligation of the Special Servicer, enforceable against it in
accordance with the terms of this Agreement, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, liquidation, receivership,
moratorium or other laws relating to or affecting creditors' rights generally,
or by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law), and all requisite corporate
action has been taken by the Special Servicer to make this Agreement and all
agreements contemplated hereby valid and binding upon the Special Servicer in
accordance with their terms;
(iv) The Special Servicer is not in violation of, and the execution
and delivery of this Agreement by the Special Servicer and its performance and
compliance with the terms of this Agreement will not constitute a violation
with respect to, any order or decree of any court binding on the Special
Servicer or any order or regulation of any federal, state, municipal or
governmental agency having jurisdiction, or result in the creation or
imposition of any lien, charge or encumbrance which, in any such event, would
have consequences that would materially and adversely affect the condition
(financial or otherwise) or operation of the Special Servicer or its properties
or impair the ability of the Trust Fund to realize on the Mortgage Loans;
(v) There is no action, suit, proceeding or investigation pending
or threatened against the Special Servicer which, either in any one instance or
in the aggregate, would result in any material adverse change in the business,
operations, financial condition, properties or assets of the Special Servicer,
or in any material impairment of the right, or would, if adversely determined,
materially impair the ability of the Special Servicer, to carry on its business
substantially as now conducted, or in any material liability on the part of the
Special Servicer, or which would draw into question the validity of this
Agreement or the Mortgage Loans or of any action taken or to be taken in
connection with the obligations of the Special Servicer contemplated herein, or
which would be likely to impair materially the ability of the Special Servicer
to perform under the terms of this Agreement; and
(vi) No consent, approval, authorization or order of, or
registration or filing with, or notice to any court or governmental agency or
body, is required for the execution, delivery and performance by the Special
Servicer of or compliance by the Special Servicer with this Agreement, or if
required, such approval has been obtained prior to the Cut-off Date.
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(vii) It is understood and agreed that the representations and
warranties set forth in this Section shall survive delivery of the respective
Mortgage Files to the Trustee or the Custodian on behalf of the Trustee until
the termination of this Agreement, and shall inure to the benefit of the
Trustee, the Depositor and the Servicer or Special Servicer, as the case may
be. Upon discovery by the Depositor, the Servicer, Special Servicer or a
Responsible Officer of the Trustee (or upon written notice thereof from any
Certificateholder) of a breach of any of the representations and warranties set
forth in this Section which materially and adversely affects the interests of
the Certificateholders, the Servicer, Special Servicer or the Trustee in any
Mortgage Loan, the party discovering such breach shall give prompt written
notice to the other parties hereto and the Mortgage Loan Seller.
SECTION 2.5. Execution and Delivery of Certificates; Issuance of
Lower-Tier Regular Interests.
The Trustee acknowledges the assignment to it of the Mortgage Loans and
the Anchorage Participation and the delivery of the Mortgage Files to the
Custodian (to the extent the documents constituting the Mortgage Files are
actually delivered to the Custodian), subject to the provisions of Section 2.01
and Section 2.02 and, concurrently with such delivery, (i) acknowledges the
issuance of and hereby declares that it holds the Lower-Tier Regular Interests
on behalf of the Upper-Tier REMIC and the Holders of the Regular Certificates
and the Class R Certificates and (ii) has caused to be executed and caused to
be authenticated and delivered to or upon the order of the Depositor, or as
directed by the terms of this Agreement, Class A-1A, Class A-1B, Class A-1C,
Class A-CS1, Class A-CS2, Class A-1D, Class A-2, Class A-3, Class A-4, Class A-
5, Class B-1, Class B-2, Class B-3, Class B-4 , Class B-4H, Class V-1, Class V-
2, Class R and Class LR Certificates in authorized denominations, in each case
registered in the names set forth in such order or so directed in this
Agreement and duly authenticated by the Authenticating Agent, which
Certificates (described in the preceding clause (ii)) and Lower Tier Regular
Interests evidence ownership of the entire Trust Fund.
SECTION 2.6. Miscellaneous REMIC and Grantor Trust Provisions.
(a) The Class _____, Class ______, Class _____, Class _____, Class _____,
Class ______, Class _____, Class ______, Class _____, Class _____, Class _____,
Class _____ and Class _____ Interests are hereby designated as "regular
interests" in the Lower-Tier REMIC within the meaning of Section 860G(a)(1) of
the Code, and the Class LR Certificates are hereby designated as the sole Class
of "residual interests" in the Lower-Tier REMIC within the meaning of Section
860G(a)(2) of the Code. The Class _____, Class _____, Class _____, Class _____,
Class _____, Class _____, Class _____, Class _____, Class _____, Class _____,
Class _____, Class _____, Class _____, Class _____ and Class _____ Certificates
are hereby designated as "regular interests" in the Upper-Tier REMIC within the
meaning of Section 860G(a)(1) of the Code and the Class R Certificates are
hereby designated as the sole Class of "residual interests" in the Upper-Tier
REMIC within the meaning of Section 860G(a)(2) of the Code. The Closing Date is
hereby designated as the "Startup Day" of the Lower-Tier REMIC and the
Upper-Tier REMIC within the meaning of Section 860G(a)(9) of the Code. The
"latest possible maturity date" of the Lower-Tier
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Regular Interests and the Regular Certificates for purposes of Section
860G(a)(1) of the Code is the Scheduled Final Distribution Date.
(b) The Class V-1 Certificates represent pro rata undivided beneficial
interests in the Default Interest subject to the liability of the Trust Fund to
pay interest on Advances at the Advance Rate. The Class V-2 Certificates
represent beneficial pro rata undivided interests in the Excess Interest. The
Class V-1 and Class V-2 Certificates do not represent regular or residual
interests in either the Upper-Tier REMIC or the Lower-Tier REMIC.
(c) None of the Depositor, the Trustee, the Servicer, the Fiscal Agent or
the Special Servicer shall enter into any arrangement by which the Trust Fund
will receive a fee or other compensation for services other than as
specifically contemplated herein.
ARTICLE III.
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
SECTION 3.1. Servicer to Act as Servicer; Administration of the
Mortgage Loans.
(a) The Servicer and the Special Servicer, each as an independent
contractor servicer, shall service and administer the Mortgage Loans on behalf
of the Trust Fund and the Trustee (as trustee for Certificateholders) in
accordance with the Servicing Standard.
The Servicer's or Special Servicer's liability for actions and omissions
in its capacity as Servicer or Special Servicer, as the case may be, hereunder
is limited as provided herein (including, without limitation, pursuant to
Section 6.03 hereof). To the extent consistent with the foregoing and subject
to any express limitations set forth in this Agreement, the Servicer and
Special Servicer shall seek to maximize the timely and complete recovery of
principal and interest on the Notes; provided, however, that nothing herein
contained shall be construed as an express or implied guarantee by the Servicer
or Special Servicer of the collectability of the Mortgage Loans. Subject only
to the Servicing Standard, the Servicer and Special Servicer shall have full
power and authority, acting alone or through sub-servicers (subject to
paragraph (c) of this Section 3.01 and to Section 3.02), to do or cause to be
done any and all things in connection with such servicing and administration
which it may deem consistent with the Servicing Standard and, in its reasonable
judgment, in the best interests of the Certificateholders, including, without
limitation, with respect to each Mortgage Loan, to prepare, execute and
deliver, on behalf of the Certificateholders and the Trustee or any of them:
(i) any and all financing statements, continuation statements and other
documents or instruments necessary to maintain the lien on each Mortgaged
Property and related collateral; (ii) any modifications, waivers, consents or
amendments to or with respect to any documents contained in the related
Mortgage File; and (iii) any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Mortgage Loans and the Mortgaged
Properties. Subject to Section 3.11, the Trustee shall, upon the receipt of a
written request of a Servicing Officer, execute and deliver to the Servicer and
Special Servicer any powers of attorney and other documents prepared by the
Servicer and Special Servicer and necessary or appropriate (as certified in
such written request) to enable the Servicer and Special Servicer to carry out
their servicing and administrative duties hereunder.
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(b) Unless otherwise provided in the related Note, the Servicer shall
apply any partial Principal Prepayment received on a Mortgage Loan on a date
other than a Due Date to the principal balance of such Mortgage Loan as of the
Due Date immediately following the date of receipt of such partial Principal
Prepayment. Unless otherwise provided in the related Note, the Servicer shall
apply any amounts received on U.S. Treasury obligations (which shall not be
redeemed by the Servicer prior to the maturity thereof) in respect of a
Mortgage Loan being defeased pursuant to its terms to the principal balance of
and interest on such Mortgage Loan as of the Due Date immediately following the
receipt of such amounts.
(c) Each of the Servicer and the Special Servicer may enter into
sub-servicing agreements with third parties with respect to any of its
respective obligations hereunder, including, with respect to the Special
Servicer, those obligations for which it is paid the Additional Servicing Fee,
as provided herein, provided, that (i) any such agreement shall be consistent
with the provisions of this Agreement and (ii) no sub-servicer retained by the
Servicer or the Special Servicer, as applicable, shall grant any modification,
waiver or amendment to any Mortgage Loan without the approval of the Servicer
or the Special Servicer, as applicable, which approval shall be given or
withheld in accordance with the procedures set forth in Section 3.30 (or the
definition of Minimum Defaulted Monthly Payment), and (iii) such agreement
shall be consistent with the Servicing Standard. Any such sub-servicing
agreement may permit the sub-servicer to delegate its duties to agents or
subcontractors so long as the related agreements or arrangements with such
agents or subcontractors are consistent with the provisions of this Section
3.01(c).
Any sub-servicing agreement entered into by the Servicer or the Special
Servicer, as applicable, shall provide that it may be assumed or terminated by
the Trustee or the Servicer, respectively, if the Trustee or the Servicer,
respectively, has assumed the duties of the Servicer or the Special Servicer,
respectively, or any successor Servicer or Special Servicer, as applicable,
without cost or obligation to the assuming or terminating party or the Trust
Fund, upon the assumption by such party of the obligations of the Servicer or
the Special Servicer, as applicable, pursuant to Section 7.02.
Any sub-servicing agreement, and any other transactions or services
relating to the Mortgage Loans involving a sub-servicer, shall be deemed to be
between the Servicer or the Special Servicer, as applicable, and such
sub-servicer alone, and the Trustee and the Certificateholders shall not be
deemed parties thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to the sub-servicer, except as set forth in Section
3.01(d).
(d) If the Trustee or any successor Servicer assumes the obligations of
the Servicer, or if the Servicer or any successor Special Servicer assumes the
obligations of the Special Servicer, in each case in accordance with Section
7.02, the Trustee, the Servicer or such successor, as applicable, to the extent
necessary to permit the Trustee, the Servicer or such successor, as applicable,
to carry out the provisions of Section 7.02, shall, without act or deed on the
part of the Trustee, the Servicer or such successor, as applicable, succeed to
all of the rights and obligations of the Servicer or the Special Servicer, as
applicable, under any sub-servicing agreement entered into by the Servicer or
the Special Servicer, as applicable, pursuant to Section 3.01(c), subject to
the right of termination by the Trustee set forth in Section 3.01(c). In such
event, the Trustee, the
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Servicer or the successor Servicer or the Special Servicer, as applicable,
shall be deemed to have assumed all of the Servicer's or the Special Servicer's
interest, as applicable, therein (but not any liabilities or obligations in
respect of acts or omissions of the Servicer or the Special Servicer, as
applicable, prior to such deemed assumption) and to have replaced the Servicer
or the Special Servicer, as applicable, as a party to such sub-servicing
agreement to the same extent as if such sub-servicing agreement had been
assigned to the Trustee, the Servicer or such successor Servicer or successor
Special Servicer, as applicable, except that the Servicer or the Special
Servicer, as applicable, shall not thereby be relieved of any liability or
obligations under such sub-servicing agreement that accrued prior to the
succession of the Trustee, the Servicer or the successor Servicer or successor
Special Servicer, as applicable.
In the event that the Trustee, the Servicer or any successor Servicer or
Special Servicer, as applicable, assumes the servicing obligations of the
Servicer or the Special Servicer, as applicable, upon request of the Trustee,
the Servicer or such successor Servicer or Special Servicer, as applicable, the
Servicer or Special Servicer shall at its own expense (except in the event that
the Servicer is terminated pursuant to Section 6.04(c), in which event, at the
expense of the Certificateholders effecting such termination) deliver to the
Trustee, the Servicer or such successor Servicer or Special Servicer, as
applicable, all documents and records relating to any sub-servicing agreement
and the Mortgage Loans then being serviced thereunder and an accounting of
amounts collected and held by it, if any, and will otherwise use its best
efforts to effect the orderly and efficient transfer of any sub-servicing
agreement to the Trustee, the Servicer or the successor Servicer or Special
Servicer, as applicable.
SECTION 3.2. Liability of the Servicer.
Notwithstanding any sub-servicing agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer or
Special Servicer and any Person acting as sub-servicer (or its agents or
subcontractors) or any reference to actions taken through any Person acting as
sub-servicer or otherwise, the Servicer or Special Servicer, as applicable,
shall remain obligated and primarily liable to the Trustee and
Certificateholders for the servicing and administering of the Mortgage Loans in
accordance with the provisions of this Agreement without diminution of such
obligation or liability by virtue of such sub-servicing agreements or
arrangements or by virtue of indemnification from the Depositor or any other
Person acting as sub-servicer (or its agents or subcontractors) to the same
extent and under the same terms and conditions as if the Servicer or Special
Servicer, as applicable, alone were servicing and administering the Mortgage
Loans. Each of the Servicer and the Special Servicer shall be entitled to enter
into an agreement with any sub-servicer providing for indemnification of the
Servicer or Special Servicer, as applicable, by such sub-servicer, and nothing
contained in this Agreement shall be deemed to limit or modify such
indemnification, but no such agreement for indemnification shall be deemed to
limit or modify this Agreement.
SECTION 3.3. Collection of Certain Mortgage Loan Payments.
(a) The Servicer or the Special Servicer, as applicable, shall use
reasonable efforts to collect all payments called for under the terms and
provisions of the Mortgage Loans it is obligated
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to service hereunder, and shall follow the Servicing Standard with respect to
such collection procedures. The Special Servicer shall use its reasonable
efforts to collect income statements and rent rolls from Borrowers as required
by the Loan Documents and the terms hereof and shall provide copies thereof to
the Servicer as provided herein. The Servicer shall provide reasonable advance
notice to the Special Servicer and Borrowers of Balloon Payments coming due.
Consistent with the foregoing, the Servicer or Special Servicer, as applicable,
may in its discretion waive any late payment charge in connection with any
delinquent Monthly Payment or Balloon Payment with respect to any Mortgage
Loan. In addition, the Servicer shall be entitled to take such actions with
respect to the collection of payments on the Mortgage Loans as are permitted or
required under Section 3.28 hereof.
(b) In the event that the Servicer receives, or receives notice from the
related Borrower that it will be receiving, Excess Interest in any Collection
Period, the Servicer or Special Servicer, as applicable, will promptly notify
the Trustee.
SECTION 3.4. Collection of Taxes, Assessments and Similar Items;
Escrow Accounts.
(a) With respect to each Mortgage Loan (other than any REO Mortgage
Loan), the Servicer shall maintain accurate records with respect to each
related Mortgaged Property reflecting the status of taxes, assessments and
other similar items that are or may become a lien on the related Mortgaged
Property and the status of insurance premiums payable with respect thereto.
From time to time, the Servicer shall (i) obtain all bills for the payment of
such items (including renewal premiums), and (ii) effect payment of all such
bills with respect to such Mortgaged Properties prior to the applicable penalty
or termination date, in each case employing for such purpose Escrow Payments as
allowed under the terms of the related Mortgage Loan. If a Borrower fails to
make any such payment on a timely basis or collections from the Borrower are
insufficient to pay any such item before the applicable penalty or termination
date, the Servicer shall advance the amount of any shortfall as a Property
Advance unless the Servicer determines in its good faith business judgment that
such Advance would be a Nonrecoverable Advance. The Servicer shall be entitled
to reimbursement of Advances, with interest thereon at the Advance Rate, that
it makes pursuant to the preceding sentence from amounts received on or in
respect of the related Mortgage Loan respecting which such Advance was made or
if such Advance has become a Nonrecoverable Advance, to the extent permitted by
Section 3.06 of this Agreement. No costs incurred by the Servicer in effecting
the payment of taxes and assessments on the Mortgaged Properties shall, for the
purpose of calculating distributions to Certificateholders, be added to the
amount owing under the related Mortgage Loans, notwithstanding that the terms
of such Mortgage Loans so permit.
(b) The Servicer shall segregate and hold all funds collected and
received pursuant to any Mortgage Loan constituting Escrow Payments separate
and apart from any of its own funds and general assets and shall establish and
maintain one or more segregated custodial accounts (each, an "Escrow Account")
into which all Escrow Payments shall be deposited within one (1) Business Day
after receipt. The Servicer shall also deposit into each Escrow Account any
amounts representing losses on Permitted Investments pursuant to Section
3.07(b) and any Insurance Proceeds or Liquidation Proceeds which are required
to be applied to the restoration or repair of any Mortgaged Property pursuant
to the related Mortgage Loan. Escrow Accounts shall be Eligible
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Accounts (except to the extent the related Mortgage Loan requires it to be held
in an account that is not an Eligible Account) and shall be entitled
"________________, as Servicer, in trust for _________________, as Trustee in
trust for Holders of Heller Financial Commercial Mortgage Asset Corp., Mortgage
Pass-Through Certificates, Series 199_-_, and Various Borrowers". Withdrawals
from an Escrow Account may be made by the Servicer only:
(i) to effect timely payments of items constituting Escrow
Payments for the related Mortgage;
(ii) to transfer funds to the Collection Account to reimburse the
Servicer, the Trustee or the Fiscal Agent, as applicable, for any Advance
relating to Escrow Payments, but only from amounts received with respect to the
related Mortgage Loan which represent late collections of Escrow Payments
thereunder;
(iii) for application to the restoration or repair of the related
Mortgaged Property in accordance with the related Mortgage Loan and the
Servicing Standard;
(iv) to clear and terminate such Escrow Account upon the
termination of this Agreement;
(v) to pay from time to time to the related Borrower any interest
or investment income earned on funds deposited in the Escrow Account if such
income is required to be paid to the related Borrower under law or by the terms
of the Mortgage Loan, or otherwise to the Servicer; and
(vi) to remove any funds deposited in an Escrow Account that were
not required to be deposited therein.
SECTION 3.5. Collection Account; Distribution Account; Upper-Tier
Distribution Account; Default Interest Distribution Account; and Excess
Interest Distribution Account.
(a) The Servicer shall establish and maintain the Collection Account in
the Trustee's name, for the benefit of the Certificateholders and the Trustee
as the Holder of the Lower-Tier Regular Interests. The Collection Account shall
be established and maintained as an Eligible Account. The Servicer shall
deposit or cause to be deposited in the Collection Account within one Business
Day following receipt the following payments and collections received or made
by it on or with respect to the Mortgage Loans:
(i) all payments on account of principal on the Mortgage Loans,
including the principal component of Unscheduled Payments;
(ii) all payments on account of interest on the Mortgage Loans
and the interest portion of all Unscheduled Payments and all Prepayment
Premiums;
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(iii) any amounts required to be deposited pursuant to Section
3.07(b), in connection with net losses realized on Permitted Investments with
respect to funds held in the Collection Account;
(iv) all Net REO Proceeds withdrawn from an REO Account pursuant to
Section 3.17(b) and all Net Insurance Proceeds and Net Liquidation Proceeds;
(v) any amounts received from Borrowers which represent recoveries
of Property Protection Expenses, to the extent not permitted to be retained by
the Servicer or Special Servicer as provided herein;
(vi) any other amounts required by the provisions of this Agreement
to be deposited into the Collection Account by the Servicer or Special
Servicer, including, without limitation, proceeds of any repurchase of a
Mortgage Loan pursuant to Sections 2.03(d) and (e) hereof; and
(vii) any Servicer Prepayment Interest Shortfalls for the next
Distribution Date into the Collection Account on the Servicer Remittance Date.
The foregoing requirements for deposits in the Collection Account shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of late payment charges
(subject to Section 3.12 hereof), Assumption Fees, loan modification fees, loan
service transaction fees, extension fees, demand fees, beneficiary statement
charges and similar fees need not be deposited in the Collection Account by the
Servicer and, to the extent permitted by applicable law, the Servicer or the
Special Servicer, as applicable in accordance with Section 3.12 hereof, shall
be entitled to retain any such charges and fees received with respect to the
Mortgage Loans. In the event that the Servicer deposits in the Collection
Account any amount not required to be deposited therein, it may at any time
withdraw such amount from the Collection Account, any provision herein to the
contrary notwithstanding.
(b) The Trustee shall establish and maintain the Distribution Account in
the name of the Trustee, in trust for the benefit of the Certificateholders and
the Trustee as the Holder of the Lower-Tier Regular Interests. The Distribution
Account shall be established and maintained as an Eligible Account.
(c) The Trustee shall establish and maintain the Upper-Tier Distribution
Account in the name of the Trustee, in trust for the benefit of the
Certificateholders. The Upper-Tier Distribution Account shall be established
and maintained as an Eligible Account. With respect to each Distribution Date,
the Trustee shall withdraw from the Distribution Account and deposit in the
Upper-Tier Distribution Account on or before such date the amount of Available
Funds (including P&I Advances) and Prepayment Premiums to be distributed in
respect of the Lower-Tier Regular Interests pursuant to Section 4.01 hereof on
such date.
(d) Prior to the Servicer Remittance Date relating to the Collection
Period, if any, in which Default Interest is received, the Trustee shall
establish and maintain the Default Interest Distribution Account in the name of
the Trustee in trust for the benefit of the Holders of the Class
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V-1 Certificates. The Default Interest Distribution Account shall be
established and maintained as an Eligible Account. On or before the Servicer
Remittance Date related to each Distribution Date, the Servicer shall remit to
the Trustee for deposit in the Default Interest Distribution Account an amount
equal to (i) the amount of the aggregate Default Interest received during the
preceding Collection Period, minus (ii) any portions thereof withdrawn from the
Collection Account pursuant to clause (iii) of Section 3.06 (such amount, if
any, the "Net Default Interest" for such Distribution Date).
(e) Prior to the Servicer Remittance Date relating to the Collection
Period, if any, in which Excess Interest is received, the Trustee shall
establish and maintain the Excess Interest Distribution Account in the name of
the Trustee in trust for the benefit of the Holders of the Class V-2
Certificates. The Excess Interest Distribution Account shall be established and
maintained as an Eligible Account. On or before the Servicer Remittance Date
related to the applicable Distribution Date, the Servicer shall remit to the
Trustee for deposit in the Excess Interest Distribution Account an amount equal
to the Excess Interest received during the applicable Collection Period.
Following the distribution of Excess Interest to Certificateholders on the
first Distribution Date after which there are no longer any Mortgage Loans
outstanding which pursuant to their terms could pay Excess Interest, the
Trustee shall terminate the Excess Interest Distribution Account.
(f) Funds in the Collection Account, the Distribution Account, the
Upper-Tier Distribution Account, the Default Interest Distribution Account and
the Excess Interest Distribution Account may be invested in Permitted
Investments in accordance with the provisions of Section 3.07. The Servicer
shall give written notice to the Trustee of the location and account number of
the Collection Account and shall notify the Trustee in writing prior to any
subsequent change thereof.
SECTION 3.6. Permitted Withdrawals from the Collection Account.
The Servicer may make withdrawals from the Collection Account only as
described below (the order set forth below not constituting an order of
priority for such withdrawals):
(i) to remit to the Trustee for deposit in the Distribution
Account, the Default Interest Distribution Account, the Interest Reserve
Account, and the Excess Interest Distribution Account, the amounts required to
be deposited in the Distribution Account, the Default Interest Distribution
Account, the Interest Reserve Account, and the Excess Interest Distribution
Account pursuant to Sections 4.06, 3.05(c), 3.05(d), 3.27(a) and 3.05(e);
(ii) to pay or reimburse the Trustee, the Fiscal Agent, the
Servicer and the Special Servicer for Advances (provided, that the Trustee and
Fiscal Agent shall have priority with respect to such payment or
reimbursement), the Servicer's right to reimburse any such Person pursuant to
this clause (ii) being limited to either (x) any collections on or in respect
of the particular Mortgage Loan or REO Property with respect to which such
Advance was made, (y) with respect to P&I Advances, any Subordinate Class
Advance Amounts with respect to the related Distribution Date as provided in
Section 4.06(d), or (z) any other amounts in the Collection Account in the
event that such Advances have been deemed to be Nonrecoverable Advances or are
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not reimbursed from recoveries in respect of the related Mortgage Loan or REO
Property after a Final Recovery Determination;
(iii) (A) to pay to the Servicer, the Trustee or the Fiscal Agent
the Advance Interest Amount relating to P&I Advances (to the extent not
reimbursed from Default Interest), and (B) to pay to the Servicer, Special
Servicer, Trustee or Fiscal Agent any Advance Interest Amounts not relating to
any P&I Advances (provided that in the case of both (A) and (B), the Trustee
and the Fiscal Agent shall have priority with respect to such payments);
(iv) to pay on or before each Servicer Remittance Date to the
Servicer and the Special Servicer, as applicable, as compensation, the
aggregate unpaid Servicing Compensation and Special Servicing Compensation,
respectively, in respect of the immediately preceding month, to be paid, in the
case of the Servicing Fee and Additional Servicing Fee, from interest received
on the related Mortgage Loan, and to pay from time to time to the Servicer in
accordance with Section 3.07(b) any interest or investment income earned on
funds deposited in the Collection Account (The Servicer may rely on a
certification of the Special Servicer as to amounts of Special Servicing
Compensation to be withdrawn pursuant to this clause (iv));
(v) to remit to the Distribution Account, an amount equal to the
Trustee Fee in respect of the immediately preceding month to be paid from
interest received on the related Mortgage Loan;
(vi) to pay on or before each Distribution Date to the Depositor,
the Mortgage Loan Seller or other Originator, as the case may be, with respect
to each Mortgage Loan or REO Property that has previously been purchased or
repurchased by it pursuant to Section 2.03(d), Section 2.03(e), Section 3.18 or
Section 9.01, all amounts received thereon during the related Collection Period
and subsequent to the date as of which the amount required to effect such
purchase or repurchase was determined;
(vii) to the extent not reimbursed or paid pursuant to any other
clause of this Section 3.06, to reimburse or pay the Servicer, the Trustee, the
Special Servicer, the Depositor or the Fiscal Agent, as applicable, for unpaid
Servicing Fees, Special Servicing Compensation and other unpaid items incurred
by such Person pursuant to the second sentence of Section 3.07(c), Section
3.08(a) and (b), Section 3.10, Section 3.12(e), Section 3.17(a), (b) and (c),
Section 3.18(a), the fourth paragraph of Section 3.22, Section 6.03, Section
7.04, Section 8.01(c)(v), Section 8.05(d) or Section 10.07, or any other
provision of this Agreement pursuant to which such Person is entitled to
reimbursement or payment from the Trust Fund, in each case only to the extent
reimbursable under such Section, it being acknowledged that this clause (vii)
shall not be deemed to modify the substance of any such Section, including the
provisions of such Section that set forth the extent to which one of the
foregoing Persons is or is not entitled to payment or reimbursement;
(viii) to transfer to the Trustee for deposit in one or more
separate, non-interest bearing accounts any amount reasonably determined by the
Trustee to be necessary to pay any applicable federal, state or local taxes
imposed on the Upper-Tier REMIC or the Lower-Tier REMIC under the circumstances
and to the extent described in Section 4.05;
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(ix) to pay to the participant or participants (the "Other
Participant") in the Anchorage Participation, other than the Trustee as
assignee of the Depositor (as "Lead Lender" under the Anchorage Participation
Agreement), the amount of the Monthly Payment to which the Other Participant is
entitled under the Anchorage Participation Agreement;
(x) to withdraw any amount deposited into the Collection
Account that was not required to be deposited therein; and
(xi) to clear and terminate the Collection Account pursuant to
Section 9.01.
The Servicer shall keep and maintain separate accounting, on a Mortgage
Loan by Mortgage Loan basis, for the purpose of justifying any withdrawal from
the Collection Account pursuant to subclauses (ii)-(vii) above.
The Servicer shall pay to the Trustee, the Fiscal Agent or the Special
Servicer from the Collection Account (to the extent permitted by clauses (i)-
(vii) above) amounts permitted to be paid to the Trustee, the Fiscal Agent or
the Special Servicer therefrom, promptly upon receipt of a certificate of a
Responsible Officer of the Trustee or the Fiscal Agent or a certificate of a
Servicing Officer, as applicable, describing the item and amount to which such
Person is entitled. The Servicer may rely conclusively on any such certificate
and shall have no duty to recalculate the amounts stated therein.
The Trustee, the Fiscal Agent, the Special Servicer and the Servicer
shall in all cases have a right prior to the Certificateholders to any funds on
deposit in the Collection Account from time to time for the reimbursement or
payment of the Servicing Compensation (including investment income), or Trustee
Fees, Special Servicing Compensation, Advances, Advance Interest Amounts, their
respective expenses hereunder to the extent such fees and expenses are to be
reimbursed or paid from amounts on deposit in the Collection Account pursuant
to this Agreement (and to have such amounts paid directly to third party
contractors for any invoices approved by the Trustee, the Servicer or the
Special Servicer, as applicable) and any federal, state or local taxes imposed
on either the Upper-Tier REMIC or Lower-Tier REMIC.
SECTION 3.7. Investment of Funds in the Collection Account, the REO
Account, the Lock-Box Accounts, the Cash Collateral Accounts, the Interest
Reserve Account and the Reserve Accounts.
(a) The Servicer (or with respect to any REO Account, the Special
Servicer), may direct any depository institution maintaining the Collection
Account, any Borrower Accounts (subject to the second succeeding sentence), the
Interest Reserve Account and any REO Account (each, for purposes of this
Section 3.07, an "Investment Account"), to invest the funds in such Investment
Account in one or more Permitted Investments that bear interest or are sold at
a discount, and that mature, unless payable on demand, no later than the
Business Day preceding the date on which such funds are required to be
withdrawn from such Investment Account pursuant to this Agreement. Any
direction by the Servicer, the Special Servicer, to invest funds on deposit in
an Investment Account shall be in writing and shall certify that the requested
investment is a Permitted Investment which matures at or prior to the time
required hereby or is payable on demand. In the
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case of any Escrow Account, Lock-Box Account, Cash Collateral Account or
Reserve Account (the "Borrower Accounts"), the Servicer shall act upon the
written request of the related Borrower or Manager to the extent the Servicer
is required to do so under the terms of the respective Mortgage Loan or related
documents, provided that in the absence of appropriate written instructions
from the related Borrower or Manager meeting the requirements of this Section
3.07, the Servicer shall have no obligation to, but will be entitled to, direct
the investment of funds in such accounts in Permitted Investments. All such
Permitted Investments shall be held to maturity, unless payable on demand. Any
investment of funds in an Investment Account shall be made in the name of the
Trustee (in its capacity as such) or in the name of a nominee of the Trustee.
The Trustee shall have sole control (except with respect to investment
direction which shall be in the control of the Servicer (or the Special
Servicer, with respect to any REO Accounts), as an independent contractor to
the Trust Fund) over each such investment and any certificate or other
instrument evidencing any such investment shall be delivered directly to the
Trustee or its agent (which shall initially be the Servicer), together with any
document of transfer, if any, necessary to transfer title to such investment to
the Trustee or its nominee. The Trustee shall have no responsibility or
liability with respect to the investment directions of the Servicer or the
Special Servicer or any losses resulting therefrom, whether from Permitted
Investments or otherwise. The Servicer shall have no responsibility or
liability with respect to the investment directions of or the Special Servicer,
any Borrower or Manager or any losses resulting therefrom, whether from
Permitted Investments or otherwise. In the event amounts on deposit in an
Investment Account are at any time invested in a Permitted Investment payable
on demand, the Servicer (or the Special Servicer, as applicable) shall:
(x) consistent with any notice required to be given thereunder,
demand that payment thereon be made on the last day such Permitted
Investment may otherwise mature hereunder in an amount equal to the
lesser of (1) all amounts then payable thereunder and (2) the amount
required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder promptly upon
determination by the Servicer (or the Special Servicer as applicable)
that such Permitted Investment would not constitute a Permitted
Investment in respect of funds thereafter on deposit in the related
Investment Account.
(b) All income and gain realized from investment of funds deposited in
any Investment Account shall be for the benefit of the Servicer (except with
respect to the investment of funds deposited in (i) any Borrower Account, which
shall be for the benefit of the related Borrower to the extent required under
the Mortgage Loan or applicable law, (ii) any REO Account, which shall be for
the benefit of the Special Servicer or (iii) the Interest Reserve Account,
which shall be for the benefit of ______________________________) and, if held
in the Collection Account or REO Account shall be subject to withdrawal by the
Servicer or the Special Servicer, as applicable, in accordance with Section
3.06 or Section 3.17(b), as applicable, and if held in the Interest Reserve
Account, shall be subject to withdrawal by _____________________________
pursuant to written instructions. The Servicer (or with respect to any REO
Account, the Special Servicer or with respect to the Interest Reserve Account,
______________________________.) shall deposit from its own funds into the
Collection Account, any REO Account or the Interest Reserve Account, as
applicable, the amount of any loss incurred in respect of any such Permitted
Investment
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immediately upon realization of such loss; provided, however, that the
Servicer, Special Servicer, or ________________________________, as applicable,
may reduce the amount of such payment to the extent it forgoes any investment
income in such Investment Account otherwise payable to it. The Servicer shall
also deposit from its own funds in any Borrower Account the amount of any loss
incurred in respect of Permitted Investments, except to the extent that amounts
are invested for the benefit of the Borrower under the terms of the Mortgage
Loan or applicable law.
(c) Except as otherwise expressly provided in this Agreement, if any
default occurs in the making of a payment due under any Permitted Investment,
or if a default occurs in any other performance required under any Permitted
Investment, the Trustee may, and upon the request of Holders of Certificates
representing greater than 50% of the Percentage Interests of any Class shall,
take such action as may be appropriate to enforce such payment or performance,
including the institution and prosecution of appropriate proceedings. In the
event the Trustee takes any such action, the Trust Fund shall pay or reimburse
the Trustee for all reasonable out-of-pocket expenses, disbursements and
advances incurred or made by the Trustee in connection therewith. In the event
that the Trustee does not take any such action, the Servicer may take such
action at its own cost and expense.
SECTION 3.8. Maintenance of Insurance Policies and Errors and
Omissions and Fidelity Coverage.
(a) The Servicer on behalf of the Trustee, as mortgagee, shall cause the
related Borrower to maintain, to the extent required by each Mortgage Loan
(other than REO Mortgage Loans), and if the Borrower does not so maintain,
shall itself maintain (subject to the provisions of this Agreement concerning
Nonrecoverable Advances) to the extent the Trustee as mortgagee has an
insurable interest and to the extent available at commercially reasonable
rates, (i) fire and hazard insurance with extended coverage on the related
Mortgaged Property in an amount which is at least equal to the lesser of (A)
one hundred percent (100%) of the then "full replacement cost" of the
improvements and equipment, (excluding foundations, footings and excavation
costs), without deduction for physical depreciation, and (B) the outstanding
principal balance of the related Mortgage Loan or such greater amount as is
necessary to prevent any reduction in such policy by reason of the application
of co-insurance and to prevent the Trustee thereunder from being deemed to be a
co-insurer and provided such policy shall include a "replacement cost" rider,
(ii) insurance providing coverage against 12 months (or such longer period as
provided in the related Mortgage or other loan document) of rent interruptions
and (iii) such other insurance as is required in the related Mortgage Loan. The
Special Servicer shall maintain fire and hazard insurance with extended
coverage on each REO Property (subject to the provisions of this Agreement
concerning Nonrecoverable Advances) in an amount which is at least equal to one
hundred percent (100%) of the then "full replacement cost" of the improvements
and equipment (excluding foundations, footings and excavation costs), without
deduction for physical depreciation. If the Special Servicer does not maintain
the insurance described in the preceding sentence or the required flood
insurance described below, the Servicer shall, as soon as practicable
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after receipt of notice of such failure, maintain such insurance, and if the
Servicer does not maintain such insurance, the insurance required in the first
sentence of this Section 3.08(a) or the required flood insurance described
below (if the related Borrower fails to maintain such insurance), the Trustee
shall, as soon as practicable after receipt of notice of such failure, maintain
such insurance and if the Trustee does not maintain such insurance, the Fiscal
Agent shall do so, provided that, in each such case, such obligation will be
subject to the provisions of this Agreement concerning Nonrecoverable Advances.
The Special Servicer shall maintain, with respect to each REO Property (i)
public liability insurance providing such coverage against such risks as the
Special Servicer determines, consistent with the related Mortgage and the
Servicing Standard, to be in the best interests of the Trust Fund, (ii)
insurance providing coverage against 24 months of rent interruptions and (iii)
such other insurance as was required pursuant to the terms of the related
Mortgage Loan. All insurance for an REO Property shall be from a Qualified
Insurer. Any amounts collected by the Servicer or the Special Servicer under
any such policies (other than amounts required to be applied to the restoration
or repair of the related Mortgaged Property or amounts to be released to the
Borrower in accordance with the terms of the related Mortgage) shall be
deposited into the Collection Account pursuant to Section 3.05, subject to
withdrawal pursuant to Section 3.06. Any cost incurred by the Servicer or the
Special Servicer in maintaining any such insurance shall not, for the purpose
of calculating distributions to Certificateholders, be added to the unpaid
principal balance of the related Mortgage Loan, notwithstanding that the terms
of such Mortgage Loan so permit. It is understood and agreed that no other
additional insurance other than flood insurance or earthquake insurance subject
to the conditions set forth below is to be required of any Borrower or to be
maintained by the Servicer other than pursuant to the terms of the related
Mortgage and pursuant to such applicable laws and regulations as shall at any
time be in force and as shall require such additional insurance. If the
Mortgaged Property (other than an REO Property) is located in a federally
designated special flood hazard area, the Servicer will use its best efforts to
cause the related Borrower to maintain, to the extent required by each Mortgage
Loan, and if the related Borrower does not so maintain, will itself obtain
(subject to the provisions of this Agreement concerning Nonrecoverable
Advances) flood insurance in respect thereof. Such flood insurance shall be in
an amount equal to the lesser of (i) the unpaid principal balance of the
related Mortgage Loan and (ii) the maximum amount of such insurance required by
the terms of the related Mortgage and as is available for the related property
under the national flood insurance program (assuming that the area in which
such property is located is participating in such program). If an REO Property
(i) is located in a federally designated special flood hazard area or (ii) is
related to a Mortgage Loan pursuant to which earthquake insurance was in place
at the time of origination and continues to be available at commercially
reasonable rates, the Special Servicer will obtain (subject to the provisions
of this Agreement concerning Nonrecoverable Advances) flood insurance and/or
earthquake insurance in respect thereof providing substantially the same
coverage as described in the preceding sentences or, with respect to earthquake
insurance, in the amount required by the Mortgage Loan or, if not specified,
in-place at origination. If at any time during the term of this Agreement a
recovery under a flood or fire and hazard insurance policy in respect of an REO
Property is not available but would have been available if such insurance were
maintained thereon in accordance with the standards applied to Mortgaged
Properties described herein, the Special Servicer shall (subject to the
provisions of this Agreement concerning Nonrecoverable Advances) either (i)
immediately deposit into the Collection Account from its own funds the amount
that would have been recovered or (ii) apply to the restoration and repair of
the property from its own funds the amount that would have been recovered, if
such application would be consistent with the Servicing Standard; provided,
however, that the Special Servicer shall not be responsible for any shortfall
in insurance proceeds resulting from an insurer's refusal or inability to pay a
claim. In the case of any insurance otherwise required
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to be maintained pursuant to this Section that is not being so maintained
because the Servicer or the Special Servicer, as applicable, has determined
that it is not available at commercially reasonable rates, the Servicer or the
Special Servicer, as applicable, shall deliver an Officer's Certificate to the
Trustee and each Rating Agency which details the steps that were taken in
seeking such insurance and the factors which led to the determination that such
insurance was not so available. Costs to the Servicer or Special Servicer of
maintaining insurance policies pursuant to this Section 3.08 shall be paid by
the Servicer or Special Servicer as a Property Advance and shall be
reimbursable to the Servicer or Special Servicer with interest at the Advance
Rate, which reimbursement may be effected under Section 3.06(ii) or (vii).
The Servicer (or the Special Servicer, with respect to the Specially
Serviced Mortgage Loans) agrees to prepare and present, on behalf of itself,
the Trustee and the Certificateholders, claims under each related insurance
policy maintained pursuant to this Section 3.08(a) in a timely fashion in
accordance with the terms of such policy and to take such reasonable steps as
are necessary to receive payment or to permit recovery thereunder.
All insurance policies required hereunder shall name the Trustee or the
Servicer or the Special Servicer, on behalf of the Trustee as the mortgagee, as
loss payee.
(b) (I) If the Servicer or the Special Servicer, as applicable, obtains
and maintains a blanket insurance policy insuring against fire and hazard
losses on all of the Mortgaged Properties (other than REO Properties) as to
which the related Borrower has not maintained insurance required by the related
Mortgage Loan or on all of the REO Properties, as the case may be, it shall
conclusively be deemed to have satisfied its respective obligations concerning
the maintenance of insurance coverage set forth in Section 3.08(a). Any such
blanket insurance policy shall be maintained with a Qualified Insurer. A
blanket insurance policy may contain a deductible clause, in which case the
Servicer or the Special Servicer, as applicable, shall, in the event that (i)
there shall not have been maintained on the related Mortgaged Property a policy
otherwise complying with the provisions of Section 3.08(a), and (ii) there
shall have been one or more losses which would have been covered by such a
policy had it been maintained, immediately deposit into the Collection Account
from its own funds the amount not otherwise payable under the blanket policy
because of such deductible clause to the extent that any such deductible
exceeds the deductible limitation that pertained to the related Mortgage Loan,
or, in the absence of any such deductible limitation, the deductible limitation
which is consistent with the Servicing Standard. In connection with its
activities as Servicer or the Special Servicer hereunder, as applicable, the
Servicer or the Special Servicer, respectively, agrees to prepare and present,
on behalf of itself, the Trustee and Certificateholders, claims under any such
blanket policy which it maintains in a timely fashion in accordance with the
terms of such policy and to take such reasonable steps as are necessary to
receive payment or permit recovery thereunder.
(II) If the Servicer or the Special Servicer, as applicable, causes
any Mortgaged Property or REO Property to be covered by a master force placed
insurance policy, such policy shall be issued by a Qualified Insurer and
provide no less coverage in scope and amount for such Mortgaged Property or REO
Property than the insurance required to be maintained pursuant to Section
3.08(a) in which case the Servicer or Special Servicer shall conclusively be
deemed to have
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satisfied its respective obligations to maintain insurance pursuant to Section
3.08(a). Such policy may contain a deductible clause, in which case the
Servicer or the Special Servicer, as applicable, shall, in the event that (i)
there shall not have been maintained on the related Mortgaged Property or REO
Property a policy otherwise complying with the provisions of Section 3.08(a),
and (ii) there shall have been one or more losses which would have been covered
by such a policy had it been maintained, immediately deposit into the
Collection Account from its own funds the amount not otherwise payable under
such policy because of such deductible to the extent that any such deductible
exceeds the deductible limitation that pertained to the related Mortgage Loan,
or, in the absence of any such deductible limitation, the deductible limitation
which is consistent with the Servicing Standard.
(c) The Servicer and the Special Servicer shall maintain a fidelity bond
in the form and amount that would meet the servicing requirements of prudent
institutional commercial mortgage lenders and loan servicers. The Servicer and
the Special Servicer each shall be deemed to have complied with this provision
if one of its respective Affiliates has such fidelity bond coverage and, by the
terms of such fidelity bond, the coverage afforded thereunder extends to the
Servicer and the Special Servicer, as applicable. In addition, the Servicer and
the Special Servicer shall keep in force during the term of this Agreement a
policy or policies of insurance covering loss occasioned by the errors and
omissions of its officers and employees in connection with its obligations to
service the Mortgage Loans hereunder in the form and amount that would meet the
servicing requirements of prudent institutional commercial mortgage lenders and
loan servicers. The Servicer shall cause each and every sub-servicer for it to
maintain, or cause to be maintained by any agent or contractor servicing any
Mortgage Loan on behalf of such sub-servicer, a fidelity bond and an errors and
omissions insurance policy which satisfy the requirements for the fidelity bond
and the errors and omissions policy to be maintained by the Servicer pursuant
to this Section 3.08(c). All fidelity bonds and policies of errors and
omissions insurance obtained under this Section 3.08(c) shall be issued by a
Qualified Insurer.
SECTION 3.9. Enforcement of Due-On-Sale Clauses; Assumption
Agreements; Defeasance Provisions.
(a) If any Mortgage Loan contains a provision in the nature of a
"due-on-sale" clause, which by its terms:
(i) provides that such Mortgage Loan shall (or may at the
mortgagee's option) become due and payable upon the sale or other transfer of
an interest in the related Mortgaged Property, or
(ii) provides that such Mortgage Loan may not be assumed without
the consent of the related mortgagee in connection with any such sale or other
transfer, then, for so long as such Mortgage Loan is included in the Trust
Fund, the Servicer or Special Servicer, as applicable, on behalf of the Trust
Fund shall enforce such due-on-sale clause and in connection therewith shall
(x) accelerate payments thereon or (y) withhold its consent to such an
assumption to the extent permitted under the terms of the related Mortgage Loan
only if (x) such provision is exercisable under applicable law or such exercise
is not reasonably likely to result in meritorious legal action
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by the Borrower and (y) the Servicer or Special Servicer, as applicable,
determines, in accordance with the Servicing Standard, that such enforcement or
the withholding of such consent would be likely to result in a greater
recovery, on a present value basis (discounting at the related Mortgage Rate)
than would a waiver of such clause. If the Servicer or Special Servicer, as
applicable, determines that such enforcement or the withholding of such consent
would not be likely to result in a greater recovery, the Servicer or Special
Servicer, as applicable, is authorized to take or enter into an assumption
agreement from or with the Person to whom the related Mortgaged Property has
been or is about to be conveyed, and to release the original Borrower from
liability upon the Mortgage Loan and substitute the new Borrower as obligor
thereon provided that (y) the credit status of the prospective new Borrower is
in compliance with the Servicer or Special Servicer's regular commercial
mortgage origination or servicing standards and criteria (as evidenced in
writing by the Servicer or Special Servicer) and the terms of the related
Mortgage and (z) for Mortgage Loans with an unpaid principal balance in excess
of $__________, the Servicer or the Special Servicer, as applicable, has
received written confirmation from at least one Rating Agency that such
assumption or substitution would not, in and of itself, cause a downgrade,
qualification or withdrawal of the then current ratings assigned to the
Certificates. The Servicer or Special Servicer shall notify the Trustee that
any such assumption or substitution agreement has been completed by forwarding
to the Trustee the original copy of such agreement, which copies shall be added
to the related Mortgage File and shall, for all purposes, be considered a part
of such Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.
(b) If any Mortgage Loan contains a provision in the nature of a
"due-on-encumbrance" clause, which by its terms:
(i) provides that such Mortgage Loan shall (or may at the
mortgagee's option) become due and payable upon the creation of any lien or
other encumbrance on the related Mortgaged Property, or
(ii) requires the consent of the related mortgagee to the creation
of any such lien or other encumbrance on the related Mortgaged Property, then
the Special Servicer, as applicable, on behalf of the Trust Fund, shall (x)
enforce such due-on-encumbrance and accelerate the payments thereon unless (1)
the Servicer determines, in accordance with the Servicing Standard, that such
or (y) consent to the creation of any such lien or other encumbrance only if
the Servicer or Special Servicer, as applicable, (1) determines, in accordance
with the Servicing Standard, that such consent would be in the best interests
of the Trust Fund and (2) receives prior written confirmation from at least one
Rating Agency granting such consent would not, in and of itself, cause a
downgrade, qualification or withdrawal of any of the then current ratings
assigned to the Certificates.
(c) Nothing in this Section 3.09 shall constitute a waiver of the
Trustee's right, as the mortgagee of record, to receive notice of any
assumption of a Mortgage Loan, any sale or other transfer of the related
Mortgaged Property or the creation of any lien or other encumbrance with
respect to such Mortgaged Property.
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(d) In connection with the taking of, or the failure to take, any action
pursuant to this Section 3.09, neither the Servicer nor the Special Servicer
shall agree to modify, waive or amend, and no assumption or substitution
agreement entered into pursuant to Section 3.09(a) shall contain any terms that
are different from, any term of any Mortgage Loan or the related Note, other
than pursuant to Section 3.30.
(e) With respect to any Mortgage Loan which permits release of Mortgaged
Properties through defeasance:
(i) In the event such Mortgage Loan requires that the Servicer on
behalf of the Trustee purchase the required U.S. government obligations, the
Servicer shall purchase such obligations in accordance with the terms of such
Mortgage Loan; provided, that the Servicer shall not accept the amounts paid by
the related Borrower to effect defeasance until acceptable U.S.
government obligations have been identified.
(ii) In the event that such Mortgage Loan permits the assumption of
the obligations of the related Borrower by a successor mortgagor, prior to
permitting such assumption and to the extent not inconsistent with such
Mortgage Loan, the Servicer shall obtain written confirmation from at least one
Rating Agency that such assumption would not, in and of itself, cause a
downgrade, qualification or withdrawal of the then current ratings assigned to
the Certificates.
(iii) To the extent not inconsistent with such Mortgage Loan, the
Servicer shall require an Opinion of Counsel to the related Borrower (which
shall be an expense of the related Borrower) to the effect that the Trustee has
a first priority security interest in the defeasance deposit and the U.S.
government obligations and the assignment thereof is valid and enforceable;
such opinion, together with any other certificates or documents to be required
in connection with such defeasance shall be in form and substance acceptable to
each Rating Agency.
(iv) To the extent not inconsistent with the Mortgage Loan, the
Servicer shall require a certificate at the related Borrower's expense from an
Independent certified public accountant certifying that the U.S. government
obligations comply with the requirements of the related Loan Agreement or
Mortgage.
(v) Prior to permitting release of any Mortgaged Properties through
defeasance, to the extent not inconsistent with the related Mortgage Loan, the
Servicer shall obtain written confirmation from each Rating Agency that such
defeasance would not, in and of itself, result in a downgrade, qualification or
withdrawal of the then current ratings assigned to the Certificates.
(vi) Prior to permitting release of any Mortgaged Property through
defeasance, if the related Mortgage Loan so requires and provides for the
related Borrower to pay the cost thereof, the Servicer shall require an Opinion
of Counsel of the related Borrower to the effect that such release will not
cause either the Upper-Tier REMIC or Lower-Tier REMIC to fail to qualify as a
REMIC at any time that any Certificates are outstanding or cause a tax to be
imposed on the Trust Fund under the REMIC Provisions.
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SECTION 3.10. Appraisals; Realization Upon Defaulted Mortgage Loans.
(a) Contemporaneously with the earliest of (i) the effective date of any
(A) modification of a Mortgage Rate, principal balance or amortization terms of
any Mortgage Loan, or any other term of a Mortgage Loan, (B) extension of the
Maturity Date of a Mortgage Loan as described below in Section 3.30(c), or (C)
consent to the release of any Mortgaged Property from the lien of the related
Mortgage other than pursuant to the terms of the related Mortgage Loan, (ii)
the occurrence of any Appraisal Reduction Event, (iii) a default in the payment
of a Balloon Payment, or (iv) the date on which the Special Servicer,
consistent with the Servicing Standard, requests that an Updated Appraisal be
obtained, the Servicer (after consultation with the Special Servicer) shall
obtain an Updated Appraisal; provided, however, that the Servicer shall not be
required to obtain an Updated Appraisal pursuant to clauses (i) through (iii)
above with respect to any Mortgaged Property for which there exists an
appraisal which is less than twelve months old provided, further, that if the
Servicer is the Special Servicer and either it or an Affiliate thereof owns
more than 51% of the most subordinate Class of Certificates then outstanding,
then the Trustee shall obtain such Updated Appraisal. The Servicer shall obtain
letter updates to each Updated Appraisal annually and prior to the Special
Servicer granting extensions beyond one year or any subsequent extension after
granting a one year extension with respect to the same Mortgage Loan; For so
long as any Mortgage Loan for which an Updated Appraisal has been obtained is
included in the Trust Fund, the Servicer shall obtain a new Updated Appraisal
with respect to an Updated Appraisal which is more than three years old.
(b) Upon the occurrence of a material default under a Specially Serviced
Mortgage Loan, except as otherwise specifically provided in Section 3.09(a) and
(b), the Special Servicer may, consistent with the Servicing Standard,
accelerate such Specially Serviced Mortgage Loan and commence a foreclosure or
other acquisition with respect to the related Mortgaged Property or Properties,
provided, that, that Special Servicer determines that such acceleration and
foreclosure are more likely to produce a greater recovery to Certificateholders
on a present value basis (discounting at the related Mortgage Rate) than would
a waiver of such default or an extension or modification in accordance with the
provisions of Section 3.30 hereof. In connection with any foreclosure or other
acquisition as to which the Special Servicer is not required to act under
Instructions from the Directing Holders, the Servicer shall pay the costs and
expenses in any such proceedings as an Advance unless the Servicer determines,
in its good faith judgment, that such Advance would constitute a Nonrecoverable
Advance. The Servicer shall be entitled to reimbursement of Advances (with
interest at the Advance Rate) made pursuant to the preceding sentence to the
extent permitted by Section 3.06(a)(ii), (iii) and (vii). If the Special
Servicer is acting pursuant to Instructions, the cost and expenses in any such
proceeding shall be paid by the Directing Certificateholders or the Special
Servicer, without reimbursement therefor by the Trust Fund.
(c) If the Special Servicer elects to proceed with a non-judicial
foreclosure in accordance with the laws of the state where the Mortgaged
Property is located, the Special Servicer shall not be required to pursue a
deficiency judgment against the related Borrower or any other liable party if
the laws of the state do not permit such a deficiency judgment after a
non-judicial foreclosure or if the Special Servicer determines, in its best
judgment, that the likely recovery if a
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deficiency judgment is obtained will not be sufficient to warrant the cost,
time, expense and/or exposure of pursuing the deficiency judgment and such
determination is evidenced by an Officers' Certificate delivered to the
Trustee.
(d) In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee, or to its nominee (which shall not include the
Special Servicer) or a separate trustee or co-trustee on behalf of the Trustee
as holder of the Lower-Tier Regular Interests and Certificateholders.
Notwithstanding any such acquisition of title and cancellation of the related
Mortgage Loan, such Mortgage Loan shall (except for purposes of Section 9.01)
be considered to be an REO Loan held in the Trust Fund until such time as the
related REO Property shall be sold by the Trust Fund and shall be reduced only
by collections net of expenses. Consistent with the foregoing, for purposes of
all calculations hereunder, so long as such Mortgage Loan shall be considered
to be an outstanding Mortgage Loan:
(i) it shall be assumed that, notwithstanding that the indebtedness
evidenced by the related Note shall have been discharged, such Note and, for
purposes of determining the Stated Principal Balance thereof, the related
amortization schedule in effect at the time of any such acquisition of title
remain in effect; and
(ii) Subject to Section 1.02(b), Net REO Proceeds received in any
month shall be applied to amounts that would have been payable under the
related Note in accordance with the terms of such Note. In the absence of such
terms, Net REO Proceeds shall be deemed to have been received first in payment
of the accrued interest (not including Excess Interest) that remained unpaid on
the date that the related REO Property was acquired by the Trust Fund; second
in respect of the delinquent principal installments that remained unpaid on
such date; and thereafter, Net REO Proceeds received in any month shall be
applied to the payment of installments of principal and accrued interest on
such Mortgage Loan deemed to be due and payable in accordance with the terms of
such Note and such amortization schedule until such principal has been paid in
full and then to Excess Interest and other amounts due under such Mortgage
Loan. If such Net REO Proceeds exceed the Monthly Payment then payable, the
excess shall be treated as a Principal Prepayment received in respect of such
Mortgage Loan.
(e) Notwithstanding any provision herein to the contrary, the Special
Servicer shall not acquire for the benefit of the Trust Fund any personal
property pursuant to this Section 3.10 unless either:
(i) such personal property is incident to real property (within the
meaning of Section 856(e)(1) of the Code) so acquired by the Special Servicer
for the benefit of the Trust Fund; or
(ii) the Special Servicer shall have requested and received an
Opinion of Counsel (which opinion shall be an expense of the Lower-Tier REMIC)
to the effect that the holding of such personal property by the Lower-Tier
REMIC will not cause the imposition of a tax on the Lower-Tier REMIC or
Upper-Tier REMIC under the REMIC Provisions or cause the
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Lower-Tier REMIC or Upper-Tier REMIC to fail to qualify as a REMIC at any time
that any Certificate is outstanding.
(f) Notwithstanding any provision to the contrary in this Agreement, the
Special Servicer shall not, on behalf of the Trust Fund, obtain title to any
direct or indirect partnership interest or other equity interest in any
Borrower pledged pursuant to any pledge agreement unless the Special Servicer
shall have requested and received an Opinion of Counsel (which opinion shall be
an expense of the Trust Fund) to the effect that the holding of such
partnership interest or other equity interest by the Trust Fund will not cause
the imposition of a tax on the Lower-Tier REMIC or Upper-Tier REMIC under the
REMIC Provisions or cause the Lower-Tier REMIC or Upper-Tier REMIC to fail to
qualify as a REMIC at any time that any Certificate is outstanding.
(g) Notwithstanding any provision to the contrary contained in this
Agreement, the Special Servicer shall not, on behalf of the Trust Fund, obtain
title to a Mortgaged Property as a result of or in lieu of foreclosure or
otherwise, obtain title to any direct or indirect partnership interest in any
Borrower pledged pursuant to a pledge agreement and thereby be the beneficial
owner of a Mortgaged Property, and shall not otherwise acquire possession of,
or take any other action with respect to, any Mortgaged Property if, as a
result of any such action, the Trustee, for the Trust Fund or the
Certificateholders, would be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or "operator" of such
Mortgaged Property within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from time to time,
or any comparable law, unless the Special Servicer has previously determined in
accordance with the Servicing Standard, based on an updated environmental
assessment report prepared by an Independent Person who regularly conducts
environmental audits, that:
(h) such Mortgaged Property is in compliance with applicable
environmental laws or, if not, after consultation with an environmental
consultant, that it would be in the best economic interest of the Trust Fund to
take such actions as are necessary to bring such Mortgaged Property in
compliance therewith, and
(i) there are no circumstances present at such Mortgaged Property
relating to the use, management or disposal of any Hazardous Materials for
which investigation, testing, monitoring, containment, clean-up or remediation
could be required under any currently effective federal, state or local law or
regulation, or that, if any such Hazardous Materials are present for which such
action could be required, after consultation with an environmental consultant,
it would be in the best economic interest of the Trust Fund to take such
actions with respect to the affected Mortgaged Property.
In the event that the environmental assessment first obtained by the
Special Servicer with respect to a Mortgaged Property indicates that such
Mortgaged Property may not be in compliance with applicable environmental laws
or that Hazardous Materials may be present but does not definitively establish
such fact, the Special Servicer shall cause such further environmental tests to
be conducted by an Independent Person who regularly conducts such tests as the
Special Servicer shall deem prudent to protect the interests of
Certificateholders. Any such tests shall be deemed
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part of the environmental assessment obtained by the Special Servicer for
purposes of this Section 3.10.
(j) The environmental assessment contemplated by Section 3.10(g) shall be
prepared within three months of the determination that such assessment is
required by any Independent Person who regularly conducts environmental audits
for purchasers of commercial property where the Mortgaged Property is located,
as determined by the Special Servicer in a manner consistent with the Servicing
Standard. The Servicer shall advance the cost of preparation of such
environmental assessments unless the Servicer determines, in its good faith
judgment, that such Advance would be a Nonrecoverable Advance. The Servicer
shall be entitled to reimbursement of Advances (with interest at the Advance
Rate) made pursuant to the preceding sentence in the manner set forth in
Section 3.06.
(k) If the Special Servicer determines pursuant to Section 3.10(g)(i)
that a Mortgaged Property is not in compliance with applicable environmental
laws but that it is in the best economic interest of the Trust Fund to take
such actions as are necessary to bring such Mortgaged Property in compliance
therewith, or if the Special Servicer determines pursuant to Section
3.10(g)(ii) that the circumstances referred to therein relating to Hazardous
Materials are present but that it is in the best economic interest of the Trust
Fund to take such action with respect to the containment, clean-up or
remediation of Hazardous Materials affecting such Mortgaged Property as is
required by law or regulation, the Special Servicer shall take such action as
it deems to be in the best economic interest of the Trust Fund, but only if the
Trustee has mailed notice to the Holders of the Regular Certificates of such
proposed action, which notice shall be prepared by the Special Servicer, and
only if the Trustee does not receive, within 30 days of such notification,
instructions from the Holders of greater than 50% of the aggregate Voting
Rights of such Classes directing the Special Servicer not to take such action.
Notwithstanding the foregoing, if the Special Servicer reasonably determines
that it is likely that within such 30-day period irreparable environmental harm
to such Mortgage Property would result from the presence of such Hazardous
Materials and provides a prior written statement to the Trustee setting forth
the basis for such determination, then the Special Servicer may take such
action to remedy such condition as may be consistent with the Servicing
Standard. None of the Trustee, the Servicer or the Special Servicer shall be
obligated to take any action or not take any action pursuant to this Section
3.10(i) at the direction of the Certificateholders unless the
Certificateholders agree to indemnify the Trustee, the Servicer and the Special
Servicer with respect to such action or inaction. The Special Servicer shall
advance the cost of any such compliance, containment, clean-up or remediation
unless the Special Servicer determines, in its good faith judgment, that such
Advance would constitute a Nonrecoverable Advance.
(l) The Special Servicer shall report to the IRS and to the related
Borrower, in the manner required by applicable law, the information required to
be reported regarding any Mortgaged Property which is abandoned or foreclosed
or regarding any cancellation of indebtedness with respect to any Mortgage
Loan. The Special Servicer shall deliver a copy of any such report to the
Trustee.
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(m) The costs of any Updated Appraisal obtained pursuant to this Section
3.10 shall be paid by the Servicer as an Advance and shall be reimbursable from
the Collection Account (or from the Collateral Account to the extent Advances
are otherwise reimbursable therefrom pursuant to this Section 3.10).
SECTION 3.11. Trustee to Cooperate; Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full has been escrowed in a manner
customary for such purposes, the Servicer shall immediately notify the Trustee
or the Custodian by a certification (which certification shall include a
statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 3.05 have been or will be so deposited)
of a Servicing Officer and shall request delivery to it of the Mortgage File.
No expenses incurred in connection with any instrument of satisfaction or deed
of reconveyance shall be chargeable to the Trust Fund.
From time to time upon request of the Servicer or Special Servicer and
delivery to the Trustee and the Custodian of a Request for Release, the Trustee
shall promptly cause the Custodian to release the Mortgage File (or any portion
thereof) designated in such Request for Release to the Servicer or Special
Servicer, as applicable. Upon return of the foregoing to the Custodian, or in
the event of a liquidation or conversion of the Mortgage Loan into an REO
Property, receipt by the Trustee of a certificate of a Servicing Officer
stating that such Mortgage Loan was liquidated and that all amounts received or
to be received in connection with such liquidation which are required to be
deposited into the Collection Account or Distribution Account have been so
deposited, or that such Mortgage Loan has become an REO Property, the Custodian
shall deliver a copy of the Request for Release to the Servicer or Special
Servicer, as applicable.
Upon written certification of a Servicing Officer, the Trustee shall
execute and deliver to the Special Servicer any court pleadings, requests for
trustee's sale or other documents prepared by the Special Servicer, its agents
or attorneys, necessary to the foreclosure or trustee's sale in respect of a
Mortgaged Property or to any legal action brought to obtain judgment against
any Borrower on the Note or Mortgage or to obtain a deficiency judgment, or to
enforce any other remedies or rights provided by the Note or Mortgage or
otherwise available at law or in equity. Each such certification shall include
a request that such pleadings or documents be executed by the Trustee and a
statement as to the reason such documents or pleadings are required, and that
the execution and delivery thereof by the Trustee will not invalidate or
otherwise affect the lien of the Mortgage, except for the termination of such a
lien upon completion of the foreclosure or trustee's sale.
SECTION 3.12. Servicing Fees, Trustee Fees and Special Servicing
Compensation.
(a) As compensation for its activities hereunder, the Servicer shall be
entitled with respect to each Mortgage Loan to the Servicing Fee, which shall
be payable from amounts on deposit in the Collection Account as set forth in
Section 3.06(iv). The Servicer's rights to the Servicing Fee may not be
transferred in whole or in part except in connection with the transfer of all
of the Servicer's responsibilities and obligations under this Agreement. In
addition, the Servicer shall be entitled to receive, as additional Servicing
Compensation, to the extent permitted by
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applicable law and the related Mortgage Loans, any late payment charges,
Assumption Fees, loan service transaction fees, loan modification fees,
extension fees, beneficiary statement charges or similar items (but not
including any Prepayment Premiums) in each case to the extent received and not
required to be deposited or retained in the Collection Account pursuant to
Section 3.05; the Servicer shall also be entitled pursuant to, and to the
extent provided in, Sections 3.06(iv) and 3.07(b) to withdraw from the
Collection Account and to receive from any Borrower Accounts (to the extent not
payable to the related Borrower under the Mortgage Loan or applicable law), the
Distribution Account, Upper-Tier Distribution Account, Default Interest
Distribution Account, and the Excess Interest Distribution Account, any
interest or other income earned on deposits therein.
As compensation for its activities hereunder on each Distribution Date,
the Trustee shall be entitled with respect to each Mortgage Loan to the Trustee
Fee, which shall be payable from amounts on deposit in the Collection Account
as set forth in Section 3.06(v). The Trustee shall pay the routine fees and
expenses of the Certificate Registrar, the Paying Agent, the Custodian and the
Authenticating Agent. The Trustee's rights to the Trustee Fee may not be
transferred in whole or in part except in connection with the transfer of all
of the Trustee's responsibilities and obligations under this Agreement.
Except as otherwise provided herein, the Servicer shall pay all expenses
incurred by it in connection with its servicing activities hereunder, including
all fees of any sub-servicers retained by it. Except as otherwise provided
herein, the Trustee shall pay all expenses incurred by it in connection with
its activities hereunder.
(b) As compensation for its activities hereunder, the Special Servicer
shall be entitled with respect to each Specially Serviced Mortgage Loan to the
Special Servicing Fee, which shall be payable from amounts on deposit in the
Collection Account as set forth in Section 3.06(iv). In addition, the Special
Servicer shall be entitled to, with respect to each Mortgage Loan, the
Additional Servicing Fee for performing the duties set forth in Section
3.19(c), which fee shall be payable from amounts on deposit in the Collection
Account pursuant to Section 3.06(iv). The Special Servicer's rights to the
Special Servicing Fee and Additional Servicing Fee may not be transferred in
whole or in part except in connection with the transfer of all of the Special
Servicer's responsibilities and obligations under this Agreement. In addition,
the Special Servicer shall be entitled to receive, as additional servicing
compensation, (i) to the extent permitted by applicable law and the related
Loan Documents, any Assumption Fees, loan service transaction fees, demand
fees, statement charges and other fees relating to any Specially Serviced
Mortgage Loan or with respect to servicing activities performed by the Special
Servicer and, for any modification, extension or other action by the Special
Servicer payable by the related Borrower in connection therewith.
Except as otherwise provided herein, the Special Servicer shall pay all
expenses incurred by it in connection with its servicing activities hereunder.
(c) Reserved.
(d) Reserved.
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(e) The Servicer, Special Servicer and Trustee shall be entitled to
reimbursement from the Trust Fund for the costs and expenses incurred by them
in the performance of their duties under this Agreement which are
"unanticipated expenses incurred by the REMIC" within the meaning of Treasury
Regulations Section 1.860G-1(b)(3)(iii). Such expenses shall include, by way of
example and not by way of limitation, environmental assessments, Updated
Appraisals and appraisals in connection with foreclosure, the fees and expenses
of any administrative or judicial proceeding and expenses expressly identified
as reimbursable in Section 3.06(vii).
(f) No provision of this Agreement or of the Certificates shall require
the Servicer, the Special Servicer, the Trustee or the Fiscal Agent to expend
or risk their own funds or otherwise incur any financial liability in the
performance of any of their duties hereunder or thereunder, or in the exercise
of any of their rights or powers, if, in the good faith business judgment of
the Servicer, Special Servicer, Trustee or Fiscal Agent, as the case may be,
repayment of such funds would not be ultimately recoverable from late payments,
Net Insurance Proceeds, Net Liquidation Proceeds and other collections on or in
respect of the Mortgage Loans, or from adequate indemnity from other assets
comprising the Trust Fund against such risk or liability.
If the Servicer, the Special Servicer or the Trustee receives a request
or inquiry from a Borrower, any Certificateholder or any other Person the
response to which would, in the Servicer's or the Trustee's good faith business
judgment require the assistance of Independent legal counsel or other
consultant to the Servicer, the Special Servicer or the Trustee, the cost of
which would not be an expense of the Trust Fund hereunder, then the Servicer,
the Special Servicer or the Trustee, as the case may be, shall not be required
to take any action in response to such request or inquiry unless the Borrower
or such Certificateholder or such other Person, as applicable,
makesarrangements for the payment of the Servicer's, the Special Servicer's or
the Trustee's expenses associated with such counsel (including, without
limitation, posting an advance payment for such expenses) satisfactory to the
Servicer, the Special Servicer or the Trustee, as the case may be, in its sole
discretion. Unless such arrangements have been made, the Servicer, the Special
Servicer or the Trustee, as the case may be, shall have no liability to any
Person for the failure to respond to such request or inquiry.
SECTION 3.13. Reports to the Trustee; Collection Account Statements.
(a) The Servicer shall deliver to the Trustee and the Special Servicer,
no later than 2:00 p.m. Central time on the Servicer Remittance Date prior to
each Distribution Date, the Servicer Remittance Report with respect to the
related Distribution Date (which shall include, without limitation, the amount
of Available Funds for such related Collection Period) including a written
statement of anticipated P&I Advances for the related Distribution Date. The
Servicer's responsibilities under this Section 3.13(a) with respect to REO
Loans shall be subject to the satisfaction of the Special Servicer's
obligations under Section 3.26.
(b) For so long as the Servicer makes deposits into and withdrawals from
the Collection Account, not later than fifteen days after each Distribution
Date, the Servicer shall forward to the Trustee a statement prepared by the
Servicer setting forth the status of the Collection Account as of the close of
business on the last Business Day of the related Collection Period and showing
the
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aggregate amount of deposits into and withdrawals from the Collection Account
of each category of deposit specified in Section 3.05 and each category of
withdrawal specified in Section 3.06 for the related Collection Period. The
Trustee and its agents and attorneys may at any time during normal business
hours, upon reasonable notice, inspect and copy the books, records and accounts
of the Servicer solely relating to the Mortgage Loans and the performance of
its duties hereunder.
(c) The Trustee shall be entitled to rely conclusively on and shall not
be responsible for the content or accuracy of any information provided to it by
the Servicer or the Special Servicer pursuant to this Agreement.
SECTION 3.14. Annual Statement as to Compliance.
The Servicer and the Special Servicer (the "reporting person") each shall
deliver to the Trustee, the Depositor and to the Rating Agencies on or before
March 15 of each year, beginning with March 15, 199__, an Officer's Certificate
stating, as to each signatory thereof, (i) that a review of the activities of
the reporting person during the preceding calendar year (or such shorter period
from the Closing Date to the end of the related calendar year) and of its
performance under this Agreement has been made under such officer's
supervision, (ii) that, to the best of such officer's knowledge, based on such
review, the reporting person has fulfilled all of its obligations under this
Agreement throughout such year (or such shorter period), or, if there has been
a default in the fulfillment of any such obligation, specifying each such
default known to such officer, the nature and status thereof and what action it
proposes to take with respect thereto, (iii) that, to the best of such
officer's knowledge, each related sub-servicer has fulfilled its obligations
under its sub-servicing agreement in all material respects, or, if there has
been a material default in the fulfillment of such obligations, specifying each
such default known to such officer and the nature and status thereof, and (iv)
whether it has received any notice regarding qualification, or challenging the
status, of the Upper-Tier REMIC or Lower-Tier REMIC as a REMIC from the IRS or
any other governmental agency or body.
SECTION 3.15. Annual Independent Public Accountants' Servicing Report.
On or before March 15 of each year, beginning with March 15, 199__, the
Servicer and the Special Servicer (the "reporting person") each at the
reporting person's expense shall cause a firm of nationally recognized
Independent public accountants (who may also render other services to the
reporting person) which is a member of the American Institute of Certified
Public Accountants to furnish a statement (an "Accountant's Statement") to the
Trustee, the Depositor and to the Rating Agencies, to the effect that such firm
has examined certain documents and records relating to the servicing of the
similar mortgage loans under similar agreements and that, on the basis of such
examination conducted substantially in compliance with generally accepted
auditing standards and the Uniform Single Attestation Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for FHLMC, such servicing
has been conducted in compliance with similar agreements except for such
significant exceptions or errors in records that, in the opinion of such firm,
generally accepted auditing standards and the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC require it to report, in which case such exceptions and errors shall be
so reported. Each reporting person shall obtain from the
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related accountants, or shall prepare, an electronic version of each
Accountant's Statement and provide such electronic version to the Trustee for
filing in accordance with the procedures set forth in Section 3.22 hereof. With
respect to any electronic version of an Accountant's Statement prepared by the
reporting person, the reporting person shall receive written confirmation from
the related accountants
SECTION 3.16. Access to Certain Documentation.
The Servicer and Special Servicer shall provide to any Certificateholders
that are federally insured financial institutions, the Federal Reserve Board,
the FDIC and the OTS and the supervisory agents and examiners of such boards
and such corporations, and any other governmental or regulatory body to the
jurisdiction of which any Certificateholder is subject, access to the
documentation regarding the Mortgage Loans required by applicable regulations
of the Federal Reserve Board, FDIC, OTS or any such governmental or regulatory
body, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer and
Special Servicer. Nothing in this Section 3.16 shall detract from the
obligation of the Servicer and Special Servicer to observe any applicable law
prohibiting disclosure of information with respect to the Borrowers, and the
failure of the Servicer and Special Servicer to provide access as provided in
this Section 3.16 as a result of such obligation shall not constitute a breach
of this Section 3.16.
SECTION 3.17. Title and Management of REO Properties and REO Account
Properties.
(a) In the event that title to any Mortgaged Property is acquired for the
benefit of Certificateholders in foreclosure, by deed in lieu of foreclosure or
upon abandonment or reclamation from bankruptcy, the deed or certificate of
sale shall be taken in the name of the Trustee, or its nominee (which shall not
include the Servicer), or a separate trustee or co-trustee, on behalf of the
Trust Fund. The Special Servicer, on behalf of the Trust Fund, shall dispose of
any REO Property within two years after the Trust Fund acquires ownership of
such REO Property for purposes of Section 860G(a)(8) of the Code, unless (i)
the Special Servicer on behalf of the Lower-Tier REMIC has applied for an
extension of such two-year period pursuant to Sections 856(e)(3) and
860G(a)(8)(A) of the Code, in which case the Special Servicer shall sell such
REO Property within the applicable extension period or (ii) the Special
Servicer seeks and subsequently receives an Opinion of Counsel (which opinion
shall be an expense of the Trust Fund), addressed to the Special Servicer and
Trustee, to the effect that the holding by the Trust Fund of such REO Property
for an additional specified period will not cause such REO Property to fail to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code (determined without regard to the exception applicable for purposes of
Section 860D(a) of the Code) at any time that any Certificate is outstanding,
in which event such two-year period shall be extended by such additional
specified period subject to any conditions set forth in such Opinion of
Counsel. The Special Servicer, on behalf of the Trust Fund, shall dispose of
any REO Property held by the Trust Fund prior to the last day of such period
(taking into account extensions) by which such REO Property is required to be
disposed of pursuant to the provisions of the immediately preceding sentence in
a manner provided under Section 3.18 hereof. The Special Servicer shall manage,
conserve, protect and operate each REO Property for the Certificateholders
solely for the purpose of its prompt
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disposition and sale in a manner which does not cause such REO Property to fail
to qualify as "foreclosure property" within the meaning of Section 860G(a)(8)
of the Code (determined without regard to the exception applicable for purposes
of Section 860D(a)).
(b) The Special Servicer shall have full power and authority, subject
only to the specific requirements and prohibitions of this Agreement, to do any
and all things in connection with any REO Property as are consistent with the
manner in which the Special Servicer manages and operates similar property
owned or managed by the Special Servicer or any of its Affiliates, all on such
terms and for such period as the Special Servicer deems to be in the best
interests of Certificateholders, and, in connection therewith, the Special
Servicer shall agree to the payment of management fees that are consistent with
general market standards. The Special Servicer shall segregate and hold all
revenues received by it with respect to any REO Property separate and apart
from its own funds and general assets and shall establish and maintain with
respect to any REO Property a segregated custodial account (each, an "REO
Account"), each of which shall be an Eligible Account and shall be entitled
___________________, as Trustee, in trust for Holders of Asset
_____________________ Corporation, Commercial Mortgage Pass-Through
Certificates, Series 199_-_, REO Account." The Special Servicer shall be
entitled to withdraw for its account any interest or investment income earned
on funds deposited in an REO Account to the extent provided in Section 3.07(b).
The Special Servicer shall deposit or cause to be deposited in the REO Account
within one Business Day after receipt all revenues received by it with respect
to any REO Property (other than Liquidation Proceeds), and shall withdraw
therefrom funds necessary for the proper operation, management and maintenance
of such REO Property and for other Property Protection Expenses with respect to
such REO Property, including:
(i) all insurance premiums due and payable in respect of any
REO Property;
(ii) all real estate taxes and assessments in respect of any REO
Property that may result in the imposition of a lien thereon;
(iii) all costs and expenses reasonable and necessary to protect,
maintain, manage, operate, repair and restore any REO Property; and
(iv) any taxes imposed on the Upper Tier REMIC or Lower-Tier REMIC
in respect of net income from foreclosure property in accordance with Section
4.05.
To the extent that such REO Proceeds are insufficient for the purposes
set forth in clauses (i) through (iii) above and the Special Servicer has
provided written notice of such shortfall to the Servicer at least five
Business Days prior to the date that such amounts are due, the Servicer shall
advance the amount of such shortfall unless the Servicer determines, in its
good faith judgment, that such Advance would be a Nonrecoverable Advance. If
the Servicer does not make any such Advance in violation of the immediately
preceding sentence, the Trustee shall make such Advance; and if the Trustee
fails to make any such Advance, the Fiscal Agent shall make such Advance,
unless in either case, the Trustee or the Fiscal Agent determines that such
Advance would be a Nonrecoverable Advance. The Trustee and the Fiscal Agent
shall be entitled to rely, conclusively, on any determination by the Servicer
that an Advance, if made, would be a Nonrecoverable Advance. The Trustee and
the Fiscal Agent, in determining whether or not a proposed Advance
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would be a Nonrecoverable Advance, shall be subject to the standards applicable
to the Servicer hereunder. The Servicer, the Trustee or the Fiscal Agent, as
applicable, shall be entitled to reimbursement of such Advances (with interest
at the Advance Rate) made pursuant to the preceding sentence, to the extent set
forth in Section 3.06. The Special Servicer shall withdraw from each REO
Account and remit to the Servicer for deposit into the Collection Account on a
monthly basis prior to the related Servicer Remittance Date the Net REO
Proceeds received or collected from each REO Property, except that in
determining the amount of such Net REO Proceeds, the Special Servicer may
retain in each REO Account reasonable reserves for repairs, replacements and
necessary capital improvements and other related expenses.
Notwithstanding the foregoing, the Special Servicer shall not:
(i) permit the Trust Fund to enter into, renew or extend any New
Lease, if the New Lease by its terms will give rise to any income that does not
constitute Rents from Real Property;
(ii) permit any amount to be received or accrued under any New
Lease, other than amounts that will constitute Rents from Real Property;
(iii) authorize or permit any construction on any REO Property,
other than the repair or maintenance thereof or the completion of a building or
other improvement thereon, and then only if more than ten percent of the
construction of such building or other improvement was completed before default
on the related Mortgage Loan became imminent, all within the meaning of Section
856(e)(4)(B) of the Code; or
(iv) Directly Operate or allow any Person to Directly Operate any
REO Property on any date more than 90 days after its date of acquisition by the
Trust Fund, unless such Person is an Independent Contractor; unless, in any
such case, the Special Servicer has requested and received an Opinion of
Counsel addressed to the Special Servicer and the Trustee (which opinion shall
be an expense of the Trust Fund) to the effect that such action will not cause
such REO Property to fail to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code (determined without regard to the
exception applicable for purposes of Section 860D(a) of the Code) at any time
that it is held by the Trust Fund, in which case the Special Servicer may take
such actions as are specified in such Opinion of Counsel.
The Special Servicer shall be required to contract with an Independent
Contractor (acceptable to each Rating Agency as evidenced by written
confirmation that contracting with such Independent Contractor would not, in
and of itself cause a downgrade, qualification or withdrawal of the then
current ratings assigned to any Class of Certificates), the fees and expenses
of which shall be an expense of the Trust Fund and payable out of REO Proceeds,
for the operation and management of any REO Property, within 90 days of the
Trust Fund's acquisition thereof (unless the Special Servicer shall have
provided the Trustee with an Opinion of Counsel that the operation and
management of any REO Property other than through an Independent Contractor
shall not cause such REO Property to fail to qualify as "foreclosure property"
within the meaning of Code Section 860G(a)(8)) (which opinion shall be an
expense of the Trust Fund), provided that:
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(i) the terms and conditions of any such contract shall be
reasonable and customary for the area and type of property and shall not be
inconsistent herewith;
(ii) any such contract shall require, or shall be administered to
require, that the Independent Contractor pay all costs and expenses incurred in
connection with the operation and management of such REO Property, including
those listed above, and remit all related revenues (net of such costs and
expenses) to the Special Servicer as soon as practicable, but in no event later
than thirty days following the receipt thereof by such Independent Contractor;
(iii) none of the provisions of this Section 3.17(b) relating to
any such contract or to actions taken through any such Independent Contractor
shall be deemed to relieve the Special Servicer of any of its duties and
obligations to the Trust Fund or the Trustee on behalf of the
Certificateholders with respect to the operation and management of any such REO
Property; and
(iv) the Special Servicer shall be obligated with respect thereto
to the same extent as if it alone were performing all duties and obligations in
connection with the operation and management of such REO Property.
The Special Servicer shall be entitled to enter into any agreement with
any Independent Contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Special Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification.
(c) Promptly following any acquisition by the Trust Fund of an REO
Property, the Servicer shall obtain an Updated Appraisal thereof, but only in
the event that any Updated Appraisal with respect thereto is more than 12
months old, in order to determine the fair market value of such REO Property
and shall notify the Depositor, the Special Servicer and the Trustee hereto of
the results of such appraisal. Any such appraisal shall be conducted in
accordance with MAI standards and the cost thereof shall be an expense of the
Trust Fund.
(d) When and as necessary, the Special Servicer shall send to the Trustee
a statement prepared by the Special Servicer setting forth the amount of net
income or net loss, as determined for federal income tax purposes, resulting
from the operation and management of a trade or business on, the furnishing or
rendering of a non-customary service to the tenants of, or the receipt of any
other amount not constituting Rents from Real Property in respect of, any REO
Property in accordance with Sections 3.17(a) and 3.17(b).
SECTION 3.18. Sale of Specially Serviced Mortgage Loans and REO
Properties.
(a) With respect to any Specially Serviced Mortgage Loan or REO Property
which the Special Servicer has determined to sell in accordance with Section
3.10, the Special Servicer shall deliver to the Trustee an Officers'
Certificate to the effect that pursuant to Section 3.10, the Special Servicer
has determined to sell such Specially Serviced Mortgage Loan or REO Property in
accordance with this Section 3.18. The Special Servicer may then offer to sell
to any Person any Specially Serviced Mortgage Loan or any REO Property or,
subject to the following sentence, purchase any such Specially Serviced
Mortgage Loan or REO Property (in each case at the
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Repurchase Price therefor), but shall, in any event, so offer to sell any REO
Property no later than the time determined by the Special Servicer to be
sufficient to result in the sale of such REO Property within the period
specified in Section 3.17(a). The Special Servicer shall deliver such Officers'
Certificate and give the Trustee not less than ten Business Days prior written
notice of its intention to sell any Specially Serviced Mortgage Loan or REO
Property, in which case the Special Servicer shall accept the highest offer (of
at least three offers) received from any Person for any Specially Serviced
Mortgage Loan or any REO Property in an amount at least equal to the Repurchase
Price therefor or, at its option, if it has received no offer at least equal to
the Repurchase Price therefor, purchase the Specially Serviced Mortgage Loan or
REO Property at the Repurchase Price.
In the absence of any such offer or purchase by the Special Servicer, the
Special Servicer shall accept the highest offer received from any Person that
is determined by the Special Servicer to be a fair price, as determined in
accordance with Section 3.18(b), for such Specially Serviced Mortgage Loan or
REO Property, if the highest offeror is a Person other than an Interested
Person, or is determined to be a fair price by the Trustee in accordance with
Section 3.18(b), if the highest offeror is an Interested Person; provided, that
the Trustee shall be entitled to engage, at the expense of the Trust Fund, an
Independent appraiser to determine whether the highest offer is a fair price
and, further provided, that if the highest offeror is an Interested Person such
offer shall not be accepted if it is less than the Repurchase Price, unless the
Rating Agencies have confirmed, in writing, that such acceptance will not, in
itself, result in the qualification, downgrade or withdrawal of the then-
current ratings assigned to the Certificates. Notwithstanding anything to the
contrary herein, neither the Trustee, in its individual capacity, nor any of
its Affiliates may make an offer or purchase any Specially Serviced Mortgage
Loan or any REO Property pursuant hereto.
The Special Servicer shall not be obligated by either of the foregoing
paragraphs or otherwise to accept the highest offer if the Special Servicer
determines, in accordance with the Servicing Standard, that rejection of such
offer would be in the best interests of the Certificateholders. In addition,
the Special Servicer may accept a lower offer if it determines, in accordance
with the Servicing Standard, that acceptance of such offer would be in the best
interests of the Certificateholders (for example, if the prospective buyer
making the lower offer is more likely to perform its obligations, or the terms
offered by the prospective buyer making the lower offer are more favorable),
provided that the offeror is not an Affiliate of the Special Servicer. In the
event that the Special Servicer determines with respect to any REO Property
that the offers being made with respect thereto are not in the best interests
of the Certificateholders and that the end of the two-year period referred to
in Section 3.17(a) with respect to such REO Property is approaching, the
Special Servicer shall seek an extension of such two-year period in the manner
described in Section 3.17(a); provided, however, that the Special Servicer
shall use its best efforts, consistent with the Servicing Standard, to sell any
REO Property prior to the Rated Final Distribution Date.
(b) In determining whether any offer received from an Interested Person
represents a fair price for any Specially Serviced Mortgage Loan or any REO
Property, the Trustee may conclusively rely on the opinion of an Independent
appraiser or other expert in real estate matters retained by the Trustee at the
expense of the Trust Fund. In determining whether any offer
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constitutes a fair price for any Specially Serviced Mortgage Loan or any REO
Property, the Special Servicer (if the highest offeror is not an Interested
Person) or the Trustee (or, if applicable, such appraiser) shall take into
account, and any appraiser or other expert in real estate matters shall be
instructed to take into account, as applicable, among other factors, any
Updated Appraisal previously obtained, the period and amount of any delinquency
on the affected Specially Serviced Mortgage Loan, the physical (including
environmental) condition of the related Mortgaged Property or such REO
Property, the state of the local economy and the Trust Fund's obligation to
dispose of any REO Property within the time period specified in Section
3.17(a).
(c) Subject to the provisions of Section 3.17, the Special Servicer shall
act on behalf of the Trust Fund in negotiating and taking any other action
necessary or appropriate in connection with the sale of any Specially Serviced
Mortgage Loan or REO Property, including the collection of all amounts payable
in connection therewith. Any sale of a Specially Serviced Mortgage Loan or any
REO Property shall be without recourse to, or representation or warranty by,
the Trustee, the Fiscal Agent, the Depositor, the Servicer, the Special
Servicer or the Trust Fund (except that any contract of sale and assignment and
conveyance documents may contain customary warranties of title, so long as the
only recourse for breach thereof is to the Trust Fund), and, if such sale is
consummated in accordance with the duties of the Special Servicer, the
Servicer, the Depositor, the Fiscal Agent and the Trustee pursuant to the terms
of this Agreement, no such Person who so performed shall have any liability to
the Trust Fund or any Certificateholder with respect to the purchase price
therefor accepted by the Special Servicer or, if the offeror is an Interested
Person, the Servicer (or the Trustee, if the Servicer is an offeror).
(d) The Special Servicer shall file information returns regarding the
abandonment or foreclosure of Mortgaged Properties with IRS at the time and in
the manner required by the Code.
(e) The proceeds of any sale after deduction of the expenses of such sale
incurred in connection therewith shall be promptly, and in any event within one
Business Day following receipt thereof, deposited in the Collection Account in
accordance with Section 3.05(a)(iv).
SECTION 3.19. Additional Obligations of the Servicer and Special
Servicer; Inspections.
The Special Servicer shall inspect or cause to be inspected (at its own
expense) each Mortgaged Property at such times and in such manner as are
consistent with the Servicing Standard, but in any event shall inspect each
Mortgaged Property securing a Note with a Stated Principal Balance (or in the
case of a Note secured by more than one Mortgaged Property, having an Allocated
Loan Amount) of (A) $2,000,000 or more at least once every 12 months and (B)
less than $2,000,000 at least once every 24 months, in each case commencing in
_____________ 199___ (or at such lesser frequency as each Rating Agency shall
have confirmed in writing to the Servicer or the Special Servicer, will not
result a downgrade, qualification or withdrawal of the then current ratings
assigned to any Class of the Certificates), provided, that if any Mortgage Loan
(a) becomes a Specially Serviced Mortgaged Loan, (b) is delinquent for 60 days
or (c) has a debt service coverage ratio of less than 1.0, each related
Mortgaged Property shall be inspected by the Special Servicer as soon as
practicable and thereafter at least every 12 months for so long as any Monthly
Payment with respect to such Mortgage Loan remains delinquent.
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SECTION 3.20. Authenticating Agent.
The Trustee may appoint an Authenticating Agent to execute and to
authenticate Certificates. The Authenticating Agent must be acceptable to the
Depositor and the Servicer and must be a corporation organized and doing
business under the laws of the United States of America or any state, having a
principal office and place of business in a state and city acceptable to the
Depositor and the Servicer, having a combined capital and surplus of at least
$15,000,000, authorized under such laws to do a trust business and subject to
supervision or examination by federal or state authorities. The Trustee shall
serve as the initial Authenticating Agent and the Trustee hereby accepts such
appointment.
Any corporation into which the Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Authenticating Agent
shall be party, or any corporation succeeding to the corporate agency business
of the Authenticating Agent, shall be the Authenticating Agent without the
execution or filing of any paper or any further act on the part of the Trustee
or the Authenticating Agent.
The Authenticating Agent may at any time resign by giving at least 30
days' advance written notice of resignation to the Trustee, the Depositor and
the Servicer. The Trustee may at any time terminate the agency of the
Authenticating Agent by giving written notice of termination to the
Authenticating Agent, the Depositor and the Servicer. Upon receiving a notice
of resignation or upon such a termination, or in case at any time the
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 3.20, the Trustee promptly shall appoint a successor
Authenticating Agent, which shall be acceptable to the Servicer and the
Depositor, and shall mail notice of such appointment to all Certificateholders.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers, duties and responsibilities of
its predecessor hereunder, with like effect as if originally named as
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section 3.20.
The Authenticating Agent shall have no responsibility or liability for
any action taken by it as such at the direction of the Trustee. Any reasonable
compensation paid to the Authenticating Agent shall be an unreimbursable
expense of the Trustee.
SECTION 3.21. Appointment of Custodians.
The Trustee may appoint one or more Custodians to hold all or a portion
of the Mortgage Files as agent for the Trustee, by entering into a Custodial
Agreement. The Trustee agrees to comply with the terms of each Custodial
Agreement and to enforce the terms and provisions thereof against the Custodian
for the benefit of the Certificateholders. Each Custodian shall be a depository
institution subject to supervision by federal or state authority, shall have a
combined capital and surplus of at least $10,000,000, shall have a long-term
debt rating of at least "BBB" from Fitch and DCR and "Baa2" from Moody's ,
unless the Trustee shall have received prior written confirmation from each
Rating Agency that the appointment of such Rating Agency would not cause such
Rating Agency to withdraw, qualify or downgrade any of its then-current
ratings on the Certificates, and
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shall be qualified to do business in the jurisdiction in which it holds any
Mortgage File. Each Custodial Agreement may be amended only as provided in
Section 10.07. Any reasonable compensation paid to the Custodian shall be an
unreimbursable expense of the Trustee. The Trustee shall serve as the initial
Custodian.
SECTION 3.22. Reports to the Securities and Exchange Commission;
Available Information.
(a) The Servicer shall prepare and sign, on behalf of the Depositor, any
and all Exchange Act Reports; provided, however, that (i) the Depositor shall
prepare, sign and file with the Commission the initial Form 8-K relating to the
Trust Fund and (ii) the Special Servicer shall prepare and sign on behalf of
the Depositor any Exchange Act Report which includes an Annual Compliance
Report relating to the Special Servicer. Each Exchange Act Report consisting of
a Monthly Distribution Statement, Special Event Report or Summary Report shall
be prepared as an exhibit or exhibits to a Form 8-K. Each Exchange Act Report
consisting of an Annual Compliance Report shall be prepared as exhibits to an
Annual Report on Form 10-K and shall identify the aggregate number of Holders
of Public Certificates and Direct Participants holding positions in Public
Certificates as of December 31 (or the nearest Business Day if such date is
note a Business Day) of the related year. For each Exchange Act Report, the
Servicer or the Special Servicer, as applicable, shall prepare (i) a
manually-signed paper version of such report and (ii) an electronic version of
such report, which version shall be prepared as a Microsoft Word for Windows
file (or in such other format as the Trustee and the Servicer or the Special
Servicer may agree), provided, that, with respect to the electronic version of
each Exchange Act Report consisting of a Monthly Distribution Statement, the
Servicer need only deliver an electronic version of the related Form 8-K and
the Trustee shall attach an electronic version of the related Monthly
Distribution Statement thereto as an exhibit. Exchange Act Reports consisting
of (i) a Monthly Distribution Statement shall be delivered within ten days
after the related Distribution Date; (ii) a Special Event Report shall be
delivered within ten days after the occurrence of event being reported or the
date on which the Servicer has knowledge of the occurrence of such event,
whichever is later; (iii) a Summary Report shall be delivered within ten days
after the last Business Day of the related calendar quarter or year, as
applicable; and (iv) an Annual Compliance Report shall be delivered on or prior
to March 15 of each calendar year. Electronic versions of each Exchange Act
Report shall be delivered to the Trustee on a computer diskette (delivered by
courier in packaging designed to shield such diskette from damage in
transmission) or by means of electronic data transfer system mutually agreed
upon by the Trustee and the Servicer or Special Servicer. Manually-signed
copies of each Exchange Act Report shall be delivered to the Depositor to the
attention of William Kramer (or such other Persons as are designated in writing
by the Depositor), with a copy to the Trustee. The Trustee shall file each
Exchange Act Report with the Commission by means of the EDGAR system no later
than two Business Days after receipt thereof from the Servicer or Special
Servicer, as applicable. Each Exchange Act Report shall be filed by the Trustee
using the following information relating to the Trust Fund:
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CIK Number: [To be determined]
CCC Number: [To be provided]
Exchange Act
Number: [To be determined]
The Trustee shall (i) cause the submission header for each EDGAR filing
to send a copy of each filing confirmation by electronic mail to the electronic
mail address specified by the Depositor in writing or (ii) fax a copy of such
confirmation to the Depositor, to the attention of William Kramer upon receipt.
The Depositor shall (i) pay or reimburse the Trustee for any expenses
(including attorney's fees and filing fees) incurred in connection with the
preparation of any Exchange Act Report for filing by means of the EDGAR system
and (ii) pay the Trustee a fee for processing each filing of an Exchange Act
Report; the amount of such fee to be separately agreed by the Trustee and the
Depositor.
If information for any Exchange Act Report is incomplete by the date on
which such report is required to be delivered to the Trustee hereunder, the
Servicer or, with respect to any Annual Compliance Report relating to the
Special Servicer, the Special Servicer shall prepare and execute a Form 12b-25
under the Exchange Act and shall deliver an electronic version of such form to
the Trustee for filing electronically. The Trustee shall file such electronic
version no later than the date on which the related Exchange Act Report was
required to be filed under the Exchange Act. The Servicer or the Special
Servicer, as applicable, shall deliver the related report in electronic form to
the Trustee when such information is available and such completed report shall
be filed electronically by the Trustee in the manner provided above. If the
Trustee experiences unanticipated technical difficulties preventing the timely
preparation and submission of any electronic filing of an Exchange Act Report,
the Trustee shall file such Exchange Act Report, under cover of Form TH, in
paper format no later than one Business Day after the date on which such
Exchange Act Report was required to be filed under the Exchange Act and shall
file the related Exchange Act Report as soon as reasonably practicable
thereafter.
None of the Servicer, the Special Servicer and the Trustee shall (i) file
a Form ID with respect to the Depositor or (ii) cause the Trust Fund to stop
filing reports, statements and information with the Commission pursuant to this
Section unless directed to do so by the Depositor or the continued reporting is
prohibited under the Exchange Act or any regulations thereunder. Upon the
written request of the Depositor, the Servicer shall file a Form 15 with the
Commission and send a copy thereof to the Trustee.
The Trustee shall solicit any and all proxies of the Certificateholders
whenever such proxies are required to be solicited pursuant to the Exchange
Act.
(b) The Servicer shall promptly prepare a report (each, a "Special Event
Report") reporting (i) any notice from a Borrower or insurance company, or any
knowledge otherwise obtained, regarding an upcoming voluntary or involuntary
prepayment (including that resulting from a casualty or condemnation) or
defeasance of all or part of the related Mortgage Loan (provided that a request
by a Borrower or other Person for a quotation of the amount necessary to
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satisfy all obligations with respect to a Mortgage Loan shall not, in and of
itself, be deemed to be such notice); (ii) any imminent or actual default on a
Mortgage Loan that results or which the Servicer, after consultation with the
Special Servicer, reasonably believes is likely to result in the acceleration
of the indebtedness due under such Mortgage Loan; (iii) the results of any
property inspection which has revealed any material damage or deterioration or
the presence of any environmental condition with respect to any Mortgaged
Property; (iv) any notice from a Borrower, or any knowledge otherwise obtained,
regarding any litigation involving such Borrower or any related Mortgaged
Property which the Servicer reasonably believes is likely to have an adverse
effect on the Mortgaged Property or the ability of such Borrower to pay the
amounts due under the related Mortgage Loan; (v) any notice received from a
Borrower, Manager or tenant of a Mortgaged Property, or any knowledge otherwise
obtained, regarding the material default of such tenant under the terms of its
lease or early termination by either the tenant or the Borrower of such lease,
the bankruptcy of such tenant or its direct or indirect parent, or the loss of
a license or permit relating to the Mortgaged Property; (vi) any amendment,
modification or waiver of a material provision of a Mortgage Loan; (vii) any
event of which the Servicer has actual knowledge (other than an event covered
by clause (i)) which would result in the release of any part of the Mortgaged
Property; provided, however, that in the event that the Servicer after
consulting with the Depositor and the Special Servicer determines in its good
faith judgment that any of the preceding items will not materially affect the
interests of the Certificateholders, the Servicer shall omit such item from the
reporting obligation described above.
The Special Servicer shall report to the Servicer any of the foregoing
events within one Business Day of the Special Servicer having knowledge of such
event. In addition, in connection with their servicing of the Mortgage Loans,
the Servicer and the Special Servicer shall provide to each other and to the
Trustee written notice of any other known event with respect to a Mortgage Loan
or REO Property that the Servicer or the Special Servicer, respectively,
determines would have a material adverse effect on such Mortgage Loan or REO
Property, which notice shall include an explanation as to the reason for such
material adverse effect.
(c) The Special Servicer shall collect all information available pursuant
to the Mortgage Loans and shall furnish such information, without modification,
interpretation or analysis (except that the Special Servicer will use its best
efforts to isolate management fees and funded reserves from Borrower reported
expenses, if necessary), to the Servicer on or prior to the fifteenth day of
each month with respect to information relating to the prior month and in a
form sufficient to permit the Servicer to fulfill its obligations in this
Section. Once per applicable period, the Servicer shall prepare a Summary
Report based on information provided to the Servicer by the Special Servicer.
To the extent not inconsistent with the related Borrower's rights under the
Mortgage Loan or applicable law, the Servicer shall deliver a copy of each
Summary Report to each Rating Agency and the Trustee. None of the Servicer, the
Special Servicer and the Trustee shall be responsible for the completeness or
accuracy of such information provided by the Borrowers.
(d) The Servicer shall, in accordance with such reasonable rules and
procedures as it may adopt (which may include the requirement that an agreement
that provides that such information shall be used solely for purposes of
evaluating the investment characteristics of the Certificates be executed to
the extent the Servicer deems such action to be necessary or
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appropriate), also make available any additional information relating to the
Mortgage Loans, the Mortgaged Properties or the Borrowers, for review by the
Depositor, the Rating Agencies and any other Persons to whom the Servicer
believes such disclosure is appropriate, in each case except to the extent
doing so is prohibited by applicable law or by any related Loan Documents
related to a Mortgage Loan.
(e) The Trustee shall deliver a copy of each Summary Report and Annual
Compliance Statement to each Rating Agency and, upon request, to each
Certificateholder and Beneficial Owner (provided that each Certificateholder
and Beneficial Owner may only make one request per month and will be required
to pay any expenses incurred by the Trustee in connection with the provision of
such information). The Trustee shall also deliver a copy of each Special Event
Report to each Rating Agency, Certificateholder and, if known, Beneficial Owner
within one Business Day of receipt. The Trustee shall deliver the foregoing
information and reports regardless of whether the Trust Fund is still filing
Exchange Act Reports. The Trustee shall also make available at its offices
primarily responsible for administration of the Trust Fund, during normal
business hours, or send to the requesting party at the expense of each such
requesting party (other than the Rating Agencies) for review by the Depositor,
the Rating Agencies, any Certificateholder, any Person identified to the
Trustee by a Certificateholder as a prospective transferee of a Certificate and
any other Persons to whom the Trustee believes such disclosure is appropriate,
the following items: (i) this Agreement, (ii) all Monthly Distribution
Statements, (iii) all Annual Compliance Reports, (iv) all Summary Reports and
(v) all Special Event Reports.
The Servicer and the Special Servicer shall make available at its offices
during normal business hours, or send to the requesting party at the expense of
each such requesting party (other than the Rating Agencies) for review by the
Depositor, the Trustee, the Rating Agencies, any Certificateholder, any Person
identified to the Servicer or the Special Servicer, as applicable, by a
Certificateholder as a prospective transferee of a Certificate and any other
Persons to whom the Servicer or the Special Servicer, as applicable, believes
such disclosure to be appropriate the following items: (i) all financial
statements, occupancy information, rent rolls, average daily room rates and
similar information received by the Servicer or the Special Servicer, as
applicable, from each Borrower, (ii) the inspection reports prepared by or on
behalf of the Servicer or the Special Servicer, as applicable, in connection
with the property inspections pursuant to Section 3.19, (iii) any and all
modifications, waivers and amendments of the terms of a Mortgage Loan entered
into by the Servicer or the Special Servicer, as applicable and (iv) any and
all officer's certificates and other evidence delivered to the Trustee and the
Depositor to support the Servicer's determination that any Advance was, or if
made would be, a Nonrecoverable Advance. Copies of any and all of the foregoing
items shall be available from the Servicer or the Special Servicer, as
applicable, or the Trustee, as applicable, upon request.
(f) Notwithstanding the obligations of the Servicer set forth in the
preceding provisions of this Section 3.22, the Servicer may withhold any
information not yet included in a Form 8-K filed with the Commission or
otherwise made publicly available with respect to which the Trustee or the
Servicer has determined that such withholding is appropriate.
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(g) Notwithstanding any provisions in this Agreement to the contrary, the
Trustee shall not be required to review the content of any Exchange Act Report
for compliance with applicable securities laws or regulations, completeness,
accuracy or otherwise, and the Trustee shall have no liability with respect to
any Exchange Act Report filed with the Commission or delivered to
Certificateholders. None of the Servicer, the Special Servicer and the Trustee
shall be responsible for the accuracy or completeness of any information
supplied by a Borrower or a third party for inclusion in any Form 8-K, and each
of the Servicer, the Special Servicer and the Trustee shall be indemnified and
held harmless by the Trust Fund against any loss, liability or expense incurred
in connection with any legal action relating to any statement or omission or
alleged statement or omission therein. None of the Trustee, the Special
Servicer and the Servicer shall have any responsibility or liability with
respect to any Exchange Act Report filed by the Depositor, and each of the
Servicer, the Special Servicer and the Trustee shall be indemnified and held
harmless by the Trust Fund against any loss, liability or expense incurred in
connection with any legal action relating to any statement or omission or
alleged statement or omission therein.
SECTION 3.23. Lock-Box Accounts, Cash Collateral Accounts, Escrow
Accounts and Reserve Accounts.
The Servicer shall administer each Lock-Box Account, Cash Collateral
Account, Escrow Account and Reserve Account in accordance with the related
Mortgage or Loan Agreement, Cash Collateral Account Agreement or Lock-Box
Agreement, if any.
SECTION 3.24. Property Advances.
(a) The Servicer (or, to the extent provided in Section 3.24(b), the
Trustee or the Fiscal Agent or to the extent specifically provided for in this
Agreement, the Special Servicer) shall make any Property Advances as and to the
extent otherwise required pursuant to the terms hereof. For purposes of
distributions to Certificateholders and compensation to the Servicer, Special
Servicer or Trustee, Property Advances shall not be considered to increase the
principal balance of any Mortgage Loan, notwithstanding that the terms of such
Mortgage Loan so provide.
(b) The Servicer shall notify the Trustee and the Fiscal Agent, and the
Special Servicer shall notify the Servicer, the Trustee and the Fiscal Agent,
in writing promptly upon, and in any event within one Business Day after,
becoming aware that it will be unable to make any Property Advance required to
be made pursuant to the terms hereof, and in connection therewith, shall set
forth in such notice the amount of such Property Advance, the Person to whom it
will be paid, and the circumstances and purpose of such Property Advance, and
shall set forth therein information and instructions for the payment of such
Property Advance, and, on the date specified in such notice for the payment of
such Property Advance, or, if the date for payment has passed or if no such
date is specified, then within five Business Days following such notice, the
Trustee (or with respect to a Property Advance required to be made by the
Special Servicer, the Servicer, and if the Servicer so fails, the Trustee),
subject to the provisions of Section 3.24(c), shall pay the amount of such
Property Advance in accordance with such information and instructions. If the
Trustee fails to make any Property Advance required to be made under this
Section 3.24, the Fiscal Agent, subject to the provisions of Section 3.24(c),
shall make such Advance on the same day the Trustee was
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required to make such Property Advance and, thereby, the Trustee shall not be
in default under this Agreement.
(c) None of the Servicer, the Trustee, the Fiscal Agent or the Special
Servicer shall be obligated to make a Property Advance as to any Mortgage Loan
or REO Property if the Servicer, the Trustee, the Fiscal Agent or the Special
Servicer, as applicable, determines that such Advance will be a Nonrecoverable
Advance. The Trustee and the Fiscal Agent (or the Servicer with respect to a
Property Advance required to be made by the Special Servicer) shall be entitled
to rely, conclusively, on any determination by the Servicer or Special
Servicer, as applicable, that a Property Advance, if made, would be a
Nonrecoverable Advance. The Trustee and the Fiscal Agent, in determining
whether or not a Property Advance previously made is, or a proposed Property
Advance, if made, would be, a Nonrecoverable Advance shall be subject to the
standards applicable to the Servicer hereunder.
(d) The Servicer, the Special Servicer, the Trustee and/or the Fiscal
Agent, as applicable, shall be entitled to the reimbursement of Property
Advances made by any of them to the extent permitted pursuant to Section
3.06(ii) of this Agreement, together with any related Advance Interest Amount
in respect of such Property Advances, and the Servicer and Special Servicer
hereby covenant and agree to promptly seek and effect the reimbursement of such
Property Advances from the related Borrowers to the extent permitted by
applicable law and the related Loan Documents.
SECTION 3.25. Appointment of Special Servicer.
(a) ___________________ will act as the initial Special Servicer to
service each Specially Serviced Mortgage Loan and perform the other obligations
of the Special Servicer hereunder.
(b) Certificateholders representing 51% of the Percentage Interests of
the most subordinate Class of Certificates outstanding at any time shall be
entitled to remove the Special Servicer with or without cause and to appoint a
successor Special Servicer, provided that each Rating Agency confirms to the
Trustee in writing that such appointment, in and of itself, would not have
caused a downgrade, qualification or withdrawal of the then current ratings
assigned to any Class of Certificates. If there is a Special Servicer Event of
Default the Special Servicer shall be removed and replaced pursuant to Sections
7.01(c) and 7.02.
(c) The appointment of any such successor Special Servicer, shall not
relieve the Servicer, the Trustee or the Fiscal Agent of their respective
obligations to make Advances as set forth herein; provided, however, the
Servicer shall not be liable for any actions or any inaction of such successor
Special Servicer. Any termination fee payable to the terminated Special
Servicer (and it is acknowledged that there is no such fee payable in the event
of a termination of the Servicer as Special Servicer or in the event of a
termination for breach of this Agreement) shall be paid by the
Certificateholders so terminating the Special Servicer and shall not in any
event be an expense of the Trust Fund.
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(d) No termination of the Special Servicer and appointment of a successor
Special Servicer shall be effective until the successor Special Servicer has
assumed all of its responsibilities, duties and liabilities hereunder pursuant
to a writing satisfactory to the Servicer and Trustee, as evidenced in writing,
and the Trustee has received written confirmation from each Rating Agency that
such appointment would not cause any Rating Agency to qualify, withdraw or
downgrade any of its then current ratings on any Certificates. Any successor
Special Servicer shall make the representations and warranties provided for in
Section 2.04(a), with the necessary changes in points of detail as are
necessary, as to names, offices and the like.
SECTION 3.26. Transfer of Servicing Between Servicer and Special
Servicer; Record Keeping.
(a) Upon determining that any Mortgage Loan has become a Specially
Serviced Mortgage Loan, the Servicer shall immediately give notice thereof, to
the Special Servicer and shall use its best efforts to provide the Special
Servicer with all information, documents (but excluding the original documents
constituting the Mortgage File) and records (including records stored
electronically on computer tapes, magnetic discs and the like) relating to the
Mortgage Loan and reasonably requested by the Special Servicer to enable it to
assume its duties hereunder with respect thereto without acting through a sub-
servicer. The Servicer shall use its best efforts to comply with the preceding
sentence within five Business Days of the date such Mortgage Loan became a
Specially Serviced Mortgage Loan and in any event shall continue to act as
Servicer and administrator of such Mortgage Loan until the Special Servicer has
commenced the servicing of such Mortgage Loan, which shall occur upon the
receipt by the Special Servicer of the information, documents and records
referred to in the preceding sentence. With respect to each Mortgage Loan that
becomes a Specially Serviced Mortgage Loan, the Servicer shall instruct the
related Borrower to continue to remit all payments in respect of such Mortgage
Loan to the Servicer. The Servicer and Special Servicer may agree that,
notwithstanding the preceding sentence, with respect to each Mortgage Loan that
became a Specially Serviced Mortgage Loan, the Servicer shall instruct the
related Borrower to remit all payments in respect of such Mortgage Loan to the
Special Servicer, provided that the payee in respect of such payments shall
remain the Servicer. The Special Servicer shall remit to the Servicer any such
payments received by it pursuant to the preceding sentence within one Business
Day of receipt. The Servicer shall forward any notices it would otherwise send
to the Borrower of a Specially Serviced Mortgage Loan to the Special Servicer
who shall send such notice to the related Borrower.
Upon determining that no event has occurred and is continuing with
respect to a Mortgage Loan that causes such Mortgage Loan to be a Specially
Serviced Mortgage Loan, the Special Servicer shall immediately give notice
thereof to the Servicer, and upon giving such notice, such Mortgage Loan shall
cease to be a Specially Serviced Mortgage Loan in accordance with the first
proviso of the definition of Specially Serviced Mortgage Loan, the Special
Servicer's obligation to service such Mortgage Loan shall terminate and the
obligations of the Servicer to service and administer such Mortgage Loan as a
Mortgage Loan that is not a Specially Serviced Mortgage Loan shall resume. In
addition, if the related Borrower has been instructed, pursuant to the last
sentence of the preceding paragraph, to make payments to the Special Servicer,
upon such
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determination, the Special Servicer shall instruct the related Borrower to
remit all payments in respect of such Mortgage Loan directly to the Servicer.
(b) In servicing any Specially Serviced Mortgage Loan, the Special
Servicer shall provide to the Trustee originals of documents included within
the definition of "Mortgage File" for inclusion in the related Mortgage File
(to the extent such documents are in the possession of the Special Servicer)
and copies of any additional related Mortgage Loan information, including
correspondence with the related Borrower, and the Special Servicer shall
promptly provide copies of all of the foregoing to the Servicer as well as
copies of any analysis or internal review prepared by or for the benefit of the
Special Servicer.
(c) Not later than the Business Day preceding each date on which the
Servicer is required to furnish a report under Section 3.13(a) to the Trustee,
the Special Servicer shall deliver to the Trustee, with a copy to the Servicer,
a written statement describing, on a Mortgage Loan by Mortgage Loan basis, (i)
the amount of all payments on account of interest received on each Specially
Serviced Mortgage Loan, the amount of all payments on account of principal,
including Principal Prepayments, on each Specially Serviced Mortgage Loan, the
amount of Net Insurance Proceeds and Net Liquidation Proceeds received with
respect to each Specially Serviced Mortgage Loan, and the amount of net income
or net loss, as determined from management of a trade or business on, the
furnishing or rendering of a non-customary service to the tenants of, or the
receipt of any rental income that does not constitute Rents from Real Property
with respect to the REO Property relating to each applicable Specially Serviced
Mortgage Loan, in each case in accordance with Section 3.17 and (ii) such
additional information relating to the Specially Serviced Mortgage Loans as the
Servicer or Trustee reasonably requests to enable it to perform its duties
under this Agreement.
(d) Notwithstanding the provisions of the preceding subsection (c), the
Servicer shall maintain ongoing payment records with respect to each of the
Specially Serviced Mortgage Loans and shall provide the Special Servicer with
any information reasonably required by the Special Servicer to perform its
duties under this Agreement. The Special Servicer shall provide the Servicer
with any information reasonably required by the Servicer to perform its duties
under this Agreement.
(e) The Servicer shall furnish to the Special Servicer a current copy of
any "watch list" that it maintains with respect to the Mortgage Loans.
SECTION 3.27. Interest Reserve Account.
(a) On each Servicer Remittance Date relating to any Interest Accrual
Period commencing in any January and on any Servicer Remittance Date relating
to any Interest Accrual Period commencing in any December which occurs in a
year immediately preceding a year which is not a leap year, the Servicer shall
remit to the Trustee, in respect of the Interest Reserve Loan, for deposit into
the Interest Reserve Account, an amount equal to one day's interest on the
Stated Principal Balance of the Interest Reserve Loan as of the Due Date
occurring in the month preceding the month in which such Servicer Remittance
Date occurs at the related Mortgage Rate, to the
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extent a full Monthly Payment or P&I Advance is made in respect thereof (all
amounts so deposited in any consecutive January and February, "Withheld
Amounts").
(b) On each Servicer Remittance Date occurring in March (other than
March, 1996), the Servicer shall withdraw from the Interest Reserve Account an
amount equal to the Withheld Amounts from the preceding January and December,
if any, and deposit such amount into the Distribution Account.
SECTION 3.28. Limitations on and Authorizations of the Servicer and
Special Servicer with Respect to Certain Mortgage Loans.
(a) Prior to taking any action with respect to a Mortgage Loan secured by
Mortgaged Properties located in a "one-action" state, the Servicer or Special
Servicer, as applicable, shall consult with legal counsel, the fees and
expenses of which shall be an expense of the Trust Fund.
(b) With respect to any Mortgage Loan which permits the related Borrower,
with the consent or grant of a waiver by mortgagee, to incur additional
indebtedness or to amend or modify the related Borrower's organizational
documents, then the Special Servicer may only consent to either such action, or
grant a waiver with respect thereto, if the Special Servicer determines that
such consent or waiver is likely to result in a greater recovery on a present
value basis (discounted at the related Mortgage Rate) than would not consenting
to such action and the Special Servicer first obtains written confirmation from
at least one Rating Agency that such consent or grant of a waiver would not, in
and of itself, result in a downgrade, qualification or withdrawal of any of the
then current ratings assigned to the Certificates. The Servicer shall not be
entitled or required to consent to, or grant a waiver with respect to, either
action.
(c) With respect to the Mortgage Loans that require the related Borrower
to pay Rating Agency monitoring or review fees, the Servicer shall enforce the
obligation of the related Borrowers to pay Rating Agency monitoring or review
fees and shall remit such fees from the related Cash Collateral Account for
payment of such fees to the applicable Rating Agencies. The Servicer shall
receive bills from the Rating Agencies for monitoring, review and surveillance
of the Certificates and the Mortgage on behalf of ______________________ and
shall promptly notify and send such bills to __________________________,
Attention ______________________________________ will notify each Rating Agency
to bill ___________________________ for such services and to send such bills to
the Servicer ____________________________ will pay such portion of the bill not
paid from funds provided by the applicable Borrowers (as described in this
section (c)) and the Servicer shall notify ___________________________, of the
portion of the bill that it has paid from funds collected from such Borrowers.
(d) With respect to each Mortgage Loan listed on Exhibit L, the Servicer
shall require the related Borrower to fund the related Escrow Account for
replacement reserves in the amounts specified on Exhibit L.
(e) With respect to all Mortgage Loans that provide that the holder of
the related Note may apply the monthly payment against principal, interest and
any other sums due in the order as
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the holder shall determine, the Servicer shall apply such Monthly Payment to
interest (other than Excess Interest or Default Interest) under the related
Mortgage Loan prior to application to principal or any other sums due.
(f) With respect to the Mortgage Loans that have Anticipated Repayment
Dates, the Servicer (including the Servicer in its capacity as a
Certificateholder, if applicable), shall not take any enforcement action with
respect to the payment of Excess Interest or principal in excess of the
principal component of the constant Monthly Payment, other than requests for
collection, until the maturity date of the related Mortgage Loan.
(g) To the extent not inconsistent with the related Mortgage Loan, the
Servicer shall not consent to a change of franchise affiliation with respect to
a Mortgaged Property unless it obtains written confirmation from Fitch and
Moody's that such consent would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to the
Certificates.
(h) With respect to any Mortgage Loan secured by a senior
housing/healthcare facility, the Special Servicer shall hire a consultant which
is experienced in the operation of such facilities in the event that such
Mortgage Loan becomes a Specially Serviced Mortgaged Loan.
(i) With respect to the Mortgage Loans that have Anticipated Repayment
Dates, the Servicer shall be permitted, in its discretion, to waive all or any
accrued Excess Interest if, prior to the related maturity date, the related
Borrower has requested the right to prepay the Mortgage Loan in full together
with all payments required by the Mortgage Loan in connection with such
prepayment except for all or a portion of accrued Excess Interest, provided
that the Servicer's determination to waive the right to such accrued Excess
Interest is reasonably likely to produce a greater payment to
Certificateholders on a present value basis than a refusal to waive the right
to such Excess Interest. Any such waiver shall not be effective until such
prepayment is tendered. The Servicer will have no liability to the Trust Fund,
the Certificateholders or any other person so long as such determination is
based on such criteria. Other than pursuant to Section 3.30, the Special
Servicer shall have no right to waive the payment of Excess Interest under the
circumstances described in this Section 3.28(i).
(j) With respect to the Mortgage Loans that (i) require earthquake
insurance, or (ii) (A) at the date of origination were secured by Mortgaged
Properties on which the related Borrower maintained earthquake insurance and
(B) have provisions which enable the Servicer to continue to require the
related Borrower to maintain earthquake insurance, the Servicer shall require
the related Borrower to maintain such insurance in the amount, in the case of
clause (i), required by the Mortgage Loan and in the amount, in the case of
clause (ii), maintained at origination, in each case, to the extent such
amounts are available at commercially reasonably rates.
(k) The Servicer shall send written notice to each Borrower and the
related Manager and clearing bank that, if applicable, the Servicer and/or the
Trustee has been appointed as the "Designee" of the "Lender" under any related
Lock-Box Agreement.
(l) Reserved.
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(m) Reserved.
(n) For any Specially Serviced Mortgage Loan and with respect to which,
under the terms of the related Loan Documents, the mortgagee may, in its
discretion, apply Insurance Proceeds, condemnation awards or escrowed funds to
the prepayment of such loan prior to the expiration of the related Lock-out
Period, the Special Servicer may only make such a prepayment if the Special
Servicer has first received (i) the prior written consent of the Servicer
(which consent will be given or withheld in accordance with the Servicing
Standard) or (ii) the affirmative vote in favor of such prepayment from 66 2/3%
of the Voting Rights of all Certificateholders or 66 2/3% of the Voting Rights
of all Certificateholders responding within 20 Business Days of being given
notice by the Trustee of such proposed action. Upon the written request of the
Special Servicer, the Trustee shall forward Certificateholders any request of
the Special Servicer for the vote of the Certificateholders pursuant to this
Section.
(o) If any Mortgage Loan provides that the "Lender" with respect thereto
is required to purchase U.S. government obligations on behalf of the related
Borrower in connection with any defeasance of the related Note, the Servicer
shall purchase such obligations and effectuate such defeasance, at the
Borrower's expense, in accordance with the provisions of the related Loan
Documents, consistent with the Servicing Standard.
(p) Reserved.
(q) Reserved.
SECTION 3.29. Residual Trigger Date.
The Servicer shall give prompt written notice to __________________ of
each release of a Mortgaged Property pursuant to defeasance with U.S.
government obligations pursuant to the terms of the related Mortgage Loan and
the percentage of the aggregate then outstanding principal balance of the
Mortgage Loans that is secured by U.S. government obligations after giving
effect to such release. Upon the occurrence of the Residual Trigger Date, the
Servicer shall give prompt written notice thereof to the Trustee, the Depositor
and ___________________________. Notice to __________________________ shall be
sent to:
--------------------------
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SECTION 3.30. Modification, Waiver, Amendment and Consents.
(a) The Special Servicer may, consistent with the Servicing Standard,
agree to any modification, waiver or amendment of any term of any Mortgage
Loan, subject, however, to each of the following limitations, conditions and
restrictions:
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(i) the Special Servicer shall not agree to any modification,
waiver or amendment of any term of, or take any action with respect to, any
Mortgage Loan, if such modification, waiver or amendment relates to any payment
term thereof, the release of the related Borrower from any material term
thereunder or the release or substitution of collateral therefor except in
accordance with clause (b) or (c) of this Section 3.30; and
(ii) the Special Servicer shall not consent to the modification of
any term of a Mortgage Loan pursuant to this clause (a), or otherwise alter,
delete or add, in whole or in part, any legal right or obligation of the
related Borrower or the Trustee, as holder of the related Mortgage Loan, unless
such modification would not be a "significant modification" as such term is
defined in Code Section 1001 and applicable Treasury Regulations thereunder or
Treasury Regulations Section 1.860G-2(b)(3).
(b) The Special Servicer may, consistent with the Servicing Standard,
agree to any modification, waiver or amendment of any term of, forgive or defer
interest on and principal of, and/or add collateral for, any Mortgage Loan with
the consent of Certificateholders representing 100% of the Percentage Interests
of the most subordinate Class of Certificates then outstanding determined as
provided below, subject, however, to each of the following limitations,
conditions and restrictions:
(i) a material default on such Mortgage Loan has occurred or, in
the Special Servicer's reasonable and good faith judgment, a default in respect
of payment on such Mortgage Loan is reasonably foreseeable, and such
modification, waiver, amendment or other action is reasonably likely to produce
a greater recovery to Certificateholders on a present value basis (the relevant
discounting of anticipated collections that will be distributable to
Certificateholders will be done at the related Mortgage Rate), than would
liquidation;
(ii) the Special Servicer shall not extend the date on which any
Balloon Payment is scheduled to be due on any Specially Serviced Mortgage Loan
except as provided for below;
(iii) no reduction of any scheduled monthly payment of principal
and/or interest on any Specially Serviced Mortgage Loan may result in a debt
service coverage ratio for such Mortgage Loan of greater than 1.10 to 1, and
the Special Servicer may only agree to reductions lasting a period of no more
than twelve consecutive months and, in the aggregate, no more than three
consecutive reductions of twelve-months or less each;
(iv) the Special Servicer shall not release or substitute
collateral or release mortgagors or guarantors except as provided in clause (v)
below;
(v) the Special Servicer may only allow a substitution of
collateral and the assumption of a Borrower's obligations with respect to a
Mortgage Loan in accordance with the terms thereof and the provisions of
Section 3.09 hereof;
(vi) the Special Servicer may not forgive an aggregate amount of
principal of the Mortgage Loans in excess of the Certificate Principal Balance
of the most subordinate Class of Certificates then outstanding (as determined
as provided below) minus the aggregate of the greater
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of (A) any Appraisal Reduction Amounts and (B) Delinquency Reduction Amounts of
each Mortgage Loan that, in each case, have not resulted in a Realized Loss;
(vii) the Special Servicer shall not permit any Borrower to add any
collateral unless (A) the Special Servicer has first determined in accordance
with the Servicing Standard, based upon an environmental assessment prepared by
an Independent Person who regularly conducts environmental assessments, at the
expense of the Borrower, that such additional collateral is in compliance with
applicable environmental laws and regulations and that there are no
circumstances or conditions present with respect to such new collateral
relating to the use, management or disposal of any hazardous materials for
which investigation, testing, monitoring, containment, clean-up or remediation
would be required under any then applicable environmental laws and/or
regulations and (B) the Special Servicer has received an Opinion of Counsel at
the expense of the Special Servicer or the Borrower (unless the Special
Servicer owns the most subordinate Class of Certificates in which case, at the
expense of the Trust Fund), to the effect that the addition of such collateral
will not cause either the Upper-Tier REMIC or the Lower-Tier REMIC to fail to
qualify as a REMIC or cause a tax to be imposed on the Trust Fund under the
REMIC Provisions; and
(viii) the Special Servicer may waive or reduce a Lock-out Period
or any Prepayment Premiums only if the commencement of a foreclosure proceeding
with respect to the related Mortgage Loan is imminent and the Special Servicer
first receives written notification from the Servicer that such action in the
opinion of the Servicer, consistent with the Servicing Standard and based
solely upon information furnished by the Special Servicer without independent
investigation of the Servicer thereof, is more likely to result in a greater
recovery, on a present value basis, than would a foreclosure.
Notwithstanding the foregoing, the Special Servicer shall not be required
to oppose the confirmation of a plan in any bankruptcy or similar proceeding
involving a Borrower if in its reasonable and good faith judgment such
opposition would not (i) ultimately prevent the confirmation of such plan or
one substantially similar and (ii) produce a greater recovery to
Certificateholders on a present value basis.
For purposes of determining the amount of principal which the Special
Servicer may forgive pursuant to clause (vi) above, the most subordinate Class
shall include the next subordinate Class (determined as provided in the
preceding sentence) provided that Certificateholders evidencing 100% of the
Percentage Interests of such Class consent to such forgiveness.
(c) Following a default by a Borrower in the payment of a Balloon Payment
on the related Maturity Date, or if the Special Servicer reasonably determines
that a default with respect to such Balloon Loan is imminent the Special
Servicer may elect to grant a one-year extension of such Balloon Loan; provided
that the Special Servicer may only extend such Balloon Loan if (i) immediately
prior to the default on the Balloon Payment the related Borrower had made
twelve consecutive Monthly Payments on or prior to their Due Dates, (ii) the
Special Servicer determines in its reasonable judgment that such Borrower has
attempted in good faith to refinance such Balloon Loan or Mortgaged Property,
(iii) the Special Servicer determines that (A) extension of
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such Balloon Loan is consistent with the Servicing Standard and (B) extension
of such Mortgage Loan is likely to result in a recovery which on a net present
value basis would be greater than the recovery that would result from a
foreclosure, (iv) such extension requires that all cash flow on all related
Mortgaged Property or Properties in excess of amounts required to operate and
maintain such Mortgaged Property or Properties be applied to payments of
principal and interest on such Balloon Loan and (v) the Special Servicer
terminates the related Manager unless the Special Servicer determines that
retaining such Manager is conducive to maintaining the value of the Mortgaged
Properties.
The Special Servicer may, consistent with the Servicing Standard, grant
subsequent one-year extensions of such Balloon Loan if (i) the related Borrower
has made twelve consecutive Monthly Payments in an amount equal to or greater
than the Minimum Defaulted Monthly Payments, (ii) the requirements set forth in
clauses (ii) - (iv) of the preceding paragraph are satisfied. If the related
Borrower fails to make a timely Minimum Defaulted Monthly Payment more than
once during any two year period after an extension of a Balloon Loan, no
further extensions will be granted.
Any extension of a Balloon Loan pursuant to this Section will require
monthly payments in an amount equal to or greater than the Minimum Defaulted
Monthly Payment.
(d) The Special Servicer may be given revocable instructions
("Instructions") (with a copy to the Servicer) to extend a Specially Serviced
Mortgage Loan that has defaulted on a Balloon Payment (which extension shall be
conditioned on the requirements of clauses (ii)-(iv) of Section 3.30(c) above
except that such Instructions shall not be subject to the rejection of the
other Certificateholders and the related Borrower will not be required to have
made twelve consecutive Monthly Payments on or prior to the Due Date) by the
Holders of Certificates representing greater than 50% of the Voting Rights of
the most subordinate Class or Classes of Certificates then outstanding
representing a minimum of 2.5% of the aggregate initial Certificate Balances of
all Classes of Certificates (or if the Certificate Balance of such Class or
Classes has been reduced to less than 40% of its initial Certificate Balance,
the holders of such Class together with the Holders of the next most
subordinate Class) (the "Directing Holders") under the following circumstance:
(i) If the Special Servicer has determined to commence foreclosure
or acquisition proceedings, the Special Servicer shall notify the Trustee (and
the Trustee hereby agrees to notify Directing Holders ), the Depositor and the
Servicer of its proposed action;
(ii) If the Special Servicer receives contrary Instructions from
the Directing Holders within seven days after notice was given to the Directing
Holders (and the Trustee hereby agrees to forward to the Special Servicer
promptly any Instructions provided by the Directing Holders), the Special
Servicer will delay such proceedings, and the procedures described below shall
apply to the servicing of such Mortgage Loan; and
(iii) In the event that the Special Servicer does not receive such
Instructions within such seven-day period, the Special Servicer may proceed in
connection with the foreclosure or acquisition in a manner consistent with the
Servicing Standard.
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If the Directing Holders revoke their Instructions to extend the Mortgage
Loan, the Special Servicer shall service the Mortgage Loan without regard to
such original Instructions; provided, however, that the Directing Holders shall
be required to maintain the Collateral Account in accordance with this Section
3.30 unless and until the Mortgage Loan is no longer a Specially Serviced
Mortgage Loan for nine consecutive months or has been liquidated; and provided,
further, that any such foreclosure shall be subject to the provisions of
Section 3.10.
(e) If the Special Servicer receives Instructions and the Servicer has
not otherwise been required to obtain an Updated Appraisal as described in
Section 3.10 above within the preceding twelve month period, the Special
Servicer shall as soon as reasonably practicable obtain an Updated Appraisal of
the Mortgaged Property (the cost of which shall be a Property Advance), in
order to determine the fair market value of such Mortgaged Property, after
accounting for the estimated liquidation and carrying costs (the "Fair Market
Value" of such Mortgaged Property). Within two Business Days after the Special
Servicer's receipt of Instructions, the Servicer shall establish a segregated
account (the "Collateral Account") and the Directing Holders shall deposit
therein (at the Servicer's request), in proportion to their respective
Percentage Interests, an amount equal to the lesser of (i) 125% of the Fair
Market Value of the related Mortgaged Property and (ii) the outstanding
principal balance of the Mortgage Loan plus unreimbursed Advances (with
interest thereon at the Advance Rate) and unpaid accrued interest (the
"Deposit"). If no Updated Appraisal has yet been obtained, the amount of the
Deposit will be determined based on the Servicer's estimate of the Fair Market
Value of the Mortgaged Property, in which case, upon the Servicer's receipt of
such Updated Appraisal, the Servicer shall remit any excess deposit to the
Directing Holders, or the Directing Holders will deposit in the Collateral
Account any shortfall, as the case may be. In the event that the Directing
Holders do not make the required deposit within two Business Days following the
Special Servicer's receipt of Instructions, the Special Servicer shall act in
accordance with the Servicing Standard without regard to such Instructions.
The Directing Holders shall be deemed to have granted to the Servicer
for the benefit of Certificateholders a first priority security interest in the
Collateral Account, as security for the obligations of the Directing Holders.
If the Special Servicer is acting pursuant to Instructions, the Servicer
shall withdraw from the Collateral Account and deposit into the Collection
Account on or prior to the Business Day preceding each Servicer Remittance Date
an amount equal to the sum of (i) the Minimum Defaulted Monthly Payment on the
related Balloon Loan and (ii) any Property Protection Expenses or any expenses
incurred to protect and preserve the security for a Mortgage Loan or taxes and
assessments or insurance premiums (without regard to a non-recoverability
determination), and the Directing Holders shall, upon request therefor by the
Servicer, deposit from their own funds into the Collateral Account the amount
of such P&I Advance or Property Advance. Such withdrawals shall be reimbursed,
with interest, at the Advance Rate (but in no event greater than the Default
Rate on the related Mortgage Loan), and shall be recoverable only from funds
recovered from the related Mortgage Loan (whether pursuant to liquidation or
the Mortgage Loan being brought current) but only after such funds have been
applied to the purposes set forth in Section 3.06(i)-(x). If the Directing
Holders fail to make such deposit within one (1) Business Day after receipt of
the Servicer's request, the Special Servicer shall no longer be required to
follow such Instructions and
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shall specially service such Mortgage Loan as though no Instructions had been
given; provided, however, that the Directing Holders shall be required to
maintain the Collateral Account in accordance with the requirements of this
Section 3.30 unless and until the related Mortgage Loan is no longer a
Specially Serviced Mortgage Loan for nine consecutive months or has been
liquidated. The Servicer shall invest amounts on deposit in the Collateral
Account in Permitted Investments upon direction by the Directing Holders.
Directing Holders shall be entitled to reinvestment income as received, and
will reimburse the Collateral Account for any losses incurred. Any Collateral
Account established hereunder will be an "outside reserve fund" beneficially
owned by the related Directing Holders for federal income tax purposes, and
any amounts paid or reimbursed from the Upper-Tier REMIC or Lower-Tier REMIC to
the Collateral Account will be treated as paid to the Directing Holders as
beneficial owners.
(f) If a Balloon Loan or the related Mortgaged Property which is subject
to Instructions is liquidated or disposed of all Net Liquidation Proceeds shall
be deposited in the Collection Account and the Servicer shall withdraw from the
Collateral Account, and deposit into the Collection Account as additional
Liquidation Proceeds for distribution to Certificateholders the lesser of (a)
the amount by which 125% of the Fair Market Value (determined at the time of
the Deposit) (plus accrued and unpaid interest, accumulated carrying costs and
conveyance expenses) exceeds the net sales proceeds, and (b) the amount by
which the outstanding principal balance of the related Mortgage Loan plus
unreimbursed Advances (with interest thereon) and unpaid accrued interest
exceeds the net sales proceeds, provided that in no event shall such additional
Liquidation Proceeds exceed the unpaid principal balance, accrued and unpaid
interest (including Default Interest), unpaid Advances made by the Servicer,
Special Servicer, Trustee or Fiscal Agent and interest thereon, and any
expenses paid by the Trust Fund with respect to such Mortgage Loan.
If the amount realized upon disposition of the Mortgage Loan or Mortgaged
Property exceeds 125% of the Fair Market Value, the Servicer shall deposit the
excess in the Collection Account to the extent not required by applicable law
to be paid to the related Borrower. If the Mortgage Loan has not been sold,
liquidated or disposed of on or before the third anniversary of the
Instructions (or such earlier date so that the Trust Fund owns the Mortgaged
Property for no longer than the period permitted by Section 3.17(a)), the
Directing Holders shall immediately purchase the Mortgage Loan for a purchase
price equal to Fair Market Value (determined at the time of the Deposit) plus
accrued and unpaid interest, accumulated carrying costs and conveyance expenses
and, in connection therewith, amounts then on deposit in the Collateral Account
shall be applied first in payment of such purchase price. For purposes of this
paragraph, if the Updated Appraisal is dated more than twelve months prior to
the date on which such purchase is to occur, then the Servicer shall obtain an
Updated Appraisal upon which the calculation of Fair Market Value shall be
based and the term "Fair Market Value" for purposes of the purchase price and
the first paragraph of this section (d) shall be the greater of (i) the Fair
Market Value calculated at the time the Instructions were first given and (ii)
the Fair Market Value calculated in connection with the referenced Updated
Appraisal, provided that in no event shall such price exceed the unpaid
principal balance, accrued interest (including Default Interest), unpaid
Advances made by the Servicer, Special Servicer, Trustee or Fiscal Agent, and
interest thereon and expenses paid by the Trust Fund with respect to such
Mortgage Loan.
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If at any time following the establishment of a Collateral Account and
prior to the disposition of the Specially Serviced Mortgage Loan or Mortgaged
Property, the Mortgaged Property suffers a hazard loss that results in the
Mortgaged Property not being rebuilt and payments to the Trustee are made under
the related hazard insurance policy, the Servicer shall pay all amounts on
deposit in the Collateral Account to the Directing Holders. In addition, after
amounts required to be deposited in the Collection Account as set forth above
have been withdrawn from the Collateral Account following foreclosure,
liquidation, disposition, purchase by Directing Holders, or if the related
Mortgage Loan is no longer a Specially Serviced Mortgage Loan for nine
consecutive months, any remaining amounts in the Collateral Account shall be
released to the Directing Holders.
(g) Until the disposition of the Specially Serviced Mortgage Loan or
Mortgaged Property as to which Directing Holders have provided Instructions or
the cure of such default, no P&I Advances shall be made in respect of amounts
otherwise distributable to the Class of the Directing Holders in respect of
such Mortgage Loan. The Trustee shall notify the Servicer at least five
Business Days prior to the Servicer Remittance Date of the amount of
distributions to be made to the Directing Holders on the related Distribution
Date.
(h) The Special Servicer shall provide copies of any modifications or
extensions to each Rating Agency. All modifications, waivers, amendments and
other actions entered into or taken in respect of the Mortgage Loans pursuant
to this Section 3.30 shall be in writing. The Special Servicer shall notify the
Servicer and the Trustee, in writing, of any modification, waiver, amendment or
other action entered into or taken in respect of any Mortgage Loan pursuant to
this Section 3.30, prior to the effective date thereof and the date as of which
the related modification, waiver or amendment is to take effect, and shall
deliver to the Trustee or the related Custodian for deposit in the related
Mortgage File (with a copy to the Servicer) an original counterpart of the
agreement relating to such modification, waiver, amendment or other action,
promptly (and in any event within 10 Business Days) following the execution
thereof. Following the execution of any modification, waiver or amendment
agreed to by the Special Servicer pursuant to the clause (a) or (b)(i) above,
the Special Servicer shall deliver to the Trustee (with a copy to the Servicer)
an Officer's Certificate setting forth in reasonable detail the basis of the
determination made by it pursuant to clause (a) or (b)(i) above.
(i) If a modification, waiver or amendment results, in and of itself, in
the withdrawal, downgrade or qualification of any of the then-current ratings
assigned to any Class of Certificates (not including the Class of Certificates,
if any, that consented to such actions), then the Special Servicer shall be
terminated and shall be replaced pursuant to Section 7.02.
(j) Any payment of interest which is deferred as described herein shall
not, for purposes, including, without limitation, of calculating monthly
distributions to Certificateholders, be added to the unpaid principal balance
of the related Mortgage Loan, notwithstanding that the terms of such Mortgage
Loan so permit or that such interest may actually be capitalized.
(k) Except as otherwise specifically provided for herein, (i) the Special
Servicer shall not modify any payment term of any Mortgage Loan, consent to the
release or substitution of any
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collateral for such Mortgage Loan or otherwise alter, delete or add, in whole
or in part, any legal right or obligation of the Borrower or the Trustee as
holder of such Mortgage Loan, unless such modification would not be a
"significant modification" as such term is defined in Code Section 1001 and
applicable Treasury Regulations thereunder or Treasury Regulations Section
1.860G-2(b)(3) and (ii) the Servicer shall not be entitled or required to
modify, amend or extend any provision of any Mortgage Loan.
ARTICLE IV.
DISTRIBUTIONS TO CERTIFICATEHOLDERS
SECTION 4.1. Distributions.
(a) On each Distribution Date, to the extent of Available Funds, amounts
held in the Distribution Account shall be withdrawn and paid in the following
amounts:
(i) First, pro rata, from Available Funds in respect of interest:
(A) to the Class _______ Interest, up to an amount equal to
interest for the related Interest Accrual Period at the Class _____A
Pass-Through Rate on the Certificate Balance of the Class ______L Interest;
(B) [Describe remaining distributions]
(ii) Second, pro rata, from Available Funds in respect of interest:
(A) to the Class ______ Interest, up to an amount equal to the
aggregate unpaid Interest Shortfalls in respect of clause (i)(A) previously
allocated thereto in respect of the Certificate Balance of the Class _______
Interest;
(B) [Described remaining distributions]
(iii) Third, prior to the Cross-over Date, to the Class _____
Interest, in reduction of the Certificate Balance thereof, an amount up to the
Principal Distribution Amount until the Certificate Balance thereof is reduced
to zero;
(iv) Fourth, prior to the Cross-over Date and after the Certificate
Balance of the Class ______ Interest has been reduced to zero, to the Class
_____ Interest, in reduction of the Certificate Balance thereof, the Principal
Distribution Amount less the portion thereof distributed on such Distribution
Date pursuant to any preceding clause, until the Certificate Balance thereof is
reduced to zero;
(v) Fifth, [describe additional distributions] to the Class LR
Certificates, but only to the extent of Available Funds remaining in the
Distribution Account.
All references to "pro rata" in each of the preceding clauses in respect
of interest or Interest Shortfalls shall mean pro rata based on the amount
distributable pursuant to such clause. All
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references to "pro rata" in the preceding clauses in respect of distribution of
principal other than for unreimbursed Realized Losses shall mean pro rata based
upon the respective Certificate Balances of the Lower-Tier Regular Interests
receiving distributions pursuant to such clause. All references to "pro rata"
of the preceding clauses in respect of unreimbursed Realized Losses shall mean
pro rata based on the amount of unreimbursed Realized Losses in respect of such
clauses.
(b) On each Distribution Date, amounts distributed to the Lower-Tier
Regular Interests pursuant to Section 4.01(a) shall be deposited in the
Upper-Tier Distribution Account.
On each Distribution Date, Holders of each Class of Certificates (other
than the Class LR Certificates) shall receive distributions from amounts on
deposit in the Upper-Tier Distribution Account in respect of interest and
principal in the amounts and in the order of priority set forth below, to the
extent corresponding amounts of interest and principal were distributed
pursuant to Section 4.01(a):
(i) [Describe]
(ii) _____________, to the Class R Certificates, but only to the
extent of funds, if any, remaining in the Upper-Tier Distribution Account.
On each Distribution Date, amounts received on a Mortgage Loan that
represent Subordinate Class Advance Recoveries shall be allocated by the
Trustee to the Class of Certificates and the Related Lower-Tier Regular
Interest that advanced the related Subordinate Class Advance Amount in respect
of the distributions to which such Class of Certificates and Related Lower-Tier
Regular Interest were entitled on the Distribution Date on which such
distributions were reduced by such Subordinate Class Advance Amount. Amounts
allocated with respect to interest shall be applied, first, to any related
unpaid Interest Shortfalls or Class Interest Shortfalls. On each Distribution
Date, the Paying Agent shall distribute Subordinate Class Advance Recoveries
allocated to the related Class of Certificates and Related Lower-Tier Regular
Interest pursuant to this paragraph to such Class and Related Lower-Tier
Regular Interest.
All references to pro rata in the preceding clauses with respect to
interest and Interest Shortfalls shall mean pro rata based on the amount
distributable pursuant to such clauses, with respect to distribution of
principal other than for unreimbursed Realized Losses shall mean pro rata based
on Certificate Balance and with respect to distributions with respect to
unreimbursed Realizes Losses shall mean pro rata based on the amount of
unreimbursed Realized Losses previously allocated to the applicable Classes.
(c) (i) On each Distribution Date, following the distribution from the
Distribution Account in respect of the Lower-Tier Regular Interests pursuant to
Section 4.01(c)(ii), the Paying Agent shall make distributions of Prepayment
Premiums with respect to any Principal Prepayments received in the related
Collection Period from amounts deposited in the Upper-Tier Distribution
Account pursuant to Section 3.05(c) in the following amounts and order of
priority, with respect to the Certificates of each Class in each case to the
extent remaining amounts of Prepayment Premiums are available therefor:
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(I) [List and describe]
In all clauses above, Prepayment Premiums will only be distributed on a
Distribution Date (i) if the respective Certificate Balance or Notional Balance
of the related Class or Classes is greater than zero on the last business day
of the Interest Accrual Period preceding such Distribution Date and (ii) if the
amount computed pursuant to the related clause above is greater than zero. Any
Prepayment Premiums remaining following the distributions described in the
preceding clauses (I) through (V) shall be distributed to holders of the Class
_____ Certificates regardless of whether the Certificate Balance thereof has
been reduced to zero.
Notwithstanding the foregoing, Prepayment Premiums shall be distributed
on any Distribution Date only to the extent they are received in respect of the
Mortgage Loans in the related Collection Period.
(ii) [Reserved.]
(d) (i) On each Distribution Date, Net Default Interest for such
Distribution Date shall be distributed to the Class V-1 Certificates.
(ii) On any applicable Distribution Date, Excess Interest for such
Distribution Date shall be distributed to the Class V-2 Certificates.
(e) The Certificate Balances of the Lower-Tier Regular Interests will be
reduced without distribution on any Distribution Date as a write-off to the
extent of any Realized Losses with respect to such date. Any such write-offs
will be applied to the Lower-Tier Regular Interests: first, to the Class _____
and Class _____ Interests, pro rata, based on their respective Certificate
Balances; second to the Class _____ Interest; third, to the Class _____
Interest; fourth, to the Class _____ Interest, fifth, to the _____ Interest;
sixth, to the Class _____ Interest; seventh, to the Class _____ Interest;
eighth, to the Class _____ Interest; ninth, to the Class _____ Interest; and
tenth, to the Class _____, Class _____ and Class _____ Interests, pro rata,
based on their respective Balances.
Realized Losses applied to each Class of Lower-Tier Regular Interests
will be allocated to reduce the Certificate Balance of the Related Certificates
(and correspondingly, to reduce the Component Balances of the related
components).
(f) All amounts distributable to a Class of Certificates pursuant to this
Section 4.01 on each Distribution Date shall be allocated pro rata among the
outstanding Certificates in each such Class based on their respective
Percentage Interests. Such distributions shall be made on each Distribution
Date other than the Termination Date to each Certificateholder of record on the
related Record Date by check mailed by first Class mail to the address set
forth therefor in the Certificate Register or, provided that such
Certificateholder holds Certificates with an aggregate initial Certificate
Balance in excess of $5,000,000, and shall have provided the Paying Agent with
wire instructions in writing at least five Business Days prior to the related
Record Date, by wire transfer of immediately available funds to the account of
such Certificateholder at a bank or other entity located in the United States
and having appropriate facilities therefor. The final distribution on
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each Certificate shall be made in like manner, but only upon presentment and
surrender of such Certificate at the office of the Trustee or its agent (which
may be the Paying Agent or the Certificate Registrar acting as such agent)
maintained in the ______________________ that is specified in the notice to
Certificateholders of such final distribution.
(g) Except as otherwise provided in Section 9.01 with respect to an
Anticipated Termination Date, the Trustee shall, no later than the fifteenth
day of the month in the month preceding the month in which the final
distribution with respect to any Class of Certificates is expected to be made,
mail to each Holder of such Class of Certificates, on such date a notice to the
effect that:
(A) the Trustee reasonably expects based upon information
previously provided to it that the final distribution with respect to such
Class of Certificates will be made on such Distribution Date, but only upon
presentation and surrender of such Certificates at the office of the Trustee
therein specified, and
(B) if such final distribution is made on such Distribution Date,
no interest shall accrue on such Certificates from and after such Distribution
Date;
provided, however, that the Class V-1, Class V-2, Class R and Class LR
Certificates shall remain outstanding until there is no other Class of
Certificates or Lower-Tier Regular Interests outstanding.
Any funds not distributed to any Holder or Holders of Certificates of
such Class on such Distribution Date because of the failure of such Holder or
Holders to tender their Certificates shall, on such date, be set aside and held
in trust for the benefit of the appropriate non-tendering Holder or Holders. If
any Certificates as to which notice has been given pursuant to this Section
4.01(g) shall not have been surrendered for cancellation within six months
after the time specified in such notice, the Trustee shall mail a second notice
to the remaining non-tendering Certificateholders to surrender their
Certificates for cancellation to receive the final distribution with respect
thereto. If within one year after the second notice not all of such
Certificates shall have been surrendered for cancellation, the Trustee may,
directly or through an agent, take appropriate steps to contact the remaining
non-tendering Certificateholders concerning surrender of their Certificates.
The costs and expenses of holding such funds in trust and of contacting such
Certificateholders shall be paid out of such funds. If within two years after
the second notice any such Certificates shall not have been surrendered for
cancellation, the Paying Agent shall pay to the Trustee all amounts
distributable to the Holders thereof, and the Trustee shall thereafter hold
such amounts for the benefit of such Holders until the earlier of (i) its
termination as Trustee hereunder and the transfer of such amounts to a
successor Trustee and (ii) the termination of the Trust Fund and distribution
of such amounts to the Class R Certificateholders. No interest shall accrue or
be payable to any Certificateholder on any amount held in trust hereunder or by
the Trustee as a result of such Certificateholder's failure to surrender its
Certificate(s) for final payment thereof in accordance with this Section
4.01(g). Any such amounts transferred to the Trustee may be invested in
Permitted Investments and all income and gain realized from investment of such
funds shall be for the benefit of the Trustee.
(h) Notwithstanding any provision in this Agreement to the contrary, the
aggregate amount distributable to each Class pursuant to this Section 4.01
shall be reduced by the aggregate
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amount paid to any Person pursuant to Section 6.03 or Section 8.05(b) and (d),
such reduction to be allocated among such Classes pro rata, based upon the
respective amounts so distributable without taking into account the provision
of this Section 4.01(h). Such reduction of amounts otherwise distributable to a
Class shall be allocated first in respect of interest and second in respect of
principal. For purposes of determining Interest Shortfalls and Certificate
Balances, the amount of any such reduction so allocated to a Class shall be
deemed to have been distributed to such Class.
(i) The Component Balance of the Strip Components (other than the Class
_____ Strip Component, the Class _____ Strip Component and the Class _____
Strip Component) shall be reduced on any Distribution Date after the
Certificate Balances of the Class _____, Class _____, Class _____, Class _____
and Class _____ Certificates have been reduced to zero to the extent of any
Delinquency Reduction Amounts or Appraisal Reduction Amounts with respect to
such Distribution Date; provided that (I) if a Delinquency and an Appraisal
Reduction Event occur on the same Distribution Date with respect to the same
Mortgage Loan, the reduction will equal the greater of the related Delinquency
Reduction Amount and the Appraisal Reduction Amount, (ii) for any Distribution
Date, the aggregate of the Delinquency Reduction Amounts may not exceed the
Component Balance of the most junior Strip Component then outstanding and (iii)
except as described in clause (i), on any Distribution Date, Appraisal
Reduction Amounts will be allocated to the applicable Component Balances prior
to Delinquency Reduction Amounts. On any Distribution Date after the respective
Certificate Balances of the Class _____, Class _____, Class _____, Class _____
and Class _____ Certificates have been reduced to zero, any such reductions
shall be applied to the Strip Components in the following order, until each is
reduced to zero: first, to the Class _____ Strip Component, second, to the
Class _____ Strip Component, third, to the Class _____ Strip Component, fourth,
to the Class _____ Strip Component, and fifth, to the Class _____D Strip
Component. The Notional Balance of the Class _____Certificates shall be reduced
to reflect reductions in the Component Balances of the Class _____ Strip
Component, Class _____ Strip Component, Class _____ Strip Component, Class
_____ Strip Component and Class _____ Strip Component resulting from
Delinquency Reduction Amounts and Appraisal Reduction Amounts. Any reduction of
the Component Balance of a Strip Component as a result of any Delinquency or
Appraisal Reduction Event shall be reversed to the extent there is a recovery
of any or all of the Delinquency Amounts or a Realized Loss (which results in
the reduction of the Certificate Balance of the related Class and therefore the
reduction of the Component Balance of such Strip Component). Additionally, a
reversal or additional reduction shall occur to the extent that the Servicer's
Appraisal Estimate is less than or greater than the Appraisal Reduction as
adjusted to take into account a subsequent independent MAI Appraisal. For
purposes of calculating Interest Accrual Amounts, any such reversal or
additional reductions made on the Distribution Date occurring in an Interest
Accrual Period shall be deemed to have been made on the first day of such
Interest Accrual Period.
SECTION 4.2. Statements to Certificateholders; Available Information;
Information Furnished to Financial Market Publisher.
(a) On each Distribution Date, the Trustee shall, based on information
provided by the Servicer or provided by the Special Servicer to the Servicer
(with respect to a Specially Serviced Mortgage Loan or the servicing
responsibilities of the Special Servicer set forth herein) and subject
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to receipt thereof, prepare and forward by mail to each Holder of a
Certificate, with copies to the Depositor, the Paying Agent, the Special
Servicer, the Servicer, the Rating Agencies and up to three market reporting
services designated by the Depositor, a statement as to such distribution
setting forth for each Class, as applicable:
(i) The Principal Distribution Amount and the amount of
Available Funds allocable to principal included therein;
(ii) The Class Interest Distribution Amount distributable on such
Class and any related Strip Component and the amount of Available Funds
allocable thereto, together with any Class Interest Shortfall allocable to such
Class and any related Strip Component;
(iii) The amount of any P&I Advances by the Servicer, the Trustee
or the Fiscal Agent included in the amounts distributed to Certificateholders
not reimbursed since the last Distribution Date;
(iv) The Certificate Balance or Notional Balance, as applicable, of
each Class or Strip Component after giving effect to the distribution of
amounts in respect of the Principal Distribution Amount on such Distribution
Date;
(v) Realized Losses (for such month and on a cumulative basis)
and their allocation to the Certificate Balance of any Class of Certificates;
(vi) The Stated Principal Balance of the Mortgage Loans as of
the Due Date preceding such Distribution Date;
(vii) The number and aggregate principal balance of Mortgage Loans
(and the identity of each related Borrower) (A) delinquent one month, (B)
delinquent two months, (C) delinquent three or more months, (D) as to which
foreclosure proceedings have been commenced and (E) that otherwise constitute
Specially Serviced Mortgage Loans, and, with respect to each Specially Serviced
Mortgage Loan, the amount of Property Advances made during the related
Collection Period, the amount of the P&I Advance made on such Distribution
Date, the aggregate amount of Property Advances theretofore made that remain
unreimbursed and the aggregate amount of P&I Advances theretofore made that
remain unreimbursed;
(viii) With respect to any Mortgage Loan that became an REO
Property during the preceding calendar month, the principal balance and
appraised value (based on the most recent Updated Appraisal) of such Mortgage
Loan as of the date it became an REO Mortgage Loan;
(ix) As of the Due Date preceding such Distribution Date (A) for
any REO Property sold during the related Collection Period, the date on which
the Special Servicer determined that a Final Recovery Determination was made
and the amount of the proceeds of such sale deposited into the Collection
Account and (B) the aggregate amount of other revenues collected by the Special
Servicer with respect to each REO Property during the related Collection Period
and credited to the Collection Account, in each case identifying such REO
Property by name;
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(x) The appraised value as determined by the most recent Updated
Appraisal (or annual letter update thereof) of any REO Property;
(xi) The amount of the Servicing Fee, Trustee Fee and Special
Servicing Compensation paid with respect to such Distribution Date, and the
amount of the additional servicing compensation described in Section 3.12(a)
that was received during the related Collection Period;
(xii) (A) The amount of Prepayment Premiums, if any, received
during the related Collection Period, (B) the amount of Default Interest
received during the related Collection Period and the Net Default Interest for
such Distribution Date and (C) the amount of Excess Interest, if any, received
during the related Collection Period;
(xiii) The outstanding principal balance and repurchase price of
any Mortgage Loan purchased or repurchased pursuant to Sections 2.03(d),
2.03(e), 3.18 or 9.01(c);
(xiv) The amount of Prepayment Interest Shortfalls with respect
to such Distribution Date; and
(xv) The account balance contained in the Reserve Accounts as of
the related Due Date relating to the preceding Distribution Date for each
Mortgage Loan.
In the case of information furnished pursuant to subclauses (i), (ii),
(iii), (iv), (v) and (xiii) above, the amounts shall be expressed as a dollar
amount in the aggregate for all Certificates of each applicable Class and for
each Class of Certificates with a denomination of $1,000 initial Certificate
Balance.
Within a reasonable period of time after the end of each calendar year,
the Trustee shall furnish to each Person who at any time during the calendar
year was a Holder of a Certificate (except for a Class R or Class LR
Certificate) a statement containing the information set forth in subclauses (i)
and (ii) above, aggregated for such calendar year or 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 it provided
substantially comparable information pursuant to any requirements of the Code
as from time to time in force.
On each Distribution Date, the Trustee shall forward to each Holder of a
Class R or Class LR Certificate a copy of the reports forwarded to the other
Certificateholders on such Distribution Date and a statement setting forth the
amounts, if any, actually distributed with respect to the Class R or Class LR
Certificates on such Distribution Date. Such obligation of the Trustee shall be
deemed to have been satisfied to the extent that it provided substantially
comparable information pursuant to any requirements of the Code as from time to
time in force.
Within a reasonable period of time after the end of each calendar year,
the Trustee shall furnish to each Person who at any time during the calendar
year was a Holder of a Class R or Class LR Certificate a statement containing
the information provided pursuant to the previous paragraph aggregated for such
calendar year or applicable portion thereof during which such Person was a
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Certificateholder. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that it provided substantially comparable information
pursuant to any requirements of the Code as from time to time in force.
(b) On or within two Business Days following each Distribution Date, the
Trustee shall prepare and furnish to the Financial Market Publisher and the
Underwriter, using the format and media mutually agreed upon by the Trustee,
the Financial Market Publisher and the Underwriter, the following information
regarding each Mortgage Loan and any other information reasonably requested by
the Underwriter and available to the Trustee:
(i) the Loan Number;
(ii) each related Mortgage Rate; and
(iii) the principal balance as of such Distribution Date.
The Trustee shall only be obligated to deliver the statements, reports
and information contemplated by Section 4.02(a) and 4.02(b) to the extent it
receives the necessary underlying information from the Servicer or the Special
Servicer and shall not be liable for any failure to deliver any thereof on the
prescribed due dates, to the extent caused by failure to receive timely such
underlying information. Nothing herein shall obligate the Trustee, the Servicer
or the Special Servicer to violate any applicable law prohibiting disclosure of
information with respect to any Borrower and the failure of the Trustee, the
Servicer or the Special Servicer to disseminate information for such reason
shall not be a breach hereof.
SECTION 4.3. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the Paying Agent
shall comply with all federal withholding requirements with respect to payments
to Certificateholders of interest or original issue discount that the Paying
Agent reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for any such withholding. The Paying
Agent agrees that it will not withhold with respect to payments of interest or
original issue discount in the case of a Certificateholder that is non-U.S.
Person that has furnished or caused to be furnished (i) an effective Form W-8
or Form W-9 or an acceptable substitute form or a successor form and who is not
a "10-percent shareholder" within the meaning of Code Section 871(h)(3)(B) or a
"controlled foreign corporation" described in Code Section 881(c)(3)(C) with
respect to the Trust Fund or the Depositor, or (ii) an effective Form 4224 or
an acceptable substitute form or a successor form. In the event the Paying
Agent or its agent withholds any amount from interest or original issue
discount payments or advances thereof to any Certificateholder pursuant to
federal withholding requirements, the Paying Agent shall indicate the amount
withheld to such Certificateholder. Any amount so withheld shall be treated as
having been distributed to such Certificateholder for all purposes of this
Agreement.
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SECTION 4.4. REMIC Compliance.
(a) The parties intend that each of the Upper-Tier REMIC and the
Lower-Tier REMIC shall constitute, and that the affairs of each of the Upper-
Tier REMIC and the Lower-Tier REMIC shall be conducted so as to qualify it as,
a "real estate mortgage investment conduit" as defined in, and in accordance
with, the REMIC Provisions, and the provisions hereof shall be interpreted
consistently with this intention. In furtherance of such intention, the Trustee
shall, to the extent permitted by applicable law, act as agent, and is hereby
appointed to act as agent, of each of the Upper-Tier REMIC and the Lower-Tier
REMIC and shall on behalf of each of the Upper-Tier REMIC and the Lower-Tier
REMIC: (i) prepare, sign and file, or cause to be prepared and filed, all
required Tax Returns for each of the Upper-Tier REMIC and the Lower-Tier
REMIC, using a calendar year as the taxable year for each of the Upper-Tier
REMIC and the Lower-Tier REMIC when and as required by the REMIC Provisions and
other applicable federal, state or local income tax laws; (ii) make an
election, on behalf of each of the Upper-Tier REMIC and the Lower-Tier REMIC,
to be treated as a REMIC on Form 1066 for its first taxable year, in accordance
with the REMIC Provisions; (iii) prepare and forward, or cause to be prepared
and forwarded, to the Certificateholders and the Internal Revenue Service and
applicable state and local tax authorities all information reports as and when
required to be provided to them in accordance with the REMIC Provisions of the
Code; (iv) if the filing or distribution of any documents of an administrative
nature not addressed in clauses (i) through (iii) of this Section 4.05(a) is
then required by the REMIC Provisions in order to maintain the status of the
Upper-Tier REMIC or the Lower-Tier REMIC as a REMIC or is otherwise required by
the Code, prepare, sign and file or distribute, or cause to be prepared and
signed and filed or distributed, such documents with or to such Persons when
and as required by the REMIC Provisions or the Code or comparable provisions of
state and local law; (v) within thirty days of the Closing Date, furnish or
cause to be furnished to the Internal Revenue Service, on Form 8811 or as
otherwise may be required by the Code, the name, title and address of the
Person that the holders of the Certificates may contact for tax information
relating thereto (and the Trustee shall act as the representative of each of
the Upper-Tier REMIC and the Lower-Tier REMIC for this purpose), together with
such additional information as may be required by such Form, and shall update
such information at the time or times and in the manner required by the Code
(and the Depositor agrees within 10 Business Days of the Closing Date to
provide any information reasonably requested by the Servicer, the Special
Servicer or the Trustee and necessary to make such filing); and (vi) maintain
such records relating to each of the Upper-Tier REMIC and the Lower-Tier REMIC
as may be necessary to prepare the foregoing returns, schedules, statements or
information, such records, for federal income tax purposes, to be maintained on
a calendar year and on an accrual basis. The Holder of the largest Percentage
Interest in the Class R or Class LR Certificates shall be the tax matters
person of the Upper-Tier REMIC or the Lower-Tier REMIC, respectively, pursuant
to Treasury Regulations Section 1.860F-4(d). If more than one Holder should
hold an equal Percentage Interest in the Class R or Class LR Certificates
larger than that held by any other Holder, the first such Holder to have
acquired such Class R or Class LR Certificates shall be such tax matters
person. The Trustee shall act as attorney-in-fact and agent for the tax matters
person of each of the Upper-Tier REMIC and Lower-Tier REMIC, and each Holder of
a Percentage Interest in the Class R or Class LR Certificates, by acceptance
hereof, is deemed to have consented to the Trustee's appointment in such
capacity and agrees to execute any documents required to give effect thereto,
and any fees and expenses incurred by the Trustee in connection
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with any audit or administrative or judicial proceeding shall be paid by the
Trust Fund. The Trustee shall not intentionally take any action or
intentionally omit to take any action if, in taking or omitting to take such
action, the Trustee knows that such action or omission (as the case may be)
would cause the termination of the REMIC status of the Upper-Tier REMIC or the
Lower-Tier REMIC or the imposition of tax on the Upper-Tier REMIC or the
Lower-Tier REMIC (other than a tax on income expressly permitted or
contemplated to be received by the terms of this Agreement). Notwithstanding
any provision of this paragraph to the contrary, the Trustee shall not be
required to take any action that the Trustee in good faith believes to be
inconsistent with any other provision of this Agreement, nor shall the Trustee
be deemed in violation of this paragraph if it takes any action expressly
required or authorized by any other provision of this Agreement, and the
Trustee shall have no responsibility or liability with respect to any act or
omission of the Depositor, the Servicer or the Special Servicer which does not
enable the Trustee to comply with any of clauses (i) through (vi) of the fifth
preceding sentence or which results in any action contemplated by clauses (i)
or (ii) of the next succeeding sentence. In this regard the Trustee shall (i)
exercise reasonable care not to allow the occurrence of any "prohibited
transactions" within the meaning of Code Section 860F(a), unless the party
seeking such action shall have delivered to the Trustee an Opinion of Counsel
(at such party's expense) that such occurrence would not (A) result in a
taxable gain, (B) otherwise subject the Upper-Tier REMIC or Lower-Tier REMIC to
tax (other than a tax at the highest marginal corporate tax rate on net income
from foreclosure property), or (C) cause either the Upper-Tier REMIC or
Lower-Tier REMIC to fail to qualify as a REMIC; and (ii) exercise reasonable
care not to allow the Trust Fund to receive income from the performance of
services or from assets not permitted under the REMIC Provisions to be held by
a REMIC (provided, however, that the receipt of any income expressly permitted
or contemplated by the terms of this Agreement shall not be deemed to violate
this clause). None of the Servicer, the Special Servicer and the Depositor
shall be responsible or liable (except in connection with any act or omission
referred to in the two preceding sentences) for any failure by the Trustee to
comply with the provisions of this Section 4.04. The Depositor, the Servicer
and the Special Servicer shall cooperate in a timely manner with the Trustee in
supplying any information within the Depositor's, the Servicer's or the Special
Servicer's control (other than any confidential information) that is reasonably
necessary to enable the Trustee to perform its duties under this Section 4.04.
(b) The following assumptions are to be used for purposes of determining
the anticipated payments of principal and interest for calculating the original
yield to maturity and original issue discount with respect to the Regular
Certificates: (i) each Mortgage Loan will pay principal and interest in
accordance with its terms and scheduled payments will be timely received on
their Due Dates, provided that the Mortgage Loans in the aggregate will prepay
in accordance with the Prepayment Assumption; (ii) none of the Servicer, the
Depositor and the Class LR Certificateholders will exercise the right described
in Section 9.01 of this Agreement to cause early termination of the Trust Fund;
and (iii) no Mortgage Loan is repurchased by the Mortgage Loan Seller, the
Depositor or an Mortgage Loan Seller pursuant to Article II hereof.
SECTION 4.5. Imposition of Tax on the Trust Fund.
In the event that any tax, including interest, penalties or assessments,
additional amounts or additions to tax, is imposed on the Upper-Tier REMIC or
Lower-Tier REMIC, such tax shall be
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charged against amounts otherwise distributable to the Holders of the
Certificates; provided, that any taxes imposed on any net income from
foreclosure property pursuant to Code Section 860G(d) or any similar tax
imposed by a state or local jurisdiction shall instead be treated as an expense
of the related REO Property in determining Net REO Proceeds with respect to the
REO Property (and until such taxes are paid, the Special Servicer from time to
time shall withdraw from the REO Account and transfer to the Trustee amounts
reasonably determined by the Trustee to be necessary to pay such taxes, which
the Trustee shall maintain in a separate, non-interest-bearing account, and the
Trustee shall deposit in the Collection Account the excess determined by the
Trustee from time to time of the amount in such account over the amount
necessary to pay such taxes) and shall be paid therefrom; provided that any
such tax imposed on net income from foreclosure property that exceeds the
amount in any such reserve shall be retained from Available Funds as provided
in Section 3.06(viii) and the next sentence. Except as provided in the
preceding sentence, the Trustee is hereby authorized to and shall retain or
cause to be retained from Available Funds sufficient funds to pay or provide
for the payment of, and to actually pay, such tax as is legally owed by the
Upper-Tier REMIC or Lower-Tier REMIC (but such authorization shall not prevent
the Trustee from contesting, at the expense of the Trust Fund, any such tax in
appropriate proceedings, and withholding payment of such tax, if permitted by
law, pending the outcome of such proceedings). The Trustee is hereby authorized
to and shall segregate or cause to be segregated, into a separate non-interest
bearing account, (i) the net income from any "prohibited transaction" under
Code Section 860F(a) or (ii) the amount of any contribution to the Upper-Tier
REMIC or Lower-Tier REMIC after the Startup Day that is subject to tax under
Code Section 860G(d) and use such income or amount, to the extent necessary, to
pay such tax (and return the balance thereof, if any, to the Collection Account
or the Upper-Tier Distribution Account, as the case may be). To the extent that
any such tax is paid to the Internal Revenue Service, the Trustee shall retain
an equal amount from future amounts otherwise distributable to the Holders of
the Class R or the Class LR Certificates as the case may be, and shall
distribute such retained amounts to the Holders of Regular Certificates or
Lower-Tier Regular Interests, as applicable, until they are fully reimbursed
and then to the Holders of the Class R Certificates or the Class LR
Certificates, as applicable. Neither the Servicer, the Special Servicer nor the
Trustee shall be responsible for any taxes imposed on the Upper-Tier REMIC or
Lower-Tier REMIC except to the extent such tax is attributable to a breach of a
representation or warranty of the Servicer, the Special Servicer or the Trustee
or an act or omission of the Servicer, the Special Servicer or the Trustee in
contravention of this Agreement in both cases, provided, further, that such
breach, act or omission could result in liability under Section 6.03, in the
case of the Servicer or Section 4.04 or 8.01, in the case of the Trustee.
Notwithstanding anything in this Agreement to the contrary, in each such case,
the Servicer or the Special Servicer shall not be responsible for Trustee's
breaches, acts or omissions, and the Trustee shall not be responsible for the
breaches, acts or omissions of the Servicer or the Special Servicer.
SECTION 4.6. Remittances; P&I Advances.
(a) "Applicable Monthly Payment" shall mean, for any Mortgage Loan with
respect to any month, (A) if such Mortgage Loan is delinquent as to its Balloon
Payment (including any such Mortgage Loan as to which the related Mortgaged
Property has become an REO Property), the related Assumed Scheduled Payment,
(B) if such Mortgage Loan has been extended in accordance with the terms and
conditions otherwise set forth in this Agreement, the Minimum Defaulted
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Monthly Payment and (C) if such Mortgage Loan is not described by the preceding
two sentences (including any such Mortgage Loan as to which the related
Mortgaged Property has become an REO Property), the Monthly Payment (after
giving effect to any modification other than as described in (A) or (B) above);
provided, however, that for purposes of calculating the amount of any P&I
Advance required to be made by the Servicer, the Trustee or the Fiscal Agent,
notwithstanding the amount of such Applicable Monthly Payment, interest shall
be calculated at the Mortgage Pass-Through Rate. The Applicable Monthly Payment
shall be reduced, for purposes of P&I Advances, by any modifications pursuant
to Section 3.30 or otherwise and by any reductions by a bankruptcy court
pursuant to a plan of reorganization or pursuant to any of its equitable
powers.
(b) On the Servicer Remittance Date immediately preceding each
Distribution Date, the Servicer shall:
(i) remit to the Trustee for deposit in the Distribution Account an
amount equal to the Prepayment Premiums received by the Servicer or Special
Servicer in the Collection Period preceding such Distribution Date;
(ii) remit to the Trustee for deposit in the Distribution Account
an amount equal to the aggregate of the Available Funds (other than P&I
Advances) and Subordinate Class Advance Recoveries for such Distribution Date;
(iii) make a P&I Advance, by deposit into the Distribution Account,
in an amount equal to the sum of the Applicable Monthly Payments for each
Mortgage Loan to the extent such amounts were not received on such Mortgage
Loan as of the close of business on the day preceding the Servicer Remittance
Date (and therefore are not included in the remittance described in the
preceding clause (ii)).
(c) Notwithstanding the provisions of Section 4.06(b)(iii), the Servicer
may reduce the aggregate amount of P&I Advances to be deposited by the Servicer
on the related Servicer Remittance Date by the amount the Servicer is not
required to advance pursuant to clauses (d) and (e) below. The Trustee shall
provide to the Servicer written statements prior to the Servicer Remittance
Date listing (i) the aggregate Reduction Interest Distribution Amounts and
Reduction Interest Shortfalls for such Distribution Date and (ii) distribution
due to the Holders of the most subordinate Class of Certificates and the
Related Lower-Tier and Regular Interests.
(d) Unless the related Delinquency is cured prior to the following Due
Date, the Servicer shall make only one P&I Advance in respect of a Delinquency
on any Mortgage Loan for the benefit of the most subordinate Class of
Certificates and the Related Lower-Tier Regular Interests then outstanding and,
accordingly, the Servicer may reduce the aggregate amount of the P&I Advance to
be deposited by the Servicer on the related Servicer Remittance Date by the
amount that the Servicer is not required to advance. On the Servicer Remittance
Date on which the Servicer is not required to make a P&I Advance for the
benefit of the most subordinate Class and the Related Lower-Tier Regular
Interests as described above, for each Mortgage Loan for which a Delinquency
has occurred the amount of the P&I Advance with respect to such Servicer
Remittance Date that the Servicer will not advance will be equal to (i) the
amount that would be
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distributable to the most subordinate Class if the Monthly Payment or Minimum
Defaulted Monthly Payment for every Mortgage Loan had been received less (ii)
the amount that would be distributable to the most subordinate Class if the
Monthly Payment or Minimum Defaulted Monthly Payment for every Mortgage Loan
other than such Mortgage Loan had been received. In addition, on any Servicer
Remittance Date on which the Servicer is not required to make a P&I Advance for
the benefit of the most subordinate Class and the Related Lower-Tier Regular
Interests as described above, if the Servicer does make a P&I Advance that
includes amounts payable to the most subordinate Class and the Related
Lower-Tier Regular Interests, the Servicer shall, immediately subsequent to the
making of the P&I Advance on such Servicer Remittance Date, reimburse itself
(without interest) for the portion of such P&I Advance allocable to the most
subordinate Class from amounts otherwise distributable to such most subordinate
Class on the related Distribution Date (such amount of reimbursement, the
"Subordinate Class Advance Amount"). For the purposes of determining amounts to
which the most subordinate Class and the Related Lower-Tier Regular Interests
are entitled as reimbursements from Subordinate Class Advance Recoveries with
respect to a Mortgage Loan, each Subordinate Class Advance Amount with respect
to a Distribution Date shall be related to each Mortgage Loan for which a
Delinquency has occurred on the prior Due Date pro rata based on the amount by
which the related P&I Advance could be reduced with respect to such Mortgage
Loan in accordance with the second preceding sentence. No interest shall accrue
on, or be payable with respect to, any outstanding Subordinate Class Advance
Amount.
(e) The Servicer shall not be required or permitted to make an advance
for Excess Interest or Default Interest or in respect of Reduction Interest
Distribution Amounts and Reduction Interest Shortfalls. The amount required to
be advanced by the Servicer in respect of Applicable Monthly Payments on
Mortgage Loans that have been subject to an Appraisal Reduction Event will
equal the product of (i) the amount required to be advanced by the Servicer
without giving effect to such Appraisal Reduction Amounts and (ii) a fraction,
the numerator of which is the Stated Principal Balance of the Mortgage Loan
less any Appraisal Reduction Amounts thereof and the denominator of which is
the Stated Principal Balance.
(f) Any amount advanced by the Servicer pursuant to Section 4.06(b)(iii)
shall constitute a P&I Advance for all purposes of this Agreement and the
Servicer shall be entitled to reimbursement thereof to the full extent as
otherwise set forth in this Agreement.
(g) If as of 11:00 a.m., New York City time, on any Distribution Date the
Servicer shall not have made the P&I Advance required to have been made on the
related Servicer Remittance Date pursuant to Section 4.06(b)(iii), the Trustee
shall immediately notify the Fiscal Agent by telephone promptly confirmed in
writing, and the Trustee shall no later than 12:00 noon, New York City time, on
such Business Day deposit into the Distribution Account in immediately
available funds an amount equal to the P&I Advances otherwise required to have
been made by the Servicer. If the Trustee fails to make any P&I Advance
required to be made under this Section 4.06, the Fiscal Agent shall make such
P&I Advance not later than 2:00 p.m., New York City time, on such Business Day
and, thereby, the Trustee shall not be in default under this Agreement.
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(h) None of the Servicer, the Trustee or the Fiscal Agent shall be
obligated to make a P&I Advance as to any Monthly Payment or Assumed Scheduled
Payment or Minimum Defaulted Monthly Payment on any date on which a P&I Advance
is otherwise required to be made by this Section 4.06 if the Servicer, the
Trustee or Fiscal Agent, as applicable, determines that such advance will be a
Nonrecoverable Advance. The Servicer shall be required to provide notice to the
Trustee and the Fiscal Agent on or prior to the Servicer Remittance Date of any
such non-recoverability determination made on or prior to such date. The
Trustee and the Fiscal Agent shall be entitled to rely, conclusively, on any
determination by the Servicer that a P&I Advance, if made, would be a
Nonrecoverable Advance (and with respect to a P&I Advance, the Trustee or the
Fiscal Agent, as applicable, shall rely on the Servicer's determination that
the Advance would be a Nonrecoverable Advance if the Trustee or Fiscal Agent,
as applicable, determines that it does not have sufficient time to make such
determination); provided, however, that if the Servicer has failed to make a
P&I Advance for reasons other than a determination by the Servicer that such
Advance would be a Nonrecoverable Advance, the Trustee or Fiscal Agent, as
applicable, shall make such advance within the time periods required by Section
4.06(g) unless the Trustee or the Fiscal Agent, in good faith, makes a
determination prior to the times specified in Section 4.06(g) that such advance
would be a Nonrecoverable Advance. The Trustee and the Fiscal Agent, in
determining whether or not an Advance previously made is, or a proposed
Advance, if made, would be, a Nonrecoverable Advance shall be subject to the
standards applicable to the Servicer hereunder.
(i) The Servicer, the Trustee or the Fiscal Agent, as applicable, shall
be entitled to the reimbursement of P&I Advances it makes to the extent
permitted pursuant to Section 3.06(ii) of this Agreement together with any
related Advance Interest Amount in respect of such P&I Advances to the extent
permitted pursuant to Section 3.06(iii) and the Servicer and Special Servicer
hereby covenant and agree to promptly seek and effect the reimbursement of such
Advances from the related Borrowers to the extent permitted by applicable law
and the related Mortgage Loan.
SECTION 4.7. Grantor Trust Reporting.
The parties intend that the portions of the Trust Fund consisting of (i)
the Default Interest and the Default Interest Distribution Account and (ii) the
Excess Interest and the Excess Interest Distribution Account shall constitute,
and that the affairs of the Trust Fund (exclusive of the Trust REMICs) shall be
conducted so as to qualify such portion as a "grantor trust" under the Code,
and the provisions hereof shall be interpreted consistently with this
intention. In furtherance of such intention, the Trustee shall furnish or cause
to be furnished to Class V-1 and Class V-2 Certificateholders and shall file or
cause to be filed with the Internal Revenue Service together with Form 1041 or
such other form as may be applicable, income with respect to their applicable
share of Default Interest and the amount of any interest on unreimbursed
Advances payable to the Servicer, the Trustee and the Fiscal Agent, as
applicable, therefrom pursuant to Section 3.06(iii) in the case of the Class
V-1 Certificates, and Excess Interest in the case of the Class V-2
Certificates, at the time or times and in the manner required by the Code.
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SECTION 4.8. Special Distribution Date.
(a) Upon a prepayment with respect to the _____________ Loan after the
expiration of the related Lock-out Period, the Servicer shall remit on the
Business Day preceding the related Special Distribution Date, the amount of the
related ________ Principal, and interest thereon, to the Trustee for deposit in
the Lower-Tier Distribution Account. The Trustee shall deposit such amount in
the Lower-Tier Distribution Account and apply such amount on the related
Special Distribution Date as set forth in clause (b) below.
ARTICLE V.
THE CERTIFICATES
SECTION 5.1. The Certificates.
(a) The Certificates will be substantially in the respective forms
annexed hereto as Exhibits. The Class ___, Class ____, Class ___, Class ___,
Class ___, Class ___, Class ___, Class ___, Class ___, Class ___, Class ___ and
Class ___ Certificates will be issuable only in minimum denominations (based on
the respective Certificate Balance each Class on the first Distribution Date or
Notional Amounts) corresponding to initial Certificate Balances or Notional
Amounts on the first Distribution Date of not less than $100,000, and integral
multiples of $1 in excess thereof. Only one Class ____, one Class ____ and one
Class _____ Certificate may be issued.
(b) The Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee in its capacity as trustee hereunder 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 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 Authenticating Agent 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.
(c) The Class ___, Class ___, Class ___, Class ___, Class ___, Class ___,
Class ___, Class ___ and Class ___ Certificates, Class ___, Class ___ and Class
___ Certificates shall initially be issued as one or more Certificates
registered in the name of the Depository or its nominee and, except as provided
below, registration of such Certificates may not be transferred by the Trustee
except to another Depository that agrees to hold such Certificates for the
respective Certificate Owners with Ownership Interests therein. The Certificate
Owners shall hold their respective Ownership Interests in and to each of the
referenced herein Certificates (except for such remainders) through the
book-entry facilities of the Depository and, except as provided below, shall
not be entitled to Definitive Certificates in respect of such Ownership
Interests. All transfers by Certificate Owners of their respective Ownership
Interests in the Book-Entry Certificates shall be made in accordance with the
procedures established by the Depository Participant or brokerage
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firm representing such Certificate Owner. Each Depository Participant shall
transfer the Ownership Interests only in the Book-Entry Certificates of
Certificate Owners it represents or of brokerage firms for which it acts as
agent in accordance with the Depository's normal procedures.
The Trustee, the Servicer and the Depositor may for all purposes
(including the making of payments due on the respective Classes of Book-Entry
Certificates) deal with the Depository as the authorized representative of the
Certificate Owners with respect to the respective Classes of Book-Entry
Certificates for the purposes of exercising the rights of Certificateholders
hereunder. The rights of Certificate Owners with respect to the respective
Classes of Book-Entry Certificates shall be limited to those established by law
and agreements between such Certificate Owners and the Depository Participants
and brokerage firms representing such Certificate Owners. Multiple requests and
directions from, and votes of, the Depository as Holder of any Class of
Book-Entry Certificates with respect to any particular matter shall not be
deemed inconsistent if they are made with respect to different Certificate
Owners. The Trustee may establish a reasonable record date in connection with
solicitations of consents from or voting by Certificateholders and shall give
notice to the Depository of such record date.
If (i)(A) the Depositor advises the Trustee in writing that the
Depository is no longer willing or able to properly discharge its
responsibilities as Depository and (B) the Depositor is unable to locate a
qualified successor or (ii) the Depositor at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the
Depository, the Trustee shall notify all Certificate Owners, through the
Depository, of the occurrence of any such event and of the availability of
Definitive Certificates to Certificate Owners representing the same. In
addition, upon request, the Trustee will issue Definitive Certificates in
exchange for Ownership Interests in like Certificate Balances of the Book-Entry
Certificates for the Class ___, Class ___ or Class ___ Certificates in
connection with a transfer permitted pursuant to Section 5.02(b)(ii). Upon
surrender to the Trustee of the Book-Entry Certificates by the Depository,
accompanied by registration instructions from the Depository for registration
of transfer, the Trustee shall issue the Definitive Certificates. Neither the
Depositor, the Servicer nor the Trustee shall be liable for any actions taken
by the Depository or its nominee, including, without limitation, any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates all references herein to obligations imposed upon or to be
performed by the Depositor in connection with the issuance of the Definitive
Certificates pursuant to this Section 5.01 shall be deemed to be imposed upon
and performed by the Trustee, and the Trustee and the Servicer shall recognize
the Holders of the Definitive Certificates as Certificateholders hereunder.
SECTION 5.2. Registration of Transfer and Exchange of Certificates.
(a) At all times during the term of this Agreement, there shall be
maintained at the office of the Certificate Registrar a Certificate Register in
which, subject to such reasonable regulations as the Certificate Registrar may
prescribe, the Certificate Registrar shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as herein provided.
The Trustee is hereby initially appointed (and hereby agrees to act) as
Certificate Registrar for the purpose of registering Certificates and transfers
and exchanges of Certificates as herein provided.
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The Certificate Registrar may appoint, by a written instrument delivered to the
Trustee, any other bank or trust company to act as Certificate Registrar under
such conditions as the predecessor Certificate Registrar may prescribe,
provided that the predecessor Certificate Registrar shall not be relieved of
any of its duties or responsibilities hereunder by reason of such appointment.
The Master Servicer shall have the right to inspect the Certificate Register or
to obtain a copy thereof at all reasonable times, and to rely conclusively upon
a certificate of the Certificate Registrar as to the information set forth in
the Certificate Register.
(b) No transfer of any Class ___, Class ___, Class ___, Class ___, Class
___ and Class ___ Certificate shall be made unless that transfer is made
pursuant to an effective registration statement under the Act, and effective
registration or qualification under applicable state securities laws, or is
made in a transaction which does not require such registration or
qualification. If such a transfer is to be made without registration or
qualification and is to be made in connection with the issuance or transfer of
a Definitive Certificate, then the Certificate Registrar shall require, in
order to assure compliance with such laws, receipt of: (i) if such transfer is
purportedly being made in reliance upon Rule 144A under the Act, a certificate
from the prospective transferee substantially in the form attached as Exhibit D
hereto, and (ii) in all other cases, (A) except where the Depositor or an
Affiliate thereof is the transferor or transferee, an Opinion of Counsel
satisfactory to the Certificate Registrar to the effect that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Servicer,
the Trustee or the Certificate Registrar in their respective capacities as
such), (B) a certificate from the Certificateholder desiring to effect such
transfer substantially in the form attached as Exhibit C hereto and (C) a
certificate from such Certificateholder's prospective transferee substantially
in the form attached as Exhibit E hereto. None of the Depositor, the Trustee or
the Certificate Registrar is obligated to register or qualify the Class ___,
Class ___, Class ___, Class ___, Class ___ and Class ___ Certificates under the
Act or any other securities law or to take any action not otherwise required
under this Agreement to permit the transfer of any Class ___, Class ___, Class
___, Class ___, Class ___ and Class ___ Certificate without registration or
qualification. Any Class ___, Class ___, Class ___, Class ___, Class ___ or
Class ___ Certificateholder desiring to effect such a transfer shall, and does
hereby agree to, indemnify the Trustee, the Certificate Registrar 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.
(c) None of the Certificates except for the Class ___, Class ___, Class
___, Class ___, or any interest therein shall be transferred to (A) 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, that is subject to ERISA, or the Code (each, a "Plan") or (B) any
Person who is directly or indirectly purchasing any such Class or interest
therein on behalf of, as named fiduciary of, as trustee of, or with assets of a
Plan, unless the prospective transferee provides the Certificate Registrar with
a certification of facts and an Opinion of Counsel which establish to the
satisfaction of the Certificate Registrar that such transfer will not result in
a violation of Section 406 of ERISA or Section 4975 of the Code or cause the
Servicer or the Trustee to be deemed a fiduciary of such Plan or result in the
imposition of an excise tax under Section 4975 of the Code. In the absence of
its having received the certification and Opinion of Counsel contemplated by
the preceding
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sentence, the Certificate Registrar shall require the prospective transferee of
any Class ___, Class ___, Class ___, Class ___, Class ___ or Class ___
Certificate to certify, and each prospective transferee of any Class ___, Class
___, Class ___, Class ___ or Class ___ Certificate shall be deemed to have
represented by its acquisition of such Certificate, that it is neither (A) a
Plan nor (B) a Person who is directly or indirectly purchasing any such Class
Certificates on behalf of, as named fiduciary of, as trustee of, or with assets
of a Plan.
(d) No transfer of any Residual Certificate shall be made to a Non-U.S.
Person. Notwithstanding anything to the contrary contained herein, prior to
registration of any transfer, sale or other disposition of a Residual
Certificate, the Certificate Registrar shall have received (i) an affidavit
from the proposed transferee substantially in the form attached as Exhibit F-1
hereto, to the effect that, among other things, (A) such transferee is not a
Disqualified Organization or an agent (including a broker, nominee or
middleman) of a Disqualified Organization, (B) such transferee is not a Non-
U.S. Person, (C) such transferee has no present knowledge or expectation that
it will become insolvent or subject to a bankruptcy proceeding for so long as
the Residual Certificate remains outstanding, and (D) no purpose of such
proposed transfer, sale or other disposition of the Residual Certificate is or
will be to impede the assessment or collection of any tax, and (ii) a
certificate from the transferor substantially in the form attached as Exhibit
F-2 hereto, to the effect that, among other things, no purpose of such proposed
transfer, sale or other disposition of the Residual Certificate is or will be
to impede the assessment or collection of any tax. Notwithstanding the
registration in the Certificate Register of any transfer, sale or other
disposition of a Residual Certificate to a Disqualified Organization or an
agent (including a broker, nominee or middleman) of a Disqualified Organization
or to a Non-U.S. Person, 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 distributions in respect of such Residual Certificate. If any
purported transfer of a Residual Certificate shall be in violation of the
provisions of this Section 5.02(d), then the prior Holder of the Residual
Certificate purportedly transferred shall, upon discovery, that the transfer of
such Residual Certificate was not in fact permitted by this Section 5.02(d), be
restored to all rights as Holder thereof retroactive to the date of the
purported transfer. The Trustee shall be under no liability to any Person for
any registration of transfer of a Residual Certificate that is not permitted by
this Section 5.02(d) or for making payments due on such Residual Certificate to
the purported Holder thereof or taking any other action with respect to such
purported Holder under the provisions of this Agreement. The prior Holder shall
be entitled to recover from any purported Holder of a Residual Certificate that
was in fact not a permitted transferee under this Section 5.02(d) at the time
it became a Holder all payments made on such Residual Certificate. The Holder
of Residual Certificates, by its acceptance thereof, shall be deemed for all
purposes to have consented to the provisions of this Section 5.02 and to any
amendment of this Agreement deemed necessary by counsel of the Depositor to
ensure that the transfer of a Residual Certificate to a Disqualified
Organization or any other Person will not cause the Trust Fund to cease to
qualify as a REMIC or cause the imposition of a tax upon the Trust Fund.
(e) Subject to the preceding subsections, upon surrender for registration
of transfer of any Certificate at the office of the Certificate Registrar, the
Trustee or the Authenticating Agent shall execute and authenticate and the
Certificate Registrar shall deliver, in the name of the
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designated transferee or transferees, one or more new Certificates of the same
Class of a like aggregate Percentage Interest.
(f) At the option of any Holder, its Certificates may be exchanged for
other Certificates of authorized denominations of the same Class of a like
aggregate Percentage Interest, upon surrender of the Certificates to be
exchanged at the office of the Certificate Registrar. Whenever any Certificates
are so surrendered for exchange the Trustee or the Authenticating Agent shall
execute and authenticate and the Certificate Registrar shall deliver the
Certificates which the Certificateholder making the exchange is entitled to
receive.
(g) Every Certificate presented or surrendered for transfer or exchange
shall (if so required by the Certificate Registrar) be duly endorsed by, or be
accompanied by a written instrument of transfer in the form satisfactory to the
Certificate Registrar duly executed by, the Holder thereof or his attorney duly
authorized in writing.
(h) No service charge shall be imposed for any transfer or exchange of
Certificates, but the Trustee or the Certificate Registrar 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.
(i) All Certificates surrendered for transfer and exchange shall be
physically canceled by the Certificate Registrar and a certificate of such
cancellation shall be delivered to the Trustee by the Certificate Registrar.
The Certificate Registrar shall hold such canceled Certificates in accordance
with its standard procedures.
SECTION 5.3. Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Certificate
Registrar, or the Certificate Registrar receives evidence to its satisfaction
of the destruction, loss or theft of any Certificate, and (ii) there is
delivered to the 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 or the
Authenticating Agent shall execute and authenticate and the Certificate
Registrar shall deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of the same Class and
like Percentage Interest. Upon the issuance of any new Certificate under this
Section, the Trustee and the Certificate Registrar may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the 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 5.4. Persons Deemed Owners.
The Depositor, the Servicer, the Special Servicer, the Trustee, the
Certificate Registrar and any agent of any of them may treat the person in
whose name any Certificate is registered as the
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owner of such Certificate for the purpose of receiving distributions pursuant
to Section 4.01 and for all other purposes whatsoever, and neither the
Depositor, the Servicer, the Special Servicer, the Trustee, the Certificate
Registrar nor any agent of any of them shall be affected by notice to the
contrary.
ARTICLE VI.
THE DEPOSITOR, THE SERVICER AND THE SPECIAL SERVICER
SECTION 6.1. Liability of the Depositor, the Servicer and the Special
Servicer.
The Depositor, the Servicer and the Special Servicer each shall be liable
in accordance herewith only to the extent of the obligations specifically
imposed by this Agreement.
SECTION 6.2. Merger or Consolidation of the Servicer.
Subject to the following paragraph, the Servicer will keep in full effect
its existence, rights and good standing as a corporation under the laws of the
State of _______ and will not jeopardize its ability to do business in each
jurisdiction in which the Mortgaged Properties are located or to protect the
validity and enforceability of this Agreement, the Certificates or any of the
Mortgage Loans and to perform its respective duties under this Agreement.
The Servicer may be merged or consolidated with or into any Person, or
transfer all or substantially all of its assets to any Person, in which case
any Person resulting from any merger or consolidation to which it shall be a
party, or any Person succeeding to its business, shall be the successor of the
Servicer hereunder, and shall be deemed to have assumed all of the liabilities
of the Servicer hereunder, if each of the Rating Agencies has confirmed in
writing that such merger or consolidation or transfer of assets and succession,
in and of itself, will not cause a downgrade, qualification or withdrawal of
the then current ratings assigned by such Rating Agency to any Class of
Certificates.
SECTION 6.3. Limitation on Liability of the Depositor, the Servicer
and Others.
Neither the Depositor, the Servicer, the Special Servicer nor any of the
directors, officers, employees or agents of the Depositor or the Servicer or
the Special Servicer shall be under any liability to the Trust Fund or the
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the
Depositor or the Servicer or the Special Servicer or any such Person against
any breach of warranties or representations made herein, or against any
liability which would otherwise be imposed by reason of willful misconduct, bad
faith, fraud or negligence in the performance of duties or by reason of
reckless disregard of obligations or duties hereunder. The Depositor, the
Servicer, the Special Servicer and any director, officer, employee or agent of
the Depositor, the Servicer or the Special Servicer may rely in good faith on
any document of any kind which, prima facie, is properly executed and submitted
by any appropriate Person respecting any matters arising hereunder. The
Depositor, the Servicer, the Special Servicer and any director, officer,
employee or agent of the Depositor or the Servicer or the Special Servicer
shall be
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indemnified and held harmless by the Trust Fund against any loss, liability or
expense (including legal fees and expenses) (i) incurred in connection with any
legal action relating to this Agreement or the Certificates, other than any
loss, liability or expense incurred by reason of willful misconduct, bad faith,
fraud or negligence (or in the case of the Servicer, by reason of any specific
liability imposed for a breach of the Servicing Standard) in the performance of
duties hereunder or by reason of reckless disregard of obligations or duties
hereunder, in each case by the Person being indemnified or (ii) imposed by any
taxing authority if such loss, liability or expense is not specifically
reimbursable pursuant to the terms of this Agreement. Neither the Depositor nor
the Servicer nor the Special Servicer shall be under any obligation to appear
in, prosecute or defend any legal action unless such action is related to its
respective duties under this Agreement and in its opinion does not expose it to
any expense or liability; provided, however, that the Depositor or the Servicer
or the Special Servicer may in its discretion undertake any action related to
its obligations hereunder which it may deem necessary or desirable with respect
to this Agreement and the rights and duties of the parties hereto and the
interests of the Certificateholders hereunder. In such event, the legal
expenses and costs of such action and any liability resulting therefrom shall
be expenses, costs and liabilities of the Trust Fund, and the Depositor, the
Servicer and the Special Servicer shall be entitled to be reimbursed therefor
from the Collection Account as provided in Section 3.06 of this Agreement.
SECTION 6.4. Limitation on Resignation of the Servicer and the Special
Servicer; Termination of the Servicer and the Special Servicer.
(a) The Servicer and the Special Servicer may assign their respective
rights and delegate their respective duties and obligations under this
Agreement in connection with the sale or transfer of a substantial portion of
their mortgage servicing or asset management portfolio, provided that: (i) the
purchaser or transferee accepting such assignment and delegation (A) shall be
satisfactory to the Trustee and to the Depositor, (B) shall be an established
mortgage finance institution, bank or mortgage servicing institution, organized
and doing business under the laws of any state of the United States or the
District of Columbia, authorized under such laws to perform the duties of a
servicer of mortgage loans or a Person resulting from a merger, consolidation
or succession that is permitted under Section 6.02, (C) shall be acceptable to
each Rating Agency as confirmed by a letter from each Rating Agency delivered
to the Trustee that such assignment or delegation will not cause a downgrade,
withdrawal or qualification of the then current ratings of the Certificates,
and (D) shall execute and deliver to the Trustee an agreement, in form and
substance reasonably satisfactory to the Trustee, which contains an assumption
by such Person of the due and punctual performance and observance of each
covenant and condition to be performed or observed by the Servicer under this
Agreement from and after the date of such agreement; (ii) as confirmed by a
letter from each Rating Agency delivered to the Trustee, each Rating Agency's
rating or ratings of the Regular Certificates in effect immediately prior to
such assignment, sale or transfer will not be qualified, downgraded or
withdrawn as a result of such assignment, sale or transfer; (iii) the Servicer
or the Special Servicer shall not be released from its obligations under this
Agreement that arose prior to the effective date of such assignment and
delegation under this Section 6.04; and (iv) the rate at which the Servicer
Compensation or Special Servicer Compensation, as applicable (or any component
thereof) is calculated shall not exceed the rate then in effect. Upon
acceptance
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of such assignment and delegation, the purchaser or transferee shall be the
successor Servicer or Special Servicer, as applicable, hereunder.
(b) Except as provided in this Section 6.04, the Servicer and the Special
Servicer shall not resign from their respective obligations and duties hereby
imposed on them except upon determination that such duties hereunder are no
longer permissible under applicable law. Any such determination permitting the
resignation of the Servicer or the Special Servicer, as applicable, shall be
evidenced by an Opinion of Counsel (obtained at the resigning Servicer's or
Special Servicer's expense) to such effect delivered to the Trustee.
(c) Certificateholders representing in the aggregate at least 51% of the
Voting Rights of all Certificateholders may remove the Servicer and the Special
Servicer upon the occurrence of an Event of Default under this Agreement, upon
written notice to the Servicer, the Special Servicer, the Depositor and the
Trustee, provided that each Rating Agency has confirmed in writing that such
removal will not result in a downgrade, qualification or withdrawal of the then
current ratings by such Rating Agency to any Class of Certificates. Without
limiting the generality of the succeeding paragraph, no such removal shall be
effective unless and until (i) the Servicer or the Special Servicer has been
paid any unpaid Servicer Compensation or Special Servicer Compensation, as
applicable, unreimbursed Advances (including Advance Interest Amounts thereon
to which it is entitled) and all other amounts to which the Servicer or the
Special Servicer is entitled hereunder to the extent such amounts accrue prior
to such effective date and (ii) with respect to a resignation by the Servicer,
the successor Servicer has deposited into the Investment Accounts from which
amounts were withdrawn to reimburse the terminated Servicer, an amount equal to
the amounts so withdrawn, to the extent such amounts would not have been
permitted to be withdrawn except pursuant to this paragraph, in which case the
successor Servicer shall, immediately upon deposit, have the same right of
reimbursement or payment as the terminated Servicer had immediately prior to
its termination without regard to the operation of this paragraph.
No resignation or removal of the Servicer or the Special Servicer as
contemplated by the preceding paragraphs shall become effective until the
Trustee or a successor Servicer or Special Servicer shall have assumed the
Servicer's or the Special Servicer's responsibilities, duties, liabilities and
obligations hereunder. If no successor Servicer or Special Servicer can be
obtained to perform such obligations for the same compensation to which the
terminated Servicer or Special Servicer would have been entitled, additional
amounts payable to such successor Servicer or Special Servicer shall be treated
as Realized Losses.
SECTION 6.5. Rights of the Depositor and the Trustee in Respect of the
Servicer and the Special Servicer.
The Servicer and the Special Servicer shall afford the Depositor, the
Trustee and the Rating Agencies, upon reasonable notice, during normal business
hours access to all records maintained by it in respect of its rights and
obligations hereunder and access to its officers responsible for such
obligations. Upon request, the Servicer and the Special Servicer shall furnish
to the Depositor, Servicer, Special Servicer and the Trustee its most recent
financial statements (or in the case of the Servicer or Special Servicer, the
financial statements of _______________. If no separate financial
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statements have been prepared for the Servicer or Special Servicer) and such
other information in its possession regarding its business, affairs, property
and condition, financial or otherwise as the party requesting such information,
in its reasonable judgment, determines to be relevant to the performance of the
obligations hereunder of the Servicer and the Special Servicer. The Depositor
may, but is not obligated to, enforce the obligations of the Servicer or the
Special Servicer hereunder which are in default and may, but is not obligated
to, perform, or cause a designee to perform, any defaulted obligation of such
Person hereunder or exercise its rights hereunder, provided that the Servicer
and the Special Servicer shall not be relieved of any of its obligations
hereunder by virtue of such performance by the Depositor or its designee. In
the event the Depositor or its designee undertakes any such action it will be
reimbursed by the Trust Fund from the Collection Account as provided in Section
3.06 and Section 6.03(a) hereof to the extent not recoverable from the Servicer
or Special Servicer, as applicable. Neither the Depositor nor the Trustee and
neither the Servicer, with respect to the Special Servicer, nor the Special
Servicer, with respect to the Servicer, shall have any responsibility or
liability for any action or failure to act by the Servicer or the Special
Servicer and neither such Person is obligated to monitor or supervise the
performance of the Servicer or the Special Servicer under this Agreement or
otherwise. Neither the Servicer nor the Special Servicer shall be under any
obligation to disclose confidential or proprietary information pursuant to this
Section.
SECTION 6.6. Servicer or Special Servicer as Owner of a Certificate.
The Servicer or an Affiliate of the Servicer or the Special Servicer or
an Affiliate of the Special Servicer may become the Holder (or with respect to
a Global Certificate, Beneficial Owner) of any Certificate with the same rights
it would have if it were not the Servicer or the Special Servicer or an
Affiliate thereof. If, at any time during which the Servicer or the Special
Servicer or an Affiliate of the Servicer or the Special Servicer is the Holder
or Beneficial Owner of any Certificate, the Servicer or the Special Servicer
proposes to take action (including for this purpose, omitting to take action)
that (i) is not expressly prohibited by the terms hereof and would not, in the
Servicer's or the Special Servicer's good faith judgment, violate the Servicing
Standard, and (ii) if taken, might nonetheless, in the Servicer's or the
Special Servicer's good faith judgment, be considered by other Persons to
violate the Servicing Standard, the Servicer or the Special Servicer may seek
the approval of the Certificateholders to such action by delivering to the
Trustee a written notice that (i) states that it is delivered pursuant to this
Section 6.06, (ii) identifies the Percentage Interest in each Class of
Certificates beneficially owned by the Servicer or the Special Servicer or an
Affiliate of the Servicer or the Special Servicer, and (iii) describes in
reasonable detail the action that the Servicer or the Special Servicer proposes
to take. The Trustee, upon receipt of such notice, shall forward it to the
Certificateholders (other than the Servicer and its Affiliates or the Special
Servicer and its Affiliates, as appropriate) together with such instructions
for response as the Trustee shall reasonably determine. If at any time
Certificateholders holding greater than 50% of the Voting Rights of all
Certificateholders (calculated without regard to the Certificates beneficially
owned by the Servicer or its Affiliates or the Special Servicer or its
Affiliates) shall have consented in writing to the proposal described in the
written notice, and if the Servicer or the Special Servicer shall act as
proposed in the written notice, such action shall be deemed to comply with the
Servicing Standard. The Trustee shall be entitled to reimbursement from the
Servicer or the Special Servicer, as applicable, of the reasonable expenses of
the Trustee incurred pursuant to this
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paragraph. It is not the intent of the foregoing provision that the Servicer or
the Special Servicer be permitted to invoke the procedure set forth herein with
respect to routine servicing matters arising hereunder, except in the case of
unusual circumstances.
ARTICLE VII.
DEFAULT
SECTION 7.1. Events of Default.
(a) "Servicer Event of Default", wherever used herein, means any one
of the following events:
(i) any failure by the Servicer to remit to the Collection Account
or any failure by the Servicer to remit to the Trustee for deposit into the
Distribution Account, Upper-Tier Distribution Account, Excess Interest
Distribution Account, Interest Reserve Account or Default Interest Distribution
Account, any amount required to be so deposited by the Servicer (including a
P&I Advance) pursuant to, and at the time specified by the terms of this
Agreement; or
(ii) any failure on the part of the Servicer duly to observe or
perform in any material respect any other of the covenants or agreements or the
breach of any representations or warranties on the part of the Servicer
contained in this Agreement which continues unremedied for a period of 30 days
after the date on which written notice of such failure, requiring the same to
be remedied, shall have been given to the Servicer by the Depositor or the
Trustee, or to the Servicer, the Depositor and the Trustee by the Holders of
Certificates evidencing Percentage Interests of at least 25% of any Class
affected thereby; or
(iii) confirmation in writing by any Rating Agency that failure to
remove the Servicer will, in and of itself, cause a downgrade, qualification or
withdrawal of the then current ratings assigned to any Class of Certificates;
or
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case under any
present or future federal or state bankruptcy, insolvency or similar law for
the appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Servicer and such decree or order shall have remained
in force undischarged or unstayed for a period of 60 days; or
(v) the Servicer shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt, marshaling
of assets and liabilities or similar proceedings of or relating to the
Servicer, or of or relating to all or substantially all of its property; or
(vi) the Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization
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statute, make an assignment for the benefit of its creditors, or voluntarily
suspend payment of its obligations; or
(vii) the Servicer shall fail to make any Property Advance required
to be made by the Servicer hereunder (whether or not the Trustee or the Fiscal
Agent makes such Advance), which failure continues unremedied for a period of
fifteen (15) days after the date on which such Property Advance was first due
(or for any shorter period as may be required, if applicable, to avoid any
lapse in insurance coverage required under any Mortgage or this Agreement with
respect to any Mortgaged Property or to avoid any foreclosure or similar action
with respect to any Mortgaged Property by reason of a failure to pay real
estate taxes and assessments and if the Trustee makes a required Property
Advance pursuant to Section 3.08(a) due to the Servicer's failure to make a
required Advance, such Event of Default shall occur immediately upon such
Advance);
then, and in each and every such case, so long as a Servicer Event of
Default shall not have been remedied, the Trustee may, and at the written
direction of the Holders of at least 25% of the aggregate Voting Rights of all
Certificates shall, terminate the Servicer.
In the event that the Servicer is also the Special Servicer and the
Servicer is terminated as provided in this Section 7.01, the Servicer shall
also be terminated as Special Servicer.
(b) "Special Servicer Event of Default", wherever used herein, means any
one of the following events:
(i) any failure by the Special Servicer to remit to the Collection
Account any amount required to be so deposited by the Special Servicer pursuant
to and in accordance with the terms of this Agreement; or
(ii) any failure on the part of the Special Servicer duly to
observe or perform in any material respect any other of the covenants or
agreements or the breach of any representations or warranties on the part of
the Special Servicer contained in this Agreement which continues unremedied for
a period of 30 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Special
Servicer by the Servicer, the Depositor or the Trustee, or to the Special
Servicer, the Servicer, the Depositor and the Trustee by the Holders of
Certificates evidencing Percentage Interests of at least 25% of any Class
affected thereby; or
(iii) confirmation in writing by any Rating Agency that failure to
remove the Special Servicer would, in and of itself, cause a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class
of Certificates; or
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case under any
present or future federal or state bankruptcy, insolvency or similar law for
the appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Special
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Servicer and such decree or order shall have remained in force undischarged or
unstayed for a period of 60 days; or
(v) the Special Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of or relating to
the Special Servicer, or of or relating to all or substantially all of its
property; or
(vi) the Special Servicer shall admit in writing its inability to
pay its debts generally as they become due, file a petition to take advantage
of any applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its
obligations;
(vii) the Special Servicer shall fail to make any Property Advance
required to be made by the Special Servicer hereunder (whether or not the
Servicer, Trustee or Fiscal Agent makes such Advance), which failure continues
unremedied for a period of fifteen (15) days after the date on which such
Property Advance was first due (or for any shorter period as may be required,
if applicable, to avoid any lapse in insurance coverage required under any
Mortgage or this Agreement with respect to any Mortgaged Property or to avoid
any foreclosure or similar action with respect to any Mortgaged Property by
reason of a failure to pay real estate taxes and assessments;
then, and in each and every such case, so long as a Special Servicer
Event of Default shall not have been remedied, the Trustee may, and at the
written direction of the Holders of at least 25% of the aggregate Voting Rights
of all Certificates shall, terminate the Special Servicer.
(viii) In the event that the Servicer or the Special Servicer is
terminated pursuant to this Section 7.01, the Trustee (the "Terminating Party")
shall, by notice in writing to the Servicer or the Special Servicer, as the
case may be (the "Terminated Party"), terminate all of its rights and
obligations under this Agreement and in and to the Mortgage Loans and the
proceeds thereof, other than any rights it may have hereunder as a
Certificateholder and any rights or obligations that accrued prior to the date
of such termination (including the right to receive all amounts accrued or
owing to it under this Agreement, plus, in the case of the Servicer, interest
at the Advance Rate on such amounts until received to the extent such amounts
bear interest as provided in this Agreement, with respect to periods prior to
the date of such termination and the right to the benefits of Section 6.03
notwithstanding any such termination). On or after the receipt by the
Terminated Party, of such written notice, all of its authority and power under
this Agreement, whether with respect to the Certificates (except that the
Terminated Party shall retain its rights as a Certificateholder in the event
and to the extent that it is a Certificateholder) or the Mortgage Loans or
otherwise, shall pass to and be vested in the Terminating Party pursuant to and
under this Section and, without limitation, the Terminating Party is hereby
authorized and empowered to execute and deliver, on behalf of and at the
expense of the Terminated Party, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents, or otherwise. The
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Servicer and the Special Servicer each agree in the event it is terminated
pursuant to this Section 7.01 to promptly (and in any event no later than ten
Business Days subsequent to such notice) provide, at its own expense, the
Terminating Party with all documents and records requested by the Terminating
Party to enable the Terminating Party to assume its functions hereunder, and to
cooperate with the Terminating Party and the successor to its responsibilities
hereunder in effecting the termination of its responsibilities and rights
hereunder, including, without limitation, the transfer to the successor
Servicer or Special Servicer or the Terminating Party, as applicable, for
administration by it of all cash amounts which shall at the time be or should
have been credited by the Servicer or the Special Servicer to the Collection
Account, and any REO Account, Lock-Box Account or Cash Collateral Account
thereafter be received with respect to the Mortgage Loans, and shall promptly
provide the Terminating Party or such successor Servicer or Special Servicer
(which may include the Trustee), as applicable, all documents and records
reasonably requested by it, such documents and records to be provided in such
form as the Terminating Party or such successor Servicer or Special Servicer
shall reasonably request (including electromagnetic form), to enable it to
assume the Servicer's or Special Servicer's function hereunder. All reasonable
costs and expenses of the Terminating Party or the successor Servicer or
successor Special Servicer incurred in connection with transferring the
Mortgage Files to the successor Servicer or Special Servicer and amending this
Agreement to reflect such succession as successor Servicer or successor Special
Servicer pursuant to this Section 7.01 shall be paid by the predecessor
Servicer or the Special Servicer, as applicable, upon presentation of
reasonable documentation of such costs and expenses. If the predecessor
Servicer or Special Servicer (as the case may be) has not reimbursed the
Terminating Party or the successor Servicer or Special Servicer for such
expenses within 90 days after the presentation of reasonable documentation,
such expense shall be reimbursed by the Trust Fund; provided that the
Terminated Party shall not thereby be relieved of its liability for such
expenses.
SECTION 7.2. Trustee to Act; Appointment of Successor.
On and after the time the Servicer or the Special Servicer receives a
notice of termination pursuant to Section 7.01, the Terminating Party shall be
its successor in all respects in its capacity as Servicer or Special Servicer
under this Agreement and the transactions set forth or provided for herein and,
except as provided herein, shall be subject to all the responsibilities,
duties, limitations on liability and liabilities relating thereto and arising
thereafter placed on the Servicer or Special Servicer by the terms and
provisions hereof; provided, however, that (i) the Terminating Party shall have
no responsibilities, duties, liabilities or obligations with respect to any act
or omission of the Servicer or Special Servicer and (ii) any failure to
perform, or delay in performing, such duties or responsibilities caused by the
Terminated Party's failure to provide, or delay in providing, records, tapes,
disks, information or monies shall not be considered a default by such
successor hereunder. The Trustee, as successor Servicer or successor Special
Servicer, shall be indemnified to the full extent provided the Servicer or
Special Servicer, as applicable, under this Agreement prior to the Servicer's
or the Special Servicer's termination. The appointment of a successor Servicer
or successor Special Servicer shall not affect any liability of the predecessor
Servicer or Special Servicer which may have arisen prior to its termination as
Servicer or Special Servicer. The Terminating Party shall not be liable for any
of the representations and warranties of the Servicer or Special Servicer
herein or in any related document or agreement, for any acts or omissions of
the
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predecessor Servicer or Special Servicer or for any losses incurred in respect
of any Permitted Investment by the Servicer pursuant to Section 3.07 hereunder
nor shall the Trustee be required to purchase any Mortgage Loan hereunder. As
compensation therefor, the Terminating Party as successor Servicer or Special
Servicer shall be entitled to the Servicing Compensation or Special Servicing
Compensation, as applicable, and all funds relating to the Mortgage Loans that
accrue after the date of the Terminating Party's succession to which the
Servicer or Special Servicer would have been entitled if the Servicer or
Special Servicer, as applicable, had continued to act hereunder. In the event
any Advances made by the Servicer and the Trustee or the Fiscal Agent shall at
any time be outstanding, or any amounts of interest thereon shall be accrued
and unpaid, all amounts available to repay Advances and interest hereunder
shall be applied entirely to the Advances made by the Trustee or the Fiscal
Agent (and the accrued and unpaid interest thereon), until such Advances and
interest shall have been repaid in full. Notwithstanding the above, the Trustee
may, if it shall be unwilling to so act, or shall, if it is unable to so act,
or if the Holders of Certificates entitled to at least 25% of the aggregate
Voting Rights so request in writing to the Trustee, or if neither the Trustee
nor the Fiscal Agent is rated by each Rating Agency in one of its two highest
long-term debt rating categories or if the Rating Agencies do not provide
written confirmation that the succession of the Trustee, as Servicer or Special
Servicer, as applicable, will not cause a downgrade, qualification or
withdrawal of the then current ratings assigned to the Certificates, promptly
appoint, or petition a court of competent jurisdiction to appoint, any
established mortgage loan servicing institution the appointment of which will
not result in a downgrade, qualification or withdrawal of the then current
rating or ratings assigned to any Class of Certificates as evidenced in writing
by each Rating Agency, as the successor to the Servicer or Special Servicer, as
applicable, hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer or Special Servicer
hereunder. No appointment of a successor to the Servicer or Special Servicer
hereunder shall be effective until the assumption by such successor of all the
Servicer's or Special Servicer's responsibilities, duties and liabilities
hereunder. Pending appointment of a successor to the Servicer (or the Special
Servicer if the Special Servicer is also the Servicer) hereunder, unless the
Trustee shall be prohibited by law from so acting, the Trustee shall act in
such capacity as herein above provided. Pending the appointment of a successor
to the Special Servicer, unless the Servicer is also the Special Servicer, the
Servicer shall act in such capacity. In connection with such appointment and
assumption described herein, the Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Terminated Party hereunder, provided, further,
that if no successor to the Terminated Party can be obtained to perform the
obligations of such Terminated Party hereunder, additional amounts shall be
paid to such successor and such amounts in excess of that permitted the
Terminated Party shall be treated as Realized Losses. The Depositor, the
Trustee, the Servicer or Special Servicer and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession.
SECTION 7.3. Notification to Certificateholders.
(a) Upon any termination pursuant to Section 7.01 above or appointment of
a successor to the Servicer or the Special Servicer, the Trustee shall give
prompt written notice thereof to
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Certificateholders at their respective addresses appearing in the Certificate
Register and to each Rating Agency.
(b) Within 30 days after the occurrence of any Event of Default of which
a Responsible Officer of the Trustee has actual knowledge, the Trustee shall
transmit by mail to all Holders of Certificates and to each Rating Agency
notice of such Event of Default, unless such Event of Default shall have been
cured or waived.
SECTION 7.4. Other Remedies of Trustee.
During the continuance of any Servicer Event of Default or a Special
Servicer Event of Default, so long as such Servicer Event of Default or Special
Servicer Event of Default, if applicable, shall not have been remedied, the
Trustee, in addition to the rights specified in Section 7.01, shall have the
right, in its own name as trustee of an express trust, to take all actions now
or hereafter existing at law, in equity or by statute to enforce its rights and
remedies and to protect the interests, and enforce the rights and remedies, of
the Certificateholders (including the institution and prosecution of all
judicial, administrative and other proceedings and the filing of proofs of
claim and debt in connection therewith). In such event, the legal fees,
expenses and costs of such action and any liability resulting therefrom shall
be expenses, costs and liabilities of the Trust Fund, and the Trustee shall be
entitled to be reimbursed therefor from the Collection Account as provided in
Section 3.06. Except as otherwise expressly provided in this Agreement, no
remedy provided for by this Agreement shall be exclusive of any other remedy,
and each and every remedy shall be cumulative and in addition to any other
remedy and no delay or omission to exercise any right or remedy shall impair
any such right or remedy or shall be deemed to be a waiver of any Servicer
Event of Default or Special Servicer Event of Default, if applicable.
SECTION 7.5. Waiver of Past Events of Default; Termination.
The Holders of Certificates evidencing not less than 66-2/3% of the
aggregate Voting Rights of the Certificates may, on behalf of all Holders of
Certificates, waive any default by the Servicer or Special Servicer in the
performance of its obligations hereunder and its consequences, except a default
in making any required deposits (including P&I Advances) to or payments from
the Collection Account or the Distribution Account or in remitting payments as
received, in each case in accordance with this Agreement. Upon any such waiver
of a past default, such default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
ARTICLE VIII.
CONCERNING THE TRUSTEE
SECTION 8.1. Duties of Trustee.
(a) The Trustee, prior to the occurrence of an Event of Default of which
a Responsible Officer of the Trustee has actual knowledge and after the curing
or waiver of all Events of Default
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which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement and no permissive right of the
Trustee shall be construed as a duty. During the continuance of an Event of
Default of which a Responsible Officer of the Trustee has actual knowledge, the
Trustee, subject to the provisions of Sections 7.02 and 7.05 shall exercise
such of the rights and powers vested in it by this Agreement, and use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of such person's own affairs.
(b) The Trustee, upon receipt of any resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform on their face to the requirements of this Agreement; provided, however,
that, the Trustee shall not be responsible for the accuracy or content of any
such resolution, certificate, statement, opinion, report, document, order or
other instrument provided to it hereunder. If any such instrument is found not
to conform on its face to the requirements of this Agreement in a material
manner, the Trustee shall take action as it deems appropriate to have the
instrument corrected, and if the instrument is not corrected to the Trustee's
reasonable satisfaction, the Trustee will provide notice thereof to the
Certificateholders.
(c) Neither the Trustee nor any of its officers, directors, employees,
agents or "control" persons within the meaning of the Act shall have any
liability arising out of or in connection with this Agreement, provided, that,
subject to Section 8.02, no provision of this Agreement shall be construed to
relieve the Trustee, or any such person, from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct or its
own bad faith; and provided, further, that:
(i) Prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge, and after the curing
or waiver of all such Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance
of such duties and obligations as are specifically set forth in this Agreement,
no implied covenants or obligations shall be read into this Agreement against
the Trustee and, in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any resolutions,
certificates, statements, reports, opinions, documents, orders or other
instruments furnished to the Trustee that conform on their face to the
requirements of this Agreement without responsibility for investigating the
contents thereof;
(ii) The Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible Officers,
unless it shall be proved that the Trustee was negligent in ascertaining the
pertinent facts;
(iii) The Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Holders of Certificates entitled to greater
than 50% of the Percentage Interests (or such other percentage as is
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specified herein) of each affected Class, or of the aggregate Voting Rights of
the Certificates, relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Agreement;
(iv) Neither the Trustee nor any of its respective directors,
officers, employees, agents or control persons shall be responsible for any act
or omission of any Custodian, Paying Agent or Certificate Registrar that is not
an Affiliate of the Trustee and that is selected other than by the Trustee,
performed or omitted in compliance with any custodial or other agreement, or
any act or omission of the Servicer, Special Servicer, the Depositor or any
other Person, including, without limitation, in connection with actions taken
pursuant to this Agreement;
(v) The Trustee shall not be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its respective
duties as Trustee in accordance with this Agreement (and, if it does, all legal
expenses and costs of such action shall be expenses and costs of the Trust
Fund), and the Trustee shall be entitled to be reimbursed therefor from the
Collection Account, unless such legal action arises out of the negligence or
bad faith of the Trustee or any breach of an obligation, representation,
warranty or covenant of the Trustee contained herein; and
(vi) The Trustee shall not be charged with knowledge of any act,
failure to act or breach of any Person upon the occurrence of which the Trustee
may be required to act, unless a Responsible Officer of the Trustee obtains
actual knowledge of such failure. The Trustee shall be deemed to have actual
knowledge of the Servicer's or the Special Servicer's failure to provide
scheduled reports, certificates and statements when and as required to be
delivered to the Trustee pursuant to this Agreement.
None of the provisions contained in this Agreement shall require either
the Trustee, in its capacity as Trustee, or the Fiscal Agent, to expend or risk
its own funds, or otherwise incur financial liability in the performance of any
of its duties hereunder, or in the exercise of any of its rights or powers, if
in the opinion of the Trustee or the Fiscal Agent, respectively, the repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it, and none of the provisions contained in this
Agreement shall in any event require the Trustee to perform, or be responsible
for the manner of performance of, any of the obligations of the Servicer or the
Special Servicer under this Agreement, except during such time, if any, as the
Trustee shall be the successor to, and be vested with the rights, duties,
powers and privileges of, the Servicer or the Special Servicer in accordance
with the terms of this Agreement. Neither the Trustee nor the Fiscal Agent
shall be required to post any surety or bond of any kind in connection with its
performance of its obligations under this Agreement and neither the Trustee nor
the Fiscal Agent shall be liable for any loss on any investment of funds
pursuant to this Agreement.
SECTION 8.2. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may request and/or rely upon and shall be protected
in acting or refraining from acting upon any resolution, Officers' Certificate,
certificate of auditors or any other
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certificate, statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document reasonably believed by it to
be genuine and to have been signed or presented by the proper party or parties
and the Trustee shall have no responsibility to ascertain or confirm the
genuineness of any such party or parties;
(ii) The Trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in good faith and in
accordance with such Opinion of Counsel;
(iii) (A) The Trustee shall be under no obligation to institute,
conduct or defend any litigation hereunder or in relation hereto at the
request, order or direction of any of the Certificateholders, pursuant to the
provisions of this Agreement, unless such Certificateholders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby; (B) the right of the
Trustee to perform any discretionary act enumerated in this Agreement shall not
be construed as a duty, and the Trustee shall not be answerable for other than
its negligence or willful misconduct in the performance of any such act; and
(C) provided, that subject to the foregoing clause (A), nothing contained
herein shall relieve the Trustee of the obligations, upon the occurrence of an
Event of Default (which has not been cured or waived) of which a Responsible
Officer of the Trustee has actual knowledge, to exercise such of the rights and
powers vested in it by this Agreement, and to use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs;
(iv) Neither the Trustee nor any of its directors, officers,
employees, Affiliates, agents or "control" persons within the meaning of the
Act shall be personally liable for any action taken, suffered or omitted by it
in good faith and reasonably believed by the Trustee to be authorized or within
the discretion or rights or powers conferred upon it by this Agreement;
(v) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond or
other paper or document, unless requested in writing to do so by Holders of
Certificates entitled to at least 25% (or such other percentage as is specified
herein) of the Percentage Interests of any affected Class; provided, however,
that if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Agreement, the
Trustee may require reasonable indemnity against such expense or liability as a
condition to taking any such action. The reasonable expense of every such
investigation shall be paid by the Servicer or the Special Servicer if an Event
of Default shall have occurred and be continuing relating to the Servicer, or
the Special Servicer, respectively, and otherwise by the Certificateholders
requesting the investigation; and
(vi) The Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys.
(b) Following the Start-up Day, the Trustee shall not, except as
expressly required by any provision of this Agreement, accept any contribution
of assets to the Trust Fund unless the
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Trustee shall have received an Opinion of Counsel (the costs of obtaining such
opinion to be borne by the Person requesting such contribution) to the effect
that the inclusion of such assets in the Trust Fund will not cause either the
Upper-Tier REMIC or the Lower-Tier REMIC to fail to qualify as a REMIC at any
time that any Certificates are outstanding or subject either the Upper-Tier
REMIC or the Lower-Tier REMIC to any tax under the REMIC Provisions or other
applicable provisions of federal, state and local law or ordinances.
(c) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial
or other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
The Trustee shall have no duty to conduct any affirmative investigation
as to the occurrence of any condition requiring the repurchase of any Mortgage
Loan by the Depositor pursuant to this Agreement or the eligibility of any
Mortgage Loan for purposes of this Agreement.
SECTION 8.3. Trustee and Fiscal Agent Not Liable for Certificates or
Mortgage Loans.
The recitals contained herein and in the Certificates shall not be taken
as the statements of the Trustee, the Fiscal Agent, the Servicer, or the
Special Servicer and the Trustee, the Fiscal Agent, Servicer and the Special
Servicer assume no responsibility for their correctness. The Trustee, the
Fiscal Agent, the Servicer and the Special Servicer make no representations or
warranties as to the validity or sufficiency of this Agreement, of the
Certificates or any prospectus used to offer the Certificates for sale or the
validity, enforceability or sufficiency of any Mortgage Loan, or related
document. Neither the Trustee nor the Fiscal Agent shall at any time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Mortgage, any Mortgage Loan, or the perfection and
priority of any Mortgage or the maintenance of any such perfection and
priority, or for or with respect to the sufficiency of the Trust Fund or its
ability to generate the payments to be distributed to Certificateholders under
this Agreement. Without limiting the foregoing, neither the Trustee nor the
Fiscal Agent shall be liable or responsible for: the existence, condition and
ownership of any Mortgaged Property; the existence of any hazard or other
insurance thereon (other than if the Trustee shall assume the duties of the
Servicer pursuant to Section 7.02) or the enforceability thereof; the existence
of any Mortgage Loan or the contents of the related Mortgage File on any
computer or other record thereof (other than if the Trustee shall assume the
duties of the Servicer or the Special Servicer pursuant to Section 7.02); the
validity of the assignment of any Mortgage Loan to the Trust Fund or of any
intervening assignment; the completeness of any Mortgage File; the performance
or enforcement of any Mortgage Loan (other than if the Trustee shall assume the
duties of the Servicer or the Special Servicer pursuant to Section 7.02); the
compliance by the Depositor, the Servicer or the Special Servicer with any
warranty or representation made under this Agreement or in any related document
or the accuracy of any such warranty or representation prior to the Trustee's
receipt of notice or other discovery of any non-compliance therewith or any
breach thereof; any investment of monies by or at the direction of the Servicer
or any loss resulting therefrom, it being understood that the Trustee shall
remain responsible for any Trust Fund property that it may hold in its
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individual capacity; the acts or omissions of any of the Depositor, the
Servicer or the Special Servicer (other than if the Trustee shall assume the
duties of the Servicer pursuant to Section 7.02) or any subservicer or any
Borrower; any action of the Servicer (other than if the Trustee shall assume
the duties of the Servicer pursuant to Section 7.02) or any subservicer taken
in the name of the Trustee, except to the extent such action is taken at the
express written direction of the Trustee; the failure of the Servicer or the
Special Servicer or any subservicer to act or perform any duties required of it
on behalf of the Trust Fund or the Trustee hereunder; or any action by or
omission of the Trustee taken at the instruction of the Servicer or the Special
Servicer (other than if the Trustee shall assume the duties of the Servicer or
the Special Servicer pursuant to Section 7.02) unless the taking of such action
is not permitted by the express terms of this Agreement; provided, however,
that the foregoing shall not relieve the Trustee of its obligation to perform
its duties as specifically set forth in this Agreement. Neither the Trustee nor
the Fiscal Agent shall be accountable for the use or application by the
Depositor, the Servicer or the Special Servicer of any of the Certificates or
of the proceeds of such Certificates, or for the use or application of any
funds paid to the Depositor, the Servicer or the Special Servicer in respect of
the assignment of the Mortgage Loans or deposited in or withdrawn from the
Collection Account, Distribution Account, Upper-Tier Distribution Account, Lock
Box Account, Cash Collateral Account, Reserve Accounts, Interest Reserve
Account, Default Interest Distribution Account or Excess Interest Distribution
Account or any other account maintained by or on behalf of the Servicer or the
Special Servicer, other than any funds held by the Trustee or the Fiscal Agent,
as applicable. Neither the Trustee nor the Fiscal Agent shall have any
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder (unless the Trustee shall
have become the successor Servicer) or to record this Agreement. In making any
calculation hereunder which includes as a component thereof the payment or
distribution of interest for a stated period at a stated rate "to the extent
permitted by applicable law," the Trustee shall assume that such payment is so
permitted unless a Responsible Officer of the Trustee has actual knowledge, or
receives an Opinion of Counsel (at the expense of the Person asserting the
impermissibility) to the effect, that such payment is not permitted by
applicable law.
SECTION 8.4. Trustee and Fiscal Agent May Own Certificates.
The Trustee, the Fiscal Agent and any agent of the Trustee and Fiscal
Agent in its individual capacity or any other capacity may become the owner or
pledgee of Certificates, and may deal with the Depositor, the Servicer and
Special Servicer in banking transactions, with the same rights it would have if
it were not Trustee, Fiscal Agent or such agent.
SECTION 8.5. Payment of Trustee's Fees and Expenses; Indemnification.
(a) The Trustee or any successor Trustee shall be entitled, on each
Distribution Date, to the Trustee Fee (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust) for all services rendered by the Trustee in the execution of the trusts
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee, which Trustee Fee shall be paid to the Trustee
prior to the distribution on such Distribution Date of amounts to the
Certificateholders. In the event that the Trustee assumes the
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servicing responsibilities of the Servicer or the Special Servicer hereunder
pursuant to or otherwise arising from the resignation or removal of the
Servicer or the Special Servicer, the Trustee shall be entitled to the
compensation to which the Servicer or the Special Servicer, as the case may be,
would have been entitled.
(b) The Trustee and the Fiscal Agent shall each be paid or reimbursed by
the Trust Fund upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee or the Fiscal Agent pursuant to and in
accordance with any of the provisions of this Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel and
of all persons not regularly in its employ) to the extent such payments are
"unanticipated expenses incurred by the REMIC" within the meaning of Treasury
Regulations Section 1.860G-1(b)(iii) except any such expense, disbursement or
advance as may arise from its negligence or bad faith; provided, however, that,
subject to the last paragraph of Section 8.01, neither the Trustee nor the
Fiscal Agent shall refuse to perform any of its duties hereunder solely as a
result of the failure to be paid the Trustee Fee and the Trustee's expenses or
any sums due to the Fiscal Agent.
The Servicer and the Special Servicer covenant and agree to pay or
reimburse the Trustee for the reasonable expenses, disbursements and advances
incurred or made by the Trustee in connection with any transfer of the
servicing responsibilities of the Servicer or the Special Servicer,
respectively, hereunder, pursuant to or otherwise arising from the resignation
or removal of the Servicer, in accordance with any of the provisions of this
Agreement (and including the reasonable fees and expenses and disbursements of
its counsel and all other persons not regularly in its employ), except any such
expense, disbursement or advance as may arise from the negligence or bad faith
of the Trustee; provided, that in the event that the Servicer is terminated
pursuant to Section 6.04(c), expenses incurred in connection with such transfer
shall be paid by the Certificateholders effecting such termination.
(c) Each of the Paying Agent, the Certificate Registrar, the Custodian,
the Depositor, the Servicer and the Special Servicer (each, an "Indemnifying
Party") shall indemnify the Trustee and the Fiscal Agent and their respective
Affiliates and each of the directors, officers, employees and agents of the
Trustee, the Fiscal Agent and their respective Affiliates (each, an
"Indemnified Party"), and hold each of them harmless against any and all
claims, losses, damages, penalties, fines, forfeitures, reasonable and
necessary legal fees and related costs, judgments, and any other costs, fees
and expenses that the Indemnified Party may sustain in connection with this
Agreement (including, without limitation, reasonable fees and disbursements of
counsel incurred by the Indemnified Party in any action or proceeding between
the Indemnifying Party and the Indemnified Party or between the Indemnified
Party and any third party or otherwise) related to each such Indemnifying
Party's respective willful misconduct, bad faith, fraud and/or negligence in
the performance of each of it's respective duties hereunder or by reason of
reckless disregard of its respective obligations and duties hereunder
(including in the case of the Servicer, any agent of the Servicer or
subservicer).
(d) The Trust Fund shall indemnify each Indemnified Party from, and hold
it harmless against, any and all losses, liabilities, damages, claims or
unanticipated expenses (including,
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without limitation, reasonable fees and disbursements of counsel incurred by
the Indemnified Party in any action or proceeding between the Indemnifying
Party and the Indemnified Party or between the Indemnified Party and any third
party or otherwise) arising in respect of this Agreement or the Certificates,
in each case to the extent and only to the extent, such payment are expressly
reimbursable under this Agreement or are "unanticipated expenses incurred by
the REMIC" within the meaning of Treasury Regulations Section
1.860G-1(b)(3)(iii), other than (i) those resulting from the negligence, fraud,
bad faith or willful misconduct of the Indemnified Party and (ii) those as to
which such Indemnified Party is entitled to indemnification pursuant to Section
8.05(c). The term "unanticipated expenses incurred by a REMIC" shall include
any fees, expenses and disbursement of any separate trustee or co-trustee
appointed hereunder, only to the extent such fees, expenses and disbursements
were not reasonably anticipated as of the Closing Date and the losses,
liabilities, damages, claims or expenses (including reasonable attorneys' fees)
incurred or advanced by an Indemnified Party in connection with any litigation
arising out of this Agreement, including, without limitation, under Section
2.03, Section 3.10, the third paragraph of Section 3.11, Section 4.05 and
Section 7.01. The right of reimbursement of the Indemnified Parties under this
Section 8.05(d) shall be senior to the rights of all Certificateholders.
(e) Notwithstanding anything herein to the contrary, this Section 8.05
shall survive the termination or maturity of this Agreement or the resignation
or removal of the Trustee or the Fiscal Agent, as the case may be, as regards
rights accrued prior to such resignation or removal and (with respect to any
acts or omissions during their respective tenures) the resignation, removal or
termination of the Servicer, the Special Servicer, the Paying Agent, the
Certificate Registrar or the Custodian.
(f) This Section 8.05 shall be expressly construed to include, but not be
limited to, such indemnities, compensation, expenses, disbursements, advances,
losses, liabilities, damages and the like, as may pertain or relate to any
environmental law or environmental matter.
SECTION 8.6. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or association
organized and doing business under the laws of any state or the United States
of America, authorized under such laws to exercise corporate trust powers and
to accept the trust conferred under this Agreement, having a combined capital
and surplus of at least $50,000,000 and a rating on its unsecured long-term
debt of at least "BBB" by Fitch and DCR and "Baa2" by Moody's (or at any time
when there is no Fiscal Agent appointed and acting hereunder or any such Fiscal
Agent so appointed has a rating on its long-term unsecured debt that is lower
than "AA" by Fitch and DCR and "Aa2" by Moody's (without regard to any plus or
minus or numeric qualifier), or meeting different standards provided that each
Rating Agency shall have confirmed in writing that such different standards
would not, in and of itself, result in a downgrade, qualification or withdrawal
of the then current ratings assigned to the Certificates) and subject to
supervision or examination by federal or state authority and shall not be an
Affiliate of the Servicer (except during any period when the Trustee has
assumed the duties of the Servicer pursuant to Section 7.02); provided that,
notwithstanding that the long-term unsecured debt of
_____________________________ and ____________________________ are not rated by
DCR and Fitch, _________________________ shall not fail to qualify as Trustee
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solely by virtue of the lack of such ratings until such time as either DCR or
Fitch shall notify the Trustee, the Servicer and the Special Servicer in
writing that _________________________ is no longer exempt from the foregoing
rating requirements imposed by this sentence. If a corporation or association
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for
purposes of this Section the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In the event that the place of
business from which the Trustee administers the Trust Fund is a state or local
jurisdiction that imposes a tax on the Trust Fund or the net income of a REMIC
(other than a tax corresponding to a tax imposed under the REMIC Provisions)
the Trustee shall elect either to (i) resign immediately in the manner and with
the effect specified in Section 8.07, (ii) pay such tax and continue as Trustee
or (iii) administer the Trust Fund from a state and local jurisdiction that
does not impose such a tax. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 8.07.
SECTION 8.7. Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Depositor, the Servicer
and each Rating Agency. Upon such notice of resignation, the Fiscal Agent shall
also be deemed to have been removed and, accordingly, the Servicer shall
promptly appoint a successor Trustee, acceptable to each Rating Agency (such
acceptability confirmed in writing), and successor Fiscal Agent, which, if the
successor Trustee is not rated by each Rating Agency in one of its two highest
long-term debt rating categories, shall be acceptable to each Rating Agency
(such acceptability confirmed in writing), by written instrument, in
triplicate, which instrument shall be delivered to the resigning Trustee, with
a copy to the Fiscal Agent deemed removed, and the successor Trustee and
successor Fiscal Agent. If no successor Trustee and successor Fiscal Agent
shall have been so appointed and have accepted appointment within 30 days after
the giving of such notice of resignation, the resigning Trustee and the Fiscal
Agent may petition any court of competent jurisdiction for the appointment of a
successor Trustee and successor Fiscal Agent.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.06 and shall fail to resign after written request
therefor by the Depositor or Servicer, or if at any time the Trustee shall
become incapable of acting, or shall be adjudged bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then
the Depositor or the Servicer may remove the Trustee and the Fiscal Agent and
the Servicer shall promptly appoint a successor Trustee and successor Fiscal
Agent by written instrument, which shall be delivered to the Trustee and the
Fiscal Agent so removed and to the successor Trustee and the successor Fiscal
Agent.
The Holders of Certificates entitled to at least 50% of the Voting Rights
may at any time remove the Trustee and the Fiscal Agent (and any removal of the
Trustee shall be deemed to be a removal also of the Fiscal Agent) and appoint a
successor Trustee and successor Fiscal Agent by
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written instrument or instruments, in seven originals, signed by such Holders
or their attorneys-in-fact duly authorized, one complete set of which
instruments shall be delivered to the Depositor, one complete set to the
Servicer, one complete set to the Trustee so removed, one complete set to the
Fiscal Agent deemed removed, one complete set to the successor Trustee so
appointed and one complete set to the successor Fiscal Agent so appointed.
In the event of removal of the Trustee the Fiscal Agent shall be deemed
to have been removed.
In the event that the Trustee or Fiscal Agent is terminated or removed
pursuant to this Section 8.07, all of its rights and obligations under this
Agreement and in and to the Mortgage Loans shall be terminated, other than any
rights or obligations that occurred prior to the date of such termination or
removal (including the right to receive all fees, expenses and other amounts
accrued or owing to it under this Agreement, plus interest at the Advance Rate
on all such amounts until received to the extent such amounts bear interest as
provided in this Agreement, with respect to periods prior to the date of such
termination or removal).
Any resignation or removal of the Trustee and Fiscal Agent and
appointment of a successor Trustee and, if such trustee is not rated by each
Rating Agency in one of its two highest long-term debt rating categories, a
successor Fiscal Agent pursuant to any of the provisions of this Section 8.07
shall not become effective until acceptance of appointment by the successor
Trustee and, if necessary, Fiscal Agent as provided in Section 8.08.
SECTION 8.8. Successor Trustee and Fiscal Agent.
(a) Any successor Trustee and any Fiscal Agent appointed as provided in
Section 8.07 shall execute, acknowledge and deliver to the Depositor, the
Servicer and to the predecessor Trustee and predecessor Fiscal Agent, as the
case may be, instruments accepting their appointment hereunder, and thereupon
the resignation or removal of the predecessor Trustee and predecessor Fiscal
Agent, shall become effective and such successor Trustee and successor Fiscal
Agent, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with the like effect as if originally named as Trustee or Fiscal
Agent herein, provided that each Rating Agency shall have approved in writing
the appointment of such successor Trustee and successor Fiscal Agent. The
predecessor Trustee shall deliver to the successor Trustee all Mortgage Files
and related documents and statements held by it hereunder, and the Depositor
and the predecessor Trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for more fully and certainly
vesting and confirming in the successor Trustee all such rights, powers, duties
and obligations. No successor Trustee shall accept appointment as provided in
this Section 8.08 unless at the time of such acceptance such successor Trustee
shall be eligible under the provisions of Section 8.06.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 8.08, the Depositor shall mail notice of the succession of such Trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register. If the Depositor fails to mail such notice within 10 days
after acceptance of appointment by the successor Trustee, the successor Trustee
shall cause such notice to be mailed at the expense of the Depositor.
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(b) Any successor Trustee or Fiscal Agent appointed pursuant to this
Agreement shall meet the eligibility requirements set forth in Section 8.06
hereof and shall be acceptable to each Rating Agency as evidenced by written
confirmation that such appointment will not cause a downgrade, qualification or
withdrawal of the then current ratings assigned to the Certificates.
SECTION 8.9. Merger or Consolidation of Trustee.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such corporation shall be eligible under the provisions of
Section 8.06, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the purpose
of meeting any legal requirements of any jurisdiction in which any part of the
Trust Fund or property securing the same may at the time be located, the
Depositor and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act (at the expense of the Trustee) as co-trustee or co-trustees,
jointly with the Trustee, or separate trustee or separate trustees, of all or
any part of the Trust Fund, and to vest in such Person or Persons, in such
capacity, such title to the Trust Fund, or any part thereof, and, subject to
the other provisions of this Section 8.10, such powers, duties, obligations,
rights and trusts as the Depositor and the Trustee may consider necessary or
desirable. If the Depositor shall not have joined in such appointment within 15
days after the receipt by it of a request so to do, or in case an Event of
Default shall have occurred and be continuing, the Trustee alone shall have the
power to make such appointment. Except as required by applicable law, the
appointment of a co-trustee or separate trustee shall not relieve the Trustee
of its responsibilities, obligations and liabilities hereunder. No co-trustee
or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor Trustee under Section 8.06 hereunder and no notice
to Holders of Certificates of the appointment of co-trustee(s) or separate
trustee(s) shall be required under Section 8.08 hereof.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 8.10, all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act), except
to the extent that under any law of any jurisdiction in which any particular
act or acts are to be performed (whether as Trustee hereunder or as successor
to the Servicer hereunder), the Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Fund or any portion
thereof in any such jurisdiction) shall be exercised and performed by such
separate trustee or co-trustee solely at the direction of the Trustee.
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No trustee under this Agreement shall be personally liable by reason of
any act or omission of any other trustee under this Agreement. The Depositor
and the Trustee acting jointly may at any time accept the resignation of or
remove any separate trustee or co-trustee, or if the separate trustee or
co-trustee is an employee of the Trustee, the Trustee acting alone may accept
the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Every such instrument shall be filed with the Trustee.
Each separate trustee and co-trustee, upon its acceptance of the trusts
conferred, shall be vested with the estates or property specified in its
instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the
conduct of, affecting the liability of, or affording protection to, the
Trustee. In no event shall any such separate trustee or co-trustee be entitled
to any provision relating to the conduct of affecting the liability of or
affording protection to such separate trustee or co-trustee that imposes a
standard of conduct less stringent than that imposed by the Trustee hereunder,
affording greater protection than that afforded to the Trustee hereunder or
providing a greater limit on liability than that provided to the Trustee
hereunder.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Trustee, to the extent permitted by law, without the appointment of a
new or successor trustee.
SECTION 8.11. Fiscal Agent Appointed; Concerning the Fiscal Agent.
(a) The Trustee hereby appoints ________________________ as the initial
Fiscal Agent hereunder for the purposes of exercising and performing the
obligations and duties imposed upon the Fiscal Agent by Sections 3.24 and 4.06.
(b) The Fiscal Agent undertakes to perform such duties and only such
duties as are specifically set forth in Sections 3.24 and 4.06.
(c) No provision of this Agreement shall be construed to relieve the
Fiscal Agent from liability for its own negligent failure to act or its own
willful misfeasance; provided, however, that (i) the duties and obligations of
the Fiscal Agent shall be determined solely by the express provisions of
Sections 3.24 and 4.06, the Fiscal Agent shall not be liable except for the
performance of such duties and obligations, no implied covenants or obligations
shall be read into this Agreement against the Fiscal Agent and, in the absence
of bad faith on the part of the Fiscal Agent, the Fiscal Agent may conclusively
rely, as to the truth and correctness of the statements or conclusions
expressed therein, upon any resolutions, certificates, statements, opinions,
reports, documents, orders or other instruments furnished to the Fiscal Agent
by the Depositor, the Servicer, the Special Servicer or the Trustee and which
on their face do not contradict the requirements of
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this Agreement, and (ii) the provisions of clause (ii) of Section 8.01(c) shall
apply to the Fiscal Agent.
(d) Except as otherwise provided in Section 8.11(c), the Fiscal Agent
also shall have the benefit of provisions of clauses (i), (ii), (iii) (other
than the proviso thereto), (iv), (v) (other than the proviso thereto) and (vi)
of Section 8.02(a).
ARTICLE IX.
TERMINATION
SECTION 9.1. Termination.
(a) The respective obligations and responsibilities of the Servicer, the
Special Servicer, the Depositor, the Trustee and the Fiscal Agent created
hereby with respect to the Certificates (other than the obligation to make
certain payments and to send certain notices to Certificateholders as
hereinafter set forth) shall terminate immediately following the occurrence of
the last action requiredto be taken by the Trustee pursuant to this Article IX
on the Termination Date; provided, however, that in no event shall the trust
created hereby continue beyond the expiration of twenty-one years from the
death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the United Kingdom, living on the date
hereof.
(b) The Trust Fund, the Upper-Tier REMIC and the Lower-Tier REMIC shall
be terminated and the assets of the Trust Fund shall be sold or otherwise
disposed of in connection therewith, only pursuant to a "plan of complete
liquidation" within the meaning of Code Section 860F(a)(4)(A) providing for the
actions contemplated by the provisions hereof pursuant to which the applicable
Notice of Termination is given and requiring that the Trust Fund, the Upper-
Tier REMIC and the Lower-Tier REMIC shall terminate on a Distribution Date
occurring not more than 90 days following the date of adoption of the plan of
complete liquidation. For purposes of this Section 9.01(b), the Notice of
Termination given pursuant to Section 9.01(c) shall constitute the adoption of
the plan of complete liquidation as of the date such notice is given, which
date shall be specified by the Servicer in the final federal income tax returns
of the Upper-Tier REMIC and the Lower-Tier REMIC.
(c) Any holder of a Class LR Certificate representing greater than a 50%
Percentage Interest in such Class may effect an early termination of the Trust
Fund, upon not less than 30 days' prior Notice of Termination given to the
Trustee and Servicer any time on or after the Early Termination Notice Date
specifying the Anticipated Termination Date, by purchasing on such date all,
but not less than all, of the Mortgage Loans then included in the Trust Fund,
and all property acquired in respect of any Mortgage Loan, at a purchase price,
payable in cash, equal to not less than the greater of:
(i) the sum of
(A) 100% of the unpaid principal balance of each Mortgage Loan
included in the Trust Fund as of the last day of the month preceding such
Distribution Date;
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(B) the fair market value of all other property included in the
Trust Fund as of the last day of the month preceding such Distribution Date, as
determined by an Independent appraiser acceptable to the Servicer as of the
date not more than 30 days prior to the last day of the month preceding such
Distribution Date;
(C) all unpaid interest accrued on such principal balance of each
such Mortgage Loan (including for this purpose any Mortgage Loan as to which
title to the related Mortgaged Property has been acquired) at the Mortgage Rate
(plus the Excess Rate, to the extent applicable), to the last day of the month
preceding such Distribution Date;
(D) the aggregate amount of unreimbursed Advances, with interest
thereon at the Advance Rate, and unpaid Servicing Compensation, Special
Servicing Compensation, Trustee Fees and Trust Fund expenses; and
(i) the aggregate fair market value of the Mortgage Loans, and all
other property acquired in respect of any Mortgage Loan in the Trust Fund, on
the last day of the month preceding such Distribution Date, as determined by an
Independent appraiser acceptable to the Servicer as of a date not more than 30
days prior to the last day of the month preceding such Distribution Date,
together with one month's interest thereon at the Mortgage Rate.
The Servicer or the Depositor may also effect such termination as
provided above if it first notifies each Holder of a Class LR Certificate
through the Trustee of its intention to do so in writing at least 30 days prior
to the Early Termination Notice Date and no Class LR Holder terminates the
Trust Fund as described above within such 30-day period. All costs and expenses
incurred by any and all parties to this Agreement or by the Trust Fund in
connection with the purchase of the Mortgage Loans and other assets of the
Trust Fund pursuant to this Section 9.01(c) shall be borne by the party
exercising its purchase rights hereunder. The Trustee shall be entitled to rely
conclusively on any determination made by an Independent appraiser pursuant to
this subsection (c).
Anything in this Section 9.01 to the contrary notwithstanding, the
holders of the Class V-1 Certificates shall receive that portion of the
proceeds of a sale of the assets of the Trust Fund allocable to the Net Default
Interest, as their interests may appear, and the holders of the Class V-2
Certificates shall receive that portion of the proceeds of a sale of the assets
of the Trust Fund allocable to Excess Interest, as their interests may appear.
(d) If the Trust Fund has not been previously terminated pursuant to
subsection (c) of this Section 9.01, the Trustee shall determine as soon as
practicable the Distribution Date on which the Trustee reasonably anticipates,
based on information with respect to the Mortgage Loans previously provided to
it, that the final distribution will be made (i) to the Holders of outstanding
Regular Certificates, and to the Trustee in respect of the Lower-Tier Regular
Interests notwithstanding that such distribution may be insufficient to
distribute in full the Certificate Balance of each Certificate or Lower-Tier
Regular Interest, together with amounts required to be distributed on such
Distribution Date pursuant to Section 4.01(a) or (ii) if no such Classes of
Certificates are then outstanding, to the Holders of the Class LR Certificates
of any amount remaining in the Collection Account or the Distribution Account
and to the Holders of the Class R
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Certificates of any amount remaining in the Upper-Tier Distribution Account, in
either case, following the later to occur of (A) the receipt or collection of
the last payment due on any Mortgage Loan included in the Trust Fund or (B) the
liquidation or disposition pursuant to Section 3.18 of the last asset held by
the Trust Fund.
(e) Notice of any termination of the Trust Fund pursuant to this Section
9.01 shall be mailed by the Trustee to affected Certificateholders with a copy
to the Servicer and each Rating Agency at their addresses shown in the
Certificate Registrar as soon as practicable after the Trustee shall have
received, given or been deemed to have received a Notice of Termination but in
any event not more than thirty days, and not less than ten days, prior to the
Anticipated Termination Date. The notice mailed by the Trustee to affected
Certificateholders shall:
(i) specify the Anticipated Termination Date on which the final
distribution is anticipated to be made to Holders of Certificates of the
Classes specified therein;
(ii) specify the amount of any such final distribution, if
known; and
(iii) state that the final distribution to Certificateholders will
be made only upon presentation and surrender of Certificates at the office of
the Paying Agent therein specified.
If the Trust Fund is not terminated on any Anticipated Termination Date
for any reason, the Trustee shall promptly mail notice thereof to each affected
Certificateholder.
(f) Any funds not distributed on the Termination Date because of the
failure of any Certificateholders to tender their Certificates shall be set
aside and held in trust for the account of the appropriate non-tendering
Certificateholders, whereupon the Trust Fund shall terminate. If any
Certificates as to which notice of the Termination Date has been given pursuant
to this Section 9.01 shall not have been surrendered for cancellation within
six months after the time specified in such notice, the Trustee shall mail a
second notice to the remaining Certificateholders, at their last addresses
shown in the Certificate Register, to surrender their Certificates for
cancellation in order to receive, from such funds held, the final distribution
with respect thereto. If within one year after the second notice any
Certificate shall not have been surrendered for cancellation, the Trustee may,
directly or through an agent, take appropriate steps to contact the remaining
Certificateholders concerning surrender of their Certificates. The costs and
expenses of maintaining such funds and of contacting Certificateholders shall
be paid out of the assets which remain held. If within two years after the
second notice any Certificates shall not have been surrendered for
cancellation, the Paying Agent shall pay to the Trustee all amounts
distributable to the Holders thereof, and the Trustee shall thereafter hold
such amounts for the benefit of such Holders until the earlier of (i) its
termination as Trustee hereunder and the transfer of such amounts to a
successor Trustee and (ii) the termination of the Trust Fund and distribution
of such amounts to the Class LR Certificateholders. No interest shall accrue or
be payable to any Certificateholder on any amount held as a result of such
Certificateholder's failure to surrender its Certificate(s) for final payment
thereof in accordance with this Section 9.01. Any such amounts transferred to
the Trustee may be invested in Permitted Investments and all income and gain
realized from investment of such funds shall be for the benefit of the Trustee.
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(g) The Holder of a more than a 50% Percentage Interest in the Class LR
Certificates may purchase any Mortgage Loan on its Anticipated Repayment Date,
if any, at a price equal to the sum of the following:
(i) 100% of the outstanding principal balance of such Mortgage
Loan on such Anticipated Repayment Date;
(ii) all unpaid interest accrued on such principal balance of such
Mortgage Loan at the Mortgage Rate thereof, to the last day of the Interest
Accrual Period preceding such Anticipated Repayment Date;
(iii) the aggregate amount of unreimbursed Advances with respect to
such Mortgage Loan, with interest thereon at the Advance Rate, and unpaid
Special Servicing Compensation, Servicing Compensation, Trustee Fees and Trust
Fund expenses; and
(iv) the amount of any Liquidation Expenses incurred by the Trust
Fund in connection with such purchase. provided, that, such Holder, at its
expense, has provided the Trustee with an opinion of counsel to the effect that
such purchase would not (x) result in a gain which would be subject to the tax
on net income derived from "prohibited transactions" imposed by Code Section
860F(a)(1) or otherwise result in the imposition of any other tax on the
Lower-Tier REMIC or the Upper-Tier REMIC under the REMIC Provisions or (y)
cause either the Upper-Tier REMIC or the Lower-Tier REMIC to fail to qualify as
a REMIC; such opinion relying upon appraisals of the fair market value (for the
purposes of Section 860F(c)(1) of the Code) of such Mortgage Loan by at least
three Independent appraisers.
The proceeds of any such purchase shall be deposited in the Collection
Account and disbursed as provided herein.
ARTICLE X.
MISCELLANEOUS PROVISIONS
SECTION 10.1. Counterparts.
Agreement may be executed simultaneously in any number of counterparts,
each of which counterparts shall be deemed to be an original, and such
counterparts shall constitute but one and the same instrument.
SECTION 10.2. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
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No Certificateholder shall have any right to vote (except as expressly
provided for herein) or in any manner otherwise control the operation and
management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of the Certificates,
be construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right to institute any suit, action
or proceeding in equity or at law upon or under or with respect to this
Agreement or any Mortgage Loan, unless such Holder previously shall have given
to the Trustee a written notice of default and of the continuance thereof, as
hereinbefore provided, and unless also the Holders of Certificates representing
Percentage Interests of at least 25% of each affected Class of Certificates
shall have made written request upon the Trustee to institute such action, suit
or proceeding in its own name as Trustee hereunder and shall have offered to
the Trustee such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby, and the Trustee,
for 60 days after its receipt of such notice, request and offer of indemnity,
shall have neglected or refused to institute any such action, suit or
proceeding. It is understood and intended, and expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates of any Class shall have any right in any
manner whatever by virtue of any provision of this Agreement to affect, disturb
or prejudice the rights of the Holders of any other of such Certificates, or to
obtain or seek to obtain priority over or preference to any other such Holder,
or to enforce any right under this Agreement, except in the manner herein
provided and for the equal, ratable and common benefit of all Holders of
Certificates of such Class. For the protection and enforcement of the
provisions of this Section, each and every Certificateholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.
SECTION 10.3. Governing Law.
THIS AGREEMENT 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 10.4. Notices.
All demands, notices and communications hereunder shall be in writing,
shall be deemed to have been given upon receipt (except that notices to Holders
of Class B-4B, Class R and Class LR Certificates or Holders of any Class of
Certificates no longer held through a Depository and instead held in
registered, definitive form shall be deemed to have been given upon being sent
by first class mail, postage prepaid) as follows:
If to the Trustee, to:
------------------------
------------------------
------------------------
------------------------
------------------------
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Attention:
-----------------
-----------------
If to the Fiscal Agent, to:
-----------------------
-----------------------
-----------------------
-----------------------
-----------------------
Attention:
-------------
-----------------------
If to the Depositor, to:
-----------------------
-----------------------
-----------------------
-----------------------
-----------------------
Attention:
-------------
-----------------------
If to the Servicer and/or Special Servicer, to:
-----------------------
-----------------------
-----------------------
-----------------------
-----------------------
Attention:
-------------
If to the Mortgage Loan Seller, to:
-----------------------
-----------------------
-----------------------
-----------------------
-----------------------
Attention:
-------------
-----------------------
If to any Certificateholder, to:
the address set forth in the
Certificate Register,
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or, in the case of the parties to this Agreement, to such other address
as such party shall specify by written notice to the other parties hereto.
SECTION 10.5. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then, to the
extent permitted by applicable law, such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the
Certificates or the rights of the Holders thereof.
SECTION 10.6. Notice to the Depositor and Each Rating Agency.
(a) The Trustee shall use its best efforts to promptly provide notice to
the Depositor and each Rating Agency with respect to each of the following of
which a Responsible Officer of the Trustee has actual knowledge:
(i) any material change or amendment to this Agreement;
(ii) the occurrence of any Event of Default that has not been
cured;
(iii) the merger, consolidation, resignation or termination of the
Servicer, Special Servicer, the Trustee or Fiscal Agent;
(iv) the repurchase of Mortgage Loans pursuant to Section 2.03(d)
or 2.03(e);
(v) the final payment to any Class of Certificateholders;
(vi) any change in the location of the Collection Account or the
Distribution Account;
(vii) any event that would result in the voluntary or involuntary
termination of any insurance of the accounts of the Servicer;
(viii) each report to Certificateholders described in Section 4.02
and Section 3.22;
(ix) any change in the lien priority of a Mortgage Loan;
(x) any new lease of an anchor or a termination of an anchor lease
at a retail Mortgaged Property;
(xi) any termination of licensing certification at a Mortgaged
Property securing a Senior Housing/Healthcare Loan; and
(xii) any material damage to a Mortgaged Property.
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(b) The Servicer shall promptly furnish to each Rating Agency copies of
the following:
(i) each of its annual statements as to compliance described in
Section 3.14;
(ii) each of its annual independent public accountants'
servicing reports described in Section 3.15; and
(iii) a copy of each rent roll and each operating and other
financial statement and occupancy reports, to the extent such information is
required to be delivered under a Mortgage Loan, in each case to the extent
collected pursuant to Section 3.03.
(c) The Servicer shall furnish each Rating Agency with such information
with respect to the Trust Fund, a Mortgaged Property, a Borrower and a
non-performing or Specially Serviced Mortgage Loan as such Rating Agency shall
reasonably request and which the Servicer can reasonably obtain. The Rating
Agencies shall not be charged any fee or expense in connection therewith.
(d) Notices to each Rating Agency shall be addressed as follows:
----------------------------
----------------------------
----------------------------
Attention:
------------------
----------------------------
----------------------------
-----------------------------
Attention:
------------------
-----------------------------
-----------------------------
------------------------------
Attention:
------------------
or in each case to such other address as either Rating Agency shall specify by
written notice to the parties hereto.
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SECTION 10.7. Amendment.
This Agreement or any Custodial Agreement may be amended from time to
time by the Depositor, the Servicer, the Special Servicer, the Trustee and the
Fiscal Agent, without the consent of any of the Certificateholders, (i) to cure
any ambiguity, (ii) to correct or supplement any provisions herein or therein
that may be defective or inconsistent with any other provisions herein or
therein, (iii) to amend any provision hereof to the extent necessary or
desirable to maintain the rating or ratings assigned to each of the Classes of
Regular Certificates by each Rating Agency, (iv) to amend or supplement any
provisions herein or therein that shall not adversely affect in any material
respect the interests of any Certificateholder not consenting thereto, as
evidenced in writing by an Opinion of Counsel, at the expense of the party
requesting such amendment or confirmation in writing from each Rating Agency
that such amendment or supplement will not result in a qualification,
withdrawal or downgrading of the then-current ratings assigned to the
Certificates, or (v) to make any other provisions with respect to matters or
questions arising under this Agreement, which shall not be inconsistent with
the provisions of this Agreement and will not result in a downgrade,
qualification or withdrawal of the then current rating or ratings then assigned
to any outstanding Class of Certificates, as confirmed by each Rating Agency in
writing.
This Agreement or any Custodial Agreement may also be amended from time
to time by the Depositor, the Servicer, the Special Servicer, the Trustee and
the Fiscal Agent with the consent of the Holders of each of the Classes of
Regular Certificates representing not less than 66-2/3% of the Percentage
Interests of each Class of Certificates affected by the amendment for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the
rights of the Certificateholders; provided, however, that no such amendment
shall:
(i) reduce in any manner the amount of, or delay the timing of,
payments received on Mortgage Loans which are required to be distributed on any
Certificate without the consent of all the holders of all Certificates
representing all Percentage Interests of the Class or Classes affected thereby;
(ii) change the percentages of Voting Rights of Holders of
Certificates which are required to consent to any action or inaction under this
Agreement, without the consent of the Holders of all Certificates representing
all of the Percentage Interest of the Class or Classes affected hereby;
(iii) alter the Servicing Standard or the obligations of the
Servicer, the Special Servicer, the Trustee or the Fiscal Agent to make a P&I
Advance or Property Advance without the consent of the Holders of all
Certificates representing all of the Percentage Interests of the Class or
Classes affected thereby; or
(iv) amend any section hereof which relates to the amendment of
this Agreement without the consent of all the holders of all Certificates
representing all Percentage Interests of the Class or Classes affected thereby.
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Further, the Depositor, the Servicer, the Special Servicer, the Trustee
and the Fiscal Agent, at any time and from time to time, without the consent of
the Certificateholders, may amend this Agreement to modify, eliminate or add to
any of its provisions to such extent as shall be necessary to maintain the
qualification of the Trust REMIC as two separate REMICs, or to prevent the
imposition of any additional material state or local taxes, at all times that
any Certificates are outstanding; provided, however, that such action, as
evidenced by an Opinion of Counsel (obtained at the expense of the Trust Fund),
is necessary or helpful to maintain such qualification or to prevent the
imposition of any such taxes, and would not adversely affect in any material
respect the interest of any Certificateholder.
In the event that neither the Depositor nor any successor thereto, if
any, is in existence, any amendment under this Section 10.07 shall be effective
with the consent of the Trustee, the Fiscal Agent, and the Servicer, in
writing, and to the extent required by this Section, the Certificateholders.
Promptly after the execution of any amendment, the Servicer shall forward to
the Trustee and the Trustee shall furnish written notification of the substance
of such amendment to each Certificateholder and each Rating Agency.
It shall not be necessary for the consent of Certificateholders under
this Section 10.07 to approve the particular form of any proposed amendment,
but it shall be sufficient if such consent shall approve the substance thereof.
The method of obtaining such consents and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe; provided, however, that such method
shall always be by affirmation and in writing.
Notwithstanding any contrary provision of this Agreement, no amendment
shall be made to this Agreement or any Custodial Agreement unless, if requested
by the Servicer and/or the Trustee, the Servicer and the Trustee shall have
received an Opinion of Counsel, at the expense of the party requesting such
amendment (or, if such amendment is required by either Rating Agency to
maintain the rating issued by it or requested by the Trustee for any purpose
described in clause (i) or (ii) of the first sentence of this Section, then at
the expense of the Trust Fund), to the effect that such amendment will not
cause either the Upper-Tier REMIC or Lower-Tier REMIC to fail to qualify as a
REMIC at any time that any Certificates are outstanding or cause a tax to be
imposed on the Trust Fund under the REMIC Provisions (other than a tax at the
highest marginal corporate tax rate on net income from foreclosure property).
Prior to the execution of any amendment to this Agreement or any
Custodial Agreement, the Trustee, the Fiscal Agent, the Special Servicer and
the Servicer may request and shall be entitled to rely conclusively upon an
Opinion of Counsel, at the expense of the party requesting such amendment (or,
if such amendment is required by either Rating Agency to maintain the rating
issued by it or requested by the Trustee for any purpose described in clause
(i), (ii), (iii) or (v) (which do not modify or otherwise relate solely to the
obligations, duties or rights of the Trustee) of the first sentence of this
Section, then at the expense of the Trust Fund) stating that the execution of
such amendment is authorized or permitted by this Agreement. The Trustee and
the Fiscal Agent may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's or the Fiscal Agent's own rights, duties
or immunities under this Agreement.
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SECTION 10.8. Confirmation of Intent.
It is the express intent of the parties hereto that the conveyance of the
Trust Fund (including the Mortgage Loans) by the Depositor to the Trustee on
behalf of Certificateholders as contemplated by this Agreement and the sale by
the Depositor of the Certificates be, and be treated for all purposes as, a
sale by the Depositor of the undivided portion of the beneficial interest in
the Trust Fund represented by the Certificates. It is, further, not the
intention of the parties that such conveyance be deemed a pledge of the Trust
Fund by the Depositor to the Trustee to secure a debt or other obligation of
the Depositor. However, in the event that, notwithstanding the intent of the
parties, the Trust Fund is held to continue to be property of the Depositor
then (a) this Agreement shall also be deemed to be a security agreement under
applicable law; (b) the transfer of the Trust Fund provided for herein shall be
deemed to be a grant by the Depositor to the Trustee on behalf of
Certificateholders of a first priority security interest in all of the
Depositor's right, title and interest in and to the Trust Fund and all amounts
payable to the holders of the Mortgage Loans in accordance with the terms
thereof and all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, instruments, securities or other property, including,
without limitation, all amounts from time to time held or invested in the
Collection Account, the Distribution Account, Upper-Tier Account, Default
Interest Distribution Account and Excess Interest Distribution Account, whether
in the form of cash, instruments, securities or other property; (c) the
possession by the Trustee (or the Custodian on its behalf) of Notes and such
other items of property as constitute instruments, money, negotiable documents
or chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
_________ and ________ Uniform Commercial Code; and (d) notifications to
Persons holding such property, and acknowledgments, receipts or confirmations
from Persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Trustee for the purpose of perfecting
such security interest under applicable law. Any assignment of the interest of
the Trustee pursuant to any provision hereof shall also be deemed to be an
assignment of any security interest created hereby. The Depositor shall, and
upon the request of the Servicer, the Trustee shall, to the extent consistent
with this Agreement (and at the expense of the Trust Fund), take such actions
as may be necessary to ensure that, if this Agreement were deemed to create a
security interest in the Mortgage Loans, such security interest would be deemed
to be a perfected security interest of first priority under applicable law and
will be maintained as such throughout the term of this Agreement. It is the
intent of the parties that such a security interest would be effective whether
any of the Certificates are sold, pledged or assigned.
SECTION 10.9. No Intended Third-Party Beneficiaries.
No Person other than a party to this Agreement and any Certificateholder
shall have any rights with respect to the enforcement of any of the rights or
obligations hereunder. Without limiting the foregoing, the parties to this
Agreement specifically state that no Borrower, property manager or other party
to a Mortgage Loan is an intended third-party beneficiary of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Depositor, the Servicer, the Special Servicer,
the Trustee and the Fiscal Agent have caused their names to be signed hereto by
their respective officers thereunto duly authorized all as of the day and year
first above written.
HELLER FINANCIAL COMMERCIAL MORTGAGE
ASSET CORP.,
as Depositor
By:
------------------------------
Name:
Title:
---------------------------------
as Servicer and Special Servicer
By:
------------------------------
Name:
Title:
---------------------------------
as Trustee
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By:
------------------------------
Name:
Title:
---------------------------------
As Fiscal Agent
By:
------------------------------
Name:
Title:
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<PAGE>
STATE OF _________ )
) ss:
COUNTY OF ________ )
On this ____ day of_________, 199_, before me, the undersigned, a Notary
Public in and for the State of ____________, duly commissioned and sworn,
personally appeared ___________, to me known who, by me duly sworn, did depose
and acknowledge before me and say that s/he resides at
______________________________________________; that s/he is the _____________
of _________________________, a ________ corporation, the corporation described
in and that executed the foregoing instrument; and that s/he signed her/his
name thereto under authority of the board of directors of said corporation and
on behalf of such corporation.
WITNESS my hand and seal hereto affixed the day and year first above
written.
---------------------------------
NOTARY PUBLIC in and for the
State of ____________
My Commission expires:
(stamp)
(seal)
This instrument prepared by:
- ---------------------------------
Name:
----------------------------
Address:
-------------------------
- ---------------------------------
<PAGE>
STATE OF_______________ )
) ss:
COUNTY OF_____________ )
On this ____ day of __________, 199_, before me, the undersigned, a
Notary Public in and for the State of _______, duly commissioned and sworn,
personally appeared _____________________, to me known who, by me duly sworn,
did depose and acknowledge before me and say that s/he resides at
__________________________________________ is the ____________________ of
______________________, the corporation described in and that executed the
foregoing instrument; and that he/she signed his/her name thereto under
authority of the board of directors of said corporation and on behalf of such
corporation.
WITNESS my hand and seal hereto affixed the day and year first above
written.
---------------------------------
NOTARY PUBLIC in and for the
State of ____________
My Commission expires:
(stamp)
(seal)
This instrument prepared by:
- ---------------------------------
Name:
----------------------------
Address:
-------------------------
- ---------------------------------
<PAGE>
STATE OF _____________ )
) ss:
COUNTY OF ____________ )
On this ____ day of _____________, 199_, before me, the undersigned, a
Notary Public in and for the State of _______, duly commissioned and sworn,
personally appeared _____________________, to me known who, by me duly sworn,
did depose and acknowledge before me and say that s/he resides at ___________;
is the ____________________ of ______________________________, the corporation
described in and that executed the foregoing instrument; and that he/she signed
his/her name thereto under authority of the board of directors of said
corporation and on behalf of such corporation.
WITNESS my hand and seal hereto affixed the day and year first above
written.
---------------------------------
NOTARY PUBLIC in and for the
State of ____________
My Commission expires:
(stamp)
(seal)
This instrument prepared by:
- ---------------------------------
Name:
----------------------------
Address:
-------------------------
- ---------------------------------
<PAGE>
STATE OF __________ )
) ss:
COUNTY OF __________ )
On this ____ day of ___________, 199_, before me, the undersigned, a
Notary Public in and for the State of _______________, duly commissioned and
sworn, personally appeared _____________________, to me known who, by me duly
sworn, did depose and acknowledge before me and say that he resides at
___________________________; that s/he is a _____________ of
____________________________, a _______________________________, the
corporation described in and that executed the foregoing instrument; and that
he signed his name thereto under authority of the board of directors of said
corporation and on behalf of such corporation.
WITNESS my hand and seal hereto affixed the day and year first above
written.
---------------------------------
NOTARY PUBLIC in and for the
State of ____________
My Commission expires:
(stamp)
(seal)
This instrument prepared by:
- ---------------------------------
Name:
----------------------------
Address:
-------------------------
- ---------------------------------
<PAGE>
STATE OF __________ )
) ss:
COUNTY OF_____________ )
On this ____ day of _____________, 199_, before me, the undersigned, a
Notary Public in and for the State of ________, duly commissioned and sworn,
personally appeared _____________, to me known who, by me duly sworn, did
depose and acknowledge before me and say that s/he resides at _____________,
_____________, __________; that s/he is a _____________ of
_________________________., a _____________________________, the corporation
described in and that executed the foregoing instrument; and that s/he signed
her/his name thereto under authority of the board of directors of said
corporation and on behalf of such corporation.
WITNESS my hand and seal hereto affixed the day and year first above
written.
---------------------------------
NOTARY PUBLIC in and for the
State of ____________
My Commission expires:
(stamp)
(seal)
This instrument prepared by:
- ---------------------------------
Name:
----------------------------
Address:
-------------------------
- ---------------------------------
